The European Emissions Trading Scheme (ETS) should be expanded on a global scale, according to a landmark UK report on the costs of climate change that also calls on the world to act now or face dire consequences.
"The EU emissions trading scheme is leading the way," said the report's author Sir Nicholas Stern at the launch of the 'Stern review on the economics of climate change' in London on Monday (30 October).
Mr Stern wants to see the emissions trading scheme (ETS) include aviation emissions, and polluting greenhouse gases other than CO2 included, viewing the scheme as the nucleus of future global carbon markets.
The report, commissioned by the UK government, says the setting of a price on carbon – either through taxation, emissions trading or regulation – would make people more aware of the full costs of emitting CO2.
But the document also paints a grim picture of what the world will look like only 50 years from now if politicians, industries and citizens alike across the world do not take action now to reverse the trend of climate change.
According to the report, business as usual will in the worst case scenario cost the world €5.5 trillion – or up to 20 percent of the global economy, it will make at least 200 million people "climate change refugees" and will make around 40 percent of the globe's animals extinct.
EU to take a lead
The president of the European Commission, Jose Manuel Barroso, on Monday welcomed the report and said "the EU has and will continue to take a lead in the fight against climate change."
"We are facing a serious and urgent issue," Mr Barroso said while speaking at an energy conference in Lisbon, also on Monday.
EU countries have agreed to reduce by 2012 their emissions by eight percent below 1990 levels. "But, if we continue as we are, we are going to miss this target; emissions are going up, not down," Mr Barroso warned.
He announced a raft of measures to be proposed by January to "accelerate the change of Europe to a low carbon economy."
"Pillars" of the plan are an increase in our energy efficiency; a substantial increase in the amount of energy used from renewable sources and clean hydrocarbons; accelerating advance of clean coal technologies and a debate on nuclear energy which "should not be taboo."
UK prime minister Tony Blair said the conclusions of the Stern review should be seen as "the final word" on why the world must act now to limit the damage we are doing to our planet.
"Unless we act now the consequences – disastrous as they are – will be irreversible," he stated, adding that it will not happen in "some science fiction future, but in our lifetime."
His finance minister Gordon Brown said "environmental policy is now economic policy" and added that the fight against climate change could mean new investments, jobs, technology and export markets.
The UK chancellor said his new international advisor on climate change is former vice-president Al Gore, who has won worldwide acclaim for his film, An Inconvenient Truth, on the dangers of global warming.
The EU emissions trading scheme was launched in January 2005 to put a ceiling on the total emissions by major industrial energy users and reduce carbon dioxide being pumped into the air - widely blamed for climate change.
Earlier this month the commission came out with a plan to make energy usage more efficient in the EU and will by the end of this year come out with a new proposal to introduce aviation into the emissions trading scheme – a move the airline lobby prefers to raising air passenger taxes.
The EU executive will also soon publish a report on the functioning of the ETS.
"Governments across Europe must take the warning of internationally-respected economist Sir Nicholas Stern, that fighting climate change is now fundamentally linked to the health of the global economy," Esther Bollendorff from Friends of the Earth Europe said.
"Failing to take action now may cause catastrophic climate change and global economic recession."