Alternatives and Variants
Introduction
The 'Cap & Share' proposal on this website is equivalent to a similar proposal called 'Cap and Dividend', but applied globally. Cap & Share was developed by Feasta, an Irish-based think-tank; meanwhile, Cap & Dividend for the USA was proposed by Peter Barnes, and a similar idea called 'Kyoto 2' was proposed by Oliver Tickell.
All these are discussed below. But the important thing is to start capping carbon SERIOUSLY, and to get going SOON - the choice of which method we use is less important, as long as it does the job.
So look at the comparisons below as comparing tools. We need to pick a good tool for the job in hand, but let's not get sidetracked so much into debating the tools that we postpone starting the job beyond the point where it's too late.
Finally, a warning - this section is a bit technical and may be of interest mainly to 'policy wonks'!
Global and National plans
Cap & Share, like many of the ideas to be discussed below, can operate at a global or a national level. It is simpler to act globally, with a single global system (such as C&S), run by a single institution such as a Trust or an agency set up by the UN. However, some see this as politically unrealistic, given a world of nations anxious not to surrender any of their sovereignty. So an alternative global solution might consist of an international framework tying together national arrangements in each country. (This still requires a pooling of sovereignty, of course).
Two factors come into play when looking at national schemes.
Firstly there are technical adjustments. At a national level, the fossil fuels being introduced into the national economy include imports and well as the fossil fuels extracted from the ground. So fossil fuel suppliers would have to buy permits to cover the (carbon content of) not only the fuel they extract from the ground, but also the fuels they import. Conversely, fossil fuels extracted but then exported would be exempt.
The second factor is a need to tie national schemes together. Frameworks such as 'Contraction and Convergence' (see below) have been proposed for this. Essentially the big climate talks at Copenhagen and Paris are about negotiating such a framework. In the absence of such a framework we are left with national schemes producing national 'contributions' without any way of ensuring that these contributions add up to solving the problem.
The next few sections assume that we're looking at a national scheme for a single country - although much of the discussion would carry over to a global level.
Carbon Taxes
Putting a tax on carbon is an obvious way of making carbon more expensive (establishing a 'carbon price'), and so reducing the amount of carbon in the economy, and hence the emissions of CO2. It has the advantage that all the tax systems are already in place.
One problem with taxes is that they are unpopular (although in theory tax revenues could be distributed back to the population as in 'Fee & Dividend' below). So governments will be reluctant to set carbon taxes at the high levels necessary to bring down emissions fast enough.
The other problem is that carbon taxes are like an elastic cap. So that even if they are set at high levels, people can still buy more and more fossil fuels if they want to. If we are serious about capping carbon, we have to aim for caps, not weaker systems like carbon taxes. However, carbon taxes may be an interim step: if a carbon tax is 'high enough' it becomes equivalent to a cap.
Fee & Dividend
This is the idea proposed by James Hansen (for example in the book 'Storms of my Grandchildren'). It is essentially a carbon tax (see the previous section), but with the revenue be distributed back to the population as a 'dividend'. Again, if a carbon fee is 'high enough' it becomes equivalent to a cap. The Fee & Dividend proposal for the USA aims to sidestep the bipartisan divide in US politics.
Cap & Dividend / Climate & Prosperity /
Cap & Prosper / Sky Trust
These are all essentially the same as Cap & Share (although see 'Classic Cap & Share' below).
Cap & Dividend is proposed in the USA by Peter Barnes as part of the 'On the Commons' initiative - more recently under the label 'Climate & Prosperity'. An upstream auction of permits would be run by a 'Sky Trust', independent of government, and the money refunded to the people on an equal per capita basis. The Alaska Permanent Fund is a precedent for this type of approach in the USA.
In moving from Fee & Dividend to Cap & Dividend, the word 'cap' simply means a firm limit on emissions: that is, setting the desired quantity of emissions. The difference between a fee/tax and a cap is strength. Small fees would make little difference to emissions; larger fees would be needed to get substantial reductions. A cap simply sets the fee as high as it needs to be, by setting the 'safe' amount of permits, and allowing their price to be determined by auction. Instead of paying a fee, corporations buy permits to cover the (carbon content of the) fossil fuels they extract.
