Carbon scheme is doomed to fail

POLITICIANS never admit they do not have a solution to a problem. Call it "yes we can!" syndrome. As a consequence, some have vowed to decarbonise their economies to save the environment from climate change.
The Czech Republic president Vaclav Klaus reminded the audience at a luncheon this week of the boast of former communist rulers of Czechoslovakia, "we control the wind and the rain!" Such hubris is alive and well.
Those nations headed down the carbon abatement path have asked economists to seek the most cost-effective means of doing so. The predictable answer was to price emissions. The trouble is it cannot succeed. A paper by David Campbell and others, After Copenhagen: The Impossibility of Carbon Trading, tells why.
The Kyoto Protocol carbon trading scheme has failed because while there may be a loose cap on emissions for developed countries, without a cap on all other countries the trade between the two is uncapped, so there is no overall emissions reduction. To illustrate, at the end of the Kyoto's first commitment period 2012, the increase in China's emissions will be in the order of 1000 per cent of the total reductions the developed countries were to make under Kyoto.
Further, the promises made after Copenhagen have no legal basis and refer to reductions in carbon intensity, which almost certainly will mean growth in absolute emissions. Any promises made are less credible than Kyoto itself, which was not credible. Pray tell us then, Prime Minister, what is the point of your carbon tax?
Forget about whether Australia is at the head of the pack on carbon pricing, it is, in fact, at the back end of a failed abatement experiment. And neither Australia's physical contribution to carbon abatement nor its "moral leadership" can help. China, India, Brazil and myriad others need to raise the standard of living of their people or risk political instability. (War and insurrection can damage the environment too.) So these countries will never agree to carbon reductions sufficient to allow the world to stay within the 2C limit we are told is essential. They have each given economic development explicit priority over reduction of emissions.
Speculation the Chinese will pursue a 40 per cent reduction by 2020 and commence an emissions trading scheme is about as credible, and indeed would be as destructive, as any of Chairman Mao's five-year plans. Consider these numbers. In 2006, China had 350 gigawatts of coal-fired power generation capacity. It plans to install an additional 600 gigawatts (plus transmission and distribution systems) by 2030. To put this into context, in 2008, the entire coal-fired power generation capacity of the US was 313 gigawatts (31 per cent of total US power generation capacity). By 2030 China plans to install additional coal-fired power generation capacity equal to almost 200 per cent of existing US capacity.
China is responsible for more than half of the growth in global emissions. And since 500 million Chinese live on less than $2 a day, it is pretty clear what China will be doing for the next 50 years. China has signed multiple 25-year contracts to purchase LNG from Australia and elsewhere. It is building more coal-fired power stations than the world has ever seen and, despite the fact that it is one of the world's biggest producers, it is importing coal, such is the appetite for energy. These power stations will operate for decades, well past Australia's romantic target of reducing emissions 80 per cent by 2050.
Last week former British prime minister Tony Blair said: "It is absolutely clear the world will move away from carbon dependence." Not quite.
As the Campbell paper says, Britain's policy under the Climate Change Act 2008 requires rates of "decarbonisation" of the national economy that "are impossibly costly to achieve. Nevertheless, that what is being pursued is impossible does not mean that immense costs may not be run up in the course of the doomed effort."
If politicians swallow their pride and ask a different question of the economists, they get a very different answer. Bjorn Lomborg did so some years ago. "If the global community wants to spend up to $250 billion per year over the next 10 years to diminish the adverse effects of climate changes, and to do the most good for the world, which solutions would yield the greatest net benefits?"
Numerous Nobel Prize-winning economists agreed on a priority list showing the most and least effective ways of reining in temperature increases. They concluded the most effective use of resources would be to invest in:
• Researching solar radiation management technology
• Technology-led policy response to global warming designed to develop green technology faster
• Researching carbon storage technology
Cutting emissions now is too expensive and politically infeasible. Cutting in the future when the technology is available is cheaper and feasible. As for abatement, as Campbell says, "action in pursuit of the impossible is irrational".