Climate policies should target the control of stocks of greenhouse gas emissions (GGEs) in the atmosphere not the flow rates at which people are adding to these stocks. It is a simple point – heating effects depend on the stocks not on the rate at which these stocks are being added to. The point can be made simply by supposing a country agrees to a 90% reduction in GGE flows by 2050 which is the normal way policy objectives are set. That country could then do nothing at at all about GGEs until 2049 and then in that final year close down all coal-fired power stations and introduce a punitive carbon tax of say $200/tonne in that final year. It could even pre-announce such policies so that firms would not be subject to unexpected shocks and could be prepared for the sudden transition. The net effect is that the country would have added enormously to carbon emissions from 2014 to 2049 (it is these stocks which determine warming effects*) but would still be meeting its emission control objectives. Clearly the appropriate target is not to reduce flows but to restrict the volume of GGEs a country is adding to the atmosphere. Doing otherwise is to fudge the intent of GGE restriction policies.
I wonder if, on a less dramatic scale than this hypothetical example, the Government’s Emission Reduction Fund policies are in fact seeking to do. To allow lots of pollution and then, in the 11th hour, to introduce carbon control policies that meet the miserly objective of a 5% cut over year 2000 levels by 2020. Or is it just a matter of postponing real action and eventually back-flipping to do almost nothing because “money is scarce” or some other phoney argument.
* Indeed that it is stocks which matter not flows provides one argument for a carbon tax rather than an ETS. Getting the wrong annual flow by setting a tax wrongly isn’t very costly if you can adjust the tax in future years. Policy-makers can still hit stock objectives by increasing the tax if emissions are being cut too slowly. In addition tax policies provide a measure of carbon price stability that is useful for public and private sector planning. To be clear this is only one reason favouring a tax. There are also many arguments for an ETS – it can be used to reflect a nations’s contributions to emission’s stock reduction, achieves exact cutback targets etc. On balance I prefer an ETS although, of course, either a tax or an ETS outperforms the current Government’s emissions subsidy scheme. .