DAVOS GURU: TAX AND TRADE CARBON

TAX IT:

Stern favours world carbon tax
Edmund Conway, January 25, 2007 (UK Telegraph)
- Sir Nicholas Stern has spoken out in favour of a global carbon tax, warning that global warming represents "the biggest market failure the world has ever seen".

- The former World Bank chief economist and author of the Government-commissioned report on the economic effects of climate change, said environmental taxes should play an essential role in combating global warming.
- In a debate at the World Economic Forum, Sir Nicholas…argued that environmental taxes – such as those on transport and energy – should not be discounted in favour of worldwide carbon markets…
- Climate change has already become the most hotly-debated subject at the meetings in Davos this year, and the debate in which Sir Nicholas took part was one of the most eagerly awaited…

- Sir Nicholas said that ruling out green taxes was "a risk we cannot take…Unless we act quickly and effectively, we will not bring down carbon emissions…we must cut our emissions from current levels by around 40pc…The market hasn't worked because we haven't fixed it…Equity demands that the rich countries, who are largely responsible for this problem, do more about it…”
- Sir Nicholas said he was not proposing a treaty in which countries around the world agree on a particular tax plan but said by discussing the issue, countries could align their fiscal policies.
- However, he said it was essential to have a market structure which could determine the price of carbon.
- The debate's panellists also included Vinod Khosla, founding chief executive of Sun Microsystems, who argued against the proposition that nuclear and clean coal technologies were the only long-term rivals to oil…Lady Barbara Thomas Judge, chair of the UK Atomic Energy Agency…said it would be foolish to rule nuclear power out, adding that it had a key role to play in green power generation in the coming years.

TRADE IT:

Climate change expert seeks expansion of carbon trading
James Kanter and Alan Cowell, January 25, 2007 (International Herald Tribune)
- The foremost European expert on climate change, Nicholas Stern, called Thursday for a huge expansion of carbon trading with China and India, and described 2007 as a "year of opportunity" to step up efforts to tackle global warming.
- Stern, who is the chief economist for the British government and an author of an influential report on climate change, said during an interview at the World Economic Forum in Davos, Switzerland, that the program [by which businesses in wealthier countries in Europe and Japan pay to reduce pollution in poorer ones as a way of staying within government limits for emitting climate-changing gases like carbon dioxide] must "be capable of operating on a much bigger scale than it does at the moment." Stern said he saw "a wonderful market opportunity" and that trade under the program could be raised to $30 billion a year from the current level of about $1 billion.

- Critics of the program complain that the reductions are hard to verify and that it mostly enriches a few bankers, consultants and factory owners.
- Stern gained international stature last year when Prime Minister Tony Blair of Britain presented his report on climate change, the Stern Review, which said that tackling global warming now would be far less costly than taking action later…
- Kevin Smith of Carbon Trade Watch, a not-for-profit research group with a branch in London, said factories in China can sell large amounts of credits by installing equipment often required anyway…
- Yuriko Koike, a delegate at Davos who is a special adviser to the Japanese prime minister and a former minister of the environment…supported Stern's call for an expansion of the program as it created "a win-win situation" benefiting businesses in Japan and China, and helped combat global warming.
- Stern acknowledged that the design of the current verification procedure, which is overseen by the United Nations Framework Convention on Climate Change in Bonn, Germany, had flaws.

- But he said that the program remained the most potent tool to bring down emissions in countries like China, which is poised to overtake the United States as the world's leading polluter by 2009…
- Stern also said the program was the fairest way for the rich world, which is responsible for 75 percent of the existing level of greenhouse gases, to help finance the majority of emissions reductions…
- Although questions remained about whether existing institutions could do the job of overseeing such a vast expansion of carbon trading, Stern suggested that the World Bank and three United Nations bodies, including the climate change monitor, could take on the expanded verifications role…
- "I think you see change across America," said Stern, praising ambitious targets set by California to lower emissions, the fledgling carbon-trading programs among a group of states in the northeast of the country, and the pledge this week by President George W. Bush on energy efficiency…