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We bail out banks but not environment
By Joseph E. Stiglitz |
January 8, 2010, Friday
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PRETTY speeches can take you only so far. A month after the Copenhagen climate conference, it is clear that the world's leaders were unable to translate rhetoric about global warming into action.
The failure of Copenhagen was not the absence of a legally binding agreement. The real failure was that there was no agreement about how to achieve the lofty goal of saving the planet, no agreement about reductions in carbon emissions, no agreement on how to share the burden, and no agreement on help for developing countries.
Even the commitment of the accord to provide amounts approaching US$30 billion for the period 2010-2012 for adaptation and mitigation appears paltry next to the hundreds of billions of dollars that have been doled out to the banks in the bailouts of 2008-2009. If we can afford that much to save banks, we can afford something more to save the planet.
The consequences of the failure are already apparent: the price of emission rights in the European Union Emission Trading System has fallen, which means that firms will have less incentive to reduce emissions now and less incentive to invest in innovations that will reduce emissions in the future.
Firms that wanted to do the right thing, to spend the money to reduce their emissions, now worry that doing so would put them at a competitive disadvantage as others continue to emit without restraint. European firms will continue to be at a competitive disadvantage relative to American firms, which bear no cost for their emissions.
Underlying the failure in Copenhagen are some deep problems.
The Kyoto approach allocated emission rights, which are a valuable asset. Most ethical principles would suggest that those that have polluted more in the past - especially after the problem was recognized in 1992 - should have less right to pollute in the future.
But such an allocation would implicitly transfer hundreds of billions of dollars from rich to poor. Given the difficulty of coming up with even US$10 billion a year - let alone the US$200 billion a year that is needed for mitigation and adaptation - it is wishful thinking to expect an agreement along these lines.
Perhaps it is time to try another approach: a commitment by each country to raise the price of emissions to an agreed level, say, US$80 per ton. Countries could use the revenues as an alternative to other taxes -it makes much more sense to tax bad things than good things.
Developed countries could use some of the revenues generated to fulfill their obligations to help the developing countries in terms of adaptation and to compensate them for maintaining forests.
We must now conjoin self-interest with good intentions, especially because leaders in some countries (particularly the United States) seem afraid of competition from emerging markets even without any advantage they might receive from not having to pay for carbon emissions.
Time is of the essence. While the world dawdles, greenhouse gases are building up in the atmosphere.
(The author is university professor at Columbia University and the winner of the 2001 Nobel Prize in economics. Shanghai Daily condensed the article. Copyright: Project Syndicate, 2010. www.project-syndicate.org)
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