After Kyoto, a new economics?

In the results of a survey out today, 800 sustainability experts from around the world have a clear message for governments: make greenhouse gases more expensive. Jeff Erikson explains.

At the end of this year, the first commitment period of the Kyoto Protocol will expire. That’s not because it has succeeded in tackling climate change – far from it. While the global treaty drawn up in 1997 has had many positive effects, getting carbon reductions down to a safe level has not been one of them.

The climate challenge looms larger than ever, and the governments of the world still have no clear plan to addr­­ess it. Japan, Canada and Russia have refused to sign up to a second period of binding cuts, while the United States never ratified the global treaty. So what should be done as Kyoto part one breathes its final breaths? And what will it take to make real progress?

Earlier this year, SustainAbility and GlobeScan surveyed more than 800 sustainability experts and practitioners located in more than 70 countries, asking for their views on climate-change policy. We asked our respondents to rank the effectiveness of various mechanisms to address climate change. Notably, the tools garnering the most support – economic instruments, regulatory approaches and technology development – are those that will change the cost of emitting greenhouse-gas emissions and, consequently, change the economics of energy.

It seems that this group of experts recognises that better understanding of the impacts of global warming alone won’t change behaviours. The environmental community has been trying that for about two decades. Real, lasting and widespread transformation requires change to how carbon is priced – and that will occur most effectively through the use of economic instruments, regulatory approaches and technological progress.

Even corporate respondents, who unsurprisingly favour technological answers to climate change more than any other sector, also see comparative value in regulatory approaches and economic instruments. Among the latter, taxes on greenhouse-gas emissions are, by a wide margin, seen as the most likely to be effective in providing global solutions.

Surprisingly, emissions-trading schemes are seen as the least effective economic instrument (this compared to its second place ranking in a similar 2006 survey). This result may be influenced by the evident shortcomings of the European Union’s Emissions Trading Scheme, which has so far resulted in neither the intended reductions in carbon-dioxide emissions, nor a stable and substantial price on carbon.

Europeans, however, tend still to have some faith in regulatory approaches and are less convinced by technology than respondents from other regions.

But overall results show a strikingly low level of confidence that international agreements, such as a successor to the Kyoto Protocol, will result in adequate solutions. This is reflected in the relatively low expectations for the coming Rio +20 sustainable development conference in June, as well as the distinct lack of buzz around the annual UN-led climate-change conference in Durban last December.

So our experts are pretty clear on what must be done to address climate change in the post-Kyoto Protocol era: change the cost of greenhouse-gas emissions, change the economics of energy. Make it more expensive to emit more, and less expensive to emit less. That is what will really drive behaviour change, at the institutional and the individual level. We don’t need a complex scheme of capping and trading. Instead, governments should make use of taxes, tax credits and rebates, and support technology development.

Does this mean that companies and individuals should sit back and wait for governments to act? Certainly not. We know how great an influence business has in shaping public policy in many countries throughout the world. The voices opposing action on climate change are, at present, loud enough to stymie progress. What is required is for those companies who understand the implications of climate change – both to their business and to the broad economy – to make their voices more prominent.

It is not enough “not to oppose” policies and actions that move us toward a low-carbon economy. Policymakers need to know that business supports action on climate change because it is essential for long-term commercial success.

For the full results of our climate change survey, click here.

Jeff Erikson is senior vice president at SustainAbility

Homepage image by Onearth