Climate Talks Deadlock and the Fiscal Cliff Spark Fresh Interest in Carbon Taxes

November 28, 2012
This is a joint post with Lawrence MacDonald.What do the stalled climate talks getting underway in Doha, Qatar, this week and the partisan jousting in Washington over the impending “fiscal cliff” have in common? Not much if you get your information from the mainstream media, which has mostly either ignored the idea or poured cold water on it. Below the surface, however, there is fresh interest in the United States in taxing carbon pollution, including from some unexpected quarters. Such a move can’t come soon enough.This week the 18th session of the United Nations Framework Convention on Climate Change (UNFCCC) global climate negotiations begin in Doha, Qatar, with expectations for an effective solution to the problem of global warming lamentably low.  This is particularly bad news for developing countries that will suffer the most damaging consequences from a warmer and more volatile climate, as my colleague David Wheeler documented in a paper on Quantifying Vulnerability to Climate Change.Governments participating in the global climate talks have committed previously to hold the average rise in temperatures to 2 degrees Celsius.  But a new report issued by the World Bank warns that “scientists are nearly unanimously predicting” average increases of 3.5 to 4 degrees by the end of the century based on the so-far anemic pledges to cut greenhouse gas emissions.  If these commitments are not met—and already there are signs of slippage—a 4 degree increase could occur as early as the 2060s.The World Bank commissioned the report, prepared by the Potsdam Institute for Climate Impact Research and Climate Analytics, to better understand the potential impact on development of a 4 degree warmer world.World Bank president Jim Kim said the report offers “devastating scenarios.” These include: inundation of coastal cities (think New York); risks for food production that could lead to more malnutrition; unprecedented heat waves; severe droughts and floods; more high-intensity tropical cyclones; and irreversible loss of biodiversity. While all nations will be affected, the distribution of impacts is likely to be tilted against poor countries and poor people.The report concludes that an increase of 4 degrees “simply must not be allowed to occur” and urges “early, cooperative international action” to avert the catastrophe. Warming of 4 degrees can be avoided.  But the fact that Doha is the 18th global climate summit suggests that the chance for “early” action has already been missed.Clearly new approaches are needed.Enter a new book by CGD senior fellow Arvind Subramanian and Aaditya Mattoo, a World Bank trade policy economist, called Greenprint.  As described in a short video and a recent Financial Times oped by the authors, the book calls for a fresh approach built on a new grand bargain instead of the failed path of negotiated emissions cuts. With a Greenprint approach, China and other emerging economies frame a deal in which rich countries would agree to price carbon — through carbon pollution taxes or cap-and-trade — highly enough to spark a technology revolution in cheap renewable energy. In exchange, the cash-rich emerging powers would agree to end fossil fuel subsidies (globally more than $700 billion annually), contribute to a global clean tech fund, and commit to future emissions cuts as new low-carbon technology becomes available.The idea might seem far-fetched, except that there are signs of growing interest in carbon pollution taxes among as a way to address the US fiscal crisis—the combination of mandatory tax increases and steep spending cuts set to take effect at the end of the year unless Congress comes up with an alternative.One sign of this interest was the unexpectedly large turnout in early November for a meeting on carbon taxes hosted by the conservative American Enterprise Institute, and co-sponsored by the Brookings Institution, the International Monetary Fund, and Resources for the Future. The day-long discussions, which covered such wonky issues as the macroeconomic effects and distributional impacts of carbon pollution taxes, drew more than 200 people from across the political spectrum. More recently a handful of prominent conservative politicians have signaled a possible willingness to break with an outdated “no-new-taxes” pledge to avert the fiscal cliff.A thin reed of hope? Perhaps. But given the dire alternatives outlined in the World Bank’s 4 degrees report, it’s perhaps not unreasonable to hope that the US politicians will gather the courage to stand up to the fossil fuel lobby before it’s too late.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.