E3G

Will carbon markets save the planet?

By Tom Burke

If we make the wrong policy decisions in the next few years, it will be impossible to keep the eventual rise in global temperatures below a devastatingly dangerous three degrees, let alone the two degrees that most scientists think is already risky.

The task we face is immense. But its dimensions are clear. The technologies we need are already available or within reach. We know we can afford to deploy them. What we do not know is whether we can agree to do so. It’s the politics that’s the problem.

Securing a stable climate means making the global energy system carbon neutral by the middle of the century. The earth’s natural buffers absorb some of our carbon emissions. But that buffering capacity is all taken up by agriculture, deforestation and land-use changes.

That is why stabilising carbon concentrations, and thus temperatures, means all our electricity generation and transport must be emissions free in just over forty years. We can do this by improving energy efficiency, using zero carbon coal, wind and solar and other renewables for electricity and hybrids and eventually hydrogen for transport.

By 2050, if we want a stable climate, we have to be living in a world where gas is no longer used for domestic and commercial heating and cooling, there are no internal combustion engines in our transport fleets and all our electricity is generated by coal with carbon capture and the renewables.

Getting there from here means making very rapid step changes in technology. At best, a carbon price will make a difference at the margins. Price signals are helpful if you are making incremental decisions. However, incremental decisions will not stabilise the climate in the time we have available.

Furthermore, there are many price signals in a market place and not all of them are going in the same direction. The fuel duty escalator illustrates this difficulty perfectly.

You will remember, it raised the tax on petrol five percent in real terms each year. But while the tax was going up, the real cost of driving fell and real disposable incomes rose over forty percent. Not surprisingly, it did not change driving behaviour very much.

It did however raise a very large amount of revenue for the government.