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Critique of cap and trade “We are Selling Indulgencies” by James Hansen

31/12/2009 Observer Last month’s minimalist Copenhagen global climate accord provides a great opportunity. The old deceitful, ineffectual approach is severely wounded and must die.Now there’ is a   chance for the world to get on to an honest, effective path to an agreement.   The centrepiece of the old approach was a “cap and-trade” scheme, festooned with offsets   and bribes -  ribes that purportedly, but hardly, reduced carbon emissions. It was   analogous to the indulgences scheme of the Middle Ages, whereby sinners paid for   forgiveness.

  With today’s indulgences the sinners, developed countries, buy off developing countries   by paying for offsets to their own emissions and providing reparation money for   adaptation to climate change. But such hush money won’t work. Yes, some developing   country leaders salivated over the proffered $100bn per year. But by buying in, they   would cheat their children and ours. Besides, even the $100bn hush money is fugacious.   The US, based on its proportion of the fossil fuel carbon in the air today, would owe   $27bn per year. Chance of Congress providing that: dead zero.

  Most purchased offsets to fossil fuel carbon dioxide emissions are hokey. But there is no   need to flagellate the details of this modern indulgences scheme. Science provides an   unambiguous fact that our leaders continue to ignore: carbon dioxide from fossil fuel   burning remains in the climate system for millennia. The only solution is to move   promptly to a clean energy future.

  The difficulty is that fossil fuels are the cheapest energy, if the price does not include the   damage they do to health, the planet and the future of our children. “Goals” for future   emission reductions, whether “legally binding” or not, are utter nonsense as long as fossil   fuels are the cheapest. The Kyoto protocol illustrates the deceit of our governments,   which have not screwed up their courage to face down the fossil fuel industry.

  As far as the planet is concerned, agreements to “cap” emissions, such as the Kyoto   protocol and the imagined Copenhagen protocol, are worthless paper. Yes, people must   make changes in the way they live. Countries must co-operate. Matters as intractable as   population must be included. Technology improvements are required. Changes must be   economically efficient. The climate solution necessarily will increase the price of fossil   fuel energy. We must admit that.

But in the end, energy efficiency and carbon-free energy   can be made less expensive than fossil fuels, if fossil fuels’ cost to society is included.   The solution must have honesty, backbone and a fair international framework.

We need a rising price on carbon applied at the source (the mine, wellhead, or port of   entry). The fee will affect all activities that use fossil fuels, directly or indirectly. The   entire fee collected from fossil fuel companies should be distributed to the public. In this   fee-and-dividend approach people maintaining a carbon footprint smaller than average   will receive more in the dividend than they pay via increased energy costs. The monthly   dividend will stimulate the economy and provide people with the means to increase their   carbon efficiency.

Cap-and-trade is the antithesis of this simple system. Cap-and-trade is a hidden tax,   increasing energy costs, but with no public dividend. Cap-and-trade is advantageous only   to energy companies with strong lobbyists and government officials who dole out   proceeds from pollution certificates to favoured industries.   Fee-and-dividend, in contrast, is a non-tax – on average it is revenue-neutral. The public   will probably accept a rise in the carbon fee rate, because their monthly dividend will   increase correspondingly. As fee-and-dividend causes fossil fuel energy prices to rise, a   series of points will be reached at which various carbon-free energies and carbon-saving   technologies are cheaper than fossil fuels plus the fee. As time goes on, fossil fuel use   will collapse, coal will be left in the ground, and we will have arrived at a clean energy   future. A rising carbon fee is essential for a climate solution. But how to achieve a fair   framework?

The critical requirement is that the US and China agree to apply across-the-board carbon   fees, at a relative rate to be negotiated. Why would China agree to a carbon fee? China   does not want to be saddled with the problems that attend fossil fuel addiction. Besides,   China would be hit extraordinarily hard by climate change. A uniform rising carbon fee is   the most economically efficient way for China to limit its fossil fuel dependence.

Copenhagen discussions showed that China and the US can work together. Countries   refusing to levy an across-the-board carbon fee can be dealt with via an import duty   collected on products from that nation in accord with the amount of fossil fuel that goes   into producing the product.   The international framework must define how proceeds from import duties are used to   assure fairness. Duties on products from developing countries will probably dwarf present   foreign aid to those countries.

These funds should be returned to developing countries,   but distributed so as to encourage best practices, for example, improved women’s rights   and education that helps control population growth.  Fairness also requires that   distribution of the funds takes account of the ongoing impacts of climate change.   Successful efforts in limiting deforestation and other best practices could also be   rewarded.

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