The European Union’s Joint Research Centre (JRC) has just released a document which could eventually see a fundamental change to the manner in which decarbonisation is pursued in the agricultural sector.
In the early 1990s, when the first reports from the United Nation’s Intergovernmental Panel on Climate Change (IPCC) warned that emissions were excessive and needed to be reduced, the policy response was inadequate and emissions thresholds have been breached year after year.
There has been a better response in the European Union than elsewhere, but time is running out and the failure of the COP conference in Baku, Azerbaijan in November is the latest in a long line of disappointments.
Externality
An essential explanation is the simple fact that the planet has over 200 sovereign governments but just one atmosphere. There is an ‘externality’ in economics jargon, each act of consumption imposes costs on everyone else, rather like illegal parking.
The economist Nicholas Stern, advising the UK government almost 20 years ago, described global warming as the greatest externality that had ever arisen in human affairs.
Unless planetary emissions are reduced, no single country, not even the biggest, can shoulder the entire burden alone.
Every country has an incentive to encourage everyone else to cut emissions and to dodge doing so itself.
If Ireland cuts emissions to zero it would do nothing to address the global crisis
The incentive is greatest for very small countries which cause – whether measured by production or consumption – a tiny portion of planetary emissions. In the current year, for every tonne of carbon (or equivalent) attributable to Ireland, the rest of the world will notch up between 850 and 900t, depending on the measurement methodology employed.
If Ireland cuts emissions to zero it would do nothing to address the global crisis. China, the biggest emitter, will be responsible for around one-third of the total.
China
Only if China were a planet would it reap all the benefits of cutting its emissions. In fairness, China has just one-sixth of the world’s population and an active climate policy.
Current policy focuses more on imposing output targets on production, country by country
Whatever about China, it would be irresponsible for countries like Ireland to make no effort at all and each member of the EU is bound by common climate obligations.
These are evolving and the JRC report, by Mattia Ricci and co-authors, argues that policy should focus on discouraging demand for high-emissions products and services whatever their national origin.
Current policy focuses more on imposing output targets on production, country by country.
Their preference is a focus on measures like carbon taxes, designed to prod end-users in the right direction by altering the composition of demand, rather than on supply-side measures like production constraints on the output side.
All goods and services absorb raw materials, labour and capital in their production
It also argues against subsidies for renewables or other low-carbon technologies since penalising high-emission alternatives on the demand side can achieve the same objective.
All goods and services absorb raw materials, labour and capital in their production.
In the ordinary course of competition through international trade, those able to deliver at lowest costs will dominate markets, reflecting their natural endowments and comparative advantage.
For many products, that is not enough if there are significant externalities – the combustion of petrol, wherever it is produced, creates emissions and there are two options.
Impose taxes at the point of consumption or impose limits on the producers.
The first is the option chosen in high-income countries anxious to reduce emissions, as against the clearly daft alternative of restricting production in Saudi Arabia, which happens to be the lowest-cost producer.
The planet is better off if production is routed to the source with the lowest costs and importing countries trim demand, which is what we do with products like petrol.
The JRC has concluded, in earlier reports, that Ireland, taking emissions externalities into account, is a low-cost producer for dairy products in this sense.
It enjoys natural endowments of soil and climate which make it competitive as against countries in southern Europe, for example.
Restraining output
To restrain output in Ireland or in several other regions in northern Europe is not the most efficient policy. Some excitable journalists urge subsidies for speculative technologies like Atlantic wind converted to hydrogen, painting a picture of Ireland as the ‘Saudi Arabia of wind’ when the JRC approach would see it, in the here and now, as the Saudi Arabia of cheese.
Following their logic to implementation would require countries to agree on minimum domestic taxes in the importing regions across the full range of products and services, a far cry from the current situation and hardly likely given the failure to make progress in Baku.
Many countries have negligible taxes even on petrol, where the retail mark-up on ex-refinery prices in Europe is up to 100%.
Within Europe, where national sovereignty is more easily pooled, the prospects for a policy shift are better and the JRC report should be attracting attention from the Irish farming organisations.
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