Cap and Share

Cap and Share is the name of both an approach and a campaign to halt climate change. It is based on the belief that every human being has a right to an equal share of the Earth's very limited capacity to accept further greenhouse gas emissions before the temperature target adopted by the European Union, a maximum 2 degree Celsius rise in the Earth's average temperature over that in pre-industrial times, is exceeded. It wants global emissions to be capped at their current level and then brought down year by year at a rate consistent with achieving the temperature target. Each year, the emissions tonnage involved would be shared equally amongst the Earth's adult population, each of whom would receive a certificate for their individual entitlement. The recipients would then sell their certificates through the banking system to oil, coal and gas producers who would need to acquire enough of them to cover the carbon dioxide emissions from every tonne of fossil fuel they sold. The advantage of the system is that it provides everyone with at least partial compensation for the higher cost of fossil fuels that limiting their availability would necessarily involve.

The policy was devised by Feasta (The Foundation for the Economics of Sustainability) in 2005 and 2006, and they have set out the case in policy documents. Foundation for the Economics of Sustainability, 2008. [http://www.feasta.org/documents/energy/Cap-and-Share-May08.pdf Cap and Share: A Fair Way to Cut Greenhouse Gas Emissions] . Faesta, Dublin. ] Comhar have commissioned their own report on the scheme.AEA Energy and Environment, 2008. [http://www.feasta.org/documents/energy/AEA_cap_and_share.pdf Cap and Share: Phase 1; Policy Options for Reducing Greenhouse Gas Emissions.] Report to Comhar Sustainable Development Council. AEA, Didcot.] It is partly an extension and popularisation of the Contraction and Convergence proposal developed by the Global Commons Institute, which also calls for an equal per capita distribution of emissions. Cap and Share differs in that it insists that emissions allocations should be distributed equally to individuals as their right, whereas Contraction and Convergence (C&C) allows governments to decide if this is the way they wish to share out what is, essentially, their national allocation. C&C also allows for (but does not insist on) a convergence period, during which the richer countries would receive higher per capita emissions allowances than poorer countries. Cap and Share says people in rich countries should get the same emissions entitlement as those in poor countries from the start, but suggests that in the early years of the system, a portion of everyone's emissions entitlement should be held back and distributed to governments of countries which were facing exceptional difficulties in adapting to climate change or to low levels of fossil energy use. The governments involved would sell their certificates to raise money for remedial works. For example, the government of Bangladesh might sell its allocation to pay for better defences against rising sea levels.

The diagram below sets out the basic process of the policy:

The policy

Principles

1. That a ceiling or cap on carbon dioxide and other green house gas (ghg) emissions should be calculated that prevents an average global temperature rise of over 2 degrees Celsius.

2. That the right to emit such ghgs is a human right, and should be shared on an equal-per-capita basis, with permits going to each individual rather than to their governments.

3. That the permits would be saleable through the post office and banking system to the importers and producers of fossil fuels who would need to acquire enough permits to cover the emissions from the fuels they introduce.

4. That any national or European Union scheme should be designed as a possible prototype for a global system that will also help set the conditions for the alleviation of poverty and the maintenance of biodiversity.

Economic assessment

If the future is known with certainty, then the economic implications of cap and share equal the economic implications of a carbon tax with lump sum recycling -- that is, the carbon tax revenue is used to send every household a cheque in the post. Lump sum recycling is generally recognised as an inferior way to recycle the revenue of environmental taxes, [Lawrence H. Goulder (1995), Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis, Journal of Environmental Economics and Management, 29, 271-297.] and this has been repeatedly confirmed for Ireland. [Adele Bergin et al. (2004), [http://www.epa.ie/downloads/pubs/research/econ/epa_reducing_greenhouse_gas.pdf | The macroeconomic effects of using fiscal instruments to reduce greenhouse gas emissions] , Environmental Protection Agency, Johnstown Castle.] [Thomas Conefrey et al. (2008), [http://ideas.repec.org/p/esr/wpaper/wp251.html The impact of a carbon tax on economic growth and carbon dioxide emissions in Ireland] , Working Paper 251, Economic and Social Research Institute, Dublin.]

If the future is not known with certainty, then cap and share has all the drawbacks of quantity-based regulation for a stock pollutant. [Martin Weitzman (1974), Prices vs Quantities, Review of Economic Studies, 41 (4), 477-491.] In the case of greenhouse gas emissions, price-based regulation (incl. a carbon tax with lump-sum recycling) is more robust to uncertainty and leads to lower welfare losses. [William A. Pizer (1999), The optimal choice of climate change policy in the presence of uncertainty, Resource and Energy Economics, 21, 255-287.]

References

See also

* Economics of global warming
* Carbon tax
* Emissions trading

Links

* [http://www.climatecooperation.org The Climate Cooperation wiki]
* [http://www.capandshare.org Cap and Share] website
* [http://www.feasta.org/ Feasta] (The Foundation for the Economics of Sustainability)
* [http://www.neweconomics.org/gen/ nef] (the new economics foundation)
* [http://www.gci.org.uk/ The Global Commons Institute]
* Personal carbon trading - an alternative approach to allocating emissions rights directly to individuals