[R-G] [BillTottenWeblog] If the cap fits, share it

[Bill Totten]

Instead of setting up a new currency in carbon, cap and share utilises
the oldest rationing system in the book: the price mechanism

by Mark Lynas

New Statesman (January 31 2008)


It is strange how little British people know about what goes on in
Ireland. The Irish government is just a few months away from introducing
a scheme to tackle greenhouse-gas emissions which is revolutionary in
its ambition and scope, and could be extraordinarily important as a
model for the rest of the world. Yet no one here has heard anything
about it. A search I conducted on a news database returned a grand total
of zero documents.

Ireland's energy and environment ministers are both Greens, governing in
coalition with the more traditional Fianna Fail party. The Green Party's
condition for entering the coalition was a climate-change bill -
imported, as is often the custom, from the UK. This bill will be passed
soon but, like us, Ireland at present has no coherent programme for
actually getting the cuts in carbon emissions that the new legislation
will mandate. Except that now the Irish may have invented just the tool
for the job. It is called "cap and share". Remember the phrase - you
could soon be hearing much more about it.

In previous issues of this magazine, I have argued strongly in favour of
carbon rationing, under which every adult citizen would get a share of
the country's carbon allowance to "spend" on fossil-fuelled things such
as flights, heating and petrol. The idea is radical, and - with its
wartime connotations - evokes images of shared sacrifice in the face of
a great emergency. However, it would not be easy to implement: because
carbon rations would have to be tradable in order to be economically
efficient, the government would need to set up and police 48 million
carbon accounts. This presents privacy as well as administrative
problems. It also establishes carbon as a kind of parallel currency:
people who are over their ration limit (or have already sold their
share) would have to buy carbon at market prices in order to purchase
fuel. We would, in effect, need to become a nation of carbon currency
speculators - quite a tall order, when most people can barely even
manage their mortgage.

This is where cap and share comes in. The proposal being considered by
the Irish government - and likely to be announced in December's budget -
takes a very different angle. Carbon permits are created not to regulate
individual consumption, but to share among all adult citizens the
revenue generated from carbon trading. In order to sell petrol, a
company such as Shell would need to have sufficient permits. It would
need to buy these from Irish citizens, who would then find themselves
receiving GBP 100 or more in the post in order to offset rising prices
at the pump.

As Richard Douthwaite, an ecological economist who sits on the council
advising the Irish government about the system, explains: "Cap and share
is a way of upping the price of fossil fuels and recycling the money to
citizens. It is rationing at the top level rather than at the level of
individuals."

So, instead of setting up a new currency in carbon, cap and share
utilises the oldest rationing system in the book: the price mechanism.
You don't need a carbon credit card; petrol will still be bought and
sold in plain old money. But the price will go up, because petrol
entering the economy will be restricted in line with the legally
established need to reduce greenhouse-gas emissions. Instead of going to
the companies or the government, however, the extra revenue from these
higher prices will be going back to ordinary consumers. The higher price
establishes a clear incentive for people to adopt low-carbon lifestyles,
while ensuring that the poor are not disadvantaged and that the rich -
who tend to have higher emissions - pay more.

Cap and share would not cover the whole economy. The current Irish
proposal is for only the road transport sector to be included at the
initial stage. Nor need it regulate industrial emissions, which are
covered by the European Union's Emissions Trading Scheme. Because of the
ETS, cap and share need only cover those instances where consumers buy
fossil fuels directly, generally for either domestic heating or transport.

If the cap and share scheme is duly implemented, Ireland will have
invented an ingenious way of restricting greenhouse-gas emissions with a
minimum of pain and fuss. Most people may even find themselves better
off. Here in the UK, even though we, too, have a climate bill going
through parliament, there is little sign from the government of coherent
thinking about how any of it will actually be implemented. I suggest a
trip to Dublin - by ferry, of course.

http://www.newstatesman.com/200801310021


TO POST A COMMENT, OR TO READ COMMENTS POSTED BY OTHERS, please click
on the word "comment" highlighted at the end of the version of this
essay posted at http://billtotten.blogspot.com/