Energy Blog: Alternative Approach to Climate Change Negotiations

UNFCCC Treaty nationsby Andy Silber

This winter leaders from across the world will meet in Paris for the 21st yearly session of the Conference of the Parties (COP 21) to the 1992 United Nations Framework Convention on Climate Change (UNFCCC) with the objective to achieve a legally binding and universal agreement on climate from all the nations of the world. I predict that they will fail. The Pope, Ban Ki-moon and Bono could get on stage with the ghosts of Nelson Mandela, Martin Luther King, and Jesus imploring for us to take action and still nothing would happen.

“How do I know nothing will happen” you might ask. Well for one, it’s been 21 years and nothing has happened. The other is that there are two fundamental forces at play. On one side are the developed countries (e.g. USA, Canada, Australia, Europe, Japan) who are willing to act, but don’t want to cripple their economies. These countries want the baseline to be current emissions (“We’ll reduce our emissions by 20% from 2010 level by 2050” offers the representative from some random rich country), but that the poor countries should also make reductions, though not as drastic. On the other side are the less developed countries (e.g. China and India), who won’t agree to a treaty that locks in poverty for their people. These countries also feel that the problem was created by the rich countries, so they should pay for fixing it. These countries feel we should look at emissions on a per capita basis and not use historical emissions as a baseline. Otherwise the rich countries benefit from their past pollution.

The Obama administration is unlikely to agree to a treaty that is fair to the poor countries and even if they did, it wouldn’t be able to get it through the Senate (I doubt Obama could get a bill stating that “clean water is a healthy beverage” passed, but that’s a different issue). The Chinese and Indians are unlikely to agree to binding emissions targets that puts their economies at a disadvantage to America’s. And the representatives of countries like Bangladesh, that face serious climate impacts but didn’t have anything to do with creating the problem, are unlikely to agree to a treaty unless it helps them mitigate the impacts to changing weather and rising seas. I don’t mean to say there’s no hope, only the approach we’ve been taking for 21 years is going to continue to fail.

Here’s an alternative approach that might have more success (we wouldn’t know until the year 2035 if it’s as bad). Rather than try and set a different binding limit for each country, we agree to a few policies that are applied in every country.

  • No subsidies for fossil fuel extraction or exportation. That doesn’t mean you can’t drill for oil or natural gas, but that it can’t be subsidized by tax dollars or extraction allowed on public land without charging fair market value for that right.
  • Every country implements a carbon tax at an agreed upon level (of course higher carbon taxes would be allowed). This level would start out low (say $20 a ton) and increase by a moderate amount each year (say 20%). The bulk of the money raised by the carbon tax would stay in the country and could be used to improve mass transit, hire teachers, reduce other taxes or any other use that the local government chose.
  • A fraction of the funds raised by the carbon tax (say 10%) would go to fund an international effort to mitigate climate impacts in the developing world and to support climate refugees.

One interesting advantage of this approach, is that you might be able to achieve most of this (other than the international fund) via the WTO. It’s possible that the EU could impose tariffs on incoming products from countries that don’t have a carbon tax, claiming that not putting a cost on carbon is an illegal subsidy. If they won that case, it would quickly create a huge impetus to get all countries on the same page, rather than fight a trade war on the right way to add a cost to carbon.

Let’s look at how this concept would impact three countries:

  • USA: The carbon cost would accelerate the death of coal. No new coal plants would be constructed anywhere, so the already struggling effort to export coal would also die. Since natural gas has less carbon, this market would be less severely impacted, but the rush to build gas-fired plants would slow. Depending on the price set on carbon, the LNG export market might be impacted, but natural gas is so cheap here compared to world markets it would probably continue. I expect that most of the revenue from the carbon tax would be used to reduce other taxes and not go into large public works, but I’d love to see some of the revenue used to rebuild our electric grid to support more renewable power.
  • China: Since they’re already putting a cost on carbon this might not have any impact in the short term. China is already making huge investments in renewables. The biggest change might be to increase the efficiency of the operating coal plants. It would also probably increase the investments in nuclear power.
  • Bangladesh: Since the electricity production per capita in Bangladesh is 2% of what it is in the US, their carbon tax would be pretty small. On the other hand, since most of the arable and populated land in Bangladesh is near sea-level, they will be in need of the kind of international support that the carbon tax will fund. In net, they should come out ahead in this proposal.

I’d love to hear from someone with some knowledge of WTO rules if this is possible.