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Cutting emissions: my country’s, BHP’s, mine, or thine?

By Geoff Carmody - posted Tuesday, 29 October 2019


'If you can't measure it, you can't manage it'. Obvious, right? When cutting greenhouse gas emissions (GHGs), however, how do you do it?

Who's responsible for Australian GHGs? Australia? BHP? Me? Thee? If you're a zealot, all of the above, and more. Simultaneously.

Accounting for GHGs can fry your brain. A long time ago it was agreed countries should take responsibility for their national production of GHGs. This remains the 'official' accounting measure of countries' GHG reduction efforts (eg, under the Paris 'Agreement').

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Before that, zealots went for 'extended producer responsibility' (EPR). EPR says any business or person producing anything that generates GHGs over the life of that product is responsible for all of those GHGs. Don't ask me how that's a practical measure.

If encouraging a global deal on emissions reduction is central to dealing with an assumed global problem, some suggest measuring and reducing national GHGs consumption is best. I did, back in 2008. This measure eliminates trade competitiveness issues blocking a global deal. National GHGs production measures build-in such trade competitiveness 'blockers' where countries act at different times, as we know they have, and will.

Today, anything and everything goes. All these accounting measures for GHGs are advocated. Many 'green' supporters advocate all three measures at the same time. Consistent accounting frameworks? Double counting? Who cares? Those are concerns for number nerds. If we get a bigger GHG reduction by using all three, and more, go for it!

This is reminiscent of H.G. Nelson's exhortation about sport. 'Too many measures of GHG emissions are barely enough'.

What happens if national production and national consumption GHG reduction targets are both achieved globally? National accounting ensures that, globally, the total sum of national production equals the sum for national spending. And global exports equal global imports.

GHGs reductions from international trade in energy therefore would be delivered twice: once as exports, and again as imports. 'Green' advocates will applaud – and want more.

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Isn't this far-fetched? Today, zealots are arguing that Australia's global GHG contribution is much more than the 1.3% (and falling) share based on the globally-agreed national production measure. They assert we must add to Australia's 1.3% GHGs production share, the GHGs due to our energy exports used in importers' production. On that basis, they claim our 'share' of global emissions could rise from 5% now, up to 13% or more.

Why should we add other countries' GHGs production from using their Australian energy imports to our Australian GHGs production? Isn't this tendentious double-speak? Isn't it also counted as importers' GHG production as per the agreed international accounting framework for measuring GHGs?

Maybe not, if we revert consistently to EPR accounting. This accounting isn't part of international agreements about measuring and managing GHGs. But zealots and some major corporates say they support this EPR model.

Really? Look no further than the 'big Australian', BHP. Recently, BHP has announced it 'accepts' some responsibility (how?) for its customers' 'scope 3' GHGs. 'Scope 3' GHGs is jargon referring to emissions generated by importers and users of BHP's energy exports. It includes other countries' GHGs emissions production.

If so, are these energy importers exempted from reporting such GHGs production from their own GHGs? Or does it mean such GHGs reductions are double-counted, once in Australia as exports, and then again offshore as imports? Or – excuse my cynicism – is this just part of the current fad: more empty corporate 'virtue signalling'?

Is there a consistent solution? Yes. It requires sheeting home responsibility for GHGs to everybody, and ultimately consumers. Producers sell stuff because consumers want to buy it. GHGs embodied in that stuff come with the purchase. Rich consumers (developed countries) consume more GHGs per capita (increasingly via imports). It's fair to ask them to pay more per capita for that consumption, but not to exempt others' consumption.

A globally uniform ad valorem price on all GHGs consumption does the job. It eliminates trade competitiveness concerns for those taking the lead. It removes trade advantages for laggards. It doesn't guarantee an eventual global deal, but does improve its chances.

A GST-type price on GHGs ensures everybody in the supply chain, from primary producer to final consumer, faces costs of emitting or cutting GHGs. Suppliers will pass this cost on to the next stage in the supply chain if possible. If not, they wear it. Incentives to cut GHGs are pervasive, consistent, and transparent.

In Douglas Adams' Hitch-Hiker's Guide to the Galaxy, the computer Deep Thought was asked the question: 'What's the meaning of life, the universe, and everything'?

After 7.5 million years' reflection, Deep Thought warned the elders, gathered to hear its answer, that:

You're really not going to like it.

They didn't. Its answer was '42'.

On global warming, some say the answer is 'no more than +1.50C'. If so, we continue to ignore the best global policy option for achieving that. Despite its greater efficiency, transparency, global consistency, and fairer sharing of responsibility, it seems we really don't like the national GHGs consumption answer, either.

Apart from choosing far more costly but ineffective alternatives, as we have, what to do?

The Hitch-Hiker's Guide cover might help. It advises the reader, in large, friendly letters:

Don't panic.

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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