Would you like carbon insurance with that latte?
You might not hear that exact question any time soon, but don’t be surprised if companies start shifting carbon risk from their balance sheets to someone else’s, using the time-honored marketplace tool of insurance. And when that happens, expect the price of products to reflect the new reality.
China, India, and other emerging economies argue that we became prosperous using up the atmosphere and must now bear a disproportionate share of the burden to fix the problem, at least in the first few years of any new global deal.
One proposal floating around before the global climate talks in Copenhagen next month is for developed entities, like the U.S. and E.U., to buy insurance for climate change-related impacts that are likely to occur to developing nations. Flood insurance for low-lying areas of Indonesia, for example. That might be a way, some argue, to deal with the rich/poor nation divide that threatens to undermine any new global deal.
Insurance premiums may be cheaper than other forms of compensation or aid, but like any cost borne by governments or companies, it will be passed on to taxpayers or consumers.
There is also a growing movement to be more transparent about such costs, adding them as surcharges. California is flirting with car insurance paid at the gas pump, so you’re actually paying based on how much of highway system you use—and how much carbon you pump into the air—and are reminded of it each time you fill up. A carbon insurance premium could easily be included in such a gas pump surcharge so drivers pay the true cost of operating their vehicles in terms of all relevant risks, including their fair share of creating both fender benders and climate change collisions.