Many of us are already aware that climate change is one of, if not, the biggest global issue of our lifetime. Over the past few centuries, we have increasingly relied on fossil fuels to run our everyday lives, resulting in excessive amounts of greenhouse gases being emitted, such as carbon dioxide.
Carbon dioxide increasingly traps more heat within our atmosphere leading to a rising average global temperature. It has reached a point where we are witnessing more severe weather conditions such as floods, droughts, forest wildfires, and storms than ever before globally.
At the rate that average global temperature is rising, we will eventually arrive at a situation where many coastal cities, regions, and entire nations will be underwater due to a massive sea-level rise as a result of melting glaciers and ice sheets worldwide.
The natural question to ask next is what must we do to address climate change and avoid a climate disaster? We have to globally achieve carbon neutrality, also known as “Net-zero” within the next few decades. Net-zero is a state in which we are emitting as much greenhouse gases as we are taking out from the atmosphere.
So how do we achieve Net-zero? The research shows despite all current efforts to date, global greenhouse gas emissions are increasing and breaking records annually even post the signing of the Paris Agreement in 2016. Only the COVID-19 pandemic forced a slight dip in global emissions as a result of governments around the world issuing lockdowns and work from home being prevalent early in the pandemic. Global emissions are expected to pick back up and exceed their previous levels once the pandemic ends.
Global CO2 emissions in 2020–2021 had a slight dip only because of the worldwide response to the COVID-19 pandemic with work from home and lockdowns prevalent across the world.
We are off track in solving the climate crisis and that is just the reality of the situation. We have put too much attention on ambitious targets that are very difficult for top-emitting nations to achieve or get on board with considering the economic repercussions; instead of looking at the incentives that drive our global system.
The saying goes, “money makes the world go round” and whether or not you like to admit it, at least economically it is true. Market forces are still the most powerful driver of economic change. The reality is the world is still very dependent on fossil fuel because it is still the most economically affordable and utility-wise easiest energy resource to use compared to the alternatives, especially in poor nations.
Emerging dominant renewable energy sources such as solar and wind are still not superior enough compared to fossil fuel in terms of utility and cost as it needs to be, to completely replace the latter globally; especially when taking into account the limitations of current large-scale energy storage both in technology and cost, on which renewables depend upon.
Low and zero-carbon technologies (LZC) as a whole right now that include renewables are still not economically superior to fossil fuel technologies. That is just the hard truth.
Therefore, to achieve climate objectives, the world must tilt the scale in favor of LZC by making fossil fuels economically less attractive. This starts with the biggest emitting nations collectively, also known as the G20, as they are responsible for close to 80% of global greenhouse gas emissions.
The G20 as a collective must make the use of fossil fuel increasingly economically less attractive than it currently is. This leads to the most important action that must be taken to avoid a climate disaster. Starting with the G20, the world needs to all come to a unanimous agreement in adopting a treaty that makes the use of fossil fuel economically less attractive via a global minimum carbon tax (GMCT) with an escalator clause.
A carbon tax is simply a tax that governments charge for greenhouse gas emitted as a result of the production of goods or services. Under a GMCT, governments around the world will impose a carbon tax that is at least at the GMCT price in which emitters must pay.
There are many reasons for a GMCT versus alternative mechanisms. A GMCT is easy to comprehend, simple to implement, consistent, less administrative, less manipulatable, proven to lower emissions, and most importantly, it addresses the key issue among the biggest emitting nations in the world which is competition.
Competition and staying economically competitive against rivaling nations is one of the major obstacles governments face in enacting stronger policies to tackle climate change. A GMCT eliminates the competition concern as all the top-emitting countries will be operating under the same playing floor. Therefore, no superpower nation will be gaining an edge over a rivaling nation economically or politically as a result of tackling climate change.
What is an escalator clause and why should it be included as part of a GMCT agreement? An escalator clause or “escalator” can simply be understood as an agreed-upon rate in which the price of the item in question, which in this case is the cost for carbon emission, increases over time. There are two main reasons why an escalator should be included in a GMCT agreement.
The first reason is that having an escalator increases the chance of having a GMCT to even be agreed upon and getting adopted by all the top-emitting nations. With an escalator, more climate-conscious nations will more likely be willing to concede to climate hesitant nations on a lower than desirable GMCT to start.
The second reason why is to gradually raise the global price for carbon over time in a way bearable for top-emitting nations that are climate hesitant, and to ultimately reach a GMCT price deemed by climate experts to be capable of achieving big picture climate goals. (Though my prediction is that the impact of the actual adoption of a GMCT to start despite how low the GMCT may initially be, will be far greater than what climate experts and environmentalists will expect.)
In the end, it is important to remember that a global issue like climate change requires collective action from the world, especially from the G20, versus individual effort. Otherwise, it all becomes futile. The proof is the year-to-year increase in global emissions despite all local, regional, and national efforts.
A GMCT will increasingly tilt the scales in favor of LZC. It will be an overarching catalyst that will drive all other decarbonization efforts in helping the world reach net-zero before it’s too late.
We who reside in a G20 country must advocate our elected head of government to urgently negotiate with all other G20 leaders on a GMCT being agreed upon and adopted. As it is either the world, led by the G20 acts together on climate change or utter failure.
It is still not too late, we can still prevent the worst-case scenario. Therefore, let us continue to work in bringing the entire world to the table in achieving a sustainable future.
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