"World leaders and about 30,000 others from assorted interest groups will
converge on Glasgow in November for the United Nations’ 26th annual climate
summit, COP26 (“Conference of the Parties”).
It will be five years (allowing for a one-year Tokyo 2020-style pandemic
hiatus) since the Paris Agreement adopted at COP21 in 2015.
There has been plenty of cynicism about that agreement, its structure and
non-binding nature. Important emitters like China were effectively exempt from
making meaningful carbon-reduction commitments.
Some OECD countries (such as Canada) have paid lip service to the agreement but
done little. Still others (such as Australia) have made some progress reducing
emissions but have no long-term plan, relying instead on bumper-sticker slogans
about “technology not taxes” and, until recently, hiding behind dodgy
That aside, it’s hard to see how the world solves what amounts to — as
economists put it — a “coordination problem” without global agreements.
For roughly half a century economists have been unanimous about what those
agreements must involve — a price on carbon. The 2018 economics Nobel prize
awarded to William Nordhaus was belated recognition of this fact.
A price on carbon — in the form of a carbon tax or emissions trading scheme —
is a way to use the power of the market’s price mechanism to balance the good
that comes from emitting carbon (economic development) with the bad (climate
Set the price of carbon at the true social cost of carbon (taking into account
all the ills that come from climate change) and the invisible hand of the
market will balance the pros and cons. Think of it as Friedrich von Hayek meets
But there is another, less dramatic way to harness market forces to reduce
carbon emissions: disclosure."
*** Xanni ***
Chief Scientist, Xanadu
Partner, Glass Wings
Manager, Serious Cybernetics