A Global Emissions Trading Scheme? Never say never

There were interesting discussions at two of the cement industry conferences that I’ve recently attended, the Global FutureCem Conference on CO₂ reduction strategies for the cement and concrete industries, and the Intercem event in Istanbul, its 100th edition. Industry experts were asked at both events if there was any prospect of there being a global emissions trading scheme (a ‘GETS’). One expert said “It’s a fairy tale - it will never happen.” Another said, “Yes, it’s inevitable. It will happen within five years.” The likely outcome probably lies somewhere between the two. But why might it come into being and what would such a scheme look like?

At the moment, around 20% of global emissions are covered by schemes that put a price on carbon.¹ 46 national jurisdictions and 25 sub-national (city, state, collection of states or regional) jurisdictions have a carbon pricing scheme. Notable schemes include the EU ETS, which covers 2Bnt of CO₂ emissions, a scheme in South Korea that covers 500Mt of greenhouse gases and a Chinese city-based pilot scheme that includes up to 1Bnt of CO₂ emissions. North American carbon trading systems have emerged at the regional level: nine US States have joined forces in a joint trading system called the Regional Greenhouse Gas Initiative (RGGI), and the Canadian province of Quebec linked with California’s emissions trading programme in January 2014.² Countries that are covered by some form of carbon pricing include those in the EU, Switzerland, New Zealand, Japan, Kazakhstan, Mexico, South Africa and Chile. Countries considering a carbon-pricing mechanism include Vietnam, Brazil and Turkey. China expects the first trades in its own national ETS in 2020.³

It’s clear then that from the first carbon tax, in Finland in 1990, that the concept has spread world-wide, although not relentlessly: Australian voters threw out a government that had successfully inaugurated a carbon-pricing scheme, in favour of a government that immediately closed it down, ‘axing the tax.’ However, whether you believe in global warming or not, this is a
wave that is picking up momentum.

Carbon pricing comes in a variety of flavours; The widespread ‘Cap and trade’ model specifies the amount of carbon that can be emitted and scheme participants are obliged to buy permits: The carbon tax model essentially taxes all carbon emissions at the same rate, while a combined ‘cap and trade and floor price’ model sets a minimum cost for carbon emitters, irrespective of market demands (such as is the case in the UK, where the government-mandated floor price is now below the price of emissions permits in the EU ETS). Trevor Sikorski describes (from page 58 in the September 2019 issue of Global Cement Magazine) how the EU ETS has evolved over the years, to - finally - become an effective scheme to deliver carbon emission reductions.

The various schemes around the world differ in their details from each other, but they approach the situation from the same standpoint - to charge the polluter a cost to pollute, on the ‘polluter pays’ principle. Philippe Fonta suggests on page 24 of this issue that there should be a ‘New International Carbon Economy’ - and I would like to suggest that this will have to be based on global carbon pricing, which would look like this:

• All major static sources of CO₂ would be included in the scheme - for example, any source contributing more than 10t/yr of CO₂ (or equivalent) - so including schools, hospitals, cement factories, iron and steel works, fossil-fuel power stations and the like;
• The cost will be incurred at the point that the pollutant enters the atmosphere (or earlier if the emission is inevitable, such as with fuel taxes, thus including minor mobile sources, such as cars and trucks);
• All sources of CO₂ will be included - including farming, transport, manufacture and energy - so that the real environmental costs of our choices would be reflected in the actual up-front prices that we pay;
• The price should be uniform worldwide, so that to emit a tonne of CO₂ in Ulaanbaatar would cost the same as in Timbuktu - ensuring a level playing field. 

A global level playing field suggests that there would be a single body that would be in charge of the scheme (the United Nations, perhaps), but this begs plenty of other questions: Who would decide on the level of the‘cap’? Where would the money go? Would a developed country have a higher cap than a less developed one?

I don’t have all the answers to these questions, but the brightest minds in the human race, who can put (a) man on the Moon, and who can use artificial intelligence to make me look 30 years older, can certainly figure this out if required. Then it’s down to the politicians to agree.

1 Greening construction: The role of carbon pricing,’ Aditi Maheshwari, IFC Climate Business Department: Global FutureCem Conference, May 2019, Brussels
2 https://climatepolicyinfohub.eu/global-rise-emissions-trading
3 https://www.reuters.com/article/climate-change-china/update-1-chinaexpects-first-trade-in-national-emissions-scheme-in-2020-idUSL3N21H02Bfirst-trade-in-national-emissions-scheme-in-2020-idUSL3N21H02B