Emissions cap is key in addressing climate issue

Emissions cap is key in addressing climate issue

Here’s a plan that offers a comprehensive approach and puts money in the pocket of every Minnesotan.

By David Morris and Peter Barnes, originally published in the Minneapolis Star Tribune, July 10, 2007

For Gov. Tim Pawlenty, global warming is the “defining issue of our time.” Our Legislature agrees. A new law, passed with bipartisan support, forces Minnesotans to act.

The timeline is tight. A 50-member Climate Change Advisory Group, composed of leaders from businesses, utilities, environmental groups and churches, must deliver its plan to the Legislature by February.

A dozen committees are sifting through hundreds of policy proposals, from taxing carbon to reducing speed limits to streamlining trash pickup. They will assemble what a Star Tribune story calls “a salad of strategies” for legislative review.

We are concerned that a salad strategy approach could lose the forest for the trees. Reducing speed limits, expanding renewable energy, imposing carbon taxes and raising building efficiency are steps that, at best, might stabilize emission levels. But the legislative goal, and the governor’s commitment, is to dramatically reduce statewide greenhouse gas emissions: 15 percent below 2005 levels by 2015, 30 percent by 2025 and at least 80 percent by 2050.

The advisory group must embrace a fundamental truth: The only way to guarantee significant reductions is to demand significant reductions. And the only effective strategy is to impose a cap on emissions and ratchet down that cap over time.

The advisory group should focus on the mechanics of a cap. To that end we offer three guiding principles.

Make the cap comprehensive.

The law establishes statewide emission-reductions goals but it also allows the advisory group to develop plans for a cap solely on electricity-related emissions. That will not achieve the goals. Statewide reductions will not occur without a statewide cap. Indeed, because of Minnesota’s newly enacted renewable electricity mandate, most emission increases will come from outside the electricity sector.

Auction off the carbon allowances and return the revenue as a universal dividend.

A cap sets an emissions limit. That in turn creates an emission value. Who should capture this value? Europe’s disastrous initial foray into climate policy taught us what not to do. Carbon allowances were given away to existing polluters. The result? A windfall profit to polluters with no reduction in emissions.

Most jurisdictions are now proposing to auction off emission permits. The revenue from such an auction could be substantial, perhaps $800 million to $1 billion a year in Minnesota alone. What should be done with that revenue?

Here we come to the key question. Who owns the sky? We all do. The biosphere is a commons. We are limiting our collective emissions to levels that do not exceed the biosphere’s capacity to absorb and recycle. No individual or business has the right to pollute any more than any other individual or business.

Each person should have an equal share. Ideally we might issue a carbon allowance to each person. Administratively that could prove unmanageable. Therefore, we suggest the following.

Return at least half the annual revenue as a per capita dividend. That is how Alaska distributes revenues from its oil royalties. Such a distribution would make our commitment to the idea of the biosphere as commons manifest. It would also attract widespread political support, and hold low income households harmless from the higher prices of carbon based fuels.

Indeed, the poor may well get back more in dividends than they pay in higher prices. They drive much less. Indeed, a significant number do not own cars. They use less household energy. They don’t fly. The goods and services they buy — clothes, food, medical care, rent — are not carbon intensive.

Since the sky belongs to all of us, any revenue remaining after the universal dividend is paid should fund universally available services, like libraries or parks or public clinics. Many will lobby to use the revenue for narrowly targeted programs, including financing low-carbon energy programs. We should fight this urge. An ever-more-rigorous carbon cap will inexorably increase the price of carbon fuels, encouraging higher efficiency and low- and non-carbon fuels.

Require fossil fuel suppliers, not consumers, to purchase carbon permits.

Many propose that users of fossil fuels participate in an emissions auction based on carbon dioxide emissions. We recommend that the suppliers of fossil fuels — coal, natural gas, oil — purchase allowances based on the carbon content of their fuel. This is far less administratively onerous than forcing thousands and even millions of users of fossil fuels — car owners, building owners, power plant owners, farmers, factories — to purchase allowances.

A comprehensive emission cap. A carbon auction for suppliers of carbon fuels. A universal and equal distribution of revenues from that sale. Three keys to an effective and equitable strategy to reduce global warming.

[see also Podcast: Caps on Carbon as a Greenhouse Gas Reduction Strategy – David Morris discusses a state-based cap and share climate proposal that combines environmental and equity goals. A state task force must offer legislative recommendations by February 2008, broadcast on Air America radio, July 10, 2007]

David Morris is vice president of the Institute for Local Self-Reliance, based in Minneapolis and Washington, D.C. Peter Barnes is author most recently of “Capitalism 3.0: A Guide to Reclaiming the Commons.”

About ILSR: The Institute for Local Self-Reliance is a nonprofit organization founded in 1974 to advance sustainable, equitable, and community-centered economic development through research and educational activities and technical assistance. More at https://ilsr.org