Monday, November 12, 2012

Europe must adopt a 30% emissions reduction target


With any luck we are about to see a shift in action on curbing carbon emissions.

It's not just that the annual United Nations climate change talks, COP-18, begin at the end of this month at Doha in Qatar. Nor is it that with the re-election of Barack Obama there will be a renewed impetus in the American Senate to get a climate change bill passed.

Over on the other side of the world, Australia's Climate Change Minister Greg Combet has said his country will sign up to a second round of the Kyoto Protocol, joining the European Union and just a handful of other major greenhouse gas emitters in recommitting to the world's only climate treaty.

The Kyoto Protocol, negotiated in 1997, required wealthy nations to limit their emission of greenhouse gases by 5.2% on average for the period 2008-2012 from 1990 levels. It is due to expire at the end of this year.

Through the UN climate change negotiations, countries are attempting to thrash out a replacement treaty. If successful, it would be agreed by 2015 and take effect in 2020, and it would include emissions targets for developing nations such as China and India as well as developed countries.

To date, only the European Union and a handful of other small developed nations have signed up to Kyoto 2, which is intended to start in 2013 and continue until such time as when a new agreement comes into effect.

Japan, Russia, Canada and, currently, the US are among the countries refusing to sign up to Kyoto 2. They want a non-binding agreement.

New Zealand has already said it will not follow Australia.

But Kyoto 1 and 2 has been widely criticised. The main candidates for alternative action are a carbon tax activated at national levels, and a network of regional emission trading schemes.

Already, a carbon tax is back on the agenda in the US and the UK.

Republicans are not expected to be enthusiastic; they dislike taxes. The main American proponent of a carbon tax is prominent NASA climate scientist James Hansen. His proposal is to tax carbon at source, whether oil, gas or coal, with a 100% dividend returned to citizens in equal shares, under the principle of the “commons", that every citizen has an equal right to a portion of the sky.

It is estimated that citizens would each get $3,000 to spend as compensation for the tax.

A similar tax has been in place in Canada's British Columbia for four years and is currently under review. The income from the tax is spent on public works.

But how high would a carbon tax need to be to make a significant difference in the consumption of fossil fuels? Consider the amount of tax (60%) already on a litre of petrol. Does it deter us from driving?

Would it make a difference if the price of a barrel of oil was doubled with a $100 tax? That would put up the cost of a litre of petrol to almost £2.

You can imagine the public reaction, even with a cash dividend. The thing is, it’s a blunt instrument. It affects some people more than others.

British Columbia's tax has been introduced gradually and reaches about 5% of the price of fuel. The review will tell us whether or not it has made any difference at all to consumption levels. The jury is yet out.

Hansen distrusts "cap and trade" agreements such as the Kyoto Protocol, and says why in chapter 9 of his book Storms of My Grandchildren.

But that isn't stopping Korea and China from going ahead with their own local schemes emissions trading schemes. On November 15 a presidential decree in Korea will see a mandatory ETS introduced from 2015 for 60% of South Korea’s total greenhouse gas emissions.

The purpose of an ETS is to minimise the cost of meeting a set emissions target. The Korean ETS and most of the Chinese pilot schemes have watched the European Union's ETS become swamped with excess credits and the price of carbon bomb to an ineffectual level.

To prevent this happening in their schemes, they plan to include the use of market stabilising checks and balances to enable them to adjust to external factors such as significant and sustained changes in gross domestic product. These are said to include: a strategic reserve, limitations on banking and borrowing and a ceiling and/or floor price.

Japan has its own scheme, as do Switzerland, New Zealand, California and a number of other American and Canadian states linked together in the Regional Greenhouse Gas Initiative and the Western Climate Initiative.

If such schemes become more common and the European scheme can overcome its current problems, international trading in permits is an attractive way of achieving reductions at the lowest possible cost. This is because it is cheaper to abate or eliminate a ton of carbon dioxide in some countries than in others, and the market automatically gravitates towards the cheapest solution.

In other words, is not such a blunt instrument. On the other hand, a huge amount of money gets wasted and goes into the wrong pockets.

The question is, whether any of these proposals will get us where we want to be fast enough. The answer depends upon the level of political ambition for the level at which an overall target for, or cap on carbon emissions is set, which in turn depends on the amount of public concern.

European environment ministers met at the end of October to discuss the European Union negotiating position at Doha, and what to do about the EU ETS' glut of allowances.

It emerged from their talks that Europe has already beaten its target of 20% emission reductions by 2020 with eight years to spare.

A leaked draft of the Commission's report on the EU ETS says that there will be a surplus of at least two billion allowances next year, rising in the following years. Removing just 1.4 billion of these would be sufficient to let Europe reach a 30% target by 2020.

This would align the scheme with Europe's 2050 climate goal of reducing emissions up to 95% below 1990 levels.

It's this kind of ambition, at least, which is necessary.

The British government supports a 30% target. It should do, it is already ahead of the game. Officials have been arguing for it for some time.

Europe should immediately adopt such a position and, in three weeks time, take it to Doha and challenge the world to follow suit.

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