This was my submission to the UNFCCC’s Talanoa Dialogue on climate change. Although the consultation process was advertised as being open to “all interested stakeholders”, my contribution was rejected because I was not attached to a “a non-Party stakeholder to the Convention” (i.e. an organisation).
Table of Contents
- Where are we?
1.1 A permanent global catastrophe is approaching.
1.2 The window for effective action is closing.
1.3 The demand for carbon must collapse.
1.4 A price on carbon is central to any solution.
1.4.1 Tax and Subsidize doesn’t work.
1.4.2 Trading Systems don’t work.
1.5 The core challenge in pricing carbon is political.
- Where do we want to go?
2.1 Voters must gain.
2.2 Low and middle income earners must be protected.
2.3 The free market must be protected.
2.4 Cross-spectrum political support is necessary.
2.5 An international adjustment mechanism is necessary
2.6 Values, morality, justice and fairness must be central to any carbon pricing.
3. How do we get there?
3.1 Carbon fee and dividend.
3.2 Building political will.
1. Where are we?
1.1 A permanent global catastrophe is approaching.
A nightmare is coming. Climate change is much, much more than just global warming of a few degrees. It is the arctic melting, the permafrost thawing, the coral dying, the extinction of many species and the dramatic loss of biodiversity. It is the sea level rising, storm surges and accelerating coastal erosion. Climate change is hurricanes, typhoons, wildfires and flooding, and also desertification, the death of forests and the failure of the rains. Climate change is unpredictability. It is chaos.
For human beings, climate change is drought, crop failure and famine. It is the vast inundation of the great coastal cities. Climate change is hundreds of millions of refugees fleeing drought, flooding, famine and collapse. It is destabilized societies, ruined economies and infectious pandemics. Climate change is hatred, conflict and war on a vast scale. It is human misery, pain, fear and horror. Climate change is a return to the darkness from which we have so recently emerged.
1.2 The window for effective action is closing.
We do not know the details of this nightmare or how fast it will arrive. Ice core data shows that dramatic shifts in temperature are possible within a matter of years. If the antarctic ice sheets collapse we could see many meters of sea level rise within a few decades. The methane of the permafrost might be a tipping point, or perhaps the release of ocean methane clathrate, or a dieback of the Amazon or of the great boreal forests, or something else that we don’t yet know about. We do not know if a tipping point will occur at 2°C, or 2.2°C or 1.8°C or something else. We don’t know the specific details of the coming nightmare or how fast it will arrive. But if we do know that if we do not change then, sooner or later, it will happen. Catastrophe is the default option.
Climate change is caused mostly by our emissions of carbon dioxide, formed when we burn carbon for energy. The Paris Agreement is the commitment of the nations of the world to reduce these emissions, but it is weak and it is not enough. Even if every single country meets their Paris Agreement commitments we would still be emitting enough carbon to cause permanent and catastrophic damage. We have already burned enough carbon and emitted enough CO2 to raise the temperature of the world by 1°C. In order to keep it under 1.5°C or 2°C we need our CO2 emissions and thus our use of carbon to essentially collapse within the next few decades. Make no mistake – it may already be too late. But if we are to have a chance, then this is it.
If we are to avoid the collapse of our modern, technological, organised human society then our CO2 emissions and our use of carbon must collapse. We cannot have both. This is a fact. For humanity to have any chance of a prosperous, progressive, positive future, our use of carbon must collapse.
1.3 The demand for carbon must collapse.
Imagine what would have to happen for humanity’s use of carbon to collapse within the next few decades: Our entire energy supply would have to change. Many of our manufacturing processes would have to change. Many of our modern agricultural practices would have to change. Finance and investment and the way we do business would have to change. The work that many of us do to earn a living would have to change. We would have to change the way we heat and light our homes, the way we travel, cook, shop and socialise. Our lives and behaviour would have to change.
And it would have to change soon. If we are to have a chance of avoiding the terrible consequences of 2°C or 3°C temperature increases then these change would have to begin almost immediately, and this beginning would have to be strong and noticeable and dramatic. The reduction in the use of carbon would have to deepen, and deepen, and deepen again. Every person on this planet would have to know, without doubt, that carbon was ending – and make their choices accordingly.
