Depending on which source you trust, the effects of climate change are set to become devastating and irreversible between 2030 or 2050, when we pass 1.5 degrees Celsius above pre-industrial levels. After that, there doesn’t seem to be much more that we can do. Worst case scenario, we have less than ten years to rid ourselves of this phenomenally large problem. Looking at our current progress and the plans of our world leaders, the easiest response is to give up. It’s easy to look at how much we still need to do and concede there is simply not enough time to fix it all. March 2020 has shown us that even if most of the world was in lockdown, the changes it would bring about (the abandonment of cars, trains and planes and halting of production cycles) would only be 10% of the necessary decarbonization (this incredible statistic also raises useful questions on what type of emissions need to be cut to stop climate change, especially around the transport industry).
Carbon pricing in 2020
It is widely agreed amongst most economists that carbon pricing is an effective mechanism to curb climate change. Many have placed all their hopes on it. There have been debates about how to implement the pricing, whether to use taxes or ETSs (emission trading systems), what the optimal carbon price is and how carbon pricing will affect the global economy. However, I think there is one question that has not been asked enough: will carbon pricing work in time? Is there enough time for markets to shift, respond to the pricing, and adapt before time is up? Many papers I’ve read seem to measure carbon pricing progress in very esoteric, economisty ways, such as emissions per unit of GDP and carbon tax per capita but in the end, only one simpler measure really matters; the cumulative change in greenhouse gas emissions, particularly carbon dioxide.
We know that emissions need to reach near net-zero by maximum 2050 to stop devastating effects from climate change. That means that, as Duke University puts it, developed countries need to reduce emissions by 2% per year starting 2010 to decrease emissions by 80% by 2050. They have not met this requirement for the first 10 years which begs the question, will carbon pricing achieve this goal in time?
To answer this question, it is useful to ask how countries who have implemented carbon pricing have fared and what governments plan to do with carbon pricing in the short and medium-term.
Sweden was one of the first countries to impose carbon pricing around the early 1990s and has been a leading example in climate change policy. France and Canada only enacted carbon pricing much later with France only implementing a carbon tax in 2014, but both countries’ policies have been admirable and sweeping. All three of these countries have a carbon price above $20, much higher than other countries which have either begun or flirted with climate change policy (most countries, like South Africa, only have a carbon price in the single digits). But have these policies had any effect?
A study conducted by Patrick Criqui, Mark Jaccard and Thomas Sterner illustrates these effects quite nicely. As can be seen in the graphs below, there has been some progress, most notably in Sweden which has decreased emissions by 26% since 1990. Some countries, like France, have been relatively successful in decoupling CO2 from their energy supplies, but since energy consumption has still been rising, CO2 emissions have either stayed the same or risen, even with their efforts. But the main takeaway from this data is that the results are mixed. From 2010, both Sweden and France (barely) have met the target of 2% reductions per year. Canada, even with its policies, still has rising emissions. I do realise I’ve given you a limited example with only three countries, but I think it is reasonable to assume matching or worse performance by most other countries that have not put in place as extensive measures, especially since their experiences have been so different.
Maybe there is more hope in the future. Carbon pricing may only cover 22% of current greenhouse gas emissions, but since the 2015 Paris Agreement, many nations have made promises to radically improve their CO2 emissions policies, including using carbon pricing. However, the United States and China are not on this list. The two nations together made up 43% of CO2 emissions in 2020 and any argument about climate change would be incomplete without mentioning them. Last year, China made a carbon neutrality pledge for 2060 which as we know, will be too late. Additionally, they only attempted to introduce a national ETS tax last year. America is no different. Carbon pricing is only employed locally and even the most stringent states, like California, are only on the lower end of the carbon pricing spectrum. There has been some buzz around a national carbon tax in the future, especially with President Biden assuming office soon, but it is not set in stone.
So it doesn’t look like there is much hope. As you saw with the example of the three nations, carbon pricing policy took a while to have any real effect (around a decade), and that was only after policy was fully implemented. Carbon pricing relies on the markets to shift and respond to new incentives, but these responses take time. Individuals and companies are often sticky and reluctant to change. Carbon pricing will need to be harsher, stricter and more widely used in order for it to work.
Ultimately, I’m not trying to criticise the idea of carbon pricing in this post. It is an incredibly well thought-out efficient solution to combating greenhouse gases. But if carbon pricing is the solution, countries like America and China need to enact policy similar to successful countries like Sweden immediately (or 10 years ago). Carbon pricing takes time. Time of which we are running out. We may have already run out.
References:
https://www.ucsusa.org/resources/each-countrys-share-co2-emissions
https://www.mdpi.com/2071-1050/11/22/6280
https://openknowledge.worldbank.org/bitstream/handle/10986/33809/9781464815867.pdf?sequence=4&isAllowed=y
https://www.climatecommunication.org/wp-content/uploads/2011/08/presidentialaction.pdf