Equity begins at home

Politicians must put fairness at the heart of domestic – not just global – climate strategies, argues David Nash, or the poor will end up bearing a disproportionate burden.

Tomorrow (23 July), ministers from the BASIC countries – the powerful grouping of developing-country heavyweights comprising Brazil, South Africa, India and China – are to meet for the third time since the bloc’s formation prior to last year’s summit in Copenhagen. The sole theme of a special session taking place during their high-profile deliberations in Rio de Janeiro will be familiar to anyone involved in international climate-change negotiations.

“Climate equity” has a long and recurrent history in talks to agree a global framework for reducing greenhouse-gas emissions to levels that are deemed safe by climate scientists. The principles of “historical responsibilities”, “respective capabilities” and the “right to development” are engrained in the United Nations Framework Convention on Climate Change (UNFCCC) and have been instrumental in cementing the dividing line between what is expected of industrialised countries and their poorer, developing counterparts. This dictates, rightfully, that rich nations should take the lead in cutting their carbon emissions and provide the finance, technology and capacity-building support to enable poor countries to leapfrog carbon-intensive growth in favour of cleaner, more sustainable development.

However, putting this burden-sharing concept into practice remains contentious (and, given doubts over the future of the Kyoto Protocol, the prospects of managing it bleak). The purpose of the BASIC meeting will be to shore up support for “climate equity” after what many developing countries considered to be a frontal attack on the very principle at Copenhagen – namely, the not so subtle attempts by the Danish hosts to ditch the two negotiating tracks in favour of a single all-encompassing agreement, in the quest to tie major emerging economies such as China and India into taking on tangible emissions cuts.

And yet, while an equitable division of labour between countries seemingly remains a prerequisite for achieving any sort of agreed outcome at Cancún and beyond, the principles of fairness and social justice have received relatively scant attention in climate-change policymaking at the domestic level. Now analysts are beginning to think in terms of national equity and, specifically, how climate-change policies impact different social groups within countries.

Not only are the poorest individuals, households and communities in society least responsible for mounting emissions and typically more exposed to heat waves, flooding and the many other possible impacts of a changing climate, they are also particularly vulnerable to the indirect effects of global warming: namely, the policy responses drawn up by governments to curb carbon-dioxide emissions.

In developed countries, consumer-funded mechanisms are playing an increasingly important role in the policy mix to meet carbon reduction and renewable-energy targets. But while the logic of pricing carbon to simultaneously curb demand and generate revenue for climate-friendly policies is an attractive one to policymakers, it tends to lead to regressive effects of the first order.

Take the energy sector. In the United Kingdom, the outgoing government estimated that the suite of low-carbon energy policies set out in its Low-carbon Transition Plan would cumulatively increase domestic energy bills by an average of £125 (US$186) each year by 2020 compared with 2009 prices. Since poorer households spend a greater proportion of their income on heating and powering their homes, racking up the costs of electricity and gas will hit their pockets the hardest. So for instance, while the flagship European Union Emissions Trading Scheme (ETS) has led to higher energy bills for all consumers as suppliers pass on the costs of buying ETS permits, poorer households, as a proportion of their income, pay more.

Measures that indirectly increase the price of energy, such as requirements for electricity companies to source a proportion of supply from renewables (the Renewables Obligation as it is known in the United Kingdom) and roll out smart meters, are all the more regressive as they are funded by passing costs on to consumers at a flat rate.

Introducing a carbon tax – a measure that has been endorsed by both parties in the new UK coalition government, the Conservatives and the Liberal Democrats – would, on the face of it, have similar repercussions for the least well off. Modelling carried out using the tax-benefit calculator created by UK think tank the Institute for Public Policy Research (ippr) suggest that a levy on domestic fuels including electricity, set at £25 (US$37) per tonne of carbon dioxide, would, as a proportion of income, hit the poorest households in the United Kingdom the hardest – taking 1.07% off their average weekly income before housing costs and 1.68% after housing costs (see table below). Put another way, those in the lowest income decile would, in proportional terms, lose almost four times as much from a carbon tax as those in the highest decile.

Undeniably, these sorts of measures would be more socially acceptable if increased energy costs for low earners were offset elsewhere in the tax system, for instance through cuts in VAT. Poverty campaign groups might also be more enthusiastic if the benefits of climate policies were shared out in a more progressive manner. In some cases they have been. The previous government’s Warm Front programme has helped to bring energy efficiency retrofitting to low-income households, as has the Carbon Emissions Reduction Target (CERT), which obliges energy providers to make carbon savings by fitting insulation and renewing heating systems in the poorest homes.

On the other hand, the feed-in tariff for microrenewables, which became operational in the United Kingdom in April this year, is realistically-speaking, only accessible to households that can afford the high upfront costs of installing solar photovoltaic panels. The same is true of electric cars, highly-efficient home energy appliances and other expensive green innovations that promise net savings, but which currently remain the preserve of the better-off. In the case of the feed-in tariff, payouts for generated electricity are funded from energy bills, meaning that poorer households are paying disproportionately more towards a scheme that they are unable to benefit from. The result: a double whammy of disadvantage.

At the regional level, climate policy needs simultaneously to take steps to curtail the pain and maximise the gain in the transition to a low-carbon economy. Proactive and well-targeted government policies to stimulate clean energy technology markets promise new job creation and an opportunity to diversify local economies and it is essential that these opportunities are targeted foremost at those regions most at risk from decarbonisation, such as, in the case of the UK, the few remaining industrial and manufacturing hubs of north England and south Wales.

In view of the tough times ahead for poorer communities in the United Kingdom, and many other countries, given the impending cuts in public spending, blanket emissions-reduction policies cannot be left to mirror the mistakes of 1980s economic restructuring and further exacerbate Britain’s marked regional disparities. Instead, government should support innovation in manufacturing to help at-risk firms lower the carbon footprint of their operations, increase efficiency and protect jobs.

Just as equity will be crucial to a successful global emissions reduction settlement, as BASIC ministers will reiterate at their meeting this week, ensuring fairness is at the heart of national climate-change policy should be a key priority for governments. The challenge for climate progressives is to develop new thinking and solutions that rapidly and effectively reduce emissions but do so in a way that ensures the costs are not disproportionately borne by lower-income groups, either within developed countries such as the United Kingdom or developing nations. Yet, if the conventional way of doing climate policy is anything to go by, we have yet to truly grasp the nettle when it comes to national climate equity.

David Nash is a researcher in international climate change at the Institute for Public Policy Research (ippr).

Homepage image from Shelter