tag:theconversation.com,2011:/ca/topics/carbon-tax-320/articlesCarbon tax – The Conversation2024-02-16T16:17:37Ztag:theconversation.com,2011:article/2135012024-02-16T16:17:37Z2024-02-16T16:17:37ZState-owned energy companies are among the world’s most polluting – putting a price on carbon could help<figure><img src="https://images.theconversation.com/files/575920/original/file-20240215-30-unjkap.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C6000%2C3997&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/leh-ladakh-india-aug-7-petrol-316059917">Tooykrub/Shutterstock</a></span></figcaption></figure><p>Existing measures to cajole companies to decarbonise, with subsidies for renewable energy and carbon taxes, have failed to prevent <a href="https://theconversation.com/fossil-co-emissions-hit-record-high-yet-again-in-2023-216436">global emissions rising</a>. Does state ownership, particularly in the energy sector, make this process easier? </p>
<p>State-owned energy firms that search for, produce and refine fossil fuels are among the most polluting organisations in the world. But because governments have a big say in how they operate, it might be considered easier for their emissions to be rapidly phased out by treating them as extensions of the government, without needing to rely on the incentives, fines or sanctions usually necessary to make private firms act. </p>
<p>So far, however, things have not proved to be so simple.</p>
<h2>A blessing or a curse?</h2>
<p>When it comes to climate change, ownership of a polluting company creates a dilemma for a government. On the one hand, state-owned firms are better equipped to bear the costs of decarbonisation as they can draw from a tax base (a more reliable revenue source) to subsidise green measures.</p>
<p>But ownership of a polluting, state-owned firm also creates conflicting incentives within and across different branches of a government. Some ministries may rely on the income generated from these industries (such as the <a href="https://www.aramco.com/en/sustainability/responsible-business/supporting-communities?gclid=Cj0KCQiAsburBhCIARIsAExmsu43EJVq6WyagPW7-djngYoguvH71aG8vsLPB1LyawZscVYGVnKvTZIaAr5YEALw_wcB">Saudi Arabian Oil Group</a>) to finance public services or <a href="https://www.nbim.no/en/the-fund/about-the-fund/">support pensions</a>. Other ministries, perhaps responsible for environmental protection, will be tasked with curtailing the activities of these firms to cut pollution.</p>
<p>This conflict indicates that state-owned firms are not simply “instruments of the state” that can be easily directed to cut emissions quickly. The ability of governments to use state-owned firms to tackle climate change depends on various governance issues <a href="https://doi.org/10.1017/mor.2021.25">within the state bureaucracy</a>.</p>
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<img alt="A yellow oil platform in a fjord with a red ship nearby." src="https://images.theconversation.com/files/575922/original/file-20240215-28-7iwhzo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575922/original/file-20240215-28-7iwhzo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575922/original/file-20240215-28-7iwhzo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575922/original/file-20240215-28-7iwhzo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575922/original/file-20240215-28-7iwhzo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=506&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575922/original/file-20240215-28-7iwhzo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=506&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575922/original/file-20240215-28-7iwhzo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=506&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Surplus revenue of the Norwegian petroleum sector is invested in a government pension fund.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/oil-platform-tromso-189016517">V. Belov/Shutterstock</a></span>
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<p>Governments attempting to reform state-owned entities can face resistance from various stakeholders – ranging from the workers and managers of these firms to the users of subsidised services, who may object to higher tariffs to fund a transition to renewable energy. </p>
<p>State-owned utilities such as the Federal Electricity Commission in Mexico and Eskom in South Africa have previously defended their energy market monopolies against smaller competitors – in some cases, preventing more decentralised renewable energy generation. State-owned firms can exploit their close contact with policymakers to do this, and may even <a href="https://doi.org/10.1016/j.esd.2022.06.006">refuse to sign</a> purchasing agreements with independent power generators.</p>
<h2>State-owned firms and emissions</h2>
<p><a href="https://www.sciencedirect.com/science/article/pii/S1090951620300882">Our research</a> showed that for some countries with high CO₂ emissions per capita, the state played a big role in their major polluting industries. Countries such as China, India, Russia, Japan, Iran and Saudi Arabia, where state ownership is extensive in the energy sector, are among the world’s ten biggest emitters.</p>
<p>In countries with established state entities to manage the production of fossil fuel reserves, commitments to cut CO₂ emissions are often overridden by the incentive to generate revenue from oil. Yet, we also found that regulatory measures, such as “cap-and-trade” systems, can complement state ownership and produce positive outcomes by resolving conflicts between different government departments.</p>
<p>Cap-and-trade regulations compel firms to buy carbon emission allowances and pay fines if they exceed them. Under a cap-and-trade system designed to limit the total amount of pollutants a company can emit, firms can also sell unused allowances. Take <a href="https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en">the EU Emissions Trading System (ETS)</a>: state-owned companies within it have lower emissions than their equivalents elsewhere that are not covered by such schemes. </p>
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<img alt="An industrial scene on the banks of a river." src="https://images.theconversation.com/files/575938/original/file-20240215-18-ob6ko4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575938/original/file-20240215-18-ob6ko4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575938/original/file-20240215-18-ob6ko4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575938/original/file-20240215-18-ob6ko4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575938/original/file-20240215-18-ob6ko4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575938/original/file-20240215-18-ob6ko4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575938/original/file-20240215-18-ob6ko4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Carbon pricing schemes attempt to lower pollution by making emissions expensive.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/ijmuiden-nederland-08-22-2022tata-steel-2199596409">BZ Travel/Shutterstock</a></span>
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<p>This finding contradicts <a href="https://cepr.org/voxeu/columns/inefficiency-carbon-pricing-government-owned-companies">economic literature</a> that has argued state-owned firms are not sensitive to prices on carbon – the thinking being that state ownership shelters them from the same pressures private firms face to stay competitive, as fines from exceeding emissions allowances eat into private profits.</p>
<p>This puzzle can be solved by what we call the legitimacy effect. Governments that publicly commit to cap-and-trade or similar carbon pricing schemes have stronger incentives as a result of public pressure to ensure state-owned firms reduce emissions, compared with governments that opt out. While other obstacles to achieving this goal remain, the government’s commitment goes some way to generating the necessary pressure on state-owned firms – above and beyond the pricing itself.</p>
<p>So, while the <a href="https://www.ineteconomics.org/perspectives/blog/carbon-pricing-isnt-effective-at-reducing-co2-emissions">the effectiveness of carbon pricing schemes</a> is debatable, our research provides one reason to stick with them. Namely, that they constitute a means of tying a government’s reputation to emissions reduction, and so create incentives for that government to get serious about the emissions of its state-owned firms.</p>
<p>Given that these firms are often among the worst polluters, this can make a difference.</p>
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<img alt="Imagine weekly climate newsletter" src="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p class="fine-print"><em><span>Aldo Musacchio is affiliated with the National Bureau of Economic Research (NBER) as a Research Fellow. He also receives funding from the World Bank and the Inter-American Development Bank for projects associated with state-owned enterprises. </span></em></p><p class="fine-print"><em><span>Anna Grosman and Gerhard Schnyder do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Governments that publicly commit to carbon pricing are compelled to get their own house in order.Anna Grosman, Reader in Innovation and Entrepreneurship, Loughborough UniversityAldo Musacchio, Professor of Management and Economics, Brandeis UniversityGerhard Schnyder, Professor of International Management & Political Economy, Loughborough UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2237222024-02-16T03:07:23Z2024-02-16T03:07:23ZRoss Garnaut and Rod Sims have proposed a $100 billion-a-year fossil fuel tax – and it’s a debate Australia should embrace<figure><img src="https://images.theconversation.com/files/576107/original/file-20240216-28-n2qwvj.jpeg?ixlib=rb-1.1.0&rect=0%2C0%2C3842%2C2557&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Leading Australian economists Ross Garnaut and Rod Sims this week sought to shake up the carbon policy debate in Australia, by <a href="https://www.theguardian.com/australia-news/2024/feb/14/fossil-fuel-tax-australia-revenue-economists-ross-garnaut-rod-sims">proposing</a> a tax on the nation’s fossil fuel production. They claim it could raise A$100 billion in its first year and position Australia at the forefront of the low-carbon revolution.</p>
<p>The proposal has been rejected by the federal government and the Nationals, as well as business groups and the fossil fuel industry. The Greens have thrown their support behind the idea.</p>
<p>Garnaut and Sims have characterised their proposal as a “levy”. But it’s essentially a tax, applied to one sector of the economy: exporters of fossil fuels such as coal and gas, as well as importers of oil and diesel.</p>
<p>Australia’s recent political history tells us the road to a carbon tax is not smooth. However, as other nations race to restructure their economies in line with a low-carbon future, Australia risks being left behind. Whether to introduce a major, economy-shaping tax on fossil fuels is a conversation Australia must have. </p>
<h2>How would the plan work?</h2>
<p>The respected economists presented <a href="https://cdn.sanity.io/files/1pv5uha8/production/acd64198bc1248006ac829e4852c0c72b9e120e6.pdf">the plan</a> to the National Press Club this week. It involves a “carbon solutions levy” applied to all fossil fuel extraction sites in Australia (around 105 sites), and on all fossil fuel imports to Australia. The tax would presumably be calculated according to the emissions generated when the fuels are burned.</p>
<p>Garnaut and Sims say proceeds in the first year of the levy would be well over A$100 billion. They say the money should be spent on a rapid acceleration of Australia’s renewable energy expansion, as well as subsidising the development of low-carbon manufacturing for products such as steel and aluminium. </p>
<p>The proceeds would also be spent on cost-of-living relief for consumers, such as energy bill relief and scrapping the current excise on petrol and diesel fuel.</p>
<p>Garnaut told the National Press Club the global transition to net-zero represents a huge opportunity Australia must seize:</p>
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<p>We can use it to raise productivity and living standards after the decade of stagnation. Other countries do not share our natural endowments of wind and solar energy resources, land to deploy them, as well as land to grow biomass sustainably as an alternative to petroleum and coal for chemical manufacture. </p>
<p>In the zero-carbon economy, Australia is the economically natural location to produce a substantial proportion of the products currently made with large carbon emissions in Northeast Asia and Europe.</p>
</blockquote>
<p>And as Garnaut also outlined in his speech, climate change threatens Australia’s economy, which remains heavily dependent on exporting fossil fuels. </p>
<h2>Is the levy a good idea?</h2>
<p>Carbon dioxide emissions cause global warming, which damages the planet and its people. The purpose of a carbon tax, or levy, is to ensure polluting companies pay for the damage they cause. In theory, the taxes make polluting production processes more expensive than the alternatives, reducing demand for those products.</p>
<p>The world, including Australia, has committed to reaching net-zero emissions by 2050. It’s a big task and we need to act fast. Economists <a href="https://link.springer.com/article/10.1007/s10640-020-00436-x">broadly agree</a> carbon taxes are the most efficient, lowest-cost way to reduce greenhouse gas emissions. So the proposal makes good policy sense.</p>
<p>Australia had a carbon price, or tax, from 2012 until 2014. It was introduced by Labor but repealed by the Abbott Coalition government. The policy was working: <a href="https://theconversation.com/despite-its-imminent-demise-the-carbon-price-has-cut-emissions-29199">analysis</a> showed emissions in Australia’s national electricity market would have been 11 million to 17 million tonnes higher without the measure.</p>
<p>Of course, sound policy ideas do not always come to fruition. After more than a decade of the so-called “climate wars” in Australia, the term “carbon tax” remains politically unpalatable.</p>
<p>Unsurprisingly, the plan proposed this week was <a href="https://www.theaustralian.com.au/business/chris-bowen-and-david-littleproud-reject-carbon-solutions-levy-proposed-by-rod-sims-and-ross-garnaut/news-story/a28f15c7588a8b18845198d1162b4a5a">immediately rejected</a> by Labor and the Nationals. Even less surprising was the strong rebuff from business groups such as the Australian Chamber of Commerce and Industry, and the fossil fuel lobby. </p>
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<h2>The rest of the world got the memo</h2>
<p>Putting a price on carbon is not groundbreaking policy. <a href="https://unfccc.int/about-us/regional-collaboration-centres/the-ciaca/about-carbon-pricing">Many countries</a> do it – either as direct taxes or <a href="https://www.journals.uchicago.edu/doi/10.1086/717898">emissions trading schemes</a>.</p>
<p>Notably, from 2026 a European Union <a href="https://www.reuters.com/business/environment/eu-launches-first-phase-worlds-first-carbon-border-tariff-2023-09-30/#:%7E:text=Importers%20will%20from%202026%20need,carbon%20market%20when%20they%20pollute.">tariff on carbon-intensive imports</a> will come into effect. Known as the “carbon border adjustment mechanism”, it means importers will have to report on – and pay for – the emissions created when producing goods such as iron and steel. </p>
<p>The policy is designed to level the playing field for EU manufacturers that must pay a penalty for their own pollution. Imports from countries where a carbon price applies would be exempt from the tariff. </p>
<p>In coming years, we can expect other jurisdictions to implement similar policies to guard their domestic industries. Australia must protect its export revenue by expanding its production of low-carbon goods, or else find itself stuck with expensive, emissions-intensive products that no-one wants to buy.</p>
<p>It’s also important to remember Australia is a relatively small economy with little clout in global trade. To remain serious trading partners, we must come to the table with adequate climate policies.</p>
<p>And finally, imposing a carbon levy in Australia would ensure we get to keep the revenue for ourselves. The potential proceeds are enormous, and could be spent raising the living standard for all Australians.</p>
<p>My only real quibble with the plan is the proposal to set the levy at the level of the EU’s five-year average carbon price, currently around $90 a tonne. This puts Australia at the mercy of economic conditions in Europe. We’d be far wiser to determine the price ourselves.</p>
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Read more:
<a href="https://theconversation.com/carbon-pricing-works-the-largest-ever-study-puts-it-beyond-doubt-142034">Carbon pricing works: the largest-ever study puts it beyond doubt</a>
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<h2>Will such a levy ever happen?</h2>
<p>Garnaut and Sims know their policy is a bold one – and will have its detractors. But as the world comes to terms with the economic reality of climate change, Australia risks being left behind. </p>
<p>As Garnaut told the ABC, everyone is a winner under the plan, except fossil fuel companies which, <a href="https://www.abc.net.au/news/2024-02-14/economists-call-for-carbon-levy/103461496">he conceded</a>, “will hate it”. That may be true. But climate change is wreaking havoc on human communities, on natural systems, and on the global economy. It’s only fair that those responsible pay for the damage.</p>
<p>The political hurdles are high, but not insurmountable. Australia already penalises polluting companies via the <a href="https://theconversation.com/australias-safeguard-mechanism-deal-is-only-a-half-win-for-the-greens-and-for-the-climate-202612">safeguard mechanism</a>, which imposes a hard cap on industrial emissions. Ten years ago, such a policy seemed highly unlikely, but we got there.</p>
<p>A carbon levy of the type proposed is an eminently sensible approach to get to net zero. This is a policy debate whose time has come. Let’s bring it on.</p>
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<p class="fine-print"><em><span>Ian A. MacKenzie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As other nations race to restructure their economies in line with a low-carbon future, Australia risks being left behind. An economy-shaping tax on fossil fuels is a conversation we must have.Ian A. MacKenzie, Professor of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2230472024-02-15T13:43:44Z2024-02-15T13:43:44ZGhana’s new vehicle tax aims to tackle pollution – expert unpacks how it’ll work and suggests reforms<p><em>Ghana has introduced an <a href="https://gra.gov.gh/implementation-of-new-tax-laws-and-amendments/">annual carbon levy on vehicles and industrial emissions</a>. It’s only the third <a href="https://carbonpricingdashboard.worldbank.org/">African country</a> to introduce an explicit carbon tax, after <a href="https://www.tandfonline.com/doi/pdf/10.1080/0376835X.2023.2171366">South Africa and Mauritius</a>. The tax is intended to address <a href="https://mofep.gov.gh/sites/default/files/budget-statements/2024%20Budget%20Statement_v2.pdf">harm</a> associated with vehicle emissions. But it has prompted a <a href="https://www.ghanaweb.com/GhanaHomePage/NewsArchive/Inconsiderate-vehicle-emissions-tax-won-t-prevent-carbon-emission-Ben-Boakye-1914538">pushback</a> from various citizens, civic and consumer groups.</em></p>
<p><em>The Conversation Africa’s Godfred Akoto Boafo spoke to Theophilus Acheampong, an energy economist who has consulted for Ghana’s finance ministry on environmental fiscal reform, about the impact and implementation of this kind of levy.</em></p>
<h2>Why is the government taxing emissions?</h2>
<p>The proposed vehicle emissions tax under the <a href="https://gra.gov.gh/implementation-of-new-tax-laws-and-amendments/">Emissions Levy Act, 2023</a> is one of several environmental fiscal reform measures being introduced by the government. I am among several consultants who have worked on these proposed reforms since 2010. </p>
<p>Environmental tax reform <a href="https://www.eea.europa.eu/highlights/environmental-tax-reform-increasing-individual">aims</a> to shift the burden of taxation to environmentally damaging activities, such as pollution. </p>
<p>Reforms like this can help raise domestic revenue, protect the environment by meeting country climate targets under the <a href="https://www.ciwf.org.uk/research/environment/paris-climate-agreement-2030-sustainable-development-goals/#:%7E:text=Paris%20Climate%20Agreement%20%26%202030%20Sustainable%20Development%20Goals,-Implementing%20the%20Paris&text=The%20goals%20include%20zero%20hunger,lifestyles%20in%20harmony%20with%20nature">Paris Agreement and the Sustainable Development Goals</a>, and reduce poverty. These benefits have been confirmed in many <a href="https://doi.org/10.3390/su10020501">studies</a> but with mixed results.</p>
<p>Ghana’s government believes the vehicle emissions tax is a more cost-effective and equitable way to make sure the <a href="https://www.sciencedirect.com/topics/earth-and-planetary-sciences/polluter-pays-principle">polluter pays</a>, <a href="https://www.gov.uk/government/publications/environmental-principles-policy-statement/environmental-principles-policy-statement#:%7E:text=Description%3A%20The%20prevention%20principle%20means,%5Bfootnote%206%5D%20is%20avoided.">prevent harm</a> and <a href="https://eur-lex.europa.eu/EN/legal-content/glossary/precautionary-principle.html">protect the public</a>. </p>
<p>Ghana’s energy sector is the <a href="https://unfccc.int/sites/default/files/resource/gh_nir5_15052022_final.pdf">major source</a> (46%) of the country’s greenhouse emissions. Within this, mobile combustion emissions <a href="https://unfccc.int/sites/default/files/resource/gh_nir5_15052022_final.pdf">accounted</a> for 34% of the total energy emissions and 15% of the total national emissions in 2019. Transportation emissions, predominantly from road transport, have <a href="https://unfccc.int/sites/default/files/resource/gh_nir5_15052022_final.pdf">increased</a> by 47% compared to 2016 levels due to growing vehicle ownership and the associated traffic congestion in cities and peri-urban areas.</p>
<p>Lower respiratory <a href="https://www.cdc.gov/globalhealth/countries/ghana/default.htm#death">infections</a>, which are linked to air pollution, are among the top five causes of <a href="https://www.who.int/data/gho/data/themes/mortality-and-global-health-estimates/ghe-leading-causes-of-death">death</a> in the country. Some <a href="https://www.cleanairfund.org/geography/ghana/">28,000</a> Ghanaians died prematurely from air pollution in 2020. Air pollution-related deaths cost Ghana 0.95% of gross domestic product, according to a <a href="https://www.thelancet.com/journals/lanplh/article/PIIS2542-5196(22)00090-0/fulltext">2021 Lancet study</a>.</p>
<h2>What has been done so far to reduce air pollution?</h2>
<p>In 2021, the government introduced a sanitation and pollution levy on petrol and diesel under the <a href="https://atugubaassociates.com/file/Energy%20Sector%20Levies%20(Amendment)%20Act.pdf">Energy Sector Levies Act</a> to raise revenue to improve air quality, among other goals. The levy accrued <a href="https://mofep.gov.gh/sites/default/files/reports/economic/Final_%202022-Annual-ESLA-Report.pdf">GHS452 million</a> (US$55 million) in 2022. </p>
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Read more:
<a href="https://theconversation.com/ghana-wants-fewer-polluting-old-cars-on-the-road-but-its-going-about-it-the-wrong-way-198805">Ghana wants fewer polluting old cars on the road. But it’s going about it the wrong way</a>
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<p>In 2018, the government also <a href="https://mofep.gov.gh/sites/default/files/news/Notice-Luxury-Vehicle.pdf">introduced</a> a luxury vehicle tax on vehicles with engine capacities of three litres or more, except for commercial vehicles. However, following a public outcry, the government <a href="https://www.graphic.com.gh/business/business-news/govt-withdraws-vehicle-luxury-tax.html">suspended</a> the tax in July 2019. There were <a href="https://www.graphic.com.gh/news/politics/bring-back-luxury-vehicle-tax-upsa-to-government.html">subsequent calls</a> for it to be reintroduced. </p>
<p>These measures weren’t well designed from a tax policy point of view as they were not tied to actual vehicular emissions. Hence the need for an vehicle emissions tax. </p>
<h2>How should an emissions tax work and how does the new tax work?</h2>
<p>Ghana’s <a href="https://gra.gov.gh/implementation-of-new-tax-laws-and-amendments/">proposed</a> emissions tax is based on internal combustion engine capacities. Charges range from GHS75 (US$6) for motorcycles and tricycles to GHS150 (US$12) for motor vehicles, buses and coaches up to 3 litre engine. A higher threshold of GHS300 (US$24) applies for motor vehicles, buses and coaches above 3 litre engine capacity, and cargo trucks and articulated trucks. </p>
<p>Ideally, the tax should be based on the actual carbon dioxide and other pollutant emissions from a vehicle, measured in grams of carbon dioxide per kilometre. A threshold of tailpipe CO₂ is set. Each car owner would pay an annual tax for the amount of CO₂ their car emits above that threshold.</p>
<p>The <a href="https://caura.com/blog/why-does-an-mot-include-an-exhaust-emissions-test#:%7E:text=An%20exhaust%20emissions%20test%20ensures,a%20visual%20test%20is%20applied">tailpipe emissions test</a> would be done during the annual roadworthiness check by Ghana’s <a href="https://www.dvla.gov.gh/">Driver Vehicle and Licensing Authority</a>. It would also collect the amounts and then remit them to the Treasury. </p>
<p>There is scope in Ghana’s case to tie it to actual tailpipe emissions and also revise the upper end of the tax as it is prohibitive. This would make the tax more equitable and better reflect the “polluter pays” principle. </p>
<h2>What are the objections to the tax and can they be accommodated?</h2>
<p>The main objection is that it amounts to double taxation. Critics point to the existing pollution levy. There is also no clear plan for what the tax will be used for after it is collected. </p>
<p>Several critics, especially in the<a href="https://www.graphic.com.gh/news/general-news/emissions-levy-premature-antibusiness-food-and-beverage-association.html"> manufacturing</a> and <a href="https://citinewsroom.com/2024/02/emissions-levy-well-increase-our-fares-accordingly-gprtu/">transport sector</a>, say there are already too many taxes. A new one adds to the cost of operating a business. This cost will be passed on to consumers in an already struggling economy. </p>
<p>Some have <a href="https://citinewsroom.com/2024/02/withdraw-emissions-levy-itll-worsen-already-acidic-business-environment-fabag-to-govt/">urged </a>the government to develop environmentally friendly power sources like nuclear and solar energy.</p>
<p>But the government is under pressure to <a href="https://theconversation.com/ghana-and-the-imf-have-struck-a-deal-but-hard-choices-lie-ahead-206240">raise domestic revenue</a> as part of its International Monetary Fund conditionalities. It is therefore difficult to predict whether it will accommodate the concerns that have been raised.</p>
<h2>How does Ghana’s tax compare with others in Africa?</h2>
<p>Ghana, Zambia, South Africa and Namibia have various environmental taxes covering energy, transport, air pollution and waste. </p>
<p>For example South Africa <a href="https://www.reuters.com/article/us-safrica-carbontax-idUSKCN1SW0K6/">introduced</a> a carbon emissions tax on vehicles in 2010. This was updated in 2019 and 2022. The tax applies when cars have emissions above 120g CO₂ per km as well as 3litre engine capacity. The former is about the typical emission from a Ford Fiesta 1.0T EcoBoost or KiaPicanto 1.0. The rate is adjusted for inflation every year. The tax rate ranges from R132 (US$7; GHS86) to R176(US$9; GHS115) for every gram of carbon dioxide per kilometre above the threshold. A 2018 <a href="https://www.tandfonline.com/doi/abs/10.1080/10291954.2018.1505265">study</a> indicated that South Africa’s CO₂ emissions tax had failed to influence which new cars consumers were buying. This is understandable given <a href="https://www.statssa.gov.za/?p=15473">low income levels</a> and that <a href="https://www.statssa.gov.za/?p=14063">35% of households</a> used public transport, according to the 2020 National Household Travel Survey.</p>
<p>Ghana’s proposed emissions tax for vehicles up to 3 litre engine capacity is not unreasonable when benchmarked to South Africa’s. </p>
<p>However, the tax for engines above 3 litres is steep. It targets the main means of transport for many citizens. The 2012 Ghana National Transport Household Survey showed that <a href="https://www2.statsghana.gov.gh/docfiles/publications/Second%20National%20Household%20Transport%20Survey%20Report%202012.pdf">90%</a> of commuters used shared public transport (known locally as “tro-tro”); this figure may have declined in recent times. </p>
<h2>Can the tax be implemented and will it meet its objectives?</h2>
<p>Ghana is already implementing several environment tax reforms across different sectors, with varying degrees of success. There is the potential to harmonise these instruments to improve environmental outcomes and behavioural incentives. </p>
<p>The existing sanitation and pollution levy must first be scrapped and replaced with the vehicle emissions tax. This should be based on actual carbon dioxide, nitric oxide and other tailpipe emissions to maximise efficiency. The tax bands should conform to emission standards set by the <a href="https://www.gsa.gov.gh/">Ghana Standards Authority</a> and the vehicle licensing authority. </p>
<p>Having both the sanitation and pollution levy and vehicle emissions tax operating at the same time amounts to double taxation. </p>
<p>Ghana must also agree to earmark and allocate an agreed proportion of the proceeds to address environmental issues. </p>
<h2>What is the tax collection picture in Ghana?</h2>
<p>Ghana tax collection is currently <a href="https://www.oecd.org/tax/tax-policy/revenue-statistics-africa-ghana.pdf">around</a> 14% of GDP. Its aim is to get to 18% by 2028, comparable with its <a href="https://www.oecd.org/tax/tax-policy/brochure-revenue-statistics-africa.pdf">peers</a> such as Senegal, Namibia, Togo and Rwanda. Other revenue generation avenues have been met with stiff resistance. A recent value added tax on electricity has just been <a href="https://www.bbc.com/news/world-africa-68236869?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=68236869%26Ghana%20suspends%20controversial%20power%20tax%20after%20uproar%262024-02-08T17%3A42%3A01.000Z&ns_fee=0&pinned_post_locator=urn:bbc:cps:curie:asset:af7380e7-a5ab-4afb-9364-57740148921b&pinned_post_asset_id=68236869&pinned_post_type=share">suspended</a>. </p>
<p>In 2024, Ghana plans to improve revenue performance through <a href="https://mofep.gov.gh/sites/default/files/budget-statements/2024%20Budget%20Statement_v2.pdf">extending</a> the electronic VAT system to cover 600 large taxpayers and more than 2,000 small and medium-sized taxpayers, as well as taxing industrial and vehicle emissions, among others.</p><img src="https://counter.theconversation.com/content/223047/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Theophilus Acheampong is affiliated with the IMANI Centre for Policy and Education in Accra, Ghana. He has also consulted for the Government of Ghana on environmental fiscal reform in a private capacity. </span></em></p>Critics have described Ghana’s emissions tax as premature.Theophilus Acheampong, Associate Lecturer, University of AberdeenLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2172512023-12-20T21:13:38Z2023-12-20T21:13:38ZClimate change solutions require collaboration between politicians, scientists and entrepreneurs<iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/climate-change-solutions-require-collaboration-between-politicians-scientists-and-entrepreneurs" width="100%" height="400"></iframe>
<p><a href="https://globalnews.ca/news/9932965/canada-climate-action-economy-poll/">Most Canadians agree</a> something should be done about climate change. Yet, even though there is tremendous pressure on politicians to <em>do something</em>, <a href="https://www.politico.eu/article/discontent-eu-green-deal-climate-change-backlash/">widespread discontent</a> usually follows whatever action they may take. </p>
<p>How can governments balance the desire for climate action with the usual discontent that follows any major climate regulation? Looking to the past reveals key insights.</p>
<p>Half a century ago, the depletion of planetary natural resources was also a <a href="https://doi.org/10.1086/712926">major concern</a>, alongside the perceived <a href="https://www.library.dartmouth.edu/digital/digital-collections/limits-growth">implications this would have for economic growth</a>. </p>
<p>Indeed in 1990, the biologist Paul Ehrlich <a href="https://www.nytimes.com/1990/12/02/magazine/betting-on-the-planet.html">lost his famous bet against economist Julian Simon</a> when he predicted ten years earlier that prices of raw materials would increase over the long-term due to limited supply and increased demand. This outcome did not come to pass.</p>
<p>At the same time, the reverberations of the government-supported <a href="https://www.nobelprize.org/prizes/peace/1970/borlaug/biographical/">work of biologist Norman Borlaug</a>, who helped usher in the Green Revolution, were still being felt. </p>
<p>Simply put, gloomy <a href="https://www.britannica.com/money/Malthusianism">Malthusian predictions</a> of population collapse overlooked arguably more fundamental factors of human ingenuity and technological innovation — perhaps because their impact is so hard to predict and quantify. </p>
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<a href="https://theconversation.com/7-5-billion-and-counting-how-many-humans-can-the-earth-support-98797">7.5 billion and counting: How many humans can the Earth support?</a>
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<p>While natural resources may be limited (and the ecosystems we rely upon are fragile), alternative sources of energy can be perfected and new cultivation methods <a href="https://www.pnas.org/doi/full/10.1073/pnas.0912953109">can be invented</a>. Governments should remember the work of Borlaug and the insights it provides into promoting innovation when looking to address the climate crisis. </p>
<h2>Taxing carbon</h2>
<p><a href="https://climate.nasa.gov/what-is-climate-change/">Concern about climate change caused by greenhouse gas emissions</a> has grown exponentially since Simon and Ehrlich first made their wager in 1980. So much so that the <a href="https://www.cop28.com/en/">2023 United Nations Climate Change Conference (COP28)</a> ended with a statement of intent and pledges to move away from fossil fuels and reduce carbon emissions.</p>
<p>One commonly discussed mechanism to do so <a href="https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information.html">are carbon pricing schemes</a>, or a carbon tax.</p>
