In view of the current report of the Intergovernmental Panel on Climate Change with its deteriorated assessment of the climate problems up to 2030 as well as the extreme summer weather events in Germany, other European countries, North America and Asia, the question arises more than ever before the Glasgow Summit: How can we achieve more effective climate protection and Achieve climate neutrality by 2050? And: What role should Germany and the group of the 20 most important industrialized and emerging countries (G20) play in this?
The answer is an innovative approach that can achieve the goal of climate neutrality at comparatively low costs. To do this, however, important G20 countries in the global south would have to be motivated to launch national and later internationally integrated CO2 certificate systems.
Against the background of the corona pandemic, it would certainly be motivational if Europe and the USA were to relocate parts of their vaccine production locally to these countries: vaccine progress worldwide means consolidating the economic upturn and thus reducing resistance to a more effective climate policy.
According to the 2015 Paris Climate Agreement, a good 190 countries are called upon to make their contribution to achieving climate neutrality. The high number of countries alone indicates a complicated situation. Remember: In the Montreal Agreement of 1987, which introduced the fight against the ozone hole, the then twelve members of the European Economic Community only negotiated with a further 24 countries.
Top jobs of the day
Find the best jobs now and
be notified by email.
Many other states were added later. It should be expedient to start the development of CO2 certificate trading initially as a G20 project – especially since the G20 countries account for almost 80 percent of global CO2 emissions. If all G20 countries could be induced to create national emissions trading systems and, in a second step, to integrate them across borders, there would be a globally uniform CO2 price with enormous trade profits – and the associated global increases in real incomes.
Integrated certificate markets promote innovation
A look at the CO2 trading systems of the EU, California and China shows how large the potential trade profits can be if the regional and national CO2 certificate trading systems are integrated. The European community of states has so far covered the energy and industry sectors, which account for around 45 percent of total EU CO2 emissions. California’s certificate trading system records around 80 percent of emissions; in China, including only the energy sector, it is 40 percent.
The price for one ton of CO2 in the EU was recently around 60 euros, in California the ton costs the equivalent of 18 euros, in China it is seven euros. An integration of the three certificate markets would not only result in a “world market price” of around 35 euros per ton, but would at the same time set in motion an increased global innovation dynamic. If, for example, the three of them could agree on a common CO2 reduction target of four percent per year, this would mean a noticeable cost reduction for the industries of the EU countries – the consequences would be increased goods production, more jobs, and rising real incomes and tax revenues.
EU companies would buy certificates from California and China. The CO2 avoidance costs per tonne are apparently lower in California and China than in the EU, whereby the geographical distribution of the CO2 savings is irrelevant for climate protection because greenhouse gases know no boundaries. The more dramatic the climate problem develops and the greater the north-south income gap, the more important it appears to use global, cost-minimal trading in CO2 certificates.
Anyone who refrains from this trade exposes himself to the charge of being responsible for global income losses and millions of additional poor people in the south. It would be wise to gradually integrate national CO2 certificate trading systems into an international system. Ideally, comprehensive integration would take place if all countries involved, such as California, had a CO2 coverage rate of around 80 percent.
India causes the most problems
In this context, it is expedient for the EU Commission to plan to expand certificate trading to include real estate and mobility, starting in 2026. It seems sensible to only include the commercial real estate sector so that private home ownership does not experience sudden fluctuations of the price of carbon. Otherwise, the CO2 tax rate applicable in Germany should also be transferred to EU emissions trading.
Among the G20 countries, the hardest to win for a CO2 certificate trading system is probably India with its many state coal mines and power plants. The government in New Delhi argues that India has the historical right to first emit as much CO2 “for free” as Europe and the US did for their own benefit in the industrial age. Of course, in the interests of climate protection, the other G20 countries cannot accept this line of argument.
However: How would it be if, for example, the USA, Japan and the EU offered India a compensation payment in order to win the huge country over to a swift entry into the CO2 certificate trading? In addition, the USA, Japan and the EU could open up their markets to Indian exporters of solar systems – after all, the subcontinent is already the fifth largest user of solar power worldwide. The prerequisite would be that India begins with a China-oriented certificate trading.
That the administration of US President Joe Biden should learn at the national level from California’s success in reducing CO2 would also be desirable in the interests of climate protection – and should be part of the transatlantic debate. Incidentally, it cannot be ruled out that large foundations will link up with companies in order to finance the global disclosure of climate protection-related patents. What Tesla founder Elon Musk has done with his patents – in the interests of expanding electromobility – also appears conceivable in some areas of the renewable energies or green hydrogen technologies sector.
Corona requires a gesture of goodwill
Speaking of patents: The West should ask itself whether corona vaccination patents are not being bought up at the level of the most important western industrialized nations (G7), thus enabling more license-based production of corona vaccines, for example in countries in Southeast Asia and South America.
In view of the difficult corona situation in Indonesia and Brazil, for example, this “gesture of goodwill” could possibly dispel existing reservations about CO2 pricing via certificate trading. Seen in this way, overcoming the pandemic and protecting the climate in the current situation can best be achieved in parallel.
The author: Prof. Paul JJ Welfens is President of the European Institute for International Economic Relations in Wuppertal and author of the book “Climate Protection Policy. The end of the comfort zone ”.
More: We can only save the world climate together