KEY POINTS:
Inexorably the world seems to be moving to put a price on carbon emissions. Even the United States and Australia, which refused to join the Kyoto initiative, are taking part in discussions under the United Nations Framework Convention on Climate Change to decide what happens after the Kyoto commitments expire in 2012. And China, one of the "emerging economies" treated too leniently at Kyoto, has signalled it may be ready to join a global effort.
If countries such as China, India and Brazil are part of the next push against carbon emissions they will remove one of the obstacles to US participation. Washington looked askance, understandably, on a protocol that excluded fast-developing economies, one of which, China, could overtake the US in the next year or two as the world's largest emitter of greenhouse gases.
China gratefully adopted the reason offered for excluding emerging economies - previously low emissions, low per-capita emissions now, the right to catch up on rich polluters - but these excuses always reflect poorly on a government that claims to adhere to principles higher than national interest. The People's Republic should have been the first to join an emissions control regime for the common good. If despite recent signs China continues to lag, it should receive some of the opprobrium directed at the US since Kyoto.
Whether or not the US remains the largest emitter, its leadership will remain vital to a global effort. The Bush Administration has softened its earlier scepticism and acknowledges the need for action, and leading candidates to be the next President sound more committed to the cause. The Howard Government in Canberra is expected to adopt an emissions pricing system after a task force reports next month and New Zealand has been hearing submissions on options for setting a carbon price.
Putting a price on pollution is easier said than done. Should it simply be a tax, at a level set largely by government guesswork, or should governments set a permitted volume of emissions for each industry and let the volumes be traded at whatever price polluters will pay. Most governments seem to be tilting towards the market method, including ours. Energy Minister David Parker told a biofuels conference last week that work has started on devising an emissions trading scheme for the whole economy, not just the electricity generating sector that was targeted first.
Ideally, an international carbon price could be set by a market trading in permitted emissions of declining volumes to be set by the next global agreement. That prospect has already enticed countries to weigh up the likely impact on their industries and the costs they could face for exceeding their agreed targets for emissions reduction. Even if industries do the international emissions trading it must fall to governments to police their compliance and states will be held accountable for their targets.
Developed economies like ours are wary of exposing some of their fossil-fueled industries to an international emissions market, particularly if competitors in Third World economies are not also exposed. Like free trade generally, emissions markets may be established on a bilateral or regional basis more easily. New Zealand and Australia, according to Mr Parker, are already jointly considering the adoption of a newly issued international standard for verification of greenhouse gases, surely a precursor to a single market.
Both countries will want to be part of a much larger emissions market than they comprise together. The mood in most countries gives reason for optimism that a global trading agreement is not far away.
