Cap & Share in the run-up to Paris

First of all an announcement: a new Cap & Share website is up and running (although there are more refinements to come) – thanks to Alison for lots of work on this. There is now a Twitter presence (@CapandShare) too.

To support CapGlobalCarbon, the new C&S site describes the principles of C&S (the upstream cap, the sharing of the benefits, the global approach) and explains the mechanism of a global auction of permits (this is technically global Cap & Dividend, although the ‘classic’ Cap & Share mechanism with certificates embodies the same principles and is also described).

Although C&S can operate as a national scheme (for example to deliver national INDCs as part of an international climate treaty), there are many advantages to a global approach. It can guarantee a cap globally (and after all, the atmosphere is a global system, ppm concentrations are global figures, and the ‘2 degrees’ target is a global one); equally importantly it sidesteps a lot of the international arguments and bargaining. But it would need a single global body to operate it on behalf of humanity. Below are my views on this.

Is it realistic?

There are several possibilities for what form this global body might take: a ‘World Climate Organisation’ as part of the UN process ; or a group of countries might begin by forming a ‘coalition of the willing’, set up a Trust to act on their behalf, and seek to recruit further countries to join; or equally the Trust could be set up by a small group of people of high standing who could take the lead on behalf of humanity, ignoring countries altogether (a Trust needs legitimacy, but legitimacy does not come solely from nation states). These options are not exclusive – for example the Trust could be started by a citizen’s group which might hand over to a Trust of eminent ‘elders’ which then gets UN backing. C&S is a tool ready to be used by whatever group emerges.

But having a tool ready, or having a good idea, isn’t enough. It needs to be taken up and implemented. Ending slavery and apartheid were simple ideas too, but both still required a political fight, and so will C&S. Now any serious attempt to limit our carbon emissions will run into opposition, but at least the C&S approach offers incentives working in its favour, to help overcome the inevitable opposition from vested interests.

Let’s look at these incentives, to assess the prospects for establishing a global Trust. To do this, first suppose that the Trust is up and running (and take as read the usual caveats about cash injections into non-cash-based communities, etc).

Moving the climate lever

In the UK a Monetary Policy Committee sets the level of UK interest rates. This is the only thing the MPC does, a single lever it has at its disposal. All debates, concerns and points of view boil down to views on the best position of this lever.

Similarly, our Trust has one lever which it can adjust: the size of the cap. This represents the strength of the bending downwards of the emissions curve. How much bending – how steep a reduction in emissions – is a matter for debate. There is scientific advice; there are economic consequences; there is special pleading; there is politics.

As with the MPC, this is a 1-dimensional argument about the setting of a lever. Remember this is a global carbon budget: there are no separate levers for different nations, any more than the MPC considers separate interest rates for different towns in the UK.

The setting of this carbon lever has two effects. The physical effect is to set the global budget for the extraction of fossil fuels (and hence the global emissions budget). The economic effect, through the supply/demand mechanism, is to determine permit prices, and hence the strength of the price signals in the economy and the size of the ‘carbon cashback’ payments to the world population.

A ‘weak’ setting of the lever achieves a slower reduction in carbon emissions, a weaker carbon signal, and lower carbon cashback payments. Supporters of weaker settings of the lever would presumably include fossil fuel companies and others with vested interests in high-carbon products; governments answering to such vested interests, or more generally anxious about disruptive change to the economy or loss of sovereignty; and a (rich and vocal) minority of the population who would lose out financially (from having to pay more for high-carbon products and services while only enjoying the same carbon cashback payments as everyone else).

A ‘strong’ setting of the lever, conversely, achieves a faster reduction in carbon emissions, a stronger carbon price signal, and higher cashback payments. Supporters of strong settings would include those most concerned about risks of severe climate disruption; those promoting low-carbon products and services; those concerned with world poverty; and the majority of the population, who would gain financially (from carbon cashback payments that outstrip any extra they have to pay for high-carbon products and services).

This discussion is important for thinking about establishing the Trust. People who support weak settings, once the Trust is operating, will also will be more likely to oppose the establishment of the Trust in the first place. Conversely, supporters of strong settings will be most supportive of the initial setting up of the Trust.

The fight to establish the Trust

Initially the main hurdle to overcome is that of the proposal simply being ignored. That is why a core starting group of prominent people, with influence, contacts and standing, would be highly desirable. Such a group would also be more credible in claiming legitimacy when they take a lead. The current groundswell of people, from pop stars to the Pope, calling for ‘strong climate action’ is a hopeful sign.

But they need to adopt a specific tool – such as C&S – to champion, before their voices become really effective (I wrote a comment piece on the RTCC site about this recently. Reaching such people would be my top priority at the moment).

If the Trust is initially set up, by whatever means, there will probably be an interim stage where some corporations and some countries are ‘signed up’ and others are not (yet). What are the incentives at this stage? For the Trust to function effectively we need fossil fuel companies to comply, that is, to agree to buy permits to cover the (carbon content of) the fossil fuels they extract. Why would they do this?

One route is legislation. If a nation ‘signs up’, it agrees to mandate compliance in its jurisidiction. The Trust might request this as a condition for releasing the cashback funds for the population of that nation. One could envisage populations pushing for this, despite pressure from vested interests resisting it.

However, the Trust does not rely on ratification by nations: there are other routes for securing compliance by fossil fuel suppliers. These corporations might sign up even in the absence of legislation, in order to label their fuels ‘climate-safe’ (similar to ‘fair trade’ goods or ‘dolphin friendly’ tuna). The fossil fuel companies which refuse to sign up are then a clear target for divestment campaigns and more general confrontation on moral grounds; legal challenges are also an up-and-coming trend.

Consumer pressure could extend this by calling for other corporations, starting with energy companies, to be climate-safe too, meaning that they only used climate-safe fuels. NGOs would investigate and highlight supply chains (much as they do now for palm oil, say).

In all cases, proponents make a clear, unambiguous demand. Signing up with the Trust or not is clear cut: if you don’t say yes, then you’re saying no.

None of these tactics is guaranteed to work; they are simply tools available to overcome the obvious sources of resistance (cartel pressure, greed, and the capitalist wish to be unfettered by restrictions of any kind). This will be a political fight – but so will any attempt to wrest control from those responsible for the destruction of our planetary life-support system.

We have to recognise the power of opposing vested interests, and recruit allies to overcome it. The ‘share’ element of C&S provides incentives to help line up forces on our side. Meanwhile the simplicity of C&S helps to make the choices clear and visible (much as the divestment movement does). When we can see clearly, hopefully we have a better chance of making the right choice.