The United Nations Framework Convention on Climate Change (UNFCC) is holding a major conference on climate change and global warming in Copenhagen on December 7-18 that up to 20,000 people are expected to attend.
It was originally hoped that a Copenhagen Treaty would replace the Kyoto Protocol, which was initially adopted in 1997 although it did not come into force until 2005.
However, agreement on a Copenhagen Treaty now seems very unlikely, although some of the politicians involved are talking confidently about making good progress towards signing an agreement in 2010. I am sceptical. To be honest, I am somewhat fed up with seemingly never-ending column inches and TV time devoted to this summit. Moreover, I have felt the same about the Kyoto Protocol for some time.
Climate change, particularly reducing greenhouse-gas emissions, is obviously one of those good things that we should all support. However, from the economic perspective, much of what is being said is nonsense. Some of the existing measures, such as the emissions trading scheme (ETS) in the European Union, are economically inept and should be replaced.
It seems to me rather strange that up to 20,000 people are going to fly from all around the world for a conference intended to reduce global warming. Has any one calculated the carbon footprint of this event?
The Kyoto Protocol has long seemed shambolic to me. I know it is extremely difficult to reach international agreements of this type, but the proliferation of signatories, Annex 1 countries, non-parties (notably the US), and so on, is very confusing.
The main focus is clearly on reducing carbon-dioxide (CO) emissions. As a non-scientist, I accept that these are having a damaging impact on the environment. However, I recently read a scientific article which seemed to argue convincingly that methane-gas emissions from cows and other animals are far more damaging. But very little attention seems to be given to those.
Thus the current initiatives appear to be taking only a partial or incomplete approach to solving the problems.
There is also a bewildering range of initiatives, such as carbon funds, greenhouse-gas certificates, clean development mechanisms and flexible mechanisms. I confess that I am not an expert on any of these, but I have done some recent work on the EU emissions trading scheme (EMS) and carbon prices in the EU, and their basic economic principles are simply wrong. Consequently, they are not having the intended or desired effects, and in some cases, may be causing more problems.
If that is the case with the EMS, could it not also apply to some of the other climate-change policies? I would be less concerned if the deficiencies were recognised and that Copenhagen would try to improve their effectiveness, but I have seen little evidence of that. The basic approach seems just to be even more of the same.
Indeed, many European delegates support the extension of private-sector carbon trading to the rest of the world. However, the loopholes in the EU may be tiny compared with those in countries such as China, India and the Russian Federation.
A key issue is obviously to get the big polluting countries to participate, notably China and the US. Any progress with such nations at Copenhagen must be welcomed.
I sympathise with some of the complaints by China, India and other developing countries that they are being asked to bear some of the burden of a century of deficient policies in developed countries such as the UK and US. Nevertheless, we must be able to demonstrate that the climate-change policies in our own backyard are effective and economically sensible. Some are not at the present time.
The EU emissions trading scheme, for example, should be a substantial tax on carbon emissions intended to reduce its production, particularly from large polluters such as power stations and industrial plants.
Countries were allocated permits that were then reallocated to companies, but the initial permits were far too generous. As a result, the price of carbon credits has plummeted to a level where there is little or no incentive to reduce CO emissions.
That is economic nonsense, but no one seems interested in making the scheme effective. It may not be a typical example, but I suspect there are similar ones elsewhere in the plethora of initiatives.
I hope there will be genuine political progress at Copenhagen. However, implementing any agreement will be much more difficult, as Kyoto has shown.
Tony Mackay is MD of economists Mackay Consultants
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