Clean skies ahead? The economic solutions to climate problems

COP26 is well underway, but one influential world leader is missing from the conference table — Xi Jinping. The Chinese president cited pandemic-related travel concerns in his snub of the global climate gathering, instead, sending a note to the other delegations in lieu of a visit. 

China is the world’s largest polluter and has the second-largest economy, so this glaring absence begs the question: Will COP26 yield any real impact in the fight against climate change?

Early indications point to yes. Speaking to the conference, Canadian Prime Minister Justin Trudeau announced a hard cap on oil and gas emissions on Monday. 

“We’ll cap oil and gas sector emissions today and ensure they decrease tomorrow at a pace and scale needed to reach net zero by 2050,” Trudeau declared. 

The announcement was long promised by the Prime Minister, who first pledged to enact the policy during a reelection bid in August 2021. But this goal will be difficult for Canada to achieve, as the country is a major oil and gas producer. Yet, hard cap programs are an effective policy states can use to lower their greenhouse gas (GHG) emissions. They are often combined with further legislation to create cap-and-trade programs, which incentivize decreasing pollution by allowing firms to buy and sell emission allotments.

Several Asian countries announced plans to implement cap and trade trade programs in the days before the COP26 conference, including Malaysia and Indonesia. And while China sent no high-level representative to Glasgow, the country has not been entirely absent. Xi implemented a cap-and-trade program in July 2021, setting initial prices for carbon near $7.5 per ton.

While these carbon tax programs offer an important mechanism to regulate emissions, developed states have yet to be fully adopt them. Notably, neither the United States nor the United Kingdom has enacted such policies. Yet, these countries had other important announcements to make at COP26. At the summit, both underscored their commitment to support developing countries in their pursuit of climate change goals. 

American Climate Envoy John Kerry specifically announced partnerships with Indonesia to reduce deforestation and with India to implement green power plants. At the conference, Kerry underscored the United States’ commitment, saying that, “… our focus, our primary focus, will be marrying the trillions that will be on the table with the blended finance, the de-risking, the … development banks, that make deals happen.”

In other words, the United States has made major pledges towards supporting allies in their pursuit of climate goals. 

Together with cap-and-trade policies, these economic packages will play a significant role in the global implementation of climate change solutions. All eyes will be on Glasgow in the coming weeks to see how world leaders further combine these market-based environmental policies to bring about real change.

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