To cap global carbon, use a global licence scheme

Going, going, gone?
Going, going, gone?

Today’s post is by John Jopling of the Irish think tank FEASTA on behalf of CapGlobalCarbon

Irreversible climate change currently threatens everything the OECD does and stands for. This post suggests how the OECD could play a crucial part in helping to establish an effective global response to climate change.

The science is clear: the main cause of climate change is increased emissions of CO2 from human use of fossil fuels. The global total of emissions is all that matters in the context of avoiding calamitous change in the Earth’s climate system. To avoid runaway climate change, the aggregate global total of emissions from the use of fossil fuels must be reduced by something like 6% each year if we start reducing now, or by a greater percentage the longer we delay.

The reason we now have a global crisis is that the current system of inter-governmental negotiations under the 1992 United Nations Framework Convention on Climate Change (UNFCCC) cannot be relied on to achieve these reductions in the overall total of global emissions.

The science on climate change is worrying enough. The knowledge that there is currently no effective system for addressing it is worse.

The reason is that the current system lacks a vital component: a regulator of total aggregate global emissions. To prevent climate change becoming irreversible, it is essential that an effective regulator of the aggregate global total of emissions from the use of fossil fuels is put in place, not to replace the system of inter-national negotiations but as a back up in case it fails. In case, to be specific, the outcome of the negotiations is not enough to satisfy climate science. We are faced with an emergency. We need to design and implement a system that enables us to address it.

There is no time to be lost. The regulator must be science-based and market-friendly. The easiest way to control emissions is to control production. The easiest way to control production is by a global licence scheme administered by a global institution established for the purpose. The number of licences should be determined in compliance with climate science, the number being reduced each year. The global institution would auction the licences and these would then be tradable. Fossil fuel extraction companies would pay the market price for the licences they buy; and pass on the cost to their customers. The global institution would arrange for the net proceeds from the auction to be distributed to or for the benefit of people throughout the world in equal shares, so low carbon fuel uses would benefit. The scheme would thus contribute to social justice and should attract wide support.

Such a scheme would need the cooperation of nation-state governments. The government of each country would have to ban the introduction into that country of fossil fuels not covered by a global licence.

That is the simplest possible way to make sure that aggregate global emissions from fossil fuels are reduced as required by climate science. It involves the least possible interference with market forces and the least negotiation between nation states. The concept is simple and clear. It can, and should, be sold to all concerned in a non-confrontational way, not blaming anyone for anything. We owe it to ourselves and our children to implement it.

As the current system of inter-governmental negotiations shows no sign of introducing any such scheme or any other effective system to regulate the aggregate global total of carbon emissions, and cannot be relied on to do so, the initiative to do this has to come from the global non-governmental sector. The necessary global institution to run the scheme, call it the Global Climate Trust, would need to be independent of both governments and the fossil fuel industry. It could be established by ordinary citizens and thereafter accepted by governments. This is in practise the only way such a body could ever be established; and it is also probably the only way to make sure that this body is indeed independent.

The Trust could be established by a group of institutions and individuals. If established, for example, in England or Ireland, it could be constituted as a trust for public purposes. It would be a legal entity competent to develop relations with nation-state governments and the fossil fuel industry.

Under its constitution, the Trust would be charged with acting on behalf of humanity as a whole, including future generations. It would be subject to the appropriate regulatory and court system of the country in which it is based. The law requires trustees to act with undivided loyalty to the purposes of the trust and they must act transparently. Obligations written into the constitution of the Trust to ensure transparency and accountability would be enforceable in courts of law.

The idea that an international institution could arise from a citizen’s initiative is not new. There is the inspiring example of Henri Dunant whose actions, after he had seen 40,000 soldiers left dead or dying on the battlefield at Solferino in 1859, led to the formation of the International Committee of the Red Cross.

A number of individuals and non-governmental organisations, with a very wide range of interests and activities, need to discuss the details of the Trust and take responsibility for establishing it. The OECD could perhaps host some of the necessary discussions.

The role of the OECD could be crucial not only in hosting discussions and helping to promote this idea but also in bringing governments on board to support it.

Useful links

Cap and share doesn’t appeal to everybody:

OECD work on carbon markets

Transition to a Low-carbon Economy: Public Goals and Corporate Practices

Climate: The Doha Round

Bob Dylan’s new album gets released. Another Star Trek film gets released. Lindsay Lohan gets released. All major events at one time, in certain media anyway, but now nobody really cares that much. I get the impression it’s the same with the COP climate conference. Who can remember what it did after the Kyoto Protocol? Where and when was the last one? Where and when is the next one? The answers to the last two questions are Durban last year and Doha today.  Any media coverage tends to be about the fact that it’s in Qatar which, as even the state-sponsored Al Jazeera admits, has the worst CO2 emissions rate per person in the world: 53.4 tonnes a year, three times more than the US.

