Monday, February 1, 2010

Climate Conflicts

The outcome of the UN Framework Convention on Climate Change 'COP 15' climate negotiations at Copenhagen in December was pretty thin, with no agreements on emission reduction targets. A very general ‘Copenhagen Accord’ was produced by the US, China, India, Brazil and South Africa, none of whom currently face legally binding emissions reduction targets under the existing Kyoto Protocol. Some developing countries objected to it- including Venezuala. Certainly it has only weak links to the main focus of the UNFCCC negotiations on a post-Kyoto agreement- and UNFCCC members simply ‘noted’ the Accord. Some blamed the US for what is widely seen as a weak outcome - but China was also a target. But apologists for the unilateral ‘Accord’ said that at least it was something to show for all the COP 15 efforts. And that it was something of a triumph for Obama to get China on board. Others however saw the fault line being between those who wanted a continued Kyoto type legal targets approach (including the EU and some developing countries) and those, like the US and China, who wanted the freedom to develop their own national plans within a loose Accord. This conflict won’t go away. It will no doubt resurface at the intermediary meeting in Bonn in June, and at COP 16 in Mexico City in December.

Meanwhile, under the terms of the Accord, UNFCC member countries were asked to submit national plans for emission reductions via mitigation actions by the end of January. Crucially, it seems that a proposed exclusion of nuclear projects from national mitigation plans was removed from the texts. So, the use of nuclear energy could be included in the list of mitigation actions to be sent to the UNFCCC. That too could lead to conflict. But then the January deadline was abandoned, so the whole thing seems to have gone in to (presumably only temporary) free fall.

Conflict have already emerged in relation to France’s attempt to introduce a carbon tax. Announced last year, it was aimed to cover all transport/household fuel use, but not electricity, and has been seen as possible template for other national programmes . It would be phased in gradually, starting at around 17 €/tonne of CO2, adding about 4 cents per litre to the cost of petrol and a 5% rise to the price of household gas. But it would be 'tax neutral'- with the revenue from it being returned via tax concessions. It would apply to all homes and enterprises, but not to the heavy industries and power firms included in the EU-ETS.

The left felt the proposal would be ‘unjust’ and ‘inefficient’- a flat levy on fuel would hit low-income families, especially those in out-of-town areas who have no choice but to use cars, without helping clean alternatives. Segolene Royal said it would be better to ‘tax oil and energy companies based on the profits they make from fossil fuels’ and invest in electric cars.

The draft plan called for a levy of 32 €/tonne of CO2 emitted, rising to 100 €/tonne in 2030. That would add 0.077€ to the cost of one litre of unleaded fuel. Home heating costs would rise by 60-170 € p.a, depending on the type of building and method used. 50% of homes would see bills for transport and heating jump by ~ €300p.a. But to avoid a consumer backlash, the government said the levy would start at €17.

Former Socialist prime minister Michel Rocard, who headed the bipartisan panel that drafted the plans, admitted that ‘there is a real risk of social injustice.’ He added that the key issue facing the government was ‘how do we redistribute the money to people in a way that changes their behaviour, but without harming their overall spending power.’

Although painful, a 17 € tax wouldn't have much impact on consumer behaviour. Pascal Husting, the head of Greenpeace France, said excluding electricity and starting the tax at such a low rate meant ‘it would change absolutely nothing in terms of behaviour’ nor encourage energy saving or renewable energy. Over two thirds of the public were said to oppose the idea.

It was meant to start on 1st January, but has been blocked by a legal dispute.

Carbon taxes have their detractors: carbon emissions are hard to verify and quantify. Energy taxes are usually seen as easier, since energy is a familiar traded commodity which is easier to measure and value: as one quip has it, "if you want to keep a donkey healthy you don't regulate what comes out of it: you regulate what goes in".

But at what point should an energy tax be applied? If it is levied on all energy users, it can get very bureaucratic. It’s simpler to focus on just the energy generation companies and let them pass extra costs on to the rest, in their prices. In fact that would also work for a carbon tax since its easier to identify the fuels used /emissions produced by a few companies than by millions of energy consumers. But this ‘upstream’ approach means challenging the power companies head on, and some argue that individual consumer taxes have more of an educative value- making people more aware of their energy consumption.

One thing seems certain, we are going to pay more for energy in future. The only uncertainty is who we will pay, and how much. So far most of the energy companies have made very large profits from energy price rises. There is strong case for using taxes, including possibly a one-off windfall tax, to claw some of that back, for ‘hypotheticated’ re-investment in more efficient green energy technology. The private sector says that’s what it does with its profits, but in reality they often seem chary of taking risks with new technology. Could governments do better? Would a hypothecated tax, clearly devote to clean energy development, be more popular than tinkering with tax neutral systems to try to maintain consumer buying power?

Sources: Times, Guardian, BBC, AFP

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