In an article that appeared yesterday on Dollars & Sense as well as truthout.org, Jim Boyce of UMass Amherst first breaks down all the climate policy we talk about into demand-side (encouraging energy efficiency, subsidizing renewables, investing in mass transit) and supply-side (putting a price on carbon emissions) approaches to reducing emissions. Then he does a really good job describing the latter: a carbon tax and a cap-based system, what they might look like, and how they differ. If you have trouble grasping these so-called ‘market-based’ climate solutions, this article is for your understanding of that debate. And if you already know all that stuff, the way Boyce explains it will probably be interesting and may even give you a new perspective on some aspects (it did for me).
A tax sets the price and allows the quantity of emissions to fluctuate. A cap sets the quantity and allows the price of emissions to fluctuate.
Then the piece goes on to advocate for a market-based policy that treats the atmosphere in a manner consistent with popular opinion: it’s a global commons — we all own it, so nobody should accumulate private wealth by profiting from using it as a waste dump. Even as we reduce emissions, there are huge profits to be made from burning fossil fuels. Let’s share them equally.
Notably, Boyce argues for applying the pricing system when fossil fuels “enter the economy” — when oil gets on a tanker or changes hands to slip into a pipeline; when coal leaves the mountaintop-removal operation or the strip mine; when natural gas leaves the fracking well. This method of pricing takes the costs straight to dirty energy companies and spreads them around the economy from there, such that goods whose production, distribution, or use involves a lot of carbon emissions will get much more expensive. So high-consumption wealthy regions can’t escape the economic costs by simply sending polluting industries to poorer areas. Instead, they might be forced to grapple with the big C: Consumption, the economic boogeyman we’ve been so reluctant to address.
In a world where emissions are ‘capped’, reducing consumption in rich nations would leave more atmospheric space for poor ones to consume and emit while they work to meet material needs and provide basic human rights. And if we split the revenues from auctions of limited carbon permits on an equal per-person basis, the least well-off members of society will benefit the most, since they contribute so little to climate change. Furthermore, over half the population would gain income greater than their increased expenditure from paying for the carbon in their lives, because shares of the global carbon footprint skew so heavily toward the wealthiest few.
Don’t take it from me. Read the damn article!