There is no organisation or government or group of governments that could micro-manage the behaviour and choices of so many people so quickly without catastrophic economic effects. Laws can be passed but are useless if ignored or destructive if they lead to political instability or economic collapse. It is not possible for any group of human minds to reorganise the entire economy of the human species within a few decades – that is just not realistic. There is much for governments to do, but the heavy lifting of mass societal and economic change is beyond their capabilities.
There is only one mechanism that has even the potential to flexibly and efficiently offer the innovation, mass communication, distribution, organisation and other factors necessary for humanity’s use of carbon to collapse within the next few decades. If we are to have a chance of doing what must be done for our modern organised societies to survive, then we must make the power, creativity and efficiency of the market work to this end. That means a price on carbon.
1.4 A price on carbon is central to any solution.
Climate change has many terrible financial and human costs, today and in the future. But when you buy an airline ticket or fill your car’s fuel tank or pay your electricity bill, you do not pay these costs. In economic terms, the costs of climate change are not internalised into the price of carbon. There is no price signal, and so as far as the market is concerned, climate change does not exist. If we had to pay for the consequences of your carbon choices then we would probably make different choices, but we don’t. Essentially the market cannot see climate change. To the powerful market forces that shape the world around us and how we see it, climate change is invisible.
In order to make climate change visible to the market – and thus to every person making every spending decision – we need to internalise the costs of climate change into the price of carbon. In other words, we need to put a price on carbon so that we are financially aware that it is not free and that its use has consequences. This means that the price of things that include carbon (electricity, heating, fuel, food, etc.) must increase, making them much less competitive relative to competing non-carbon products, services, options and behaviours. In order for the demand for carbon to collapse, the price of carbon-related consumption must dramatically increase.
1.4.1 Tax and Subsidise doesn’t work.
One way to increase the price of carbon and thus discourage its use is simply to tax it, and to spend the revenues raised from that tax on subsidising non-carbon alternatives. This is command-and-control, in which government or regulatory authorities decides what to tax and what to subsidise, thus altering and influencing the market away from carbon. One problem, of course, is that civil servants may not be the best people to decide what technology, products, services, processes and people to subsidise – especially since they are not spending their own money. There is also a substantial administrative cost, including an army of means-testers deciding who is and is not deserving of financial assistance. And there is the fact that everybody’s life and situation is different, and so the costs and benefits as imagined by government may be substantially different on the ground in the lives of real people. Perverse and expensive incentives may be created. Carbon tax and renewable subsidies dramatically concentrates financial power and thus power over the lives of others. Mistakes can be made. There is wide opportunity for abuse.
However the core problem with the tax and subsidise model of pricing carbon is a moral one. When carbon is taxed, everybody’s prices go up equally. This means that the prices that must be paid by the poor and the middle rise more relative to income than for the rich. A carbon price that is a barely noticed inconvenience for the rich can create misery for the poor. Similarly, because rich people tend to use much more energy than poor people, subsidising energy is essentially a subsidy for the rich. A good example of this injustice can be seen in present carbon pricing in my own country, Ireland, where fuel for heating and transportation is taxed at €20 per ton. Ireland also offers a subsidy of up to €5,000 to encourage people to switch to electric cars. In practice this means that poor people struggling to stay warm are taxed so that the expensive new cars of rich people can be subsidised.
Leaving aside the centralisation of power, the high administrative cost and the potential for abuse, the tax and subsidise model of pricing carbon ultimately means that the necessities of the poor are taxed to subsidise the luxuries of the rich. This is not only deeply unfair, immoral and unjust, but it is politically impossible at the scale necessary. It might work at €20 per ton, but it won’t work at €50 per ton, or €100 per ton or more. Electorates will not accept it.
