COP27, the climate change conference that brings together representatives of heads of state and government in Sharm el-Sheikh, Egypt, will end in failure, the umpteenth in a series of failures, including Paris (2015 ), Katowice (2017), Madrid (2019) and Glasgow (2021). Ambitious and grandiose commitments will be made to reduce greenhouse gas (GHG) emissions by 2030 and 2050, but will not be kept. Why ? Because good policies are pursued using the wrong tools.
Greta Thunberg now appears to be taking this stance: “Speaking at the London Literature Festival where she was promoting her new book, the 19-year-old activist dismissed the upcoming climate summit as an opportunity for the powerful… to greenwash , lying and cheating,” Reuters tells us.
Rather than discussing a meaningful, universal price on carbon emissions, to be levied in conjunction with World Trade Organization-regulated compensatory tariffs on imports from non-compliant countries, leaders and activists prefer an approach dirigiste, flattering anyone marching under an environmental banner, pontificating good-natured bans, subsidizing anyone with political clout and sometimes advocating a toothless carbon tax.
It’s inefficient and doesn’t solve anything, but it allows some leaders and activists to garner applause, cut ribbons, complain, and elected officials to avoid Juncker’s curse: “We all know what to do , but we just don’t know how to get re-elected if need be. »
It may be useful to recall that economic analysis is an important component of environmental protection. It is wrong and misleading to oppose environment and economy. In many cases, economists are credible environmental advocates. Indeed, they are above all experts in the efficiency of systems and instruments, whether in terms of production, consumption, public policies, investment or environmental protection.
For economists, the problems of environmental protection are attributable to the absence of relevant market prices, an absence leading to a tragedy of the commons by inciting each user of environmental resources to abuse them. For more than 30 years, there has been a broad consensus among economists that the best tool for reducing greenhouse gas emissions is a carbon right, or carbon levy, which is not a tax, but a price.
By correcting a well-known market failure, a carbon right sends a powerful price signal that can guide economic agents (consumers, producers, investors) towards a low-carbon future: technological innovation and development of pro-environment infrastructure, energy transition and production, distribution and consumption of low-carbon goods and services.
The carbon charge should increase each year to encourage a gradual and sustainable adjustment until emission reduction targets are achieved. The best studies available suggest annual real increases of 5%, from, for example, $200 per ton of CO2 in 2022 to $300 in 2030 (in 2022 dollars).
In order to prevent carbon leakage, protect the competitiveness of nations and promote broad citizen support, the carbon border adjustment system should be accompanied by a redistribution to citizens of the government revenues generated, possibly in equal shares, thus contributing significantly to protect low-income groups while maintaining incentives to adapt.
It would no longer be necessary to define grand government plans filled with moralizing regulations and prohibitions and hobbies of all kinds, nor to impose on companies a set of ill-defined and manipulable ESG measures, a sham that can consume significant management resources without generating measurable benefits.
An example of actions motivated by good intentions, but analytically ill-founded, is the cancellation of the Keystone XL pipeline by US President Joe Biden in January 2020. Unlike the implementation of a real carbon law, the stop of the Keystone XL pipeline will have no effect on fossil fuel consumption. The criticism voiced by then Alberta premier Jason Kenney, pro-pipeline and anti-carbon law, is equally misguided. The right combination of policies: implement a meaningful carbon right and let pipelines develop where necessary.
While it may already be too late for COP27 in Sharm el-Sheikh, hopefully climate leaders and activists will one day pay more attention to the economists’ message and focus on determining a carbon right. universal and widespread, under the aegis of the major players in climate change such as the United States, the European Union and the BRIC (Brazil, Russia, India, China). Negotiations will be tough and demanding, and social license will require education and information, but it will be easier than implementing a plethora of national “grand plans”.