<p>It is <a href="https://climate.mit.edu/explainers/carbon-pricing">generally accepted among economists that carbon pricing schemes</a> such as taxing pollution, subsidizing reductions in pollution, or establishing markets for emission rights, would help reduce emissions. These schemes can easily be justified on the basis that emissions are a textbook example of an “<a href="https://scholar.harvard.edu/files/stantcheva/files/lecture7.pdf">externality</a>,” or a side effect of some economic activity on third parties.</p>
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<a href="https://theconversation.com/a-carbon-tax-on-investment-income-could-be-more-fair-and-make-it-less-profitable-to-pollute-a-new-analysis-shows-why-211485">A carbon tax on investment income could be more fair and make it less profitable to pollute – a new analysis shows why</a>
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<p>Would such a move be effective, though? The available evidence shows that carbon taxes set at reasonable levels have a <a href="https://doi.org/10.1016/j.enpol.2011.05.050">limited to sometimes insignificant effect on individual behaviour</a>, although there are <a href="https://doi.org/10.1088/1748-9326/abdae9">variations across sectors and countries</a>. </p>
<p>This limited effectiveness, and the fact that Canada only accounts for <a href="https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/global-greenhouse-gas-emissions.html">1.5 per cent of global greenhouse gas emissions</a>, suggests the planned massive increase of this tax by the Canadian federal government would have a very limited effect on global carbon emissions. It might also increase inequalities across the population, as some households <a href="https://www.cbc.ca/news/climate/carbon-tax-home-heating-oil-1.7015480">will be more impacted</a>.</p>
<p>Moreover, substantial increases in carbon taxes to account for the social cost of externalities can permanently antagonize a fraction of the population with regards to climate policies, and even trigger popular protests.</p>
<p>A planned increase in gasoline taxation triggered the widespread <a href="https://www.theguardian.com/world/2018/dec/03/who-are-the-gilets-jaunes-and-what-do-they-want">“gilets jaunes”</a> protests that paralyzed France for months. The current context is perhaps even more explosive due to high levels of inflation and <a href="https://www.theglobeandmail.com/business/article-canada-needs-345-million-more-homes-by-2030-to-cut-housing-costs-as/">rising housing costs</a> paired with higher interest rates. </p>
<p>Considering this delicate political balance, it is perhaps not surprising that governments often make bold claims about the importance of mitigating climate change <a href="https://www.politico.com/news/2022/02/08/citizens-politicians-combat-climate-change-00004590">without actually doing much</a>. </p>
<p>When they take action, as Justin Trudeau’s government did, they are criticized about the negative consequences <a href="https://edmontonjournal.com/opinion/columnists/opinion-anti-energy-policies-hurting-canadas-economy-reputation">for the energy sector</a>, public finances and <a href="https://www.cbc.ca/news/canada/calgary/bakx-scoc-ruling-1.6995962">the division of power between federal and provincial governments</a>. In the end, their decisions may also depend on <a href="https://nationalpost.com/news/politics/trudeau-pulls-carbon-tax-from-home-heating-oil">electoral considerations</a>. </p>
<p>What shall they do? Wise politicians should remember the power of their words and set up proper incentives and infrastructure for the adoption of new technologies. By shaping the public discourse and hinting at future policies, they can direct the attention of scientists and entrepreneurs to specific issues who are better placed to find solutions to environmental problems. </p>
<p>Simply put, the limits of political possibility mean governments can only do so much. It is essential that governments use their power to not just regulate, but incentivize innovation. </p>
<h2>Promoting innovation</h2>
<p>In the next few years, the advancements could be the widespread adoption of solar power, nuclear power, carbon capture and electric cars. In a few decades, it could be <a href="https://www.iaea.org/newscenter/news/what-is-nuclear-fusion">nuclear fusion</a>, some type of <a href="https://sitn.hms.harvard.edu/flash/2022/reversing-climate-change-with-geoengineering/">geo-engineering</a>, <a href="https://ftedit.ft.com/Ju3k/mvo1y8xl">space-based solar power</a> or another technology unimaginable today. At least if the <a href="https://www.cbc.ca/news/politics/power-grid-demand-electric-vehicles-1.6440595">electric grid is updated accordingly</a>. </p>
<p>This is something that governments can either hinder or facilitate. Other useful measures include investing in scientific research, as well as science, engineering and business education, and ensuring innovative firms can receive financing by cultivating a <a href="https://doi.org/10.1146/annurev-financial-111914-041825">well-developed financial sector</a>.</p>
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Read more:
<a href="https://theconversation.com/nuclear-fusion-breakthrough-decades-of-research-are-still-needed-before-fusion-can-be-used-as-clean-energy-196758">Nuclear fusion breakthrough: Decades of research are still needed before fusion can be used as clean energy</a>
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<p>Likewise, mechanisms such as carbon taxation may be useful not primarily because of their direct effects on carbon emissions, <a href="https://doi.org/10.1088/1748-9326/abdae9">which are limited</a>, but rather because the signals that they send will spur technological innovation and the phasing-out of existing technologies. Through their words and actions, governments can help <a href="https://doi.org/10.1257/pandp.20231000">shape the direction of technological innovation</a>. </p>
<p>To fight climate change and other challenges, the world needs space and support for scientists who will revolutionize the technological environment and more entrepreneurs and financiers to help these technologies reach their full potential.</p><img src="https://counter.theconversation.com/content/217251/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pierre Chaigneau receives funding from SSHRC. </span></em></p>We look to politicians to provide climate change solutions, but there is only so much they can do. Beyond regulation, governments should remember the key role they play in promoting innovation.Pierre Chaigneau, Associate Professor at the Smith School of Business, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2190462023-12-08T16:14:49Z2023-12-08T16:14:49ZFrom the Paris agreement to COP28, how oil and gas giants try to influence the global climate agenda<figure><img src="https://images.theconversation.com/files/564333/original/file-20231207-27-7ium24.jpg?ixlib=rb-1.1.0&rect=0%2C11%2C3925%2C2497&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/carbon-tax-concept-environmental-pricing-climate-2348760739">Sadi-Santos/Shutterstock</a></span></figcaption></figure><p>There is “no science” behind demands to phase out fossil fuels, according to <a href="https://www.theguardian.com/environment/2023/dec/03/back-into-caves-cop28-president-dismisses-phase-out-of-fossil-fuels">the current COP president</a>. This level of cynicism at the top of the annual climate summit makes it less surprising that the conference has also been used as <a href="https://www.bbc.com/news/science-environment-67508331">an oil trading venue</a>.</p>
<p>A <a href="https://www.theguardian.com/environment/2023/dec/05/record-number-of-fossil-fuel-lobbyists-get-access-to-cop28-climate-talks">record number of fossil fuel lobbyists</a> gained access to the conference this year. So it seems to presage a bright future for fossil fuels, when it should be a venue to discuss how to stop using them.</p>
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Read more:
<a href="https://theconversation.com/cop28-president-is-wrong-science-clearly-shows-fossil-fuels-must-go-and-fast-219128">COP28 president is wrong – science clearly shows fossil fuels must go (and fast)</a>
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<p>But this is not the first time that the international climate agenda has been “hijiacked” by oil companies. In 2015, a few months before COP21 – the summit that lead to the <a href="https://en.wikipedia.org/wiki/Paris_Agreement">Paris agreement</a>, a comprehensive global agreement to reduce greenhouse gas emission by all countries in the world – six oil majors including BP, Shell and Total, wrote <a href="https://unfccc.int/news/major-oil-companies-letter-to-un">an open letter</a> calling for a carbon tax on companies’ CO2 emissions. Under such a scheme, the more a company pollutes, the more it is taxed.</p>
<p>The oil majors suggested a two step approach. First, implement a carbon tax in all countries. And then – and this is where it gets complicated – they wanted all nations to get in a room and agree on the scheme. In their letter, the six oil majors said they wanted to “create an international framework that could eventually connect national systems”.</p>
<p>But carbon taxes are difficult to implement because of the international coordination they require to be effective. To make a carbon tax work, every country in the world would need to participate. Otherwise there would be what policymakers call <a href="https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/free-allocation/carbon-leakage_en">carbon leakage</a>. </p>
<p>This is when businesses simply transfer production to other countries with no – or more relaxed – emissions rules. If China started taxing its companies for the CO² they emit but the US refused, for example, it would be less competitive – its taxed products would be more expensive than those from the US. </p>
<p>Getting Russia, China and the US to agree on an international deal today seems <a href="https://www.ft.com/content/02bbdde1-2a9d-416d-953e-68d205be3e19">near impossible</a>. So any talk that advocates for an international carbon tax is cheap. </p>
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Read more:
<a href="https://theconversation.com/china-us-tensions-how-global-trade-began-splitting-into-two-blocs-188380">China-US tensions: how global trade began splitting into two blocs</a>
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<h2>Oil majors as climate activists?</h2>
<p>Some oil companies understand that public opinion on climate change is shifting and are starting to reflect this in their public actions. Exxon’s CEO, Darren Woods,<a href="https://www.ft.com/content/fcf73abc-4202-11e7-9d56-25f963e998b2">urged then-US president Donald Trump</a> to stay in the Paris agreement after Trump <a href="https://www.bbc.co.uk/news/science-environment-54797743">announced plans to withdraw</a> the US in 2017. This decision was later <a href="https://www.state.gov/the-united-states-officially-rejoins-the-paris-agreement/">reversed by Biden</a>. Woods and Exxon also <a href="https://corporate.exxonmobil.com/news/news-releases/statements/our-position-on-climate-policy-and-carbon-pricing">publicly advocate</a> for a carbon tax.</p>
<p>As some of the world’s <a href="https://www.theguardian.com/environment/2019/oct/09/revealed-20-firms-third-carbon-emissions">most polluting companies</a>, oil producers surely have an interest in avoiding such taxes. But my <a href="https://www.sciencedirect.com/science/article/pii/S0921800923003087">recent research</a> shows that 54% of oil and gas companies with a policy on carbon taxes support them (78% of the 50 largest firms by reserves). Among the 100 largest globally, I found 19 in favour of carbon taxes and 16 against them. 49 fossil fuel companies, mostly smaller operators, have no public position on the issue.</p>
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<img alt="Barrels of oil with an industrial plant in the background, blue sky and clouds or smoke." src="https://images.theconversation.com/files/564322/original/file-20231207-25-n4uprb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/564322/original/file-20231207-25-n4uprb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/564322/original/file-20231207-25-n4uprb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/564322/original/file-20231207-25-n4uprb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/564322/original/file-20231207-25-n4uprb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/564322/original/file-20231207-25-n4uprb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/564322/original/file-20231207-25-n4uprb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Fossil fuel production and use contributes a lot to global emissions.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/rockoil-barrels-on-processing-storage-plant-2343133011">Dancing_Man/Shutterstock</a></span>
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<h2>So why do oil companies support a carbon tax?</h2>
<p>In June 2021, <a href="https://www.reuters.com/business/sustainable-business/exxon-lobbyist-duped-by-greenpeace-says-climate-policy-was-ploy-ceo-condemns-2021-06-30/">undercover interviews</a> conducted by Greenpeace activists who posed as headhunters to interview a lobbyist for ExxonMobil, showed the lobbyist claiming to support a carbon tax because it would be politically impossible to implement. </p>
<p>The lobbyist concerned later apologised, saying he was embarrassed that he “allowed myself to fall for Greenpeace’s deception”. And <a href="https://corporate.exxonmobil.com/news/news-releases/2021/0630_exxonmobil-comments-on-recorded-interviews">ExxonMobil’s Woods</a> condemned the statements made during the interview. He said they don’t “represent the company’s position” and that the lobbyist was never involved in developing corporate policy on the issue.</p>
<p>Nevertheless, that’s one theory for fossil fuel company support – if there’s no real risk of a carbon tax being implemented. It’s like supporting the introduction of CO²-eating unicorns to reduce atmospheric CO². The idea is beautiful but impractical.</p>
<p>One way around potential deadlock is to establish a carbon border tax. The EU wants to do this with its <a href="https://multimedia.europarl.europa.eu/en/video/the-carbon-border-adjustment-mechanism-explained_N01_AFPS_230524_FIT3">Carbon Border Adjustment Mechanism (CBAM)</a>. This would place a carbon tax on any goods produced abroad that have not already been taxed in their country of production – it’s essentially a customs tax for countries that refuse to implement a carbon tax. </p>
<p>This tax could be a solution, if the World Trade Organization (WTO) doesn’t deem it <a href="https://www.nortonrosefulbright.com/en/knowledge/publications/9c5d9ec6/potential-conflicts-between-the-european-cbam-and-the-wto-rules">against free trade rules</a>. It recently launched a taskforce to review the CBAM after some WTO members called it “<a href="https://www.reuters.com/sustainability/wto-launching-global-carbon-price-task-force-okonjo-iweala-2023-10-17/">protectionist</a>”. </p>
<p>But while everyone waits for “unicorn” climate solutions to be implemented, major oil companies continue to profit and generate more emissions. For real change to happen, fossil fuel companies need to be encouraged to transition to cleaner energy using incentives, as well as stronger limits on fossil fuel extraction – an issue set to be <a href="https://www.theguardian.com/environment/2023/dec/08/talks-at-cop28-set-to-intensify-in-bid-to-break-impasse-over-fossil-fuels">top of the agenda</a> during the last days of COP28.</p>
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<img alt="Imagine weekly climate newsletter" src="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p class="fine-print"><em><span>Alain Naef does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Many oil and gas companies support a tax on carbon, even though they are significant emitters.Alain Naef, Assistant Professor, Economics, ESSEC Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2182392023-11-26T19:20:42Z2023-11-26T19:20:42ZGreen growth or degrowth: what is the right way to tackle climate change?<p>Nearly all the world’s governments and vast numbers of its people are convinced that addressing human-induced climate change is essential if healthy societies are to survive. The two solutions most often proposed go by various names but are widely known as “<a href="https://www.oecd.org/greengrowth/whatisgreengrowthandhowcanithelpdeliversustainabledevelopment.htm#:%7E:text=Green%20growth%20means%20fostering%20economic,which%20our%20well%2Dbeing%20relies.">green growth</a>” and “<a href="https://www.nature.com/articles/d41586-022-04412-x">degrowth</a>”. Can these ideas be reconciled? What do both have to say about the climate challenge?</p>
<p>The crude version of green growth – the solution that dominates the discourse of developed countries – is essentially that technology will save us if we get the incentives right. We can stick with the idea that economic growth is the central determinant of human flourishing, we just need technological fixes for unsustainable industrial practices. These will emerge if we get prices pointing in a green direction, which is first and foremost about carbon taxes.</p>
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<p>Yet this sort of thinking still seems head-in-the-sand. Yes, the <a href="https://www.climatecouncil.org.au/what-is-the-difference-between-absolute-emissions-and-emissions-intensity/">emissions intensity</a> of per-capita GDP growth <a href="https://ourworldindata.org/grapher/co2-intensity?tab=chart&country=USA%7ECHN%7EIND%7EIDN%7EDEU">is generally falling</a>, in part because added economic value increasingly comes from ideas not widgets.</p>
<p><a href="https://ourworldindata.org/energy/country/sweden">Sweden, for example</a>, has increased its GDP by 76% but its domestic energy use by only 2.5% since 1995. But we are still <a href="https://www.nature.com/articles/d41586-023-01702-w#:%7E:text=The%20planet%20is%20on%20track,cross%20the%20line%20much%20sooner.">missing carbon reduction deadlines</a> by wide margins and struggling to enact meaningful carbon pricing.</p>
<h2>Eco-socialism and political suicide: the caricature of degrowth</h2>
<p>The crude version of degrowth is that to ensure sustainability, GDP must contract. Endless growth got us to where we are, and endless growth will kill us. We need to throw out the status quo and make our revolutionary way to eco-socialism. Rich countries need to stop where they are and transfer wealth to poor countries so we can equitably share what we have.</p>
<p>This sort of thinking is <a href="https://www.noahpinion.blog/p/degrowth-we-cant-let-it-happen-here">easily caricatured</a> as political suicide and more likely to undermine enthusiasm for sustainability than achieve it.</p>
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<p>Yet these caricatures can be easily dismissed. While it’s hard to pin down exactly what each camp stands for, since they represent amorphous agglomerations of ideas in a fast-moving discourse, it’s clear many advocates of both green growth and degrowth are sophisticated in their views and <a href="https://www.sciencedirect.com/science/article/abs/pii/S0921800919319615">share many points of agreement</a>. </p>
<h2>Where green growth and degrowth agree</h2>
<p>The first is that contemporary industry is too environmentally intensive – it crosses multiple planetary boundaries in its carbon emissions, ocean acidification, nitrogen, phosphorus loading and so on.</p>
<p>Second, to avoid ecological collapse, sectors such as fossil fuels, fast fashion, industrial meat farming, air travel, plastics and many more need to draw down their economic activity.</p>
<p>Meanwhile, other sectors need to grow. These include clean energy, obviously, but also biodegradable materials, green steel and pesticide-free agriculture, on and on. Effecting this structural transition will require <a href="https://www.energypolicy.columbia.edu/publications/green-new-deal-and-carbon-taxes-can-work-together/">both carbon taxes and more muscular</a> industrial policy of the <a href="https://www.nytimes.com/2019/02/21/climate/green-new-deal-questions-answers.html">Green New Deal</a> sort.</p>
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<a href="https://theconversation.com/too-hard-basket-why-climate-change-is-defeating-our-political-system-214382">Too hard basket: why climate change is defeating our political system</a>
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<p>Third, environmental damage is both licensed and exacerbated by a narrow policy focus on <a href="https://data.oecd.org/gdp/gross-domestic-product-gdp.htm">gross domestic product</a> (GDP). We need to shift priorities away from GDP and towards frameworks and budgets – such as those used in <a href="https://www.treasury.govt.nz/information-and-services/nz-economy/higher-living-standards/our-living-standards-framework">New Zealand</a>, the <a href="https://www.act.gov.au/wellbeing">Australian Capital Territory</a> and other places – that do a far better job than GDP does of measuring whether we are using our resources effectively to advance human wellbeing.</p>
<p>And many of these wellbeing goals can be achieved using a fraction of the wealth of advanced nations. For example, Cuba, with about <a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=CU">an eighth of the GDP</a> per capita, has similar <a href="https://www.newsweek.com/americans-can-now-expect-live-three-years-less-cubans-1739507">life expectancy</a> and <a href="https://worldpopulationreview.com/country-rankings/literacy-rate-by-country">literacy rates</a> to the United States.</p>
<h2>New ways to measure and increase human wellbeing</h2>
<p>A complementary approach is to <a href="https://www.bennettinstitute.cam.ac.uk/research/research-projects/wealth-economy-social-and-natural-capital/">measure comprehensive wealth</a> – financial, natural, human, and social – rather than income. If economic activity substitutes a relatively small amount of financial capital concentrated in few hands for a huge amount of natural capital, then it isn’t sustainable nor does it increase total wealth.</p>
<p>Finally, we need to measure productivity – the extent to which we can do more with less. Economic growth models stress that only <a href="https://en.wikipedia.org/wiki/Solow%E2%80%93Swan_model">long-run improvements in productivity</a> lead to sustained increases in wealth. Simply increasing investment, of the kind associated with extractive industries, provides only a transitory boost.</p>
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<p>Another virtue of productivity growth is <a href="https://www.cmu.edu/epp/irle/irle-blog-pages/schumpeters-theory-of-creative-destruction.html">creative destruction</a>: when innovation clears out outmoded industries, ideas, and ways of working. Today creative destruction is held back by the power of vested interests, <a href="https://theconversation.com/how-to-deal-with-fossil-fuel-lobbying-and-its-growing-influence-in-australian-politics-188515">notably in fossil fuels</a>, to lobby governments to slow the industrial transition required to address climate change.</p>
<p>Quality of life frameworks, wealth accounts, and productivity growth all have problems and present measurement difficulties, but they point us in the right direction. They help us to understand GDP as a means, not an end. Twentieth century statistics cannot measure 21st century progress.</p>
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<a href="https://theconversation.com/australias-new-dawn-becoming-a-green-superpower-with-a-big-role-in-cutting-global-emissions-216373">Australia's new dawn: becoming a green superpower with a big role in cutting global emissions</a>
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<p>Green growth and degrowth advocates also agree that getting people to practise less carbon intensive lifestyles, especially in rich countries, is politically and culturally difficult. Witness the recent <a href="https://www.theguardian.com/world/2022/aug/02/spain-puts-limits-on-air-conditioning-and-heating-to-save-energy">outcry in Spain</a> when the government legislated that public and commercial buildings could not be cooled below 27 or heated above 19 degrees respectively.</p>
<p>That’s why sweeteners are fundamental to the political logic of Green New Deals: for example, the proceeds of carbon taxes can be returned to households as compensation.</p>
<h2>Where green growth and degrowth disagree</h2>
<p>What green growth and degrowth advocates disagree most about is how deeply we need to alter our political economy to survive climate change. </p>
<p>Green growth is broadly optimistic about the capacity of liberal democracy’s incremental style to get the green transition done in time. It has faith in markets, and even as it recognises the need for green industrial policy it is cautious about government’s ability to micromanage it.</p>
<p>Degrowth believes something more radical is in order, with equality at its core. We need to understand what is “sufficient” for people to live good lives, and then redistribute from people who have far more than they need to people who have much less.</p>
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<p>This approach would include the provision of energy-efficient social housing, and international aid for green development. Government must adopt the climate transition as its mission in the manner of winning a total war. It must get involved in the economy and society in a big way, including by regulating things like private jets and low emission traffic zones.</p>
<p>The problem for degrowthers is that getting such a radical agenda off the ground requires first and foremost a change in public values. But the movement’s focus on international political economy – its tendency to target its efforts at bureaucrats and quasi-governmental agencies like the <a href="https://www.ipcc.ch/">Intergovernmental Panel on Climate Change</a> (IPCC) – undermines cultural change by feeding populist narratives about technocratic overreach.</p>
<p>Spain’s experience illustrates that citizens haven’t internalised the sorts of lifestyle changes degrowth believes are required. Politically hopeless slogans like “degrowth” that don’t even capture the essence of the movement need to be tossed out, and much more attention needs to be given to marketing the experience of living green in sustainable societies.</p><img src="https://counter.theconversation.com/content/218239/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Fabian does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>One set of ideas runs counter to the mainstream consensus that technology will save us from climate change. Can degrowth ever win enough converts to persuade humanity to change course?Mark Fabian, Assistant professor of public policy, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2147092023-10-04T19:05:43Z2023-10-04T19:05:43ZMade in America: how Biden’s climate package is fuelling the global drive to net zero<p>Just over a year since US President Joe Biden signed the <a href="https://en.wikipedia.org/wiki/Inflation_Reduction_Act">Inflation Reduction Act</a> (IRA) into law, it’s becoming clear this strangely named piece of legislation could have a powerful impact in spurring the global transition to net zero emissions by 2050.</p>
<p>But the vast amount of investment unleashed by the IRA has raised tensions with some of the United States’ closest allies, and creates risks, as well as opportunities, for Australia’s transition to clean energy sources.</p>
<p>In his 2020 presidential campaign, Biden promised <a href="https://www.theguardian.com/us-news/2021/dec/08/biden-signs-order-government-net-zero-emissions-2050">to commit the US to net zero</a> by 2050, and to spend US$2 trillion to get there – the biggest investment in manufacturing since World War II. Biden is delivering on those promises.</p>
<p><a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/06/fact-sheet-the-bipartisan-infrastructure-deal/">The 2021 Infrastructure Investment and Jobs Act</a> included about $100 billion for electric vehicles and for speeding the electricity grid’s transition to clean energy sources.</p>
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<h2>The IRA changes the landscape</h2>
<p>Passage of the IRA, in August 2022, ensured a swathe of green technologies would benefit from tax credits, loans, customer rebates and other incentives.</p>
<p>The original announcement estimated that uncapped subsidies over ten years would be US$369 billion, but <a href="https://www.goldmansachs.com/intelligence/pages/the-us-is-poised-for-an-energy-revolution.html">Goldman Sachs Research now estimates that total subsidies</a> could reach US$1.2 trillion and attract US$3 trillion investment by industry. That’s trillion, not billion.</p>
<p>Already, <a href="https://climatepower.us/wp-content/uploads/sites/23/2023/07/Clean-Energy-Boom-Anniversary-Report-1.pdf">272 new or expanded clean energy manufacturing projects</a> in the US, including 91 in batteries, 65 in electric vehicles and 84 in wind and solar power, have been announced. These projects are estimated to <a href="https://climatepower.us/wp-content/uploads/sites/23/2023/07/Clean-Energy-Boom-Anniversary-Report-1.pdf">create 170,000 jobs</a>, predominantly in Republican-led states.</p>
<p>The IRA is all carrot, no stick. It contains no carbon taxes or emissions trading schemes. Instead, tax credits for capital expenditure and production costs encourage companies to invest in solar, wind, hydrogen, batteries, electric vehicles and other zero emissions technologies.</p>
<p>This approach is shifting the debate on the best way to reach net zero emissions. To free-market economists who ask why government should invest in private sector industries, the answer is that the green energy transition is not natural. Renewable energy would never have advanced without Germany subsidising solar and Denmark subsidising wind.</p>
<p>Subsidies and mandates are also crucial in explaining why, last year, Chinese vehicle manufacturers produced 64% of the global total of 10.5 million electric vehicle sales, and deployed about half of the global capacity additions in solar and wind power.</p>
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<h2>Industrial policy to protect the climate</h2>
<p>The IRA is America’s response. More than climate policy, it is industrial policy, replete with made-in-America provisions. Companies are more likely to obtain tax credits if they employ unionised labour, train apprentices and set up shop in states that are transitioning out of fossil fuels.</p>
<p>Consumers will earn a $7,500 federal tax credit on an electric car only if that car is assembled and at least half the battery made in America. Similarly, wind and solar projects will earn tax credits only if half of their manufactured components are made in America.</p>
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<p>These policies were made with China in mind. Both main US parties agree the US must reduce its dependence on sourcing minerals and products from China, and move towards a new form of “<a href="https://ecfr.eu/article/a-united-front-how-the-us-and-the-eu-can-move-beyond-trade-tensions-to-counter-china/">strategic economic nationalism</a>”.</p>
<p>Yet while America’s strongest allies are also alarmed by the challenge from China, they are disturbed by aspects of the IRA. They fear that to benefit from its subsidies, their own clean energy companies might pack up shop and establish plants in the US.</p>
<p>The European Union, for example, has praised the IRA’s overall approach, but <a href="https://energywatch.com/EnergyNews/Policy___Trading/article14567471.ece">fiercely criticised</a> its made-in-America provisions. French President Emmanuel Macron called the Act “<a href="https://www.reuters.com/world/europe/macron-visits-nasa-talks-space-cooperation-us-visit-begins-2022-11-30/">super aggressive</a>” toward European companies. European leaders say the IRA violates trade rules by discriminating against imported products, and could “<a href="https://www.reuters.com/business/autos-transportation/automakers-foreign-governments-seek-changes-us-ev-tax-rules-2022-11-08/">trigger a harmful global subsidy race to the bottom</a> on key technologies and inputs for the green transition.”</p>
<p>Yet even as it criticises the US, the EU <a href="https://www.politico.eu/article/eu-united-states-inflation-reduction-act-subsidies-investment-threat-data/">has responded to the IRA</a> by relaxing its rules and allowing individual states to provide direct support to clean energy companies to stop them taking their projects to the US.</p>
<p><a href="https://financialpost.com/commodities/mining/how-inflation-reduction-act-changed-canada">Canada</a>, worried about investment flowing south to benefit from the IRA even though its free trade agreement with the US should give its companies access to the subsidies, has also announced tax credits and programs to boost clean energy production. <a href="https://japannews.yomiuri.co.jp/politics/politics-government/20230513-109457/">Japan</a> and <a href="https://www.bloomberg.com/news/articles/2023-03-15/samsung-drives-400-billion-south-korea-plan-to-propel-key-tech?sref=wpjMCURG">South Korea</a> have announced similar programs.</p>
<h2>Why the IRA challenges Australia</h2>
<p>In Australia, before the IRA was legislated, the Morrison government <a href="https://www.exportfinance.gov.au/newsroom/transforming-australia-s-critical-minerals-sector/">provided a A$1.25 billion loan</a> to Iluka Resources to fund construction of an integrated rare-earths refinery in Western Australia. The refinery will produce separated rare earth oxide products that are used in permanent magnets in electric vehicles, clean energy generation and defence.</p>
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<p>But Australia risks being left behind in the race to build clean energy industries. The US could so heavily subsidise <a href="https://www.dcceew.gov.au/energy/hydrogen">green hydrogen production</a> that our own planned industry – seen as a foundation of our aspiration to be <a href="https://www.csiro.au/en/news/all/articles/2023/july/australia-energy-future#:%7E:text=Australia%20has%20vast%20amounts%20of,change%20from%20challenge%20to%20opportunity.">a clean energy superpower</a> – will be uncompetitive, leading our aspiring manufacturers to set up shop in the US.</p>
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Read more:
<a href="https://theconversation.com/green-steel-is-hailed-as-the-next-big-thing-in-australian-industry-heres-what-the-hype-is-all-about-160282">'Green steel' is hailed as the next big thing in Australian industry. Here's what the hype is all about</a>
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<p>The IRA, however, brings Australia many potential benefits. The US wants to source the raw and refined materials it needs from countries, such as Australia, with which it has a free trade agreement. To respond to this interest, Australian industry, transport and mining must have access to low-emissions electricity.</p>
<p>The US will be an essential market for our <a href="https://news.climate.columbia.edu/2023/04/05/the-energy-transition-will-need-more-rare-earth-elements-can-we-secure-them-sustainably/">rare earths</a> such as neodymium, praseodymium, dysprosium and terbium, used to make the powerful permanent magnets in wind turbines and electric car motors. Australia can also build new industrial processes and supply chains so that we earn more from decarbonised metallic iron, aluminium and nitrogenous fertiliser. We can ship our renewable energy in the form of hydrogen and ammonia.</p>
