Monday, 5 December 2011

Plan B for our planet

The Kyoto protocol is running out and the climate conference in Durban will likely end without a new stronger protocol to reduce (the growth) green house gas emissions. Maybe we need a plan B.

Under the Kyoto protocol a cap on the greenhouse gas emissions for the participating industrialized countries is set. Within this group emission rights can be traded, so that emissions are cut in the most efficient way. With a similar aim, emission can also be reduced by financing emission reductions in emerging economies and developing countries.

The problem of the Kyoto protocol is that the cap on the greenhouse emissions only makes sense if everyone is participating, or at least will participate as soon as they are rich enough. It is possible to do so, the Montreal protocol to curb emissions of chlorofluorocarbons (CFC) to protect the ozone layer works well. In case of the Montreal protocol only the producers of fridges, air conditionings and spray cans were affected. Greenhouse gasses are emitted by the energy, agricultural and building sectors. These are very powerful agents with an interest in the status quo. With propaganda and by encouraging conflicts, they can makes sure that there are always some large greenhouse gas producers not participating.

Maybe a global cap is not needed. Maybe we can see the problem as a dynamical one. How can we develop cost efficient technologies to reduce green house gas emissions. These technologies will be developed if there is a clear price signal; emitting CO2, wasting energy should be costly. Furthermore, economies of scale will be important to reduce the price and the increase competition.

For this, all we need are higher prices for greenhouse gas emissions (for non-renewable energy, etc.) in a large part of the world, but not necessarily all of the world. This part of the world should be allowed to protect itself against imports produced with cheap energy. That is all that the world would need to agree upon.

I expect that Europe would be the region that would start working this way. Due to the import levies, the playing field would be levelled and Europe's industry would be able to compete in the here and now with industries from the outside. In the long run, the Europe's industry would be come more efficient and would be world leader in green technologies. Technologies that will be needed everywhere once the prices of energy, concrete and fertilizer will start to rise due to shortages.

This is a quite attractive position. No disadvantage now, due to the levy, and likely advantages later, due to a technological leading role. It might well be that many countries would like to cooperate, get into this green region to be able to export without levies and to be part of the future.

An agreement that climate import levies are allowed may be easier to achieve as a global cap on greenhouse emissions.

Further reading

More posts on economics.

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