Sunday, January 28, 2007

The qantum shift in Climate Change

Tony Blair has said there has been a quantum shift in climate change in the US and there is now a possibility of a deal as long as India, China and other similar emerging economies join in (China and India are 2nd and 4th worst emitters respectively). Yet recent comments by an Indian minister seems to think they should still be allowed to emit at their current levels.

Which kind of leaves us in deadlock. The US is not going to accept caps without the major emerging economies also accepting caps. Neither side seems to be willing to shift. Is there anything that break the deadlock?

There is.

The US, Europe and other interested countries sign a treaty to create caps and a global emissions trading scheme. But included in the treaty is an agreed method to calculate the carbon cost of goods and services. This serves as a standard and is used across the economy. Companies (whether in the signatory countries or not) can receive an audit to show they are below the standard. This allows them to purchase less carbon credits as their goods and services fall below the standard (or even sell carbon credits).

Now to deal to recalcitrant countries. All goods and services receive a carbon cost whether they are produced/provided by the signatory countries or not. Here is the key aspect. The goods and services need only to be consumed in the signatory countries. Companies wanting to sell goods and services within signatory countries would have to purchase carbon credits.

The majority of the exports from the emerging countries go to be consumed in the developed world. Without this methodology, carbon caps will only see the carbon production transfered from the developed world to the developing world. Nothing is gained. By requiring carbon credits at point of consumption forces the producing companies to take the lead in reducing their carbon emmissions as they now have an economic incentive to do so.

A side benefit of this methodology is that it will turn the externality of carbon emission generated in the transport of products (currently not included) into an internality. This will allow the price of the good to better reflect the true cost of production.



Seamus McCauley said...

That's brilliant.

Simon Cast said...

Brilliant? Possibly :) More a step on the road. No one thing will solve all the problems but it easily implemented and solves a major stumbling block.

Anonymous said...

All to true. You could add to that a social responsibility tax(taxing countries who allow child/slave like labor) and other such international ethical peer pressure measures and the world would become a better place.
Sadly world leaders are not willing to pay the price of forcing consumers to pay the price. The hidden environmental/ social/ ethical price tag is too big and to complicated for allot of people to care for.
It would be a great start if your proposition caught on :) I hope it will.