Ireland’s Vulnerability to the Rising Price of Carbon

In 2020, for the first time ever, Ireland’s dismal failure to control its climate-changing emissions will result in direct financial consequences for the state and for its taxpayers. We will overshoot our binding EU emissions target and will have to cover our excess emissions by buying carbon credits from other countries at an annual cost estimated at €455 million. This looming prospect of financial accountability has powerfully focused minds among Irish decision makers, as it was intended to do. Slowly but surely the country is waking up to one central and salient fact with deep implications for national finances, trade, the economy, and for the lives and livelihoods of many Irish people: carbon has a price, and that price is only going up.

Average global temperatures are increasing, ice sheets and glaciers are melting, the seas are rising and we are experiencing more of what have come to be called “significant weather events”. Climate scientists agree that the cause of these changes is carbon dioxide and its greenhouse gas equivalents (conflated here as ‘carbon’), and economists agree that the most effective and efficient way to reduce carbon is to make it more expensive, thus “internalising” the considerable costs of climate change into the actual price of the products and behaviours that cause it. There are many alternatives to carbon and more are being developed and brought to market every day. A price on carbon makes each one of these alternatives cheaper relative to their fossil fuel competition, biasing the entire market away from carbon and towards renewables and sustainability. It’s a fundamental part of any realistic solution to climate change.

Ireland currently prices carbon in two ways: by participation in the EU’s Emission Trading System (ETS) in which emission permits are bought and sold, and by directly taxing carbon not covered by the ETS at a flat rate of €20/ton. Growing scientific, economic and political pressures mean that both of these carbon prices will rise dramatically over the coming decade.

There is widespread recognition that the EU’s ETS carbon price is far too low and uncertain to meaningfully influence purchasing and investment decisions. As a market signal the current ETS trading price of €20/ton is essentially background noise against the fluctuating prices of oil and other fossil fuels, and far below the €40-€80/ton required to meet Paris Agreement commitments. In response to this failure the EU will reduce the number of emission permits available to the ETS from 2021, with the goal of increasing the market price of ETS carbon. The ETS is also scheduled for a full review and reform by 2028 and there is growing movement to put a minimum “floor price” on carbon, essentially going around the ETS market to directly tax carbon instead (the UK already has such a floor price, currently £18/ton). The point is that whatever way the ETS carbon market is reformed or circumvented in the coming decade, it’s clear that the price is only going one way.

Carbon pricing around world from the World Bank’s Carbon Pricing Dashboard.

Ireland’s existing direct carbon tax of €20/ton can also only rise. Ireland has the third highest per-capita emissions in the EU (after Luxembourg and Estonia) and is far behind most other member states in decarbonising its economy. Finland currently taxes non-ETS carbon at €62/ton, Norway at €52/ton and France at €45/ton, with plans to increase this to €84/ton by 2022. Professor John Fitzgerald, chairman of the Climate Change Advisory Council, has estimated that Irish carbon tax would have to be as high as €70/ton to be in line with our 2020 emissions target. Meanwhile Sweden, which currently taxes carbon at €120/ton, is moving beyond EU targets (source: World Bank’s Carbon Pricing Dashboard)

Not all EU states directly tax carbon, but most of them are better positioned than Ireland on emissions. If we are to have even the slightest chance of reducing our emissions to within acceptable EU levels, dramatic increases in carbon taxation will be necessary.

In two years the Irish taxpayer will begin to pay an annual carbon bill to others, outside of the country, who are better at reducing and eliminating carbon. This recurring bill will be our fiscal and legal responsibility under EU “burden sharing” in response to increasingly alarming climate change. The expected €455 million due in 2020 is only the beginning of an ongoing and growing liability.

The EPA estimates that on our current path Ireland’s annual emissions will be around 50 million tons beyond our agreed target by 2030 . At €100/ton – a very realistic carbon price for 2030 – that overshoot would cost us €5 billion, or about half of the current cost of servicing the entire national debt. Considering the quickening urgency surrounding climate change, the very real possibility that emissions targets may tighten further, and the growing upwards pressures on carbon prices, the actual cost of our excess emissions could easily be much higher.

There are other threats too. Significantly higher EU carbon prices would require “border adjustments” in order to maintain competitiveness against jurisdictions with lower carbon taxes. These ‘adjustments’, essentially tariffs on imported goods containing carbon, would likely be returned in kind, with significant effects for agricultural and other emission-intensive Irish exports. Tourism, a significant employer and foreign exchange earner, is also likely to be hit hard by higher travel costs. Throughout the country businesses and lifestyles will be seriously disrupted.

