Tuesday, May 30, 2017

Climate change: A hard transition

At the moment greenhouse gas concentrations are rising, and the global temperature with it. So what would it take to turn this around? A global carbon tax of US$100 or more:

A group of leading economists warned on Monday that the world risks catastrophic global warming in just 13 years unless countries ramp up taxes on carbon emissions to as much as $100 (£77) per metric tonne.

Experts including Nobel laureate Joseph Stiglitz and former World Bank chief economist Nicholas Stern said governments needed to move quickly to tackle polluting industries with a tax on carbon dioxide at $40-$80 per tonne by 2020.

A tax of $100 a tonne would be needed by 2030 as one of a series of measures to prevent a rise in global temperatures of 2C.

Which is a hell of a transition. But that's what happens if you piss around against a fixed deadline: it gets harder and harder.

At the moment, NZ carbon prices are currently ~NZ$17, or ~US$12 / ton. Assuming we stick with the ETS, we need to increase that significantly, which means either reducing supply or increasing demand. Cutting out pollution subsidies will help reduce supply, while brining agriculture (which currently gets a free ride) into the ETS should increase demand. Ultimately though we need to move to a model where the government sets the number of available units (or effectively sets it through carbon tax rates) and ramps it down to zero or near zero in a known pathway over a few decades. The question is whether any government is willing to take that long-term step - and whether we can trust National not to welch on it, as they did on the supposed long-term ETS.