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Cutting emissions: my country’s, BHP’s, mine, or thine?

By Geoff Carmody - posted Tuesday, 29 October 2019


Really? Look no further than the 'big Australian', BHP. Recently, BHP has announced it 'accepts' some responsibility (how?) for its customers' 'scope 3' GHGs. 'Scope 3' GHGs is jargon referring to emissions generated by importers and users of BHP's energy exports. It includes other countries' GHGs emissions production.

If so, are these energy importers exempted from reporting such GHGs production from their own GHGs? Or does it mean such GHGs reductions are double-counted, once in Australia as exports, and then again offshore as imports? Or – excuse my cynicism – is this just part of the current fad: more empty corporate 'virtue signalling'?

Is there a consistent solution? Yes. It requires sheeting home responsibility for GHGs to everybody, and ultimately consumers. Producers sell stuff because consumers want to buy it. GHGs embodied in that stuff come with the purchase. Rich consumers (developed countries) consume more GHGs per capita (increasingly via imports). It's fair to ask them to pay more per capita for that consumption, but not to exempt others' consumption.

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A globally uniform ad valorem price on all GHGs consumption does the job. It eliminates trade competitiveness concerns for those taking the lead. It removes trade advantages for laggards. It doesn't guarantee an eventual global deal, but does improve its chances.

A GST-type price on GHGs ensures everybody in the supply chain, from primary producer to final consumer, faces costs of emitting or cutting GHGs. Suppliers will pass this cost on to the next stage in the supply chain if possible. If not, they wear it. Incentives to cut GHGs are pervasive, consistent, and transparent.

In Douglas Adams' Hitch-Hiker's Guide to the Galaxy, the computer Deep Thought was asked the question: 'What's the meaning of life, the universe, and everything'?

After 7.5 million years' reflection, Deep Thought warned the elders, gathered to hear its answer, that:

You're really not going to like it.

They didn't. Its answer was '42'.

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On global warming, some say the answer is 'no more than +1.50C'. If so, we continue to ignore the best global policy option for achieving that. Despite its greater efficiency, transparency, global consistency, and fairer sharing of responsibility, it seems we really don't like the national GHGs consumption answer, either.

Apart from choosing far more costly but ineffective alternatives, as we have, what to do?

The Hitch-Hiker's Guide cover might help. It advises the reader, in large, friendly letters:

Don't panic.

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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