Copenhagen Will Fail

Copenhagen will fail. That's about as newsworthy as 'dog bites man'. But it won't fail because the assembled 210 nations or so don't agree, it will fail because the wrong remedies are being proposed for environmental pollution, and in their hearts everybody knows that this is the case.

A recent study by Deutsche Bank concluded that the introduction of new taxes on emissions is “problematic” given the current economic climate, as they invariably increase the burden on both individuals and businesses, which has a deadening, procyclical effect on economic activity. The study also points out that as soon as carbon dioxide and other harmful emissions decrease, so too does tax revenue for the state. In order to avoid this phenomenon, the study argues that the tax rate must be fixed at such a low rate as to have very little impact on emissions.

That's just one of the problems that vitiate most tax-based solutions to environmental pollution. The next problem is that just about every state in existence is short of money, and approaches pollution as a source of revenue, as witness the UK's wrong-headed Air Passenger Duty. It won't work anyway, because any sensible person will take a short flight (or Eurostar) to Paris to catch their long-distance flight to Bejing rather than pay the duty. If all countries agreed to impose APD it might work, but at a disastrous cost in terms of economic output (the Deutsche Bank trap).

Tax as an economic weapon is only useful to the extent that there are alternatives. You can persuade people to buy less-polluting cars with tax-breaks, but even then not much has been achieved unless the total carbon footprint of the car has been reduced, which is often not the case: electricity is carbon-free at the point of use, but anything but carbon-free in terms of its production, in most cases. Of course there is a direct environmental benefit in terms of amenity in avoiding the burning of petroleum on our streets, but it doesn't follow that there is less CO2 in total. The State knows this, of course, but it is very happy to collect outrageous fees from the majority of people who don't change their cars.

So, what about carbon trading schemes, which one could fairly describe as flavour of the month in the CO2 world? Sorry, but they are so riddled with loopholes, outright fraud and misfeasance (as witness the enormous abuse of the UN's carbon trading scheme by China which was revealed last week) that it is very doubtful if they achieve anything at all, other than giving serious polluters a legitimate way of getting permission for their activity at very low cost. They don't pollute any the less; it just costs them a bit more.

So what is to be done? Let's leave on one side the quite respectable argument that there is nothing to be done, anyway, and that we should just learn to live with a hotter planet. Instead, let's concentrate on how to reduce emissions directly, something that is seldom addressed. The production of oil, gas and coal is going to result in the burning of the same, at some stage, and in some form: there is no way around that. You can play with the exact order of events, but it won't help. Less CO2 means producing less oil, gas and coal, something which is completely against the national agenda of every state on the planet. Put like that, the task seems hopeless.

But if oil companies in the aggregate were told that they had to produce 5% less oil in every future year, do you not think that they would finally set their immense resources and skills to developing alternative sources of energy, instead of making all those tasteful advertisements showing little girls playing in flower-strewn fields?

It won't happen. So in the meantime, enjoy the show, but understand it for what it is: window-dressing.