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Calls for a price on carbon

Irene QuaileDecember 3, 2014

Global temperature will continue to rise to dangerous levels, unless emissions are reduced. Germany economist Ottmar Edenhofer says a price on carbon is the answer.

Ottmar Edenhofer
Image: DW/I. Quaile

DW: You are calling for a price to be put on carbon emissions within the next 10 years. Why do we need a carbon tax?

We need a tax on CO2 because we can only deposit a certain amount of carbon in the atmosphere and we have already used up a considerable chunk of that budget. We can only store around 1000 gigaton more CO2 in the atmosphere. That means that storage space is becoming scarce. And like anything that becomes scarce, you have to put a price on it. Otherwise investors, consumers and companies don't know in which direction they should invest. But once the scarcity of a resource becomes evident through the price, the investments will go in the right direction.

Deutschland Energie Braunkohle Kraftwerk Jänschwalde
Coal power plants provide relatively cheap energy but harm the environment.Image: Fotolia/blumenkind

We have known about the climate problem for a long time. What has changed in the last ten years or so to make the problem so urgent?

The reason for the urgency is that the window of opportunity is closing. Because we can only store another 1000 gigaton in the atmosphere, that space will be full in two to three decades if we keep on as we are doing now. So the need to take action has become more urgent. But at the same time we also have more opportunities to take action. Today, we understand far better that you can use the revenue from a CO2 tax to reduce other taxes, to reduce national debt and to invest in infrastructure. In many countries in the world there is a huge need to develop the infrastructure. A CO2 tax could be a good way to do that.

What arguments would you use to convince a politician that he has to take action now?

I would say a CO2 tax will help you to drastically improve your local air quality – in China, for example. Then I would tell politicians in a country like Mexico: “This will give you the means to invest in the infrastructure which you will need so desperately in the next 10 to 20 years.”

But what would motivate countries which still have plenty of fossil fuels left in the ground, and companies who are profiting from that, to change course and opt for climate protection?

Smog in Peking China 24.02.2014
Smog in Beijing forces visitors to wear masks.Image: STR/AFP/Getty Images

Ultimately, you just have to assume that they will see reason and realize the long-term consequences of what we do today. If we carry on as before, the result will be irreversible climate change with all the problems that this will bring. Of course for a politician, another key factor is that measures to halt climate change also have advantages in the short term. For instance, the terrible air pollution in Beijing is already putting people off the city as a business location. So the Chinese government is thinking very intensively about how to protect the climate, because that will also be a step towards improving local air quality.

But European countries are rather concerned that a CO2 tax might make them less attractive as business locations?

You can easily make up for that by investing in the quality of your location using the revenue from the CO2 tax. We can invest in education, or in improving the infrastructure. Everybody is complaining that our infrastructure is crumbling away. It would great to finance that infrastructure by income from a CO2 tax or the auctioning off of CO2 certificates.

Ottmar Edenhofer is one of the three co-chairs of the IPCC working group III, deputy director and chief economist at the Potsdam Institute for Climate Impact Research (PIK), professor for the economy of climate change at Berlin' s Technical University and Director of the Mercator Research Institute on Global Commons and Climate Change (MCC).