Posts Tagged ‘carbon market’

Carbon market or carbon tax? – Give Washington a trade war carrot and stick

Thursday, August 23rd, 2018

The world can reign in Trump’s America for a new security…

by Felix von Geyer

The world has been waiting since 1997 for Washington to take meaningful and effective action on climate change.

Between the tweets, statements, retractions, and double bluff surrounding double positives, discerning coherent straight lines through the scatter diagram of Trump’s bluff and vitriol political style is akin to aluminium chaff thrashed out by naval warcraft seeking to divert the honing device of enemy missiles, real or imaginery. In the wake of Manafort and Cohen, one can expect only more of the same.

More white hairs pervade Trump’s Administration than grey cells, their collective political imagination honed in a bygone time hazed with political nostalgia. As Trump’s style embraces pugilistic revisionism, so it threatens to knock the post-second world war era of international co-operation whose spirit embedded US interests and values within multi-lateral regimes that provided America permanent pole position on the world’s starting grid of international political economic order.

Now anxious the supposed Pacific Rise of China will lose America the race to win the Grand Prix of the international political and economic order makes Trump further rescind on the post-Cold War new security agenda the world urgently needs but the United States still fails to lead.

Security stopped being a nuclear military security; a deeper security agenda in the 1990s embraced environmental, political, economic and even human security once Moscow’s bankruptcy through US-inspired low oil prices ended the Cold War.

If Europe ever expected the US to take an economic hit for the sake of the environment however, then the EU had another thing coming, a former career staff US climate change policy framer told me somewhere in the wake of the economic crisis.

Ironically, a decade ago, projected climate change costs to the economy were estimated at 1.8% of US GDP by 2100. Last year, America lost 1.66% of its GDP to climate change.

Yes, eighty years early, the economic hit from the environment came ahead of schedule but Trump’s response instead liberates US coal and automotive industries from any responsibility in redressing the global issue of climate change, the issue that terrorizes humankind beyond all borders.

The reality check is that any responsibility for saving the world now lays with the rest of the world. The US government – namely Republican politicians – long ago abdicated any federal responsibility on addressing climate security. For humanity to survive, the world must save America from itself and force the US towards a new security.

In a world where power is sometimes defined as A making B do something B ordinarily would not do, that would require a big carrot and an even bigger stick.

Encouraging the United States requires a carrot. So, the world should invite Washington to roll-out a global carbon market and suggest it be traded in US dollars as with every other major commodity.

Moreover, money through a certain percentage of all trade deals, akin to a Tobin tax but only on traded carbon credits, could furnish the coffers of the United Nations climate change mitigation and adaptation funds which Hillary Clinton said would receive US$100 billion of funding per year from 2020 onward at the 2009 Copenhagen climate change conference.

Yes, a global carbon market traded in US dollars would benefit the US economy, particularly the US Treasury and, the tighter the cap, the higher the price and the greater the role and strength of the US dollar. Taken a step further, a cryptocurrency hedged against the price of carbon could also be leveraged. The US dollar could see its history since 1945 shift perspective from gold to petrocurrency, now to carbon and more.

So, what if Washington fails to jump on such a generous opportunity? Simply, if the rest of the world fails to make Washington eat a fat supply of carrots for the benefit of everybody, they must transcend Trump`s bullying style.

Quite simply, impose a straightforward carbon tax against the US in place of retaliatory tariffs. Surely, the world over would applaud and support this necessary move?

Where the Trump Administration is hitting America’s traditional allies with sticks in the form of tariffs over steel and aluminium requires Canada, the EU and China to respond:- not just with a stick, but a moral staff. A new security agenda requires transcending old style politics.

Unlike Trump`s tariffs over steel and aluminium and retaliatory measures by Canada, EU and China that all likely flout World Trade Organisation rules, carbon taxes in the shape of border adjusted tariffs would be legal under WTO rules. The WTO said as much almost a decade ago in its joint WTO/United Nations Environment Program Trade and Climate Change report produced in the run up to the 2009 Copenhagen climate change conference.

Ironically, in 2009, carbon taxes or border adjusted tariffs were intended for use against developing countries like China and India to force them to address their future emissions trajectory set to outstrip current US emissions, or at least plug the so-called carbon leakage gap should countries like the US and Canada face the economic consequences of reducing their emissions while developing countries did not.

US states who have tried to lead on emissions reductions such as California’s Western Climate Initiative and the North-Eastern states’ Regional Greenhouse Gas Initiative, would not be able to receive exemption as the WTO only recognizes nation-states as members or entities. Therefore, a blanket carbon tax would on all US exports would be required.

Again, where the United Nations faces shortfalls in funding its Green Fund to help countries adapt to climate change under the Paris Agreement, much of the revenue from taxing US exports could be diverted accordingly.

