Climate change is now widley recognised as the greatest environmental threat facing the world. Arguably, it takes us beyond our typical understanding of what an ‘environmental issue’ actually is, because if climate change continues unchecked then it is not just the natural world, but the political, economic and human landscape that will be irreversibly and devastatingly altered. Surely then, someone must step up and take responsibility for protecting us from this fundamental threat?
Government responsibility
The knee-jerk reaction is that this must be a role for government. After all, isn’t the whole purpose of government to act for the greater good of its citizens? As an issue, climate change can feel so distant that individuals lack the sense of threat needed to take direct action. Furthermore, the investment cycles of the market are currently too short-term to automatically take global warming into account. In short, it seems as though this is the very type of issue that governments were designed to tackle – they can act on the bigger picture and in our long-term interests.
Of course, the problem here is that the time horizons of climate change also expand beyond the average democratic government term. Still, in the UK we are already seeing a political consensus emerge, with all three main political parties pinning their green credentials to the mast and putting climate change at the heart of the policy agenda.
Global policies
In fact, all around the globe the regulatory framework is starting to evolve. The best-known initiative is the Kyoto Protocol, an international agreement covering 164 countries globally and 55% of the world’s greenhouse gas (GHG) emissions. It commits ratifying countries to reducing their carbon emissions over fixed periods of time. However, political progress is also being made in many other contexts. Various US and Australian states as well as several world cities are developing robust policy frameworks to address the climate issue. In July this year, Florida’s Governor Charlie Crist announced a range of targets, including one to reduce emissions of greenhouse gases by 80% by 2050 on 1990 levels. This followed on from California’s AB 32 bill, signed last year by Governor Schwarzenegger, which puts a cap on California’s GHG emissions and creates a clear path for a market-based system and other mechanisms to bring the state’s emissions back down to 1990 levels by 2020, a 25% reduction.
One of the possible regulatory approaches for meeting the target set out in AB 32 would be to introduce a ‘cap and trade’ system. Indeed, the emergence of emissions trading, which puts a price on carbon, is one of the strongest trends in tackling greenhouse gas emissions. Trading systems enable participants to reduce emissions at the least cost, giving them the option to buy reductions from elsewhere when their own abatement costs are high. The European Union Emissions Trading Scheme (EU ETS), the highest profile example, traded over €19bn in 2006.
There are many other similar schemes evolving. The Regional Greenhouse Gas Initiative in the US, for example, brings northeastern and mid-Atlantic US states together to reduce emissions from electric power generators via a regional trading scheme. In the UK there are plans to extend emissions trading beyond those companies that pass the threshold for the EU ETS, and also to launch a compulsory domestic scheme for energy users with electricity bills exceeding £500,000 a year, which would cover organisations as diverse as Tesco, BBC and Birmingham Council.
