Plan to use financial markets to prevent climate change ‘a dangerous distraction’

A leading climate scientist has warned that attempts to use global financial markets in the fight against climate change are “doomed to failure”.

After the release of the UN Intergovernmental Panel on Climate Change’s (IPCC) latest report – a comprehensive review of climate science that said climate change was “unequivocal” – Rajenda Pachauri, the chairman of the IPPC said that financial markets are humanity’s best hope in the fight to prevent climate change.

The best way of doing this, he argued, would be to put a price on carbon emissions that was high enough to force power companies and manufacturers to reduce their fossil-fuel use and turn to cleaner sources of energy.

“An extremely effective instrument would be to put a price on carbon. It is only through the market that you can get a large enough and rapid enough response,” he said, urging policymakers “to see what’s required”.

However, in an interview with the Independent, Kevin Anderson, professor of energy and climate change at the University of Manchester, criticised Pachauri’s suggestions, saying that focusing on the markets would distract attention away from more effective methods. 

“I disagree strongly with Dr Pachauri’s optimism about markets and prices delivering on the international community’s 2C commitments. I hold that such a market-based approach is doomed to failure and is a dangerous distraction from a comprehensive regulatory and standard-based framework”, he said.

“I get the impression that many scientists engaged in climate change seriously misunderstand the mitigation challenge.”

Anderson argued that this approach would require such a high carbon price that it would distort the market, increasing the cost of goods and services so much that it would put them beyond the reach of much of the global population.

On Monday, the leading economist and climate change expert Lord Stern called for talks to begin now on the world’s “carbon budget”.

The IPCC report found that a 2C increase in global temperatures could be catastrophic, causing rising sea levels and extreme weather conditions. It said that in order to have a chance of keeping to less than 2C of warming, the total carbon emitted could not exceed 1,000 gigatons.

The report estimated that humanity might have already used up two-thirds of this carbon “budget.”

“If we continue to increase annual emissions, the budget will be depleted even sooner. That is why I think nations, cities, communities and companies will recognise the importance of these findings and will increase the urgency and scale of the emissions reductions that they are planning to undertake,” said Stern. 

The IPCC will publish its final fifth assessment report in April 2014, which is expected to suggest ways in which society can attempt to mitigate climate change, including mechanisms through which the market can cut carbon emissions. 

Further reading:

Lord Stern: delaying climate action is ‘dangerous’

George Osborne: UK should not lead climate change fight

IPCC climate report: global temperatures likely to exceed 2C this century

IPCC report sparks debate on climate change

Fossil fuels reserves must stay in the ground, leading UN diplomat warns