In advocating Fee & Dividend instead of Cap & Dividend, James Hansen seems to feel that the word 'cap' is too contaminated by 'Cap and Trade' (see below), but the Cap in Cap & Dividend is a no-nonsense upstream hard cap, stronger than a 'fee'.
Cap & Prosper' in Jonathon Porrit's book 'The World We Made' is also essentially Cap & Dividend, except that a fraction of the money is diverted into community projects and investing in low-carbon technologies. (The original Cap & Share proposal had an Adaptation Fund like this, see below).
Upstream auctions
The various schemes above all use an upstream auction.
Of course, there is nothing to say that the money raised from such an auction has to go to the people. Instead of giving people the money, the government might just auction the permits and keep the money, using it for general expenditure and to reduce other taxes. Governments (not surprisingly) tend to favour this latter approach. But the system is then likely to suffer the same unpopularity as carbon taxes.
'Classic' Cap & Share
In the original, 'classic' version of Cap & Share, you don't get money. Instead, you get certificates for your share of the country's CO2 emissions allowance. You might get certificates for 10 tonnes of CO2 a year, say. Certificates might look something like this:
Certificates are free, and every adult in the country gets the same. The fossil fuel suppliers (oil, coal and gas companies) have to buy these certificates (you'd sell them via banks or post offices) and they become the permits. Certificates are in demand, and are worth serious money.
By selling your certificate for 10 tonnes of CO2, you are allowing the fossil fuel company that buys it to bring in as much fossil fuel as will emit 10 tonnes of CO2 when it's burnt (somewhere down the line). That is, you are giving permission to bring in the fossil fuel corresponding to your share of the country's carbon footprint.
So, to recap: you get these certificates, and sell them - as opposed to the simplest form of Cap & Share, where the certificates are auctioned for you and you simply get the money. Why the extra complexity, compared with an auction?
The advantage of certificates is purely psychological. With 'classic' C&S your certificate is literally your share of the overall carbon footprint. You are in control of your share, and by selling your certificate you are allowing this share of the carbon footprint to be emitted. If you want to, you can withhold part of it (simply tear it up) and you will reduce the country's carbon footprint by that amount. This advantage over an auction has to be weighed against the extra complication and cost.
Upstream, Downstream
All of the proposals so far: a fee, tax, or cap, with or without a dividend to the people, have an upstream focus, and all would deliver a carbon price (hence the economic efficiency claimed for downstream carbon trading) without resorting to trading and the complexities of carbon markets.
Recall that 'upstream' means controlling the tap rather than the sprinkler holes (see 'The basic idea' on this page).
The other approach is to go downstream, with Personal Carbon Trading for individuals and an Emissions Trading Scheme for companies. The next few sections cover these ideas.
The two ideas, an ETS and PCT, apply to the emissions from companies and individuals respectively. In a sense, the only reason companies emit carbon is that they are producing goods and services for us. So the emissions from companies are sometimes regarded as our 'indirect emissions', which are 'embedded' in these goods and services we buy - as opposed to our 'direct' emissions (such as when we buy petrol and burn it ourselves). The two types of emissions are shown in the following picture: indirect emissions in the top line and direct emissions in the bottom line. The flame symbols show where the emissions take place.
An upstream system like Cap & Share doesn't care about this distinction. It simply applies the permit system (represented by the yellow permits) to fossil fuel extraction:
But downstream systems tend to have, as we said, Personal Carbon Trading for individuals and an Emissions Trading Scheme for companies.
The next few sections look at PCT and ETS in more detail.
Personal Carbon Trading (PCAs, TEQs, DTQs)
Personal Carbon Trading is a straightforward and understandable form of rationing, reminiscent of food or petrol rations in the Second World War. You would have an allowance, or ration, and a carbon card (the modern equivalent of a 'ration book') which you would swipe each time you buy petrol (or gas or electricity). If you wanted more than your ration, you could buy allowances form people who used less carbon and were willing to sell their 'spare' allowances to you.
