Midweek Climate Focus: Climate-Friendly Choices, Carbon Tax, and the Quintessential Human Agony
Edition #5
Welcome to the 5th edition of Climate Focus.
This is a special mid-week edition and something that I had been intending to do for some time. Festive season in India nudged me over the line =)
The COP 26 is currently underway in Glasgow and developments are coming thick and fast. I have listed some of the significant ones, what I am closely watching, and a PSA, at the end of this post.
I will be back again with an edition next Friday. I am cautiously optimistic that the scorecard from last week will come handy, and come 12th of November, I will be a content man.
Let’s dive in to this week’s edition.
Human beings make about 35,000 conscious decisions on average every day. That is an awful lot. Right from whether to snooze your alarm or jump out of bed, to work out in the morning or the afternoon (when you force silver linings from a pandemic), to do the dishes right after a meal or later. You get the general idea.
Unless we have rules to make these choices, we are sure to see an uptick in the number of times we self-negotiate over all of these choices. Negotiating over each decision is far from efficient. I am not here to talk about the power of habits or rituals. There are others that do a fantastic job at that.
What I am here to tell you is how I am convinced that silently agonising over decisions is a quintessential human trait. Whether you are ruing something you have done, or (over-)analysing something you are about to, agony is a given, even if it is of the trivial persuasion.
When we are self-negotiating between a choice we favour and one that is rational, it is on us to build scenarios, guess which one is likely, and the pièce de résistance - commit to a decision.
Think about this in the context of making climate-friendly choices.
Even for the willing and the informed, quantifying climate tradeoffs against our individual choices is amorphous.
When it comes to making climate-friendly choices, we have a good sense of what the right categories are - buying produce that is locally sourced, avoiding air travel when possible, taking public transport instead of cars etc. But we aren’t always going to avoid air travel or stop driving our car altogether.
More Information = Less Agony
Information is what will help us reconcile with such context-specific choices without the agony. But it is a wicked problem to solve when it comes to climate information.
Given the complexity and different dimensions to what is considered pertinent climate information, it is important that we use the following key criteria -
It must directly influence the consumption decision
It must be relevant across different consumption choices
It must be standard and trustworthy
While it might be tempting to start with absolute emissions, the mother of all climate metrics, it is arduous. I do not know where to begin measuring the carbon footprint of my tomatoes or my last Amazon delivery.
We need a conduit to bridge the opaqueness of data.
The price we pay for good and services has never reflected its true costs. If it did, it would include the costs of emissions built into what we pay. The age of industrialisation bears close resemblance to a Faustian bargain, and now is as good a time as yesterday to pay what we owe.
The simplest way to do it is a tax for emissions. The taxes will be priced into the product, and the market will self-select.
A carbon tax checks all three criteria -
Each consumption decision comes with appropriate emissions-related costs integrated into it,
It applies to uniformly to all choices in a decision, and
If implemented successfully, governments will institutionalise standardised emissions calculation and labelling
A natural next question is, ‘Wouldn’t paying a carbon tax significantly increase the price of goods and services?’. You’d be surprised at how little an increase it is. I sure was.
[..] a kilogram of coffee beans delivered to the UK has a typical footprint of about 15 kilograms of CO2.
If farmed and shipped more sustainably, the footprint is 3.5 kilograms. With a £100/tonne carbon tax, that’s either £1.50 or 35 pence. […] so coffee drinkers might not notice, but you can bet that behind the scenes farmers and shippers will be looking to push their costs away from £1.50 and towards 35 pence.
Financing climate finance
Carbon taxes have the greatest influence on reallocating climate capital, hands down. And it would be generous to call its current price as ‘watered down’.
[…] the average global price is currently $2 a ton, and needs to rise to $75 a ton by 2030 to curb emissions in line with the goals of the Paris Agreement.
This is an excerpt from a speech made by an IMF representative back in April this year. The Paris Agreement outlined a goal to limit global warming to well below 2, preferably to 1.5 degrees Celsius. The UN IPCC report published in August rendered the goal inadequate. We need it to be absolutely at 1.5 degrees Celsius or below. Our current trajectory pegs us anywhere between 2.7 to 3.1 degrees Celsius.
The case for a carbon tax has never been more significant.
However, there is still the question of what will change in our current emissions structures with a carbon tax. Here is how the market will self-select to accelerate a clean energy transition.
Fossil-fuel based electricity will not be cost-competitive compared to cleaner options (at $30-$70 per tonne of emissions)
High emission industries will invest in decarbonisation technologies, because it would be costly not to (at $70-$120 per tonne of emissions)
Breakthrough technologies that are expensive to develop and integrate such as direct air capture and sequestration will become more viable (at $120-$150 per tonne of emissions)
A carbon tax is the most efficient policy lever at our disposal to reallocate flow of capital, especially coming off the back of failed promises of international climate finance.
One of the key outcomes I would love to see is a global floor price for carbon that is at or over $30 to begin with.
I know it is insufficient and wouldn’t please climate advocates universally. But, it is better to have a low carbon tax, than to have none. Reasons: Inertia and Austria.
Over the years, Austria has seen plenty of plans for what is commonly known as ökosoziale or “eco-social” tax reform. […] The first concrete proposal for taxing fossil energy in exchange for lowering personal-income and other taxes came in 1991 […] It took another 23 years, and a coalition […] to agree on the tax.
Give me a (reasonably high) low carbon tax over nothing, and may be, just may be, we could all stop agonising in silence.
COP 26 Roundup
#1 The US and the EU are rallying countries to sign on to its methane pledge. It stands at 90+ countries now but excludes the 3 biggest emitters
#2 India announces an ambitious update to its climate commitments, including achieving net-zero by 2070; while Biden relied a lot more on rhetoric than action
#3 Over 100 nations pledged to halt and reverse deforestation, and land degradation by end of the decade, alongside a pledge of nearly $19 billion
#4 South Africa receives $8.5 billion in commitments from rich countries to ditch coal, in a first-of-its-kind financing (but it is likely to experience domestic union trouble)
What I am Closely Watching At COP26
3rd November - Everything ‘Climate Finance’
4th November - Energy transition from fossil-fuels
11th November - Cities, Regions and Built Environments
Public Service Announcement
Bloomberg’s Climate Desk (imo the best there is) has dropped its paywall for the duration of the Glasgow Summit