I just came from a talk by a guy affiliated with the CO2PE group about accounting for the carbon cost of manufacturing. The speaker presented a novel means of accounting for the carbon cost of manufacturing parts in terms of tonnes of CO2 equivalent emitted. It was very technical, and highlighted the enormous significance of location (and thus source of grid electricity, with coal burning places the worst and those with large hydroelectricity and nuclear power the best).
However, the discussion afterword quickly fell into "What about X?" questions in his accounting. After a couple "we will have to consider that", mostly related to water, the answer became "we have to start somewhere, and tweak the accounting later." The major difference between his formula and the 54 wildly divergent "carbon footprint" surveys is its transparency, which is good. However, I doubt anyone left the room satisfied that that this was a good method. That is was also the best most of us had seen (indeed, the only formula), highlights how difficult it will be to have carbon trading schemes that involve manufacturers directly.
He did, however, make a subtle point that there's an enormous amount of inefficient equipment in use today. Getting rid of this equipment will require two things: (1) a rise in energy prices due to something like a carbon tax and (2) functional credit markets. Given the state of finances in the Western world, we're looking at a combination of higher taxes, cut services and high inflation. A tax that encouraged investment, by say, covering the Social Security Deficit with a carbon tax (~$4.74/ton this year), could potentially shore up the fiscal situation and ease a lot of fears worldwide.
The trouble, of course, is that realizing that future savings requires investment in real things today. I think this is a big part of why so little progress has been made, especially in the US. Our economic policy since 1982 has heavily encouraged, through gov't guarantees, Federal reserve action, tax incentives and "degregulation" (aka regulatory capture) financial investments (housing, 401K's, IRA's, etc) at the expense of infrastructure and physical capital. Changing that requires a fundamental shift in how we view retirement, wealth and the role of government.
The concept of "too big to fail" and the S&L crisis heartily confirmed that our economy would be structured to favor financial instruments. Problems with unions and energy supply in the 1970s probably had a lot to do with that, but basically the federal government has been quietly moving downside risk away from private investors and into the public purse since Lockheed's debacle with the L-1011. This form of economic planning is largely invisible to the average citizen. They are invited to join in the benefits with tax-deferred savings, higher property values, and access to a society that "feels" wealthier. Now that the blush is off the rose, we've seen a few groups that would like less economic planning, but still plead for government action that will give them jobs.
However, the kinds of policies that will result in a clearer, more efficient economy will be visible. You can't ignore a wind turbine or a solar rooftop, and rising energy prices will hit everyone. Getting there will require credit markets that are actually healthy, not relying on clever debt-hiding schemes. Given where we are now, and how all major markets now rely on some kind of government guarantee or subsidy, an explicit move must be made. Using a carbon tax to cover entitlement shortfalls is my personal favorite, since it fixes a temporary shortfall with a temporary revenue stream. It also puts a very powerful lobby on the side of clean technology and physical-plant investment. However, actually getting the metal bashed will require successful financial reform.
Hopefully those of us in the metal-bashing world will bear in mind the lessons of Greece, Enron, Madof, Lehman Brothers and the failure of Sarbanes-Oxley to prevent the financial crisis. Accounting is good when there are no places to hide or fudge numbers, but "off balance sheet liabilities" are especially common when the rules are vague and incomplete. Open standards for carbon footprints are a huge step in the right direction, but at best they tell us how much trouble we're in. Getting out of it means creating incentives and allowing investment.
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