May, 2007 - By Richard Corin
Simultaneously
introduce a Carbon Dumping
Charge, Carbon Dividend and independent Carbon Authority.
·
Establish a Carbon
Dumping Charge for CO2 emissions from fossil fuel combustion. This
carbon price
creates incentives for energy efficiency and the transition to low
carbon
energy sources.
·
All revenue from the
carbon charge will be distributed as a Carbon Dividend equally to all
Australians (half for children) through the tax and welfare systems.
The Carbon
Dividend recognises the right to an equal share of the carbon emissions
budget.
It will compensate consumers for price rises and reward reduced
consumption of
fossil energy.
·
The Carbon Authority
will be empowered to set the carbon price with the purpose of
controlling
demand to meet emissions targets. It will monitor CO2
emissions,
infrastructure developments and all aspects of the carbon economy to
inform a
mid and long term view about the appropriate carbon price.
The goal is to massively reduce carbon
emissions over 20 to 40 years by replacing carbon intensive energy
sources with
green energy and promoting energy efficiency and waste elimination.
Equity considerations combined with market incentives are
central.
This policy focuses on “new” carbon from
fossil fuels destined for release into the atmosphere as CO2.
Compatible
but separate policies addressing land management issues, biological
emissions
and storage, as well as other greenhouse gasses are also necessary.
It is
recommended that industrial emissions of potent greenhouse gasses such
as HFCs
and SF6 should be rapidly regulated to zero with severe penalties.
An essential foundation of this proposal is a
feasible plan, which incorporates targets for CO2 emissions released
from
fossil sources over a period of decades. (Whatever target
curve is
negotiated, it can be reduced to 2 factors:- a final target,
which
represents the sustainable level of CO2 emissions, plus the total
amount
of CO2 we can “spend” along the way. These are the figures
that matter
for global warming.) Scientific knowledge and international
negotiations
will result in a curve describing a series of CO2 emissions
targets. It
must be recognised that this target trajectory will change as more
accurate
information becomes available. Long term targets cannot be fixed with
certainty, but near term targets should be well defined. The emissions
trajectory will be converted into a target supply curve
for fossil
carbon.
The concept is to use the carbon price to
reduce demand for fossil fuels in order to meet the supply
target. The
target trajectory is to be “soft” in the sense that errors are allowed,
but the
future carbon price will be adjusted to compensate for accumulated
errors.
Adjusting the Carbon Dumping Charge is all about finding the right
price to
keep emissions reductions on track. It is analogous to the
Reserve Bank
setting interest rates to achieve inflation targets.
Following the introduction of the Carbon
Dumping
Charge, the price of energy derived from fossil carbon and energy
intensive
products will rise. Through the Carbon Dividend,
the “average”
consumer of fossil energy and products will receive an amount of money
equal to
their cost increases. High consumers of carbon energy (and
products) will
end up paying more, while the efficient, frugal and users of green
energy will
be rewarded. As the price difference between fossil energy
and “Green
Power” reduces, more consumers will demand green energy. A
higher price
for fossil energy will stimulate investment in renewable sources, and
underpin
a secure, minimum price for renewable energy. The higher
price of energy
generally provides an incentive for efficiency savings. The
economics of
solar hot water, solar PV, passive thermal management and efficient
appliances
are a lot more attractive when they provide greater monetary savings
though the
reduced consumption of “expensive” energy.
Equity requires that people can afford these
increased expenses. It is important that the carbon revenues
are returned
to people’s pockets so they have the option of using it to save energy,
switch
to green power and low carbon products or continuing to pay their
increased
expenses. (We don’t want people on low or fixed incomes
living in
darkness, nor disruptive anomalies like everybody wanting to convert
vehicles
to LPG at the same time.)
Over time, as the economy moves to higher
efficiency and green energy becomes the norm, revenues from the Carbon
Dumping
Charge will decline. The average consumer will then be
compensated for a
lower level of carbon consumption. The “average” consumer is
encouraged
to keep up with the community or accept paying more. This
pressure comes
automatically from changing community choices – through a declining
Carbon
Dividend – not directly from the government.
Under this system, carbon revenues are
effectively and equitably recycled. Low carbon energy and
demand
reduction become affordable through subsidising the customer.
The
technological, cultural and economic transformations become cost
effective
alternatives to the slowly rising price of fossil energy. Carbon
Dumping
Charges finance the transition to a low carbon economy by removing the
subsidy
which previously allowed the cost of CO2 emissions to be
“externalised”.
Simultaneously, consumers are empowered to demand more
effective energy
services. Civilisation’s dependence on fossil fuels means we
cannot make
this transition instantly, but it must happen quickly enough.
Apart from equity, there are additional
reasons for not relying on
carbon revenue for funding other
worthwhile purposes.
·
Carbon revenue will
decline as fossil fuel consumption
and CO2 emissions reduce. Success with reducing carbon emissions will
reduce
the funds available for such purposes. There is a perverse incentive,
or
conflict of interest, when Governments depend on revenue from sources
it
purports to discourage. Consider gambling revenue.
·
We don’t know what the
carbon price needs to be, so
budgeting will be unreliable. To reduce CO2 emissions in an
orderly
manner, the carbon price will need to be sufficient to achieve
emissions
targets and not more. (Why not? The short answer – energy is
wealth.)
The emissions trajectory is likely to decline dramatically
over decades
and the appropriate carbon price will depend on the elasticity of
demand for
carbon fuels at the time. If a small incentive produces a
major response,
then the rate of the carbon levy can be small. Also the
converse.
The major determinant of the price will always be the cost of
substitute
energy services.
·
Politics. If the
public perceive the Carbon
Dumping Charge as “just another tax”, it will be easy for competing
political
parties to bribe the electorate with a promised return to free
emissions.
