I have just finished what feels like a really important book, Kyoto2 by Oliver Tickell. The author starts from all the right premises in terms of action on climate change, including arguing for stabilising concentrations of carbon dioxide at far, far lower levels than current policy is yet ready to accept – 300-350 parts per million rather than the 550 ppm in the Stern Review. The programme of action he sets out is based on a global auction of greenhouse gas permits within an overall cap on emissions. The funds can then be used to smooth the transition to a low-carbon economy.
The framework is simple, more so than other schemes based on per capita rights or household quotas for emissions. But of course it leads pretty rapidly to the enormous complexity of implementation – what in fact it means to adjust economies to the added costs of internalising the full cost of carbon. But at least we are then focused on the right question, which is how to adjust rather than whether.
There is a summary of the proposals here.
One of the big choices though is whether policy should continue a route of ’emissions trading’, such as an auction scheme, at all given that the EU Emissions Trading Scheme has been pretty desultory. It is all very well to design a framework for markets to do their thing, but it is all to easy for powerful groups, including polluters, to lobby the design so that it works for them and not for the rest of us. Consumers end up paying for emissions trading and it really grates when all we are really paying for is windfall surpluses for polluters and ineffective outcomes in terms of carbon reductions. Because of the opaque way that environmental charges are levied onto consumers, it is a classic case of misselling and it is not hard to predict anger and a backlash as the economy turns tough.
The alternative – at least at national level – is a system of carbon taxes. Oliver Tickell, I think, concludes that we need to hang on in there with emissions trading and make it work, building from the European to the global level. The good news, at least, is that we would know where we want to get to.