Ireland is starting from a bad place. Our late industrial development, our high agricultural emissions, decades of planning and building with little regard for carbon, the way EU emissions targets are calculated, our growing population and our late start on taking the environment seriously – all are standing against us now. But carbon dioxide, climate change, and the rising price of carbon are not going to go away because of our unique circumstances. This is a war on carbon and like it or not, Ireland is part of that war.

We will pay much more for carbon in the decade ahead – that much is certain. Ireland’s essential choice now is what will happen to that money. If we continue on our current path our taxes will flow outside the country to those who are better than we are at eliminating carbon from their lives, businesses and economies than we are. One way or another we will be paying a much higher price for the carbon we use in the years ahead. If we want to keep that money in Ireland, then the time to start paying that price is now.

Graham Caswell is the coordinator of Citizens’ Climate Lobby Ireland, an advocacy group campaigning on carbon pricing.

Submission to the Talanoa Dialogue

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

  1. 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.

  1. 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.


It’s 2068. Three years ago the CO2 content of the atmosphere fell below 350ppm for the last time, even in the northern winter. Depending on who you listen to, temperatures may have stabilized over the last 20 years or so but it’s still too early to definitively tell (although the recent evidence of some Himalayan glacier growth is encouraging). Sea level rise may have slowed slightly (according to the Intergovernmental Panel on Science), but the sea defense industry won’t be short of business for the foreseeable future. Argument over the carbon-fixing price continues, with fewer and fewer people paying attention.

Use of nitrogen, phosphorous and many other elements and chemicals are a fraction of what they were in the early decades of the 21st Century. Non-renewable resource use is also a fraction of what it once was, and some reserves of rare, important and strategic finite resources are held in perpetuity, earmarked for the use of future generations. Nearly 45% of the planet’s surface is now under some form of legal protection, and regular progress is being made towards the global goal of 50% of the planet as full nature reserve. The human population of the planet is 9.7 billion, most of them in cities and almost all of them online.

The economy is circular. Plastic and other materials are standardized and easily and almost universally recycled. One operation’s waste is usually a resource for another operation, with resource/waste efficiency at the core of industrial design. There is flexible exchange and sharing of all sorts of goods, and refurbishment and reuse is the norm. Since both waste and resources are very expensive, people and businesses organize themselves accordingly. But even if it wasn’t expensive to be inefficient and dirty, nobody wants to be thought of as a “waster”. Nobody likes wasters.

It’s not just the economy that’s circular now – economics is circular too. Every schoolchild knows the Doughnut and understands the world ecologically. Later they learn about how fees are put on resources, pollution and public services and returned to everybody as the citizen’s dividend (of course, there are central bank dividends too, but that’s different). Everybody understands that it’s this redistribution from the heaviest users and polluters to the lightest users and polluters that keeps money flowing through the free market economy while keeping us within the ‘safe space’ between ecological limits and human necessities. The point is that everybody is a commoner now. Even the contrarians who rail against the Commoner Movement are, in fact, commoners if you look at their underlying assumptions. We’re all commoners now.

Some american historians like to trace the Commoner Movement to the 2020 US presidential election in which congressman Carlos Curbelo defeated Donald Trump in the GOP primaries. Although he went on to lose the election, Curbel’s pivotal Carbon Fee & Dividend policy was quickly adopted by the Sanders-Warren administration and then around the world. It was these first carbon dividend payments that grew into the ecotaxes and citizen’s dividend that we know today. Carbon still provides over 20% of the citizen’s dividend – higher than nitrogen and phosphorus combined.

Other historians see the roots of the Commoner Movement well before 2020 in campaigns for policies such as carbon tax and dividend, monetary financing, land value tax and, of course, a basic income (essentially the citizen’s dividend that we know today). Many of the core ideas of the Commoner Movement had been well articulated long ago by people such as Thomas Paine (18th C.), Henry George (19th C.) and Elinor Ostrom (20th C.). But it was after the rise of social media that campaigns for specific, actionable policies aimed at returning common value to society and to individuals began to proliferate. These campaigners were the crucial innovators and early adopters of the idea that shapes the world that we live in today.

