How do you price the extra tonne of carbon that, once burned, tips the balance and triggers potentially catastrophic, irreversible global warming?
The answer is 42 Dollars, Euros, Pounds, Yen or Yuan or in whatever currency we will be pricing the meaning of human life when it comes to an end.
Meanwhile, the question is how we can continue to contemplate quantifying, or placing a monetary value on the infinite. Global warming is the greatest ever market failure says Lord Stern, so fix the market and the error will be corrected?
Since the Stern Review was published in October 2006 the whole concept of the ‘market’ has been discredited in almost every area in which it has been applied. While the banks are being trusted to reform their ways and to continue to fuel most areas of economic life, the credit crunch might have come at the right time to spread the sense that the marketeers should not be trusted to commodify; that is, to price and trade in carbon. If market economics or capitalism are unlikely to save the whale, the rain forest, or the atmosphere, will it be down to the command economy - discredited during the last century - to ride to the rescue?
Suppose that we have ten years to reverse the trend of adding carbon to the atmosphere, ten years before the tonne of greenhouse gas that broke the camel’s back is emitted from a power station chimney or the back of a camel: the mechanism of control has to be capable of dealing with both carbon and methane (and possibly account for water vapour).
The value must be applicable to the producer and the sequesterer, to the fossil fuel burner and to owners of flatulent beasts. In ten years - and the earlier the better - the market economist has to revisit the rule of discounting whereby the bird in the hand is worth two in the bush, and whereby future benefits are given less value due the uncertainty of their manifestation.
It is true that a tonne of carbon saved today is worth very much more in terms of reducing global warming than the same tonne saved ten years down the line. However, the tonne that needs to be saved in ten years to prevent irreversible global warming would actually have an infinite value if oblivion is to be avoided. So much for economics as we know it, putting a price on everything and knowing the value of nothing.
Few would dissent from another homily: that the best things in life are free to acquire and enjoy, and most if not all are free of or low in carbon content. That being the case, it should not be too difficult to see that pricing or regulating carbon so that its use is largely out of reach will not deprive people of those things that they value most. Whether it is through price or regulation, access must be given to ‘survival emissions’: those we need to subsist in both developed, over-developed and under-developed countries. On the other hand, through price or regulation it should be made universally difficult to emit ‘luxury emissions’: those attributed to the excesses of modern life that show no benefit in human welfare.
A third category of carbon emissions are those associated not with survival or luxury, but with the alleviation of poverty, hunger and disease in all parts of the world. These could only be delivered, through a world carbon bank and national agencies, according to need, and not the ability to pay.
What price a Bengali mother?
Thus we have the carbon ‘market’ cut in three, where access to, and consumption of, these distinctive tonnes of carbon and their subsequent emissions is the different between life and death.
Perhaps there are clever bankers in city towers even now being offered bonuses to work out the formula that would put a value on a tonne of carbon that would be considered fair by a Bengali mother whose home will be flooded and a Sudanese farmer whose pasture will be wasted at, say, 3 degrees of warming that might, at the same time, provide warmer winters to a Muscovite family and improve the crops of an arable farmer in Alberta?
Bankers need to be dissuaded from widening the ‘market’ to embrace the emissions of carbon and other greenhouse gases. If the tonne of carbon that pushes the climate over the edge is a ‘luxury emission’ then it should logically have a value close to infinity such that the market would prevent it from being emitted.
Unfortunately it could be a tonne of emissions relating to the survival of the 9 billionth inhabitant of this crowded planet, by denying them the benefits of an item of energy, water or food. A Malthusian revenge. This outcome being within the realms of possibility, if not probability, should suggest to the market economist that a price should be put on the process of procreation, if the existence of more souls to be fed, sheltered and watered is causing both intolerable carbon concentrations, and death would arise from their prohibition.
Or would the market economist rather work at the other end and calculate the scale of bribe that would attract volunteers for an early but very green funeral? Economists will soon find that some of the externalities to which significant carbon effects can be attributed are not just hard to quantify but are taboo subjects. Would they want to be the ones responsible for a revised concept of human rights?
No, Lord Stern, climate change has not been a failure of markets. Global warming is no more and no less than a failure of global governance, and a measure of general deference to economists and reliance on markets. Economists have drawn the net around what to value and include on balance sheets too narrowly. But the answer is not to always try to include externalities, but to acknowledge that some goods are beyond quantification, atmospheric carbon being one of them. The quicker we abandon the concept of placing a price on carbon the better. The use and access to goods that cannot be traded needs instead to be regulated, allocated or rationed.
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