We don’t need an energy or resources tax; we need an instrument for letting resource prices rise in parallel with resource productivity.

Question: Do you believernthe Copenhagen Climate Council was a failure? 

Ernst Weizsäcker: There was a bit of a catch-22. rnThe United States of America, since the days before the Kyoto protocolrnof 1997, have a firm political decision, a unanimous decision at the Senaternlevel that they are not going to enter commitments unless and until the largerndeveloping countries also do.  Butrnthe developing countries, on their parts, say before Kyoto and beforernCopenhagen "We are not going to enter commitments until the rich countries haverndone their homework."  So, it wasrnsort of clear from the beginning that the conference would not lead to bindingrncommitments. 

President Obama made arnclever move by inviting the big developing countries into some kind of a greenrnroom with the Europeans cut out, agreeing on the so-called Copenhagen Accordrnwhich at least defines that the two degrees Celsius limit should be respected,rnthat soon we should have a peaking of carbon dioxide emissions, and that thernnations, including the developing nations should make at least relativerncommitments.  Meaning, a reductionrnof carbon intensity of their economies, which the Chinese were in the processrnof doing anyway, which is a good thing. 

The trouble is that this isrnless binding than the Kyoto Protocol, and could even kill the Kyoto Protocol, andrnthen the world will be without any binding agreement.  Now, this is why many environmentalists and certainly most ofrnthe Europeans say Copenhagen was a failure.  From the U.S. American perspective, it was not.  It was perhaps the only way thernAmerican President could come home with something in his hand, tangiblernthings.  But I suggest that if allrndelegations assembled in Copenhagen had understood the message of “Factor Five,”rnthat you can become richer while at the same time reducing your carbonrnemissions, then I believe the attitudes of Americans, Europeans, and indeedrnChinese and Indians would have been completely different.  But so far the idea, the ideology, ifrnyou wish, has been that you get richer only by emitting more carbon dioxide. 

Question: Should therernbe a tax on carbon? 

Ernst Weizsäcker: We are suggesting to learn from the glorious experience of the IndustrialrnRevolution which was the following: rnBetween 1850 and, say, 2000, in 150 years or so, the labor productivityrnhas been increasing year by year by year by year, ending up a 20-fold increase ofrnlabor productivity, which is fantastic. rnBut, the trick is, it always went in parallel with gross wages, withrnlabor costs.  Now, this was arnmutual chain of causes.  If laborrngets more expensive, companies have a strong incentive of laborrnrationalization, of increasing labor productivity.  If labor productivity goes up, the trade unions see thernpotential for increasing wages. rnSo, it’s a mutually supportive process, this has been a gloriousrnexperience, as I say. 

But in resources, whichrntoday is actually more important than labor, we have seen a constant decline ofrncosts.  The relative costs measuredrnby the purchasing power, or whatever, of a ton of steel was much higher 200rnyears ago than it is now, or 100 years ago.  And the same essentially holds for energy.  So, now we have to engineer this kindrnof mutual climbing process between prices of resources and resourcernproductivity.  

So, it is not just plainlyrnan energy tax or resource tax, it is an instrument of letting resources pricesrnrise in parallel, step by step, with resource productivity.  Then by definition, there would be nornsocial hardship.  The mile drivenrnwould not be more expensive next year even if the petrol was becoming morernexpensive because the driving efficiency or the fuel efficiency was going up.  And if this sort of eternal ecologicalrntax reform was politically decided, you would see investors, engineers,rnmanagers, traders, and indeed consumers, flocking into ever more efficientrnresource efficient technologies. rnThe selling of LED lamps in place of the old incandescent light bulbsrnwould be sort of a natural thing to do. rnAnd all the electrical companies would run into their direction andrnimproving it ever further.  And thernsame for the car companies, the same for the infrastructure planners for publicrntransport.  In agriculture, organicrnfood would become much more competitive compared with energy intensive andrnpesticide intensive food, and the entire economy from buildings throughrnmobility, agriculture, heavy industry, and everything.  All sectors would move into therndirection of what we call a new long-term cycle of technology.  And this time correctorized by mayberna five-fold increase of resource productivity with the constant whip ofrngradually increasing resource prices.

Question: Do you havernhigher hopes for the summit in Mexico next year?   

Ernst Weizsäcker: I think that after the bad experience of Copenhagen, the Cancun meetingrnwill at least try and find a new compromise.  One element that I find particularly important is unlikelyrnto be on the agenda, but maybe in a post-Mexico conference.  This is per capita equal emissionrnrights.

That means, an American, arnGerman, a Russian, a Japanese has no larger right to make use of the atmospherernthan a person from Cameroon, Bangladesh, China, Ecuador, whatever developingrncountry.  And that would mean forrnus in the north with very high per capita emissions, we would have to gornshopping to India, to Bangladesh buying rights.  If that was politically agreed with or without America, yournwould see investors in India, in China, in Brazil and other places, whenrnconsidering the construction of a new co-power plant to weigh it against thernpotential of selling permits to the rich countries.  Today planning and building a new co-power plant forrnelectricity in India or in China is a license for printing money.  It’s so fabulously profitable.  But as soon as selling carbon dioxidernpermits to America, to Germany and other places becomes an alternative –rnbecomes very profitable, then all of a sudden the Chinese and Indians wouldrnsay, look, we also have fantastic opportunities of becoming more energyrnefficient needing much less electricity, and instead becoming rich by sellingrnpermits. 

So, this would be somethingrnwhich Cancun should address and later conferences should agree on. 

Recorded on April 9, 2010