1.4.2 Cap and Trade doesn’t work.
Another way to increase the price of carbon and thus discourage its use is emissions trading, also known as cap and trade. In this model the government issues, sells or auctions pollution permits to big polluters, gradually reducing the number of permits available. These permits can be bought and sold, giving big polluters flexibility and incentivising them to reduce their pollution. Emissions trading can also involve offsets, i.e. carbon credits for activities (like planting trees) that take carbon out of the atmosphere. This system is implemented in several jurisdictions around the world, notably in the EU.
Cap and trade was extremely successful in reducing the CFCs behind ozone depletion and the nitrogen oxides (NOx) and sulfur dioxide (SO2) behind acid rain, but it has been far less successful in reducing CO2 emissions. The reason is that CFCs, NOx and SO2 were relatively minor pollutants used in relatively few industrial processes and relatively insignificant in terms of their importance to our modern economy, society and life. Carbon, on the other hand, is energy itself and is embedded in almost every aspect of our modern world. Put another way, if CFCs, NOx and SO2 are comparable to products in a marketplace, carbon is comparable to money itself. The market rules of carbon are thus very different.
There are many practical problems with cap and trade. If polluters receive their pollution permits for free they may not cut their emissions (because if they do they will get fewer permits in the future). On the other hand, if pollution permits are sold or auctioned we have the moral and thus political problems encountered with the tax and subsidise model. Carbon cap and trade is highly complex and the carbon markets that result from it encourage speculation and thus price volatility. Some of the biggest polluters make the most money from this system, and many of the offsets are little more than hot air. Trading schemes such as the EU’s Emissions Trading Scheme (ETS) have been beset by perverse incentives, profiteering and even criminality.
Most importantly, however, is that carbon cap and trade does not work at the scale necessary to reduce our carbon emissions enough to avoid catastrophe. As I write this, carbon pollution permits are trading within the ETS at just over €14 per ton. This is nowhere near sufficient to alter behaviour to the extent necessary. Pope Francis had this to say about cap and trade emissions trading: “This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require. Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.” Essentially he is saying that it is an attempt to hide inaction behind the veil of complexity.
1.5 The core challenge in pricing carbon is political.
If we are to avoid permanent and catastrophic climate change and untold human misery we must quickly and radically reduce our use of carbon, and thus we must dramatically increase the price of that carbon. €14 per ton or €20 per ton is nowhere near enough to effect the kind of deep changes that we need. We need €40 or €50 per ton just to start, rising regularly to €100 per ton and more. The price of everything containing carbon must skyrocket. Whatever way we do this (and we must do it), it is important to recognise that the most important challenge we face is political.
Nobody is going to vote to be poorer, no matter what the disaster facing the planet. Nobody is going to vote for themselves and their family to freeze in the dark. Nobody is going to vote for sacrifice and pain. This is not WW2 and climate change is far, far down the list of voter’s priorities. Nobody is going to vote to make their own lives worse and they are not going to be persuaded to make their own lives worse. It is not enough to be scientifically realistic when it comes to carbon and climate change. We must be politically realistic too.
2. Where do we want to go?
I believe that this is the wrong question, because it implies that we have a choice. However, if we want our modern world to survive and to thrive and if we want any chance of a prosperous and positive future, then we do not have a choice. We must dramatically reduce carbon. We simply have to. The question might therefore be better phrased: “Where do we have to go?” or even: “What do we have to do in order to survive”. I would suggest that there are a few things that are non-negotiable.
2.1 Voters must gain.
Existing carbon taxes, subsidies and trading schemes have attracted some political attention (particularly in Australia), but so far they have generally been beneath the radar of most electorates. A carbon price of €14 or €20 per ton is so low that it is lost in the background noise of fluctuations in the price of oil and other carbon resources. However, a carbon price high enough to change behaviour must, by definition, be high enough to be widely noticed, and that means it becomes political. It is politically unrealistic to expect electorates to vote to make their own lives worse, and in the absence of a vast environmental catastrophe it is unlikely that voters will be so persuaded. There will be winners and losers from any carbon tax, but if a policy is to be realistic then there must clearly and unambiguously be more winners than losers.
