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Why the carbon must have a price? A point of view from Alain Grandjean

30.11.2015

As a Group committed to reducing greenhouse gas emissions, SUEZ is highlighting the urgent need to put a price on carbon and is supporting the World Bank’s declaration “Put a Price on Carbon.” The price of carbon is an essential factor in facilitating the switch from a linear economy to a circular economy that is more respectful of our resources. In the first open_resource magazine issue, Alain Grandjean, an economist, and Hervé Le Treut, a climatologist, both reveal their personal convictions about this key question. Read below Alain Grandjean’s point of view.

Credit: Rafal Buch

Climate scepticism’s time is up
Today, it is broadly recognised that greenhouse gas emissions produced by humans are changing the climate, and that they must therefore be limited. The most efficient way is to give them a value, so that anyone who reduces their emissions stands to benefit economically. Emissions of each one of these gases can be measured in carbon equivalents. This is the reason why substantial carbon tariffs are the only way of producing long-term changes of habits and significantly reducing greenhouse gas emissions. Today, most companies are prepared to pay a price for carbon, but only if it is understandable and does not upset balanced competition. More and more companies are even turning this imperative into an innovative strength.

Ideally, carbon tariffs should be based on a combination of several mechanisms
Regulation has shown that it can be effective, in particular for the automotive industry and the real estate sector. Regulation has forced manufacturers to invest in improving their energy efficiency. The slight initial extra costs incurred by standards are beneficial, and should be perceived as an investment that pays a return in terms of consumption and as a source of innovation. But this system cannot be readily applied to all product categories, and, sometimes, it is impossible to foresee all of the additional costs that it causes.

Quotas are another tried and tested mechanism, particularly well-suited to energy-intensive industries. But they are exposed to pressure from lobbies and they also assume that public authorities are capable of correctly sizing quotas and gradually reducing them in line with the economic situation.

Taxes have also demonstrated their usefulness. The example of petrol shows how taxes are an effective means of changing our individual habits and what’s on offer from manufacturers. But high taxes are politically damaging, because they reduce purchasing power. And since they do not take into account differences in income, they can be unjust for households living in the most insecure circumstances. To be both effective and just, taxes on consumption must be combined with a system of redistribution.

The price of carbon must not be the same for all
The economic players in a given country are not all equally sensitive to carbon. Some sectors could be seriously handicapped, if the specifics of their activities are not taken into consideration. On a worldwide scale, the differences between the situations and resources in developed and developing countries are such that applying a single price would be meaningless. A delicate balance must be found, because not a single industry or a single country will accept to bear most of the burden alone. It is essential that a first club of countries commits to introducing carbon prices with a price “corridor” that increases over time.

2015 is a key year
Both developed and emerging countries must make concrete, measurable and verifiable commitments during the COP21 conference. The conference must establish the legitimacy of the price of carbon and make it easier to be understood and accepted all over the world. Without strong political will, there is a serious risk of slipping into fatalism, whereas we know that the cost of inaction will ultimately become colossal.

Alain Granjean

Find this article in the first open_resource magazine issue: “How to make the climate change ?





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