In 2068 we take it for granted that all people are inherently equal and that every single person is entitled, as their birthright and inheritance, to a share of the returns on valuable and productive commonly owned assets. It seems obvious that the free market is only free if all participants have the power and security to say “no”, and that those who use the most and pollute the most and who cause the most damage should also pay the most. These things seem like common sense today, but they were considered radical ideas well into this century. Today it’s inconceivable that a free market could include environmental and social freeloading that damages and destroys the freedom of others, but that was once the norm. The market wasn’t always “Equal, Free and Fair”!

With carbon at $527 per ton, most people’s lives today are extremely carbon efficient – even rich people don’t want to be seen to waste carbon. The first carbon taxes were practically insignificant – background noise in the fluctuating price of oil. Even when they started to increase in the 20’s it was initially the effect on investment that was much more significant than the effect on behavior. It wasn’t until carbon reached nearly $100 per ton that people started abandoning it en masse, as the carbon boom of the late 20’s and early 30’s transformed the economy away from carbon.

Today solar heating, generation and cooling panels are widely available at essentially trivial cost, every house has a battery, and every tractor, train, car and delivery vehicle is electric. Many small towns exist completely separate from the industrial grid, even where old housing stock can’t be made fully passive and still needs electric heating. Nearly half the world’s food is now grown indoors or under glass, and every large town and city has it’s garden district. The average tomato is consumed less than 23km from where it’s grown – all year round even in the northern cities. Nitrogen is the only industrially-derived additive to most commercial growing media, and 96% of it is captured in the food cycle. Like any industrial process, most modern food production is essentially a closed system.

Home work, work hubs, flexible hours and general workforce independence means there’s a lot less daily travel now than there was in the past, and VP (virtual presence) means much less long distance conference and business travel. Most people travel a lot when they’re young but, since they can make a good living from almost anywhere, they also tend to end up close to home! Only 30% of the workforce work on a fixed contract for government, corporations or other large organizations and most people work independently. Figures show that approximately one in eight people of working age have no income other than the citizen’s dividend, and that another one in ten earn only a community wage. However in the real world it’s impossible to identify who makes what based on how they live. Most people on high salaries live lifestyles that would be considered modest a century ago, and money and material status just aren’t as important as they once were. It might still be legal to waste as much as you like as long as you pay for it, but what aware, responsible, mentally healthy person would act like that? Who would want to be a waster?

We live in a world in which personal AIs, gene therapy and deliberative democracy are taken for granted. At any one time over 300 people are living on Mars and it looks like the Titan mining station will be profitable within the next year or two. The Spiral Dynamics of Clare W. Graves has long replaced Abraham Maslow‘s Hierarchy of Needs as the accepted organizing structure of our individual motivation and growth, and our educational, media, professional and organizational perspective is based on the famous ‘trinity’ of Awareness, Empathy and Science. Most of us still face many deep and difficult personal challenges, it’s just that we just choose a lot more of them ourselves now.

Those who study the media and society of the early 21st Century tell us that there are three key differences in how people feel today compared to fifty years ago: (1) we have more time, (2) we feel safer, and (3) our future is much more hopeful. We are more relaxed today than we were in the past, and have more time to explore, cultivate and improve ourselves and the world around us. Although serious relative poverty still exists, almost nobody on the planet lives in fear of destitution any more. Everybody has the physical security and freedom from fear that makes equal participation in the market possible (and so much fun!). Everyone understands that markets can’t be free unless they’re fair, and that basic physical security is a perquisite for full market engagement and fair competition. It’s obvious now, but it wasn’t always that way.

Today we don’t just feel safer, more secure and more relaxed on a day-to-day basis than we did in the past – there are also deeper securities. Although the ruins of the unsustainable era are still all around us and the seas are still rising, the environmental trends are almost all positive. Most countries are at or close to the UN target of 5% of GNP for ecological remediation (although much of that is still spent on carbon fixing). Nature is returning in often spectacular ways and, while it will never be the same as it was before the technological revolution and the period of unsustainable expansion, there is much that remains. There is even hope that some coral reefs may come back once sea temperatures begin to fall.

It’s as if the time horizon within which we can realistically allow ourselves to think has opened up in front of us – expanding with the belief that our children and our grandchildren will also live rich, meaningful lives. The growing evidence of our own sustainability makes it psychology safe to think realistically about the far future, and so we make more and more decisions in the context of decades and even centuries, increasingly secure in the knowledge that what we do actually matters in the long term. It’s almost as if meaning has returned to the world.

