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Published on January 3rd, 2016 | by Guest Contributor

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The Transition To A Sustainable Economy By 2030

January 3rd, 2016 by  

Masdar blogging contestBelow is an article submitted to Masdar’s 2016 Engage Blogging Contest. The article is being reposted from the Masdar contest site and Considered Ranting.

By John Rennie Short

Government and business have a common interest in keeping the planet from overheating. How can they combine to foster this mutual concern?

Governments can even the playing field. In many countries there are tax benefits and subsidies for energy production. More than 40 countries currently subsidize fossil-fuel production or consumption to the tune of half a trillion US dollars. Governments in the Middle East subsidize 75 percent of the costs of fossil fuels. In the USA, oil drillers receive close to US$5 billion in tax subsidies while the solar energy sector gets US$2 billion. We need a global commitment to reduce all energy subsidies. Subsidies undermine the operation of free, efficient markets and send the wrong message to business.  Unleash market forces on a level playing field of unsubsidized energy costs. Cut subsidies for all energy industries but tax CO2 emissions to motivate business. Imagine a gradual reduction of subsidies and a steadily ratcheting pollution tax that allows business a chance to adapt. Maintaining steady fiscal pressure will result in the private sector finding ways to reduce their carbon footprint and so reduce global warming.

We need to cover the social costs of CO2, the main gas responsible for climate change. Estimates of the total social cost vary, but one commonly used figure is US$60 per metric ton of CO2. We could impose a tax, with annual increases up to US$120 by 2030 that is paid into a Global Carbon Fund (GCF). At the outset, we make each nation’s government responsible for collecting this tax. Different governments may use different methods of assessment and this variety will allow us to test different forms of tax implementation and collection. By 2030 we will be in a better position to decide what works best.

Governments are good at collecting money, much less successful in allocating funds efficiently. The GCF could then be used as an interest-free bank available to the private sector. Business can apply to the GCF, in cooperation with local impacted communities, for innovative programs of adaption and mitigation. Again, by 2030 we will have better ideas of what works and what does not, what is efficient and fair and what is a waste of money.

The allocation of funds can be decided in a series of five year tranches to allow the benchmarking of successful loans in the short-term before a major reassessment in 2030. A formula could be devised to lighten the load of countries that have a limited CO2 footprint but have very high adaption and mitigation costs. The predicament of low-lying Pacific islands comes to mind: they have tiny carbon footprints, but face huge challenges of sea-level rise.

Businesses require long-term stability in order to make equally long-term investments and to undertake ambitious changes in their trajectory. When governments provide a stable and clearly understandable global set of incentives, they harness the enormous power of the private sector to reduce global warming. A commitment by each country’s government to abolish energy subsidies, to tax carbon in order to fund the GCF will give business around the world a stable and transparent environment in which to make long-term plans and play a vital part in moving towards a low-carbon economy.

With a steadily increasing carbon tax, the private sector will look for ways to reduce their carbon footprint while the GCF will provide them with fiscal incentives to work on climate change adaption and mitigation.

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Pumping oil in Los Angeles (Photo ©John Rennie Short)

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  • JamesWimberley

    The first claim on a carbon tax is sequestration.

    What is the list of countries that face particularly high mitigation costs? Some lucky ones like Iceland have especially low ones, but everybody has either sun or wind, and most have both: standard technologies at a global price. I agree that adaptation costs do vary. For some, it’s probably too late already.

    • Matt

      Of course part of reducing the cost of mitigation is looking at the 6 ft sea level rise and accepting that in most cases people should be moved off that land. And we should start now. In US, much of southern should be marked as “lost” and no government flood insurance should be allowed in those area. Harsh? yes but that is the level of options left now since humans put our heads in a hole instead of acting in 1980s when the true was know. Does that mean some island nations will be lost, yes! How do we handle the migration of all these people?

      • Otis11

        A 6ft rise in sea level means a 6ft rise in storm surge… the surge above the ‘new normal’ sea level won’t change for the same strength of storm.

        Now you could claim that the storms will get stronger and therefore have a higher surge, but that can’t currently be quantified accurately.

  • Mikgigs

    Yes, they are subsidizing. natural gas has twice less co2 emissions than coal without including mining costs and logigstics(ever dirtier). this requires subsidizing for clean transition , it is apparently the logical way to do that. it is not a threat.

  • john

    Introducing a Carbon Tax is fraught with difficulty.
    It is easily attacked as a tax on low income people.
    Australia did for a short period actually have a carbon reduction fund financed by in part a cost on emissions of carbon.
    This was attacked as a carbon tax.
    The first bill once another government was elected was to get rid of the “tax”
    Short sighted yes, long term vision, not exactly very bright; but if your only interested in the next 3 years frankly that is the kind of vision we are going to be stuck with.
    Be optimistic and idealistic however it is extremely hard to get people to think about their fellow citizens let alone those to follow them.
    I think we have a total fail in humans care for each other let alone any other living being be it here and now or in the near or long term future.

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