<p>In this race, Australia’s friendship with the US and volatile relationship with China could be decisive. The IRA does not spell out the concept of <a href="https://www.csis.org/analysis/onshoring-and-friend-shoring-us-ev-supply-chains-what-are-boundaries">friend-shoring</a> but nevertheless it seeks “to onshore and friend-shore the electric vehicle supply chain, to capture the benefits of a new supply chain and reduce entanglement with China,” according to the US Centre for Strategic and International Studies.</p>
<p>The IRA denies electric vehicle tax credits when any component or critical mineral in the vehicle is sourced from China or any “foreign entity of concern.” </p>
<p>A clean energy trade war is just one of the potential obstacles that could prevent the full benefits of the IRA being realised. Many communities in the US and Australia are resisting the installation of new transmission lines, wind farms and other clean energy infrastructure, and these objections are often on environmental grounds – the so-called <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4443474">Greens’ Dilemma</a>. And a win for Donald Trump in next year’s presidential election could reverse American climate policy.</p>
<p>Yet on balance, the IRA can only be good for getting to net zero. It brings the US in from the climate wilderness to be a leader in emissions reduction, helping to drive new technologies and lower costs that will benefit not only America but the world.</p><img src="https://counter.theconversation.com/content/214709/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Finkel is chair of the Hysata Advisory Council and an investor in the company. He is a member of the Rio Tinto Innovation Advisory Council. </span></em></p>The Biden Administration’s signature climate legislation is unleashing a wave of clean energy investment, along with some opportunities and risks for countries like Australia.Alan Finkel, Chair of ARC Centre of Excellence for Quantum Biotechnology, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2124012023-09-05T17:02:15Z2023-09-05T17:02:15ZWhy we won’t be able to prevent climate breakdown without changing our relationship to the rest of the living world<figure><img src="https://images.theconversation.com/files/545041/original/file-20230828-17-ropd8p.jpg?ixlib=rb-1.1.0&rect=17%2C22%2C1899%2C1253&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Not only is deforestation unsightly. Fewer trees also mean less precious carbon sinks to absorb anthropogenic greenhouse gas emissions. </span> <span class="attribution"><a class="source" href="https://www.rawpixel.com/image/3326154/free-photo-image-garden-reforestation-asheville-field-office">Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Because of its growing impact on society, global warming has taken centre stage in the public debate. While most of us have not read the reports by the <a href="https://www.ipcc.ch/report/ar6/syr/">Intergovernmental Panel on Climate Change</a> (IPCC), heat waves, intensifying storms and the multiplication of extreme events remind us of the scale of climate disruption and the urgency of action.</p>
<p>Despite being documented by the <a href="https://www.ipbes.net/about">Intergovernmental Sciences Policy Platform on Biodiversity and Ecosystem Services</a> (IPBES), the equivalent of the IPCC for biodiversity, we know little about how biodiversity erosion might affect us and the rest of the planet. Its links and interactions with climate change are underestimated, and any policy to address either in isolation will miss the mark. It’s impossible to take effective action against global warming without addressing our impact on the rest of the living world, and vice versa.</p>
<h2>Fossil carbon, living carbon</h2>
<p>IPCC scientists have been explaining since their <a href="https://www.ipcc.ch/site/assets/uploads/2018/05/ipcc_90_92_assessments_far_full_report_fr.pdf">first assessment report</a> (1990) that climate change is a stock problem. To halt global warming, it is not enough to slash greenhouse gas emissions. We need to stabilise their stock in the atmosphere. To achieve <a href="https://christiandeperthuis.fr/n-comme-neutralite-climatique/">reach net zero</a> we must reduce emissions – the inflow into the stock – to the level of the outflow, which is made up of CO<sub>2</sub> absorption by carbon sinks (forests and oceans) and the elimination of non-CO<sub>2</sub> greenhouse gases at the end of their life cycle.</p>
<p>This requires that we adopt a two-pronged plan, aimed both at cutting down our reliance on both fossil <em>and</em> living carbon. The former feeds the vast majority of the world’s pollution, with coal, oil and natural gas accounting for <a href="https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_Chapter02.pdf">70% of the world’s greenhouse gas emissions</a>. Tackling it will require that we take on the so-called <a href="https://www.iea.org/topics/global-energy-transitions-stocktake">energy transition</a>.</p>
<p>On the other hand, a quarter of greenhouse gas emissions come from “living carbon”, mainly as a result of specific agricultural emissions (unrelated to fossil fuel use) and tropical deforestation and other land use changes that erode carbon sinks. There is no way to achieve carbon neutrality without a profound transformation in the use of living resources, to ensure the reflux of agricultural emissions and better protection of carbon sinks. This is the challenge of what we might call the <a href="https://www.frontiersin.org/articles/10.3389/fsufs.2021.709401/full">agroclimatic transition</a>.</p>
<p>One of the major difficulties of the ecological transition is to carry out these two transformations simultaneously, as they involve distinct economic mechanisms. For fossil carbon, we need to introduce scarcity by reducing the use of coal, oil and natural gas to the absolute minimum. For living carbon, we need to reinvest in the diversity of ecosystems to reduce agricultural emissions and protect carbon sinks as part of a bioeconomy.</p>
<h2>From adding to subtracting</h2>
<p>Since the start of the Industrial Revolution, energy transitions have followed one another. They have all involved adding new energy sources to a system initially based on the use of biomass. The result has been a massive increase in the amount of energy used worldwide.</p>
<p>The climate is forcing us to break with this logic. Lowering emissions is not a matter of adding decarbonised sources to the energy system. It’s about removing fossil fuels. We need to switch from a logic of addition to one of subtraction.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/544215/original/file-20230823-27-kbjahm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Russian tractor in a field in Ethiopia" src="https://images.theconversation.com/files/544215/original/file-20230823-27-kbjahm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/544215/original/file-20230823-27-kbjahm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/544215/original/file-20230823-27-kbjahm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/544215/original/file-20230823-27-kbjahm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/544215/original/file-20230823-27-kbjahm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/544215/original/file-20230823-27-kbjahm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/544215/original/file-20230823-27-kbjahm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Deforestation and agriculture are the source of ‘living’ carbon emissions.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/ifpri/14328252948">Ifpri/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
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<p>From an economic viewpoint, this means massively reconverting brown assets linked to the production or use of fossil fuels, through a double movement of investment in green and disinvestment in brown. The heaviest cost for the economic system is not the hundreds of billions invested in wind or solar farms, battery gigafactories or hydrogen electrolysers. It’s the cost of disinvestment that forces us to downgrade or reconvert brown assets: financial assets, of course, but also physical assets and, above all, the human assets on which the energy transition depends.</p>
<p>Multiple instruments will have to be called upon to bring about such a transformation. Pricing carbon from fossil fuel use is a key way to reflect the increasing scarcity of the atmospheric capacity to store carbon. Whether obtained through taxation or emission trading schemes, such taxation raises the cost of using fossil fuels, without returning the resulting rents to producers, as happens, for example, when oil prices soar on energy markets. On the demand side, it is a powerful stimulus to energy efficiency and sufficiency; on the supply side, it encourages a shift away from carbon assets.</p>
<p>The main difficulty with fossil carbon taxation lies in controlling its distributive impact. As the <a href="https://theconversation.com/us/topics/gilets-jaunes-movement-63133">“gilets jaunes” protests in France showed</a>, fossil carbon taxation without redistribution to the most vulnerable poses more problems than it solves. Only a <a href="https://theconversation.com/comment-reconcilier-taxe-carbone-et-pouvoir-dachat-111019">redistributive carbon tax</a> will be socially acceptable. Similarly, if carbon pricing is to be extended on an international scale, the proceeds must be returned on a massive scale to the countries of the South.</p>
<p>The distributional impacts of regulated carbon markets should also not be underestimated. Within the European Union, the extension of the emission trading scheme to the transport and buildings sector will increase household energy bills. This is why the proceeds from allowances sales at auction must be redistributed to the most vulnerable households via a <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7796">“social fund”</a> which will be the pillar of the regulation to be put in place.</p>
<figure class="align-center ">
<img alt="Yellow vests’ protest in Paris in January 2019" src="https://images.theconversation.com/files/543741/original/file-20230821-17-rfxvjq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/543741/original/file-20230821-17-rfxvjq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/543741/original/file-20230821-17-rfxvjq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/543741/original/file-20230821-17-rfxvjq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/543741/original/file-20230821-17-rfxvjq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/543741/original/file-20230821-17-rfxvjq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/543741/original/file-20230821-17-rfxvjq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Yellow vests’ protest in Paris in January 2019.</span>
<span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/commons/thumb/3/34/Paris%2C_Gilets_Jaunes_-_Acte_IX_%2846724068321%29.jpg/1024px-Paris%2C_Gilets_Jaunes_-_Acte_IX_%2846724068321%29.jpg">Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>While fossil carbon taxation accelerates the energy transition, negative carbon taxes – in other words, <a href="https://www.iea.org/reports/fossil-fuels-consumption-subsidies-2022">fossil fuel subsidies</a> – delay it. Following the outbreak of war in Ukraine, these subsidies reached unprecedented levels in the European Union, with the multiplication of “tariff shields” erected as a matter of urgency to protect Europeans from the worst of the cost of living crisis.</p>
<p>Another pernicious form of subsidy to fossil fuels is the free allocation of CO<sub>2</sub> allowances in the European trading scheme, which <a href="https://sandbag.be/2021/12/17/why-free-allocation-in-the-eu-ets-must-stop-urgently/">hampers the emergence of a green industry</a>, a lever for the competitiveness of tomorrow’s Europe.</p>
<h2>Investing in the diversity of living beings</h2>
<p>Let’s imagine for a moment that the world has eradicated all use of fossil fuels in 2050. Would we automatically be in a situation of climate neutrality? Everything depends on what has been achieved on the second front of the transition, that of living carbon, the source of a quarter of the world’s greenhouse gas emissions.</p>
<p>Pricing fossil carbon is hardly useful for the agroclimatic transition. Worse, it could even prove counterproductive: using a CO<sub>2</sub> price based on energy criteria, it would become profitable to transform the Amazon rainforest (or the centuries-old oaks of the French Tronçay forest) into short rotation coppice to produce energy! The reason is simple. Agro-climatic transformation means finding ways to reinvest in biological diversity, in other words, in the abundance of living things. But the price of CO<sub>2</sub> does not reflect the value of this diversity. We therefore need to use other instruments, which are more complex to implement.</p>
<p>On land, forests are the main carbon sink. Their capacity to soak up atmospheric CO<sub>2</sub> is weakened by a combination of climatic and anthropogenic factors. In <a href="https://www.citepa.org/wp-content/uploads/publications/secten/2023/Citepa_Secten_ed2023_v1.pdf">France</a>, for example, the CO<sub>2</sub> storage capacity of forests has been divided by three since 2005, mainly due to climatic factors. There is therefore an urgent need to adapt forest management methods in anticipation of the severity of tomorrow’s climates. Worldwide, the main anthropogenic impact on forests is tropical deforestation. Its main cause is the expansion of land for crops and livestock. This is why the key to halting deforestation lies in changing agricultural practices.</p>
<h2>The key issues of agriculture and food</h2>
<p>The impact of farming systems on the net balance of greenhouse gas emissions is not limited to deforestation. Depending on the techniques used, farming systems may themselves release carbon into the atmosphere (deep ploughing, draining of wet soils, etc.) or, on the contrary, store it in living soils (conservation agriculture, agroforestry, etc.). The former erode biodiversity by specialising farmers according to industrial-type logics. The latter use living diversity to intensify production and regenerate the natural environment.</p>
<p>These agroecological techniques also make it possible to better withstand tougher climatic conditions, while reducing methane and nitrous oxide emissions from agricultural sources. In economic terms, their promotion requires investment in innovation, research and development, the establishment of dedicated farm advisory networks and, above all, incentivisation to reward farmers for the ecosystem services they provide to society. This is not something that happens spontaneously on the market. It requires public intervention and dedicated funding.</p>
<p>As in the case of energy, the agroclimatic transition implies, on the demand side, that we consume smarter and less. The foods we eat have contrasting climate footprints. There can be no successful agroclimatic transition without finding ways to dramatically reduce emissions associated with the most polluting ingredients, including industrially processed foods and animal products, especially those from ruminant breeding. The use of food rations might be one way of achieving this, according to the recommendations of the <a href="https://www.who.int/news-room/fact-sheets/detail/healthy-diet">world’s health authorities</a>.</p>
<h2>Remembering the ocean</h2>
<p>Last but not least, the agroclimatic transition will have to take into account the management of the oceans and marine biodiversity, which are currently the blind spots of climate policies. Global warming and certain human practices (overfishing, pollutant runoff, etc.) are altering marine biodiversity, a crucial component in the storage of CO<sub>2</sub> by the oceans. Protecting the ocean sink is vital to stabilise tomorrow’s climate: it is estimated that the continental biosphere contains <a href="https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_Chapter05.pdf">four times more carbon</a> than the atmosphere. For the oceans, it’s 47 times.</p>
<hr>
<p><em>The authors thank Frank Convery for his insightful review</em></p>
<hr>
<p><em>The Climate Economics Chair of Paris Dauphine-PSL University is organising, in partnership with the Toulouse School of Economics and the National Museum of Natural History, the 24th Global Conference on Environmental Taxation, which will take place from September 6 to 8, 2023 and will have as its theme “Climate & Biodiversity: Tackling global footprints”.</em></p><img src="https://counter.theconversation.com/content/212401/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>Any smart climate strategy will need to simultaneously move away from fossil fuels and protect biodiversity, including through carbon sink preservation and a shift toward sustainable agriculture.Christian de Perthuis, Professeur d’économie, fondateur de la chaire « Économie du climat », Université Paris Dauphine – PSLÉdouard Civel, Chercheur au Square Research Center et à la Chaire Economie du Climat, Université Paris Dauphine – PSLLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2114852023-08-17T18:00:56Z2023-08-17T18:00:56ZA carbon tax on investment income could be more fair and make it less profitable to pollute – a new analysis shows why<figure><img src="https://images.theconversation.com/files/543299/original/file-20230817-15-9p8mxz.jpg?ixlib=rb-1.1.0&rect=1575%2C0%2C2161%2C1402&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Investor pressure could drive down greenhouse gas emissions.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/businessman-partnership-making-handshake-agreement-royalty-free-image/1548518397">Tippapatt/iStock/Getty Images Plus</a></span></figcaption></figure><p>About 10 years ago, a very thick book written by a French economist became a surprising bestseller. It was called <a href="https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century">“Capital in the 21st Century</a>.” In it, Thomas Piketty traces the history of income and wealth inequality over the past couple of hundred years.</p>
<p>The book’s insights struck a chord with people who felt a growing sense of economic inequality but didn’t have the data to back it up. I was one of them. It made me wonder, how much carbon pollution is being generated to create wealth for a small group of extremely rich households? Two kids, 10 years and a Ph.D. later, I finally have some answers.</p>
<p>In a <a href="https://doi.org/10.1371/journal.pclm.0000190">new study</a>, colleagues and I investigated U.S. households’ personal responsibility for greenhouse gas emissions from 1990 to 2019. We previously studied emissions tied to consumption – <a href="https://www.sciencedirect.com/science/article/abs/pii/S0921800922003597">the stuff people buy</a>. This time, we looked at emissions used in generating people’s incomes, including investment income.</p>
<p>If you’ve ever thought about how oil company CEOs and shareholders get rich at the expense of the climate, then you’ve been thinking in an “income-responsibility” way.</p>
<p>While it may seem intuitive that those getting rich from fossil fuels bear responsibility for the emissions, very little research has been done to quantify this. Recent efforts have started to look at emissions related to household <a href="https://doi.org/10.1111/jiec.13383">wages in France</a>, <a href="https://www.nature.com/articles/s41893-022-00955-z">global consumption and investments of different income groups</a> and <a href="https://policy-practice.oxfam.org/resources/carbon-billionaires-the-investment-emissions-of-the-worlds-richest-people-621446/">billionaires’ investments</a>. But no one has analyzed households across a whole country based on the emissions used to generate their full range of income, including wages, investments and retirement income, until now.</p>
<p>We linked a <a href="https://worldmrio.com/">global data set</a> of financial transactions and emissions <a href="https://cps.ipums.org/cps/">to microdata</a> from the U.S. Census Bureau and Bureau of Labor Statistics’ monthly labor force survey, which includes respondents’ job, demographics and income from 35 categories, including wages and investments. People’s wages we connected to the emission intensity of the industries that employ them, and we based the emissions intensity of investment income on a portfolio that mirrors the overall economy.</p>
<p>The results of our analysis were eye-opening, and they could have profound implications for producing more effective and fair climate policies in the future.</p>
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<h2>A view from the top 1%</h2>
<p>Both our consumption- and income-based approaches reveal that the highest-earning households are responsible for much more than an equitable share of carbon emissions. What’s more surprising is how different the level of responsibility is depending on whether you look at consumption or income.</p>
<p>In the income-based approach, the share of national emissions coming from the top 1% of households is 15% to 17% of national emissions. That’s about 2.5 times higher than their consumer-related emissions, which is about 6%.</p>
<p>In the bottom 50% of households, however, the trend is the exact opposite: Their share of consumption-based national emissions is 31%, about two times larger than their income-based emissions of 14%.</p>
<p>Why is that?</p>
<p>A couple things are going on here. First, the lowest earning 50% of U.S. households spend all that they earn, and often more via social assistance or debt. The top income groups, on the other hand, are able to save and reinvest more of their income. </p>
<p>Second, while high-income households have very high overall spending and emissions, the carbon intensity – tons of carbon dioxide emitted per dollar – of their purchases is actually lower than that of low-income households. This is because low-income households spend a large share of their income on carbon-intensive basic necessities, like home heating and transportation. High-income households spend more of their income on less-carbon-intensive services, like financial services or higher education.</p>
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<h2>Implications for a carbon tax</h2>
<p>Our detailed comparison could help change how governments think about carbon taxes.</p>
<p>Typically, a carbon tax is applied to fossil fuels when they enter the economy. Coal, oil and gas producers then pass this tax on to consumers. <a href="https://openknowledge.worldbank.org/entities/publication/58f2a409-9bb7-4ee6-899d-be47835c838f">More than two dozen countries</a> have a carbon tax, and U.S. policymakers have <a href="https://www.nytimes.com/2021/09/24/us/politics/carbon-tax-democrats.html">proposed adding one in recent years</a>. The idea is that raising the price of these products by taxing them will get consumers to shift to cheaper and presumably less carbon-intensive alternatives.</p>
<p>But our studies show that this kind of tax would disproportionately fall on poorer Americans. Even if a <a href="https://www.sciencedirect.com/science/article/pii/S092180091731580X?casa_token=jTRcE1-pQhoAAAAA:p1QyeAg1SrXIVSJUre9vaNV2DCbVPp7RlC2UGWQN59aQwCRXq-eieRkX5alAlzyvPL7xRBRB7A">universal dividend check</a> was adopted, consumer-facing carbon taxes have no impact on saved income. Generating that income likely contributed to greenhouse gas emissions, but as long as the money is used to buy stocks rather than consumables, it is excluded from carbon taxes. So, this kind of carbon tax disproportionately affects people whose income goes primarily toward consumption.</p>
<h2>A profit-focused carbon tax</h2>
<p>What if, instead of focusing on consumption, carbon taxes addressed greenhouse gases as an outcome of profit generation?</p>
<p>The vast majority of American corporations operate under the principle of “<a href="https://corpgov.law.harvard.edu/2019/08/22/so-long-to-shareholder-primacy/">shareholder primacy</a>,” where they see a fiduciary duty to maximize profit for <a href="https://corpgov.law.harvard.edu/2019/02/11/towards-accountable-capitalism-remaking-corporate-law-through-stakeholder-governance/">their investors</a>. Products – and the greenhouse gases used to make them – are not created for the benefit of the consumer, but because the sale of those products will benefit the shareholders.</p>
<p>If carbon taxes were focused on shareholder income linked to greenhouse gas emissions rather than consumption, they could target those receiving the most economic benefits resulting from these emissions.</p>
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<h2>The impact</h2>
<p>A couple of interesting things might result, particularly if the tax was set based on the carbon intensity of the company.</p>
<p>Corporate executives and boards would have incentive to reduce emissions to lower taxes for shareholders. Shareholders would have incentive, out of self-interest, to pressure companies to do so. </p>
<p>Investors would also have incentive to shift their portfolios to less-polluting companies to avoid the tax. Pension and private wealth fund managers would have incentive to divest from carbon-polluting investments out of a fiduciary duty to their clients. To keep the tax focused on large shareholders, I could see retirement accounts being excluded from the tax, or a minimum asset threshold before the tax applies.</p>
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<figcaption><span class="caption">Jared Starr explains the new study’s findings and the implications.</span></figcaption>
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<p>Revenue generated from the carbon tax could help fund <a href="https://www.unep.org/resources/adaptation-gap-report-2022?gclid=CjwKCAjw5_GmBhBIEiwA5QSMxFUxJNkRuBfUZTRp8JK00-u1lzHYGnuW9xeCHlS-sr6d5-FknWIScRoCawcQAvD_BwE">adaptation</a> and the transition to clean energy.</p>
<p>Instead of putting the responsibility for cutting emissions on consumers, maybe policies should more directly tie that responsibility to corporate executives, board members and investors who have the most knowledge and power over their industries. Based on our analysis of the consumption and income benefits produced by greenhouse gas emissions, I believe a shareholder-based carbon tax is worth exploring.</p><img src="https://counter.theconversation.com/content/211485/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jared Starr does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Taxing consumption that contributes to climate change hits the poor the hardest, while overlooking the huge profits tied to greenhouse gas emissions.Jared Starr, Sustainability Scientist, UMass AmherstLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2104752023-08-10T15:13:41Z2023-08-10T15:13:41ZWestern firms still doing business in Russia finance the war – here’s how to recoup the huge cost to taxpayers<figure><img src="https://images.theconversation.com/files/541911/original/file-20230809-5449-jcu04a.jpg?ixlib=rb-1.1.0&rect=0%2C31%2C2914%2C1962&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/world-economic-sanctions-force-country-obey-2120624531">eamesBot/Shutterstock</a></span></figcaption></figure><p>In Russia this summer, you can <a href="https://www.bbc.co.uk/news/business-66101852">still enjoy</a> a Cornetto, but you can forget about eating a <a href="https://www.bbc.co.uk/news/uk-scotland-scotland-business-60625374">Tunnock’s tea cake</a> or a <a href="https://www.theguardian.com/world/2022/jun/12/mcdonalds-restaurants-in-russia-reopen-under-new-brand">Big Mac</a>. This is because Cornetto’s UK-headquarted parent company, Unilever, is still operating in Russia after its invasion of Ukraine, alongside many other western firms such as <a href="https://www.bloomberg.com/news/articles/2023-07-07/pepsico-mars-see-business-boom-in-russia-after-staying-behind">PepsiCo</a>.</p>
<p>While lots of firms, including McDonald’s and the Scottish confectionery maker Tunnock’s, have <a href="https://som.yale.edu/story/2022/over-1000-companies-have-curtailed-operations-russia-some-remain#:%7E:text=Companies%20totally%20halting%20Russian%20engagements%20or%20completely%20exiting%20Russia...">cut business ties</a> with the country since the war started, the Kyiv School of Economics <a href="https://b4ukraine.org/pdf/BusinessOfStaying.pdf">estimates</a> western companies still operating in Russia made over US$213.9 billion (£168.2 billion) in revenues in 2022. </p>
<p>The resulting US$3.5 billion in taxes on profits paid to Russia is only a small part of their contribution to the war: the income taxes and social contributions of their employees, as well as the VAT on their sales, feed into the state’s budget. The sense of normality they give to Russian citizens also arguably <a href="https://www.bbc.co.uk/news/world-europe-64703768">fosters support</a> for the invasion of Ukraine. </p>
<p>Companies still doing business in Russia also hurt the citizens of the countries they come from. By essentially supporting the war, they share responsibility for <a href="https://www.theguardian.com/business/2023/feb/21/energy-crisis-ukraine-war-uk-cost-gas#:%7E:text=A%20study%20by%20the%20Energy,spent%20in%20a%20normal%20year.">higher energy prices</a>, for example. They also increase the cost on western taxpayers of supporting the defence of Ukraine.</p>
<p>Like many western companies that have stayed in Russia, <a href="https://contact.pepsico.com/pepsico/article/pepsico-suspends-production-sale-of-pepsi-in-russia-continues-to">PepsiCo</a> and Unilever (Cornetto’s parent company) have <a href="https://www.nytimes.com/2023/03/02/business/russia-companies-exit.html">defended the decision</a> by claiming they provide essentials and need to stay for humanitarian reasons. </p>
<p>In addition to detailing donations made to Ukrainian refugees, the statement from PepsiCo said the company “must stay true to the humanitarian aspect” of its business as a food and beverage company by continuing to offer “daily essentials” in Russia “such as milk and other dairy offerings, baby formula and baby food”. PepsiCo pointed out it also continues “to support the livelihoods of our 20,000 Russian associates and the 40,000 Russian agricultural workers in our supply chain”.</p>
<p>Unilever said <a href="https://www.unilever.com/news/press-and-media/press-releases/2023/unilever-statement-on-the-war-in-ukraine/">in a statement</a> earlier this year that, while it’s still selling products in Russia, it stopped imports and exports, all media and advertising spend and other capital flows into and out of Russia in March 2022. It’s not “trying to protect or manage” its business in Russia, the company said, but “exiting is not straightforward”.</p>
<p>Indeed, many of those who provide non-necessary items say they cannot leave because the Russian government would <a href="https://www.ft.com/content/c6108c1a-97dc-4469-aeb3-8b81ab52aaa9">seize their assets</a> and intellectual property if they do. </p>
<p>But every time a business makes the choice to leave Russia or has their assets seized, the ones who stay face lower competition, and potentially make even more profit. As of today, the only price they pay for staying <a href="https://edition.cnn.com/2023/07/10/business/russia-companies-leaving-putin/index.html">is a tarnished reputation</a> in western countries.</p>
<h2>A tax on the cost of war</h2>
<p>But there is a way to make foreign companies pay the cost they impose on the world, while acknowledging the impossibility of making them completely leave Russia. </p>
<p>In fact, western governments have already designed the two main tools necessary. What it would take is a <a href="https://www.ft.com/content/a9750db3-5d5c-4afb-a33e-e5b960b63a93">coalition of sanctioning countries</a> and a mechanism that’s already being used in other regulations: the “<a href="https://www.oecd.org/tax/beps/oecd-releases-pillar-two-model-rules-for-domestic-implementation-of-15-percent-global-minimum-tax.htm">Pillar 2</a>” OECD strategy on taxation, due to come into force next year, as well as the EU’s new <a href="https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en">Carbon Border Adjustment Mechanism</a>, due to come into force in October 2023.</p>
<p>The coalition of sanctioning countries must first implement a tax on a western company’s Russian revenues. This is public information available in company financial reports – other <a href="https://leave-russia.org/">organisations already track</a> this information. The tax would cover the company’s sales, based on the goods and services bought by people in Russia. But the tax would be collected by the country in which the company is headquartered.</p>
<figure class="align-center ">
<img alt="Hands counting Russian notes, piles of rouble-denominated notes on the table in foreground." src="https://images.theconversation.com/files/541934/original/file-20230809-29-8o0yyx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/541934/original/file-20230809-29-8o0yyx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/541934/original/file-20230809-29-8o0yyx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/541934/original/file-20230809-29-8o0yyx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/541934/original/file-20230809-29-8o0yyx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/541934/original/file-20230809-29-8o0yyx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/541934/original/file-20230809-29-8o0yyx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Doing business in Russia.</span>
<span class="attribution"><span class="source">Andrey Sayfutdinov/Shutterstock</span></span>
</figcaption>
</figure>
<p>In the case of sales of Cornetto ice creams, for example, Unilever is the parent company and is based in <a href="https://www.ft.com/content/dbaa61b7-e3c6-4e82-9680-9745953a056b">the UK</a>. So the UK government would have the first option to tax Unilever, but if it chose not to, any other country in the coalition could do so instead. </p>
<p>That would mean a country has nothing to gain from protecting its national businesses. If the UK does not tax Cornetto sales in Russia, Unilever could be taxed by the EU or US and the proceeds would go into their government coffers instead.</p>
<p>The OECD’s Pillar 2 tax agreement uses this principle in its aim to end the practice of fictionally <a href="https://www.sciencedirect.com/science/article/pii/S0047272722001785">locating profit in tax havens</a>. By the end of this year, countries have committed to charge at least 15% in profit tax to the largest multinational companies <a href="https://www.consilium.europa.eu/en/press/press-releases/2022/12/12/international-taxation-council-reaches-agreement-on-a-minimum-level-of-taxation-for-largest-corporations/">in the EU</a> and <a href="https://www.gov.uk/government/publications/introduction-of-the-new-multinational-top-up-tax-and-domestic-top-up-tax/multinational-top-up-tax-and-domestic-top-up-tax-uk-adoption-of-oecd-pillar-2">in the UK</a>. </p>
<p>If some part of a multinational’s profits is not taxed abroad, the country in which the company is headquartered can tax extra, up to the 15% limit. And if that country does not impose the extra charge, other countries in which the firm is active can collect the unpaid tax. </p>
<h2>What about non-western companies?</h2>
<p>Charging the tax on western companies only would disadvantage them in global markets. It may also make it even more profitable for other countries to trade with Russia. To avoid such “<a href="https://www.annualreviews.org/doi/abs/10.1146/annurev-environ-120820-053625">leakage</a>”, non-western companies who trade with the west and continue to do business with Russia should also be made liable for the tax. </p>