2.2 Low and middle income earners must be protected.
A price on carbon will increase a wide range of prices, including the price of essential necessities, putting pressure on low and middle income earners at a time when there is already substantial economic stress and insecurity and resulting political anger and instability. Median wages in many countries have remained static for decades while core costs – especially housing costs – have risen. There is a strong sense that financially secure elites are out of tough with the financial reality of daily life for most people, and many voters have abandoned centrist political parties in favour of populist extremes, resulting in political instability and uncertainty. In this context, therefore, any carbon tax which adds to the financial burden of most workers is not politically possible, and there are many powerful political parties and blocs that would fight such a policy at every turn. A political majority of people are low and middle income earners, and they must be protected.
2.3 The free market must be protected.
From the products and services we take for granted, to the incredible technological innovation so quickly and efficiently distributed, to the opportunity for billions to rise and escape abject poverty, the global free market has radically transformed our world in recent decades. While there have been both winners and losers in this transformation, and while the global expansion of the free market has caused both social and environmental damage, the aggregate human effects have been largely for the better. While there is substantial ideological and political opposition to the free market there is also a large and powerful constituency determined to protect it and the bounty (and profits) it has delivered. No command and control policy that substantially restricts market freedom is therefore politically possible. Our modern economy and society is built on the global free market, and it must be protected.
2.4 Cross-spectrum political support is necessary.
For any substantial price on carbon to be politically possible, therefore, both low and middle income earners and the free market must be protected from its effects. This essentially means that cross-spectrum political support would be necessary. This does not mean that such support need be universal across the parties and power blocs of both the Left and the Right. However any politically realistic price on carbon must satisfy the core ideological concerns of both sides of the political spectrum. If carbon is to be priced sufficiently to dramatically reduce its use in the time we have left, it cannot conflict with core ideological values and belief.
2.5 An international adjustment mechanism is necessary
If one jurisdiction taxes carbon and another doesn’t, then the carbon-pricing jurisdiction will be at a cost disadvantage compared to its irresponsible neighbour. No state, province, nation or country should be disadvantaged for doing the right thing, nor should they be given advantage from doing the wrong thing. This means that whatever way a price is put on carbon, some form of border adjustment mechanism will be necessary. Any such adjustment mechanism would have to measure the flow of carbon across the border (including embedded carbon) and tax that carbon accordingly, but in a way that would not hurt exporters or damage trade. This means that its not enough simply to tax the carbon coming in to a jurisdiction (basically a carbon tariff). Exporters who pay carbon tax should not be disadvantaged over competitors who do not.
2.6 Values, morality, justice and fairness must be central to any carbon pricing.
In light of our scientific knowledge and awareness of climate change, the use of carbon is a moral issue. It is the rich people and the rich world who have caused the problem, both historically and today. And it is largely the poor people and the poor world who bear most of the consequences, both today and in the future. The actions of we who are alive today will dramatically affect the lives of those who will come after us. Knowing what we now know, carbon use is a deeply moral issue.
But the solution to carbon use is also a moral issue. It is not acceptable that the necessities of low and middle income earners be taxed so that the luxuries of the rich may be subsidised. It is not acceptable that those who do the right thing are harmed and disadvantaged, while those who do the wrong thing are rewarded. It is not acceptable that the market freedoms that have so radically transformed our world for the better be replaced by the command and control of government. It is not acceptable that opaque complexity be used by insiders and speculators to profit from others without providing real value.
Climate change is a clear and present danger. This is an emergency and we are in the midst of a deep and possibly existential crisis. We will not survive as a society unless we pull together and act together. In order for this to happen values, morality, justice and fairness must be central to any carbon pricing.
3. How do we get there?
A nightmare is coming. The seas are rising, the arctic is melting, the permafrost is thawing, the coral is dying and extreme weather events of all kinds are occurring more frequently. Drought, crop failure, coastal flooding and dramatic storms are with us already while the Syrian conflict and resulting refugees are merely the briefest glimpse of an unimaginably dark future that will happen unless we change dramatically.
