Here’s an intriguing idea from California: Carbon Share. It’s basically a version of Cap and Dividend (aka Skytrust) but with a twist. Instead of auctioning carbon allowances to polluters and then returning the proceeds to citizens, Carbon Share just distributes the allowances directly to citizens. Individuals can then cash in the allowances at banks or brokerages—and the financial houses would put the permits into circulation for polluters to purchase.
I worry a bit about creating too much uncertainty for the regulated businesses. Still, it’s an intriguing idea, in part because it essentially cuts out the government’s role in handling the money. It’s worth checking out.
eldan
Britain was discussing a similar idea last year, though I don’t know if it got anywhere.
Andy Andersson
I have posted blogs discussing this very idea a number of times but I wonder how effective comments to blogs like this one really are. I want to refer to two of my earlier mini articles: Article 1 discusses how to distribute and price emission permits without any government involvement in the pricing and Article 2 discusses the moral and legal justifications for such a distribution system.
Andy Andersson
I find that my post comments are not availabe at the links on my post a few minutes ago so they are given here:Comment posted 071208The effectiveness of a carbon-trading or carbon-taxing system depends on the carbon-pricing mechanism, as do the price fluctuations. The system performance is amenable to analysis using methods developed for stability and control in engineering once some essential parameters of the problem have been empirically determined. The system can be started without such parameters available by a simply stated goal: Make carbon usage continually decrease with time. This can be accomplished by issuing carbon-emission permits (options, tax refunds, or other instruments) to the public on a per-capita basis for a total emission at current levels. How will this reduce emissions?Since the emissions by design cannot increase, they will reduce due to the fact that some parties will find it cost-effective to reduce their emissions and there will be no incentive for any party to increase emissions. For the next time period (month, quarter, year) permits will be issued to the newly established reduced level, and so on. Data will accumulate on the parameters of the system such as carbon-energy price increases and the effect of these increases on energy use and conversion to other energy sources (or modes of transportation). A control-system engineer will recognize the importance of delays in the stability of such a system and the necessity of including these in the analysis (permits for nuclear power stations, design and manufacture of more efficient transportation, etc).There is no need to set the prices for the carbon-emission permits since their price will be established by market forces. There will not be any negative effects of the increased energy prices on the average citizen, who would be fully compensated through the revenues from permit sales. In fact, there would be an opportunity for additional savings for the individual by switching to alternative energy sources (or modes of transportation) while keeping the money from permit sales.There are many other aspects on how to organize this system and how to maximally benefit from its implementation. I’ll keep that discussion for a later date but want to refer to an earlier comment posted on Nov 9, 2007. Comment posted 071109There is no scientific consensus of what carbon-emission damage is done and therefore it is difficult to set a price or a cap on allowed emissions. It is clear that the price should be greater than zero, which is the present price. A fixed cap tends to provide an incentive to maximize the emissions within the limit set by the cap rather than provide an incentive for further reductions. This is clear from the effect of caps on automobile fuel consumption where further improvements come only from threats of future tightening legislation. A total national cap on emissions does not suffer from this shortcoming but suffers from the lack of scientific consensus.Let’s take a different tack (and restrict ourselves to USA for simplicity of argument; the international aspects will be considered later) and start with fairness. The environment belongs to us all and if someone degrades it he should pay to every man, woman and child what they think is fair compensation. The payments would be made at the source, be it the coal mine, the oil well or the oil unloading dock. The distribution of the payments can take different forms, but some form of shares to every person is a possibility. They could then sell these shares to those needing to pay at the source for whatever they think they are worth. A brokerage system for this trade would rapidly develop. The several hundred dollars per month these sales would provide a family would give strong incentives to reduce carbon-emitting energy consumption or offset the costs of continuing business as usual in an environment of higher prices for energy and goods.There is of course a cap implied in the number of shares issued and the carbon equivalent of each share. Starting with a cap equal to current emissions, the strong incentives would initiate a rapid decline in emissions. By keeping the cap at the prevailing emissions at any time, the reductions would be sustained but there would be no disruptions in the economy or the lives of individuals. Delays due to the inability of society to adjust instantly, such as time for building nuclear power stations or better public transportation, would be automatically taken into account.The incentives to reduction of carbon emissions would take many forms. Several kinds of alternative energy would become competitive, without subsidies, as would more energy-efficient forms of transportation. A boon to the economy would be the emergence of alternative-energy companies with a strong market and a new ability of US industry for energy-efficient production of goods.The essence of successful reform is the creation of strong incentives!