<p>This amounts to a form of <a href="https://academic.oup.com/jcsl/article/27/1/53/6528963">extra-territorial trade sanction</a>. The approach <a href="https://www.sciencedirect.com/science/article/pii/S0014292120302026">is simple</a>: if a company wants to do business with the west, it must pay a fine for any trade in Russia. The US already does something much stricter to companies trading with Iran or Cuba. French bank Société Générale <a href="https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-criminal-charges-against-soci-t-g-n-rale-sa-violations">paid US$1.3 billion to the US government</a> in 2018 as a punishment for providing financial services in Cuba. </p>
<p>Taxing foreign companies to level competition is very similar to a <a href="https://www.journals.uchicago.edu/doi/full/10.1093/reep/rey020">border adjustment mechanism</a> for polluting industries. This is what <a href="https://www.sciencedirect.com/science/article/pii/S0140988323001718">the EU will begin to do</a> in 2026 under the Carbon Border Adjustment Mechanism. It will charge a carbon tax on certain products or activities, starting with the most <a href="https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en">energy-intensive industries</a> such as cement, iron and steel production, unless a company can prove it has already paid the equivalent at home. </p>
<figure class="align-center ">
<img alt="Child with flowers in hair holding sign with Ukrainian flag colours that says " src="https://images.theconversation.com/files/541933/original/file-20230809-13146-9hchag.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/541933/original/file-20230809-13146-9hchag.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/541933/original/file-20230809-13146-9hchag.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/541933/original/file-20230809-13146-9hchag.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/541933/original/file-20230809-13146-9hchag.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/541933/original/file-20230809-13146-9hchag.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/541933/original/file-20230809-13146-9hchag.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">shutterstock.</span>
<span class="attribution"><span class="source">Mykola Romanovskyy/Shutterstock</span></span>
</figcaption>
</figure>
<p><a href="https://www.politico.eu/article/russia-ukraine-war-invasion-slammed-russias-global-reputation-poll-shows/">Global public opinion</a> has turned against Russia since the invasion of Ukraine. Just like with global tax evasion and climate change, most countries understand that it is in everyone’s interest that a nuclear power is not allowed to invade other countries with no consequence. </p>
<p>The tools the world has developed to cooperate on international taxation and carbon emissions could now be used to take definitive action on economic sanctions and make the war in Ukraine much more difficult for Russia to sustain.</p><img src="https://counter.theconversation.com/content/210475/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Renaud Foucart does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some western companies have continued operating in Russia since it invaded Ukraine, while others have left the country altogether.Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2106052023-08-02T15:55:55Z2023-08-02T15:55:55ZThe British Miracle Meat: how banning repugnant choices obscures the real issue of poverty<p>A provocative Channel 4 satirical programme, <a href="https://www.channel4.com/programmes/gregg-wallace-the-british-miracle-meat">The British Miracle Meat</a>, has led to <a href="https://www.itv.com/news/2023-07-26/under-500-ofcom-complaints-for-gregg-wallaces-human-meat-mockumentary">hundreds of complaints</a> to media regulator Ofcom. The mockumentary depicts ordinary Britons facing the cost of living crisis selling thin slices of their tissue to an innovative factory that uses it to grow lab meat.</p>
<p>The show was inspired by Jonathan Swift’s satire <a href="https://www.gutenberg.org/files/1080/1080-h/1080-h.htm">A Modest Proposal</a> (1726), in which the author of Gulliver’s Travels suggests poor Irish people sell their children for food. The Channel 4 show’s creators wanted to <a href="https://metro.co.uk/2023/07/24/gregg-wallace-disgusts-viewers-with-human-meat-documentary-19185123/#:%7E:text=A%20Channel%204%20spokesperson">make viewers think</a> about the effects of the cost of living crisis, <a href="https://www.thesun.co.uk/tv/23184431/gregg-wallace-human-meat-programme/">as well as the future of food</a>.</p>
<p>Viewers were left baffled, however, seeing the show as <a href="https://www.itv.com/news/2023-07-26/under-500-ofcom-complaints-for-gregg-wallaces-human-meat-mockumentary">promoting cannibalism</a>. In the UK, it is illegal to sell <a href="https://www.legislation.gov.uk/ukpga/2004/30">human organs and other tissues</a>. But in economics, we teach our students the theory of “<a href="https://www.aeaweb.org/articles?id=10.1257/jep.21.3.37">repugnant markets</a>” – those in which disgust or distaste lead governments to ban certain transactions rather than tackling the underlying economic reasons for them.</p>
<p>If an individual chooses to do something extreme to make money, they must consider the alternative of living in poverty even worse. So why do we find the former less acceptable than the latter? Repugnant markets are typically forbidden by law and research by Nobel Prize winning economist <a href="https://www.nobelprize.org/prizes/economic-sciences/2012/roth/facts/">Alvin Roth</a> shows it is because people tend to be more keen to make some voluntary transactions illegal than to think about the causes of these transactions, whether that’s poverty or discrimation.</p>
<h2>Repugnant markets</h2>
<p>Perhaps the most famous real-life example of a repugnant market is the French case of “dwarf-tossing” bans. <a href="https://edition.cnn.com/2002/WORLD/europe/09/27/dwarf.throwing/index.html">In 1995</a>, Manuel Wackenheim, a French performer who measures 1.14 metres, was banned by local authorities from selling his services to bars and discotheques – he would allow customers to compete to throw him as far as they could. </p>
<p>There were no concerns about his safety – Wackenheim was using helmets and padded clothing. Rather, the French <a href="https://www.conseil-etat.fr/decisions-de-justice/jurisprudence/les-grandes-decisions-depuis-1873/conseil-d-etat-27-octobre-1995-commune-de-morsang-sur-orge-et-ville-d-aix-en-provence">Conseil d'État</a> and the United Nations Human Rights Committee <a href="http://news.bbc.co.uk/1/hi/world/europe/2285348.stm">rejected his appeal</a> of the ban because they felt that allowing someone to let others toss him in exchange for money was “contrary to human dignity”. </p>
<p>In a <a href="https://www.liberation.fr/societe/2014/01/30/manuel-wackenheim-cloue-au-sol_976662/">2014 interview</a> with French newspaper Liberation, Wackenheim – unemployed and living with his mother after losing the appeal – complained that no one cared about the fact that he suffered from discrimination and was rejected from every job he applied to. People only tried to protect him when he had finally found a way to pay his bills.</p>
<p>Underneath the initial shock about certain transactions, what people find repugnant in some markets seems to be what they reveal about poverty and the choices it forces people to make. For example, <a href="https://www.aeaweb.org/articles?id=10.1257/aer.p20151034">a study shows</a> that encouraging people to participate in clinical trials is perceived as less ethical when the subjects are paid, and even less acceptable when poor people are offered a lot of money to join. </p>
<p>The logic seems to be that payments are only acceptable if they do not influence the choice to join the trial. But poverty forces people into dire situations all the time and little is done to help. For financial reasons, many people have to live somewhere with lower air quality, for example, which may <a href="https://www.oecd.org/env/tools-evaluation/thecostofairpollution.htm">cause health risks</a>.</p>
<p>There is also little done to counteract the pressure on poorer people to feed their children badly. For example, 13.5% of 10-11 year-olds <a href="https://researchbriefings.files.parliament.uk/documents/SN03336/SN03336.pdf">living in the least deprived areas</a> of the UK are obese, compared with 31.3% in the most deprived areas. This is a massive source of inequality, in terms of health and life expectancy, but also for future labour market outcomes – <a href="https://pubs.aeaweb.org/doi/pdfplus/10.1257/jel.20161309">obese people tend to face wage discrimination</a>. </p>
<p>Arguably, these choices made under the constraint of poverty are just as detrimental to health as <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6450354/">selling a kidney</a>. But because they do not involve money directly changing hands, many people aren’t as immediately driven to call for action from the government.</p>
<h2>The price of everything</h2>
<p>The same could be said for markets for pollution and environmental taxes, which put an explicit price on the right to pollute. This is another example of a “repugnant” market because it’s <a href="https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2011/06/WP49_carbon-trading-caney-hepburn.pdf">often perceived as unethical and unjust</a> to allow rich people to simply pay to be able to do things that cause pollution. </p>
<p>The standard economic approach to fighting climate change is to put a price on carbon that corresponds to its <a href="https://www.sciencedirect.com/science/article/pii/S0095069617307131">social cost</a>. Governments, businesses and individuals must then pay for the cost their pollution imposes on society. But the <a href="https://ember-climate.org/data/data-tools/carbon-price-viewer/">current price of carbon</a> in the EU (around £80 per tonne of CO²) and <a href="https://www.ft.com/content/dfa3b6dc-e00c-4d9a-b155-a419845a39e4">in the UK</a> (around £45/t) only applies to a small subset of industries.</p>
<p>One reason is that paying for the right to pollute is often seen as a repugnant transaction. <a href="https://commonslibrary.parliament.uk/research-briefings/sn00523/">Taxing aviation</a> for instance, would make flying much more expensive. This could mean poor people fly less or even completely stop. Yet, the wealthiest people would still be able to use their private jets, as long as they pay very high taxes for their journeys. The repugnant market here would allow people to pay for the right to pollute.</p>
<p>Of course, it could encourage calls for a <a href="https://www.greenpeace.org/international/act/ban-private-jets/">ban</a> on private jets. But once again, this would obscure the real problem – poverty – while the very wealthy could continue to spend their money on other <a href="https://www.ft.com/content/e72cf7c8-cfbe-47df-9d79-27edbda74c37">highly polluting modes of transport such as superyachts</a>. </p>
<figure class="align-center ">
<img alt="A plane flying with a city skyline surrounded by clouds in the distance." src="https://images.theconversation.com/files/540722/original/file-20230802-22-b12as9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/540722/original/file-20230802-22-b12as9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/540722/original/file-20230802-22-b12as9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/540722/original/file-20230802-22-b12as9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/540722/original/file-20230802-22-b12as9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=425&fit=crop&dpr=1 754w, https://images.theconversation.com/files/540722/original/file-20230802-22-b12as9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=425&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/540722/original/file-20230802-22-b12as9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=425&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A private jet flying above Dubai.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/private-jet-plane-flying-above-dubai-1164679735">Jag_cz/Shutterstock</a></span>
</figcaption>
</figure>
<p>It is possible to tax pollution and to <a href="https://www.nature.com/articles/s41558-021-01217-0">use the proceeds to redistribute</a> from rich to poor. In a world where tax evasion and avoidance means <a href="https://www.aeaweb.org/articles?id=10.1257/aer.20172043">the super wealthy contribute very little</a>, taxing carbon in this way could actually be a major source of government revenue and reduce inequality. In contrast, banning private jets may just displace pollution to other activities and deprive the government of much-needed revenue.</p>
<p>The economic case to allow poor people to sell their flesh for meat is the same as the one for letting rich people use their private jets. You probably don’t want to live in a society where some of us are so desperate for money that they are willing to sell part of their body. Similarly, you may not want to live in a society where fighting climate change means a share of the population can never go abroad while others travel the world in single occupancy planes. </p>
<p>If you find these transactions unacceptable, what you may actually dislike is the economic inequality that makes them possible, and that’s the problem the government should be doing more to solve.</p><img src="https://counter.theconversation.com/content/210605/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Renaud Foucart does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Repugnance for certain activities tends to dictate government rules for markets but this can obscure real problems like poverty.Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2014802023-03-09T17:06:06Z2023-03-09T17:06:06ZEconomic growth doesn’t have to mean ‘more’ – consuming ‘better’ will also protect the planet<figure><img src="https://images.theconversation.com/files/514454/original/file-20230309-18-5xfpfz.jpg?ixlib=rb-1.1.0&rect=50%2C6%2C4149%2C2703&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/money-growth-concept-plant-growing-out-331587740">Nattapol_Sritongcom/Shutterstock</a></span></figcaption></figure><p>Around 30 years ago, many developed countries started a process of <a href="https://www.sciencedirect.com/science/article/pii/S2666792421000664">absolute decoupling</a> of their emissions of CO₂ and <a href="https://ourworldindata.org/energy-gdp-decoupling">energy use</a> from economic growth. This means keeping emissions stable, or better yet, shrinking them, while still growing the economy.</p>
<p>As a result, GDP is now much higher than it was in 1990 in the UK, France, Germany and the US, but CO2 emissions are lower. This is not just because of the deindustrialisation of the west: emissions decrease even if we include our imports from countries like China.</p>
<p>This trend may be too little too late to avoid the <a href="https://www.ipcc.ch/assessment-report/ar6/">worst consequences</a> of climate change and the <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/brv.12816">destruction of wildlife</a>. But it is a testimony of perhaps the biggest misunderstanding about economics: that growth is a measure of <a href="https://www.nature.com/articles/d41586-022-04412-x">how much an economy produces</a>, rather than an imperfect account of the value of this production.</p>
<p><strong>Emissions versus GDP</strong></p>
<iframe src="https://ourworldindata.org/grapher/co2-emissions-and-gdp-per-capita?time=1750..2019&country=~GBR" loading="lazy" style="width: 100%; height: 600px; border: 0px none;" width="100%" height="400"></iframe>
<p>Fighting climate change requires a radical transformation of the economy to use less energy and resources. This means it could cause economic growth by making us consume “better”, not more. Putting a monetary value on protecting the Earth means people will pay the true cost of their consumption.</p>
<h2>“Better” consumption of goods and services</h2>
<p>The things we buy typically become more valuable if the perceived quality of a product increases. And research shows that consumers are willing to pay more if they believe <a href="https://pubsonline.informs.org/doi/abs/10.1287/mksc.1080.0376">a brand is more valuable</a>, for example, because it is more ethical or environmentally friendly. This is the case for <a href="https://www.sciencedirect.com/science/article/pii/S0960148121005553">low-carbon energy sources</a>, <a href="https://academic.oup.com/erae/article/42/4/579/525958">fairtrade chocolate</a>, <a href="https://www.sciencedirect.com/science/article/pii/S0167811611000280">organic</a> and <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/agr.20210">local products</a> – and it’s even more the case for people that <a href="https://www.sciencedirect.com/science/article/pii/S0014292118301363#bib0045">care about how others see them</a>. So if this means replacing <a href="https://groceries.aldi.co.uk/en-GB/p-oakhurst-cook-from-frozen-beef-burgers-342g6-pack/4088600255743">a £1.89 pack of beef burgers</a> with <a href="https://shop.thelivegreenco.com/collections/our-favourites/products/porotos-negros-y-champinones">£12 bean and mushroom patties</a>, economic growth will certainly be <a href="https://www.fao.org/news/story/en/item/197623/icode/">good for the planet</a>.</p>
<p>The same can be said for the services people spend money on. In fact, as the economy becomes more dependent on services than products, this part of our consumption is even more important to “green”.</p>
<p>This is because much of today’s economic growth is not about measuring the value of the objects we buy. <a href="https://data.worldbank.org/indicator/NV.SRV.TOTL.ZS">Two-thirds of the world’s GDP</a> is constituted of services, and those are increasingly provided <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/ishybridworkingheretostay/2022-05-23">from our own homes</a> as we work remotely. The environmental cost is then almost entirely composed of the energy needed to make the internet work – and there is a way to <a href="https://theconversation.com/the-internet-consumes-extraordinary-amounts-of-energy-heres-how-we-can-make-it-more-sustainable-160639">make that greener</a>.</p>
<p>Sci-fi authors and futurists of the 1960s <a href="https://www.scientificamerican.com/article/pogue-what-the-1960s-got-rightand-wrongabout-todays-tech/">correctly predicted</a> that we would live in a world of wireless communications, flat-screen TVs and sophisticated kitchen appliances, while fewer foresaw that younger generations would celebrate the <a href="https://www.independent.co.uk/travel/europe/europe-trains-eu-rail-projects-sleeper-b2276469.html">return of sleeper trains</a> in Europe. They would probably also be surprised at how many people <a href="https://news.stanford.edu/2019/08/21/online-dating-popular-way-u-s-couples-meet/">find love</a> via their phone, using online dating services. The fact that Match.com is <a href="https://companiesmarketcap.com/match-group/marketcap/">worth more</a> than car companies <a href="https://companiesmarketcap.com/automakers/largest-automakers-by-market-cap/">Mitsubishi and Mazda</a> combined shows how our economy is changing towards consumption of services rather than traditional goods.</p>
<p>This does not mean that free markets and technology alone can save the world from climate change. Government intervention is also needed. In fact, one of the <a href="https://www.core-econ.org/the-economy/book/text/leibniz-12-03-01.html">oldest</a> and <a href="https://www.igmchicago.org/surveys/carbon-taxes-ii/">most accepted ideas</a> in economics is the principle that consumers should not only pay for the cost of producing what they buy, but also for its cost to society. This means taxing pollution, the destruction of wildlife, unhealthy food, traffic congestion and the depletion of natural resources, rather than raising the same amount by taxing income. </p>
<p>This could also be a source of economic growth. Research shows taxing pollution generates a “<a href="https://www.sciencedirect.com/science/article/pii/B9780123750679000735">double dividend</a>”: it restores fair competition between polluting and non-polluting products, and it generates tax revenue to invest for everyone’s benefit. If the prohibitive cost of pollution and limited natural resources forces us to innovate, we can actually create value instead of destroying it.</p>
<h2>Green policies as the future of growth</h2>
<p>In this kind of world, sustained growth for the next century would mean the phasing out of fossil fuels and increased energy efficiency, and largely <a href="https://www.agriculturejournals.cz/pdfs/age/2018/06/02.pdf">replacing meat production</a> with plant and lab-based alternatives. But also more value created by services, addressing <a href="https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/feeling-good-the-future-of-the-1-5-trillion-wellness-market">wellbeing</a>, and creating cleaner air and water, healthier food and safer cities. </p>
<p>Indeed, <a href="https://theconversation.com/15-minute-cities-how-to-separate-the-reality-from-the-conspiracy-theory-200111">15-minute cities</a> are more of an economist’s dream than a <a href="https://www.examinerlive.co.uk/news/local-news/yorkshire-tory-mp-slams-15-26284207">socialist utopia</a>. Charging for the true cost of car use by heavily taxing noise and air pollution is <a href="https://www.core-econ.org/the-economy/book/text/12.html#taxation">textbook introductory economics</a>. Reallocating public land towards humans and public transport <a href="https://www.sciencedirect.com/science/article/pii/S0166046214000404">saves time for everyone</a>. On the other hand, <a href="https://www.aeaweb.org/articles?id=10.1257/aer.101.6.2616">adding roads simply creates more congestion</a>, while public transport gets <a href="https://www.jstor.org/stable/1806101">more efficient as more people use it</a>. Less time spent in a car means more time for work and leisure.</p>
<p>And when it comes to artificial intelligence, <a href="https://www.aeaweb.org/articles?id=10.1257%2Fjep.29.3.3&source=post_page">just like machines and robots in the past</a>, it will not kill jobs but give us <a href="https://ourworldindata.org/working-hours#are-we-working-more-than-ever">more time</a> and money to spend on leisure. This is economic growth.</p>
<figure class="align-center ">
<img alt="Smiling male is putting dishes into dishwasher, chatting with woman in the background, at home, kitchen." src="https://images.theconversation.com/files/514455/original/file-20230309-28-yqilch.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/514455/original/file-20230309-28-yqilch.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/514455/original/file-20230309-28-yqilch.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/514455/original/file-20230309-28-yqilch.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/514455/original/file-20230309-28-yqilch.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/514455/original/file-20230309-28-yqilch.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/514455/original/file-20230309-28-yqilch.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">New technology often frees up people’s time.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/smiling-male-putting-dishes-into-dishwasher-1733843165">Olena Yakobchuk / Shutterstock</a></span>
</figcaption>
</figure>
<p>The real challenge for growth is not defying <a href="https://www.scientificamerican.com/article/does-economics-violate-th/">the laws of physics</a> with technology that <a href="https://www.scientificamerican.com/article/the-delusion-of-infinite-economic-growth/">magically allows us to produce more with the same or fewer resources</a>. It is the ability of our societies to tax polluting activities and <a href="https://www.nber.org/papers/w28480">regulate</a> the use of land and natural resources, while still being able to <a href="https://www.science.org/doi/10.1126/sciadv.aax3323">redistribute wealth</a>. This is the ability to do better with less.</p>
<p>We also need to work out how to correctly account for everything we value. What is counted under GDP figures has already started to change over time to <a href="https://www.bruegel.org/blog-post/welcome-dark-side-gdp-revision-and-non-observed-economy">include things not directly measured</a> by traditional markets.</p>
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Read more:
<a href="https://theconversation.com/beyond-gdp-changing-how-we-measure-progress-is-key-to-tackling-a-world-in-crisis-three-leading-experts-186488">Beyond GDP: changing how we measure progress is key to tackling a world in crisis – three leading experts</a>
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<p>Making the case for the preservation of nature means being able to put a number on it: taxing social costs but also recording the value of the use of our parks, forests and mountains. If those who care about protecting the environment do not fight to put the highest possible number on nature because they find the idea of valuing it in monetary terms <a href="https://www.aeaweb.org/articles?id=10.1257/jep.21.3.37">repugnant</a>, someone who does not care will do it.</p><img src="https://counter.theconversation.com/content/201480/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Renaud Foucart does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Paying for the true cost of consumption could help grow the economy.Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1959282023-01-23T19:19:11Z2023-01-23T19:19:11ZThe world’s carbon price is a fraction of what we need – because only a fifth of global emissions are priced<figure><img src="https://images.theconversation.com/files/505769/original/file-20230123-38981-rfuj6n.jpg?ixlib=rb-1.1.0&rect=41%2C53%2C3952%2C2191&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>At the end of last year, the world’s average price to emit one tonne of greenhouse gases was around US$5.29 (AU$7.77). For pricing to work as we want – to wean us off fossil fuels – it needs to be around $75 by the end of the decade, <a href="https://www.reuters.com/business/cop/exclusive-cop27-imf-chief-says-75ton-carbon-price-needed-by-2030-2022-11-07/#:%7E:text=a%20month%20ago-,EXCLUSIVE%20COP27%3A%20IMF%20chief%20says%20%2475%2Fton,carbon%20price%20needed%20by%202030&text=SHARM%20EL-SHEIKH%2C%20Egypt%2C,International%20Monetary%20Fund%20told%20Reuters">according to</a> the International Monetary Fund. </p>
<p>Why is the price still so low? Because even in 2023, close to 80% of the world’s emissions from land clearing, power plants, cars and industry are pumped into the atmosphere without any cost to the polluter. </p>
<p>Carbon prices have long been favoured by economists and experts as a way to drive faster change. If you want to discourage something, the easiest way is to make it cost more. Pricing the three main greenhouse gases – carbon dioxide, methane and nitrous oxide – is an elegant and effective way to force polluters to find alternative ways of producing power or creating forms of transport. (Carbon price refers to pricing a tonne of carbon dioxide equivalent, CO₂-e, which covers all three gases).</p>
<p>There’s long been a strange disconnect between the minute-by-minute updates on financial asset prices and the the lack of information on carbon prices. In 2023, as extreme weather, droughts and floods propel climate change to the front of our minds, it’s far easier to access streams of data on share markets, commodities, foreign exchange than it is to find data on the measure most critical to global survival – the price of carbon. That’s why our research team worked to produce the first <a href="https://www.realcarbonindex.org/indices">global carbon price index</a> as a way to easily track changes in pricing globally – and see change over time. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/505774/original/file-20230123-26-gt2ri9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="coal and solar" src="https://images.theconversation.com/files/505774/original/file-20230123-26-gt2ri9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/505774/original/file-20230123-26-gt2ri9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=320&fit=crop&dpr=1 600w, https://images.theconversation.com/files/505774/original/file-20230123-26-gt2ri9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=320&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/505774/original/file-20230123-26-gt2ri9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=320&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/505774/original/file-20230123-26-gt2ri9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=402&fit=crop&dpr=1 754w, https://images.theconversation.com/files/505774/original/file-20230123-26-gt2ri9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=402&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/505774/original/file-20230123-26-gt2ri9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=402&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Carbon pricing can help us go from fossil fuels to clean electricity.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>How did we determine the true price of carbon?</h2>
<p>To nail down the global price of carbon, we took into account every national or supranational scheme as well as the price of carbon traded through emissions trading schemes. We did not use carbon credits or offsets, as these tend to lack transparency, be rubbery and often questionable. </p>
<p>Different countries and jurisdictions have come at the problem of atmospheric pollution from different directions. </p>
<p>The simplest is to simply tax the pollutants you don’t want. This works if the price is set at the right level – not too low or too high at first – and increased as necessary. </p>
<p>Another common approach is to create a market for pollution through an emissions trading scheme, where high emitters have to purchase allowances. Over time, the new market will set the price on polluting as emitters and others compete for this finite pool of allowances. Regulators progressively cut the number of allowances, driving up the price of each allowance. The end result is to nudge large polluters to cut more and more of their emissions. </p>
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Read more:
<a href="https://theconversation.com/carbon-pricing-works-the-largest-ever-study-puts-it-beyond-doubt-142034">Carbon pricing works: the largest-ever study puts it beyond doubt</a>
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<p>We didn’t include carbon credits or offsets in our indices, as their use is largely voluntary, they tend to be unregulated or loosely regulated, their supply is uncapped, and their impact varies widely. Whistleblowers <a href="https://theconversation.com/we-blew-the-whistle-on-australias-central-climate-policy-heres-what-a-new-federal-government-probe-must-fix-185894">have claimed</a> Australia’s main carbon offset scheme is largely useless, for instance. </p>
<h2>So what changes have we seen?</h2>
<p>We first calculated this index a decade ago, when it became possible to pull together reliable price and scope information. When the index began, the global carbon price was just $0.67 per tonne of CO₂-e (or carbon dioxide equivalents). Back in 2013, only 20 jurisdictions had a price on carbon, covering just 8% of global emissions. At the time, Australia was one of them, before the so-called “climate wars” <a href="https://theconversation.com/3-lessons-from-australias-climate-wars-and-how-we-can-finally-achieve-better-climate-policy-187000">took over</a> national politics. </p>
<p>Over the last decade, however, we’ve seen significant progress. The current price of around $7.77 per tonne of CO₂-e is almost eight times higher than 2013. From 20 countries or jurisdictions, we now have 58, accounting for 22.5% of global emissions. That includes the European Union’s emission trading scheme and China’s new national scheme, which respectively account for around 3% and 9% of emissions globally. The schemes don’t cover their whole economies. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/505771/original/file-20230123-61764-p1udn4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/505771/original/file-20230123-61764-p1udn4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=334&fit=crop&dpr=1 600w, https://images.theconversation.com/files/505771/original/file-20230123-61764-p1udn4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=334&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/505771/original/file-20230123-61764-p1udn4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=334&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/505771/original/file-20230123-61764-p1udn4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=420&fit=crop&dpr=1 754w, https://images.theconversation.com/files/505771/original/file-20230123-61764-p1udn4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=420&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/505771/original/file-20230123-61764-p1udn4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=420&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">This chart shows the evolution of the carbon price index since 2013.</span>
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<p>That’s the good news. The bad news is there’s still a way to go. More than three-quarters of emissions go unpriced – costing the polluter nothing. That’s why the global carbon price is still so low. Nations like India, Iran, Russia, Indonesia and Australia have no carbon price or trading scheme. </p>
<h2>Australia still bringing up the rear</h2>
<p>Australia’s domestic emissions account for 1.27% of global greenhouse gas emissions. When you include our staggering fossil fuel exports as the world’s top LNG exporter and major coal exporter, our impact on the world climate <a href="https://climateanalytics.org/media/australia_carbon_footprint_report_july2019.pdf">almost quadruples</a> to 5%. That’s depressingly high, given our population is just 0.3% of the world’s total. </p>
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Read more:
<a href="https://theconversation.com/3-lessons-from-australias-climate-wars-and-how-we-can-finally-achieve-better-climate-policy-187000">3 lessons from Australia's ‘climate wars’ and how we can finally achieve better climate policy</a>
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<p>Despite our vastly outsized carbon footprint, Australia still doesn’t have a mandated carbon price. We do have a safeguard mechanism – a baseline above which its big polluters need to pay. At present, the baseline is too high, meaning only a small number of polluters participate. The mechanism is currently <a href="https://consult.dcceew.gov.au/safeguard-mechanism-reform-consultation">under review</a>. </p>
<p>Until the baselines are set lower and penalties enforced, Australia will remain a laggard in the fight against climate change. Labor’s pledge to cut emissions 43% by 2030 came without mention of a price on carbon. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/505775/original/file-20230123-53755-x4nvwy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="LNG exports" src="https://images.theconversation.com/files/505775/original/file-20230123-53755-x4nvwy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/505775/original/file-20230123-53755-x4nvwy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=225&fit=crop&dpr=1 600w, https://images.theconversation.com/files/505775/original/file-20230123-53755-x4nvwy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=225&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/505775/original/file-20230123-53755-x4nvwy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=225&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/505775/original/file-20230123-53755-x4nvwy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=283&fit=crop&dpr=1 754w, https://images.theconversation.com/files/505775/original/file-20230123-53755-x4nvwy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=283&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/505775/original/file-20230123-53755-x4nvwy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=283&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Australia’s gas and coal exports vastly increase our broader emissions impact.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>Will the rest of the world embrace carbon pricing?</h2>
