Winds of climate change becalmed



The Age

December 18th 2006

by James Button


It's not happening, is it? Is anything of substance being done to fight climate change? Six weeks ago British Treasury adviser Sir Nicholas Stern released his landmark report on the economics of global warming. Stern matters because he turned old thinking on its head. It was not action, but inaction, on climate change that would devastate the world's economies, he wrote.


To act might cost only 1 per cent of world GDP, to do nothing, between 5 and 20 per cent. It was the old green creed - no environment, no economy - written in words that Wall Street bankers would understand.


At the United Nations summit in Nairobi last month, ministers from France to Denmark to Bangladesh lined up to praise Stern and pledge their commitment to the cause.


But in Britain this month, Chancellor Gordon Brown released his pre-budget report. The document would normally hold little interest, except that it was hyped in advance as a visionary statement of what Brown will do if and when he becomes prime minister next year.


The report was brown all right. Green was hard to find. It marginally increased taxes on airlines and fuel and introduced a stamp duty exemption on a minority of new homes that are carbon-neutral. But it adopted none of Stern's proposals, notably those for targeted green taxes and more money for research into clean technology - a change Stern says is critical.


The next day, Stern resigned as a Treasury adviser. He denied rumours of tension - both personal and over policy - with Brown, but the timing was telling, as Stern must have known. It was an ominous outcome. If the Blair Government, considered a leader on climate change, is ducking hard decisions, what will other governments do?


Let's not be too bleak. Tax is not the only way to address the issue. What's more, Stern's report is not two months old. But if he is right that only 10 to 15 years remain in which to act, six months is significant. He urged world leaders to move faster to strike a new global agreement on cutting global emissions after Kyoto expires in 2012. There is no sign that will happen.


Part of the problem is that no country is willing to act alone for fear of damaging its competitiveness. The European Union, probably the world's strongest supporter of the Kyoto Protocol, is now worried that its readiness to reduce emissions is hurting its economy.


Australia's refusal to cut its emissions or ratify Kyoto may have a global effect. When they push their governments to give them softer emissions targets, Europe's aluminium producers complain of the advantages their Australian rivals enjoy, says James Cameron, vice-chairman of Climate Change Capital, a bank that trades carbon credits in the European emissions trading scheme.


The European Commission's industry commissioner, Gunter Verheugen, is also unhappy. Last month he wrote to commission president Jose Manuel Barroso urging exemptions on emissions for Europe's energy-intensive industries. If Europe cut emissions on its own, companies might shift production to countries where standards were lax, he warned. Verheugen also backed France's plans for a levy on developed countries - namely the US and Australia - that have not ratified Kyoto, the Financial Times reported.


Barroso rejected Verheugen's plea, saying Europe should be proud to lead on climate change. The commission also stood firm against lobbying by member countries and last month imposed emissions targets 7 per cent lower than what the countries had asked for.


Another sign that hard thinking was still happening came from Britain last week, when Environment Secretary David Miliband said he was considering personal carbon allowances. Under such a scheme, each time people bought petrol, paid an electricity bill or booked an airline ticket, they would swipe a carbon credit card and spend some of their carbon allowance.


People who used more than their due would have to buy carbon credits, just as countries and companies will have to do after 2008 under the Kyoto Protocol. Those who used less carbon would be able to sell their credits. The scheme would almost certainly redistribute income, since the wealthy usually produce far more greenhouse gases than the poor. This makes it fairer than flat-rate carbon taxes, which fall equally on all.


Dismissed not long ago as the dream of the loony fringe, the idea has reached the centre with surprising speed. Miliband - a young and quietly charismatic politician touted as a future prime minister - told The Guardian last week the proposal had "beauty and simplicity because it would reward carbon thrift." Yes, it would be a difficult step, but "bold thinking is required because the world is in a dangerous place".


Cost and the risk of fraud are obstacles to implementation. Some people will see Big Brother in it, the rise of what scientist Tim Flannery calls "the carbon dictatorship". But the scheme doesn't ban people from emitting an excess of greenhouse gases, it just makes them pay for the privilege.


The more they emit, they more they pay, as the price of credits rises with scarcity. The market can be socially just.


Miliband's idea reinforces but also reinterprets the roles of government and the people. Governments have the primary duties: to tax, regulate, manage carbon markets and fund research. At the same time, never has an issue been so amenable to individual action as climate change. If people don't put their own houses in order, how can they demand that governments do the same?


James Button is Europe correspondent.