To slow warming, tax carbon

Written by New York Times | Updated: Nov 18 2012, 02:05am hrs
Putting a price on carbon is fundamental. If consumers and businesses do not bear the cost of their carbon pollution, they wont do much about it. This price should not discriminate between locations: Global warming is global

Dieter Helm

Oxford, England Environment played only a modest role in the recent American presidential election. President Obama lauded his new fuel-efficiency standards and support for renewable energy sources, while Mitt Romney faulted the president for rising gasoline prices and new restrictions on coal mining.

But while environmentalists have lamented Americas slow response to climate change, the United States is actually on a much better path than Europe. It is making the transition from coal to gas, it is investing in new energy technologies, and its carbon emissions are falling faster than Europes.

This is not to paint too rosy a portrait. Since world leaders met in Kyoto, Japan, in 1997 and agreed to reduce the carbon dioxide emissions of industrialized countries by about 5 percent below 1990 levels by 2012, virtually nothing has been done to slow the buildup of greenhouse gases in the atmosphere. In 1990, carbon emissions were rising at less than 2 parts per million per year. Now they are rising at nearly 3 p.p.m. per year.

How could so little have been achieved, despite all the already considerable economic costs of climate change Europe, in particular, has put great effort into being a world leader on climate change and has spent lots of money on wind farms and rooftop solar panels. Sadly, this has had almost no global effect.

The main reason emissions have been going up is the rise of coal in China, in particular. Coal is now the source of 30 percent of the worlds energy, up from about 25 percent in the mid-1990s. Europes initiatives have had no effect on Chinas policies or the global coal burn. Indeed, the initiatives have probably made the situation worse. As the price of energy has increased using current renewables, energy-intensive industries are being driven offshore, only for their products to be imported back into the European Union.

By the standards of the Kyoto accord, Europe looks good. But those standards measure each countrys production not consumption of carbon. This has created counterproductive incentives. If steel plants are closed in Britain and replaced by steel imports from China, Britain counts that as a success. Between 1990 and 2005, Britains carbon production fell by about 15 percent but its carbon consumption rose by 19 percent, when imports were counted. The rest of Europe has been deindustrializing too, and this has also encouraged energy-intensive production to move overseas.

Contrast this with the United States, which declined to ratify the Kyoto agreement because China and other developing countries were not required to do much. America has only the crudest energy policy. And yet its carbon emissions have been falling sharply. Why Because the United States is switching from coal to gas. At the same time, Europe is moving from gas, which is expensive there, to much more polluting coal especially in Germany, which is phasing out its nuclear plants following the Fukushima disaster in Japan.

Europes answer to global warming is wind farms and other current renewables. But the numbers wont ever add up. It just isnt possible to reduce carbon emissions much with small-scale disaggregated wind turbines. There isnt enough land for biofuels, even if corn-based ethanol were a good idea (a questionable proposition). Current renewable-energy sources cannot bridge the gap if we are to move away from carbon-intensive energy production. So we will need new technologies while in the meantime slowing the coal juggernaut.

There are three sensible ways to do this: tax carbon consumption (including imports); accelerate the switch from coal to gas; and support and finance new technologies rather than pouring so much money into wind and biofuels.

Putting a price on carbon is fundamental. If consumers and businesses do not bear the cost of their carbon pollution, they wont do much about it. This carbon price should not discriminate between locations: Global warming is global. If China does not put a price on carbon, and Europe does, then China will effectively receive a huge export subsidy.

The good news is that many new energy technologies are coming down the track: next-generation solar, geothermal and even nuclear technologies, and methods to harness the energy of gravity via the oceans tides. There have been major breakthroughs in solar. Work is also under way to develop better energy-storing batteries, smart grids and electric cars. All of those advancements will need public support.

What is missing across Europe, the United States and China is a global agreement on a proper carbon price. More than any other measure, a tax on carbon consumption is whats needed to slow the warming of the planet.

(Dieter Helm, professor of energy policy at Oxford, is the author of The Carbon Crunch: How We're Getting Climate Change Wrong and How to Fix It)