Managing the global greenhouse

Science dictates that we need a 100% reduction in carbon emissions, but how do we achieve it? Oliver Tickell makes the case for controlling greenhouse gases with a worldwide permits auction.

At their 2008 meeting in Hokkaido, Japan, the Group of Eight countries agreed that the world should cut its greenhouse gas emissions by 50% by 2050. Setting aside the fact that we don’t know 50% of which year’s emissions, this is a serious target. But it has two serious problems.

First, it’s nowhere near tight enough to achieve the “ultimate objective of the climate convention”, namely “stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system…” The science indicates that we need a 100% net emissions reduction by 2050 to do that. In other words, we have to decarbonise our economy to the extent that remaining emissions can be soaked up by forests and other “carbon sinks”.

Second, the G8 has no effective delivery mechanism. Emissions have accelerated since the Kyoto Protocol came into force. Its “flexibility mechanisms”, such as the Clean Development Mechanism (CDM), may have created a dynamic carbon trading sector, but there is little evidence that they have done much to reduce emissions. Indeed, many projects carried out under the CDM appear to have actually increased emissions – while producing carbon securities worth tens of billions of dollars. And it is not enough to offset cuts in emissions in one place while maintaining or even increasing them in another: we need to move forward simultaneously on all fronts.

The one certain outcome of the existing Kyoto system – based on assigning national allocations to emit greenhouse gases – is that negotiations turn into petty squabbles over who gets how much, with every country wanting to grab the greatest possible amount. After all, under Kyoto’s trading system, the allocations are convertible into hard cash. This also makes it impossible to bring China, India, Brazil, Mexico, South Africa and other major developing country polluters into the Kyoto process: any national emissions allocations big enough to keep them happy will be too big to solve the climate problem.

The Kyoto system is also illogical in the context of today’s global economy. If a product is made in China, by a company based in Singapore, using Australian coal, for a company in the United Kingdom, and exported to end users in the United States, then which country should “own” the emissions? Under the Kyoto Protocol we have a clear but unfair, even irrational, answer: China.

But to find a better answer, we need a new way to frame the question.

Fortunately alternative approaches are coming forward. One is Contraction and Convergence (C&C), advocated by the indefatigable Aubrey Meyer of the Global Commons Institute. In a nutshell, C&C would allocate tradable greenhouse-gas emission rights to countries based on their population, up to a global cap. Industrial countries emitting more than their fair share of greenhouse gases would then have to buy extra quota from poor countries with a “surplus”.

But this throws up problems. Rich country taxpayers would have to give poor country governments hundreds of billions of dollars to buy the quota they need, but this money would not of itself do anything to solve climate problems. Would citizens go along with it, or would they rather see their taxes spent on schools, hospitals, housing and pensions at home?

Meanwhile, the US, unconstrained by the Kyoto straightjacket, is proving fertile ground for new ideas and initiatives. Ted Nordhaus and Michael Shellenberger, of the Breakthrough Institute in Oakland, argue that the G8 should “abandon the Church of Kyoto” altogether, and instead spend US$100 billion to $250 billion per year on clean energy. California is setting a fine example with its energy efficiency regulations, while Texas and Maine are going ahead with major wind power programmes. Regional greenhouse-gas trading initiatives are also under way, notably among northeastern states. And the US as a whole is moving towards a cap and trade carbon regime under the next president – no matter who wins. They may be guided by Peter Barnes’s popular “cap and dividend” initiative – a cap, auction and trade system which would redistribute the proceeds to citizens, instead of letting corporations take the profits as under the EU’s Emissions Trading Scheme.

These are all good ideas, but they are insufficient to tackle the urgent global problem that faces us. To reach zero net emissions by 2050, we need a new and effective global climate agreement. It is with this in mind that I created the framework set out in my book Kyoto2. Instead of country allocations, greenhouse gases would be controlled “upstream”, at or close to production, no matter where in the world. In the case of fossil fuels, the fuels themselves would be controlled at key points in the production process, for example at the oil refinery or coal washing station. A cap on total emissions would be set, itself contracting over time. Permits to produce fossil fuels (based on their carbon content) and other industrial greenhouse gases (such as HFC refrigerants, or CO2 from calcinating lime in cement factories) would be issued up to the cap, and sold in a global auction.

Roughly speaking, this auction would raise $1 trillion per year – which would be used to finance a major programme of expenditure in clean energy, energy efficiency, conserving forests and other ecosystems, and climate-friendly farming. There would also be $100 billion per year to help poor countries to adapt to climate change, as well as spending to address the health implications of a warmer world and the extra costs of emergency relief. These measures would be backed up by an international regulatory system similar to that of the Montreal Protocol, applying global standards for energy efficiency, and eliminating powerful industrial greenhouse gases, supported by a multilateral fund to meet the costs of poor countries.

Kyoto2 would operate as a three-pronged fork combining carbon price, substantial funding to address the causes and the consequences of climate change, and a regulatory approach to penetrate beyond the reach of carbon markets. As such it promises effectiveness (delivering the United Nations Framework Convention on Climate Change Objective), efficiency (doing so at minimum cost) and equity (among rich and poor, between countries and across generations).

The prevailing view on climate agreement reached in Hokkaido is that the G8 fluffed it. But the truth is, it’s a lot better than nothing, and as good as could be expected under a Bush presidency. But when the G8 meet next year at La Maddalena, in Italy, they must do a lot better, and agree the essentials of a new climate agreement that really is up to the job. Until then, it’s up to us all to keep up the pressure.

‘Kyoto2: How to Manage the Global Greenhouse’, by Oliver Tickell, is published by Zed Books.

 Homepage photo by Toby Keller