Got that one right.
From the transcript of James Hansen’s testimony before the House of Commons:
Professor Jaccard: We may have different views on that. As an economist, when you put in an emissions trading system, if you don’t have a floor price or even a ceiling price for that system, you do understand that you may get price fluctuation, and some economists would argue that is a good thing. If your economy is not growing rapidly so your emissions are going down, then the price would quite naturally fall for a time. That creates a problem, though, for long-term investment and price security, which is why economists would tend to prefer a carbon tax. If that is not possible politically, over time I would encourage people to revise your trading system and, if you stay with that, to get some kind of floor price on it. I know jurisdictions have done that before. There are trading systems that have worked for acid emissions, local air quality and so on, so there are design possibilities. Paul Joskow at MIT has written a fair bit on that, about how to get a price floor in.
I tend to argue that you can do this with a lot of different kinds of policies. It is going to be that design that really counts. Even with Mr Goldsmith’s point earlier, there are fluctuations in public interest, but, from what the scientists are telling us, we know this issue will keep coming back. In my own career, I remember a peak in 1988 to 1989 in interest, in 1995 to 1997 leading up to the Kyoto Protocol, and then again in 2002 to 2008 until our recession. The important thing is to get policies in place and then to try to sustain them in those periods when we are weathering the economic storms, as we are right now.
Professor Hansen: If I could just add a comment. Given the urgency of getting global reductions in carbon emissions, I think that the Kyoto type of approach, the IPCC or the United Nations type of approach, doesn’t have a chance of being effective. We can see that emissions have accelerated globally. We are going to have to have more limited and bilateral agreements. We particularly need one between the United States and China, and I think that is a real possibility-as you probably know, a few weeks ago Secretary of State Kerry went to China and they agreed to have a working dialogue on this-and also if Europe would join an agreement.
What they need to discuss is a carbon price, not a cap-and-trade system. A flat carbon price would need to apply in China and in the United States, not necessarily at the same rate because the United States is responsible for 26% of the excess CO2 in the atmosphere now and China for 10%, even though China has many more people. Incidentally, on a per-capita basis, the United Kingdom is number one in responsibility because the industrial revolution began here. If you integrate over time, the United States is number two, Germany is number three and China is way down.
In any case, in order to solve this problem, we need to put an honest price on carbon-based fuels, which begins to pay their cost to society. If both countries agree to have rising carbon fees, then we can begin to address the problem. Frankly, without that, I don’t think the measures are anywhere near what is needed.