How to cool the world
THE Intergovernmental Panel on Climate Change (IPCC), the body set up under the auspices of the United Nations to produce a global consensus on the science and economics of climate change, reports once every six years. On May 4th, it published the third tranche of its fourth report. The first two tranches, on the science of climate change and its impact around the world, made for depressing reading. Climate change was getting worse, mankind was responsible, and most regionsespecially the poorer bits of the worldwere going to suffer. The third tranche, by contrast, was upbeat. Climate change may threaten mankind, but mankind has a good chance of averting itif it puts its mind to it. Some greenhouse-gas emissions, as the IPCC points out, can be cut at no cost at allthrough straightforward measures such as improving insulation and binning wasteful incandescent light bulbs. Such measures could both save people and companies money, and save the planet from a chunk of carbon emissions. At present, they don't bother to do much, because electricity bills are not threatening enough; but governments might take a hand. The European Commission, for instance, is planning to ban incandescent light bulbs in two years' time. Such measures could make a difference, given that lighting accounts for 17% of global power consumption. In other areas, low-carbon technologies would be more expensive than conventional onesbut not necessarily exorbitant. In power generation, for instance, the biggest single source of carbon, the cost of wind and solar power has fallen sharply over the past couple of decades to the point where, in favourable locations, wind power can compete, in price terms, with more conventional forms of energy. Better still, the cost is likely to fall further. Wind turbines are going to go on getting bigger, and thin-film technology is likely to bring down the price of producing solar panels. Coal, as the IPCC recognises, remains a big challenge. It is enjoying a revival, partly because gas is expensive, and partly because coal supplies are widely distributed around the globe at a time when big energy consumers are keen to reduce their dependency on oil from politically volatile places such as the Middle East, Russia and Venezuela. Coal is the dirtiest fuel; but there are a number of projects to capture carbon dioxide emissions from coal and store them under the earth's surface. If that can be done on a large scale and at reasonable cost (a big if), it offers a quick fix for a sizeable proportion of emissions. But to bring such technologies to market, the cost of generating energy from fossil fuels will have to rise or the cost of generating energy from clean sources will have to fall, or both. That can be achieved by taxing carbon or subsidising clean energy, or both. Subsidies for clean energy are rising. George Bush, uncomfortable with anything that looks like a carbon tax and happy to pass round the pork, has been throwing money at companies investing in clean energy. Some European countries, such as Germany, have outdone him in their hurry to give taxpayers' money to renewables. Economists are uncomfortable with such measures, because history suggests that governments are bad at picking winning technologies; but these subsidies are certainly creating a demand for clean energy which should help bring down the price in the long run. The more important question, though, is whether the world is prepared to tax carbon. Europe is the only major power that prices carbon. It does so through its Emissions-Trading Scheme (ETS). Polluters are given tradable carbon credits up to a set level, and have to buy more if they want to emit more. This scheme has established a carbon pricethough, thanks to some cunning footwork by national governments and industries, which overestimated emissions and thus persuaded the European Commission to over-allocate credits, the price is currently close to zero. That's not much use. The IPCC reckons that a carbon price of $20-50 by 2020-30 is needed to stabilise atmospheric greenhouse gas concentrations at 550 parts per million. That is a level which some (but not all) scientists think reasonably safe: it would, says the IPCC, limit the increase in temperature to 2.8-3.2C. To achieve this, it would have to be applied globally. To tax, or not to tax Europe's price is moving in the right direction. The European Commission, angry with national governments and industries which, in its view, pulled a fast one in the first phase of the ETS, has slashed national allocation plans for the second phase, in 2008-12. The 2008 price has therefore risen, and hovers not far below 20 ($27). Even in the United States, there are signs of movement towards the idea of pricing carbon. California has legislated binding emissions reductions, which it plans to implement through a European-style cap-and-trade system. That means a carbon price. Threatened with the possibility of a patchwork of state-wide systems, many corporations have come to support the idea of a federal system. There is now a handful of competing bills in Congress that would legislate such a system; and most of the serious candidates for the 2008 presidential race agree with this idea. Whether America would really accept a price on the level that the IPCC envisages remains far from clear. Another big uncertainty is how the developing world, wary of anything that would limit its entitlement to grow, could be persuaded to buy into this idea. Yet there are some grounds for the upbeat tone of the IPCC's report.