An Interview in Sweden

Posted by Don Fullerton on Oct 2, 2009

Filed Under (Environmental Policy)

I usually upload a new blog each Friday, but this week I traveled from Illinois to Sweden, where I am honored to be invited to address the collected Finance Ministers of all 27 nations in the European Union.  They are meeting in Sweden, because that nation currently holds the rotating presidency of the European Union.  They are having meetings about the economic downturn and other financial matters, but one of their meetings is about climate policy.  This meeting is intended to prepare for the December negotiations among all the nations in the world in Copenhagen.  Already the European Union has an Emissions Trading System (EU-ETS) that places a price on carbon dioxide emissions in the trading sector, but the trading sector includes only about 45 percent of carbon dioxide emissions.  Thus they wonder what policy could be used to reduce greenhouse gas emissions in the non-trading sector.  As one option, they are considering a carbon tax.  I’ll write more about these policies later, when I’m back in the United States, but meanwhile I thought I would upload a copy of the interview that was published on their website.

“The most important thing is an agreement in Copenhagen”

“The single most important action to reduce carbon dioxide emissions is for all nations of the world to agree to binding emission limits when they meet at the Climate Change Conference in Copenhagen.” So says Professor of Finance Don Fullerton from the University of Illinois, who is one of the speakers at this week’s meeting of finance ministers in Göteborg.

On Thursday and Friday the EU’s finance ministers and governors of central banks will meet in Göteborg. Don Fullerton, an expert on taxation and environmental economics, has been invited to speak about cost-effective policies for reducing carbon dioxide emissions.  “I consider that the sectors not under the EU Emissions Trading System could also be made to face a tax on carbon dioxide emissions. This policy is cost effective because it is expected to provide incentives for businesses to cut emissions by any of the cheapest ways possible”, says Don Fullerton.

Don Fullerton’s work aims to find the cheapest ways to reduce emissions. The cheaper the methods, the more likely that they will be accepted by the public and implemented by policy.

Cheaper to act now

“It is not realistic to believe that we can cut carbon dioxide emissions without any costs at all”, says Don Fullerton.  “But the world still gains by cutting emissions now, because the cost of doing so is less than the cost of global warming if we don’t act.  The longer we wait, the greater the consequences in the form of sea level rise, loss of biodiversity, etc.  The cost of stopping global warming later on will be higher.”

Strength in numbers

In Don Fullerton’s view, all countries of the world must act together to reduce emissions and reach an agreement in Copenhagen.  “A small set of nations cannot do it alone, because one set of emission cuts could be more than offset by increases in carbon dioxide emissions elsewhere. When the governments have reached an agreement in Copenhagen and each nation has to cut emissions, then the most important policy for each nation is to put a price on emissions, either by an emissions trading system or a tax on greenhouse gas emissions”, concludes Don Fullerton.

Speakers

Besides Don Fullerton, a number of other economists are coming to address the finance ministers and governors of central banks at the ministerial meeting in Göteborg. These include Lars Nyberg from the Riksbank (Swedish central bank) who will speak about financial supervision and crisis management, Jean Pisani-Ferry, Director of the think tank Bruegel in Brussels, Francesco Giavazzi, from Bocconi University and MIT, who will speak about ‘exit strategies’, and Stephen Nickell from Nuffield College in Oxford who will speak about employment policy.