Whether Canada as it is forced by Trump to renegotiate NAFTA can co-ordinate this policy with the EU with whom it has a recpricoal Comprehensive Economic Trade Agreement and both EU and Canada share China as an important trade partner, they will need to be in consort to achieve a new security. Bringing the UK on-board who likely aim for an economic trade agreement with Washington in the event of a Brexit Britain will also be critical.

But hopefully the carrot of rolling-out a global carbon market traded in US dollars will help the Trump Administration – and Washington – refix its vision of a security agenda and transcend its current myopic view of US interests and global security.




Aviation breakthrough in combatting climate change

Tuesday, October 15th, 2013
Governments unanimously approve market-based mechanism for aviation to combat climate change by Felix von Geyer in Montreal
A major breakthrough in an agreement to tackle greenhouse gas emissions was made in Montreal on Friday as the member countries of the International Civil Aviation Organization unanimously agreed a Decision to Develop a market-based mechanism (MBM) to regulate and reduce global greenhouse gas emissions from aviation at ICAO’s 38th General Assembly.
The proposals will be put to ICAO by 2016 when a Decision to Implement for 2020 will be agreed.
“The devil as always will be in the detail” said ICAO Secretary General Raymond Benjamin who, acknowledging the unheralded unanimity among members on the issue of climate change, declared to much laughter: “The devil  has taken a vacation.”
Indeed, the agreement represents a major step in agreeing a global framework to addressing climate and is the first time that all governments have embraced a decision to develop a market-based mechanism and is also the first time that a sectoral approach to addressing climate change has been taken on a global scale.
ICAO has to report its proposed action to address the sector’s greenhouse gas emissions to the United Nations Framework Convention on Climate Change this year under a decision agreed at the UN Climate Change Conference in Durban in 2011.
Going into the Assembly that started last Tuesday, the options for regulating emissions were to introduce carbon offset; offsets with revenues or a full-out market-based mechanism such as a cap and trade similar to the European Union’s Emissions Trading Scheme that looked to include all aviaiton emissions into its EU ETS for phase III starting in 2013.
Aviation emissions account for approximately 2% of global greenhouse gas emissions but the specifics of aviation emissions means that their emissions actually contribute an estimated 5% of climate forcing. Until recently, it was thought that aviation could only reduce its emissions through better navigation and more direct flights. However, in the past five years the advent of biofuels have shown they can provide a safe alternative to traditional kerosene-based jetfuel while other technologies such as Gas-to-Liquids as developed by Shell in Qatar are available and possible microalgae developments that could arguably provide a carbon-neutral jetfuel are possible.
How ICAO will develop the various proposals is the “Devil in the detail” that Benjamin mentioned. Consensus is that ICAO will need to cap the carbon content of fuel against the energy content of fuel as it comes to market, which in the case of civil aviation the market would be an ICAO bunker near the airports. This in effect would look to increase the energy density of fuel against the carbon emissions and would require an assessment of what the biofuel and alternative fuel possibilities are and whether these could be made globally available while also needing to address infrastructure issues such as pipelines and so forth.
The importance of Friday’s agreement cannot however be undermined when climate polictics have divided nations, as witnessed at the Copenhagen Climate Change Conference in 2009 that was meant to usher in a comprehensive global agreement that is now deferred to 2015 as again agreed in Durban.
A total of seventy-two reservations were raised by countries, many reservations revolving around familiar dividing lines such as Common But Differentiated Responsibilities (CBDR). Saudi Arabia, traditionally the world’s largest oil producer and highest producer of greenhouse gas emissions stating that they did not want to be burdened by costs at the expense of their society and economy. India, traditionally an obstacle in the path of climate consensus due to its need to alleviate poverty and its dependence on fossil fuels, also expressed its concerns over CBDR, mutual consent and how market-based mechanisms need to pass through the test of feasibility.
Canada expressed its reservation on the inclusion of CBDR as it was incompatible with international aviation activities.
Last week’s release by the International Panel on Climate Change indicated the rate and pace of climate change has surpassed scientists’ original expectations. What the IPCC Working Group 1 report did not say, however is: “You know you can commodify carbon emissions; but you can never commodify time.”

Australian government to triple income tax thresholds in return for a carbon price

Monday, July 11th, 2011

Australia’s Labour government announced Sunday it will triple the tax-free threshold that Australians can earn before paying tax as part of a government plan to price greenhouse gas emissions at A$23 per tonne of CO2 equivalent starting next year, 1 July 2012.

In a step that Prime Minister Julia Gillard stated would reduce emissions by 159 million tonnes a year by 2020, the Clean Energy Future plan is expected to increase Australians’ individual incomes by 16% or A$9,000 per year while creating an extra 1.6 million jobs by the end of the decade.

The carbon price will increase incrementally by 2.5% per year over three years to 2015 when a full ETS will become operable, according to the government’s plans.

Initial price increases caused by the carbon tax will be compensated by recycling half the overall revenue to households to offset against these price impacts. Four million households will receive assistance that exceeds the expected price increases while 6 million households will receive assistance meeting the price increases while 8 million households will receive some assistance. Government forecasts predict a $9.90 increase in costs for households and the average assistance will be $10.10 per week.

