Although the global recession is serious and its duration uncertain, the world must nevertheless continue to focus on the far-reaching threat of climate change. Indeed, if we are smart, public policy can serve the twin goals of stimulating growth and fighting global warming.
Governments hammering out a successor agreement to the Kyoto Protocol at the UN climate conference in Copenhagen later this year should adopt strong incentives to cut greenhouse-gas emissions. Doing so could kick-start private investment and help to fuel economic recovery.
The broad outlines of an effective and efficient response to global warming have been clear for years.
A system to cap carbon dioxide emissions and trade emission allowances would channel resources toward the most cost-effective reduction measures. And widespread adoption of efficiency standards for appliances, vehicles and buildings would help companies and individuals use less energy.
Moreover, several specific policy initiatives could help government and society better harness companies’ agility and innovative power in the quest to control greenhouse-gas emissions:
• Agreements among groups of key countries to reduce emissions in specific industrial sectors;
• Incentives for companies to capture carbon dioxide and store it safely underground, accelerating the deployment of this promising technology;
• Technology funds to support the development and commercial demonstration of new technologies, such as advanced biofuels, with high potential for lowering carbon dioxide emissions.
Until now, negotiators have aimed for a global deal palatable to developed and developing countries alike. While that remains the ultimate goal, it has so far proven devilishly complex to formulate.
A possible stepping-stone would be agreements between smaller groups of pivotal countries to cap emissions from individual high-emitting sectors of their economies.
Such agreements could be important building blocks for a broader deal. Sectors to focus on include power generation, which accounts for about 35 percent of global carbon dioxide emissions, and production of cement, chemicals and steel.
Involving a limited number of the most important countries would facilitate a compromise. Such deals would ease concern in competitive global industries that strict emission rules in one region would put companies at a disadvantage relative to rivals in countries with less strict policies.
As a hypothetical example, an agreement on emissions from coal-fired power stations might include large users such as China, the EU, India, Japan and the US, which together account for about 80 percent of global coal-fired capacity. Such a deal could include mechanisms for transferring clean-coal technology from developed countries to developing ones. Cap-and-trade systems could provide a potential source of funds through the auctioning of emission allowances.
The need is urgent. Asia alone will build some 800 gigawatts of new coal-fired generating capacity over the next 10 years, equal to the EU’s total electricity generating capacity today. Once built, the plants will emit more than 3.6 billion tonnes of carbon dioxide each year — about the same as the EU’s total energy-related emissions —– and operate for 30 years or more.
Climate negotiators should also give carbon-dioxide capture and storage (CCS) high priority. While increased use of renewable and nuclear energy will help reduce emissions, by themselves they will not be able to keep up with fast-growing energy demand. Fossil fuels, like it or not, will remain the world’s main source of energy for decades.