So what is COP 18 hoping to achieve? At COP 16 in Cancun two years ago, governments agreed that emissions needed to be reduced so that global temperature increases could be limited to below 2 degrees Celsius. Fans of treaty talk will have noticed that they agreed that emissions “needed to be reduced”, not “agreed to reduce emissions”.  As we wrote here a couple of weeks ago when the International Energy Agency’s new World Energy Outlook was published, there’s no chance of hitting the 2 degrees target the way things are going.  Global energy demand is expected to grow by more than one-third by 2035 in the IEA’s central scenario, with emissions corresponding to a long-term average global temperature increase of 3.6 degrees C. Even the “Efficient World” scenario talks about a rise of “under 3 degrees” rather than 2.

The OECD Environmental Outlook to 2050 is even more pessimistic, projecting that without a significant change in policies, global greenhouse gas emissions will increase by 50%, primarily due to a 70% growth in energy-related CO2 emissions. Global average temperature would then be 3 to 6 degrees C above pre-industrial levels by the end of the century according to the Environmental Outlook.

Nobody expects the world to wake up and take action as a result of the Doha meeting, but the OECD will be presenting ideas and analyses on issues that have to be addressed. An event on November 30 will showcase new work by the OECD/IEA Climate Change Expert Group on the design and governance of carbon market mechanisms. The Environmental Outlook suggests that curbing GHG emissions by putting a price on carbon through carbon taxes or emission trading schemes can help raise significant revenues. For example, if industrialised countries implement the emission reduction actions they pledged at COP 2009 in Copenhagen through a carbon tax or a cap-and-trade scheme with fully auctioned permits, they could generate more than $250 billion extra revenue.

On December 4 the spotlight will be on other forms of “climate finance”. Transitioning to a low carbon and climate-resilient economy, and more broadly, “greening growth”, takes money, but public finance and traditional sources of private capital such as banks are unlikely to have the means, or the will, to finance the investment needed because of the impacts of the crisis on budgets and financial sector performance. The OECD has launched a project on long-term investment focusing on the role of institutional investors as a source of direct financing for green infrastructure projects. This builds on numerous networks of experts in financial markets, insurance, pensions and environment and ongoing work on institutional investors and long-term investment.

The COP event will emphasise the need to scale-up and shift infrastructure finance, to avoid lock-in of carbon-intensive and climate vulnerable development pathways in developed and developing countries alike. A major part of the infrastructure required to meet development goals is still to be built in areas where climate change mitigation and adaption action is needed, such as transportation, energy, water, or urban development.

Maybe COP 18 will surprise us all. After all, Lindsay Lohan has just made a film.

Useful links

OECD work on climate change

OECD work on green growth and sustainable development

UN Framework Convention on Climate Change

Point of view: OECD Analyst reports from Copenhagen


What images come to mind when we hear “Copenhagen”?  Ministers sitting around a table and protesters waving banners?  COP15 is also analysts, scientists, businesses and civil society representatives working together on climate-related initiatives…OECD Analyst Christa Clapp tells us what she is doing at COP15:

“While in Copenhagen, I will be speaking at an event sponsored by Eneco, a Dutch energy company. Eneco is supporting the Luz Verde programme to distribute 30 million compact fluorescent light bulbs in Mexico. This is one of the first “programmatic” Clean Development Mechanism (CDM) projects to be approved. It groups similar disbursed projects together to lower transaction costs to access the carbon market and earn carbon credits. Such projects are a first step towards scaling-up carbon market mechanisms. The OECD is working together with the International Energy Agency to support the Annex I Expert Group, which is a group of climate negotiators, on carbon market issues. Our recent papers focus on the strengths and weaknesses of project-based carbon market mechanisms and scaled-up sector-based approaches.

More than 30 countries are already trading in carbon markets, either at a national or sub-national level. Additional countries are discussing how to design new market instruments and potentially link emission trading systems. Decisions taken in Copenhagen may impact the reach of these carbon markets and how they function. At OECD we are actively exploring how carbon markets might evolve post-Copenhagen, building on our recent Economics of Climate Change Mitigation work, which analyzes how carbon market instruments can be used to build up a global carbon market.

To further explore how carbon markets are expanding and evolving, we are bringing together experts and policy-makers for an OECD Workshop on Carbon Markets in April 2010. This workshop will offer an early post-Copenhagen opportunity to investigate these key questions:

  • How can we build up a global carbon market, for example by increasing the number of countries participating, and through direct linking of emissions trading schemes?
  • How will decisions taken in Copenhagen impact incentives for developing country engagement in carbon markets, including the design of “offset” mechanisms?
  • Under what conditions can cities and sub-national actors access carbon market financing for local low-emission projects?
  • How might voluntary markets evolve as compliance markets grow?