Carbon schemes full of hot air
Thursday, 7 August 2008 12:00pm
Anti-global warming schemes based on prescriptive emission targets and cross-country carbon trading are flawed and do not address long term climate change problems, said Reserve Bank director Warwick McKibbin.
Speaking at the IFSA conference yesterday, climate change expert McKibbin said one thing that's missing in the sustainability debate is that no one has measured - definitively and scientifically - the critical threshold of greenhouse gas (GHG) emissions at a global level.
What you can't measure, you can't manage accurately, he said, rendering emission targets useless.
More importantly, for climate change management schemes to be effective in the long term, they have to factor in the economic costs of implementing those schemes in the short term.
“What's critical in this whole debate is we get the balance right between the long term environment debate and the short term economic cost and that I think is what's missing," he said.
In other words, if the schemes are not economically sustainable, they won't solve long-term environmental issues.
As an alternative, McKibbin suggests a carbon policy similar to the government's monetary policy where a combination of regulated carbon trading and bond-like carbon instruments will help determine the long term price of carbon, effectively putting a lid on pricing arbitrage.
"Setting the long term price of carbon is important otherwise it becomes yet another trading instrument as opposed to a genuine framework to reduce greenhouse gas emissions," he said.
“What is the impact to the environment if the carbon price is say $20 a tonne? The [environmental] impact is low. It is irrelevant except for the damage it does to the economy."
McKibbin also argued that not all countries have to participate in the global carbon management scheme but should have the support of the fastest growing consumers of energy such as China and India, both of which have not signed up to the Kyoto Protocol.
For countries such as China and India to fully back a global emissions scheme, the debate should focus on the practical side of managing climate change as opposed to what science dictates global temperatures should be, he said.
“It's not about creating short term targets and timetables...it's about designing policies that enable the whole society to manage the risks associated with climate change."
Michelle Baltazar
This story was found at: http://www.financialstandard.com.au/news/view/23711
Printed: Tuesday, 6 January 2009 1:24pm