Rhein on Energy and Climate

Environment ministers from the G 8 and 10 major emerging countries met in the Kobe, Japan, on May 24-26 in view of preparing the Hokkaido G 8 Summit in July that will focus on climate policy.The outcome has been disappointing. Ministers have not even been able to agree on reducing greenhouse gases by at least 50 percent at the horizon of 2050, let alone on reduction targets for 2020.

Japan, the present G8 Chair, is playing for time, waiting for the new US Administration to act more resolutely against climate change.

The emerging countries are waiting for the G8 to take credible commitments to reduce emissions. For them, climate concerns remain a secondary priority. Considering their substantially lower per capita emissions, this is understandable. The EU also allows its poorer member countries to go more slowly.

In addition, they insist on obtaining technology and finance from the “West” before seriously addressing their rising C02 emissions.

Humanity is therefore at an impasse, everyone waiting for the other to make the first steps, fearing that effective climate action might hurt their economy, competitiveness and today’s well-being of citizens. Politicians do not seem to be really concerned. They act like poker players trying to out-manoeuvre the other players around the table and unwilling to grasp that humanity’s future will very much depend on the kind of decisions they will take in the coming 18 months.

So what should happen to prevent a global catastrophe in the course of the 21st century?

  1. The EU should be the first to take decisive action. It is the best prepared. The French Presidency is committed to getting approval of the draft climate package by Council and Parliament before the end of 2008.
    This will guarantee a 20 percent reduction of European C02 emissions by 2020, but it will have little impact on the volume of global C02 emissions.
    Even more importantly, the EU offers an additional 10 percent reduction if other countries follow suit. By doing so, the EU sets incentives for the USA, Japan, Russia, Canada and others to follow.
  2. The EU should make climate policy the overriding concern in the coming 18 months and step up its climate diplomacy accordingly.
    Its first priority should be to persuade the incoming US President to accept a 30 percent reduction target for 2020. That should be easy considering the vast US potential for non-fossil energies (wind, solar, nuclear), and higher energy efficiency (e.g. thermal insulation or car engine efficiency) on the one hand, and the support from major US states, civil society and even industry for a dramatic overhaul of US energy policy.
    Politically, the US holds the key to the future international climate framework. Without it taking dramatic action there is no hope for an effective international agreement in December 2009.
  3. The EU and the USA should jointly convince their G8 colleagues to follow their example. Latest at the July 2009 G8 Summit meeting, all G8 member countries should agree on a 30 percent C02 reduction for 2020.
  4. G8 countries should go beyond the mere fixing of mandatory targets. They should also agree on the basic measures each country should take, e.g. subsidies to renewable energies, obliging utilities to introduce carbon sequestration, C02 “cap and trade”. Without a basic consensus on certain measures, complemented by strict monitoring, the risk of non-compliance remains high, as the poor Canadian record under the Kyoto Protocol demonstrates.
  5. By such action G 8 would go a long way getting China, India, Brazil and other major emerging countries on board.
    Their complaints about technology transfer are easy to dismiss:
  • The presently available technologies, e.g. for wind, solar energy, or hydropower, are available to any company on earth. Governments only have to set the necessary regulatory framework; and business will speedily find ways and means of procuring the most suitable technologies in the world market. The Chinese and Indian progress in wind energy clearly shows this.
  • Other technologies are still in the process of development, e.g. carbon sequestration, partly with participation of emerging countries.

The complaint about a lack of finance is hardly more convincing.
Once governments fully engage in alternative energy technologies, private investment will become profitable and find the necessary finance, domestically and abroad. The global boom in wind energy proves this amply. Nobody has signalled any financing constraints in the past and nobody expects any in the coming years, despite a very rapid increase of global wind capacity to 700 GW.

International and regional development banks should, of course, vastly enhance their climate-effective portfolios. To that end, governments, as the shareholders, should give appropriate instructions to management.

Last not least, with further rising prices for fossil energy, alternative energies will become increasingly competitive in the coming 30 years and no longer constitute a burden for either governments or consumers by way of subsidies.

In conclusion, it is time for heads of government of the major countries – highly developed or emerging – that are responsible for climate change to rise to the challenge and take the necessary decisions, without further delay. Time will be of the essence because of the lag of 10-20 years between decisions and their full implementation.

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Comments

  1. Antal is too rash in his judgement.
    First, EU climate policy, however inadequate, has still been the most successful world-wide. EU per capita emissions are only half of those of the USA, Canada, Australia or GCC countries.
    Second, if the USA were to put a 30 percent mandatory C02 reduction target for 2020, as the EU suggests, global emissions would decline by some 12 percent! What more can we hope for!
    Eberhard Rhein

  2. Mr. Rhein, I agree with you on the importance of mandatory reduction targets. What I do not see is what will make the citizens, schools, companies, churches of the member states to actually reduce CO2 as set in the mandatory targets. In this respect the EU’s quota allocation-trading-scheme do not look very effective. This is why I believe that states must find enforceable solutions to actually meet those targets. My guess is that the tax system is the most universal, enforceable system that may apply to all actual emitters. Quotas are to indirect and such a virtual market is too easily corrupted. But I totally agree with mandatory targets.

  3. Compliance is the key issue for any policy maker.
    Compliance is best assured by applying several instruments. This goes in particular in such a complex field as climate policy.

    The demand for energy is extremely inflexible to price rises and increase of excise taxes which is nothing but a state-imposed price rise. It may take a price rise of 100% to obtain a reduction of demand by 10%.

    Politicians are afraid of imposing additional taxes. That is why policy makers resort to “deceptive strategies”.
    Imposing progressively lower emission quotas on power generating companies is one of these.
    Fixing a mandatory fuel efficiency standard of 130 g C02/km for automobile manufacturers is another.
    So is the setting of thermal insulation standards for new and existing buildings.
    Feed-in tariffs for wind or solar electricity applied by most European countries are nothing but a concealed tax on electricity, because utilities will, of course, charge consumers with the higher feed-in tariffs.

    Ergo: policy makers have to constantly monitor the effectiveness of their measures. They must not expect immediate reactions.

    In the final analysis, the price of fossil energy has to rise very substantially to induce 6.7 billion human beings on the planet to phase the use of fossil energy.

    Eberhard Rhein

  4. Well, here is some evidence that carbon emissions are more price elastic than you would think. I think the trick is that for most end-users the price of fossil fuels is unseen, because it is built in the price of a bread or a vacation package. But if you address the end-user directly at the gas stations or with household energy prices they do feel it. And households are one of the most important (and fastest growing) emitters in the Western World. Look, what happened in America.

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