Recently the Prime Minister stated that unless we reduce our carbon emissions, our economy could become unsustainable. I have not heard an uproar in response to this statement, even though it may have sounded dramatic or possibly too extreme.
However, we need to reflect on how true it is. The World Wildlife Fund this week stated that unless the world economy reduced its carbon emissions we would have to undergo a low carbon revolution, as otherwise the market economies would no longer be able to sustain their current production capabilities. This may also be described as a drastic statement but the two statements point to the same direction.
The relevance of this statement has to be seen in the light of the international negotiations taking place on climate change, with the next session being held in Copenhagen, Denmark, in December. We need to appreciate that even if there is some sort of international agreement, what matters most are the policies adopted by each country to control their own emissions.
For example deforestation accounts for nearly one-fifth of the so-called greenhouse gas emissions. What will countries like Indonesia or Brazil, where deforestation is progressing at a fast pace, do? Another example is China, the biggest originator of greenhouse gases. It said that it will cut carbon emissions, but it did not say by how much, or by when, or how. Up to a while ago the US was taking an approach that differed from that of the EU.
The position of the US appears to have changed since Barack Obama became President. These divergent views on how best to approach climate change result form the expected economic impact of the measures that need to be taken. In other words, several countries are very wary about limits to carbon emissions as they fear that it would put brakes on the development of their economies.
One may argue about the validity of the studies that have taken place around the world. However, there is no escaping the fact that, unless the world addresses the situation, some countries may disappear totally from the face of the earth. One example that is often cited in this regard is the Maldives. Added to this is that change would be forced on to us all and the economic impact of such forced change will be more severe and more dramatic than the impact of the current economic recession.
This means that the economics of climate change requires us to manage the change process that we need to undergo to cut down carbon emissions.
Malta is not exempt from this change process. For example the country is still highly dependent on fossilised fuels (that is oil). We are the country in the EU that has made least progress in the production of renewable energy. If we have to start paying a carbon price as set by the European Emissions Trading Scheme, households and businesses may have to face even higher electricity charges than we have today. Only this particular aspect will make businesses operating in Malta less competitive.
Other countries have sought various policies on how to cut down carbon emissions, such as subsidising heavily renewable energy or regulations that encourage the efficient use of energy. Whether such policies work or not will depend on the nature of a country’s economy and public buy-in.
Our move towards an economy that is more based on the tertiary sector than on the secondary sector has certainly reduced the demand for electricity. However, habits and a significant increase in the standard of living in the last 20 years have more than made up for this decrease, with the result that there has been a net increase in the demand for electricity and for petroleum products.
I am a very strong believer in “the polluter pays” principle as it makes use of the price mechanism. However, this is not enough. Apart from making households and businesses pay more if they use more electricity and more fuel, such as petrol and diesel in motor vehicles, government needs to reward those that reduce their demand for such products.
I believe that the plastic bags initiative has curtailed the use of such bags as can be seen at any grocery shop. We need to adopt similar initiatives to reduce carbon emissions for the sake of our economic well being.