Transcript Climate Change: Setting a price on carbon

Climate Change:
Setting a price on carbon
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change
How might that be achieved?
Carbon tax
Emissions Trading Scheme
Additional actions
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change
Assessing appropriate responses
Projections of:
Analysis
approach:
Assessment of impacts
Demand,
technology,
social, envir.
options
Biogeochemistry of
greenhouse
gases
Climate
sensitivity,
response time
to gases
Regional
climate
response to
global CC
Global
emissions
over time
Atmospheric
accumulation
Global
climate
response
Regional
climate
response
Response of
all sectors to
CC
Impacts
↓
Risk
Determination of mitigative response
What can happen?
The physical world
March 19, 2011
What might it do?
Our sensitivity
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change
Are we vulnerable?
Adaptability
What are we trying to do?
Reduce greenhouse-gas emissions
Internalise the cost of emissions
The Kyoto Protocol tackles emissions of six
greenhouse gases:
– carbon dioxide (CO2)
– methane (CH4)
– nitrous oxide (N2O)
– hydrofluorocarbons (HFCs)
– perfluorocarbons (PFCs)
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
– sulphur hexafluoride
(SF6) Change
Chemical Inst. Climate
Emissions trading
• A market-based approach to control pollution
Also known as cap and trade
• Provides economic incentives for achieving
reductions in the emissions
– Used for minimising emissions of sulphur
• Carbon Pollution Trading Scheme, CPRS
– Introduced by the Labor Government and nearly with
bipartisan support in 2010
– Brought down Malcolm Turnbull
• The European Union Emissions Trading Scheme
in place since January 2005, stabilised at around
€20 per t CO2e
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change
Emissions trading
• Favoured by industry and commerce; those
committed to the use of markets
– Least priced
– No picking of winners
• Modification heavily lobbied for by those
claiming:
– International competitive disadvantage (threatening
loss of jobs or moving off shore)
– Transitional costs
– Not really convinced that there was/is a need
– Simply conservativeness- the world is fine as it was
thank you
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change
Emissions trading
• A Cap is set of total allowable emissions and then that cap
is slowly over the years reduced at a rate determined by
the objective of meeting total emissions reduction targets
• All emitters, or some selected sub groups are allocated
emissions allowances based on their current emissions
(grandfathering) or through an auction
– Those capable of reducing emissions below their allowance will
have permits to trade
– Those who do not will have to buy them or pay a penalty for over
emitting
• Experience with the EU Emissions Trading Scheme
showed their initial free allocations were too generous (it
was easier to reduce emissions than thought) so the price
initially collapsed
– The CPRS threatened to do the same under pressure from big
emitters
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change
“Along with others, I have tried to pry
economists away from narrow assumptions
about self interest.
Behavior is driven by a much richer set of
values and preferences”
Gary Becker, Nobel Prize acceptance lecture, 1992
Behavioural economics: “ …people are susceptible to irrelevant influences
…emotions, short-sightedness”
Ariely (2009): Predictably Irrational
Identity
Economics:
“Peoples Aust.
identity
defines Aust.
who they are..(and this) influences
March 19,
2011
Inst. Physics/Roy.
Inst. Climate
Change Identity economics
their decisions..”
Akerlof Chemical
and Kranton
(2010):
Emissions tax
• Advantage: Can be introduced with minimal
rules form government quickly
• Disadvantage: It is difficult to assess the
appropriate level of tax to achieve the
desired emissions reduction
• Labor with the assistance of the Greens and
independents are planning to go this way
initially and then to introduce trading
• All are concerned about:
– Forewarning likely futures so all can be preparedno surprises
– Transference of tax of or trading income to least
advantaged in the community
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change
Additionalities
• Targets (e.g. EU, China, 20/20/20)
– EU 20% reductions included growth targets for
developing states – Romania, Bulgaria et al.
– Germany -40%; UK -34% on 1990 by 2020
• Energy efficiency
– Domestic appliances
– Motor vehicles
– Commercial and industrial equipment
• Renewable energy
• Standards
• Information – labelling etc.
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change
Policy development in the shadow of
the role of party and media
• “Today’s politicians are a bunch of robots
who would rather chase soundbites than
make policy”
• “If politics was a “game” in ’93, it has
been refined to an artform today”
• “Policies are little more than ephemeral
utterances created from focus groups and
polling, summarised in a media grab. It has
become a race to the bottom”
John Hewson, The Age, 27.02.2011
March 19, 2011
Aust. Inst. Physics/Roy. Aust.
Chemical Inst. Climate Change