Carbon is so embedded into our society, our economic system and our way of life that it is impossible for any government to extract it using command and control measures. The market must be used and thus we must put a substantial prce on carbon. Carbon tax and subsidy isn’t fair and carbon cap and trade doesn’t work. Neither are politically possible or realistic at the substantially higher carbon prices that are urgently needed. We need another way to put a serious, substantial, behaviour-changing price on carbon. For any such carbon pricing mechanism to succeed it must find favour with a clear majority of voters. It must protect both the poor and middle, while at the same time keeping the market free. It must attract cross-spectrum political support and include a border adjustment mechanism. And above all it must be based on values, morality, justice and fairness.
Fortunately such a policy does exist and is rapidly gaining popularity, particularly in the United States. This is the policy of making the revenue from carbon tax neutral, by distributing it equally to everybody. It is known as carbon fee (or tax) and carbon dividend.
3.1 Carbon fee and dividend.
Unlike cap and trade, the policy of carbon fee and dividend is simple: carbon is taxed as it comes out of the ground or enters the port, and the revenues from that tax are shared equally with all. Imports from countries that don’t tax carbon are taxed according to their carbon content while exports attract a rebate. That’s it.
Under a fee and dividend carbon pricing system everybody’s prices would go up, and everybody would also get a cheque in the post or a regular deposit in their bank account. For most people (about two thirds) the cheque would be more than the higher prices, making this policy a politically possible way to dramatically price carbon. Essentially redistribution would be from heavier users/polluters to lighter users/polluters, making this policy undeniably fair. And this would happen across the market, to all industries, all firms, all competitors with no favour, making this policy market friendly. Since all of the revenue would be redistributed to everybody, it would not centralise financial power or increase the size of government. And there is already demonstrated and substantial cross-ideological, cross-party and bi-partisan political support (amazingly enough, both Exxon and the US Green Party support this policy, as do both the Democrat state legislature of California and the pre-Tea Party GOP establishment). And a border mechanism ensures no nation, state or tax jurisdiction is disadvantaged for doing the right thing. Carbon fee and dividend fills all of the requirements for a politically possible price on carbon.
Most importantly, though is that carbon fee and dividend – or tax and dividend if you prefer – is scalable. Other methods of pricing carbon are limited by political impossibility. But with most people gaining under fee and dividend, popular support would be assured. Saving money and saving carbon would become aligned and the same thing. Those who do the right thing and make the right choices are rewarded, while those who do the opposite pay for that reward.
One way to see fee and dividend is as a form of financial carbon karma, aligning with and centering around basic, core human values and concepts of morality, justice and fairness.
3.2 Building political will.
The Talanoa question we are answering here is: How do we get there? Part of that question has been answered in the proposal for the carbon fee and dividend pricing policy outlined above. But it is not enough to simply propose a policy. In order for any policy to have any meaningful effect it must be implemented, and that requires political action. In other words, the answer to the question “How do we get there?” is that we get there not only through policy but through politics.
We all want a bright, hopeful and positive view of the future. We want the world to be safe for our children and our grandchildren and those who come after them. We want to think of ourselves as good people, doing the right thing to make things better for everybody. Individually and even organisationally, we want this world and this future. But our individual and organisational will is not enough. We must become political, and translate what we want into terms that our complex systems of governance can understand. We must persuade, leverage and influence political will.
Each of us needs to take a stand, and specifically decide what it is we are for. We cannot research and study forever as the world burns. We cannot wait any longer to make up our minds. We must decide. We must choose what we are for, and loudly, clearly and unequivocally speak out in favour of our choice. If ever there was such a time, now is the time to make a stand.
If you are an individual, then speak. Work to influence who you can – especially politicians and media. Write letters, make phone calls, go to constituency clinics and encourage friends and family to do the same. Join and connect with others who want the same. If you lead or influence an organisation or a group, then work to endorse the specific policy you stand for, and seek other groups and organisations with which to collaborate with to influence politicians and media. If you work in media, close to politicians or if you otherwise have influence, then use that influence in the best way you can in favour of your chosen policy. And if you are a politician then do the same.
The hour is late and the time to act is now. Nothing is more important that averting the coming global and essentially permanent catastrophe, so whatever you can do, do it. Do it now.
