Can Copenhagen cut climate costs?

The virus is self-inflicted cost disadvantage.

If we adopt a CPRS, and our trading partners don’t, our exports cop a carbon cost not borne by our competitors. Our import-competing industries do likewise.

Globally, carbon emissions are more likely to rise than fall. Ours might fall, but only as businesses shift to countries not acting. We lose competitiveness, jobs, and the world keeps warming anyway.

It’s worse.

Under the CPRS, we download this virus. Unless we adopt Ridout’s “Clayton’s CPRS”, (a cost to business for no reason) we suffer the virus and lose jobs. Our trading partners get a competitive edge.

With the global recession, they’re losing jobs too. So they won’t adopt our CPRS, precisely because we have. That way, they gain jobs as ours fall. Globally, emissions don’t fall. They just get shuffled away from Australia.

Those without a climate change policy have strong incentives not to follow suit. Those “on board” are tempted to “jump ship”. Enter Garnaut’s “prisoners’ dilemma”. Translation: “I’ll reduce my emissions after you”. Nothing gets done, as we’ve seen since Kyoto.

Climate change is a global problem. A global policy response is needed. The “prisoners’ dilemma” (or similar labels) describes the road-block to a global deal. This road-block is a government failure. Governments chose the wrong emissions model, and so have undermined efforts in this area.

A production-based model drives other countries away (gaining jobs in the process). We lose jobs, and shift emissions offshore. Worse, our action actually underwrites failure in Copenhagen 2009.

But we can do a deal at Copenhagen.

The UNFCCC goal: stabilising greenhouse gases at levels that would prevent dangerous anthropogenic interference with the climate system should be the preamble. Acceptance countries won’t act simultaneously should also appear here.

An agreed framework of principles to guide policy design comes next. National policies should: