3.5.7.2  Cost-Effective Measures to Mitigate Climate Change

 (The latest version of this page is at Pattern Descriptions.  An archived copy of this page is held at https://www.patternsofpower.org/edition02/3572.htm)

It isn't possible to calculate how much investment could be cost-justified in cutting greenhouse-gas emissions, but it seems prudent to reduce carbon emissions where this can be achieved at a modest cost, or to find alternative ways of mitigating climate change.  There are several promising approaches:

·      Some mitigation actions cost nothing, or even save money; switching to more economical cars and a less wasteful use of domestic energy are two examples that would make an immediate saving and reduce the size of the problem facing the planet as a whole.  Economic regulation, for example to ensure that new houses are built with high standards of insulation, might be very cost-effective (unless it became excessive).

·      Alternative sources of energy, such as ethanol, wind, and sun, could be part of the answer.  Brazil, for example, is successfully using sugarcane in a way that is both cost-effective and reduces carbon emissions.  Ethanol from corn, on the other hand, is less cost-effective and barely breaks even on carbon emissions.[1]   There are other crops which may have better potential, but the best use of land has to take account of the importance of food compared to fuel.  The cost-effectiveness of using the sun varies from place to place, and both it and wind power are intermittent.

·      National carbon taxes would be a way to help change behaviour and would stimulate innovation in finding alternatives.  There is some consensus among economists that such a measure would be helpful.[2]  A stable tax has the advantage, for example, of allowing those who generate power to take a proper long-term business view when making investments in low-carbon solutions.  It would discourage unnecessary emissions €“ helping that country to meet its politically-agreed targets.  And it would be possible to have a tax that was revenue-neutral €“ which replaced other purchase taxes within that country for example €“ so that it wouldn€™t depress economic growth. 

·      An alternative to taxation is the so-called 'cap and trade' system, where each country has carbon allowances which can be distributed to organisations that produce carbon emissions.  The ability to trade these permits means that those who are best placed to make big reductions in emissions would be financially incentivised to do so.  There are disadvantages, though, such as estimating errors and deliberate abuses.[3]

·      Research into better ways of generating power is likely to be a good investment.  With a world energy market estimated at $6 trillion a year, there is a potential to make money from successful solutions to the world's increasing needs for energy.[4]  Not only might some of the adverse effects of global warming be avoided but some of the investments would turn out to be cost-justifiable in terms of direct savings (particularly if a carbon tax were imposed).  Some government funding could be considered for projects with a greater uncertainty or lower returns than would be attractive commercially, but they would have to compete within the total budget for government spend (3.5.2).

·      The Copenhagen Consensus, as quoted above, identified geo-thermal engineering as a possible way of combating climate change and recommended that $1 billion be spent on research "to investigate the feasibility of cooling the planet through geo-engineering options".[5]

This list is not exhaustive, but is sufficient to make the point that there are many possible responses to mitigate the effects of climate-change without spending as much money in the short term as would be required to reduce emissions to the extent advocated in the Stern Review.  The markets could participate in determining the best course of action for individual projects.  It is possible to allow a full subsidiarity of decision-making: individuals making their own purchasing decisions, companies deciding whether to invest in technology, countries deciding on regulations and tax policy, and global agreement of targets and collective funding.

© PatternsofPower.org, 2014