Intense Pressure on Carbon Costs?

With the release of the fifth assessment report by the IPCC, and more specifically the Summary for Policy Makers (brilliant idea), it seems like something nice and topical to comment on. I have not, as of yet, read the summary (that comes later), I want to comment on the responses to climate change in a more general sense, starting with climate change denialism.

Even if there is anything to the position that humanity is not responsible for the increase, should we not still work to minimise the negative effects? OK, so our carbon emissions aren’t problematic (despite the massive release of carbon back into the atmosphere from fossil fuels), but carbon is increasing in the atmosphere, and the earth is warming, should we still do nothing just because it’s not our fault?

This position can be summed up best as follow:

No single individual is at fault, obviously, and that is increasingly the case. The human race quadrupled in size over the course of the 20th century, mostly due to the massive growth in live births and increases in longevity. Unfortunately the vast majority of those living individuals (in the industrialised world at least) would rather be comfortable in the now, than worry about anyone else’s discomfort in the future (even their own, ironically).

Those comforts (and indeed profit margins) are bought, one way or another, with electricity, whether from the national grid, or individual generators (stationary, two-, four- or more-wheeled varieties). Comforts are also things we fall back on when times are hard. And times are hard.

What makes times hard? There’s the financial crisis, of course, a catastrophe also predicated on a refusal to take responsibility for the knock-on effect of action. Indeed, one can’t help but wonder how many people who were making money hand-over-fist from the sub-prime market made their fortunes from businesses with laissez-faire attitudes to the environment.

So as not be branded a conspiracy theorist: there are probably both direct and indirect links, both causal and otherwise, in both directions.

Laissez-faire attitudes to other people and the environment arising from laissez-faire capitalism? Not exactly a stretch, is it?

As we’ve seen with the hue and cry about tax avoidance by major corporations, there is a pattern that often (and, it seems, increasingly) emerges. People, or more correctly businesses, do what’s in their best interests, and they do so, for the most part, within the law. Suddenly the failure of the law to keep pace with a pretty generic feeling about fairness (or science) comes to light, and the powers that be (politicians) scapegoat a few key players in order to be seen to be doing something.

Alternatively, instead of scapegoating a few key players, laws are enacted that punish entire industries for doing business the way that the laws, to that point, encouraged them to do business. And invariably these laws are punitive. Why? Because politicians know very well that they were both directly and indirectly encouraging industry to carry on making money for the country, pushing up GDP, and just generally making the numbers look good whilst they’re in power. But when they get caught, flat-footed, failing to take into account the negative impact of those businesses in areas other than productivity and growth, then politicians blame industry and have to be seen to be doing something positive.

“I didn’t do it. Nobody saw me do it. You can’t prove anything!”

So the metric is at fault – productivity and growth. But worse, the punishment is seriously flawed (as most punishments are). We have a situation where politicians must make moves to force industries to change the way they operate because of the structure of the laws previously enacted. Any such change necessarily has a cost of compliance, but businesses are in the business of being in business. Counter-intuitively, businesses are not in the business of keeping customers happy, no, not any more (one of those costs of compliance). Now the shareholders are a company’s key concern, and the only way to keep a shareholder happy is to pass these costs of compliance on to the customers.

So what am I getting at?

I’m getting at an ultimate irony.

It seems that those least in favour of ‘cap and trade’ to resolve the emissions crisis are those most in favour of laissez-faire capitalism… and they’re right. Cap and Trade ultimately penalizes the end user, not the business that created the problem by doing business in the way that local laws allowed for, and not the politicians that enacted those laws (except in their capacity as end users, themselves).

Politicians are necessarily a reflection of the people, and people like to take revenge; something that is readily seen in the criminal justice system. In the carbon and the environment situation, it’s a case of taking revenge on businesses by making them pay for their emissions. Low-emission industries get a new revenue stream as they sell off their credits (good news for the shareholders).  High-emission industries pass the costs on to the end user, with no real incentive to work particularly hard to reduce emissions. So the populace get to feel comfortable about “doing something” with regard to carbon emissions whilst they drive up the cost to themselves of anything derived from high-emission industry, and do very little to impact emissions over all… and this particular carbon cycle starts all over again.

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