Pollutions in China and its ETS - a wrong priority

Comments on Alex Lo “Carbon trading in the Asian Century: China’s ETS on track”, 16/01/2013, https://theconversation.edu.au/carbon-trading-in-the-asian-century-chinas-ets-on-track-11438


What you mentioned is too complicated than necessary.

One of the problems in international negotiations on climate change is that it has included too many details. Instead, it should be focused on important ones, such as CO2 and leave most relatively unimportant emissions out.

Further, the many problems you mentioned in the Nordhaus study/paper have the same relatively easy solutions. For example, the key for a global solution is the fairness of an agreement. Once that is achieved, participation other problems will be easy to dealt with.

What solution is there for international fairness? In economics, it is fairly simple, that is, a system of user or emitter pay would do.

Is that system difficult to achieve? No, once one realise to set an international carbon price and every country is taxed for carbon emissions and the revenue is then distributed by population shares to each country.

Such a system may not achieve all the objectives from the start, but over time it will be effective and achieve the target. This is because there will be enough incentives for innovations to reduce emissions and for the use of alternative and more economic energy sources.

The difficulties Nordhaus got is the unrealistically perfection that created unnecessary problems. If everyone falls into that kind of trap of thinking, then it would be a problem of unsolvable.

But once a different thinking is adopted, it is a whole different story.

Why is it so difficult to reach an international agreement, given in economics the principles and methods are so clear for a solution? The reason is that applying the economically sound principle and method would mean the rich and powerful countries would have to pay more, much more because they emit more on the per capita basis and powerful countries would not like to do it. That is why the US has refused to do Kyoto, that has caused a serious other problems, including developing countries refusal to commit to a legally binding regime for them.

Now large developing countries are strong enough to resist the pressures from powerful countries to an unfair agreement.

Effectively, it is a loss-loss situation, unless powerful countries realise there must be a fair agreement.

Now back to the focus of the article, that is, ETS in China. Looking at the air pollution in China including in Beijing recently it is clear that China has a huge task in dealing with environment.

It also points to priorities in its task in terms of benefits and costs of analysis to determine what is most urgent and what can be left for a different time.

From that point of view, while ETS may achieve that, it does appear to be the best approach to adopt, unfortunately.  

Focusing on the more visible and localised pollutions should be the priority and for that the international experience from industrialised countries is very valuable.