the Homing Bird #10

July 2024

In this edition :

🔥 The Story - How 3.5% of people can transform the world

🎙️ Expert Insights - How will the EU election results (not) impact the EU ETS

🤪A new subscription period is closing soon - Invest in a financial asset built for price appreciation, while directly contributing to the European fight against global warming.

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The Story - Which 3.5% ?

As individuals, we like to excuse our lack of climate action with the scale of the challenge. We're just a drop in the ocean after all: what's the point of changing behaviors if the rest of the world doesn't?

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While intuitive, this train of thought is profoundly misguided.

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Nation-states are not the most appropriate level for addressing the urgent global fight against climate change either. In their academic paper, Femia and Werrel argue that it is a time of relative climate stability that enabled the nation-state system to develop and thrive. In turn, a quickly changing climate challenges national stability: global warming is too big of a problem to be solved at the national level.

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If not individuals nor nations, then maybe international institutions. After all, they are here to coordinate global efforts. However, the resulting actions are often protracted: getting a massive diverse group of actors on the same page involves a lengthy process of negotiations and legal wrangling, and a true commitment to the rule of law. There is no enforcement mechanism at the international level. While the direction is set, it is rarely performative.

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When determining the correct scope for climate action, does getting bigger mean getting better?

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Here’s the paradox: the more monumental the climate crisis gets, the more granular the solutions need to be. According to Erica Chenoweth, 3.5% of a country’s population can change its policies: it is the threshold beyond which a minority can create and sustain a wider movement.

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Interestingly enough, the European Emissions Trading Scheme covers close to 3.5% of global emissions. And since its inception in 2005, it has ushered carbon pricing schemes worldwide, so much so that today 20% of global emissions are priced. The introduction of the Carbon Border Adjustment Mechanism (CBAM) is accelerating the dynamic, with countries like India, Indonesia, Brazil, or Turkey thinking about their own pricing schemes.

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Much like the proverbial butterfly, individual actions can have global effects. And few wield as much leverage as your financial decisions.

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Every nation for itself

The Good, the Bad, the Ugly

“There is no such thing as a global citizen. We are all bound by the responsibilities and duties of national sovereignty” would say Margaret Thatcher. National governments shape climate policies. Heads of state hold the power to determine their country’s approach to tackling the environmental crisis. And the way they use that power varies, in space and time.

In June of this year, Denmark introduced a carbon pricing system for emissions from agriculture for the first time. Their government went beyond the fears of social unrest, observed in Europe just a few months ago. They managed to implement an ambitious yet balance climate policy, spearheading what is only murmured at the European level.  

In contrast, Hungary’s Prime Minister recently commented that “we are too concerned with carbon quotas and not enough with falling birth rates.” Similarly, Poland has regularly attempted to delay, pause, or otherwise repeal the EU Emissions Trading System, before embracing it in the summer of 2024.

Even within a strong and cohesive political bloc like the EU at the forefront of climate transition for the past two decades, national responses vary. This highlights the difficulty of finding, implementing, and maintaining over time consensual decisions amongst the hundreds of nations around the world.

Moody sovereignty

National sovereign approaches to handling the climate crisis are also inconsistent. There can be fluctuations depending on who is in power. The elections calendar is inconsistent with the climate calendar, which operates over decades or centuries.

This “climate switch” logic was clearly visible in the U.S. when the Obama administration appointed a scientific group to calculate the social cost of carbon to enhance its climate policies, setting it at $43. However, in its first days in office in 2017, the Trump administration slashed this figure to $3-5 by “simply” altering the research assumptions. Then, on his first day in office, Biden raised this carbon cost back up to $51.

The most recent findings indicate that the social cost of carbon is $1,056. Even climate-friendly politicians are far off the mark.

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Channeling national powers towards common objectives

The negative effects of a fragmented “every nation for itself” strategy in addressing climate change is blatantly evident. According to the Climate Action Tracker, no country’s current climate policies are sufficient to meet the climate goals recommended by the international scientific community.

How can a 3.5% change drive the global shift we need?

In 2024, more people than ever before — 49% of the global population — will vote. If national sovereignty and international coordination fail to resolve the environmental issue, this 49%, including you, can be the force for change.‍

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The EU Emissions Trading Scheme (EU ETS) covers close to 3.5% of global emissions, and this scope is more impactful than you might realize. This scheme has motivated 36 other jurisdictions to set up their own carbon pricing frameworks, with more countries like Türkiye and Brazil preparing to follow suit. The EU provides international support through a dedicated diplomatic task force that uses its experience to assist other nations in creating effective carbon pricing mechanisms.

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The introduction of the Carbon Border Adjustment Mechanism (CBAM) in 2023 safeguards the competitiveness of EU industries but also ensures that importers account for the CO₂ emissions from their production processes. It sends a strong signal globally that carbon pricing works - in turn, other countries like China and the US are now following suit by working on the implementation of their own CBAMs.

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There is no single, correct scale for addressing climate change, nor is there a scale too small to be relevant. Just like the EU has acted as a beacon in the community of nations, you too can drive meaningful change at your level and inspire your community.

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To end with a word of wisdom from Napoleon, "If you want something done, do it yourself."

