Blog & PodcastDealing with the Climate Crisis

Anthony Day helps you plan a sustainable future with expert guests and reports on green technologies from across a warming world.

We’re planning to reach Net Zero Carbon Emissions by 2050. How do we get there from here? 

Hello, I’m Anthony Day with a special edition of the Sustainable Futures Report for Friday 22nd of January. I've put this question to a panel of experts. You'll find a full transcription of our discussion on the sustainable futures report website. I've also added links to a number of articles on the topic. I'm sure the debate will run and run. 

Anyway, here's what the experts told me.


Anthony: Well, if we could make a start, and what I'd like to do is to invite each of you to introduce yourselves and then we'll go forward to a discussion. So, Nicola, would you like to kick off?


Nicola: Sure. My name's Nicola Steen. I've been working on trying to find solutions to climate change since the late eighties, when I worked with the first person in the world to consider cap and trade in carbon emissions as a solution to reducing emissions in the world. So that guy was Michael Grubb at Chatham House. I was at Chatham house and then I did study, went back and studied economics at Birkbeck.


I've worked representing the electricity generators through the nineties, helped design and instigate the first pan economy emissions trading scheme. The UK emissions trading scheme... We've now got a UK emissions trading scheme take two as of about a week ago. And then I worked for one of the biggest brokerage companies in the world building the markets, the carbon markets. So I worked for through the 2000s. And recently I've rejoined a company that's trying to build those markets. Unfortunately, that still needs to be done. But it's a very valid thing to be doing and I'm working for a company called Redshaw Advisors.


Anthony: Thank you very much Nicola. Welcome to Alessandro. Thank you for joining us. We're just going around and introducing ourselves. So, Alessandro, if you'd like to introduce yourself?


Alessandro: Sure. My name is Alessandro Vitelli. I've been a reporter covering energy and carbon now, for about 30 years. I work for myself, I'm a freelancer. I write about markets, I write about regulation and policy, as well that the United Nations climate that's in negotiations.


I focus on the European market at the moment, but I do follow developments around the world.


Anthony: Thank you. Deirdre Lane, welcome.


Deirdre: Thank you. I'm fortunate to know Nicola and Alessandro for some time in the carbon markets. So essentially my background in finance is establishing commodity trading exchanges. And when the carbon market started, we were super excited because those of us in the industry thought the carbon market would be a catalyst to change in behaviour and finance greener regenerative practices in the background.


So when the markets kicked off, we joined a group of women in carbon, very excited professional financiers, lawyers, etc., who really wanted to make a difference. So just like every other market, the market had its hiccups, it had its frauds, it had its scandals and it's still ticking over. So, currently back in Ireland, when I returned, I was so horrified at such little action actually happening. So somebody likened it to muffin, and on top of the muffin you have not a cherry but a tiny piece of Lego. So what we were doing was the icing on the top, and even that was wrong.


So, I'm very excited to see different ways that people currently are taking serious steps back to re-imagine how the economy can look to shift our mindset from a linear to circular economy. So I'm very much about empowering people to make our own choices and to do greener regenerative actions in our own spend, our own investments and different ways to do so.


So the movement I've set up having spoken to Amina Mohammed was a very frank conversation. It was like -- Amina, nothing's happening, I'd like to do this and this and this, -- and she wouldn't do it. So we have a shamrock spring in Ireland and it's a green movement, empowering people to use their voice to make choices and empowering other groups and community groups to take action on greener steps.


Anthony: Thank you very much. And Chris Goodall, Chris, please introduce yourself.


Chris: Yes. Hello, I'm Chris Goodall. I have less qualifications to be on this talk than anybody. I'm a writer and business person in the energy transition field. I've written six books, mainly aimed at a general audience, not specifically at professionals. In one of my last books, I wrote a chapter on why carbon taxation was an important feature of the attempt to get the world to move faster towards net zero.


Anthony: Thank you very much. Well, what we want to discuss this afternoon, basically, is how organisations, how states get from the present state to net zero carbon emissions in 2050. And do we actually encourage individuals and organizations to change their behaviour through a system of carbon trading, or do we introduce subsidies or do we have penalties or do we have taxes? Which way is the way forward? I'm going to ask Alessandro, would you like to start on that point?