Schemes for Personal Carbon Trading go under the names of Personal Carbon Allowances (PCAs), Domestic Tradable Quotas (DTQs) and Tradable Energy Quotas (TEQs). TEQs (see Links) were developed by David Fleming of the Lean Economy Connection, and the others are very similar.
Pesonal Carbon Trading is more complicated and expensive than C&S, but is more visible to people on an everyday basis.
Cap and Trade (Emissions Trading)
In a downstream approach, just as individuals might have carbon allowances and engage in carbon trading, companies (who also have emissions) would have carbon trading too. Their system is called an Emissions Trading Scheme. Unlike PCT, however, an ETS called the EU ETS (European Union's Emissions Trading Scheme) is already up and running for many large companies.
The first stage of the EU ETS was widely recognised to have had several problems:
- too many permits issued
- a windfall give-away to large companies
- only partial coverage - small companies excluded
- a leaky system - through some dubious CDM (carbon-offsetting) projects
Nevertheless, the system has at least started, and work is under way to tackle all four of these failings for the next stage. For example an increasing fraction of ETS permits will be auctioned to companies, not given away free.
Many other emissions trading schemes have now been set up around the world.
The EU ETS is not likely to go away in the foreseeable future, but Cap & Share can dovetail with the ETS perfectly to cover precisely all those emissions not covered by the ETS (see the next paragraph,'Hybrids').
Hybrids
This is a general name given to mixing two schemes together. For example we might have a hybrid consisting of Cap & Share working alongside the EU ETS. For a set of diagrams explaining how this could work, see the Videos part of the Useful Stuff section in this website.
Frameworks linking national schemes
We mentioned above the need to tie national schemes together. Frameworks such as 'Contraction and Convergence' (see below) have been proposed for this.
There are technical issues to address when linking carbon markets (making trading between the markets possible), but we're talking abut something different here. Each national market would only work because of a cap (or fee or tax) applied to carbon; and the question is how to set these caps fairly, while making sure that they add up to solving the problem (delivering a global solution which would meet the 2 degrees target say)?
Contraction & Convergence
'Contraction & Convergence' is proposed by Aubrey Meyer and the Global Commons Institute (see Links). This is a way of apportioning entitlements (the caps) to carbon emissions between countries. As our carbon emissions contract, countries converge to equal per capita shares of entitlements over the whole world.
C&S resonates with Contraction & Convergence. Under C&S in a single country, your cashback payment represents your equal share of the nation's carbon footprint. Under Contraction & Convergence it would also come to be your equal share of the world's carbon footprint.
GDRs
Global Development Rights (GDRs) (see Links) are an elaboration of Contraction & Convergence. The GDR system takes into account several factors in a more complicated way, explicitly looking at development needs, and income distribution within countries. These benefits come at the cost of making for a more complicated system, whereas simple frameworks like C&C are perhaps more powerful in focussing minds on getting agreement.
Adaptation Fund
Finally, back to more general questions, relevant to national or global schemes. If auctioning the permits raises money, why should it be simply given to the population? Aren't there better uses for it?
The original Feasta proposal for Cap & Share included an Adaptation Fund, which siphons off some of the money for collective projects. Cap & Prsopser (see above) also has an Adaptation Fund. There's a good argument for this: many of the things an Adaptation Fund might do (building sea walls or whatever) are not the sort of things individuals can do.
On the other hand, rebating most of the money to individuals (it is they who are paying the higher prices after all, which is where the money comes from) would give the scheme more electoral popularity, which might help to get it agreed in the first place.
Kyoto 2
This is a global scheme proposed by Oliver Tickell in the book 'Kyoto 2' (see Links). It is similar to C&S: it is an upstream system where fossil fuel suppliers are required to have permits to introduce fossil fuels into the (world) economy. But under Kyoto 2, the money from acuctioning these permits would be used to fund mitigation and adaptation projects. That is, it has an Adaptation Fund (see the previous section) which takes 100% of the money, leaving none over for direct distribution to the people.
The pros and cons of this are exactly the same as for the Adaptation Fund in the previous section, except even more so.
In conclusion
It should be stressed again that these approaches are all really variants on the same idea, capping carbon, and that the important thing is to start capping carbon SERIOUSLY, and to get going SOON - the choice of which method we use is less important, as long as it does the job.