One of the problems with the Kyoto approach to carbon emissions is that they are to be addressed on a country by country basis, and most of the world isn’t actively participating in the scheme. This is such an obviously clunky approach that even the global warming cheer squad has now picked up on it with WWF launching a report pointing out that the EU consumes more carbon than it emits (PDF 1.4mb). This happens because the EU is increasingly produces services, which are low in carbon emissions, that they trade for carbon intensive goods from countries like China, India and Russia. In a sense they outsource their emissions.
The WWF report accepts that there are considerable inaccuracies in estimating carbon emissions in manufacture, so if one accepts that a dollar of manufacture in the developing world may produce more than the same dollar in the developed world, lowering emissions in the EU probably has the perverse effect of increasing global emissions.
We frequently hear that Australia is one of the largest per capita emitters in the world. Taking account of what we export, it turns out that we’re still significant, but we produce more CO2 than we consume, meaning that the Europeans are the end beneficiaries of some of the emissions that they blame us for emitting.
I am becoming increasingly convinced that what we need isn’t a cumbersome, complicated emission-rights trading system, but a simple tax on the sources of CO2 – carboniferous fuels and land usage. If we agreed on a world-wide figure commensurate with the price required to make alternative fuels competitive, then the emissions shifting problems would disappear. We might have to make some adjustments for the few abatement schemes such as carbon sequestration which involve carbon capture, but compared to trading schemes this should be a doddle.
If governments used this tax as a substitute for other indirect taxes it would also have the virture of shifting behaviour but not penalising consumers in the same way that they will when energy prices rise under the proposed rights trading schemes.
The only thing that this approach doesn’t neatly tie-up is the contribution that population makes to net CO2 emissions. As I’ve blogged before, when you take the ecological footprint into account, both Australia and Canada have sustainable levels of CO2 emissions because their land masses absorb more than they produce. In other words, not only are the Europeans exporting their emissions, but they are also exporting their biological mitigation. This biological surplus issue doesn’t appear to be susceptible to a simple tax treatment, but perhaps it could be taken-up through a formula which required over-populous countries, like the USA and UK, to levy CO2 taxes at a higher level.
The Garnaut Review is supposed to be the latest word in greenhouse financial engineering. I suggest they get a copy of the WWF report – the international consensus might be about to change.