27 October 2013, 18:56

Is a fossil fuel tax the best way to control emissions?

Is a fossil fuel tax the best way to control emissions?
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Rajenda Pachauri, the Chairman of the UN Intergovernmental Panel on Climate Change (IPCC), which recently produced probably the most important climate change document this year said a few weeks ago that the financial markets were humanity’s only hope to combat global warming. He 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”.

 

Whilst it is indeed good that the United Nations rates climate change to be a very serious problem, considerable doubt has been expressed as to whether taxing carbon production would work or not. To debate this subject EcoPlus welcomes Kevin Anderson, Professor of Energy and Climate Change at the University of Manchester, and Director of the Tyndall Energy Programme, Oleg Shibanov, Finance Professor of the New Economic School in Moscow, and Elena Koritchenko, Head of Environmental and Social Compliance at Bank Otkritie in Moscow.

 

Kevin Anderson – Professor of Energy and Climate Change at the University of Manchester, and Director of the Tyndall Energy Program.

I think that carbon price is an important part of what we need to put in place to reduce our emissions. But I think we’ve had far too much focused on this. I would disagree with Pachauri here. I think the focus on carbon taxes has mislead us and taken us away from the things that we could be doing immediately. The technologies that already exist are much more efficient. We could put in standards that would bring about changes much more rapidly than the carbon price.

I think the problem with this is that it is global. You have two choices – either everyone does it together (which we all know is not going to happen), or some counties step up to the plate and lead on this. And I think it is the wealthier countries that should start to lead. The EU had its own emission trading scheme that brought together some countries. It was not particularly good, but it was a step in the right direction in bringing some countries together.

So, I think, if we had standards in place, if we had caps in places like the EU and the US – it is much easier for us then to discuss with places like China or India that they should also have a cap. But if all wait for a global agreement – we will be here forever.

 

Oleg Shibanov – Finance Professor of the New Economic School in Moscow.

Russia might not be able to join because this agreement would not be a world-wide agreement. You cannot have Russia in this agreement if you don’t have China or India. What is important is that now we have a less and less balanced budget. And taxing carbon in this respect might be an idea for the Government. For example, in the US they do discuss this idea because they consider this tax to be an additional revenue for the Government.

The emissions trading system in the EU really produced a lot of reduction. The only question is – is it because of recession or it is because of the system? As we observed, the price of permits is very low, but still they achieved their goal to reduce emissions. The US achieved the reduction in emissions in 2012 because of shale gas revolution. And so, the huge question is – do we really need this tax or we need some other measures?

 

Elena Koritchenko – Head of Environmental and Social Compliance at Bank Otkritie in Moscow.

I think that the introduction of such schemes will make us to start measuring at least things like CO2 emissions and greenhouse gases emissions, because from my experience of working with companies – they don’t even know that this problem exists, that this can be measured, because, traditionally, in Russia, when you pay environmental charges, you don’t measure CO2 . This would be at least a sign that this should be measured and then it could be an impulse to start thinking how to reduce it.

How to make companies participate in this scheme? I think that we have all seen that command and control methods are not really efficient, especially here in Russia. As a person coming from the financial market, I think that the only possible and efficient way is to link carbon units to money and show the businesses that it really makes sense to introduce new technologies so that they will compete to get additional money. This can be cap and tax together.

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