- Posted September 30, 2013 by
Kuala Lumpur, Malaysia
Crown Capital Management - Need an elegant antidote to global warming
The report from the Intergovernmental Panel on Climate Change (IPCC), released in Stockholm Friday, leaves almost no doubt that human activity can take the blame for the warming trend, even if the warming rate seems to be slowing. The conclusion came as no surprise. The 1996 IPCC report stated that the “balance of evidence suggests that there is a discernible human influence on global climate,” and the updates since then have reinforced that stance.
Once environment ministers and big industries digest the report, don’t expect a lot to change – even though the 1983-to-2012 period in the Northern Hemisphere was very likely the warmest 30-year period in 800 years, and the frequency and costliness of natural disasters (storms, floods, drought, fire, extreme temperatures) has been rising since the early 1980s. Reinsurance giant Munich Re reports that the damages from the 10 biggest natural catastrophes of 2012 alone, topped by the Hurricane Sandy storm surge, totalled more than $130-billion (U.S.).
The pity is that there is an efficient, fair way to reduce carbon footprints without throwing economies into reverse. It is one that is not impossibly complicated and prone to abuse like carbon-credit trading, or based on command-and-control regulations, such as milking taxpayers to subsidize renewable energy. It is carbon taxes. They are quietly being introduced by governments in North America, Europe and Asia, although not quickly enough. Given their relative simplicity and effectiveness, they ought to be ubiquitous.
More than a few prominent scientists and economists, among them Paul Ekins, director of the Institute for Sustainable Resources at University College of London, and Stewart Elgie of the University of Ottawa, think British Columbia’s carbon tax is a fine model. “The design of that carbon tax was the best in the world,” Mr. Ekins said in an interview.
The B.C. carbon tax applies to all fuels, from gasoline to propane, at the point of sale. It was launched in July, 2008 as the main effort in the province’s campaign to drop emissions by one-third by 2020. The tax was designed to be “revenue neutral” – that is, all the income it raised would be offset by reduced taxes elsewhere – and it was introduced gradually. By 2012, the tax per litre of gasoline was seven cents.
A study led by Mr. Elgie found that in the first four years of the carbon tax, B.C. fuel consumption fell 17.4 per cent per capita, and 18.8 per cent compared with the rest of Canada. In the first three years, the province’s greenhouse gas emissions fell 11 per cent (more recent data are not available). If all this were not good enough, B.C.’s economy did not get clobbered, either. Since the tax was introduced, its gross domestic product has kept pace with the rest of Canada.
The tax does not take an army of bureaucrats to administer and was relatively cheap to introduce. It went from concept to reality in a mere five months.
B.C.’s little tax beauty is not perfect. It does not apply to all carbon emissions, notably the flaring of natural gas by the drillers. It is being frozen at the current level, taking away some of its future punch.
Quebec and Alberta have less useful variants of the B.C. tax. (Alberta’s, born in 2007, was the first of its kind on the continent.) The other provinces lack such a tax and none exists at the federal level, where any new tax is treated with fear and loathing. Ditto in the United States, where the mere utterance of “tax” is considered political suicide, at least at the federal level.
Too bad, because carbon trading and regulations lack simplicity, cost fortunes to administer and are less fair and effective. A carbon tax merely sets the price of carbon use, allowing businesses and consumers to change their fuel-consumption behaviour at the lowest cost. Some will use public transportation more often; others will buy more fuel-efficient cars. Companies will innovate, knowing that fuel efficiency will save operating costs.
France, Italy, China and South Africa have recently introduced, or announced they will introduce, carbon taxes of one form or another. Several other European countries have them. All work to some degree, although they tend to lack ambition and get lost in the clutter of other climate-change mitigation efforts, from clean-technology subsidies to appliance performance standards.
The IPCC report will receive a barrage of criticism from the climate-change skeptics. They will dismiss the report as a fraud or a hoax because of the declining rate of warming; never mind that the planet is warming. They will ignore the data that reveal an alarming increase in natural catastrophes, such as floods. They will condemn carbon taxes as yet another tax grab, even if they are revenue neutral. B.C.’s fine example of a tax that helps the planet, yet neither hurts taxpayers nor growth, will fail to sway them.