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How Europe Can Lead the World to Reduce its Carbon Footprint

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27/01/2020

How Europe Can Lead the World to Reduce its Carbon Footprint

Europe Environment

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Eric Chaney

Senior Fellow - Economy

European countries are among those most likely to reach the objectives of the Paris Climate Agreement. The members of the European Union reiterated with almost unanimous agreement their objective of being carbon neutral by 2050. Their actions, with a 23% decrease in territorial emissions since 1990, are moving in this direction. However, at this stage, the 2050 objective still seems out of reach.

Faced with the climate emergency, public opinion has expressed concern and demanded that governments do more as soon as possible, without always completely grasping the scope of the actions to be taken or their resulting costs. In order to reach their objectives, European countries must continue to raise citizens’ awareness of the changes that are necessary in their everyday lives, to involve businesses and regional and local governments, and to accelerate policies for change in key areas such as energy, transportation, and production and consumption patterns. This is the objective of the European Green Deal, which was proposed by the Commission on December 11, 2019 and which lays out a multifaceted strategy and an agenda.

However, an essential dimension is lacking in EU actions, and without it, there is a risk that the 2050 objective will never come to fruition.

Today, only the European Union is capable of putting this into action, for it is politically mature and of adequate size to succeed.

In order to modify behavior and consumption, one of the most effective and least expensive strategies is to impose a uniform carbon price that is high and increases over time, in order to raise the price of goods and services so that they reflect the future damage caused by their carbon content. Carbon pricing is a policy that is gaining ground around the world.

As the European Union contributes only less than 12% of worldwide emissions, its action will only marginally change the worldwide climate. This static vision of things can discourage even the best political intentions. Yet we believe that it is erroneous. If the 28 EU governments agreed on a high carbon pricing trajectory, they would need to apply it both to local products and to imports, thus creating a significant "carbon dividend". In this way, the European Union would have a powerful argument to convince its trading partners to follow the same path, thus creating a "climate club", to borrow an idea from Nobel Prize-winning economist William Nordhaus. Today, only the European Union is capable of putting this into action, for it is politically mature and of adequate size to succeed.

This brief will examine how the European Union could change the world’s carbon use by adopting a policy of carbon reduction based on price, without harming its economy, through complete and decentralized redistribution of the carbon dividend, which would make the environmental transition not only effective but also equitable.