<p>Political pushback killed Australia’s first effort at pricing carbon in 2012. Similarly, political gridlock in America has made carbon pricing a non-starter at the national level. In response, left of centre governments have turned to different approaches, such as spending heavily on newly cheap clean energy. </p>
<p>Does this mean we’ll never see the global carbon price hit the point where it will be effective? It’s hard to say, but at present, it seems unlikely every major nation will price carbon. </p>
<p>That doesn’t mean it’s a waste of time for the nations and jurisdictions like the European Union which are embracing it. Far from it. It’s well established we can drive behaviour change by measuring it against a benchmark or expectation. That’s where we hope the real carbon price index can play a role. After all, this is one of the numbers that really matters. </p>
<p>Almost all of the trillion tonnes of carbon dioxide we’ve emitted since the Industrial Revolution were emitted for “free”. As global heating intensifies, the true cost is becoming ever more apparent. </p>
<p><em>The authors would like to thank Roger Cohen from C2Zero who was part of the index team and provided support for this article.</em></p>
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Read more:
<a href="https://theconversation.com/taxes-out-subsidies-in-australia-and-the-us-are-passing-major-climate-bills-without-taxing-carbon-189555">Taxes out, subsidies in: Australia and the US are passing major climate bills – without taxing carbon</a>
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<img src="https://counter.theconversation.com/content/195928/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nga Pham is also the co-chair of the Financial Capital Committee of the International Corporate Governance Network.</span></em></p><p class="fine-print"><em><span>Bei Cui and Ummul Ruthbah do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s far easier to see how the stock market is doing than it is to find out the global price of carbon. That has to change.Bei Cui, Research fellow, Monash UniversityNga Pham. CFA, Senior Research Fellow, Monash UniversityUmmul Ruthbah, Senior Research FellowLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1916322022-10-06T16:33:17Z2022-10-06T16:33:17ZClimate change: the fairest way to tax carbon is to make air travel more expensive<figure><img src="https://images.theconversation.com/files/488284/original/file-20221005-18-8glwcl.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4214%2C2824&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A tiny minority flies more than once a year.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/suitcases-airport-departure-lounge-airplane-background-450980248">ImYanis/Shutterstock</a></span></figcaption></figure><p>Despite the fact that poorer people generally <a href="https://doi.org/10.1017/sus.2020.12">have lower emissions</a>, taxes on the carbon dioxide (CO₂) our activities emit tend to affect people on low incomes <a href="https://iopscience.iop.org/article/10.1088/1748-9326/ac2cb1">more</a> than richer people. Having less money means you can ill afford a switch to an untaxed alternative, like an electric car, or pay for carbon-saving measures like home insulation. You are also more likely to struggle to use less of an essential good like petrol or gas for heating, even if the price goes up.</p>
<p>Carbon taxes on energy that people use in their homes – for heating, cooking or watching TV – charge consumers for the emissions per kilowatt-hour (kWh) of electricity, gas or oil used. Economists would say that these kinds of carbon taxes are <a href="https://doi.org/10.1088/1748-9326/ac2cb1">regressive</a>, because using energy to heat and power your home is a necessity and poorer people will use a much higher share of their income to pay for these things – and the taxes – than richer people.</p>
<p>While total emissions have been <a href="https://www.nature.com/articles/s41558-019-0419-7">falling</a> in several rich countries over the last few years, emissions from cars and other means of transport are <a href="https://doi.org/10.1088/1748-9326/abee4e">growing</a>. The rise in air travel emissions has been especially rapid: a roughly <a href="https://doi.org/10.1016/j.atmosenv.2020.117834">sevenfold increase</a> between 1960 and 2018 globally. </p>
<p>What’s more, the fuels for heating and powering homes or driving cars are taxed, but the fuel airlines use is exempt due to <a href="https://theconversation.com/how-a-1940s-treaty-set-airlines-on-a-path-to-high-emissions-and-low-regulation-148818">an international agreement</a> from 1944.</p>
<p>And although Europeans generally <a href="https://www.sciencedirect.com/science/article/pii/S095937801831238X?via%3Dihub">disapprove</a> of carbon taxes, <a href="https://www.tandfonline.com/doi/full/10.1080/09669582.2022.2115050">our study</a> has revealed one type which could prove popular. In the first analysis of its kind to consider the effect on different income bands, we found that carbon taxes on air travel – what we describe as luxury emissions – nearly always affect the rich more.</p>
<h2>Tax burdens from air travel</h2>
<p>Our research examined how the burden from four different taxes on air travel would fall across income groups in the UK. It shows that all of these taxes are progressive: they burden richer people more than poorer people as a proportion of income. This is because people on higher incomes are <a href="https://doi.org/10.1016/j.tbs.2021.05.008">much more likely to fly</a>, and fly more often.</p>
<p>Air travel taxes that apply to passengers could be levied on the emissions of each passenger per flight. People could also be taxed according to the distance they travel, or their seat class. An aeroplane’s economy class occupies the least space per person, while business- and first-class passengers take up more room and so are responsible for more emissions than the average passenger. </p>
<p>A person could also be taxed for the number of flights they take. A <a href="https://afreeride.org/">frequent flyer levy</a> would exempt the first return flight a person takes in a year, but would tax subsequent flights at an increasing rate. We found that taxes that take both flight emissions and the number of flights per passenger into account distribute the tax burden fairest.</p>
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<img alt="Large sofas and TV screens in the first-class section of an aeroplane." src="https://images.theconversation.com/files/488285/original/file-20221005-20-yxa2wf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/488285/original/file-20221005-20-yxa2wf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/488285/original/file-20221005-20-yxa2wf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/488285/original/file-20221005-20-yxa2wf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/488285/original/file-20221005-20-yxa2wf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/488285/original/file-20221005-20-yxa2wf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/488285/original/file-20221005-20-yxa2wf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">First-class passengers can be taxed more per flight than those flying in economy.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/dubai-uae-november-10-2015-qatar-355934918">M101Studio/Shutterstock</a></span>
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<p>The reason for this is that frequent air travel (all flights after the first return flight) is even more unequally distributed in society: the top 10% of emitters are responsible for 60.8% of flight emissions but for 83.7% of emissions from frequent flights.</p>
<p>Who else except the wealthy is likely to be affected by taxes on air travel? We found that, in the UK, university graduates, employed people, young and middle-aged adults, residents of London, as well as first- and second-generation migrants are also more likely to fly than their counterparts, regardless of income. </p>
<p>Our results showed that recent migrants with friends and family abroad are relatively likely to fly often, even when on a low income. So allowances or extra support for recent migrants could make the design of such taxes fairer.</p>
<p>Overall, taxes on air travel are far more socially just than taxes on necessities such as home energy use and could curb luxury emissions in a way that nurtures broad support for more sweeping decarbonisation measures such as those designed to limit car travel, like <a href="https://www.nature.com/articles/s41560-022-01057-y">expanding bus and cycling lanes</a>.</p>
<p>So why do politicians and others claim, as former UK treasury minister Robert Jenrick did in 2019, that air travel taxes <a href="https://www.thesun.co.uk/news/8128492/labour-holiday-tax-family-break/">disproportionately hit the poor</a>? It’s possible that they underestimate how little people in low-income groups actually fly, perhaps due to their typically middle- and upper-class backgrounds. </p>
<p>A less charitable interpretation is that they have ulterior motives for opposing such taxes. Social scientists claim that exaggerating or misrepresenting the social justice consequences of environmental policy is one of the most common <a href="https://theconversation.com/climate-denial-hasnt-gone-away-heres-how-to-spot-arguments-for-delaying-climate-action-141991">arguments</a> used to stall vital action on climate change.</p>
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<img alt="Imagine weekly climate newsletter" src="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><strong><em>Don’t have time to read about climate change as much as you’d like?</em></strong>
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<p class="fine-print"><em><span>Milena Buchs receives funding from UK Research and Innovation through the Centre for Research into Energy Demand Solutions (grant reference number EP/R035288/1). She is a fellow of the ZOE Institute for Future Fit Economies and curates the sustainable welfare stream for the UNESCO Inclusive Policy Lab.</span></em></p><p class="fine-print"><em><span>Giulio Mattioli receives funding from the German Research Foundation as part of the research project “Advancing knowledge of long-distance travel: Uncovering its connections to mobility biography, migration, and daily travel” (Project Number: SCHE 1692/10–1). </span></em></p>Carbon taxes targeting luxury emissions are more popular than those which make necessities more expensive.Milena Buchs, Professor of Sustainable Welfare, University of LeedsGiulio Mattioli, Research Fellow, Department of Transport Planning, Technical University of DortmundLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1897592022-09-21T12:35:58Z2022-09-21T12:35:58ZWhat if carbon border taxes applied to all carbon – fossil fuels, too?<figure><img src="https://images.theconversation.com/files/484426/original/file-20220913-12695-68njn0.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C4940%2C3280&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Most national carbon border adjustments being considered target only manufactured goods.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/logistics-and-transportation-of-container-cargo-royalty-free-image/850688224">Thatree Thitivongvaroon via Getty Images</a></span></figcaption></figure><p>The European Union is <a href="https://www.europarl.europa.eu/news/en/press-room/20221212IPR64509/deal-reached-on-new-carbon-leakage-instrument-to-raise-global-climate-ambitio">embarking on</a> <a href="https://crsreports.congress.gov/product/pdf/R/R47167">an experiment</a> that will expand its climate policies to imports for the first time. It’s called a <a href="https://www.consilium.europa.eu/en/press/press-releases/2022/03/15/carbon-border-adjustment-mechanism-cbam-council-agrees-its-negotiating-mandate/">carbon border adjustment</a>, and it aims to level the playing field for the EU’s domestic producers by taxing energy-intensive imports like steel and cement that are high in greenhouse gas emissions but aren’t already covered by climate policies in their home countries. </p>
<p>If the border adjustment works as planned, it could encourage the spread of climate policies around the world. But <a href="https://www.europarl.europa.eu/news/en/press-room/20221212IPR64509/deal-reached-on-new-carbon-leakage-instrument-to-raise-global-climate-ambition">the EU plan</a> – which members of the European Parliament preliminarily agreed to on Dec. 13, 2022 – as well as most attempts to evaluate the impact of such policies, is missing an important source of cross-border carbon flows: trade in fossil fuels themselves.</p>
<p>As <a href="https://www.bakerinstitute.org/expert/mark-finley">energy</a> <a href="https://www.bakerinstitute.org/expert/joon-ha-kim">analysts</a>, we decided to take a closer look at what including fossil fuels would mean.</p>
<p>In a <a href="https://www.bakerinstitute.org/research/carbon-border-adjustments-need-analyze-all-carbon-trade">newly released paper</a>, we analyzed the impact and found that including fossil fuels in carbon border adjustments would significantly alter the balance of cross-border carbon flows. </p>
<p>For example, China is a major exporter of carbon-intensive manufactured goods, and its industries will face higher costs under the EU border adjustment if China doesn’t set sufficient climate policies for those industries. But when fossil fuels are considered, China becomes a net carbon importer, so setting its own comprehensive border adjustment could be to its energy producers’ benefit.</p>
<p>The U.S., on the other hand, could see harm to its domestic fuel producers if other countries imposed carbon border adjustments on fossil fuels. But the U.S. would still be a net carbon importer, and adding a border adjustment could help its domestic manufacturers.</p>
<h2>What is a carbon border adjustment?</h2>
<p><a href="https://www.rff.org/publications/explainers/border-carbon-adjustments-101/">Carbon border adjustments</a> are trade policies designed to avoid “<a href="https://clear.ucdavis.edu/news/what-carbon-leakage">carbon leakage</a>” – the phenomenon in which manufacturers relocate their production to other countries to get around environmental regulations.</p>
<p>The idea is to impose a carbon “tax” on imports that is commensurate with the costs domestic companies face related to a country’s climate policy. The carbon border adjustment is imposed on imports from countries that do not have similar climate policies. In addition, countries can give rebates to exports to ensure domestic manufacturers remain competitive in the global market. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1415590023555133442"}"></div></p>
<p>This is all still in the future. The EU plan <a href="https://www.europarl.europa.eu/news/en/press-room/20221212IPR64509/deal-reached-on-new-carbon-leakage-instrument-to-raise-global-climate-ambition">phases in starting in 2023</a>. However, other countries are closely watching as they consider their own policies, including some members of the U.S. Congress who are <a href="https://www.whitehouse.senate.gov/news/release/whitehouse-and-colleagues-introduce-clean-competition-act-to-boost-domestic-manufacturers-and-tackle-climate-change">considering carbon border adjustment legislation</a>. </p>
<h2>Capturing all cross-border carbon flows</h2>
<p>One issue is that current discussions of carbon border taxes focus on “embodied” carbon – the carbon associated with the production of a good. For example, the EU proposal covers cement, aluminum, fertilizers, electricity, iron and steel.</p>
<p>But a comprehensive border adjustment, in theory, should seek to address all cross-border carbon flows. All the <a href="https://www.oecd.org/sti/ind/input-outputtables.htm">major analyses</a> to date, however, leave out the carbon content of fossil fuels trade, which we refer to as “explicit” carbon. </p>
<p>In <a href="https://www.bakerinstitute.org/research/carbon-border-adjustments-need-analyze-all-carbon-trade">our analysis</a>, we show that when only manufactured goods are considered, the U.S. and EU are portrayed as carbon importers because of their “embodied” carbon balance – they import a lot of high-carbon manufactured goods – while China is portrayed as a carbon exporter. That changes when fossil fuels are included.</p>
<h2>The impact of including fossil fuels</h2>
<p>By assessing the impact of a carbon border adjustment based only on embodied carbon flows, those involving manufactured goods, policymakers are missing a significant part of total carbon traded across their borders – in many cases, the largest part.</p>
<p>In the EU, our findings largely reinforce the current motivation behind a carbon border adjustment, since the bloc is an importer of both explicit carbon and embodied carbon.</p>
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<p>For the U.S., however, the results are mixed. A carbon border adjustment could protect domestic manufacturers but harm the international competitiveness of domestic fossil fuels, and at a time when Russia’s invasion of Ukraine is placing renewed importance on the U.S. as a <a href="https://apnews.com/article/russia-ukraine-biden-business-poland-migration-c0c3b6421fc0d454abf53b4b6dd746bb">global energy supplier</a>.</p>
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<p>The Chinese economy, as an exporter of embodied carbon in manufactured goods, would suffer if its trading partners imposed a carbon border adjustment on China’s products. On the other hand, a Chinese domestic border adjustment could benefit Chinese domestic energy producers at the expense of foreign competitors who fail to adopt similar policies.</p>
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<p>Interestingly, <a href="https://www.bakerinstitute.org/research/carbon-border-adjustments-need-analyze-all-carbon-trade">our analysis</a> suggests that, by including explicit carbon flows, the U.S., EU and China are all net importers of carbon. All three key players could be on the same side of the discussion, which could improve the prospects for future climate negotiations – if all parties recognize their common interests. </p>
<p><em>This article was updated Dec. 14, 2022, with the European Parliament’s preliminary approval.</em></p><img src="https://counter.theconversation.com/content/189759/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nothing to disclose.</span></em></p><p class="fine-print"><em><span>Mark Finley does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new study shows what it would mean for Europe and China, and why the US might not be too excited about the idea.Joonha Kim, Graduate fellow, Baker Institute, Rice UniversityMark Finley, Fellow in Energy and Global Oil, Baker Institute for Public Policy, Rice UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1895552022-09-05T20:04:28Z2022-09-05T20:04:28ZTaxes out, subsidies in: Australia and the US are passing major climate bills – without taxing carbon<figure><img src="https://images.theconversation.com/files/482677/original/file-20220905-24-7ck41d.jpg?ixlib=rb-1.1.0&rect=8%2C4%2C2986%2C1967&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>At last, there’s action on climate change. The United States <a href="https://theconversation.com/the-us-has-finally-passed-a-huge-climate-bill-australia-needs-to-keep-up-188525">recently passed</a> its largest climate bill ever. And Australia is <a href="https://theconversation.com/government-set-to-legislate-its-43-emissions-reduction-target-after-greens-announce-support-188153">set to usher</a> a 43% emissions target into law this week, although the Greens will try to <a href="https://www.skynews.com.au/australia-news/the-greens-to-introduce-climate-trigger-bill-to-parliament-in-a-bid-to-further-cut-greenhouse-emissions/news-story/507a14a3228268ab661a3c032ec22eb8">amend</a> the bill so the climate impacts of new gas and coal projects are considered. </p>
<p>Good news, right? There’s one issue – these laws, packages and amendments conspicuously avoid the “T” word. Economists have long argued the best option to cut emissions is a tax or, failing that, a type of carbon market known as “<a href="https://www.lse.ac.uk/granthaminstitute/explainers/how-do-emissions-trading-systems-work/">cap-and-trade</a>”. But nowhere do the Australian or US bills mention taxing carbon dioxide to discourage dumping it into the atmosphere. </p>
<p>Why? The answer is basically politics. The Gillard Labor government introduced a carbon tax that, although it worked, turned out to be political kryptonite. So Labor’s climate policies now rely not on a tax, but on incentives for clean energy, carbon farming and electric transport.</p>
<p>This is not ideal. For decades, economists have pointed out carbon taxes and pollution allowance markets are the <a href="https://theconversation.com/carbon-pricing-works-the-largest-ever-study-puts-it-beyond-doubt-142034">simplest and best way</a> to reduce emissions at the lowest possible cost. But it seems taxes are out and stimulus is in. </p>
<h2>A long history of tax avoidance</h2>
<p>This isn’t new, of course. For decades, politicians – particularly in Anglophone countries – have avoided carbon taxes or market-based ways of cutting planet-heating pollutants. </p>
<p>Every attempt to price carbon on a national level in the US <a href="https://www.cnbc.com/2021/11/15/will-us-ever-put-a-price-on-carbon-as-part-of-climate-change-policy.html">has failed</a>. The first was in 1990. Presidential candidate turned climate campaigner Al Gore <a href="https://www.belfercenter.org/publication/gores-carbon-tax-shift-beats-cap-and-trade">called for a carbon tax</a> in his influential 1992 book, Earth in the Balance. But it was <a href="https://www.politico.com/story/2009/09/gores-carbon-tax-makes-good-sense-027451">politically unappealing</a>. </p>
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Read more:
<a href="https://theconversation.com/the-us-has-finally-passed-a-huge-climate-bill-australia-needs-to-keep-up-188525">The US has finally passed a huge climate bill. Australia needs to keep up</a>
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<p>Why? Concerns over “federal overreach”, increasing cost of power, and, of course, <a href="https://doi.org/10.1016/j.jeem.2011.05.002">lobbying</a> from fossil fuel industries.</p>
<p>Australia has the sad title of the first country in the world to introduce and remove a price on carbon – a sign of <a href="https://www.abc.net.au/news/2014-07-10/carbon-tax-timeline/5569118">how fraught the idea</a> has been. Labor’s Rudd-Gillard government lost the 2013 election with the “carbon tax” issue front-and-centre <a href="https://theconversation.com/obituary-australias-carbon-price-29217">in the campaign</a>. </p>
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<a href="https://images.theconversation.com/files/482680/original/file-20220905-20-egagse.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="electric car" src="https://images.theconversation.com/files/482680/original/file-20220905-20-egagse.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/482680/original/file-20220905-20-egagse.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/482680/original/file-20220905-20-egagse.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/482680/original/file-20220905-20-egagse.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/482680/original/file-20220905-20-egagse.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/482680/original/file-20220905-20-egagse.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/482680/original/file-20220905-20-egagse.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Subsidies for electric vehicles and green energy are set to grow strongly.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>Policy and politics has evolved</h2>
<p>Since Australia repealed its carbon tax, we’ve seen significant change in climate policies towards what is politically possible. </p>
<p>In the US, federal inaction on climate change spawned stronger environmental regulation by some states. Coalitions of American states now operate some of the world’s best pollution markets, such as that covering <a href="https://doi.org/10.1016/j.jeem.2022.102620">12 eastern states</a> and California’s <a href="https://www.c2es.org/content/california-cap-and-trade/">own market</a>.</p>
<p>The EU avoided taxes in favour of a cannier approach. They created a <a href="https://doi.org/10.1007/s10640-009-9275-7">pollution market</a> but allowed each state to determine how many allowances domestic firms could obtain. This made the policy more politically appetising and the EU carbon market has since <a href="https://www.reuters.com/article/climate-change-carbonpricing-europe-idUKL8N2I61AY">expanded substantially</a>. </p>
<p>The world’s largest emitter, China, last year followed suit and launched the <a href="https://chinadialogue.net/en/climate/the-first-year-of-chinas-national-carbon-market-reviewed/">world’s largest</a> carbon trading scheme. </p>
<p>But Australia didn’t follow the emissions trading model pursued by the EU and many US states. Instead, the Abbott Coalition government brought in an <a href="https://theconversation.com/australias-emissions-reduction-fund-is-almost-empty-it-shouldnt-be-refilled-92283">emissions reduction fund</a> to subsidise pollution reduction. </p>
<p>Companies can use pollution reduction to gain carbon credits, which can be sold to government or on the private market. The policy has proven thoroughly <a href="https://theconversation.com/we-blew-the-whistle-on-australias-central-climate-policy-heres-what-a-new-federal-government-probe-must-fix-185894">underwhelming</a>. </p>
<h2>What trends are we seeing?</h2>
<p>So tax and markets seem to be off the table when it comes to climate bills. </p>
<p>Last month, the US passed a sweeping <a href="https://theconversation.com/the-us-has-finally-passed-a-huge-climate-bill-australia-needs-to-keep-up-188525">A$530 billion bill</a> aimed at boosting health care funding and tackling climate change.</p>
<p>It’s aimed at speeding up the shift to clean energy and electric transport, through rebates and tax credits for electric cars, efficient appliances and rooftop solar. Conspicuously absent was any mention of a carbon tax or pollution allowance market. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1558864379176697861"}"></div></p>
<p>Australia’s climate bill requires us to reduce emissions by 43% by 2030 – but there’s very little information on the crucial question of how. </p>
<p>Labor’s bill <a href="https://theconversation.com/australia-may-be-heading-for-emissions-trading-between-big-polluters-188799">envisages</a> a type of market, regulating large polluters by allowing them to trade credits created by emissions reduction.</p>
<p>But both Australia and the US have shied away from the principle of “polluter pays”. </p>
<p>This is disappointing. Yes, subsiding pollution reduction can create incentives for behaviour change. But subsidies are <a href="https://www.theage.com.au/politics/victoria/competing-solar-and-fast-rail-schemes-economically-wasteful-report-20181028-p50chy.html">often wasteful</a> and inefficient. Taxes and markets are better options. We now know countries with a price on carbon have emissions growth rates <a href="https://theconversation.com/carbon-pricing-works-the-largest-ever-study-puts-it-beyond-doubt-142034">around 2% lower</a> than those without. Longer term, this is often enough to see overall emissions begin to fall.</p>
<p>While the direct costs of subsidies are not immediately seen by citizens and companies, these subsidies have to be paid for through increases in general taxation. Carbon taxes, by contrast, are more explicit. A polluter will clearly notice having to pay the tax and be motivated to avoid it. </p>
<h2>We’ll still need taxes and market approaches, even with the subsidies</h2>
<p>Instead of splashing out on subsidies, governments could still <a href="https://theconversation.com/economists-back-carbon-price-say-benefits-of-net-zero-outweigh-costs-169939">introduce a carbon tax</a> to raise much-needed revenue while offering assistance to low-income households, cutting taxes elsewhere, or even reduce the deficit. </p>
<p>In Australia, there’s surprising support for a <a href="https://www.theaustralian.com.au/technology/majority-want-carbon-tax-back/news-story/de67bf2831809123d2e227788704ecb0">return of the carbon tax</a>. But Labor may well be wary, given how their last carbon tax was easily defeated with a political scare campaign. One alternative could be to follow the EU and China and begin <a href="https://doi.org/10.1086/717898">auctioning</a> off pollution permits. </p>
<p>We could also borrow from America’s approach. Deep in the bill is a <a href="https://subscriber.politicopro.com/article/eenews/2022/08/11/climate-bills-methane-fee-could-pave-the-way-to-a-carbon-tax-00050941">fee on methane emissions</a>. This, some environmentalists believe, could be the crucial first step towards wider pricing of pollution. </p>
<p>Even though subsidies and rebates are politically popular, by themselves they cannot end greenhouse gas emissions. While carrots are popular, we will still need a stick – taxes or markets – to actually encourage polluters to cut emissions. </p>
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Read more:
<a href="https://theconversation.com/carbon-pricing-works-the-largest-ever-study-puts-it-beyond-doubt-142034">Carbon pricing works: the largest-ever study puts it beyond doubt</a>
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<img src="https://counter.theconversation.com/content/189555/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ian A. MacKenzie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Climate bills in Australia and the US promise progress without carbon taxes or markets. Here’s why.Ian A. MacKenzie, Associate Professor in Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1844712022-06-09T20:10:46Z2022-06-09T20:10:46ZIf the opposition wants a mature discussion about nuclear energy, start with a carbon price. Without that, nuclear is wildly uncompetitive<figure><img src="https://images.theconversation.com/files/467921/original/file-20220609-24-bfsenj.jpg?ixlib=rb-1.1.0&rect=7%2C14%2C4786%2C2334&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Getty</span></span></figcaption></figure><p>The idea of nuclear power in Australia has been hotly debated for decades. Most of this discussion has been unproductive, focusing on symbolism and identity politics rather than the realities of energy policy. For that reason alone, we should welcome the commitment by opposition party leaders David Littleproud and Peter Dutton to a <a href="https://www.skynews.com.au/australia-news/politics/nationals-leader-david-littleproud-to-write-to-anthony-albanese-calling-for-action-on-nuclear-power-in-australia/news-story/707c0e461d7316e852d59cdecacc0160">mature conversation</a> about nuclear power, free of political taboos.</p>
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<p>Far and away the most important such taboo is the unwillingness of either Labor or the LNP to consider an effective price on carbon. A string of inquiries into nuclear power such as the 2006 Switkowski Review and the 2016 South Australian Royal Commission concluded nuclear power will never be commercially viable without a high price on carbon dioxide emissions.</p>
<p>The reasoning behind this conclusion is simple. Nuclear power directly competes with coal-fired electricity as a source of continuous 24-hour generation. But building nuclear plants is much more expensive than new coal-fired plants. In Australia, nuclear power would compete with existing coal plants, the construction costs of which were recovered long ago.</p>
<p>So nuclear power could only replace our ageing coal plants if its operating costs are lower. But as long as coal generators are permitted to dump their waste (carbon dioxide and particulate matter) into the atmosphere at no cost, nuclear power can’t compete, except in rare periods of ultra-high coal prices. As energy minister Chris Bowen <a href="https://www.smh.com.au/national/australia-news-live-police-probe-chinese-criminal-syndicate-money-in-vic-nsw-bowen-energy-ministers-agree-new-plan-20220609-p5asd8.html">pointed out yesterday</a>, nuclear is “the most expensive form of energy.”</p>
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<a href="https://images.theconversation.com/files/467914/original/file-20220609-13-38bcqi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="turbine and nuclear power" src="https://images.theconversation.com/files/467914/original/file-20220609-13-38bcqi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/467914/original/file-20220609-13-38bcqi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/467914/original/file-20220609-13-38bcqi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/467914/original/file-20220609-13-38bcqi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/467914/original/file-20220609-13-38bcqi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/467914/original/file-20220609-13-38bcqi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/467914/original/file-20220609-13-38bcqi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Without a carbon price, nuclear will struggle to find a place complementing renewables.</span>
<span class="attribution"><span class="source">Getty</span></span>
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<h2>Why is a carbon price fundamental to nuclear being able to compete?</h2>
<p>Take the example of the most recent nuclear plant under construction in the developed world, the UK’s Hinkley Point C plant. In 2012, the plant’s owners <a href="https://www.theguardian.com/news/2017/dec/21/hinkley-point-c-dreadful-deal-behind-worlds-most-expensive-power-plant">negotiated</a> a guaranteed price for power of around $A160 per megawatt hour, pegged to inflation. That’s extraordinarily expensive. </p>
<p>In Australia, the typical wholesale price for coal power in our National Electricity Market is typically $A40 to $A60, though it fluctuates and is currently very high. Even if the costs of nuclear power fall substantially, and the market price of coal remains high, there will still be a gap which won’t be bridged without a carbon price.</p>
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Read more:
<a href="https://theconversation.com/everything-you-need-to-know-about-mini-nuclear-reactors-56647">Everything you need to know about mini nuclear reactors</a>
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<p>Despite their calls for a mature discussion, none of Australia’s prominent advocates of nuclear power have suggested accepting a carbon price in return for removing the Howard government’s ban on nuclear power. Indeed, when I proposed this <a href="https://theconversation.com/nuclear-power-should-be-allowed-in-australia-but-only-with-a-carbon-price-123170">grand bargain</a> with the support of a number of conservative economists, the idea was <a href="https://johnquiggin.com/2019/12/14/no-takers-for-a-nuclear-grand-bargain/">ignored or dismissed</a> out of hand by LNP members sitting on parliamentary inquiries. </p>
