What about other countries?

In my last two blogs I reasoned that there is a sufficient risk of climate change to justify some action and that an ETS is the cheapest solution and the most likely to succeed. But I can already hear you saying "that's all well and good but if China keeps pumping smoke in the air, it wont matter what Australia does". It is certainly true that it is global emissions that need to be reduced. So setting a local emissions cap and running an ETS to achieve it wont solve the problem if we are on our own.

Of course there is an argument that we should so the right thing independent of others. And that others will follow if we set the example. Actually I'd say Europe is setting the example already and Australia and USA are laggards. But Copenhagen so far doesn't look likely to lead to a global consensus. Africa wants the Kyoto protocol to be extended because it excludes developing nations. China is offering a 40% cut in emissions intensity because it sounds better than it is. The rich world wants everyone to share the cuts which sounds more reasonable than it is. So what's the right approach? I give three options and what I think is the only fair and practical solution:

The Kyoto Protocol requires rich nations to make cuts in the total emissions of a collection of "greenhouse gases" of 5.2% from 1990 levels by 2012. The protocol is still active and does not expire after 2012. But the world is discussing the next thing because there are three major problems with it. The first is that it excludes developing nations like China which is now the worlds largest carbon emitter. The second is that the worlds second largest emitter (the USA) has not ratified it so isn't playing the game. The third is that there's no real mechanism to enforce compliance or extract penalties. So this option wont really deliver a long term solution.

Developing nations (notably China and India) talk about a scheme which requires countries to reduce their emissions intensity. What does that really mean? Emissions intensity is emissions as a percentage of GDP. China is offering a 40% cut in emissions intensity by 2020. China's GDP growth is about 8% per year and if it continues at that rate then China's GDP will have increased by 115% by 2020. So the offer of 40% cut in emissions intensity actually means about a 30% increase in total emissions. There are two major problems with this approach. The first is that it wont meet the goal of reducing absolute global emissions to the levels that collective scientific wisdom says is the safe level. That makes it pointless right from the start. The second is that it wont be perceived as fair either by rich nations (that have lower GDP growth) and very poor nations (that also have low GDP growth) - so it is unlikely to to lead to a global agreement. Think about it - if you set a global cap and then allow faster growing countries to emit more, then slower growing countries have to cut even more than they would under a flat target scheme.

Fortunately there is a fair and equitable way to share the burden of carbon emissions across the world and to do so in a way that will actually be effective in achieving emissions targets. That is to set a global cap each year and to share it equally per head of population and to allow countries with emissions below the cap (mostly the poorer and more populated ones) to sell permits to the richer ones. This per-capita emissions cap and trade system has three clear advantages. First is that it sets a clear cap each year that would be in line with the scientific targets (in other words it actually achieves the goal). Second it is self-evidently fair and equitable because poorer nations will be allowed to grow and sell permits whilst richer nations will need to buy permits or cut emissions. Also there is something intrinsically fair about every human inhabitant of the earth sharing equally and independent of national boundaries or any other variables. The third benefit is that this approach is perfectly aligned with national ETS schemes because it will immediately set a global market price for carbon emissions. Therefore it drives the right behaviour. Richer countries will have a commercial incentive to switch to clean power - and when they do so they will need to buy less permits from poorer countries. Poorer countries can burn coal but the more they burn the less available permits for sale.

This impact of this scheme on Australia is that we would all still pay about the same amount for our emissions (I estimated my share to be $635 per year in my first blog) but the government would end up paying most of this income to poorer nations. Personally I don't mind. I feel lucky to live in this country and I already give more than that to international charities anyway. And besides, it would be a short term thing - as Australia switches to clean power and poor countries are slower to do so, the payments would quickly decrease.

So far in this blog I've said why action is justified (it's an insurance policy) and how to do it at both a national and international level. But what about you and me? What can we do at a micro level in our own homes and cars to reduce Australia's emissions? Yep, that's the next blog!