Business Day, Nigeria
ANY
more warnings that time is running out to stop global warming and
Hollywood will have the script for a sequel to Groundhog Day.
Yesterday’s report on climate change by the United Nations Development
Programme sounds the latest alarm. After the shortcomings of Kyoto, it
declares, the world has one final chance to avert a disaster. To their
credit, the groundhogs are getting through to the politicians. Most
western governments now accept that reducing carbon dioxide emissions
is vital to saving the planet. The hard part is how to achieve that.
Talks on a possible successor to the Kyoto accord take place in Bali
next month. Ministers may agree on the principle of cuts. That would be
a good first step. But it is not enough. To match rhetoric with action,
governments will have to go much further and commit to establishing a
price for carbon. There are two ways to achieve this: taxes and
tradable emissions credits. Taxes would be the better of the two,
creating price certainty for polluters and enabling them to invest
efficiently. Revenues could be used to cut other taxes, on labour and
investment for example, or to motivate the development of cleaner
energy and transport fuels.
Carbon taxes are harder to sell politically than
emissions trading, where credits are bought and sold. But cap-and-trade
schemes have their own problems. While limits on emissions should be
guaranteed by quotas, the carbon price is volatile. This makes
polluters’ costs uncertain. There is scope, too, for manipulation. The two systems are not mutually exclusive. Indeed, a
combination of the two is likely. When they meet, rich nations should
remember that the end is far more important than the means. If taxes
are politically unacceptable, then emissions trading is better than no
system at all. In the battle to halt global warming, a credible carbon
price is the valuable prize.
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