There's been a nice, coherent-if-incipient debate on cap-and-trade on this blog lately, which I've alas been too busy to reply to. But I wanted to throw in just one small thought: it just might be time to ditch the whole notion. It conflates at least three things together, and as they are all quite different, the "trading debate" as we know it is both confusing and confused.
Cap-and-grandfather: A market-based system in which existing polluters are granted the right to continue polluting, modulo some typically minor and politically negotiated reduction. This right comes in the form of "allowances" that polluters can, as we all know, sell to other polluters. Such systems are manifestly unfair and easy for corporations to game (witness the first phase of the EU's trading system), but defended by "realists" (like, say, Environmental Defense and the folks at the Pew Climate Center) as necessary in order to get corporations to cooperate with the drive toward national climate legislation. Pew's Eileen Clauson, by the way, goes out of her way to talk about cap-and-trade as if it were, by definition, cap-and-grandfather, presumably as a way of arguing that there is no alternative.
But there are alternatives -- actually two -- and that's excluding a straight-ahead carbon tax.
Cap-and-auction is a market-based system that, while superficially similar to cap-and-grandfather, is actually quite different. Emission allowances are auctioned to the highest bidder instead of being grandfathered -- this means that there's no windfall for existing polluters. It also means that there's a lot less trading (though allowances remain tradeable) because, typically, polluters would only buy the permits they need. Crucially, cap-and -auction systems allow the government to collect the auction fees and then recycle them -- to RE / EE funds, Just Transition Funds, "Sky Trust"-like revenue recycling systems, payments to a global adaptation fund, whatever. Some economists say that, in this, cap-and-auction is pretty much identical to a carbon tax, save that it's more likely to actually be adopted, at least in the U.S. I'll have to take their word for this.And then there's the global side of the trading debate, the one that concerns burden sharing between rather than within nations. Here there's a third variant of cap-and-trade, also very different from cap-and-grandfather, which we might as well call cap-and-allocate.
Cap-and-allocate systems are pretty notional at this point. But the global climate equity debate has everything to do with them, which is easily seen in the fact that both the venerable Contraction and Convergence proposal and EcoEquity's own Greenhouse Development Rights proposal rely, at least in part, on cap-and-allocate mechanisms. In the first case, a nation would be allocated emissions allowances in a way that is partially based on its population. In the second, it would be allocated reduction and adaptation obligations on the basis of its responsibility and capacity. In both cases there would be trading, but in neither case is trading really the point.
Which is my point. Trading is just a mechanism. It's not a realist stance, it's not an equity principle, and it's certainly not a burden sharing architecture. As Jimmy Dale Gilmore might say (if he were a climate wonk): it's just a wave, it's not the water.
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Comments
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Rune Posted 7:40 am
19 May 2007
Grandfathering amounts to handing over remaining public environmental rights to interests that have been stealing and swindling them all along. There is no widely accepted doctrine that says if you can poison or deprive the resources of others you are free to do so if you can make a buck while you are at it, but that is pretty much what big polluters have argued. Grandfathering such practices is just the final surrender in the battle over this unjust practice.
I like the cap and auction model, so long as we set caps low enough to actually reduce carbon emissions in line with the drastic measures the latest climate destabilization models indicate are necessary to have a prayer of providing our children and grandchildren with a planet and an economy that isn't terrifying. So far, there is very little realism in that regard among those who are happily grandfathering in rights to effectively continue to make things worse and worse with each passing year.
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BruceMcF Posted 8:25 am
19 May 2007
As far as I know, Sanders-Boxer, Edwards plan and Richardson plan all hit or beat the IPCC target. Some other alternatives being set forward, like McCain-Lieberman, do not.
I know that the Edwards plan is cap-and-auction, while as far as I understand the details of the plan that Richardson announced this week will be available shortly.
Virtually Yours, BruceMcF
Energize America 2020
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Aubrey Meyer Posted 9:31 am
19 May 2007
The definition statement for C&C is here: -
http://www.gci.org.uk/briefings/ICE.pdf
General referencing for the C&C provenance is here: -
http://www.gci.org.uk/links/detail.pdf
A context animation is here: -
http://www.gci.org.uk/images/CandC_model_context_animatio ...
