In Search Of A New Climate Change Paradigm

Mutsuyoshi Nishimura, former chief climate change negotiator for Japan, writes that a new paradigm is needed to achieve real climate endpoints like the 2 degrees Celsius target.

AsianScientist (Jun. 18, 2012) – The woes of the current United Nations Framework Convention on Climate Change Conference of the Parties approach to climate change are due to its age-old ‘reduction paradigm’ of national emissions, where governments are legally held accountable for reducing the emissions of their private enterprises.

Yet, they are given latitude to pledge their reduction commitments according to their ambitions, which are intrinsically arbitrary. At best, the whole system is a ‘do your best’ game, and at worst it is tragically disconnected from science. No wonder this ever-quarreling approach is incapable of achieving any real climate targets like the 2 degrees Celsius (2°C) target.

In order to achieve the 2°C target, we should not let governments simply do their best and pray for success. Rather, we should put a firm scientific lid on global emissions by creating a carbon budget, and make sure all CO2-emitting enterprises don’t collectively go beyond this budget. Game change is indispensable, and the carbon budget approach must take center stage.

Once the new carbon budget approach is adopted, the theatre will look different. The new game will necessarily be science-driven, as a carbon budget will be scientifically calibrated depending on what climate target governments aim to achieve. It will be market-driven, as a carbon budget will be acceded to by all those who need it. Polluters, being beneficiaries of using the budget, will have to pay the cost of externalities. The market-driven approach will provoke all needed investments for achieving the climate target without manipulating the carbon price, maximize value-added production globally and realize the transition to a low-carbon globe at the lowest cost. Finally, the new game will be equity-driven, as sales from the carbon budget will create new, large and self-sustaining revenue streams that could pull poorer countries out of energy poverty.

If governments would only look up from their ‘reduction paradigm,’ which has so far failed to deliver, and institute a new, global market approach, they could achieve climate targets such as the 2°C on time, help poorer countries and integrate these states into the global march toward low-carbon sustainable growth. The new market approach should cap global emissions to ensure they do not exceed the carbon budget, put collective property rights on such a budget, establish an upstream global carbon market and sell by auction the limited carbon budget as allowances. Additionally, all fossil fuel combustion should be done with allowances, sending the revenue from these sales to developing countries as a new form of climate finance. Finally, the new market approach should establish a system of compliance to eliminate fraud.

This proposed system is nimble, effective and market-driven, and there is no supra-national authority to govern it. The new system does not need to ‘sustain’ a carbon price to provoke investment. With its single common carbon price, it eliminates concerns about competitiveness. As it abolishes national borders, it also eliminates disputes on consumption-based emissions. And it provides large, built-in, self-sustaining climate finance without burdening the tax coffers of any country.

Today there is a strong consensus that imposing a price on CO2 emissions is the most cost-effective way to motivate all players to use less fossil fuels and move to low-carbon or non-carbon economic systems. An increasing number of nations (and regions) are putting a price on carbon within the context of their national reduction commitments, with countries like China and the Republic of Korea also joining the league.

All this is good news in view of the world’s darkening economic and fiscal horizons. We have to overcome the climate challenge at the lowest cost, and the market is the answer.

But the question remains: what kind of carbon market is needed? While national carbon markets are effective for provoking investment and reducing costs, they are all based on arbitrarily pledged national emission reduction commitments which together cannot achieve any climate targets. Then what is the use of launching a carbon market if it does not achieve any real targets? Do we wish to reduce costs only to lose the climate battle? The carbon market must not remain national. It must be extended to be global for its potential to be delivered in its full measure.

Those and other questions are expected to be debated intensively, possibly leading to a new global paradigm for international climate cooperation for the next 50 years and helping to achieve climate targets at the lowest cost, a triumph the world deserves to obtain.

Mutsuyoshi Nishimura is the former chief climate change negotiator for Japan.

For more on a new climate framework and the global carbon market, see Mutsuyoshi Nishimura and Akinobu Yasumoto’s working paper, ‘In search of a new effective international climate framework for post-2020: A proposal for an upstream global carbon market’, available here.

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Source: East Asia Forum; Photo: Curt Carnemark/World Bank.
Disclaimer: This article does not necessarily reflect the views of AsianScientist or its staff.

Mutsuyoshi Nishimura is the former chief climate change negotiator for Japan.

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