Monday, November 22, 2010

Update on Stern comments

OK, this makes more sense. What Lord Nick did say was that US exports would suffer if, as is very likely, Europe taxed carbon produced through the production chain to source on all products including imports.

He did not threaten a boycott. The Huffington Post extrapolated his comments to make it seem as if he did.

How likely is it that Europe begin to directly tax carbon instead of, or in addition to, their current cap and trade scheme? I'd say pretty likely, if as is also likely, there becomes a protectionist effect. Euro-unions would love that.

What would this then do to US politics? I expect we'd try to complain via the WTO and then, when that failed, individual companies with a strong stake in Europe, such as GE and GM, would reverse engineer their European exports to reduce carbon content.

Money talks. Nick is just explaining the facts of life.

Meanwhile, conservatives all over the country will continue to try to act as if climate change wasn't happening, and as if the rest of the world had not already realized this and moved on to a new economic reality. The ultimate result, in five, ten, fifteen or twenty years, will be to hand over many if not most US leads in green technology to Europe and even China. Because despite burning millions of tons of cola per year, China is investing heavily in green.

While the US owns the patents on all of the best technology solutions but refuses to join the party.

Unless, of course we keep seeing that scarcity premium attaching to the oil price. In which case it will be oil price, and the price of substitutes such as Bloom Boxes, Hyperion reactors, wind, solar, and yes, even coal, that condition US markets for engineering products.

I never thought I d find a reason to be thankful for high oil prices, but there it is. The only reasonable hope for keeping the US in the green energy lead.

And all this, when you think about it, begins to make sense out of the Gubernator's recent promise to reorganize after his final term as a climate campaigner for green business. Silicon Valley technology leaders have a major stake in US green technology. And of course Arnold would be very well connected. Leading to his new career. It's going to be the Terminator versus the Koch Brothers for the heart and soul of American business.

The real Nick Stern story is on the AFP wire:

UK climate economist warns US of trade boycott

LONDON — A British climate change economist at the heart of international negotiations seeking a greenhouse gas deal said Friday that the US faces a trade boycott if it fails to rein in its carbon emissions.

Lord Nicholas Stern, author of the British government's 2006 report on the economics of climate change, warned the US that many countries would shun its goods if they deemed them to be "dirty."

"The US will increasingly see the risks of being left behind, and 10 years from now they would have to start worrying about being shut out of markets because their production is dirty," Stern told The Times newspaper.

"If they persist in being slow about reducing emissions, US exports will start to look more carbon intensive."

Stern advises several G20 countries and his 2006 Stern review is regarded as the most in-depth and well-known study into climate change economics.

World leaders will meet at the UN climate change conference in Cancun, Mexico, in 10 days' time to try and kickstart emissions negotiations which faltered at the Copenhagen conference last December.

Stern said that countries who have pledged to reduce their emissions would resent competition from "dirty" exports. He highlighted aircraft, cars and machine tools as goods which could face restrictions.

"If you are charging properly for carbon and other people are not, you will take that into account," he said. "Many of the more forward-looking people in the US are thinking about this."

US President Barack Obama pledged before the Copenhagen conference to cut US emissions by 17 percent on 2005 levels by 2020, but has been thwarted by Congress.

Any new US commitments within the next two years are highly unlikely following the Republican party's gains in the midterm elections.

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