Alessandro: It's my belief that using carbon markets and dynamic pricing for carbon offers a price signal that generates the innovation required to get to low carbon technology.


If we look at what's been happening, not necessarily directly in the carbon market but more in the allied fields like renewable energy, setting prices which disadvantage high carbon generation has developed or has triggered a massive investments in clean energy generation. And that is bearing fruit now in the form of rapid deployment worldwide. The cost of renewables has been driven down through its incorporation through a market mechanism, the power market, to a point whereby it competes without any subsidy anymore.


So that, to me suggests that market structures can be employed usefully to send strong price signals into new technologies.


Anthony: Chris, would you agree with that approach?


Chris: Yes, I think not only that, but add one common to this, is that most of the major participants in the Co2, the greenhouse gas producing industries also want to see a proper price on carbon so that their actions to move toward net zero are not disadvantaged by the fact that they're competing against other operators who don't face similar imperatives.


So an international a global carbon price would be ideal, possibly something like a border taxation scheme such as the EU is contemplating if that doesn't work.


Anthony: Would you like to add to that Nicola? Are people or governments actually doing these things? Are they taking steps, sufficiently large steps in the right direction in your view?


Nicola: That's two different questions, I think. Governments, I mean, I thought it was great that the UK Prime Minister Boris Johnson, said that we would be going for at least 68% reduction on 1990 levels by the end of 2030. That is an incredible statement when you think about where we were in 1990 effectively, you know, when I started working on this, that someone would say that is incredible. Or the amount of renewable energy that we have in the mix now, or the government's 10 point plan. I mean the two announcements and what's key is how are we going to get from where we are to there.


So, yeah, it's wonderful, I really think it's great to have such announcements. You know, China's making announcements. We don't know yet what forthcoming President Biden is going to say, but commitments are great, but then you need action. So I think we are seeing leadership and the UK's got the presidency of the COP next year. So that's all great. And so there's opportunity for making change. But then you've got to get down into the nitty gritty of it all.


I think it's interesting that Chris and Alessandro I would agree that having a price for carbon is a wonderful thing in that it's valuing, putting them... If we've got markets, we need a price on stuff that we value. And if we value the environment then putting a price on carbon is a way to help people in effectively a capitalist economy plan their business and value the environment. So I think that is good. I don't know if we'd agree necessarily from comments earlier on how we would think we could perhaps get to that price. But it's great that we agree on that. And I would imagine, well you can ask Deirdre if she agrees as well.


Anthony: Well, before I do that, I just want to take a step back. And let's assume that not everybody listening to this is fully aware of how it works. Let me explain how I think it works, and you can tell me.


So as far as I understand it, carbon credits are a permit to pollute. And certain organisations, large polluters, industries and so on are assigned an allowance of these permits by some sort of central body. If they're highly efficient and they don't emit an awful lot, then they'll have a surplus of these permits which they can sell to organisations which need them because their allowance is not enough for what they do. Am I right so far?


Nicola: I think the issue is that you'd be right if you'd use the word "allowance" all the way through, but you use the word "allowance permit and credit" and that's why. You know, theoretically, that's how it would work if the whole world was capped, but the whole world until now hasn't been capped, it's all about to change.


So we had a capped system in the EU, and so what you described really is about the European emissions trading scheme and in that situation effectively, governments have devolved sort of responsibility to hit a certain amount of our national targets to industry. And industry yes, has had allowances and then the rest of what you described is correct. I don't know if anyone else wants to take over and put in another angle to hear a different voice explaining other parts of the market?


Anthony: Well, Alessandro's being blogging about the new scheme which we're going to have in the UK.


Alessandro: Yes, I want to make a point, though, that in your description you were saying how industry is given permits to pollute. I think if you'd like the ultimate version of an emissions trading market, nobody would be given any permits for free. They would have to buy them, and that would properly and fully internalise the cost of environmental damage into a company's business model. By having to pay to pollute, they then are placing a value on being clean and being zero carbon.


And I think that's the direction of travel long term. The EU has already said it's going to lower the free allocation of emissions allowances to industrial companies. The UK plan, I'm sure, will follow much the same trajectory, whereby gradually every year fewer and fewer free allowances are given out, forcing industrial companies to take on board the cost of what they're doing. And I think that is an important element of an emissions trading system.


