A better way to fight climate change
By Jeffrey D. Sachs
Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University. He is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals.
Of all major world regions, Europe has worked the hardest to
implement policies aimed at countering human-caused climate change.
Yet the cornerstone of Europe's approach - a continent-wide
emissions trading system for the greenhouse gases that cause
climate change - is in trouble. That experience suggests a better
strategy for both Europe and the rest of the world.
The basic story of human-caused climate change is becoming clearer
to the global public. Several gases, including carbon dioxide,
methane, and nitrous oxide, warm the planet as their concentrations
in the atmosphere increase. As the world economy grows, so do
emissions of these gases, accelerating the pace of human-caused
climate change.
The main greenhouse gas is carbon dioxide. Most CO2 emissions
result from the burning of fossil fuels - coal, oil, and natural
gas - for energy, global consumption of which is rising as the
world economy grows. As a result, we are on a path to very
dangerous levels of CO2 in the atmosphere.
Twenty years ago, the world agreed to reduce sharply emissions of
CO2 and other greenhouse gases, but little progress has been made.
Instead, the rapid growth of the emerging economies, especially
coal-burning China, has caused global CO2 emissions to soar.
Dangerous changes in climate have already begun. If the world
continues on its current trajectory, global temperatures will
eventually rise by several degrees centigrade, causing higher sea
levels, mega-storms, severe heat waves, massive crop failures,
extreme droughts, heavy flooding, and a sharp loss of
biodiversity.
Yet changing the world's energy system is a daunting challenge,
because fossil fuels are so deeply embedded in the workings of the
global economy. Oil provides the main fuel for transportation
worldwide. Coal and gas are burned in huge and growing amounts to
produce electricity and to provide energy for industry. How, then,
can we sustain worldwide economic progress while cutting back
sharply on carbon emissions?
There are essentially two solutions, but neither has been deployed
on a large scale. The first is to shift massively from fossil fuels
to renewable energy sources, especially wind power and solar power.
Some countries will also continue to use nuclear power.
(Hydroelectric power generation emits no CO2, but there are only a
few remaining places in the world where it can be expanded without
major environmental or social costs.)
The second solution is to capture CO2 emissions for storage
underground. But this technology, called carbon capture and
sequestration (CCS), is not yet proven on a large scale. One
approach is to capture the CO2 at the power plant as the coal or
gas is burned. Another is to capture it directly from the air using
specially designed chemical processes. Either way, CCS will require
significant investment in further research and development before
it becomes a viable technology.
The big problem is time. If we had a century to change the world's
energy system, we could feel reasonably secure. Yet we must
complete most of the transformation to low-carbon energy by
mid-century. This is extraordinarily difficult given the long
transition period needed to overhaul the world's energy
infrastructure, including not only power plants, transmission
lines, and transport systems, but also homes and commercial
buildings.
Few economic regions have made much progress in this
transformation. In fact, the United States is now investing heavily
in natural gas without recognizing or caring that its shale-gas
boom, based on new hydraulic-fracturing technology, is likely to
make matters worse.
Even if the US economy shifts from coal to natural gas, America's
coal will probably be exported for use elsewhere in the world. In
any event, natural gas, though somewhat less carbon-intensive than
coal, is a fossil fuel; burning it will cause unacceptable climate
damage.
Only Europe has tried to make a serious shift away from carbon
emissions, creating a system that requires each industrial emitter
to obtain a permit for each ton of CO2 emissions. Because these
permits trade at a market price, companies have an incentive to
reduce their emissions, thereby requiring them to buy fewer permits
or enabling them to sell excess permits for a profit.
The problem is that the permits' market price has plummeted in the
midst of Europe's economic slowdown. Permits that used to sell for
more than $ 30 per ton before the crisis now trade for under $ 10.
At this low price, companies have little incentive to cut back on
their CO2 emissions - and little faith that a market-based
incentive will return. As a result, much of European industry
continues on a business-as-usual energy path, even as Europe tries
to lead the world in this transformation.
But there is a much better strategy than tradable permits. Each
region of the world should introduce a tax on CO2 emissions that
starts low today and increases gradually and predictably in the
future.
Part of the tax revenue should be channeled into subsidies for new
low-carbon energy sources like wind and solar, and to cover the
costs of developing CCS. These subsidies could start fairly high
and decline gradually over time, as the tax on CO2 emissions rises
and the costs of new energy technologies fall with more experience
and innovation.
With a long-term and predictable carbon tax and subsidy system, the
world would move systematically toward low-carbon energy, greater
energy efficiency, and CCS. Time is short. The need for all major
world regions to adopt practical and far-sighted energy policies is
more urgent than ever.
Copyrights: Project Syndicate