Desperately concerned about climate change when I was UK Cabinet Secretary in 2007, I proposed making the European Union’s emissions trading system global.
But a study in April 2020 found that between 2008 and 2016, that system had reduced carbon emissions by a minuscule 3.8% of total EU-wide emissions compared to without it.
By the end of 2021, more than a fifth of global emissions were covered by some form of carbon pricing, with more than 60 carbon taxes and emissions trading schemes. Yet, according to The Economist, only a small minority of these schemes were effective. Carbon prices were set too low and many domestic sectors were excluded.
Carbon market skeptics argue that emissions reductions have been minimal while polluting companies have polished their green credentials.
Many schemes are also limited in scope to protect domestic industries. The EU is now introducing one Carbon Limit Adjustment Mechanism (CBAM) with a transition period from October 2023 to the end of December 2025, to prevent heavy industry from moving to other jurisdictions with weaker climate rules (a classic problem with such regulations). This would remove the need to exempt certain domestic sectors and strengthen incentives for non-EU countries hoping to move from carbon to renewable energy.
Low- and middle-income countries with the fewest resources are likely to bear the greatest disruptive burdens of climate change. It is therefore essential that they can invest in renewable energy instead of fossil fuels. They also hold great potential for moving centralized electricity generation from fossil fuels to on-site, renewable energy, including solar and wind power, off-grid if necessary.
For example, Africa has the greatest solar energy potential in the world, and in 2000 I proposed and received my support at the Europe-Africa Summit in Gaborone that a significant share of EU aid should be spent on investments in all types of renewable energy sources, especially solar energy. .
Slow progress
But since then, progress has been awfully slow. As the International Energy Agency (IEA) argues, this transition to low-carbon energy will only happen if new sources of capital, including green investments and carbon credits, can receive much greater international financial support.
Together with the World Bank and the United Nations, the IEA has recently called on developed economies to fund much more renewable energy investment in emerging economies. And carbon trading schemes should be designed to help achieve that goal.
At the November 2022 Cop27 conference, US climate envoy John Kerry proposed a voluntary scheme for large companies to finance the decarbonization of energy systems in developing countries.
While his scheme would circumvent domestic US political opposition to any “carbon tax” proposal, would private companies have any incentive to join such a scheme?
By November 2022, more than a third of the world’s largest publicly traded companies had announced net zero targets. Kerry’s proposal is to find suitable projects for carbon offset funds.
The crux of it all is whether or not the world’s governments and their citizens really want to tackle the climate crisis, by funding a transition to renewable energy. As John Kerry stressed, “We must win the battle against the climate crisis, not give in to business as usual… If we don’t come up with creative ways to mobilize money, we will lose 1.5°C (of global warming).”
Kerry deserves credit for his efforts. However, its voluntary carbon credit program cannot guarantee far-reaching, real-world emissions reductions unless it is accompanied by concessional financing below market rates for poorer countries to invest in clean energy. “It amounts to rearranging the deckchairs as the climate ship goes down,” argued the Union of Concerned Scientists.
More action, less blah-blah-blah
Politicians – and frankly most citizens – are paying lip service to the climate crisis. We are shocked by unprecedented extreme weather events around the world: devastating floods and seemingly endless droughts; temperatures drop well below freezing and rise in heatwave firestorms.
But we still want to drive, order online for deliveries, fly and consume more and more energy. Wind farms yes, but not in our backyards. Marine turbines, of course – but not if we stop swimming where we want on favorite beaches or stop fishing in our favorite estuaries. Kudos to investing in the green economy, but not if it means paying higher taxes. A long-term agenda – but not if it gets in the way of a short-term solution to win the next election.
Nearly 20 years ago, I remember Nicholas Stern attending one of our Labor cabinet meetings to present his chilling report on climate change. His message: there will be large costs in the short term to limit the damage caused by climate change – but even greater costs in the longer term if governments and citizens do nothing or do too little.
How right he was. Too little action, too much blah-blah-blah, as Greta Thunberg put it succinctly.
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