<p>Where does that leave us? Just as the ban had no practical effect, the current calls for its removal are purely symbolic given we have no carbon price to make the economics stack up. Rather, the Coalition’s sudden nuclear push represents just another round in the endless culture wars bedevilling Australian politics for decades.</p>
<h2>If we had a carbon price, large scale nuclear would still not stack up</h2>
<p>Let’s assume our leaders reach agreement on a carbon price. Would nuclear stack up then? </p>
<p>Certainly not in its traditional form. Large, centralised power plants based on 20th century designs are dead, as most pro- and anti-nuclear advocates would agree. That’s due to cost and difficulty of construction. For many years, the most promising candidate for a large 21st century nuclear plant has been the <a href="https://www.westinghousenuclear.com/new-plants/ap1000-pwr">AP1000 reactor</a> built by US company Westinghouse. Massive cost and schedule over-runs on two US projects <a href="https://www.reuters.com/article/us-toshiba-accounting-westinghouse-nucle-idUSKBN17Y0CQ">sent Westinghouse broke</a>, almost taking parent company Toshiba with it.</p>
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<a href="https://images.theconversation.com/files/467917/original/file-20220609-18-ncvtac.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="hinkley point c nuclear station" src="https://images.theconversation.com/files/467917/original/file-20220609-18-ncvtac.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/467917/original/file-20220609-18-ncvtac.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/467917/original/file-20220609-18-ncvtac.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/467917/original/file-20220609-18-ncvtac.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/467917/original/file-20220609-18-ncvtac.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/467917/original/file-20220609-18-ncvtac.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/467917/original/file-20220609-18-ncvtac.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The UK’s Hinkley Point C nuclear power station is built to the European Power Reactor design.</span>
<span class="attribution"><span class="source">Getty</span></span>
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<p>There are also the European Power Reactor and the <a href="https://home.kepco.co.kr/kepco/EN/G/htmlView/ENGBHP00102.do?menuCd=EN07030102">APR1400</a> designed by Korean company KEPCO. The EPR, as it is now known, is the massively expensive design under construction at Hinkley Point. The same design has had disastrous cost overruns in other projects in France and Finland. Cost details on the APR1400 are harder to find, but there have been no new orders for a decade. </p>
<p>That leaves Chinese and Russian designs. Any prospect of Australia opting for one of these was almost certainly scotched by the Russian invasion of Ukraine. Finland, which unwisely went with Russian company Rosatom for its fifth nuclear plant, has <a href="https://www.reuters.com/world/europe/finnish-group-ditches-russian-built-nuclear-plant-plan-2022-05-02/">pulled the plug</a>, while the UK is <a href="https://www.bloomberg.com/news/articles/2021-07-25/u-k-eyes-removing-china-s-cgn-in-energy-plans-as-ties-fray">trying to cut</a> China out of its role in its new reactors. </p>
<h2>What about the small reactors touted as the future?</h2>
<p>The great hope for the future is “small modular reactors”. Here, small reactors of less than 100-megawatt capacity are built in factories and shipped to sites as needed (this is the “modular” bit). While many small reactor outfits have tried to latch on to the idea, <a href="https://www.nuscalepower.com/projects/carbon-free-power-project">US company NuScale</a> is the only one worth considering. </p>
<p>Even given the smaller size, NuScale has hit major delays. In 2014, the company <a href="https://atomicinsights.com/nuscale-doe-finalize-agreement-announced-six-months-ago/">predicted</a> the first project would be operating by 2023. That date has now been pushed out to 2030, though it hopes the first unit will be in place just before the end of this decade. </p>
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<a href="https://images.theconversation.com/files/467918/original/file-20220609-22-qhuwdk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="nuscale small reactor" src="https://images.theconversation.com/files/467918/original/file-20220609-22-qhuwdk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/467918/original/file-20220609-22-qhuwdk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/467918/original/file-20220609-22-qhuwdk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/467918/original/file-20220609-22-qhuwdk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/467918/original/file-20220609-22-qhuwdk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/467918/original/file-20220609-22-qhuwdk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/467918/original/file-20220609-22-qhuwdk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Small modular reactors like this mock-up from NuScale are much smaller than traditional nuclear plants.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:NuScale-Upper-One-Third-Mockup.jpg">Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>Let’s suppose, though, that everything goes right for nuclear. Imagine NuScale reactors can arrive on time and on budget, that Australia has a carbon tax high enough to make nuclear competitive with coal, and cheaper alternatives of firmed renewables (battery-backed solar and wind) run into issues. How long would it take before we could actually generate nuclear power in Australia?</p>
<p>Work on the legislative framework and the regulatory authority could be done in advance. But it would be silly to spend large amounts if the design isn’t proven. That means that we couldn’t start design approvals, site selections – which would be controversial – and impact assessment until the early 2030s. </p>
<p>With a determined push and broad social consensus, construction might start in the late 2030s and start producing electricity some time in the 2040s. That could be worthwhile as a backup to our energy system, which by then will be based mainly on solar and wind. </p>
<p>But to get to this point two decades away, the very first requirement for a mature discussion of nuclear energy is accepting a carbon price. </p>
<p>Until we see that, the opposition is offering a fantasy, not an energy policy.</p>
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Read more:
<a href="https://theconversation.com/yes-australia-is-buying-a-fleet-of-nuclear-submarines-but-nuclear-powered-electricity-must-not-come-next-168110">Yes, Australia is buying a fleet of nuclear submarines. But nuclear-powered electricity must not come next</a>
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<img src="https://counter.theconversation.com/content/184471/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin has appeared before numerous public inquiries into nuclear power in Australia</span></em></p>Renewed interest in nuclear energy will go nowhere unless we talk about carbon pricing. As energy minister Chris Bowen points out, nuclear is extremely expensive.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1829952022-05-23T19:52:18Z2022-05-23T19:52:18ZOther casualties of Putin’s war in Ukraine: Russia’s climate goals and science<p>As the European Union moves closer to an <a href="https://theconversation.com/europe-is-determined-to-cut-fossil-fuel-ties-with-russia-even-though-getting-hungary-on-board-wont-be-easy-182502">embargo deal on Russian oil</a>, there is much talk about the impact of war-related sanctions on <a href="https://www.theguardian.com/environment/2022/may/18/eu-plans-massive-increase-in-green-energy-to-rid-itself-of-reliance-on-russia">Europe’s energy transition</a> and the world’s <a href="https://www.eenews.net/articles/will-the-russian-invasion-accelerate-peak-oil/">decarbonisation efforts</a>.</p>
<p>But the sanctions also have strong implications for Russia’s already slow and rather unsure green transition, be it the modernisation of its energy sector or climate science. What Russia does or does not do matters for the rest of us: the world’s eleventh-largest economy also happens to be the <a href="https://edgar.jrc.ec.europa.eu/report_2021">fourth-largest emitter of greenhouse gases</a>, the <a href="https://www.iea.org/reports/russian-supplies-to-global-energy-markets/oil-market-and-russian-supply-2">second-largest crude oil exporter</a>, and the world’s <a href="https://www.iea.org/countries/russia">largest gas exporter</a>. The Russian economy is strongly dependent on the exploitation of energy-intensive industries and fossil fuels, with oil and gas alone accounting for <a href="https://www.bbc.com/future/article/20211115-climate-change-can-russia-leave-fossil-fuels-behind">35-40% of the federal budget revenue</a> in recent years. Hydrocarbons fuel Russia’s elite’s wealth and power but are also framed as a source of energy security and welfare for the country’s citizens.</p>
<h2>Russia’s decarbonisation at risk</h2>
<p>Until recently, Russia had long been seen as a <a href="https://www.opendemocracy.net/en/odr/what-can-we-expect-from-russia-at-cop26/">country with a lacklustre position in international climate negotiations</a>, at best a passive player and at worst an active saboteur of worldwide ambition. However, things have changed over the past years, most notably from November 2021 when its government adopted a <a href="http://static.government.ru/media/files/ADKkCzp3fWO32e2yA0BhtIpyzWfHaiUa.pdf">framework climate legislation</a> with a net-zero target by 2060. That year alone also saw it introduce a greenhouse gas emission reporting system for large emitters, adoption of its first national Climate Adaptation Plan and initiation of a carbon-trading experiment in its <a href="https://www.reuters.com/article/us-climate-change-russia-carbontrading-t-idUSKBN2AJ0NX">remote far Eastern region</a> aimed at reaching carbon neutrality by 2025.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/464520/original/file-20220520-12-hx9n1h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/464520/original/file-20220520-12-hx9n1h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/464520/original/file-20220520-12-hx9n1h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/464520/original/file-20220520-12-hx9n1h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/464520/original/file-20220520-12-hx9n1h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/464520/original/file-20220520-12-hx9n1h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/464520/original/file-20220520-12-hx9n1h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The government of the Russian island region of Sakhalin, in the Pacific Ocean north of Japan, has been experimenting with carbon trading and green technology in a bid to reach net-zero emissions by 2025.</span>
<span class="attribution"><span class="source">Angelina Davydova</span></span>
</figcaption>
</figure>
<p>Some will argue the impulse for these initiatives comes from outside the country. For example, as part of the European Union’s Green Deal package, the <a href="https://www.energymonitor.ai/policy/carbon-markets/eus-cbam-to-impact-russia-china">Carbon Border Adjustment Mechanism</a> (CBAM) is set to place a carbon price on imports entering the European single market from non-EU countries such as Russia from 2026. The border tariff, which would see imports covered by carbon pricing equivalent to Europe’s carbon market, the Emissions Trading System, has been credited with inspiring the Russian government and industry to finally take climate change seriously.</p>
<p>However, with every passing day of war these external incentives lose traction, making Russia’s domestic climate policy more uncertain than ever.</p>
<h2>Could Russia leave the Paris Agreement?</h2>
<p>On the one hand, it would be mistaken to claim all that is left of Russia’s climate policy is a tabula rasa. The truth is, today’s policy programmes and “green” business strategies do not fully hinge on foreign pressure. Although Russia’s parliament, the Duma, debated leaving the Paris Agreement <a href="https://iz.ru/1335953/valerii-voronov/eko-delo-v-gd-predlozhili-otkazatsia-ot-parizhskogo-soglasheniia">earlier this week</a>, there remains political will to uphold it. The chairman of the Duma’s Committee on Ecology, Natural Resources and Environmental Protection, Vyacheslav Fetisov, for example, has said:</p>
<blockquote>
<p>“Russia does not plan to withdraw from the Paris Climate Agreement [and] is not going to abandon the implementation of this most important environmental international legal instrument.”</p>
</blockquote>
<p>State agencies, companies, think tanks and other institutions that have developed “green” strategies over the past years, <a href="https://rawi.ru/2022/03/sohranit-li-biznes-v-rossii-kurs-na-dekarbonizaciyu/">insist on their enduring relevance</a> for the global fight against climate change, but also climate impacts on Russia and future trade prospects. The climate head of WWF Russia, Aleksey Kokorin, has even voiced optimism that gas surpluses resulting from sanctions could be used to substitute the country’s coal and prompt the country’s greenhouse gas emissions to drop.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/464521/original/file-20220520-13-on209d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/464521/original/file-20220520-13-on209d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/464521/original/file-20220520-13-on209d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/464521/original/file-20220520-13-on209d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/464521/original/file-20220520-13-on209d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/464521/original/file-20220520-13-on209d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/464521/original/file-20220520-13-on209d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Russian state is strongly dependent on the exploitation of fossil fuels. Here, a photograph shows the Utrenneye field located on the Kara Sea shore line in the Arctic circle, some 2500 km from Moscow.</span>
<span class="attribution"><span class="source">Natalia Kolesnikova/AFP</span></span>
</figcaption>
</figure>
<p>And yet, it is undeniable that the <a href="https://theconversation.com/war-in-ukraine-russias-reputedly-sanction-proof-economy-shows-signs-of-stress-181109">economic crisis</a>, sanctions and strengthened anti-Western rhetoric brought on by the war have made it more difficult to pursue decarbonisation plans. Politicians and lobbyists who had already opposed decarbonisation efforts have seized the moment to <a href="https://spravedlivo.ru/12016310">demand a withdrawal from the Paris Agreement</a>.</p>
<p>Many businesses are taking advantage of the situation to pressure the government to roll back environmental regulation in a bid to help them cope with harsher economic circumstances, with <a href="https://greenpeace.ru/blogs/2022/04/22/v-rossii-oslabljajut-jekologicheskoe-zakonodatelstvo/">recent bills already pointing in this direction</a>. More specifically, there have been reports of <a href="https://iz.ru/1326653/valerii-voronov/terpiat-otlagatelstv-v-rossii-khotiat-otsrochit-sokrashchenie-parnikovykh-vybrosov">talks between the government and energy companies</a> over the possibility of relaxing greenhouse gas emission reporting and verification. For example, one of the country’s biggest oil suppliers, Lukoil, has pushed the government to scrap a legislation compelling large energy companies to verify their reporting on greenhouse gas emissions with an independent company starting from 1 January 2023.</p>
<p>Import restrictions on technology, the dwindling of foreign capital sources and the freezing of international programmes have further stalled plans to modernise the country’s old industries. Russia’s fledging renewables sector has also taken a hit, with some international investors (including Vestas, Fortum and ENEL) halting their plans in Russia or withdrawing from the country completely.</p>
<p>This has prompted politicians, businesspeople, and scientists to discuss alternatives to foreign technology and <a href="https://www.ng.ru/economics/2022-05-04/100_155304052022.html">domestic options to finance the energy transition</a>.</p>
<h2>Bleak future for Russia’s climate science</h2>
<p>Moreover, the sanctions have taken a serious toll on climate science in Russia, which matters to those who implement practical decarbonisation measures in Russia, but also to the global science community. It is particularly jarring in relation to other instances in Russian history when scientists succeeded in overcoming political tensions with the West. Despite the <a href="https://www.tandfonline.com/doi/full/10.1080/14682745.2021.1885377">Cold War</a>, climate scientists managed to advance global climate science within the 1972 US-USSR environmental agreement enabling the exchange of data, equipment and joint publications.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/464755/original/file-20220523-42302-8xjk15.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/464755/original/file-20220523-42302-8xjk15.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/464755/original/file-20220523-42302-8xjk15.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/464755/original/file-20220523-42302-8xjk15.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/464755/original/file-20220523-42302-8xjk15.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/464755/original/file-20220523-42302-8xjk15.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/464755/original/file-20220523-42302-8xjk15.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">US climatologist Alan D. Hecht (1944-2019) and the USSR’s Mikhail I. Budyko (1920-2001) discussing their joint publication on climate change in 1989.</span>
<span class="attribution"><span class="source">Alan D. Hecht</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>In contrast, governments and science bodies worldwide have now sanctioned Russian research institutions. Meanwhile, the EU has suspended Russia’s participation in its flagship research programme <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1544">Horizon Europe</a> and national research councils of several European states paused collaborations with Russia.</p>
<p>Research areas that rely on foreign equipment are particularly affected. For instance, Germany’s Max Planck Institute (MPI) has received a <a href="https://www.zeit.de/2022/12/wissenschaft-ukraine-krieg-deutschland-russland-forschung">64-page list with electronic devices</a> that the EU forbids scientists to share with Russian colleagues on the grounds they could be used for military purposes. In early February, the Russian government announced <a href="https://www.themoscowtimes.com/2022/02/09/russia-aims-to-invest-79m-in-climate-research-by-2030-a76316">plans to invest 5.9 billion roubles</a> (at the time of writing, approximately $92 million) into climate and decarbonisation research, and create Russia’s own system to track carbon emissions.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/465007/original/file-20220524-24-qjue68.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/465007/original/file-20220524-24-qjue68.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/465007/original/file-20220524-24-qjue68.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/465007/original/file-20220524-24-qjue68.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/465007/original/file-20220524-24-qjue68.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/465007/original/file-20220524-24-qjue68.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/465007/original/file-20220524-24-qjue68.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A research station on the Island of Samoylov, northeastern Siberia.</span>
<span class="attribution"><span class="source">Anne Morgenstern/Alfred-Wegener Institute</span></span>
</figcaption>
</figure>
<p>However, Alexander Chernokulsky, a climatologist from the Institute of Atmospheric Physics at the Russian Academy of Sciences, told us the future of the project is unclear in the absence of foreign equipment. Similarly, for years Russian and German scientists have been measuring CO<sub>2</sub> concentration changes in the atmosphere from a tall tower observatory, <a href="https://www.zottoproject.org/">ZOTTO</a>, in the southwest Siberian region of Krasnoyarsk, considered a “hot spot” because of its potential for large carbon storage or leak. Here again, in an e-mail exchange with us, MPI scientist Sönke Zaehle has warned that the medium- and long-term future of the station are at risk from a lack of maintenance support from the German side.</p>
<p>Research in the Arctic is particularly crucial for our understanding of climate change. At least a dozen international collaborations with Russia have been stalled, here, too. The maintenance of long-term measuring systems crucial for climate modelling poses particular concerns. “There is this fear of a blind spot, no matter what research topic in the Arctic you approach,” Anne Morgenstern, a coordinator of the German Alfred Wegener Institute’s scientific cooperation with Russia, told us.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/464511/original/file-20220520-20-i7fpgo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/464511/original/file-20220520-20-i7fpgo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/464511/original/file-20220520-20-i7fpgo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/464511/original/file-20220520-20-i7fpgo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/464511/original/file-20220520-20-i7fpgo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=470&fit=crop&dpr=1 754w, https://images.theconversation.com/files/464511/original/file-20220520-20-i7fpgo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=470&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/464511/original/file-20220520-20-i7fpgo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=470&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A weather station in Russia’s northernmost region, Taymyr Peninsula in Siberia.</span>
<span class="attribution"><a class="source" href="http://www.grida.no/resources/2768">Peter Prokosch</a></span>
</figcaption>
</figure>
<p>Climate scientists in Russia have also lost access to the Climate Data Store, which provides a single point of access to a wide range of climate datasets for past, present and future climates, including satellite observations, in-situ measurements, climate model projections and seasonal forecasts. They can no longer either access supercomputers based in other countries, and the departure of technology companies such as <a href="https://www.intel.com/content/www/us/en/newsroom/news/russia-business-statement.html">Intel</a> will eventually lead to a deterioration of computing capacities in general, according to Evgeny Volodin, a climate modeller at the Institute of Computational Mathematics at the Russian Academy of Sciences.</p>
<p>Environmental concerns are at risk of being laid aside during wartime. However, as we stand at a point in earth history at which opportunities to mitigate climate catastrophe are fading, we believe subordinating climate issues to the dictates and temporalities of war is not an option. Attempts to stop the war have to stand alongside efforts to advance transnational climate cooperation and action, despite the damages and dilemmas caused by Russia’s war. Ambitious international climate agendas, including <a href="https://www.iisd.org/articles/analysis/phase-out-oil-gas-production">phasing out oil and gas production as quickly as possible</a>, are crucial to <a href="https://www.theguardian.com/environment/ng-interactive/2022/may/11/fossil-fuel-carbon-bombs-climate-breakdown-oil-gas">increase pressure on the fossil fuel industry</a> and the war machine, and to support those forces within Russia that are still holding on to decarbonisation.</p>
<hr>
<p><em>This article was co-written with Angelina Davydova, an environmental and climate journalist. She is currently a fellow of the Berlin-based <a href="https://mict-international.org/">Media in Cooperation and Transition (MICT) programme</a> and a coordinator with <a href="https://gijn.org/member/n-ost-germany/">N-ost</a>, a network for cross-border journalism.</em></p><img src="https://counter.theconversation.com/content/182995/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexander Vorbrugg a reçu des financements de Swiss National Science Foundation (SNSF). </span></em></p><p class="fine-print"><em><span>Katja Doose ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>The war in Ukraine threatens to turn back the clock on Russia’s climate progress, with some calling on the country to leave the Paris Agreement and roll back environmental regulations.Katja Doose, Senior researcher, University of FribourgAlexander Vorbrugg, Geographer, University of BernLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1821762022-05-17T12:43:04Z2022-05-17T12:43:04ZBECCS: the carbon capture technology the UK is relying on to reach net zero<figure><img src="https://images.theconversation.com/files/463383/original/file-20220516-23-p8uh9c.jpg?ixlib=rb-1.1.0&rect=177%2C44%2C5754%2C3913&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Drax power station, North Yorkshire</span> <span class="attribution"><a class="source" href="https://www.alamy.com/drax-power-station-north-yorkshire-england-uk-image261640178.html?pv=1&stamp=2&imageid=7D527818-B0FD-48CE-B756-7F253D5460C7&p=51062&n=0&orientation=0&pn=1&searchtype=0&IsFromSearch=1&srch=foo%3dbar%26st%3d0%26pn%3d1%26ps%3d100%26sortby%3d2%26resultview%3dsortbyPopular%26npgs%3d0%26qt%3ddrax%26qt_raw%3ddrax%26lic%3d3%26mr%3d0%26pr%3d0%26ot%3d0%26creative%3d%26ag%3d0%26hc%3d0%26pc%3d%26blackwhite%3d%26cutout%3d%26tbar%3d1%26et%3d0x000000000000000000000%26vp%3d0%26loc%3d0%26imgt%3d0%26dtfr%3d%26dtto%3d%26size%3d0xFF%26archive%3d1%26groupid%3d%26pseudoid%3d%26a%3d%26cdid%3d%26cdsrt%3d%26name%3d%26qn%3d%26apalib%3d%26apalic%3d%26lightbox%3d%26gname%3d%26gtype%3d%26xstx%3d0%26simid%3d%26saveQry%3d%26editorial%3d%26nu%3d%26t%3d%26edoptin%3d%26customgeoip%3dGB%26cap%3d1%26cbstore%3d1%26vd%3d0%26lb%3d%26fi%3d2%26edrf%3d%26ispremium%3d1%26flip%3d0%26pl%3d">John Morrison / Alamy Stock Photo</a></span></figcaption></figure><p>The UK government is counting on the carbon capture technologies that bioenergy power plants are trialling to meet its climate change goals. Last week the UK’s largest renewable energy power plant, Drax, <a href="https://www.drax.com/press_release/drax-to-pilot-more-pioneering-new-carbon-capture-technology/">announced plans</a> for pioneering trials of a new capture technology at its North Yorkshire power station. </p>
<p>Overall, the UK spends hundreds of millions of pounds every year on the wood-burning power stations this technology would supposedly remove the emissions of. But can it deliver the kind of reduction in carbon output the country and the world needs?</p>
<p>To answer this question, first it’s important to understand what scientists mean by the term “negative emissions” – especially if you want to decipher climate change news for yourself. </p>
<p>Imagine that household waste collectors go on strike for a month, during which huge amounts of rubbish accumulate. Upon returning to work, the collectors working their usual shifts aren’t able to clear the backlog, so the council hires extra workers. </p>
<p>For a period after the strike, the amount of household waste produced is therefore less than the total rubbish being collected. The net production of waste is negative – even if, for a period, there is still rubbish in the streets.</p>
<p>The rubbish in this example represents greenhouse gas (GHG) emissions, and what a regime of negative emissions could look like. In the last few decades, however, the worldwide levels of GHG produced remained high and very little was removed. </p>
<p>Attempts to supplement nature’s processes for removing carbon have largely proved unsuccessful. For example, the US government invested <a href="https://www.theverge.com/2021/12/30/22860207/carbon-capture-coal-plants-wasted-federal-dollars-watchdog-gao">billions of dollars</a> in technology to capture carbon released from coal power plants, but most of these carbon capture units were never built – largely because the technology was so expensive. </p>
<p>Mostly, we still <a href="https://www.drax.com/carbon-capture/negative-emissions-techniques-technologies-need-know/">rely on natural habitats</a> such as woodlands, mangroves and peatland to remove carbon from the atmosphere. But UK salt marshes could <a href="https://www.newscientist.com/article/2174043-englands-marshes-may-start-to-retreat-and-disappear-in-just-20-years/">disappear</a> under rising sea levels, huge swathes of the world’s <a href="https://www.amnh.org/explore/videos/biodiversity/mangroves-the-roots-of-the-sea/mangrove-threats-and-solutions">mangrove forests</a> have been cleared for shrimp farms, and we are losing forests to timber logging and wildfires at an alarming rate. </p>
<p>If we put in place all the potential technologies for removing GHG emissions so that we remove more than we produce (we hire more rubbish collection workers), we would instead be in a regime of negative emissions. So how feasible is this?</p>
<h2>What is BECCS?</h2>
<p>Biomass or <a href="https://www.biomass-uk.org/">bioenergy</a> is the UK’s second-largest source of renewable energy after wind power. Bioenergy is generated by burning matter, mostly wood pellets. </p>
<p>Bioenergy with carbon capture and storage (BECCS) aims to capture the carbon released from burning wood pellets and crops, and store the carbon deep below the ground. This technology is considered carbon negative because it effectively removes carbon from the atmosphere. A BECCS pilot project at Drax captured carbon in 2019, and the power station aims to have carbon capture technology fully operational in 2027.</p>
<p>So far so good. <a href="https://www.drax.com/about-us/our-projects/bioenergy-carbon-capture-use-and-storage-beccs/">BECCS advocates</a> say it will be key in the fight against climate change. However, life is never easy as it first looks. </p>
<p>For a start, BECCS only accounts for carbon released when the wood is burned. In reality, carbon is generated throughout the process chain: planting trees, harvesting them, turning the wood into pellets, shipping the pellets. </p>
<p>Conservative estimates show making wood pellets and shipping them accounts for about a <a href="http://science.aat2305.pdf/">quarter</a> of the carbon released in this process. And carbon capture and storage is itself a highly energy-intensive process. </p>
<p>To return to our earlier example, overlooking these carbon emissions would be like the council failing to factor in the time workers need to maintain rubbish collection trucks and separate different recycling materials. </p>
<figure class="align-center ">
<img alt="Wood pellets in the shape of a house on wood pellets surface" src="https://images.theconversation.com/files/463280/original/file-20220516-25-o2hpzc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/463280/original/file-20220516-25-o2hpzc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/463280/original/file-20220516-25-o2hpzc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/463280/original/file-20220516-25-o2hpzc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/463280/original/file-20220516-25-o2hpzc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/463280/original/file-20220516-25-o2hpzc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/463280/original/file-20220516-25-o2hpzc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Most biofuel comes from wood pellets.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/wood-pellets-shape-house-on-surface-263304296">Shutterstock</a></span>
</figcaption>
</figure>
<p>What’s more, burning wood can produce more <a href="http://science.aat2305.pdf/">CO₂ emissions</a> than fossil fuels. Providing a precise account of the emissions from burning wood is not an easy task as there are so many variables. And calculations tend to assume a steady process. A correct analysis should factor in things like rotation time to replace and manage the harvested forest.</p>
<p>Given that burning a unit of wood generates considerably less heat compared with burning a unit of oil or coal, wood for <a href="https://theconversation.com/carbon-capture-on-power-stations-burning-woodchips-is-not-the-green-gamechanger-many-think-it-is-110475">bioenergy</a> can actually produce more net CO₂. Yet the government is <a href="https://www.ucl.ac.uk/bartlett/news/2021/jul/can-beccs-help-us-get-net-zero">relying on BECCS</a> for its net zero strategy. </p>
<h2>So how useful is this technology?</h2>
<p>The UK is the largest importer of <a href="https://www.statista.com/statistics/477057/imports-of-wood-pellets-volume-by-key-country/#:%7E:text=The%20United%20Kingdom%20is%20the,whole%20logs%2C%20and%20wood%20products.">bioenergy in the world</a>, bringing in more than 9 million tonnes of wood pellets in 2020. Burning around 7 million tonnes of wood pellets is equivalent to burning <a href="https://www.independent.co.uk/climate-change/news/drax-greenwashing-cop26-wood-emissions-b1956072.html">25 million trees.</a> </p>
<p>In 2020, the UK government pledged to spend <a href="https://ember-climate.org/insights/research/the-burning-question/">£13 billion</a> to support wood-burning power stations, including £10 billion at the Drax power station. Energy thinktank Ember <a href="https://ember-climate.org/insights/research/the-burning-question">estimates that</a> biomass generators are getting carbon tax breaks of £333 million a year in addition to the direct subsidy. </p>
<p>Yet the latest <a href="https://www.ipcc.ch/report/ar6/wg2/">UN Intergovernmental Panel for Climate Change </a> report is lukewarm about BECCS. It states: “The use of bioenergy can lead to either increased or reduced emissions, depending on the scale of deployment, conversion technology, fuel displaced, and how and where the biomass is produced.” Overall, the report leaves us in the dark about how useful BECCS can be.</p>
<h2>The scale of the issue</h2>
<p>Harnessing plants’ ability to remove CO₂ by photosynthesis is the best carbon capture technology in the world. It takes weeks to cut down, ship and burn a tree, but decades to grow one. Younger trees suck far less CO₂ from the atmosphere than an older tree. If we want to rely on BECCS to cut our carbon emissions, we need to plant more trees at a faster rate.</p>
<p>Huge amounts of land will be needed for this bioenergy. <a href="https://committees.parliament.uk/writtenevidence/40473/pdf/">Wildlife</a> is already at risk by timber harvesting for woodchips in protected forests. Harmful practices such as logging in sensitive and protected forest habitats, home to threatened and rare wildlife, are widespread in the UK biomass supply chain. </p>
<p>In short, there are still many uncertainties around BECCS – and some proper maths to be done about its benefits.</p><img src="https://counter.theconversation.com/content/182176/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Raffaella Ocone receives funding from Heriot-Watt University.