By rewarding lower consumption of fossil energy we create a large
constituency
of supporters. The growing renewable energy sector and
investors will
obviously be supportive industrial advocates. The coal
industry will
protest in any case, especially if the community does not provide
perpetual
insurance for geosequestration – but this is another topic.
·
Direct subsidies of
particular products or industries
may not be the most cost effective way to reduce emissions. Insulation
may be
cheaper than making solar electricity for air conditioners.
Higher prices with more spending power looks
like inflation. The Carbon Dumping Charge is revenue neutral
– it is not
real inflation. As with the introduction of the GST, apparent
inflationary effects can be safely ignored. Although the cost of carbon
emissions will show up in prices, there will be no wages pressure for
cost of
living increases because the revenue is immediately distributed to the
shareholders of the atmosphere - everyone. As carbon emissions decline,
so will
the Carbon Dividend, and real energy prices will approach that of green
energy.
By that time, large scale and mature technology will provide carbon
neutral
energy services much cheaper than today.
The real price of energy will slowly rise
over decades to be equal to that of tomorrow’s green energy. This small
economic cost will be swamped by the effects of climate change itself,
such as
water and food shortages, storm damage and disease, compounded by
competition
for diminishing resources such as oil.
Within the national economy, industries and
businesses will pass their higher energy costs on to their customers
who will
have the Carbon Dividend money to pay for it. However,
imported goods
will be relatively cheaper if they have been made with “free to air”
fossil
energy, and energy intensive exports will be less competitive against
those
which have been made with subsidised emissions. In the absence of a
global
carbon price, “Border Tax Adjustments” will be needed.
If there is a world carbon price, regulated
and distributed through one global entity, no adjustment measures would
be
needed for international trade. However, for trade between
jurisdictions
with different carbon charges, the following principles are necessary
to avoid
a competitive race for the lowest carbon price. These
principles must
form part of any successful international protocol that allows
differential
pricing of carbon emissions.
·
Carbon charges shall be
imposed on imported goods &
services, but refunded for exports.
·
The information provided
in claiming export refunds
shall be made available to importing jurisdictions for the purposes of
carbon
accounting.
·
Accurate carbon accounting
information must accompany
all imported products. If reliable emissions information is
not
available, a higher amount of emissions will be deemed for calculating
carbon
charges.
·
Emissions associated with
exported products become the
liability of the importing nation.
·
Focus on
consumption!
It follows that national targets must be calculated and
specified to include only emissions generated in the provision of goods
and
services consumed by the citizens of that jurisdiction. Imports must be
included and exports excluded from national emissions targets and
assessments.
This is a major modification to Kyoto style national targets which focus on the location of smokestacks rather than the consumption by citizens. Kyoto does little more than rearrange the smokestacks on the Titanic - from where emissions are expensive to wherever they are cheap. Global emissions will only keep increasing until there is an adequate worldwide price on all carbon emissions or fossil fuels. The logical consequence of “polluter pays” is that the polluter’s customer pays. Global equity considerations follow naturally from every individual’s inalienable right to own an equal share of allowable CO2 emissions.
“Cap & trade” schemes and associated “offset programs” must be strongly opposed. “Cap & trade” privatises the assimilative capacity of the atmosphere, and together with questionable “emissions trading” schemes, constitutes the biggest fraud ever perpetrated on the hopeful and trusting citizens of this planet. The associated hype is a modern day version of The Emperor’s New Clothes with potentially disastrous consequences for society and the world. “The finest shade of green that has ever been seen.”
The
following is an extract from
Environmental
Principles and Policies:
An Interdisciplinary Approach - by Sharon
Beder
Chapter
12, under “THE EQUITY
PRINCIPLE”
Emission allowances and
targets
By
basing greenhouse emission reduction
targets on the 1990 emission levels of each country, those that were
emitting
the most at that time were given a greater allowance under the Kyoto
Protocol.
This disadvantages countries whose lower levels of economic activity at
the
time meant they were not emitting much at all in 1990. The 1990
baseline
freezes the status quo, consolidating ‘the historic overuse by Northern
industry at the expense of the South', and is therefore inequitable
(CEO 2001).
This situation has been termed 'carbon colonialism'.
Larry Lohmann
(1999) also claims that the Kyoto emission targets are inequitable:
Any
measure requiring all
countries to reduce emissions by similar percentages, for example,
would allow
the US to go on producing roughly one-quarter of the greenhouse gases
released
yearly, even though it has only four per cent of the world's
population.
Similarly, North-South 'carbon trading' suggests that it is legitimate
for rich
countries or companies who already use more than their share of the
world's
carbon sinks and stocks to buy still more of them - using cash which
has itself
been accumulated partly through a history of overexploiting those sinks
and
stocks.
Lohmann
(2004: 9-11) estimates that carbon
pollution rights allocated to large industries in the United Kingdom,
as part
of the EU Emissions Trading Scheme, will give them the saleable rights
to some
5 per cent of the world's estimated assimilative capacity for carbon.
Yet he
questions whether the United Kingdom has the moral right to grant such
rights,
given that assimilative capacity 'does not fall, geographically or
otherwise,
under UK legal jurisdiction, but is a capacity inherently spread around
the
world'. This is why he argues that the handing out of rights as part of
emissions trading schemes is 'one of the largest, if not the
largest, projects
for creation and regressive distribution of property rights in human
history'.
(bold added)
Additional
reading:-
co-published by Dag Hammarskjöld Foundation, the Durban Group for
Climate
Justice, and The Corner House. www.thecornerhouse.org.uk
The book is available for download on The Corner House website in full (360 pages, 22.5 MB) and also in 5 separate chapters. www.thecornerhouse.org.uk/summary.shtml?x=544225