[Please note: - Touch buttons to advances within scenes and . . . touch logos to advance between scenes].
A heuristic animation of C&C and risk is here [large file - overnight download]: -
http://www.gci.org.uk/images/Contraction_and_Convergence_ ...
The interviews with many eminent spokespersons commenting C&C on the DVD - The Incontestable Truth - distributed by the UK All-Party Parliamentary Group on Climate Change [who commissioned it] is here [large file - overnight download]: -
http://www.gci.org.uk/images/Contraction_and_Convergence_ ...
Alternatively, copies of the DVD are available on request for 10.00GBP - name and postal address are required for this.
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GreyFlcn Posted 12:05 pm
19 May 2007
Only new generating capacity would be considered as "in the game".
And for instance, if a new facility were to increase it's output, that increased output would be "in the game", where as the historical output would be "out of the game".
Assuming the "starting date" were slightly retroactive, or atleast very prompt, that framework might work.
_
But yes, it would be a lot less severe than having all existing capacity "in the game".
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Ken Ward Posted 3:54 am
20 May 2007
The underlaying difficulty with the cap and trade/carbon tax discussion, is that we continue to put the cart before the horse.
No policy now under consideration comes close to doing the job that is required. The only justification for Kyoto, cap & trade, all the proposals being considered by the US Senate and any other climate policy which has even a slight possibility of being adopted, is as "first steps" toward some future when the world will get serious.
The world is at that point now, however, and there is no time to take "first steps." Cap & trade in any present form is worthless and should only be discussed if its advocates at ED and Pew define workable terms. They can't do this because it would deep-six any chance to win something. But something rather nothing is deadly.
This shouldn't be tough to recognize. Every advocate, from ED and Pew on down, has acknowledged that standards will have to be tightened down the road, presumably when things have gotten bad enough to strengthen our hand.
To image that cap and trade (in any of the variations Tom neatly defines) will solve climate change simply because it is good policy is lunacy. We have only to look at the US experience with 1970's federal environmental law. The Clean Water Act, for those old enough to remember, ended surface water pollution in America - probably the only US environmental mandate as emphatic as global climate action must be now. Once out of the political and policy arena, polluting industries were able to sabotage implementation and, eventually, dumb down its goals.
No policy that imposes hefty costs on BP, Exxon-Mobil, et. al. is going to work unless there is sufficient power to force compliance. That's the horse we need to be worrying about. If we had (or could see how to gain) the leverage necessary to implement an effective cap & trade - if and when government is powerful enough to force total restructuring of global energy systems - then some other, quicker and more certain policy than cap & trade will be chosen to do the job.
Ken Ward
ken[at]brightlines.org
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GreyFlcn Posted 4:06 am
20 May 2007
Stop building coal power plants, unless you can prove they can sequester the carbon.
Get plugin hybrids on the road. (Ideally series plugins)
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msandler Posted 2:42 am
21 May 2007
Should the emission rights be given to citizens, the government, or to industry?
Cap and Grandfather is to industry.
Cap and Auction is to government.
Cap and Share is to citizens. The Ireland-based think tank FEASTA has put together http://www.capandshare.org to mobilize citizens to claim their emission rights by revising the ETS.
In California, there is a group working on a project called Carbon Share at http://www.carbonshare.org.
But Cap and Share and Cap and Auction can co-exist. There could be a check box on your tax form: How would you like your Carbon Entitlement? 1) Send me a cash dividend, 2) Send me a Share denominated in tons CO2 that I would cash at a brokerage at the time of my choosing (to play the carbon market), or 3) a tax break or expansion of my Earned Income Tax Credit.
We are going up the learning curve in how markets could work. We started by enriching the coal companies. The Northeast States have realized they could use the money for the public interest. Soon, we will discover that the money belongs to the citizens.
-Mike
http://www.carbonshare.org
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