Sunday, May 12, 2013
Flawed Carbon pricing and the cost of global warming
The climate is changing with increasing global warming caused by man-made Carbon emission. The economic impact of global warming can no longer be ignored by Governments around the world because it is impacting their budget bottom lines. Weather is becoming unpredictable. Even if Meteorological department predicts a disaster 24 hrs in advance, there is nothing Governments can do to prevent human and economic losses within a short span of time but evacuate people to safety leaving behind all their properties. Governments are forced to allocate funds for disaster management every year caused by severe draughts, unprecedented snow falls, and coastal erosion by rising sea levels, flash flooding, inundation and power black outs. We often hear people saying,” we were completely taken by surprise by this event and we have never seen anything like this in the last 50 years” after every naturals disasters explaining the nature and scale of disasters. Nature is forcing Governments to allocate more funds for disaster managements and such allocations have reached unprecedented levels. The cost of natural disasters around the world in 2011 was estimated at $ 400 billion and in 2012 it was estimated at $160 billion. The only way to fund these disasters is to tax Carbon pollution which causes global warming. Countries should take long term decisions that will save their current and future generations to come. They should understand how Carbon is emitted and what the best way to curb such emissions is. It is a global issue and its requires a collective solution. There is no use of pricing Carbon when economic recession can jeopardize the pricing mechanism? Global warming is a moral and social issue and not just an economic issue. Developed countries have been emitting bulk of the Carbon since industrial revolution while developing countries such as India and China were emitting less carbon in spite of their vast population due to their lowest per capita consumption. But that trend has now changed with rapid industrialization and economic growth of India and China and other developing economies. Australia is still a leading emitter of Carbon in the world in spite of their low population because of their high energy consumption, availability of cheap and high quality Coal and increasing mining, industrial and agricultural activities. That is why Australia is one of the first few countries who introduced Carbon tax while rest of the countries is still debating about it. Now it is clear that Carbon emission is directly proportional to industrial, economic and population growth of a country and it can be easily quantified based on the growth rate of each country. It is time countries agree to cut their Carbon emissions to sustainable levels with a realistic Carbon pricing mechanism and sign a world-wide treaty through UN. “THE EUROPEAN UNION carbon emissions trading scheme—the biggest in the world and the heart of Europe’s climate- change program—is in dire straits. The scheme’s carbon price has collapsed. The primary reason: The economic recession has suppressed manufacturing, thereby reducing emissions and creating a huge over- supply of carbon emissions allowances. Carbon trading is a market approach to reducing greenhouse gas emissions in which each facility involved is given an emissions cap for the year, and each year that cap is reduced. A firm must record and report its facilities’ emissions and must obtain allowances for its total emissions. An allowance permits a facility to emit 1 metric ton of carbon dioxide or its carbon equivalent; some allowances are given for free by the government, others can be bought at auction or from other firms. If a facility exceeds its cap, the company operating it has options: It can reduce emissions, buy allowances from other companies, or obtain allowance offsets by reducing emissions at another pollution source. The cost of an allowance is referred to as the carbon price and is driven by market conditions such as supply and demand. If the low carbon price continues, the region’s ability to meet long-term reduction targets for greenhouse gas emissions will be severely hampered because the trading scheme will fail to provide money for clean-tech programs and incentive for manufactures to adopt cleaner technologies. The trading scheme is a key component of the EU’s climate-change strategy because about 40% of all greenhouse gases emitted in the region fall under EU’s control. The mandatory scheme applies to 11,000 industrial installations, including power plants and major chemical facilities, across all 27 member states, as well as in Croatia, Iceland, Liechtenstein, and Norway. The aviation sector has been included in the scheme, but its active participation has been deferred to allow for an international agreement on aviation emissions, which is expected to be concluded in the fall. The goal of the European Commission, the EU’s administrative body and the architect of the emissions trading scheme, is to reduce all greenhouse gas emissions by 20% from 1990 levels by 2020. To contribute toward this goal, the trading scheme has targeted a 21% cut in the emissions of participating sectors by 2020 from a 2005 baseline. In recent weeks, however, the EU carbon price dropped to a new low of $5.20 for each metric ton allowance of CO2, down from a high of $23 in 2011. This is despite an annual reduction of the EU emissions cap of 1.74% through 2020 and the introduction on Jan. 1 of a new phase of the scheme requiring companies to purchase allowances. AT ITS CURRENT carbon price, the EU emission scheme’s role in encouraging chemical firms to ditch fossil fuels and adopt greener technologies “is meaningless,” says André Veneman, director of sustainability at AkzoNobel. Many of the industry’s investments in low-carbon technologies that are marginally financially viable also will likely be delayed, he says. Without a strong carbon price, the underlying push to clean-tech in the EU will come only from the price of oil, Veneman adds. Veneman and other experts say that a carbon price of between $68 and $135 is required if industry as a whole is to be forced to shift onto a new low-carbon footing. Yvo de Boer, special global adviser for climate change and sustainability for KPMG—an audit, tax, and advisory firm—and form EUROPEAN SCHEME IS IN FREE FALL Record-low CARBON PRICE threatens to derail transition away from fossil fuels and ability to meet climate-change targets.” Source: EUROPEAN SCHEME IS IN FREE FALL Record-low CARBON PRICE threatens to derail transition away from fossil fuels and ability to meet climate-change targets ALEX SCOTT, C&EN LONDO The burden of Carbon tax should be borne by both power generators as well as consumers. Even if the Carbon tax is imposed on emitters it will eventually be passed on to consumers. Either way the cost of energy will increase steeply and there is no way to avoid such escalation if we want to maintain our power consumption levels or our current life style. In other words people will have to pay penalty for polluting the air either by generating or consuming power that causes Carbon pollution. All developed countries that have been polluting the atmosphere with Carbon emission should be taxed retrospectively from the time of industrial revolution so that emerging countries need not bear the full cost of global warming. Such a fund should be used for developing renewable and clean energy technologies or to purchase Carbon allowances. Current mechanism of Carbon pricing does not penalize countries who caused the global warming in the first place for hundreds of years but penalizes only countries who currently accelerate the rate of Carbon emission. Such an approach is a gross injustice on the emerging economies and not at all pragmatic. Most of the developed countries are currently facing economic recession resulting in plummeted Carbon price. This will only encourage existing Carbon emitters to emit Carbon cheaply and penalize Renewable energy and clean energy technologies with higher tariffs and drive them to extinction. In spite of Carbon level in the atmosphere exceeding 400 ppm according to the latest report, the world is helpless to reduce the Carbon emission anytime sooner making our planet vulnerable to catastrophic natural disasters. Countries that are reluctant to pay Carbon tax will pay for Natural disasters which may be many times costlier than Carbon tax. Countries like US, European Union, Japan, Australia the largest power consumers and countries like Saudi Arabia, Russia, Venezuela, Iran, Iraq, Libya the largest oil producers should bear the cost of Carbon pollution that caused the globe to warm since industrial revolution. Such a fund should be utilized in developing innovative Renewable energy and clean energy technologies of the future. More than anything else the rich and powerful countries should declare global warming as a moral issue of the twenty-first century and take some bold and hard economic decisions to save the planet earth.