We are no longer betraying the lives of our ancestors while destroying the lives of our children. We act responsibly and so, although we’re clearly far from perfect, we know that we’re good. And we’re getting better.

There is hope for the future.

Note: The idea of taxing carbon and distributing the proceeds of that tax equally to everybody as a ‘carbon dividend’ is well established and has extensive political and other support from across the political spectrum. It is the (Liberal) Canadian federal government’s ‘backstop’ policy: it is supported by Exxon, Shell, Unilever and many other giant corporations (see; it is supported by the (Democrat) California Legislature and by the US Green Party; it is supported by James Hansen and many (possibly most) senior climate scientists, and by a wide variety of climate activist organisations from both the Right and the Left and neither/both (notably the Citizens’ Climate Lobby – see Not least, carbon dividends are the defacto climate policy of the non-Trump, non-Tea Party GOP (see

I chose Curbelo for my imaginary story because he is the leader of the Climate Solutions Caucus of the US Congress, which now includes 88 congressional representatives (44 Democrats and 44 Republicans) – over 20% of the US Congress (see While the Climate Solutions Caucus doesn’t formally support carbon dividends, it was established by Citizens’ Climate Lobby with Curbelo and so is saturated by that policy. Curbelo is also young, upcoming, anti-Trump and supports sane, bipartisan policies not only on climate but on immigration and other issues. I have no idea what his political ambitions are, but he would be a natural presidential candidate for the scientific, rational, responsible and genuinely conservative remainder of the US Republicans, and a realistic potential challenger to Trump. Whether such a challenge would succeed is, of course, another issue.

In terms of the wider picture of what I have called the ‘Commoner Movement’ in my story – that is also happening already to a certain extent. As you have an interest in these matters I am sure you are familiar with the emerging policy movements on Land Value Tax, QE for People and a Basic Income, and with growing interest in the concept of ‘the Commons’. I have been immersed in these issues for five years now and engage almost daily with many of the key people involved, and I can assure you that there is plenty of evidence of overlap between them – in both the thinking (and actions) of the individuals involved, and in terms of the deeper philosophical and political-economic ideas. Three of these real, implementable policies (CD, LVT, and QE4P) are potential funding sources for the other (UBI) and this synergy is not completely unnoticed. Leading economic thinkers (Kate Raworth, Mariana Mazzucato, Francis Coppola, Steve Keen, Scott Santens, and many more) are already connecting these threads (at least in their private and social media conversations). Much of my time is spent encouraging these connections and trying to connect the silos of each individual policy movement under the organising concepts of the Commons and Raworth’s Doughnut.

[This piece was written in response to B. Lorraine Smith’s challenge for us to imagine the future we want.]

The Ongoing Collapse of Economics

We’re obviously at the end of an economic era. Clearly there are at least one, maybe several, fundamental, structural flaws deep in the heart of our economic system. Any financial news source from any day of the week will give you evidence of economic stagnation and instability. And any Trumpeteer, Bernie Bro or Brexiter will tell you that all is not well among the ordinary people of the heartland. Clearly something is badly wrong with the actual, real economy.

Is Economics Bollox?
Very serious people who think about very important things that affect us all. Or is it bollox?

Meanwhile, in the dusty halls of academia, of governments, and of banks, think tanks and other established and often ancient institutions, a bunch of people, mostly men, who like to think of themselves as smart are charged with fixing whatever it is that has gone wrong. They’re economists, and their ideas, perspective and advice not only strongly influences what governments and central bankers do, but influences how governments and central bankers think about what they do. Economists even frame the choices within which governments and central bankers operate. In a way, their theories help create real, actual economic reality for us all.

Money is important, governments have power, and economists influence what governments do with that power. Economists are therefore very, very important people doing very, very serious and important things that affect the real lives of hundreds of millions of people. This is serious stuff. Just ask them – they’ll tell you.

economics bollox
They don’t look very practical.

The thing to know about economists is that, like the magicians in the world of Jonathan Strange and Mr Norrell, there are two kinds of them: Practical Economists and Theoretical Economists. Practical economists are the ones out to change something. They work for governments, banks, central banks, lobby groups, etc. They want to fiddle with the workings of the economic machine to make it better – for somebody, if not for everybody.

