Kevin Anderson: Relying on market based instruments to address climate change is “doomed to failure and is a dangerous distraction”
Kevin Anderson is Professor of Energy and Climate Change at the Tyndall Centre at the University of Manchester. He’s one of the UK’s leading climate scientists. In a recent post on his website, he explains “Why carbon prices can’t deliver the 2°C target”.
Anderson’s arguments relate to a global target of no more than a 2°C increase in temperatures. Meeting this target requires rich countries (Annex 1) to reduce emissions by about 10% each year, “starting now and preferably yesterday” as Anderson puts it.
Anderson argues that underlying the problem of addressing climate change is, “the obstructive and misguided dominance of economics (or more correctly finance) in framing both the climate change issue and the mitigation agenda.”
Economists can’t even do their own job, as demonstrated by the widespread failure to see the 2008 financial collapse before it was too late. So why let them loose on climate change? In the post on his website, Anderson links to a brilliant ten minute talk about the “new priesthood of economics” by Will Self on Radio 4:
The relation between economic data, which are often imperfect and can only represent the state of an economy as it was some time in the past, and the future is tenuous at best. That’s why, if you spend sufficient time listening to these Panglosses or Cassandras, you’ll notice that more often than not they’re entirely wrong. Most spectacularly so, in their failure to anticipate the financial collapse of 2008.
Anderson points out that climate change is a cumulative issue. What matters is the amount of greenhouse gases in the atmosphere, and this amount is increasing all the time. Anderson explains this point in an interview with People and Nature:
The climate change story has long been told in terms of “we must have large reductions in emissions by some abstract point in the future” – for example, an 80% reduction by 2050. The message conveyed is that, many years from now, we must have got our carbon emissions down by some arbitrary amount. But when you consider the science of climate change and how this links to the global rise in temperature, it is not what happens in 2050 that matters, but the total quantity of CO2 in the atmosphere. That is the carbon budget. We know how much CO2 we can put in the atmosphere for a given temperature – there or thereabouts…
Last week, at the launch of the latest Intergovernmental Panel on Climate Change report, Rajenda Pachauri, the chairman of the IPCC, said,
“An extremely effective instrument is to put a price on carbon. It is only through the market that you can get a large enough and rapid enough response.”
Anderson disagrees. He points out that, “Market theory does not address large (non-marginal) rates of change; and certainly 10% p.a. fits into the non-marginal category.” The evidence since the Kyoto Protocol is on Anderson’s side. Since 1997, there’s been plenty of carbon trading, but the concentration of greenhouse gases in the atmosphere has gone steadily up.
Anderson looks at what the price of carbon would need to be in order to achieve 10% reductions in emissions per year. This is where the pro-market arguments unravel completely.
The price would almost certainly be beyond anything described as marginal (probably many €100s/tonne)1 – hence the great “efficiency” and “least-cost” benefits claimed for markets would no longer apply. Moreover the equity implications, even within the UK and similarly wealthy Annex 1 nations, would be devastating; but nonetheless would pale into insignificance compared with the impacts on the many millions of deeply poor, disenfranchised and powerless people around the world.
While “A carbon price can always be paid by the wealthy”, a realistic price on carbon (i.e. a price that would stand a chance of achieving reductions of 10% per year) would have devastating impacts on the poor. Anderson told The Independent that a high carbon price would, “push the price of goods and services up by so much that it would put them beyond the reach of large swathes of the global population while the wealthy could carry on more-or-less as normal.”
Instead of tinkering with market “solutions”, Anderson argues that radical changes are needed. The Tyndall Centre is organising “The Radical Emission Reduction Conference”, which will take place at the Royal Society in December 2013.
Anderson has set out a “very provisional” regulatory framework for how the UK, or a similar Annex 1 country, could achieve rapid and deep reductions in energy demand and therefore in emissions. “Today, after two decades of bluff and lies,” Anderson writes, “the remaining 2°C budget demands revolutionary change to the political and economic hegemony.”
Previous research demonstrated how even at €300/tonne the price of a typical flight would increase by only around 25%. It is unlikely that to frequent fliers, who typically have high incomes, such a shift would radically reduce their personal flying. Nor is it likely that a 25% increase, to just one aspect of the overall cost of work travel, would catalyse more than a marginal change to work related flights. See: Aviation in a Low Carbon UK pp. 89-109.