Posts Tagged ‘climate change policy’

From Copenhagen to Mexico, the climate changes.

November 15, 2010 3 comments

Almost a year has passed since the COP15 in Copenhagen. An earlier note by the author highlights the aftermath of the Copenhagen Accord.

The Copenhagen Accord closed with a list of salient points to be observed but are not legally binding on the signatories. The next COP 16 is taking place in Cancun, Mexico from Nov 29 to Dec 10 2010. Over the past year, much has changed in the climate policies taking shape in the various countries.

Firstly, instead of a multilateral binding emissions cap on the countries, there have been more national level programs to reduce emissions. The cap-and-trade program which would have seen emissions targets in place for the various countries appears to be dead. Instead, with rising social awareness a carbon tax regime appears to be gaining popularity among many nations. Among countries which have implemented the carbon tax are India in Jul 2010 and South Africa in Sep 2010. Carbon taxes are not new and have been in place in several European countries like Switzerland, Denmark and Finland in one form or another. They have also been in debate recently in countries like Singapore, Taiwan and more importantly China for implementation starting from 2012.  Being unpopular as they are, they are likely to face political pressure for passing into legislation. Any form of tax will likely see an equitable distribution to other forms of rebates as what have happened in several European countries in the past.

See the author’s note on hybrid of taxes and a state cap-and-trade program.

On a national level, countries have also invested heavily in R&D and pilot plants on renewable technologies. Notably China has poured billions into solar power, wind and nuclear (if it qualifies as renewable energy), and will emerge as the leading nation on such technologies.

The mid term elections victory by the Republicans in the USA has also put a damper on multilateral agreement on emissions targets. The Republicans have been moving backwards on pledges on emissions targets and have even cast doubts on the scientific bases of global warming. With a lack of impetus from the largest emitter, it is unlikely that the COP16 will see any binding agreement among the nations on emission targets. Whilst carbon taxes have been studied by economists to be more efficient and distributional in its effects to reduce emissions, it lacks a volume target which the cap-and-trade program offers. Further it lacks a carrot-and-stick discipline amongst nations which only a volume target can provide.

Looking ahead, the COP16 is more likely to see piecemeal agreements in place. These may include technology transfer to poorer countries, financial aid to countries for reforestation and forestalling deforestation, and a central body for carbon monitoring and measuring. The highly successful clean development mechanism (CDM) over the past few years is likely to decline in importance over the next two years. This is partly as the Kyoto Protocol expires in 2012 for the European countries without a new deal in place. The main recipient of the deals, China has also seen a saturation of deals over the past few years.