Wednesday, October 22, 2014
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King Coal’s Pyrrhic Victory

BRUSSELS – Sometimes the most important news is what is not happening. This summer has given us one such example: the climate-change bill, for which President Barack Obama had pushed so hard, will not even be presented to the United States Senate, because it stands no chance of passage.

This means that the US is about to repeat its “Kyoto experience.” Twenty years ago, in 1990, the US participated (at least initially) in the first global talks aimed at achieving a global accord to reduce CO2 emissions. At the time, the European Union and the US were by far the greatest emitters, so it seemed appropriate to exempt the world’s emerging economies from any commitment. Over time, it became apparent that the US would not live up to its commitment, owing, as now, to opposition in the Senate. The EU then went ahead on its own, introducing its path-breaking European Emission Trading System in the hope that Europe could lead by example.

Without the American climate-change package, the promises made by the US administration only seven months ago at the Copenhagen summit have become worthless. The European strategy is in tatters – and not only on the transatlantic front.

China’s commitment to increase the CO2 efficiency of its economy by about 3% per year is of no help, because annual GDP growth rates of close to 10% mean that the country’s emissions will soar during this decade. Indeed, by 2020, Chinese emissions could be more than triple those of Europe and even surpass those of the US and Europe combined. Exempting emerging markets from any commitments, as the Kyoto Protocol sought to do, no longer makes sense.

Why has every attempt to set prices for global carbon emissions failed? The answer can be found in one word: “coal” – or, rather, the fact that coal is cheap and abundant.

Burning hydrocarbons (natural gas and petrol) yields both water and CO2. By contrast, burning coal yields only C02. Moreover, compared to natural gas and crude oil, coal is much cheaper per ton of CO2 released. This implies that any tax on carbon has a much higher impact on coal than on crude oil (or gas). Owners of coal mines and their clients are thus strongly opposed to any tax on carbon. They constitute a small but well organized group that wields immense lobbying power to block efforts to limit CO2 emissions by putting a price on them, as the planned US cap-and-trade system would have done.

In Europe, indigenous coal production no longer plays an important economic role. It is thus not surprising that Europe could enact a cap-and-trade system that imposes a carbon price on a large part of its industry. Indeed, the tax seems to fall mostly on foreign suppliers of coal (and to a lesser extend on foreign suppliers of hydrocarbons in the Middle East and Russia). By contrast, opposition by US states whose economies rely significantly on coal production proved decisive for the fate of Obama’s climate-change bill.

The US experience has wider implications. If it proved impossible to introduce a moderate carbon tax in a rich economy, it is certain that no commitment will be forthcoming for the next generation from China, which remains much poorer and depends even more on indigenous coal than the US. And, after China, India looms as the next emerging coal-based industrial superpower.

Without any significant commitment from the US, the Copenhagen Accord, so laboriously achieved last year, has become meaningless. Business will now continue as usual, both in terms of climate-change diplomacy, with its wandering circus of big international meetings, and in terms of rapidly increasing emissions.

The meetings are aimed at creating the impression that the world’s leaders are still working on a solution to the problem. But rising CO2 emissions constitute what is really happening on the ground: a rapidly growing industrial base in emerging markets is being hard-wired to intensive use of coal. This will make it exceedingly difficult to reverse the trend in the future.

A planet composed of nation-states that in turn are dominated by special interest groups does not seem capable of solving this problem. Unfortunately, there is enough cheap coal around to power ever-higher emissions for at least another century. The world will thus certainly become much warmer. The only uncertainty is how much warmer that will be.

Determined action at the global level will become possible only when climate change is no longer some scientific prediction, but a reality that people feel. But, at that point, it will be too late to reverse the impact of decades of excessive emissions. A world incapable of preventing climate change will have to live with it.

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