The New Scientist Science and Society writer Michael Le Page has an interesting commentary and suggestion to incoming President Barack Obama. In a plea to Obama to take leadership on Climate Change, Le Page suggests updating Kyoto by creating a direct system of incentives and disincentives for both large economic players and individuals around the world to promote positive changes in our technologies and practices.
Le Page criticizes Kyoto as a joke, rightly pointing out it's fatal flaw, i.e. it's lack of enforcement, and a target setting process which is open to manipulation.
Cap-and-trade schemes might look good on paper but they are doomed to fail when it comes to weaning the world off its addiction to fossil fuels. For starters, without a strong enforcement regime, any cap is meaningless. Under the Kyoto protocol, for instance, countries that do not meet their targets just increase them next time around.
The solution offered represents thinking far outside the box, in my book, and reflects an approach which I believe conservative economists like Milton Friedman would agree with, i.e. the use of taxes as a method for creating disincentive and incentive, as opposed to the creation of a body of legislative regulations and the accompanying bureaucracy to oversee and administer it. It leaves companies and people free to choose solutions and courses of action which best fit their individual situations and interests.
So what's the alternative? In the US, there is growing support for a carbon tax on fossil fuels. Such a tax can be adjusted to reflect the harm done by different fuels: coal would be taxed far more heavily than natural gas, for instance, unless burned in a power station that sequesters the carbon. The tax should be raised each year to make fossil fuels ever more expensive and renewables relatively cheaper.
There are many arguments in favour of this approach, but perhaps the strongest is that a carbon tax will be hard to dodge. It's more difficult to smuggle oil or coal than cigarettes and cocaine. Those who use fossil fuels will immediately pay a higher price.
Your advisers will tell you this is political suicide: the last thing we need in a global financial crisis is higher fuel prices. Well, here's the clever bit that should make this tax popular with most voters: every penny raised from the carbon tax should be divided equally among a country's citizens. This is called the "tax and 100-per-cent dividend" approach, and it is advocated by leading climate scientist James Hansen of NASA.
...People who live in a huge house, drive gas-guzzling cars and fly lots will lose out under this regime. The dividend they receive will be outweighed by what they pay for fuel, flights and heating. Most people, however, will be richer. Families and retired people struggling to make ends meet would gain far more from the dividend than they lose in higher bills.
Did you get that? Tax carbon, and give the money back directly to individual citizens, just as Alaska provides direct disbursements from it's Permanent Fund to residents of that state. Those who act in ways which use less carbon, get taxed at a lower rate, and keep a larger portion of the direct carbon tax distribution.
The tax-and-dividend approach is easier to implement, harder to cheat and provides a stronger, more immediate incentive to change. It applies to everyone, not just big companies, and rewards those who genuinely emit less CO2, rather than lawyers and accountants. It's bold, simple and our best hope of averting catastrophe.
Now maybe, for the sake of argument, we can also consider a scheme by which a portion of the carbon tax receipts go to basic research in alternative energy creation and storage, say 10-25%, and rest directly back to individuals...but regardless, I like the idea, and think it would produce the change we need, as well as a direct benefit to individuals and to the economy as a whole.
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