Using economics and law to decarbonise the world

Using economics and law to decarbonise the world

The EU is known as one of the world’s most pro-science governments and, with a vast population and the third largest economy behind the USA and China, massive economic clout. The facts of climate change are no longer in doubt, not least because companies like Exxon had internal research groups flagging warning signs long before the company itself would admit to the reality, just as with smoking and sugar industries.

One of the main concerns about being at the vanguard of climate action, though, is that if you go first, you put your industries at a financial disadvantage. This is only partially true since renewable energy is now cheaper, than are fossil fuels, but there are still investments to be made in power grids, energy storage, and in changing factories from the manufacture of petrol (US: gasoline) and diesel to electric or hydrogen fuel cell powered cars.

Decarbonise the world’s economy

The EU recently agreed a Carbon Border Adjustment Mechanism which will effectively impose sanctions on countries that don’t use clean electricity from 2026, meaning the EU won’t be allowed to import goods from countries like South Africa where 80% of all power is currently generated from coal.

The goals here are to:

  • compel other countries to move to greener economies,
  • protect European countries from punitive laws that don’t have a global effect; and
  • ensure European companies and countries can’t export their climate impacts.

Punitive action alone, however, will not work. This is especially true if, for example, the United States, Australia, Canada, and China, don’t decarbonise (US: decarbonize) their economies and continue to trade with polluting countries.

A group of Western nations (the EU, UK, US, France, and Germany) also created two “JET” (“Just Energy Transition”) agreements which will provide enough funds for South Africa (US$8.5bn) and Indonesia (US$20bn) to meet zero emissions in their energy generating capacity before 2050.

Difficulties (and hope?) ahead

The world has experience with making important and hard decisions. It managed to repair the hole in the ozone layer through the Montreal Protocol in 1987 (and in nine subsequent improvements). In fact climate protection treaties are the most universally agreed-upon in the history of the UN.

We have reason to be pessimistic when fossil fuel extraction is still being invested in, in 2023, but we also have reason to be optimistic – the US is decarbonising despite its voters, and the EU and UK are putting their weight behind ensuring other countries don’t try to take advantage of falling prices in coal, oil, etc. to try to out-compete those following the facts.

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