I have received funding from EPSRC, but not related to the issues discussed in this article.</span></em></p>The UK’s largest wood-burning power plant is to trial bioenergy with carbon capture and storage – but will it do enough to cut emissions?Raffaella Ocone, Chair of Chemical Engineering, Heriot-Watt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1804532022-04-07T23:25:14Z2022-04-07T23:25:14ZWhat the 2022 federal budget says about Canada’s commitment to a green recovery<figure><img src="https://images.theconversation.com/files/457009/original/file-20220407-11-865vnv.JPG?ixlib=rb-1.1.0&rect=37%2C22%2C4942%2C3284&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Deputy Prime Minister and Minister of Finance Chrystia Freeland has left the door open to maintaining Canada's position as a green leader among G20 nations. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/what-the-2022-federal-budget-says-about-canada-s-commitment-to-a-green-recovery" width="100%" height="400"></iframe>
<p>Every year, the federal budget outlines government spending priorities and sources of revenue for the coming year. While <a href="https://www.budget.gc.ca/fes-eea/2020/home-accueil-en.html">COVID-related spending</a> dominated the <a href="https://www.budget.gc.ca/2021/home-accueil-en.html">previous two budgets</a>, the 2022 budget comes amid new geopolitical uncertainties, including the war in Ukraine, ongoing socio-economic challenges in the wake of the pandemic, rising inflation, housing affordability, supply chain disruptions and increased pressure for accelerated climate action.</p>
<p>The federal government’s recently announced <a href="https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/climate-plan-overview/emissions-reduction-2030.html">2030 Emissions Reduction Plan</a>, which aims to reduce greenhouse gas emissions to <a href="https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Canada%20First/Canada%27s%20Enhanced%20NDC%20Submission1_FINAL%20EN.pdf">40 to 45 per cent below 2005 levels by 2030</a>, is expected to cost $9.1 billion in new investments, not including the cost of the investment tax credit for carbon capture and storage. </p>
<p>In our <a href="https://www.sciencedirect.com/science/article/pii/S0921800922002488">recent study</a>, we find that Canada emerged as a leader among its G20 peers in terms of green fiscal stimulus spending and policies. Green fiscal stimulus aims to spur economic growth and create jobs while reducing emissions. </p>
<p>As we look at the <a href="https://budget.gc.ca/2022/report-rapport/toc-tdm-en.html">2022 budget</a> released on April 7, we ask whether Canada will continue building on its green recovery commitment, as <a href="https://globalnews.ca/video/7284869/freeland-says-restart-of-economy-needs-to-be-green-equitable">Chrystia Freeland</a> promised to do when she took over the finance portfolio in August 2020. Today’s budget included over $12 billion in investments in lowering emissions over the next five years. These include electric vehicle infrastructure investments and <a href="https://tc.canada.ca/en/road-transportation/innovative-technologies/zero-emission-vehicles/incentives-purchasing-zero-emission-vehicles">purchase incentives</a>, an expansion of the <a href="https://www.canada.ca/en/environment-climate-change/services/climate-change/low-carbon-economy-fund.html">Low Carbon Economy Fund</a> and a new tax credit for carbon capture, utilization and storage.</p>
<p>Budget 2022 is an opportunity for Canada to continue its leadership in green fiscal policy. It marks a critical juncture with Canada’s 2030 emissions reduction goals looming. </p>
<h2>Canada emerges as a green stimulus leader</h2>
<p>At the onset of the COVID-19 induced recession, <a href="https://doi.org/10.1093/oxrep/graa015">academics</a>, <a href="https://www.theguardian.com/commentisfree/2020/jun/24/climate-biodiversity-crises-government-green-recovery-coronavirus">environmental advocates</a> and <a href="https://www.worldbank.org/en/news/press-release/2021/04/09/world-bank-imf-spring-meetings-2021-development-committee-communique">multilateral institutions</a> renewed their calls for a green fiscal response and to “build back better.” </p>
<p>Our research analyzed more than 900 policies enacted by G20 nations from early 2020 until December 2021 using a <a href="https://www.energypolicytracker.org/">novel dataset</a> — the Energy Policy Tracker. Canada accounts for 286 of these policies, adding up to $113 billion (US$85 billion) and including both federal and provincial measures.</p>
<p>In the fight against the COVID-19 pandemic, Canada has emerged as a green recovery leader with the highest spending per capita on policies aimed at reducing emissions. Yet Canada, like other countries, also committed large amounts on policies supporting fossil fuels, called brown stimulus. </p>
<p>We constructed a Green Energy Policy Index (GEPI) that allows us to rank countries based on both green and brown stimulus measures using a more granular classification of policies that are low carbon, fossil conditional or fossil unconditional. </p>
<p>Low-carbon policies support the energy transition by increasing energy efficiency, lowering energy demand or supporting renewable energy. Examples include <a href="https://www.canada.ca/en/office-infrastructure/news/2021/02/a-plan-to-permanently-fund-public-transit-and-support-economic-recovery.html">investments in transit</a>, <a href="https://www.canada.ca/en/department-finance/news/2021/04/budget-2021-a-healthy-environment-for-a-healthy-economy.html">home retrofit programs</a> that increase energy efficiency and investments in <a href="https://www.canada.ca/content/dam/eccc/documents/pdf/climate-change/climate-plan/healthy_environment_healthy_economy_plan.pdf">renewable energy and grid modernization projects</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/457003/original/file-20220407-19496-acn7jb.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two bar graphs showing the the 'greenness' of G20 fiscal policies." src="https://images.theconversation.com/files/457003/original/file-20220407-19496-acn7jb.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/457003/original/file-20220407-19496-acn7jb.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/457003/original/file-20220407-19496-acn7jb.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/457003/original/file-20220407-19496-acn7jb.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/457003/original/file-20220407-19496-acn7jb.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/457003/original/file-20220407-19496-acn7jb.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/457003/original/file-20220407-19496-acn7jb.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Total spending in 2020 (left). Number of unique policies covered (right).</span>
<span class="attribution"><span class="source">(Data: Energy Policy Tracker, January 2020 -December 2021)</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Fossil-conditional policies support the fossil-fuel sector, but include conditions aimed at reducing emissions. One example is fuel switching, such as transitioning coal power plants to natural gas. A more controversial example is the program that provides up to $1.72 billion to some provinces and the industry-funded Alberta Orphan Well Association to support the <a href="https://pm.gc.ca/en/news/news-releases/2020/04/17/prime-minister-announces-new-support-protect-canadian-jobs">cleanup of orphan and inactive wells</a>. Some <a href="https://www.canada.ca/en/department-finance/news/2021/04/details-of-financial-support-to-air-canada.html">pandemic-related support for the aviation industry</a> is classified as fossil conditional because recipients of the bailouts must follow climate-risk disclosure guidelines. </p>
<p>Fossil-unconditional policies support the fossil fuel sector with no conditions to aid the low-carbon transition. There are limited federal examples of such policies in our dataset. However, there is considerable provincial variation in fossil unconditional policies. One prominent example is the Alberta government’s <a href="https://www.alberta.ca/keystone-xl-pipeline-project.aspx">$1.5 billion equity investment</a> in the Keystone XL pipeline.</p>
<p>Taking into account the combination of all these measures, Canada ranks fourth among the G20.</p>
<figure class="align-center ">
<img alt="Table showing how G20 rank by the value of the Green Energy Policy Index." src="https://images.theconversation.com/files/457007/original/file-20220407-20-ov8784.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/457007/original/file-20220407-20-ov8784.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=381&fit=crop&dpr=1 600w, https://images.theconversation.com/files/457007/original/file-20220407-20-ov8784.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=381&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/457007/original/file-20220407-20-ov8784.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=381&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/457007/original/file-20220407-20-ov8784.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=479&fit=crop&dpr=1 754w, https://images.theconversation.com/files/457007/original/file-20220407-20-ov8784.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=479&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/457007/original/file-20220407-20-ov8784.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=479&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Ranks of countries by the value of their Green Energy Policy Index. A higher GEPI means ‘greener’ stimulus based on both dollar spending and other non-monetary measures that directly affect energy production and consumption. Spending share refers to the share of total spending allocated to the low-carbon, fossil-conditional and fossil-unconditional policies. Policy number share refers to the fraction of total policies.</span>
<span class="attribution"><span class="source">(Authors)</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>The effectiveness of green stimulus</h2>
<p>Global efforts to implement green stimulus measures emerged in the wake of the 2008-09 financial crisis. Such measures, aimed at stimulating a greener economic recovery, <a href="https://doi.org/10.1007/s10640-020-00437-w">accounted for less than nine per cent</a> of the total fiscal stimulus package in Canada, way below the G20 average of about 17 per cent. </p>
<p>Even among countries with large green fiscal stimulus packages, such as <a href="https://doi.org/10.1016/j.jclepro.2015.08.060">South Korea</a>, these measures did not lead to reductions in emissions, likely because they were not backed up with meaningful long-term investments, carbon pricing or regulatory measures. <a href="https://www.sciencedaily.com/releases/2011/12/111205140613.htm">Global emissions rebounded quickly</a>.</p>
<p>Whether the pandemic-related green fiscal stimulus will be more effective is subject to future research. Our GEPI index can help answer that question in future studies. However, past country experiences from the global financial crisis highlight that green fiscal stimulus policies are complementary to <a href="https://doi.org/10.1016/j.enpol.2021.112419">carbon pricing and climate regulations</a>.</p>
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Read more:
<a href="https://theconversation.com/the-climate-emergency-warrants-a-strong-mandate-on-zero-emission-vehicles-from-the-federal-government-168922">The climate emergency warrants a strong mandate on zero-emission vehicles from the federal government</a>
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<p>An <a href="https://climateinstitute.ca/reports/assessment-2030-emissions-reduction-plan/">independent assessment</a> of Canada’s recent emissions reduction plan suggests that over two-thirds of projected emissions reductions are attributed to the carbon tax and flexible regulations. Canada’s commitment to increase the carbon tax to $170 per tonne of carbon dioxide by 2030 put the country in the right direction, consistent with <a href="https://www.ngfs.net/ngfs-scenarios-portal/">major climate scenario models</a>, including work by the <a href="https://www.bankofcanada.ca/2022/01/staff-discussion-paper-2022-1/">Bank of Canada</a>, although more aggressive carbon pricing will be required beyond 2030 if we are to ensure a smooth transition to net zero by 2050.</p>
<h2>Green spending in the federal budget</h2>
<p>The new budget announced more than $12 billion in new green spending and other incentives that will make it more affordable for Canadians to adopt clean technologies over the next five years. This signals that Canada is continuing to build on its leadership in stimulating a green economic recovery. Note that spending levels are returning to normal as the economy recovers. For context, the data covered in our paper included over $60 billion in energy-related federal spending during 2020 and 2021 alone. </p>
<p>Today’s budget also introduced the $15 billion <a href="https://budget.gc.ca/2022/report-rapport/chap2-en.html#2022-1">Canada Growth Fund</a>, which has reducing emissions as one of its aims and more details on the highly anticipated <a href="https://budget.gc.ca/2022/report-rapport/chap3-en.html#2022-2">investment tax credit for carbon capture, utilization and storage (CCUS)</a>, which is costed at $2.6 billion over the next five years. Lastly, the government announced a <a href="https://budget.gc.ca/2022/report-rapport/chap2-en.html#2022-2">Critical Minerals Strategy</a> aimed at developing the raw inputs required to meet increased demand for batteries. </p>
<p>Overall, the ability of these measures to help Canada achieve its 2030 emissions reduction goal will depend on two key factors. First, the government must implement previously announced complementary regulatory policies, such as the <a href="https://www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-standard.html">Clean Fuel Standard</a>, quickly and maintain the rise in the carbon price. Second, these measures cannot be undone by future governments. </p>
<p>A clear path for climate policy is needed to encourage private sector investments and accelerate the low carbon transition of the Canadian financial system. This is vital since today’s budget estimates that Canada will require between $125 and $140 billion of annual investment to 2050 to meet our net-zero target.</p><img src="https://counter.theconversation.com/content/180453/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kevin Andrew's post-doctoral fellowship is funded by the Pacific Institute for Climate Solutions. </span></em></p><p class="fine-print"><em><span>Basma Majerbi receives funding from Social Sciences and Humanity Research Council (SSHRC) of Canada and the Pacific Institute for Climate Solutions (PICS). </span></em></p><p class="fine-print"><em><span>Ekaterina Rhodes receives funding from the Social Sciences and Humanities Research Council of Canada and the Swedish Research Council. She is also a President of the Canadian Society for Ecological Economics. </span></em></p>Canada has emerged as a leader among its G20 peers in terms of green fiscal stimulus spending and policies.Kevin Andrew, Post-Doctoral Research Fellow, Peter B. Gustavson School of Business, University of VictoriaBasma Majerbi, Associate Professor, Peter B. Gustavson School of Business, University of VictoriaEkaterina Rhodes, Assistant Professor, School of Public Administration, University of VictoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1764522022-03-22T21:12:41Z2022-03-22T21:12:41ZThe economic case for the mining industry to support carbon taxation<figure><img src="https://images.theconversation.com/files/452923/original/file-20220317-23-1fpa886.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C8264%2C3301&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">RioTinto's Kennecott mine in Utah produces a variety of metals, including copper, gold and silver.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/19779889@N00/36571631266">(arbyreed/Flickr)</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>As governments try to navigate a path to a safe climate in the 21st century, the public debate has focused on net zero, carbon taxes, electrification and renewable energy. Mining is rarely an anchor point of the discussion, even though renewable energy infrastructure and low-carbon technology require vast amounts of metals and minerals. </p>
<p>Nickel, for example, is essential for electric vehicles and battery storage. The amount of nickel required by 2040 for the energy transition alone will be <a href="https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/executive-summary">equal to the total demand for nickel across all industries in 2020, according to the International Energy Agency</a>.</p>
<figure class="align-center ">
<img alt="a graph showing projected demand for copper and nickel increasing over time." src="https://images.theconversation.com/files/448160/original/file-20220223-25-5f0cjt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/448160/original/file-20220223-25-5f0cjt.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=385&fit=crop&dpr=1 600w, https://images.theconversation.com/files/448160/original/file-20220223-25-5f0cjt.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=385&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/448160/original/file-20220223-25-5f0cjt.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=385&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/448160/original/file-20220223-25-5f0cjt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=484&fit=crop&dpr=1 754w, https://images.theconversation.com/files/448160/original/file-20220223-25-5f0cjt.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=484&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/448160/original/file-20220223-25-5f0cjt.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=484&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Projected demand change for copper and nickel requirements for energy transition technology. The solid bars show the amount of metal demand projected for the energy transition, while the transparent bar shows the actual total demand for copper and nickel across all industries in 2020.</span>
<span class="attribution"><span class="source">(Cox et al. 2022)</span></span>
</figcaption>
</figure>
<p>There is widespread consensus among economists that <a href="https://policyintegrity.org/files/publications/ExpertConsensusReport.pdf">carbon taxation is one of the most effective policies to reduce carbon emissions</a>. Presently, <a href="https://carbonpricingdashboard.worldbank.org/map_data">27 countries have enacted carbon taxation policy at the national level</a>, yet only <a href="https://www.statista.com/statistics/1114898/leading-mining-countries-worldwide-based-mineral-production-value/">seven are leading mining countries</a>, and mining companies and industry organizations oppose carbon taxes in many of these countries. </p>
<p>Addressing climate change requires a coalition between industry and government. The idea that the industry supplying the technology for renewable energy is also opposing the economic policy needed to curb emissions is counter productive. </p>
<p>Simple economic modelling proves that resisting a carbon tax is the wrong strategy for the industry. <a href="https://doi.org/10.1038/s43247-022-00346-4">Our recent paper</a> shows that the mining industry has an economic incentive to support a tax on carbon dioxide emissions. </p>
<h2>Opposed to taxes</h2>
<p>The mining industry has historically opposed taxes, especially carbon taxes. When <a href="https://www.legislation.gov.au/Details/C2011A00131">Australia introduced a price on carbon emissions in 2011</a>, the Minerals Council of Australia led a <a href="https://doi.org/10.1080/13567888.2011.640030">multi-million-dollar campaign against the carbon tax policy</a> even though there are <a href="https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd1112a/12bd068#_Toc308423383">tax-relief provisions for emissions-intensive industries such as steel and coal</a>. </p>
<p><a href="https://www.theguardian.com/environment/2014/jul/17/australia-kills-off-carbon-tax">The Australian carbon tax policy was repealed in 2014</a>, but some mining groups do support carbon taxes. <a href="https://www.theguardian.com/business/2019/aug/04/bhp-could-quit-minerals-council-after-clashes-over-climate-policy">BHP Billiton Ltd. supported carbon pricing in 2017 and distanced itself from the Minerals Council of Australia</a>. </p>
<p>This fractured industry standpoint on carbon pricing is also present in Canada. <a href="https://www.reuters.com/business/sustainable-business/worlds-largest-miners-pledge-net-zero-carbon-emissions-by-2050-2021-10-05/">Some mining companies have made public commitments to carbon neutrality by 2050</a>, yet there has been opposition from some industry groups at the provincial level. </p>
<h2>Metals out, a little CO2 in</h2>
<p>There are many factors throughout the mining process that contribute to carbon emissions. The commodity being mined heavily influences the amount of emissions and where the emissions are generated throughout the mining process. </p>
<p>For iron and steel most emissions are generated in the later stages during <a href="https://www.ctc-n.org/technologies/smelt-reduction-iron-and-steel-sector">smelting</a>. Mining copper ore, on the other hand, generates most of its emissions in the earlier stages <a href="https://copperalliance.org/wp-content/uploads/2020/07/Emissions-Copper-Mine-of-the-Future-Report.pdf">during the crushing, grinding and hauling of ore</a>.</p>
<p>One way to look at the impacts of carbon taxation in mining is to compare the commodity’s carbon footprint to its economic value. For example, <a href="http://hdl.handle.net/102.100.100/101541?index=1">the average carbon footprint of copper</a> is 3.83 tonnes of carbon dioxide per tonne of copper. </p>
<p>So, for each tonne of carbon dioxide emitted, 261 kilograms of copper worth US$1,700, using 2019 copper prices, are produced. This is a relatively high value. The same cannot be said for other industries, like animal agriculture, where a tonne of carbon emissions corresponds to about US$125 of wholesale beef (using equivalent 2019 pricing). </p>
<h2>How would a carbon tax affect mining?</h2>
<p>The basics of a carbon tax are that more carbon-intensive industries will be taxed more. Our study tested three levels of carbon taxation: US$30, US$70 and US$150 per tonne of carbon dioxide, and compared them against commodity prices in 2019. These levels closely follow <a href="https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information/federal-benchmark-2023-2030.html">the Pan-Canadian approach to carbon pollution pricing</a>, which are currently set to $50 per tonne and increase $15 per year to $170 in 2030. </p>
<p>We modelled the impact of a carbon tax on a range of commodities. Our model included all <a href="https://www.epa.gov/climateleadership/scope-1-and-scope-2-inventory-guidance">Scope 1 and Scope 2 emissions</a> — direct emissions from the source and indirect emissions associated with heating, cooling or electricity. The production of some commodities is more carbon-intense than others, which affects the impact of the carbon price. </p>
<p>In some cases, the carbon tax can be greater than the product’s value. When the price of carbon is US$150, coal is taxed at 144 per cent of its value. Copper, on the other hand, is taxed at 10 per cent of its value. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/448164/original/file-20220223-21387-17vmmj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/448164/original/file-20220223-21387-17vmmj.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=344&fit=crop&dpr=1 600w, https://images.theconversation.com/files/448164/original/file-20220223-21387-17vmmj.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=344&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/448164/original/file-20220223-21387-17vmmj.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=344&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/448164/original/file-20220223-21387-17vmmj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=433&fit=crop&dpr=1 754w, https://images.theconversation.com/files/448164/original/file-20220223-21387-17vmmj.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=433&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/448164/original/file-20220223-21387-17vmmj.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=433&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The impact of three levels of carbon taxation (US$30, $70 and $150) modelled as a percentage of present product value for selected commodities. This shows that most mining industry and energy transition commodities will not be taxed to the same degree as other commodities.</span>
<span class="attribution"><span class="source">(Authors)</span></span>
</figcaption>
</figure>
<p>Two metals are outliers to the industry: aluminum and steel. The mining of the raw materials are not carbon intensive. Bauxite and iron ore generate 0.005 and 0.02 tonnes of carbon dioxide per tonne of product respectively, but smelting these ores into metals emits more carbon in production.</p>
<h2>Mining for carbon taxes</h2>
<p>Outside of aluminum refining and steel mills, the mining industry will perform better with a carbon tax than it would without one. This is because the carbon tax would increase the price of fossil fuels relative to renewable energy and the materials required for renewable energy technology.</p>
<p>For example, the costs of coal used for energy production will more than double, making electricity from coal increasingly uncompetitive. The rising demand for solar and wind power will drive further increases in the consumption of base metals for wind turbines and solar panels. </p>
<p>If implemented on a global scale, a carbon tax would not change the underlying cost of the base metal business, but it does have vast financial benefits for the mining sector. These benefits come from the increased demand for metals from the energy transition, paired with a relatively lighter percentage of global carbon taxes, in comparison to other industries. </p>
<p>Rather than opposing carbon taxes, the mining sector should become a global advocate for aggressive carbon targets, the harmonization of international carbon taxes and pursue further reductions to emissions such as the <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/fintech-company-aims-to-simplify-electrification-of-mining-sector-ceo-says-60076285">electrification of fleets</a> or <a href="https://magazine.cim.org/en/environment/tailings-to-the-rescue-en/">carbon offsets</a>.</p><img src="https://counter.theconversation.com/content/176452/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sally Innis receives funding from NSERC. Some of her research projects are industry partnered with FL Smidth.</span></em></p><p class="fine-print"><em><span>Benjamin Cox receives research funding from various sources, including the Canadian Federal Government through the NSERC, and MITACS, industry partners Eriez, FL Smidth.</span></em></p><p class="fine-print"><em><span>John Steen receives research funding from a variety of sources including the Canadian Federal Government through the NSERC and Supercluster programs, MITACS, Teck, Rio Tinto, EY, Eriez, FL Smidth, and the Project Management Institute.</span></em></p><p class="fine-print"><em><span>Nadja Kunz receives funding from a variety of sources including government funding agencies (NSERC, SSHRC) and MITACS. Some of her research projects are co-sponsored by industry partners which currently include FLSmidth, Eriez, Resourceful Paths, Vale, Compass Minerals. Nadja also consults for the International Finance Corporation.</span></em></p>Simple economic modelling shows the mining industry would benefit from a carbon tax.Sally Innis, PhD Candidate in Mining Engineering, University of British ColumbiaBenjamin Cox, PhD student, mining engineering, University of British ColumbiaJohn Steen, EY Distinguished Scholar in Global Mining Futures, University of British ColumbiaNadja Kunz, Canada Research Chair and Assistant Professor, Mining, University of British ColumbiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1764322022-02-22T19:13:02Z2022-02-22T19:13:02ZWhy the cost of climate change can’t be boiled down to one right number, despite some economists’ best attempts<figure><img src="https://images.theconversation.com/files/445776/original/file-20220210-24693-1m5bgil.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C7662%2C5104&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Renewable energy prices have fallen faster than predicted.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/wind-turbine-at-motorway-a8-baden-wuerttemberg-royalty-free-image/1210777997">ImageBROKER/Lilly</a></span></figcaption></figure><p>A group of economists has issued a new estimate of the future cost of climate change that is grabbing headlines. The consultancy Deloitte estimates that unchecked climate change could cost the global economy <a href="https://www2.deloitte.com/content/dam/Deloitte/global/Documents/gx-global-turning-point-report.pdf">US$178 trillion</a> over the next 50 years.</p>
<p>While climate change does harm economies, there are a lot of problems with long-term estimates like this.</p>
<p>New technologies arrive and evolve. Human behaviors shift. For example, who would have thought before the COVID-19 pandemic that a large percentage of the population would stop driving to the office and work from home instead?</p>
<p>I am a microeconomist who investigates the <a href="https://escholarship.org/uc/item/3qp74527">causes and consequences of climate change</a>. When I think about the climate change challenge in 2040 and beyond, I anticipate many “known unknowns” about our future. Thus, I am amazed to read precise climate cost estimates like those published by economic consultants like Deloitte and <a href="https://www.mckinsey.com/business-functions/sustainability/our-insights/the-net-zero-transition-what-it-would-cost-what-it-could-bring">McKinsey & Co</a>.</p>
<p>Deloitte’s <a href="https://www2.deloitte.com/global/en/pages/about-deloitte/articles/global-turning-point.html">new estimate</a> predicts that the damage from unchecked <a href="https://www.c2es.org/content/international-emissions/">greenhouse gas emissions</a>, with global temperatures rising 3 degrees Celsius (5.4 F) over pre-industrial times, would slow growth in every region and could shave 7.6% off global GDP in 2070 alone compared to a world without climate change. That includes harms such as lost productivity during heat waves and crop failures.</p>
<p>Numbers like these are widely used to encourage action by governments, companies and individuals. Economists agree that climate change, left unchecked, will harm economies. But these estimates are produced using formal models that feature many assumptions, any one of which could throw off the accounting in a big way, leaving the estimates either wildly high or low. </p>
<p>While people might think they want “precision,” precise predictions <a href="https://www.nber.org/system/files/working_papers/w28472/w28472.pdf">raise the risk of conveying too much certainty</a> in a constantly changing world. </p>
<h2>The prediction challenge</h2>
<p><a href="https://www.nobelprize.org/uploads/2018/10/nordhaus-lecture.pdf">Climate economic models</a> seek to answer several prediction questions, such as:</p>
<ul>
<li><p>“What will we gain economically by reducing greenhouse gas emissions?”</p></li>
<li><p>“What will be the economic and quality-of-life impact if we do nothing and just allow greenhouse gas emissions to rise under ‘business as usual’?”</p></li>
</ul>
<p>To answer these complex questions, climate economists make a series of assumptions that are “baked” into their mathematical models.</p>
<h2>Known unknowns</h2>
<p>First, economists must predict the world’s average income per person for each year in the future. </p>
<p>Macroeconomists have faced challenges <a href="https://www.philadelphiafed.org/the-economy/macroeconomics/why-are-recessions-so-hard-to-predict-random-shocks-and-business-cycles">predicting the timing and duration of recessions</a>. Predicting future <a href="https://doi.org/10.1073/pnas.1713628115">economic growth over the course of 30 or 40 years</a> requires predicting how the quantity and quality of the world’s workforce and our technology will evolve over time. Predicting the world’s population growth is also a challenging exercise, as increases in <a href="https://link.springer.com/article/10.1007/s11113-012-9230-0">urbanization</a>, <a href="https://faculty.wcas.northwestern.edu/%7Emdo738/research/Doepke_JODE_15.pdf">women’s access to education</a> and improvements in birth control are all associated with reductions in fertility.</p>
<p>Second, they must make an informed guess about what technologies will exist in the future concerning our sources of power generation and the energy we use in transportation. If they can estimate the future world population level, income level and technology, then they can measure how much extra greenhouse gas emissions the world produces each year.</p>
<p>Third, they use a climate science model to estimate the extra climate change risk caused by the production of greenhouse gas emissions. This is typically measured by the increase in <a href="https://climate.nasa.gov/ask-nasa-climate/3017/making-sense-of-climate-sensitivity/">the world’s average surface temperature</a>.</p>
<p>Fourth, they must take a stand on how our future economy’s production will be affected by rising climate change risk. Ideally, these models also tell us how releasing more greenhouse gas emissions increases the <a href="https://scholar.harvard.edu/files/weitzman/files/fattaileduncertaintyeconomics.pdf">likelihood of disaster scenarios</a>.</p>
<p>By combining all of these equations with their own respective assumptions, a research team generates a single number.</p>
<h2>The ‘art’ of predicting future emissions</h2>
<p>Economists estimate future global greenhouse gas emissions by multiplying the predicted global gross national product – the total value of goods and services – by the average emissions per dollar of gross national product. </p>
<p>If the world succeeds in ending fossil fuel use, this latter figure could be close to zero. The innovation and deployment of low-carbon technologies – think electric vehicles and solar farms – can significantly shift the costs and benefits that economists are trying to quantify.</p>
<p>Many factors determine this path of technological advance, including investment in research and development. International politics also don’t always factor into climate economic models. For example, if China chooses to become more insular, will it increase its coal consumption because the nation is endowed with coal? Conversely, could <a href="https://www.nytimes.com/roomfordebate/2011/01/18/can-the-us-compete-with-china-on-green-tech/how-we-gain-from-chinas-advances">China choose to use its powerful state</a> to push the green tech sector to create a booming future export market that greens the world’s economy? </p>
<h2>Forecasting future climate change impacts</h2>
<p>Economic mathematical models boil down the impact of climate change into a single algebra equation called the “climate damage function.” In <a href="https://yalebooks.yale.edu/book/9780300246711/adapting-climate-change">my book “Adapting to Climate Change,”</a> I provide several examples for why this function is continually changing and thus is very difficult to predict. </p>
<p>For example, many companies are developing <a href="https://theconversation.com/a-new-ratings-industry-is-emerging-to-help-homebuyers-assess-climate-risks-171898">climate risk ratings systems</a> to educate real estate buyers about the different future climate risks specific pieces of real estate will face, such as wildfires or flooding.</p>
<p>Suppose this emerging climate risk rating industry makes progress in identifying less risky areas to live, and zoning codes are changed to allow more people to live in these safer areas. The damage that Americans suffer from climate change would decrease as people literally “move to higher ground”.</p>
<p>The confident climate modeler cannot capture this dynamic with inflexible algebra.</p>
<h2>Prediction under uncertainty</h2>
<p>Climate economics models can play a “Paul Revere” role – educating policymakers and the public about the likely risks ahead. As economists build these models, they must be <a href="https://doi.org/10.1093/reep/rew012">honest about their limitations</a>. A model that generates “the answer” may lead decision-makers astray. </p>
<p>As much as everyone might like a concrete answer to how much climate change and acting on climate change will cost, we’ll have to live with uncertainty. </p>
<p><em>This article was updated May 24, 2022, with Deloitte’s new estimate.</em></p><img src="https://counter.theconversation.com/content/176432/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew E. Kahn does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Human behaviors shift. Policies change. New technology arrives and evolves. All those changes and more are hard to predict, and they affect tomorrow’s costs.Matthew E. Kahn, Provost Professor of Economics and Spatial Sciences, USC Dornsife College of Letters, Arts and SciencesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1763402022-02-03T02:14:46Z2022-02-03T02:14:46ZThe sun sets on Erin O'Toole as leader of the Conservative Party of Canada<figure><img src="https://images.theconversation.com/files/444184/original/file-20220203-13-g0e7hy.JPG?ixlib=rb-1.1.0&rect=36%2C131%2C4010%2C1862&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Erin O'Toole speaks about climate change at an Ottawa event in April 2021. </span> <span class="attribution"><span class="source"> THE CANADIAN PRESS/Adrian Wyld</span></span></figcaption></figure><iframe style="width: 100%; height: 175px; border: none; position: relative; z-index: 1;" allowtransparency="" src="https://narrations.ad-auris.com/widget/the-conversation-canada/the-sun-sets-on-erin-o-toole-as-leader-of-the-conservative-party-of-canada" width="100%" height="400"></iframe>
<p>When the dust settled and the caucus votes had been counted, 73 MPs from the Conservative Party of Canada <a href="https://www.thestar.com/politics/federal/2022/02/02/erin-otoole-makes-final-appeal-to-keep-his-job.html">voted to oust their leader</a>, Erin O'Toole.</p>
<p>After weeks of speculation about whether or when it would happen, the vote proved a quick and decisive repudiation. Just what the rejection was about, however, will be the subject of debate both inside and outside the party as it moves to select <a href="https://nationalpost.com/news/politics/how-the-race-was-won-otooles-campaign-to-take-down-mackay-for-the-conservative-leadership">its third leader in less than five years.</a> </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1488980291108900864"}"></div></p>
<p>For some, the vote will be seen as a rejection of O'Toole’s very public attempts to <a href="https://www.nytimes.com/2021/09/20/world/canada/the-conservative-erin-otoole-shifted-left-to-broaden-his-partys-appeal.html">shift the party towards a more moderate stance on a range of issues</a>, in a bid to expand the pool of potential voters.</p>
<h2>Not the ‘Liberal lite’ party</h2>
<p>For those critics, the party must stop trying to be some version of <a href="https://www.ctvnews.ca/politics/o-toole-versus-the-grassroots-conservative-leader-finds-himself-divided-from-base-1.5649949">“Liberal lite</a>” and plant its flag firmly on issues supported by the party’s most fervent, and typically right-leaning, supporters. </p>
