governance, political economy, institutional development and economic regulation

fossilfree

(photo credit: http://www.occup.now.com)

Climate change took the world by storm in 1995 –two decades ago in Berlin– with the 1997 Kyoto “club of doom” postulating devastation if carbon emissions- primarily from the use of fossil energy- were not reduced.

The previous such “natural resources” doomsday club of scientists was the “Club of Rome”, which famously predicted in 1972 that oil would run out in in their life time. Some of them may still be around to ponder the recent historic reduction in oil prices, courtesy new age shale-oil development in the US.

In between, as the global doomsday industry gained strength in 1994, it predicted the “next war” would be over water shortages. Peter Gliecks, Pacific Institute<www.worldwater.org> faithfully features a list of over 400 water related conflicts since 3000 BC of which 219 happened post 1992. But the list is underwhelming. It includes every conflict with a “water” hash tag in it, none of which are of grave significance.

Take the case of water hungry Egypt, which has not gone to war against the nine other Nile basin countries upstream. Instead it was torn apart by a war against its own despot, propped up by the army. A far more worthwhile endeavor but infinitely more difficult, especially since no one organizes meeting in glitzy South American capitals, over Pina Coladas, for people who are fighting their own tyrants. The brouhaha over water related conflicts seems oversold.

Climate change-science or voodoo

Some scientists, not too many though, hold that the Climate Change science and predictions of doom are similarly dodgy. To believe that a 2 degree Celsius temperature increase is a red line the world must not cross and that the way to do that is by reducing carbon emissions, is very much like an article of faith.

Lay persons, like me, unable to understand the science, are not inclined to pay for avoiding global warming. The average citizen reaches for her wallet only after triangulating dire scientific predictions with her own experience to validate the “scientific” view.

After all we see a volte-face by “science” almost daily, diluting the credibility of science to change human behavior. Take the changing scientific view on (a) the usefulness of eggs as a food (b) Marijuana as an injurious relaxant (c) the amount of fat we should ingest (d) the virtues of jogging (e) data security levels in the cloud and social media apps to name just a few. Science, of the public goods kind, loses credibility every day because it can be secretly manipulated to set self- serving international agendas.

I spend a fair amount of time in the Ranikhet-Almora area of the Kumaon hills (in the State of Uttrakhand, India). Over the last two decades, the prevailing sentiment about the state of the local environment, was of doom and despair – all ascribed to the inevitable consequences of global-warming. Apples, a staple harvest two decades ago, had stopped growing as the volume of snowfall declined and ceased altogether below around 7000 feet.

Call it coincidence, a miracle, or an exception which proves the rule, but over the last three years snow has returned after a gap of 15 years to Dhamas-Khunt village, situated at a height of only 5600 feet and this year it is 4 inches deep already. No one there will attend a global warming seminar today, trudging through the snow underfoot, unless they are paid to do so.

The rich are tech savvy and green

Global problems and prescriptions have merit of course, as does a consistent process of trying to optimize solutions. But it is hard to disentangle global slogans from genuine problems and even harder to assess solutions.

PM Indira Gandhi famously said in the 1972 Stockholm Conference that “poverty” is the biggest polluter. She was not quite right, but made her point tellingly. The Planet has been degraded by the rich as the Climate Change science illustrates. In fact it is the patience and resilience of the poor that has enabled the rich to free ride on their environmental passivity.

If everyone on this Planet consumed at least as much energy as the minimum per capita energy consumption in the rich world, we could already be in the midst of an ecological disaster.

Access to technology, is at the heart of both becoming rich and being able to be environmentally correct. Had the rich world been willing to bear the pain caused by their environment degrading, industrial success they could have junked older, polluting technology; rapidly replaced it with “clean” energy technologies and started using them domestically to provide the scale effect to drive down costs internationally.

Risk averse and rich, Germany junked Nuclear Energy post the Fukushima Nuclear disaster. But not-as-well-off France, next door, continues to rely on Nuclear power.

More importantly it is utopian to expect rich, foreign governments to behave differently from the rich citizens in our own country.

Walk the talk

The way ahead for India is to stop the perpetual, sequential, sabre rattling, whimpering and whining we do in international fora and derive false pride in having thus “led” the developing country agenda. Let us implement, domestically, the environmental governance regime we want to see internationally. We can do this by stopping “environmental free riding”.

Why not have a national “Environmental Sin Cess (ESC)”. Those with a yen for acronyms will not miss that ESC is the button you press on your keyboard when you have got your computer into a mess.

The ESC could be in the nature of a “user charge”, levied on the electricity consumed by high-end domestic consumers only so as to insulate business and the poor from any inflationary impact. A similar tax could be levied on the supply of petroleum products to states and 1 million plus cities, which have higher than the national average per capita consumption of petro products. Building in progressivity could distinguish between states consuming marginally more than the national average and those at the very top end. State level regulators would be expected to pass through the tax to the targeted consumers.

This cost disincentive for committing “environmental sin” could drive behavior change in consumers. Cynics would say higher taxes never stopped smoking or drinking. The difference is that unlike cigarettes or alcohol there are substitutes available for fossil fuel based services, albeit not as cheap nor as convenient; energy efficient transportation, lighting and climate control services or applications or those powered by green energy: riding on a bus instead of driving; cycling or walking rather than riding or driving; LED bulbs for lighting; movement and heat sensitive switches; solar electric cars, scooters and pumps; solar heaters and air conditioners.

The tax collected should be corralled in a special account to avoid it from being drained by government expense. It could be managed by a new, independent “Sustainable Energy Innovation Authority” to develop a slew of fossil energy substituting; saving; efficiency enhancing options: human energy based transportation (walk and cycle paths); motorized public transportation; electrification of railways; solar street lights; operational cost subsidy for innovative renewable energy suppliers; energy efficiency initiatives and life-line energy access for the poor.

FM Jaitley should consider this SMART option for the FY 2015-16 budget. Growth is down and demand needs to kick started. But whilst presenting the usual array of “economic revival instruments” it would be good to also provide for incentives to delink fossil energy consumption from economic growth.

That such incentives would not be a “freebie” but would be financed by a cess on relatively rich users of fossil energy, is not only fitting but aligned with the principle of equity. The honeymoon is over. The immediate elections have been won. Time to talk “tough love” now and walk the talk in the budget.

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