With coal consumption accountable for the majority of the global C02 emissions, the Financial Times journalist Gillian Tett asks: “How can we wean the world away from coal?”. Our first We Respond article echoes her piece and delivers an insight into a solution to tackle climate change: Carbon Pricing.
Responding to Gillian Tett
Chair of the Editorial Board and Editor-at-Large at the Financial Times
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As the COP26 unfolds, the discussion about potential concrete actions to tackle climate change have finally become widespread. Policy plans are presented, and commitments are made. But from the perspective of Chair of the Editorial Board and Editor-at-Large at the Financial Times, Gillian Tett, focus should be on the price of carbon.
While the United Nations urge the world to take substantial measures to curb global greenhouse gases emissions, the reality brings a rude awakening to its aspirations. In 2020 alone, 13.98 billion tonnes of CO2 emissions were coal-induced – compared to 11.07 and 7.40 billion tonnes produced through oil and gas respectively - according to Global Carbon Project - an organisation that seeks to quantify global greenhouse gas emissions and their causes. This makes coal by far the first energy source responsible for emissions of Greenhouse gases. So, what should be done?
In her article ‘A carbon price should be top of the wish list at the climate talks’ published in the Financial Times, Gillian Tett stresses the relevance of introducing a fixed carbon price as an effective solution to cut coal emissions on a large scale. The idea put forward by the Sustainable Markets Initiative, is to regulate carbon prices worldwide. Depending on the level of the increase, the change in relative prices would generate incentives to reduce coal consumption. A first level of increment would render coal more expensive than gas. A second would encourage coal-intensive industries to decarbonise their operations. And a third would make ambitious innovations - such as bioenergy and carbon capture and sequestration technologies - economically viable.
Although this sounds attractive on paper, the author still cautions that the implementation of carbon price measures would undoubtedly be challenging: The controversial European Union Emissions Trading Scheme is one example, and the ‘Yellow Vests’ movement is another. The economic complexity and costs of such a scheme makes the endeavour unlikely to happen in the near future. The degree of exposure of economies to this policy, particularly of emerging economies, needs to be carefully evaluated. For example, coal accounts for 77% of South Africa's energy mix. In addition, as Gillian Tett points out, carbon taxes are regressive and public policies should be designed to offset the impact on the most vulnerable layers of society or risk the emergence of worldwide protest movements. Moreover, regulation authorities would face phenomenal costs in enforcing this measure in the global coal market.
Furthermore, never before has the world seen such a level of economic cooperation. The recent trade disputes between the two largest economies and the disappointing outcome of the Paris agreement have proven that cooperation is not granted. The COP26 is no exception. The agreement to reduce methane emissions by 30% before 2030 has not yet been signed by India, Russia and China and the very fact that Xi Jinping is not present raises eyebrows. Game theorists and international relations specialists have their work cut out for them.
But does this mean that introducing a carbon price is not feasible? Certainly not. History is full of stories where the immensity of the task is not enough to make success unattainable. Nelson Mandela and Mahatma Ghandi knew this well. Climate change is the challenge of the century, and all solutions should be considered. A fixed carbon price represents a ‘key weapon to save the planet’, as written by Gilian Tett, and it would be foolish not to use it.
Written by Leon Beaufils.
Resources
The Financial Times: A carbon price should be top of the wish list at the climate talks
Department of Resources and Energy, Republic of South Africa: Coal Resources
New Scientist: COP26 Methane Pledge: 105 countries agree to 30 per cent cut in emissions by 2030
Sustainable Markets Initiative: Building a sustainable future