<p>Such measures include <a href="https://www.cbc.ca/news/politics/truckers-vaccine-vandetta-conservative-mps-1.6325761">unwinding restrictions related to the pandemic</a>, <a href="https://www.ctvnews.ca/politics/conservative-mp-supports-riding-association-s-petition-against-o-toole-carbon-tax-1.5761464">rejecting a carbon tax</a>, <a href="https://www.theglobeandmail.com/politics/article-otoole-faces-caucus-revolt-as-35-mps-sign-letter-calling-for/">standing up for social conservative values,</a> and more. </p>
<p>For others, including many who agreed with O'Toole’s conclusion that the party had to moderate in order to win back the urban supporters it had lost to the Liberals, the vote may seem instead a rejection of the fitful style in which O'Toole attempted to remake the party.</p>
<figure class="align-center ">
<img alt="Three smiling men in blue suits in the House of Commons." src="https://images.theconversation.com/files/444185/original/file-20220203-21-x0pvft.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444185/original/file-20220203-21-x0pvft.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=441&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444185/original/file-20220203-21-x0pvft.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=441&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444185/original/file-20220203-21-x0pvft.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=441&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444185/original/file-20220203-21-x0pvft.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=554&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444185/original/file-20220203-21-x0pvft.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=554&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444185/original/file-20220203-21-x0pvft.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=554&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">O'Toole is lead into the House of Commons by former prime minister Stephen Harper and
the late Jim Flaherty, finance minister at the time, in December 2012.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Fred Chartrand</span></span>
</figcaption>
</figure>
<h2>Shift to the centre</h2>
<p><a href="https://www.cbc.ca/news/politics/conservative-party-leadership-results-1.5695925">After winning the leadership with a campaign based on a commitment to “true blue” values</a>, O'Toole began to tack to the centre with his comments.</p>
<p>It was reminiscent of an American Republican presidential candidates, <a href="https://www.npr.org/templates/story/story.php?storyId=18664285">like John McCain</a> <a href="https://www.nytimes.com/2012/10/05/us/politics/entering-stage-right-romney-moved-to-center.html">and Mitt Romney</a>, moderating their positions during the general election after winning the support of their right-wing base in the primaries. But while such activity is the norm in the United States for Republicans and Democrats alike, it struck many in Canada as disingenuous. </p>
<p>At the heart of the critique for most Conservative Party supporters, however, is the party’s showing in September 2021 federal election. In the space of a five-week election campaign, O'Toole updated and reversed positions repeatedly. </p>
<h2>Reversed course</h2>
<p>Most of the changes were intended to further moderate the party, like when he suggested <a href="https://www.thestar.com/politics/federal-election/2021/09/14/erin-otoole-says-the-liberals-carbon-price-wont-automatically-get-scrapped-if-he-is-prime-minister.html">the Liberal carbon tax might persist under a Conservative Party government</a>, or when he <a href="https://www.cbc.ca/news/politics/gun-control-wedge-issue-1.6165532">reversed course on a Conservative platform pledge to end a ban on some assault-style weapons</a>. </p>
<p>The strategy was clear: win over disgruntled Conservative supporters who had migrated toward the Liberals while hoping to hold on to as much of the far right wing of the party as possible.</p>
<p>For the first two weeks of the campaign, the strategy appeared to be working, as the Conservatives erased the pre-election Liberal lead. Through the first week of September, O'Toole appeared to pull ahead. One enthusiastic pollster <a href="https://www.ctvnews.ca/politics/federal-election-2021/o-toole-a-political-freight-train-as-conservatives-take-clear-lead-nanos-1.5572456">described O'Toole as a “political freight train.”</a> </p>
<p>That momentum eventually stalled however, even as the policy reversals increased in frequency. In the end, even though the CPC once again won the popular vote, it finished a distant second to the Liberals in seats as Justin Trudeau <a href="https://www.bloomberg.com/news/articles/2021-09-21/trudeau-wins-third-term-as-canada-prime-minister-ctv-projects">was returned to power with a minority government</a>. </p>
<figure class="align-center ">
<img alt="A bald man in a dark suit speaks into a microphone with stadium lights beside him." src="https://images.theconversation.com/files/444205/original/file-20220203-19-z52z6e.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444205/original/file-20220203-19-z52z6e.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=367&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444205/original/file-20220203-19-z52z6e.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=367&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444205/original/file-20220203-19-z52z6e.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=367&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444205/original/file-20220203-19-z52z6e.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=461&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444205/original/file-20220203-19-z52z6e.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=461&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444205/original/file-20220203-19-z52z6e.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=461&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">O'Toole speaks during a campaign stop at a campaign office in Flamborough, Ont.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Adrian Wyld</span></span>
</figcaption>
</figure>
<h2>Accused of flip-flopping</h2>
<p>For critics in the party, the flip-flopping throughout O'Toole’s leadership created the impression of a leader willing to say and do anything to be elected. As one caucus member described it, the reversals were the <a href="https://www.cbc.ca/news/politics/otoole-post-election-report-1.6329961">“elephant in the room” and should have been a focus of the party’s official post-mortem report</a>.</p>
<p>At the same time, O'Toole’s attempts to expand the tent and move the party to the centre alienated many in the more conservative wing of the party. Many of the <a href="https://nationalpost.com/news/politics/conservatives-headed-for-yet-another-tense-caucus-meeting-over-move-to-oust-otoole">loudest and most public post-election critiques</a> of O'Toole’s leadership, in fact, came from social conservative groups. </p>
<p>Ironically, in the months since the election, O'Toole had to make additional course corrections to mollify his opponents within the party.</p>
<p>After initially agreeing to COVID-19 containment measures, he subsequently felt compelled to <a href="https://nationalpost.com/news/politics/otoole-does-about-face-on-vaccine-mandate-for-mps-in-commons-now-says-decision-infringes-on-their-rights">voice opposition to a vaccine mandate</a> for MPs entering the House of Commons.</p>
<p>As the Omicron variant tore through provinces across the country, O'Toole <a href="https://kitchener.citynews.ca/national-news/erin-otoole-urges-accommodations-for-unvaccinated-canadians-amid-omicron-wave-4929008">supported exemptions for the unvaccinated</a> even as polling continues to suggest <a href="https://www.ctvnews.ca/health/coronavirus/majority-of-canadians-surveyed-support-fines-for-unvaccinated-citizens-nanos-1.5752630">most Canadians were less tolerant of those who wouldn’t get jabbed</a>. </p>
<h2>A party divided</h2>
<p>While the party united sufficiently to expel O'Toole, it remains unclear what else its members can agree upon. In his departing remarks, <a href="https://vancouverisland.ctvnews.ca/video?clipId=2374237">O'Toole issued a warning that the country faced a dire moment of division.</a> At present, however, it’s the party that he led that’s bitterly divided.</p>
<p>Candice Bergen, a right-wing member of the party, has been named interim leader in a possible signal of what direction the Conservative caucus is heading.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1489052835044106248"}"></div></p>
<p>Throughout his time as leader, O'Toole continually tried to ride two horses going in different directions. No leader, however adept, can indefinitely look graceful doing that. The endless reversals that were a hallmark of his leadership were the inevitable result.</p>
<p>Whoever follows him in the role will have to grapple with those same divisions, and face the same choice. </p>
<p>The leadership race will certainly feature would-be successors planting flags on either side of the fault line dividing the party, but when the dust settles once more, the next Conservative leader will face the same unpalatable choices — and the same seemingly unbridgeable divide.</p><img src="https://counter.theconversation.com/content/176340/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stewart Prest does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>After being ousted as Conservative leader, Erin O'Toole warned the country faced a dire moment of division. At the moment, however, it’s the party he attempted to lead that’s bitterly divided.Stewart Prest, Lecturer, Political Science, Simon Fraser UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1709792021-11-02T15:36:50Z2021-11-02T15:36:50Z6 priorities could deliver energy breakthroughs at the Glasgow climate summit – there’s progress on some already<figure><img src="https://images.theconversation.com/files/429678/original/file-20211102-19-a871qm.jpg?ixlib=rb-1.1.0&rect=0%2C18%2C6240%2C4072&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The energy transition is already underway.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/electricity-pylons-and-wind-turbines-stand-beside-the-rwe-news-photo/510814700">Volker Hartmann/Getty Images</a></span></figcaption></figure><p>Much of the news coming out of the U.N. climate conference has focused on the spectacle, and how countries’ pledges <a href="https://www.climate-transparency.org/g20-climate-performance/g20report2021">aren’t on track</a> to prevent dangerous climate change. But behind the scenes, there is reason for hope.</p>
<p>In many countries, the energy transition is already underway as falling costs make renewable energy ubiquitous and <a href="https://www.irena.org/newsroom/pressreleases/2021/Jun/Majority-of-New-Renewables-Undercut-Cheapest-Fossil-Fuel-on-Cost">more affordable than fossil fuels</a>. A growing number of world leaders agreed at the climate summit to <a href="https://theconversation.com/biden-announces-a-sweeping-methane-plan-heres-why-cutting-the-greenhouse-gas-is-crucial-for-protecting-climate-and-health-168220">reduce methane emissions</a> and aim for net-zero emissions. Over 40 countries <a href="https://ukcop26.org/global-coal-to-clean-power-transition-statement/">committed to phase out unabated coal power</a> in the next two decades.</p>
<p>The challenge for government officials now is figuring out how to help scale up clean energy dramatically while reducing fossil fuel emissions, and still meeting the <a href="https://theconversation.com/why-banning-financing-for-fossil-fuel-projects-in-africa-isnt-a-climate-solution-169220">rapidly growing energy demands</a> of billions of people in developing and emerging economies. With an <a href="https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/110121-europes-energy-crisis-deepens-as-russia-slashes-gas-exports">ongoing energy crisis</a> creating shortages and record high prices in several countries, navigating this early stage of the energy transition requires thoughtful policies and well-prioritized plans. </p>
<p>As <a href="https://scholar.google.com/citations?user=DAwwVkwAAAAJ&hl=en">climate</a> <a href="https://scholar.google.com/citations?user=sfI-c0YAAAAJ&hl=en">policy experts</a> with decades of experience in international energy policy, we identified six strategic priorities that could help countries navigate this tricky terrain.</p>
<figure class="align-center ">
<img alt="Illustration showing where to cut emissions soonest most efficiently" src="https://images.theconversation.com/files/421580/original/file-20210916-21-15niz3l.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/421580/original/file-20210916-21-15niz3l.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=503&fit=crop&dpr=1 600w, https://images.theconversation.com/files/421580/original/file-20210916-21-15niz3l.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=503&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/421580/original/file-20210916-21-15niz3l.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=503&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/421580/original/file-20210916-21-15niz3l.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=632&fit=crop&dpr=1 754w, https://images.theconversation.com/files/421580/original/file-20210916-21-15niz3l.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=632&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/421580/original/file-20210916-21-15niz3l.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=632&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Meeting the Paris climate agreement goal of keeping global warming under 1.5 degrees Celsius (2.7 F) will require reducing fossil fuels and increasing renewable energy and energy efficiency, as well as keeping carbon dioxide out of the atmosphere with techniques such as carbon capture and storage or use (CCS and CCU).</span>
<span class="attribution"><span class="source">International Renewable Energy Agency</span></span>
</figcaption>
</figure>
<h2>1) Deploy carbon pricing and markets more widely</h2>
<p>Only a few <a href="https://carbonpricingdashboard.worldbank.org/">countries, states and regions currently have a carbon price</a> that is high enough to push polluters to cut their emissions. </p>
<p>A price on carbon, often created through a tax or carbon market system, captures the cost of harms caused by greenhouse gas emissions that companies don’t currently pay for, such as climate change, damage to crops and rising health care costs. It is particularly critical for power production and energy-intensive industries. </p>
<p>One goal of the Glasgow negotiations is to write rules to help carbon markets function well and transparently. That’s essential for effectively meeting the many net-zero climate goals that have been announced by countries from <a href="https://www.un.org/en/climatechange/net-zero-pledges-grow">Japan and South Korea to the U.S., China and those in the European Union</a>. It includes rules on the <a href="https://www.theguardian.com/environment/2011/sep/16/carbon-offset-projects-carbon-emissions">use of carbon offsets</a>, which allow individuals or companies to invest in projects elsewhere to offset their own emissions. Carbon offsets are currently <a href="https://theconversation.com/why-corporate-climate-pledges-of-net-zero-emissions-should-trigger-a-healthy-dose-of-skepticism-156386">highly contentious</a> and not delivering trustworthy emissions credits.</p>
<h2>2) Focus attention on the hard-to-decarbonize sectors</h2>
<p>Shipping, road freight and industries like aluminum, cement and steel are all <a href="https://www.irena.org/publications/2020/Sep/Reaching-Zero-with-Renewables">difficult places for cutting emissions</a>, in part because they don’t yet have tested, affordable replacements for fossil fuels. While there are some <a href="https://theconversation.com/bendable-concrete-and-other-co2-infused-cement-mixes-could-dramatically-cut-global-emissions-152544">innovative ideas</a>, competitiveness concerns – such as companies moving production out of the country to avoid regulations – have been a key barrier to progress.</p>
<p>Europe is trying to overcome this barrier by establishing a <a href="https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12228-EU-Green-Deal-carbon-border-adjustment-mechanism-_en">carbon border adjustment mechanism</a>, which would tax imports of goods that didn’t face the same level of carbon taxes at home.</p>
<p>The United States and the European Union also announced at the summit that they would work to negotiate a global agreement to <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/10/31/joint-us-eu-statement-on-trade-in-steel-and-aluminum/">reduce the high emissions in steel production</a>.</p>
<h2>3) Get China and other emerging economies on board</h2>
<p>It is clear that coal, the most carbon-intensive fossil fuel, needs to be phased out fast, and doing so is critical to both the U.N.’s energy and climate agendas. Given that more than <a href="https://www.reuters.com/article/us-climate-change-china-coal/china-generated-over-half-worlds-coal-fired-power-in-2020-study-idUSKBN2BK0PZ">half of global coal</a> is consumed in China, its actions stand out, although other emerging economies such as India, Indonesia and Vietnam are also critical.</p>
<p>This will not be easy. <a href="https://www.carbonbrief.org/mapped-worlds-coal-power-plants">Notably half of the Chinese coal plants are less than a decade old</a>, a fraction of a coal plant’s typical life span. China has raised its climate commitments, including pledging to reach net-zero emissions by 2060 and agreeing to <a href="https://www.nature.com/articles/d41586-021-02645-w">end financing of coal power plants in other countries</a>, but its <a href="https://www4.unfccc.int/sites/NDCStaging/Pages/Party.aspx?party=CHN&prototype=1">current pathway</a> will not yield substantial reductions this decade.</p>
<p>A major announcement by <a href="https://www.cnbc.com/2021/11/01/india-targets-2070-for-net-zero-emissions-china-makes-no-new-commitments.html">India’s prime minister at the COP around a net-zero goal</a> for his country by 2070, with interim targets for ratcheting down emissions before then, is an early win. </p>
<p>Indonesia and Vietnam signed on to the <a href="https://ukcop26.org/global-coal-to-clean-power-transition-statement/">pledge to phase out unabated coal power</a>, but Indonesia included some caveats. It said it would “consider accelerating coal phase-out into the 2040s,” but made that conditional on receiving more international financial and technical assistance.</p>
<h2>4) Focus on innovation</h2>
<p>Support for innovation has brought cutting-edge renewable power and electric vehicles much faster than anticipated. More is possible. For example, <a href="https://www.g20.org/wp-content/uploads/2021/07/Annexes-G20-Joint-Energy-and-Climate-2021.pdf">offshore wind</a>, geothermal, carbon capture and <a href="https://theconversation.com/hydrogen-is-one-future-fuel-oil-execs-and-environmentalists-could-both-support-as-rival-countries-search-for-climate-solutions-159201">green hydrogen</a> are new developments that can make a big difference in years to come.</p>
<p>At the climate conference, a coalition of world leaders launched what they call the “Breakthrough Agenda” – a framework for bringing governments and businesses together to collaborate on clean energy and technology. The <a href="https://racetozero.unfccc.int/system/glasgow-breakthroughs/">Glasgow Breakthroughs</a> include making electric vehicles the affordable norm, <a href="https://www.irena.org/events/2021/Oct/IRENA-to-Mobilise-Energy-Transition-Action-at-COP26">bringing down clean energy costs</a>, scaling up hydrogen energy storage and getting steel production to near-zero emissions, all by 2030.</p>
<p>The countries and companies that lead in developing these new technologies will reap economic benefits, including jobs and economic growth. More opportunities exist in <a href="https://www.irena.org/events/2020/Aug/Thirty-Innovations-for-a-Renewable-Powered-Future">market design, social acceptance, equity, regulatory frameworks and business models</a>. Energy systems are deeply interconnected to social issues, so changing them will be successful only if the solutions look beyond the technology to societal needs.</p>
<h2>5) Prioritize green financing</h2>
<p>Over 160 banks and investment groups are involved in another coalition that has agreed to <a href="https://www.un.org/en/climatechange/biggest-financial-players-back-net-zero">put pressure on high-emissions industries</a> by tying lending decisions to the goal of global net-zero emissions by 2050.</p>
<p>Ramping up green financing will require transparent taxonomies, or guidelines, for defining green and clean investments; science-based transition plans for companies and financial institutions; and a hard look at portfolios of financial institutions given the risk of substantial stranded fossil fuel assets, such as coal power plants that haven’t reached the end of their life spans but can no longer be used. </p>
<p>Meeting the <a href="https://theconversation.com/why-banning-financing-for-fossil-fuel-projects-in-africa-isnt-a-climate-solution-169220">transition funding needs of developing economies</a> should be a high priority. </p>
<h2>6) Reduce short-lived greenhouse gases</h2>
<p>The Biden administration <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/02/fact-sheet-president-biden-tackles-methane-emissions-spurs-innovations-and-supports-sustainable-agriculture-to-build-a-clean-energy-economy-and-create-jobs/">announced a sweeping set of rules</a> on Nov. 2, 2021, for reducing emissions of methane, a greenhouse gas many times more potent than carbon dioxide that comes from leaking oil and gas infrastructure, coal mines, agriculture and landfills. Methane doesn’t stay in the atmosphere as long, so stopping emissions can have faster climate benefits while carbon emissions are reduced. </p>
<p>The U.S. and the European Union also launched a new global pledge to <a href="https://theconversation.com/biden-eu-urge-30-methane-emissions-cuts-a-move-crucial-for-protecting-climate-and-health-and-it-can-pay-for-itself-168220">cut methane emissions by nearly one-third by 2030</a>. Over 100 countries have <a href="https://ec.europa.eu/commission/presscorner/detail/en/statement_21_5766">signed on</a>.</p>
<p>This type of coalition, based on a tightly focused issue, can bring meaningful emissions reductions in places that are less likely to support broader climate agreements.</p>
<h2>Not one solution</h2>
<p>It is likely that U.N. energy and climate deliberations will continue to move in fits and starts. The real work needs to take place at a more practical implementation level, such as in states, provinces and municipalities. </p>
<p>If there is one thing we have learned, it is that mitigating climate change will be a long slog. While it’s uncontested that <a href="https://irena.org/-/media/Files/IRENA/Agency/Publication/2021/Jun/IRENA_World_Energy_Transitions_Outlook_2021.pdf?la=en&hash=C2117A51B74EAB29727609D778CDD16C49E56E83">the benefits of greenhouse gas mitigation far exceed the costs</a>, politicians need to show that the many energy transitions emerging are good for economies and communities, and can create long-lasting jobs and tax revenue. </p>
<figure class="align-right ">
<img alt="COP26: the world’s biggest climate talks" src="https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
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<p><br>
<strong>This story is part of The Conversation’s coverage of COP26, the Glasgow climate conference, by experts from around the world.</strong>
<br><em>Amid a rising tide of climate news and stories, The Conversation is here to clear the air and make sure you get information you can trust. <a href="https://theconversation.com/us/cop26">Read more of our U.S.</a> and <a href="https://page.theconversation.com/cop26-glasgow-2021-climate-change-summit/">global coverage</a>.</em></p>
<p><em>This article was updated Nov. 4, 2021, with the countries agreeing to phase out unabated coal power and Indonesia’s caveats.</em></p><img src="https://counter.theconversation.com/content/170979/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Clean energy innovation, giving up coal, cutting methane and getting China and India on board for net-zero can deliver progress at COP26.Dolf Gielen, Director for Technology and Innovation at the International Renewable Energy Agency and Payne Institute Fellow, Colorado School of MinesMorgan Bazilian, Professor of Public Policy and Director, Payne Institute, Colorado School of MinesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1707052021-10-30T16:00:21Z2021-10-30T16:00:21ZHow to meet America’s climate goals: 5 policies for Biden’s next climate bill<figure><img src="https://images.theconversation.com/files/429413/original/file-20211029-13-zerdt6.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3294%2C2169&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Joe Biden wanted to have a clear plan before the U.N. climate conference starting Oct. 31 in Scotland.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/president-joe-biden-speaks-about-his-bipartisan-news-photo/1349024147">Michael M. Santiago/Getty Images</a></span></figcaption></figure><p>President Joe Biden’s new climate strategy, announced after his <a href="https://www.eenews.net/articles/utilities-push-to-weaken-bidens-signature-climate-plan/">original plan</a> crumbled under <a href="https://www.eenews.net/articles/heres-what-manchin-told-the-biden-team-on-climate-2/">opposition</a> in Congress, will represent a historic investment in clean energy technology and infrastructure if it is enacted. But it is still not likely to be enough to meet the administration’s emissions reduction goals for 2030.</p>
<p>As <a href="https://fletcher.tufts.edu/people/kelly-sims-gallagher">director</a> of the Fletcher School’s <a href="https://www.climatepolicylab.org/">Climate Policy Lab</a> at Tufts University, I analyze ways governments can manage climate change. </p>
<p>As the <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/10/28/president-biden-announces-the-build-back-better-framework/">new plan</a> comes together, and the administration considers future steps, here are five types of policies that can help get the United States on track to achieve its climate targets. Together they would reassure the world that the United States can honor its climate commitments; help stave off the effects of a <a href="https://www.wbur.org/hereandnow/2021/08/10/carbon-border-tax-eu">carbon border tax</a> planned in Europe; and, if designed right, position U.S. workers and firms for the low-carbon economy of the 21st century.</p>
<h2>Industrial policy</h2>
<p>The United States’ ability to compete in low-carbon and resilience technologies such as energy storage has <a href="https://www.csis.org/analysis/united-states-needs-energy-industrial-strategy-and-everybody-knows-it">eroded over the past two decades</a>. </p>
<p>Part of the problem has been the political impasse in Washington over clean energy and climate policies. Over the past 20 years, tax credits, loan guarantees and regulations have started and stopped, depending on the political whims of whoever is in power in Congress and the White House. U.S. companies have gone bankrupt <a href="https://www.nature.com/articles/nature.2012.11646">while waiting for markets to materialize</a>.</p>
<p>Meanwhile, European companies, with backing from their investment and development banks, and Chinese companies have surged ahead, using their home markets to demonstrate new technologies and build industries. Wind turbines are a good example. <a href="https://www.statista.com/statistics/272813/market-share-of-the-leading-wind-turbine-manufacturers-worldwide/">European companies, led by Denmark’s Vestas, controlled 43% of the wind turbine market globally</a> in 2018, and China controlled 30%. By contrast, the United States accounted for only 10%.</p>
<p>I believe the United States as a country needs to make choices about where it has comparative advantage, and then the federal government can chart a clear course forward to develop those industries and compete in those global markets. Will it be electric vehicles? Electricity storage? Technology for adaptation such as sea wall construction, flood control or wildfire management? Independent advice could be provided to the administration and Congress, perhaps by the National Academies of Science, and then Congress could authorize an investment plan to conditionally support these industries.</p>
<p>Tempting as it is to support all technologies, public dollars are scarce. Companies that receive subsidies must be held accountable with performance requirements, and taxpayers should get a return when those companies succeed. </p>
<figure class="align-center ">
<img alt="Two men standing on a slanted roof preparing to install a solar panel" src="https://images.theconversation.com/files/429415/original/file-20211029-13-m9acij.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/429415/original/file-20211029-13-m9acij.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=430&fit=crop&dpr=1 600w, https://images.theconversation.com/files/429415/original/file-20211029-13-m9acij.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=430&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/429415/original/file-20211029-13-m9acij.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=430&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/429415/original/file-20211029-13-m9acij.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=540&fit=crop&dpr=1 754w, https://images.theconversation.com/files/429415/original/file-20211029-13-m9acij.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=540&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/429415/original/file-20211029-13-m9acij.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=540&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Workers install solar panels on a Virginia church.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/employees-with-ipsun-solar-unload-solar-panels-on-the-roof-news-photo/1232952092">Andrew Caballero-Reynolds/AFP via Getty Images</a></span>
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<p>As part of industrial policy, officials also need to squarely face up to the fact that some workers, states, cities and towns with industries closely tied to fossil fuels are <a href="https://theconversation.com/its-time-for-states-that-grew-rich-from-oil-gas-and-coal-to-figure-out-whats-next-145295">vulnerable in the transition to cleaner energy</a>.</p>
<p>On an expert panel convened by the National Academies of Science and <a href="https://www.nationalacademies.org/our-work/accelerating-decarbonization-in-the-united-states-technology-policy-and-societal-dimensions">recent study</a>, colleagues and I recommended that the government establish a national transition corporation to provide support and opportunities for displaced workers and affected communities. These communities will need to diversify their economies and their tax bases. Regional planning grants, loans and other investments can help them pivot their economies to industries that contribute less to climate change. Establishing a U.S. infrastructure bank or green bank to fund low-emissions and resilience projects could help finance these investments.</p>
<p>Equally important is investing in the workforce needed for a low-carbon economy. The government can subsidize the development of programs at colleges and universities to serve this economy and provide scholarships for students.</p>
<h2>Fiscal tools</h2>
<p>Other policies can help generate the revenue needed to support the transition to a clean economy.</p>
<p>Obviously, removing subsidies for fossil fuel industries is a crucial step forward. One analysis estimated, conservatively, that the U.S. provides <a href="https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs">about US$20 billion a year in direct subsidies</a> to the fossil fuel industries. Estimates of <a href="https://www.imf.org/en/Publications/WP/Issues/2021/09/23/Still-Not-Getting-Energy-Prices-Right-A-Global-and-Country-Update-of-Fossil-Fuel-Subsidies-466004">indirect subsidies are much higher</a>.</p>
<p>Tax reform can also help, such as replacing some individual and corporate income taxes with a carbon tax. This policy tool would tax the carbon in fuels, creating an incentive for companies and consumers to reduce use of fuels with the greatest impact on the climate. To avoid overburdening low-income households, the government could reduce income taxes on lower-income households or provide a <a href="https://thehill.com/opinion/energy-environment/550691-economists-a-us-carbon-tax-would-be-progressive">dividend check</a>.</p>
<p>Tax credits, loan guarantees, government procurement rules and investments in innovation are all useful tools and can shape markets for American companies. But these fiscal policy tools should not be permanent, and they should be phased down as technology costs come down.</p>
<h2>Investing in markets as well as innovation</h2>
<p>The government has the ability to both “push” and “pull” climate technologies into the marketplace. Government investments in research and human capital are “push”-type policies, because supporting research ensures that smart people will keep moving into the field.</p>
<p>The government can also “pull” in technologies by creating vibrant markets for them, which will provide further incentives to innovation and spur widespread deployment. Carbon taxes and <a href="https://www.lse.ac.uk/granthaminstitute/explainers/how-do-emissions-trading-systems-work/">emissions trading systems</a> can create predictable markets for industry because they provide long-term market signals that let companies know what to expect for years ahead, and they at least partially account for a product’s damage to the environment.</p>
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<img alt="An electric vehicle charging next to an EVs-only parking space" src="https://images.theconversation.com/files/429414/original/file-20211029-17-x4mg1l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/429414/original/file-20211029-17-x4mg1l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/429414/original/file-20211029-17-x4mg1l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/429414/original/file-20211029-17-x4mg1l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/429414/original/file-20211029-17-x4mg1l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/429414/original/file-20211029-17-x4mg1l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/429414/original/file-20211029-17-x4mg1l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Electric vehicles are among the examples of a new market.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/electric-vehicles-are-displayed-before-a-news-conference-news-photo/1232464216">Drew Angerer/Getty Images</a></span>
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<p>While the <a href="https://wires.onlinelibrary.wiley.com/doi/full/10.1002/wcc.734">United States is investing in clean-energy research, development and demonstration</a>, it has been less successful than China or Europe – both of which have emissions trading systems – in developing predictable, durable markets.</p>
<h2>Performance standards</h2>
<p>A tried-and-true U.S. policy tool is the use of performance standards. These standards limit the amount of greenhouse gas emissions per unit, such as fuel economy and greenhouse gas standards for motor vehicles, energy efficiency standards for appliances and industrial equipment, and building efficiency standards at the state level. Fuel economy standards on automobiles since 1975 have saved about 2 trillion gallons of gas and reduced greenhouse gas emissions <a href="https://www.sciencedirect.com/science/article/abs/pii/S0301421520305048">by about 14 gigatons</a>, roughly three times the country’s <a href="https://www.eia.gov/todayinenergy/detail.php?id=48856">annual emissions from energy in 2020</a>.</p>
<p>Performance standards give companies the flexibility to find the best way to comply, which can also fuel innovation. The Biden administration could develop new performance standards in each major emitting sector – vehicles, power plants and buildings. <a href="https://www.energy.gov/eere/buildings/articles/energy-codes-101-what-are-they-and-what-does-role">Federally imposed building codes</a>, which are set at the state and local levels, would be a difficult political lift.</p>
<p>The laws that established the government’s authority to set standards, such as the Clean Air Act and Energy Policy Act, have some ambiguities that can leave standards vulnerable to court challenge, however. Legal challenges have led to a zigzag in regulations in some sectors, most obviously the power sector.</p>
<h2>Nature-based solutions and state legislation</h2>
<p>A final area where policy is needed is for nature-based solutions. These might be fiscal incentives for restoring forests, which store carbon, or protecting existing lands from development, or they might be regulations.</p>
<p>Laws and regulations at the state level can also be enormously powerful in changing the U.S. emissions trajectory.</p>
<h2>Biden’s Plan B</h2>
<p>The <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/details-emerge-on-house-clean-electricity-performance-program-66539116">centerpiece</a> of Biden’s original climate plan was a program designed to reward and pressure utilities to shift electricity production away from fossil fuels faster. With the Senate split evenly between Democrats and Republicans, West Virginia Democrat <a href="https://www.nytimes.com/2021/10/25/us/politics/manchin-climate-budget.html">Joe Manchin’s opposition sank the plan</a>.</p>
<p>The Biden administration’s new <a href="https://www.nytimes.com/2021/10/22/climate/biden-climate-plan.html">Plan B</a> has a number of <a href="https://www.rhg.com/wp-content/uploads/2021/10/Rhodium-Group_Pathways-to-Paris-A-Policy-Assessment-of-the-2030-US-Climate-Target.pdf">heroic assumptions</a> and relies heavily on fiscal and regulatory tools, along with lots of state-level actions.</p>
<p>Missing from Plan B is the emphasis on innovation and industrial policy, both of which might have a larger impact on U.S. emissions. The elephant in the room that cannot be ignored is that the United States needs a climate bill that puts its targets for reducing emissions by 2030 and 2050 into law, gives the right government agencies the authority to set policies and addresses industrial and workforce needs.</p><img src="https://counter.theconversation.com/content/170705/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Climate Policy Lab directed by Kelly Sims Gallagher receives funding from a number of sponsors listed at <a href="https://www.climatepolicylab.org/support">https://www.climatepolicylab.org/support</a>. She is a member of the board of the Belfer Center at the Harvard Kennedy School and Energy Foundation China. She is a member of the Council on Foreign Relations and currently serves on the study committee of the National Academies of Sciences study on accelerating decarbonization in the United States. </span></em></p>President Joe Biden needed a Plan B, one that Congress could approve, to take to the UN climate conference. But his new strategy is unlikely to meet the country’s emissions reduction goals for 2030.Kelly Sims Gallagher, Professor of Energy and Environmental Policy and Director, Center for International Environment and Resource Policy at The Fletcher School, Tufts UniversityLicensed as Creative Commons – attribution, no derivatives.