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Expert Insights -  How will the EU election results (not) impact the EU ETS

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We are truly grateful to Nicolas Perrin, the Vice President of the Ille-et-Vilaine department responsible for territorial solidarity contracts and the department’s low-carbon budget, for taking the time to share his insights on the recent election results and their potential impact on climate change policies.

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H: Can you tell us about your past experiences in the field of public affairs, particularly when it comes to climate policies?

I have been working in the public sector since the beginning of my career, 20 years ago. Initially, I focused on supporting local communities by implementing public service projects, urban planning, and regional natural parks in different countries. Upon returning to France, I turned to social entrepreneurship with the company Phnix, which now distributes 200,000 meals every day as a food aid initiative in France. For the past three years, I have been involved in politics as the vice president of the Ille-et-Vilaine department, in charge of territorial solidarity contracts and the department’s low-carbon budget. Our ambition is to reduce our emissions by 25% by 2028. It is a significant project, with more than 4,000 employees involved, but thanks to this first low-carbon budget, we will make investment decisions with full awareness. We must act on climate now to avoid "paying too much" tomorrow.

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H: What, in your opinion, is the role of political leaders in the fight against climate change?

Political leaders must have a committed and ambitious approach to tackle the immense challenge of climate change. This challenge goes beyond personal, national, or even European scales; it is important to maintain the principle of shared responsibility. Political leaders must act to monitor and reduce our carbon footprints, and make sure to protect biodiversity. Although efforts have already begun, it is crucial to maintain and amplify these actions to prevent the worsening of certain natural disasters or territorial vulnerability— it is important to particularly address challenges related to insurance coverage and access. The European Green Deal is a significant step but still insufficient. Political action is necessary and should be articulated over the long run; it complements the efforts of businesses and individuals.

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H: Do you think that voting is an effective way to defend one's convictions on climate issues?  

In a democracy, voting is indeed a powerful way to express one's convictions and shape the future of our society. Abstention benefits the status quo, and it is crucial that young people, those who are most affected by climate disruptions, go to the voting polls. However, voting is not the only tool that we have: citizen collectives, corporate engagement, and initiatives like the carbon quota trading system can also have a significant impact. Citizen mobilization is essential to send a clear message to industries and political decision-makers; it is the foundation of a broader ecological movement.

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H: What are your general impressions with regards to the results of the European elections?  

History is never linear; there have been progressive advances in the past that have later engendered reactionary movements. In 2019, there was a "green wave" pushing for more environmental actions, to which the European Parliament responded adequately. This time, there is a slight backlash and a shift to the right in the parliament. Its actions on ecological policies will likely stay in the continuation of those already in place, without an increased ambition in environmental matters.

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H: How do you explain the changes in voting patterns compared to the previous European elections?  

The issue of farmers' conditions and its connection with ecological policies was central during the pre-election period, and unfortunately, this has given rise to many misconceptions. Beyond this, the media often portrayed environmentalists as criminals, even though they generally advocate for their cause peacefully. Finally, while Europe has historically been a central power on the global stage, today we are witnessing a rebalancing of its position in the world. This perception of a loss of power can lead to isolationism and partly explains the changes in some voters' choices.

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H: What major changes can we anticipate following the European electoral results, particularly in terms of climate policies?  

We are likely to witness a relative status quo when it comes to climate policies—a significant shift in policies is not expected following the European elections. French political orientation, following the legislative elections, will also be a major factor. Political inertia on climate issues would contribute to the worsening of the current environmental situation.

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H: Is it easy to undo existing climate policies?

It is not easy, either on a French or European scale. The organization of institutions, treaties, and the distribution of competences between territorial levels act as strong "safeguards" at the legislative level. A European consensus is necessary to withdraw from certain texts. However, the rise of far-right movements and some authoritarian regimes is worrying and could create the temptation to dismantle positive environmental texts, as we have seen in France with the weakening of the eco-phyto plan.

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H: Does the Ille-et-Vilaine department support the emissions trading system? Do you think this system is effective for decarbonization in France?

First, it is important to remember that the departmental council is not directly affected by the carbon allowance market. That being said, everyone must do their part, and the department has thus committed to a 25% emission reduction over five years. Moreover, the carbon market is fascinating and effective; it is a very incentivizing tool for transforming the industry. Now that the EUA price is starting to get in line with environmental realities, industrials have an incentive to transform their production tools. Therefore, it is essential to strengthen and consolidate the security and independence of this carbon market, or should we say, this "carbon currency." Also, we must be cautious about its extension, ensuring it does not impose a burden directly on citizens but on legal entities. For example, if we extend the market to agriculture, we should differentiate the treatment of farmers from that of the agri-food industry, taking into account the vulnerability of these organizations.

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H: How can we strengthen the carbon market?

The market is poorly understood nowadays—we lack pedagogy and education. The tax frauds in the past have not helped to popularize it, of course. A mistrust towards the carbon market has been created, even though it is a market of the future. Many individuals see EUAs as permits to pollute, which is a mistaken view. The EU ETS is a structuring market, very effective in adapting our development model to climate challenges. However, it remains too poorly known and often confused with other carbon-related tools that are often less virtuous in their climate effectiveness. Homaio deserves recognition for informing and raising awareness, explaining how carbon is evolving into a currency - an economic criterion to be approached with caution.

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