Anthony: Okay, Deirdre, if an organisation needs more allowances than it's got, needs more than it can actually buy, then what happens? Is it penalised in some way, presumably by the government, which is organising the whole scheme?


Deirdre: It depends on the nature of the organisation. Is it a state organisation, is it a private organisation? There's different regulations and different trading systems for different organisations. There's voluntary organisations as well.


But what I really would like to extend on Alessandro's concept is the price of things. So as a person within any organisation, before you procure any item, even an onion for the canteen at work, if you know the true price of that article, the carbon price based on the staff that had to grow the onion, the person that had to deliver the onion to the shop, the person that had to bring the onion to the canteen, etc. If you actually could visualise, even on one simple item in the workplace or in your home, the true cost of that carbon. So then you could juxtapose the one that you've got in your garden or in your local farmers market against the one that's been grown in the south of France, the south of Spain, from somebody who's suffering from climate injustice, who's been trafficked to Spain to grow these onions or whatever cheap product that we're importing.


So we really need to know the true cost beyond carbon of our spend. So if we can break it down as consumers on an item to item basis, but not overload the brain, but just contemplate what is the cost of my action in purchasing even an onion? And then peel back all those layers to get the true price of carbon, of purchasing that one good on the local market place, versus something that's being flown in from wherever.


I think we really need to take stock of not just the organisation's role, but our own role in procuring of any item to make sure that it's a truly fair climate justice purchase.


Anthony: Thank you. Well, that's interesting. I'm going to get a plug in for the next episode of the Sustainable Futures Report, because it's an interview, which I've just done with a representative from Avery Dennison, the labels company, talking about the smart labels which tracks a complete life cycle of a product and should incorporate all the things that you were talking about so that we can actually look, probably by scanning the label and find what the history of it is and what the carbon footprint actually is.


Now we've been talking about carbon markets and allowances and permits, and we've got to be careful, which is which. But, Chris, you were saying earlier that you think that taxation is really the way forward?


Chris: Yes, I'd argue for taxation against any form of allowance cap and trade based a system. I'm sorry, we're talking quite heavy jargon here, and I apologise. If I have not completely understood it, and perhaps the audience doesn't either.


But, I believe in taxation because it is a simpler and less easy to manipulate way of ensuring a proper price on the cost of the things we do. So the core idea in a carbon taxation system is that anybody who is responsible for combusting something which results in CO2, such as the use of oil in a car or gas in a power station pays a price for each tonne of CO2 that's emitted to the atmosphere, perhaps $50, perhaps $100 or something like that.


This is simpler. It has many complexities because, of course, greenhouse gas emissions come from things that aren't necessarily the combustion of fuels for example, the pouring of fertiliser onto soil. But I think those problems are small compared to the logistic problems of cap and trade schemes, permit schemes which have bean historically around the world, manipulated by large producers to ensure that they get the allowances from free or cheaply compared to potential competitors. And therefore it's anticompetitive, more difficult to enforce than a properly run carbon taxation scheme. And we should no doubt go on later to talk about the disadvantages of carbon taxation as well.


Anthony: Now who'd like to come back on that? Alessandro?


Alessandro: Yes, it occurs to me, though that there is a fundamental problem with taxation, in as much as by taxing carbon emissions, you are guaranteeing government revenue, but you're not guaranteeing an environmental outcome. A taxation system doesn't put a cap on emissions and strive to achieve that cap or below it. And the difficulty is, that again, I think taxation policy making is simply just as vulnerable to outside interference that Chris was implying as policy making in a carbon market would be. Industrialists could do exactly the same sort of influence peddling among policymakers to say, let's have a little carve out of that tax for my sector or my company or what have you.


What we're dealing with fundamentally here is a problem of political will. It's up to the regulators and the politicians behind the regulators to ensure that there is ambition in whatever system is put into place, and to resist the efforts of industrials and other commercial interests to water down that legislation and those regulations. That's a problem we suffer at every level of the environmental challenge, not just locally or nationally when it comes to an ETS, but internationally, the United Nations, when they're trying to craft rules for international carbon trading that should have been put into place three years ago. So it is an endemic issue.


