Subject: | Eliminating international competitiveness concerns in climate policy |
---|---|
Date: | Mon, 26 Jan 2009 10:11:56 +0100 |
From: | Glen Peters <[log in to unmask]> |
Reply-To: | Glen Peters <[log in to unmask]> |
To: | Climate Change Info Mailing List <[log in to unmask]> |
Eliminating international competitiveness concerns in
climate policy*
Countries
introducing emissions trading or carbon tax policies typically ‘carve
out’ large areas of economic activity, and provide
‘compensation’ particularly to trade-exposed and energy-intensive
industries. This is based on concerns about international
competitiveness
being eroded, and the resulting assumption that there’s a
‘trade-off’ between cutting greenhouse gases and cutting jobs.
Job losses imply
activity shifting to other countries not applying carbon policies.
Jobs
and emissions shift overseas, leading to clear economic costs and job
losses
for those countries applying such policies, but little or no global
reduction
in emissions. This is no ‘trade-off’. It’s just a
really bad deal.
This so-called
‘trade-off’ arises because such policies target national production
of emissions. This production model only works when all countries act
together. They haven’t, and they won’t. In fact the Kyoto
Protocol itself said that they won’t. History attests to this reality.
Even if the
supporters of the UNFCCC and Kyoto did not see it then, we can see it
clearly
now. The production model has failed, both within Europe and Australia
(because of major policy ‘carve-outs’ and exemptions), and more
generally (because countries like the USA, China, India, etc, have not
adopted
similar climate policies).
This is basic
economics. When nations act at different times or to different
degrees,
production models undermine trade competitiveness of early movers
compared with
others. Late movers don’t follow suit so they can milk trade gains
out of early movers. This ruins chances for a global deal.
But we can do
better. This ‘trade-off’ is completely avoidable. Countries can
reduce greenhouse gases without any carbon or jobs leakage by
targeting
their consumption of embedded emissions rather than production.
By definition,
global emissions production equals global emissions consumption.
So we have two roads to get to the same goal: reduction in global
emissions.
The production road only works when all countries act together. In
contrast,
the consumption road works even if countries act unilaterally. Why? Because
it is designed to eliminate international competitiveness concerns.
So why pursue a
production-based model given its now-long history of failure? It’s
even
less likely to work as the world economy slides into recession.
Countries
won’t want to suffer more job losses.
The emissions
consumption model is practical. It starts with the production
information
required under current policies. It can use existing value-added tax
(or
similar) systems to pass carbon cost signals transparently down the
supply chain
to consumers; exports are zero-rated; and it imposes a trade
competitiveness-neutral border tax adjustment on competing imports.
This system
is already applied in countries with VAT or similar taxes. Like such
systems,
it is trade competitiveness neutral.
A consumption
model gets us to the same global end-point as a production model. But
basic
economics tells us that it’s much more likely to get us there.
Isn’t it high time for the UNFCCC to move to ‘Plan B’ –
a consumption model? ‘Plan A’ isn’t working.
*
This is a modified and shortened version of an
article published in The Australian Financial Review on 15
January 2009.
For
further reading:
See
attachment
http://www.onlineopinion.com.au/author.asp?id=5613
http://onlineopinion.com.au/documents/articles/GCA_Policy_Note01.pdf
http://onlineopinion.com.au/documents/articles/GCA_Policy_Note02.pdf
http://onlineopinion.com.au/documents/articles/GCA_Policy_Note03.pdf
http://dx.doi.org/10.1021/es072023k
http://dx.doi.org/10.1007/s10584-007-9280-1
For
more information contact:
Geoff
Carmody, [log in to unmask]
Glen Peters, [log in to unmask]
Glen
Peters
Senior
Research Fellow
Center
for International Climate and Environmental Research - Oslo (CICERO)
P.O.
Box 1129 Blindern
N-0318
Oslo
Norway
Phone:
+47 2285 8780
Cell:
+47 9289 1638
Fax:
+47 2285 8751
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