The meeting of heads of state and government on climate (COP26) in Glasgow, Scotland, will end in another failure. It will be added to the recent failures of Paris (2015), Katowice (2017) and Madrid (2019). The commitments to reduce greenhouse gas (GHG) emissions by 2030 and 2050 will be ambitious and bombastic, but will not be met. The reason: we are aiming for the right policy through the wrong means.
Instead of discussing a substantial and generalized price on carbon emissions, with the imposition of compensatory tariffs for goods and services from recalcitrant countries, we prefer the interventionist approach of moralizing prohibitions always in the direction of the wind. , therefore supported by the demonstrators presumably ecologists and environmentalists.
It’s ineffective and it doesn’t solve anything, but it allows some leaders to be applauded and to cut ribbons and for others, to avoid the curse of Juncker: “We know what to do, but we does not know how to be reelected if we do it “ 1. As such, pro-environment protesters should focus their aggression on themselves or their fellow citizens rather than on their leaders.
It may be useful to remember that economic analysis is an important factor in protecting the environment. Thus, it is wrong and misleading to oppose environment and economy. Economists are ardent and credible advocates of the environment in many ways. In fact, the economist is first and foremost a specialist in the efficiency of systems and instruments, whether these systems and instruments relate to production, consumption, public policies, investments or even protection of the environment. ‘environment.
In the context of environmental protection, economic analysis states that the problems associated with environmental protection arise from the non-existence of relevant markets, giving rise to overexploitation by everyone of environmental resources: the tragedy of the commons. The phenomenon is not new and it is not limited to environmental problems, and economic theory may well explain environmental deterioration in the context of an absence of adequate price mechanisms.
For more than 30 years, there has been a broad consensus among economists as to the best tool to use in the fight against greenhouse gases: a significant price for carbon. In other words: a carbon tax.
By correcting a market failure well known to economists, a carbon tax will send a powerful price signal capable of guiding economic players, consumers, producers and investors, towards a low-carbon future: technological innovation, energy transition, infrastructure development. , production and distribution of low-carbon goods and services.
The carbon tax should increase each year to promote a sustainable rate of adjustment by all players, until the emission reduction targets are reached. The best available studies suggest annual increases of 5% above inflation from $ 200 per tonne of CO2 in 2022 to $ 375 per tonne in 2030. With a revaluation in 2030 towards carbon neutrality in 2050.
To promote its social acceptability, this carbon tax should be fiscally neutral: all tax revenue from this tax should be redistributed equally to citizens, a powerful factor in redistributing income.
No need to define a grand plan, composed of multiple regulations and moralizing prohibitions. Rather, we are using the strength of competitive procreation and pro-environment markets to change everyone’s behavior.
To avoid carbon leaks, protect the competitiveness of countries and promote membership of all countries, a border carbon adjustment system should be put in place.
Although it is too late for the COP26 in Glasgow, one can hope that the COP27 will devote itself to the determination of a global and generalized price of carbon, which can only be fixed by a planetary consensus, under the direction of the big countries and groups: the United States, China, the European Union and others. Even if the discussions will be arduous and demanding, we must realize that a comprehensive agreement, including on carbon border adjustments, will be easier to define and implement than a multitude of unilateral national plans. We can hope that the big guys will listen to economists.
1 Jean-Claude Juncker, former Prime Minister of Luxembourg and President of the European Commission, quoted by The Economist (2007)
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