Anthony: Okay, would you like to add to that Nicola?


Nicola: Yeah. I mean, that's one of the key issues for me is that the money is going to the government, it's not being kept in the market. It's very much a stick, you know, it's seen as a punitive measure if you're in industry, if you've got to pay a tax. Whereas by giving people an incentive to reduce their emissions and an opportunity to find processes and technologies that reduce emissions and therefore free up allowances to sell, it's more of a carrot, it's an incentivisation, so the mindset is different. And to date, there might be flaws, as Alessandro said in the market, but to date, hundreds and hundreds of millions of pounds has moved to clean technologies around the world and has incentivised people to make decisions based on clean technology, less emissions. I know that myself, I've been involved in money of them.


And the other point I would make how do you know what level to put the tax at to get the desired results? So we're not, as Alessandro pointed out, by having a tax, the result isn't... Well, it's not certain at all that you'll hit any particular result, but even trying to hit a result, what level do you put a price, the tax at? How do you decide that?


The thing about a cap and trade system is that the cap is the driver, it's the environmental cap and people work below that cap to meet the environmental goal.


Deirdre: And there's no guarantee that the tax raise will actually be put to sustainable purposes, regenerative purpose.


Nicola: Not at all, no. And even if they were hypothecated as they say, the economic word for it, so they're directed to sustainable products or clean growth, it doesn't mean that you've necessarily got the people making the decisions. They're going to be in the hands of the civil servants, not in the market where people on a day to day basis are working on renewable energy or clean investments into buildings or something.


Anthony: Yes. I don't know whether you remember the carbon reduction commitment, which was a British policy some time ago? I was an expert in that field for a while. But that was full of problems because it started off by saying that the most efficient companies would be paid a bonus out of the penalties levied on the least efficient companies. And before it actually was implemented, the chancellor said, no, no, we'll take that money and we'll take it back into the Treasury. But it actually got more and more complicated, and eventually the whole thing fell apart, as you may remember.


But regardless of what we do, whether we tax or whether we have a carbon market, is there not a risk that we will drive heavily polluting industries -- and I'm thinking, particularly of steelmaking and cement -- that we'll drive them abroad to places which don't actually regulate emissions? And then we won't have achieved anything.


Chris: Well, we've already done that to some extent, yes, absolutely central problem. And that's why the European ideas of putting a carbon border tax on things like, as you say, steel will have to be taken forward if we cannot get some form of global agreement. But I think the last year has shown that it ought to be possible to get some form of a global agreement, although it's going to of course, be incredibly complicated.


Nicola talked about the difficulty of establishing a price, now what my work is partly about is trying to work out how much it would cost to turn heavily carbon producing industries such as steel making, fertiliser etc., towards a technology that doesn't involve the combustion of fuels or the emission of carbon dioxide and other greenhouse gasses. And very, very roughly in general, that somewhere between 50 dollars and 100 dollars a tonne. So $100 a tonne CO2 price would, in my opinion, almost certainly lead to very rapid decarbonisation of the major producing industries. And it's also a significant disincentive, for example, to the cultivation and eating of meat.


Anthony: Nicola, you've got a point. And then Alessandro wants to pick something up, I think.


Nicola: Yeah, but the margin there is between $50 and $100, and as an observer to look at economies when each company will have a different cost of abatement, to talk about having a $100 tax when a $50 tax might actually get the results we achieve when we're facing all the things we're facing in our economy, and it's different in France and it's different in Australia and India -- then we can't have that margin of error. My team in Redshaw, we have a market update twice a day of what's going on and the price fluctuates. People are responding to loads of different signals all the time and to have something as.... I don't know what the word. I forgot my economic vocabulary. But it's just a bit, clunky really. I know that's not an economic term. But we can't afford to be that imprecise.


Alessandro: Another thing, that I wanted to just raise in conjunction with the idea of offshoring production due to high carbon costs is, more and more countries are bringing a cost of carbon to bear upon their economies. In 2021 we'll see the UK's own little market starting up, yes, but that's just continuing the EU ETS. In China, they're going to be launching hopefully this year their nationwide emissions trading system. Now, it's not perfect, it's not a real cap on emissions, but it's a step in the direction. Latin American economies are doing the same thing.