Theoretical economists, on the other hand, are above all that. They think of themselves as scientists and see their purpose as a search for Truth. The practical economists, occupied with many other matters, depend on the theoretical economists for their theories. In other words, theoretical economists (specifically, theoretical macroeconomists) create the theory used by practical economists to strongly influence power. Theoretical economists may be relatively unknown, they may be boring, they may be incomprehensible, but they are very, very, very important people.

This is unfortunate, because there are two serious problems facing the community of theoretical macroeconomists these days:

The first problem facing theoretical macroeconomists is that reality is diverging from theory. More specifically, reality is diverging from their theory. In theory, theory and practice are the same, but in practice they’re not. In macroeconomic theory, X should be happening, or Y should be happening. Meanwhile, in practice, financial instability, weak growth, austerity, inequality, income insecurity and many other economic woes blight the lives of billions. In other words, whatever it is that macroeconomists are doing, or think they’re doing, it’s clearly not working.

economics bollox
That was a surprise! Oh well, these things happen.

And it’s not just that theoretical macroeconomists can’t fix the economy – they can’t even predict what’s going to happen! The 2008 financial calamity came out of the blue for most of them. Can you imagine the credibility of weather forecasting if the biggest storm in 75 years hit with almost no warning whatsoever? When an economic theory can’t even predict that, and seems useless at improving the situation, then what’s the point of it? It’s hard not to call bullshit.

Which brings me to the second problem facing theoretical macroeconomists today – the growing rebellion within their ranks. Essentially, theoretical macroeconomists are dividing into two camps, with more and more of them publicly doubting the orthodoxy. Faced with fact after fact that does not conform to their theories, more and more theoretical economists are, to their great credit, doubting those theories. Simply put, the ideas of theoretical macroeconomists affect the lives of millions, and there is currently an earthquake happening in their conceptual field.

The Chief Economist of the World Bank says that much of macroeconomics has become a religion, whose “pseudoscience” is infecting all social disciplines (that’s the Chief Economist of the World Bank). In a NYT article titled ‘How Did Economists Get It So Wrong?’ Paul Krugman questions the very assumptions that underlie conventional macroeconomic theory. Willem Buiter, the Chief Economist of Citigroup, calls most modern macroeconomics “useless“. Former Bank of England economist Charles Goodhart argues that economists need to start paying attention to money again. Olivier Blanchard, former Chief Economist of the IMF, calls the dominant strand of macroeconomic thinking “insular” and “imperialistic”.  And on and on it goes, with the recurring theme that macroeconomic theory has become orthodoxy, not science.

In other words, the macroeconomic theories behind the decisions of finance ministers, central bankers and other powerful people and institutions may well be bollox. Looking at financial instability, stagnant demand, tepid growth, austerity, inequality, income insecurity and all the other endemic economic problems of our age, it’s hard not to think that this might explain a lot.

You might think that the debate between orthodox theoretical economists and their colleagues who call bullshit would be dry, boring and filled with talk of phlogistons, cycle theory, DSGE models and other impenetrable concepts, but it’s not always that way. With a kind of morbid fascination at the spectacle of concepts behind many a distinguished career crumbling in the cold, hard light of factual reality, huge entertainment can be had from following the twitter feed of Paul Romer, the Chief Economist of the World Bank, as he appeals to his more orthodox colleagues to face facts. It would almost be funny if weren’t for all the real human pain behind it.

If we accept the rapidly growing body of evidence and authority suggesting that many of the core concepts of conventional macroeconomics are bollox, and that economists don’t really know what they’re doing, then the important question becomes ‘What next?’ As conventional macroeconomic theory crumbles in the face of facts, what will replace it?

One of the primary contenders is Modern Monetary Theory, which focuses on money itself (something which,  believe it or not, conventional macroeconomic theory doesn’t do). Another possibility is that macroeconomics will learn from complexity and systems theory, and that its models (and, hopefully, their predictive ability) will become more like those used in meteorology and climate science. Anti-economist Steve Keen is working in this direction, influenced by the Financial Instability Hypothesis (FIH) of Hyman Minsky, whatever that is.

But wherever macroeconomics is going, it’s clear that the old order is collapsing. The theoretical orthodoxy that has guided the highest level of economic management for many decades is crumbling. Either economics is an objective science or it’s not. And if economics is not an objective science, then we quickly need an economics that is. Countless livelihoods and lives will be deeply affected by the revolution we are witnessing in theoretical macroeconomics. It may be dry, it may be boring, it may be theoretical, and it may seem incomprehensible.

But it’s hard to think of any discussion that’s more important.

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