The most important takeaway from COP28 is that the global community made very little headway in shifting greenhouse gas trajectories towards levels consistent with the goal of capping temperature rise at 2 degrees Celsius, let alone 1.5 Celsius. In particular, COP28 failed to produce a structure for a global carbon dioxide offset market. What makes this so critical is that appropriately pricing carbon is vital for reducing emissions by enough to achieve these temperature goals.
There was progress made at COP28 on two fronts. The first is an explicit pledge to eliminate fossil fuels by 2050. The second is for developed countries to increase their contributions to the Loss and Damage Fund in order to help developing countries address climate change threats. However, in the big climate picture, progress on these fronts is small relative to the threat posed by global warming.
Psychologically, humans are prone to a version of attention deficit order. This means that their attention gets distracted from more important issues to less important issues. Successful pickpockets exploit this tendency to rob their victims, by distracting their victims’ minds from monitoring their valuables.
The pledge to phase out fossil fuels over the next three decades, and the increased contributions to the Loss and Damage Fund are distractions. The first week at COP28 featured a distraction involving a “no science” comment which COP28 president Sultan Al Jaber made just before the conference about phasing out fossil fuels to prevent a temperature rise above 1.5 degrees Celsius.
What the global community needs to focus attention on is identifying the costs associated with alternative net emission strategies, and then to engage in a clear, transparent set of negotiations about the associated cost-benefit choices. This involves appropriately pricing greenhouse gases, especially carbon dioxide. The negotiations at COP28 about operationalizing Article 6, especially Article 6.4, served as the locus of discussion about pricing. In the end, the negotiations failed to produce an agreed upon structure.
The magnitude of carbon prices signals the global community’s willingness to pay for addressing global warming. The higher the price, the higher the willingness to pay in the form of investment in abatement. Business-as-usual, which features global temperatures rising well above 2 degrees Celsius to between 3 and 4 degrees, involves low prices, less than $10 a metric ton. The current price is less than $5 a ton.
Maintaining the global temperature rise to 2 degrees Celsius will require the current price of carbon to be around $200 a ton. Indeed, the Environmental Protection Agency uses a figure of $190, for regulatory purposes.
According to mainstream economic integrated assessment models, the probability of keeping the global temperature rise to 1.5 degrees Celsius is close to zero, even if the global economy were to reach net zero before 2030. These models project that the global temperature will cross 1.5 degrees before 2035. Climate scientist James Hansen predicts that crossing 1.5 degrees Celsius will happen before 2030.
If Hansen’s prediction proves to be correct, then there is reason to be fearful that global warming is much worse than previously thought. Time will tell, and 2030 will arrive before we know it. If Hansen is correct, the global price of carbon needs to be a lot higher than $200 a ton. Maintaining prices at levels near $5 and $10 could be suicidal.
There is an issue of timing. Psychologists study timing using thought experiments such as the following. Imagine a clear pond of water to which someone adds a lily pad. Suppose that the lily pad doubles in size over the course of a day. Suppose too that it takes 40 days for the pond to be completely covered by the lily pad. Ask yourself: on what day will the lily pond be 50 percent covered?
Give yourself a moment to come up with a number.
Psychologists use the lily pad problem to study a bias called exponential growth bias, whereby people misestimate the nature of processes that grow exponentially.
The answer to the lily pad problem is Day 39. Surprised? Most people are. The lesson from the lily pad problem is that the largest impact from exponential growth comes late in the game.
We are now in the late stage of exponential emissions growth, and it is a critical stage because annual emissions are now much higher than in past decades. This is why it is so alarming that COP28 failed to produce a structure for carbon offset markets which would price carbon at levels much higher than the status quo.