More and more countries are seeing that a price on carbon actually could be the way forward for them. And where those countries are not making that effort, then you have the possibility to introduce a border carbon adjustment mechanism as Chris has I think alluded to. This is where you start forcing your export market, the markets from which you import rather to account for their cost of carbon and where you attempt to do something to bend down the curve of lifetime product emissions, by trying to account for it in the price that you pay or the price that your exporter pays for bringing product into your markets.


And I think that's an important element of the conversation, because since it's been taken up seriously by the European Union as an option for its green deal, the conversation has gone global, and more and more countries are actually looking at this very seriously and beginning to say -- well, how can I avoid having to pay a board of carbon adjustment for my exports to the European Union?


Well, perhaps we can do that by addressing it ourselves, by having a price on carbon here at home. And once that becomes implemented in an exporting country, then the rationale behind the border carbon adjustment just vanishes as long as the cost is comparable.


But I think that there are ways in which the world is reacting and growing and developing towards a low carbon future, that mean that maybe these last ditch measures that the EU is considering and other countries are considering may not be required.


Deirdre: What I'm really appreciating currently is the bankers' responsibility in this field. So if you're financing a coal project or insuring a coal project, no matter what country it's in, people are reevaluating the climate risk, the human risk. It's a minefield for investors to actually know what's the right thing, and generate profits and incomes for the just transition that's happening in that country.


But I think It's a great shift in impact investment and responsible dollars spent to know exactly where your money is going to go. We know the 1.5 degree raise that we're anticipating by investing in a cement factory overseas, you're still opening yourself to that risk as an investor.


So it's a challenge. I think we're in a good place to actually stop the shift of dirty polluting industry elsewhere.


Anthony: Good. This border carbon adjustment, it's a phrase I've not heard of before. Can we just expand on it? Explain it for my benefit?


Alessandro: Border carbon adjustment system would be a way of measuring the carbon content of products being imported into a jurisdiction in the EU, and with you and requiring a tariff that corresponds to the market value of the carbon in that product to be paid by the country that is exporting to the EU.


Anthony: So that is a plan. It's not in place at the moment?


Alessandro: No, it's not in place now. It's a plan that has been raised and is part of the Green Deal Project. It's one of the many, many pieces of legislation that has been scheduled by the EU for the next few years.


So there is a definite intention to bring a border carbon adjustment into place to encourage, I think you might call it, encourage other economies to actively put a price on their carbon or to take steps to reduce carbon.


Anthony: Well, I think we might now draw all this to a close. I'm going to ask each of you for a closing thought, a closing statement.


I think overall the opinion is positive. I know if we look at the climate crisis, there are people who say it's all over, we'll be extinct within 10 years... Well, I don't subscribe to that view because I feel if you're that pessimistic, you'd never get out of bed.


But putting all that into a carbon context, what of the future?


Chris, would you like to give us some thoughts on that?


Chris: We've gone through a lot of very complicated issues, and I appreciate that we've not had the chance to discuss some of the difficulties of each of the proposals that might be on the table.


I take great heart from the fact that a large number of European fossil fuel emitters are actively looking for a form of carbon pricing -- let's not worry about exactly how it's constructed -- in order to justify to their shareholders the making of the billion, trillion dollars investments that are going to be needed.


And I, speaking personally, believe with all the disadvantages of modern capitalism, we absolutely need to use the financial firepower of the large fossil fuel companies and their major users in order to move to what Deirdre called a just transition.


And I think the simplest way of doing that is doing what they say, which is to apply a carbon taxation. We discussed earlier what the right price might be for the carbon tax. I gave this general figure of 50 to 100, and the reason I did that is because it varies by industry. So we would need to know exactly what should apply. It'd be better to have one single price across the economy, but if necessary, we might have to put a different price on ammonia production, where there's a very low carbon tax required, to steel, where it looks as though it might be as high as 80 or 90 dollars at the moment.


Anthony: Thank you. Deirdre, a just transition?


