It could be argued that nature is priceless., that its value is priceless. But not putting any price on the services it provides ends up sending out wrong signals: for being "free", many people understand that nature can be explored at will, at any cost. carbon.
The result is that the environmental damages generated by this indiscriminate use end up being paid by the entire society, especially for the most vulnerable part: the one with the least material and technological conditions to adapt to a more hostile environment.
There are already economic mechanisms aimed at correcting this distortion: are the so-called polluter-pays and conservative-receiver principles. Those who pollute remunerate those who conserve, inducing protective practices and discouraging destruction. This is a way to use economic logic in favor of environmental conservation.
perverse signs
But, in current practice, that's not what happens. A price is placed on a company's products without incorporating the cost of the pollution it generates when manufacturing the products.. This ends up sending a perverse message: suggests that the product is worth more than nature, generating what is called market failure. E, worse than that: there are still subsidies that encourage polluting activities, passing even more perverse signals. The International Monetary Fund estimates that no less than US$ are given. 5,3 trillions of direct and indirect subsidies to fossil fuels in the world per year. This equates to more than 6% of global GDP and more than total health spending worldwide.. According to data from the International Energy Agency, only direct subsidies (fuel value below the value practiced in the international market) surpass all record investment in renewable energy in 2015, which was US$ 315 billion.
Externalities
In general, the manufacturer pockets the profits he made from his activity (privatize the gains) and leaves it to society to bear the costs of its pollution (socialize the losses). It's what is called negative externality. Set a price for this externality, therefore, is a powerful way to encourage the company to reduce the environmental damage it causes.
This negative externality can be exemplified by the contamination of water, do solo e do ar, what causes disease and reduces quality of life. Another example is greenhouse gases (GEE) released into the atmosphere by a certain economic activity, changing the climate globally. This change causes a greater occurrence and intensity of extreme events, as severe dry, torrential rain, tornados, hot and cold waves that, in turn, result in landslides and flooding, deaths, mass migrations, increased conflicts, among other consequences.
All of this makes conditions more difficult for everyone., especially the poorest, increasing social inequality inside and outside countries. In everyday life – and this can already be seen on the skin – food production and energy generation increase, promote historic droughts, impacting inflation, the cost of life, the industrial activity, the jobs, and increase the incidence of tropical diseases.
in the big picture, climate change could represent a collapse of the Earth's vital systems, with unpredictable impacts, if the increase in global temperature exceeds 2 degrees from the pre-industrial level. Until now, the high average is 0,8 degree.
to zero emissions
The amount of carbon we already emit on Earth, which is cumulative, no longer allows the increase to be less than 2 degrees. Therefore, we need policies that allow humanity to adapt to the new climate defined by this increase in temperature. To stay within the limit of 2 degrees – as agreed between world leaders at the Conference of the Parties to the Framework Convention on Climate Change in Cancun, in 2010 –, we have the difficult task, but not impossible, to zero emissions by the end of this century.
The task is so big that we cannot give up any existing mechanism., be it command and control, defined by laws and regulations; either through awareness campaigns, education, investment in research and technology; either through a system of emissions trading or carbon tax.
Climate change policies have been adopted by a growing number of countries, states and cities, making use of various types of instruments to implement mitigation actions. Experience in climate policy making demonstrates that, with regard to the objective of reducing greenhouse gas emissions, no single instrument is sufficient to deal with the wide range of issuing sources and sectors and, simultaneously, achieve ambitious reduction targets at a reasonable cost.
Command and control policies in Brazil, for example, though necessary, not shown enough, making new approaches even more urgent. While global carbon emissions grew approximately 240% no period between 1960 e 2008, in the country increased by more than 680%. One of the reasons is that monitoring and compliance activities (enforcement) they are, normally, underfunded, compromising policy objectives.
Thus, command-and-control-based regulations are commonly criticized for being centralized options., inflexible and more costly than necessary. Another disadvantage is that they tend to discourage innovation, as they generally limit themselves to establishing minimum parameters, not acknowledging additional efforts.
Incentive instruments
In the last decades, as viable alternatives for dealing with environmental issues, including the reduction of emissions, Incentive-based regulations have emerged.
There are several ways to use incentives to price carbon and, thus, "Internalize to externalidade". It can be done through taxation on emitted carbon; adoption by emissions trading; or even by hybrid systems, that combine characteristics of commerce and taxation.
Incentives can also be defined to compensate those who have adopted less carbon intensive practices, instead of penalizing those who still produce intensively in carbon.
In addition to internalizing the cost of emissions, pricing instruments tend to be cost-effective, that is, are able to make a certain goal achieved at the lowest possible cost. Furthermore, signal through the pocket the importance of reducing emissions.
Under certain conditions, the two main alternatives (taxation or emissions trading) can achieve equivalent results in terms of amount of abatement and total cost to society. In practice, there are advantages and disadvantages for each of them..
taxation, or "carbon tax", provides (to the regulated) certainty about costs and reduces risks for investors, but it may not guarantee the desired environmental result.. In contrast, a permit trading system entails less uncertainty about the environmental outcome, but it can result in a volatile price and risks for economic actors.
Among the great advantages of emissions trading are the encouragement of technological innovation by those who produce, the adoption of more efficient processes by suppliers, the search for less emission-intensive products by consumers and the option for projects with lower emissions by investors.
This because, by setting a price for emissions, the trading system provides incentives for producers to replace energy inputs and sources with low-emission options and seek new technological solutions, that would not be economically viable in the absence of this system..
Furthermore, when the cost of emissions is incorporated into the price of products and final goods, it becomes easier for consumers to understand which goods and services whose production chain is intensive in emissions, becoming able to respond to price changes, that is, avoid a product when its prices increase., and replace it with an equivalent of lower carbon intensity.
Members of the value chain and governments are increasingly aware of the growing trend of carbon pricing, and aware that this movement will affect business and public policies. Thus, getting informed about carbon pricing becomes key in the definition of strategies and decision-making by companies and governments.
The original text was published in p22on.com.br. We changed some sentences and removed others in order to contextualize the subject to the current moment. For more information or questions about the subject, or for partnerships or means of implementation, between me contact us.