PAL’s Universal Carbon Price will foot the bill for climate change – and is fair to Joe Bloggses the world over

Posted on Posted in Chairman’s Blog

In my previous posting I promised Joe Bloggs, the proverbial man-in-the-street, more details on how PAL’s universal carbon price is fair, acceptable and affordable – for mankind worldwide. Here we go.

Burning fossil fuels, which triggers manmade climate change and global warming, has been on the increase since the Industrial Revolution began, some three hundred years ago. We’re still hard at it, and with every tonne of CO2 emitted as a result, our precious atmosphere warms, putting Spaceship Earth at ever greater peril of becoming uninhabitable – within just a few generations, if we don’t set a course towards a safer, more sustainable future.

A fair, acceptable and affordable carbon price is essential if the money flows necessary to deal with climate change are to be realised. The problem with carbon pricing is not so much its price – it is its lack of depth. Carbon tax today is applied to only a small proportion of global CO2 emissions. The reasons are many but fairness and affordability are key concerns. In Europe, only the large emitters are taxed: they are sitting ducks and cannot up sticks and move abroad. Although coal-fired power stations and cement works are easy targets, carbon pricing will only become meaningful if we have the ‘total carbon tax’ that UK Chancellor Philip Hammond has called for. I take this to mean a properly audited tax liability across all sectors – power generation, transportation, agriculture, etc. – so that all CO2 emitters are assessed on a ‘level playing field’. A carbon tax, together with its associated tax revenue, is ineffectual if it does not cause the movement or redirection of large flows of money to where it’s needed.

With all this in mind, PAL has now extended its carbon pricing system to create a truly global carbon price, a price that takes into account current emissions, historical emissions and the relative economic strength of each country.

The concept, developed by my colleague Richard Clarke, Director (Research) at PAL, is illustrated in the figure below. The vertical axis shows a Universal Carbon Price Weighting Factor that represents the proportions of cost of emissions that can be laid at the doors of various countries. Note that the developed economy countries, which have a large accumulated carbon ‘debt’, pay the lion’s share. On the other hand, note that the developing economy countries, which do not have accumulated carbon ‘debt’, pay much less. As the developed world de-carbonises and the developing world becomes more affluent, these curves will converge to the point where globalisation puts all countries on an equal footing – this corresponds to the 1.0 line on the figure and will occur around 2040.

Universal Carbon Pricing Weighting Factors based on current and historical emissions, and on GDP per capita.

From this figure, PAL’s Universal Carbon Price is shown to be fair, acceptable and affordable. The carbon price in each country does not need to be the same, it needs to be sufficient for purpose – to dissuade the burning of coal and encourage the deployment of renewable or low-carbon energy supplies.

For each country an audit should be done, to monetize its cost of carbon emission damages. The audit should also incorporate that country’s existing carbon pricing measures and how the resulting revenues are accounted for – something lamentably absent today. Mitigation measures, adaptation measures, climate change-related insured and uninsured losses, foreign aid, forest preservation measures and the emissions associated with imported and exported goods all need auditing. Such assessments would help countries calibrate, on a fair and accurate basis, the extent to which they are playing their part in the climate change challenge. Significantly, if an international border carbon tariff were created, most of the means for implementation would be in place.

As the UK heads towards another election, overseas aid remains a hot issue for some of the tabloids as Prime Minister Theresa May defends the UK’s commitment to give 0.7% of GDP in foreign aid. Yet, in effect, such a commitment is a proportionate response to the historical damage the UK’s emissions have caused since Newcomen’s steam engine in 1712, at the start of the industrial revolution. Currently this works out at a staggering, nearly constant £8 billion a year – ‘constant’ because although the UK’s territorial emissions are now falling, the global carbon price is rising at about the same rate. Fair’s fair, Joe, and we have to face up to our carbon ‘debt’ don’t you think? Please let me know your thoughts. Thanks.


Bruce Menzies, Chairman, Predict Ability Ltd (PAL).

© Copyright Predict Ability Ltd 2017. All rights reserved.

Bruce Menzies

Author: Bruce Menzies

Bruce Menzies is Chairman and co-founder of PAL. He founded Global Digital Systems Ltd that won the Queen’s Award For Enterprise 2011. Bruce is co-author of six books on geotechnics and geology, one of which won the British Geotechnical Association Prize 2002. He holds doctorates from the Universities of London and Auckland, and is a Fellow of the Institution of Civil Engineers.

PAL’s Universal Carbon Price will foot the bill for climate change – and is fair to Joe Bloggses the world over was last modified: June 1st, 2017 by Bruce Menzies