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Is Cap and Share the smart alternative to a carbon tax?

The Irish Times reports energy minister Eamon Ryan saying that a carbon tax is likely to be introduced this year. During last October's carbon budget, environment minister John Gormley also hinted that such a tax was likely to be introduced in 2009. Ryan said a floor price on fossil fuels was an alternative possibility.

Considering the current economic climate, it's likely any plan to introduce a carbon tax or prevent the price of fossil fuels from falling below a certain level would be politically unpopular, and would draw ire from the media and opposition politicians.

Could Cap and Share be a more popular solution? C&S was developed by Feasta, the Foundation for the Economics of Sustanability. It was discussed in depth by Richard Douthwaite, one of its developers, in Construct Ireland in 2007, and is explained as follows on capandshare.org:

Each year you get a certificate for your share of the country’s CO2 emissions. It might be for 10 tonnes of CO2, say. It’s 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. If a fossil fuel company buys your certificate, this allows them to bring in as much fossil fuel as will emit 10 tonnes of CO2 when it’s burnt (somewhere down the line). The more certificates they buy, the more fossil fuels they can bring in. Certificates are in demand, and are worth serious money.

To pay for the certificates, fossil fuel suppliers put up the price of petrol, heating oil, coal and gas. Petrol (and the other fossil fuels) would cost more, and the cost of capping carbon is built in to the price of all goods and services automatically (so carbon-intensive goods cost more, encouraging the use of low-carbon alternatives). There’s no need for carbon-trading schemes (let alone rationing) - the cap’s taken care of “upstream”. You can get on with the rest of your life.

Some prices go up, but you’re compensated by the income from selling your certificates. If you have a lower than average carbon footprint, you’ll come out ahead.

A national cap on carbon emissions would be introduced and subsequently lowered each year, meaning your annual carbon allocation, and thus the carbon permits available to fossil fuel suppliers, would fall each year too.  As carbon permits became scarcer, their value would increase.

While Cap and Share would raise fuel prices, it would certainly be more politically popular than a carbon tax, as citizens would earn money from the scheme. While it's not quite as simple in concept as a carbon tax, it could achieve the same goals while avoiding the stigma of a new tax. Even Nasa's James Hansen - perhaps the world's leading climatologist - has been pushing a similar scheme recently, called 'carbon tax and 100 per cent dividend'.
Last modified on Thursday, 08 January 2009 12:38