Deirdre: We have to open your eyes and see our own bias in this fight face conversation here and consider the advantages of a British colony in the space taking all the finance from the coal industry and the Industrial Revolution, and take stock of other countries that are now edging into their own industrial revolutions.


Carbon has been very much the backbone of the industry to generate the power in these countries and the wealth of these countries. So we're now 2020. We have the technology, we have the resources, we know the science. We have to get the message from the grassroots. Like the Greta Thunbergs of the world, to the grass tops within these companies and the companies investing our pensions, to go and take the right decisions, a greener decision, a cleaner decision, because we have polluted this atmosphere so much.


And in fact, I'll share a fact with you. Just yesterday, I heard a podcast about trees. The more carbon we have in the air, the more insects have harder shells, and they're reproducing by 30% more. Because insects were on the planet before trees. So these insects will survive. The trees are having ash dieback, etc.


I'm actually from Kildare, and our oak tree -- Kildare means Church of the Oak -- the oak will survive huge fluctuations in temperature changes, which we're seeing throughout the globe. But it's very interesting if we actually extrapolate the price of carbon on the effect of all the different biodiversity that we have on this little planet. And I think we have to have a deeper conversation within the scientists and the investment community and ourselves to see what's actually happening when this carbon is released.


So beyond an economic conversation, to have a true conversation on what species is thriving and not thriving.


So I'm optimistic on accountability of our policy makers and the voice of the people in making a difference.


Anthony: Alessandro, are you optimistic?


Alessandro: I am. I think that there are a lot of very brilliant people involved in crafting our response. And I've seen it over the past 15, 16 years in my observations of the carbon market, how solutions are found that always manage to improve the end product. And I think that we've seen over the past four years here in Europe more of the same. We've seen how events such as the growth and proliferation of US shale gas has lowered the cost of using low carbon gas to the point that coal has become marginalized. People have taken account of these price developments, and their policy making going forward takes that into account -- how do we how do we deal with coal? It's fine. It's going by itself. We're just going to edge it towards the door.


What happens after that? We have people now talking about hydrogen in Europe, people crafting policies to use hydrogen as an industrial fuel, and a process elements that would render it, if it's made properly, completely carbon neutral.


So there are many fine minds working who've employed not just the market structure but the policy structure in Europe to combine it to driving us to a higher ambition here in Europe, as evidenced by the new 55% target.


Anthony: Thank you. Nicola, the future?


Nicola: I'm an optimist. I would like, perhaps to use some different words for some of the things we've been describing. I would suggest that, like Alessandro -- we've known each other quite a while, and Deirdre as well -- but we know hundreds of people, our own networking event, actually, where people come together, there's hundreds and hundreds of people who have been -- thousands now -- who have been working on clean, sustainable development solutions for decades. And I would suggest that what we need to do is to harness all those brains, all that energy, to... The knowledge and the creativity, and the practicality that's within that community, and it's almost a democratization of finding a solution. The same people who are industrialists or financiers also have family and friends and communities. So I would suggest, rather than saying -- well, it's a market mechanism versus a public mechanism of taxation -- that I would say let the people work together, let us come together and find great solutions rather than have a top down solution imposed. It's just, we haven't got time. We need to harness everything that we've got and all the different solutions that we have, and we need to work with government to change trajectories even further than they've been changed already.


Anthony: Well, thank you. And very many, thanks to all my guests today. Nicola Steen, Chris Goodall, Deirdre Lane, and Alessandro Vitelli. Thank you all.



And thank you too for listening. Thanks in particular to my patrons for your continuing support which allows me to finance transcriptions like these as well as paying for the hosting costs of the Sustainable Futures Report.

Back to normal, well back to a normal schedule from the 1st February which is the date for the next edition of the Sustainable Futures Report. I’ll be looking at coal from Australia, where it ends up, and why. Also fish. I’ve just read “What a fish knows” by Jonathan Balcombe. I’m no vegetarian, but after reading it I really don’t want to eat any more fish.

As the lockdown goes on, stay safe, stay strong. We have never experienced anything like this before. It's clear it's affecting some groups far more seriously than others. We need to pressure governments to change that and above all to prevent them from thinking that austerity will be the ultimate solution.

I am Anthony Day

That was the Sustainable Futures Report 

Until next time. 


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