Increases to pensions and family allowances are also promised.

Furthermore, the tax-free threshold will more than triple from A$6,000/year to $18,200 by 1 July 2012 and increase a further $1,200 to $19,400 in 2015.

Clean Energy Supplements equivalent to 1.7% of pensions and family allowances equivalent of up to $338 per year in the case of pensioners will be payable initially in lump sums to families.

Families earning less than $80,000 will receive automatic tax cuts of $300 per year in addition to the increased tax-free threshold.

Programmes to re-train workers and assist industry to transform itself into a clean economy fall under a $9.2 billion Jobs and Competitiveness funding package over the three-year timeframe.

The steel industry specifically will receive $300 million worth of government investment to enhance innovation and technological competitiveness toward a low-carbon economy and its progress reviewed in 2014-2015 under the government’s proposed EITE (Energy Intensive Trade Exposed) Productivity Commission.

Companies in the so-called EITE category claim their operations are rendered commercially uncompetitive against developing country companies that face no constraints on their carbon and other greenhouse gas emissions under the United Nations Kyoto Protocol.

Ms Gillard in conjunction with Minister for Climate Change and Energy Efficiency Greg Combet and Minister for Resources and Energy Martin Ferguson also announced an almost $1.3 billion Coal Sector Jobs Package where the coal industry who will face an effective carbon price of $1.80 per tonne of coal produced due to coal mine fugitive greenhouse gas emissions.

While a small number of gassy mines will likely pay higher costs, the package is aimed at three coal mines in particular whose operation is critical to their respective local communities and economy.

The coal package of A$1.264 billion will reward coalmines that reduce their historical greenhouse gas emissions intensity as opposed to ­absolute emissions. An additional $70 million Coal Mining Abatement Technology Support Package will further seek to enable the coal industry to deploy technology to reduce its emissions.

The government stipulated that it will endeavour to close 2,000 megawatts of brown-coal fired electricity generation.

Manufacturing industries will receive a further $1.2 billion to invest in low-emissions technology and capital equipment with $200 million specifically earmarked for the food processing and metal foundries industry.

Transportation fuel tax credits for industry will be phased out with the exception of forestry, fisheries and agriculture while domestic aviation will see its fuel excise increased in keeping with the carbon price.

Small businesses will be exempt from any future carbon trading mechanism which will be designed to include Australia’s top 500 polluters. However, the government plans to orchestrate a $40 million energy efficiency awareness programme that in line with a new $6,500 business instant asset write-off it hopes will encourage investments into clean energy investments.

Programmes for improving energy efficiency for low-income households, improved energy access for indigenous and remote rural communities are also included.

A Climate Change Authority will be established under the chairmanship of Bernie Fraser, a former head of the Energy Investment Office in the early 1980s and more recently manager of two of Australia’s largest superannuation pension funds.

The CCA will advise the government on how to design and implement its carbon trading mechanism slated to start in 2015.

NGOs in Australia welcomed  the Clean Energy Future plan. The Australian Conservation Foundation made a detailed analysis but was reticent of government plans to continue to subsidize the coal industry and specifically called for the Labour Party to live up to election promises of no new investment in coal.

ACF also called for an end to all fuel subsidies within the three-year timeframe. ACF recently launched report questioning why taxpayers were spending $11 billion in subsidies for the fossil fuel industry.

Brent Hoare of the Green Cooling Association that seeks to phase out refrigerant gases that damage the ozone and cause climate change welcomed the government plan for including other greenhouse gases than just CO2, citing that per tonne, some gases have an average warming potential 4,000 times that of CO2.

“The potential direct emissions abatement that could be delivered by a widespread transition to natural refrigerants is estimated to exceed 15 million tonnes of CO2 per annum which would make an extremely significant contribution to the emission reduction target of 160 million tonnes of CO2,” Mr Hoare told New Orator.

In New Zealand where the government has an in principle linking up between any future emissions trading scheme emanating from Canberra, Climate Change Minister Nick Smith welcomed the Australian government’s announcement of a carbon emissions tax set initially at $A23 per tonne.

“New Zealand officials have been working closely with their Australian counterparts and any changes to New Zealand’s Emissions Trading Scheme will take account of the Australian announcement,” Dr Smith said in a statement to New Orator.

Dr Smith will meet Australian Treasurer Wayne Swan in the next week to further discussions on how to bring the schemes more closely together over time, according to a spokesperson in his office.

In Canada whose economy is similarly founded on mining and oil and gas as in Australia, Green Party leader Elizabeth May told New Orator by e-mail: “It’s brilliant!”

Canadian Environment Minister Peter Kent is yet to comment but he told New Orator last month that he would be announcing a Notice of Intent in July to regulate Canada’s greenhouse gas emissions by sector.