On the face of it, you might think the fact that the government is currently conducting an inquiry into an emissions trading scheme is progress. While it’s pretty unlikely that the likes of Howard and Minchin actually support the use of a trading scheme to achieve meaningful reductions in emissions, one might think that any scheme is better than none, and with a bit of rejigging of targets can offer the mechanism by which the reduction process is managed.
However, I was wondering idly about nightmare scenarios, where a government could coopt the process of setting up an emissions trading scheme in such a way as to not only delay cuts in greenhouse gases, but make it impossible to fix things later.
At the moment, there is no intrinsic right to emit greenhouse gases into the atmosphere. If the government imposes CO2 limits, therefore, as I understand it emitters would have no legal right to compensation. Politically, such compensation may have to be paid, but that’s a matter of politics, not law.
However, that would change if explicit permits to emit greenhouse gases were made available. Consider a scenario where an emissions trading scheme is set up, and an excess of permits allowing emissions into the never-never are sold – or even given away to the big polluters like the coal-based generators. If there’s an excess of permits, the price will be very low. Emissions continue to expand given the low cost of carbon.
Then, a more sane government is elected, and begins to right the wrongs of the previous scheme. However, there’s a problem. There are all these emission permits floating around. In all probability, large quantities are held by foreign traders, who always go into a panic if there’s even an inkling that their property rights aren’t respected by the local government. So the government will be faced with buying back these permits on the open market. And, while those permits might have been cheap when there was an oversupply, the price will skyrocket. The government may be faced with many billions of dollars to buy out rights that should have never have been granted in the first place – the Murray-Darling irrigation entitlement scenario on a far grander scale. The more sane government, facing budgetary pressures, decides that it simply can’t afford to do so.
Perhaps this scenario is far too cynical. However, it serves to illustrate the risks of a badly designed carbon trading scheme locking us into a high-emissions future. Clearly, any old emissions trading scheme will simply not be good enough. The devil is in the detail – for instance, how to deal with the possibility that emissions targets will have to be changed as the science becomes clearer, while still maintaining sufficient guarantees for investors in energy projects both renewable and non-renewable. It will behoove us all to keep a close eye on what the government ends up proposing, given that its commitment to global warming is obviously so half-hearted.
Very important post, Robert, as this is not just a risk but a very real likelihood, in my opinion.
I don’t know if you were implicitly referring to this, but your scenario is very close to the McKibbin / Wilcoxen emissions trading proposal. That’s Warwick McKibbin, of the Reserve Bank, and a member of the famous Howard Emissions Trading Task Group. He is on the record saying he will use the task force, obviously, to promote his model.
And, seeing that the model was designed to bring Bush back to the table after he dropped Kyoto, it’s a model that Howard and co would just love to support.
Essentially, McKibbin proposes a hybrid scheme under which large emitters would be grandfathered – allocated free of charge, permanent emissions permits equivalent to their 1990 emissions levels. That’s right. Permanent rights to emit the same amount as they did in 1990. Bang goes any chance to reduce emissions below that level without massive public expense to buy back those rights.
But that’s not all. In addition, the government would sell off (not auction – sell at a pre-determined price) any number of additional emissions permits that the market was willing to buy.
Essentially, that’s a carbon tax by a different name and excluding all major emitters.
Damn right we’ve got to watch what the government come up with as an emissions trading regime. You can bet your bottom dollar it’ll be something sweet for big emitters (and big Liberal party donors), with no environmental certainty at all.
The devil is not in the detail, but in the fact that quantity controls are being advocated instead of the price mechanism. As you so rightly point out you can control quantity but not the price. At present the GW agenda is controlled entirely by quantity control freaks and their extension of plastic shopping bag economics. None of this economic terrorism will produce decent outcomes. To do that you have to understand implicitly that there is a free market solution, but to really appreciate that you need to logically and coherently address rewriting the constitution of our marketplace. The quantity control freaks can never do that because firstly they don’t understand markets and secondly lack the psychological makeup to do so.
Obs, I think you’re making a proposal in there, but it’s so lost in general snark it’s pretty difficult to be sure.
Are you saying that you’d prefer to set a fixed price for greenhouse emissions and let the market decide the quantity of emissions reductions?
Nice framing, observa:
“you have to understand implicitly that there is a free market solution”
I’ll see your framing and match it with:
“you have to put your faith in the market”
We have a very high level of scientific certainty – that we need to see global cuts of at least 60% on 1990 levels by 2050, and as much as 30% by 2020. We have a very high level of risk that if we fail to reach that target, the impact on the global environment and the human society that depends on global environmental health would be catastrophic.
Against that high level of certainty and high level of risk, you, Howard, Albanese and others advocate free market solutions with no explicit cap on emissions.
That’s a hell of a leap of faith.
No, I’m basically saying the whole bloody GG, GW evangelism is just a total diversion from what we’ve known for a long time about the current constitution of the our marketplace and how it impacts on the environment. Why the bloody hell would you want to race off on hypothetical tangents when we never addressed that properly? Not one nation has addressed that and yet now we’re all supposed to get together in some gigantic Kyoto world love-in conference and bingo, problem solvered. We all come back home after the big pump up session, full of good intentions and within a week it’s business as usual. More bulldozing for tuscan boxes, while we liquidate Earth Sanctuaries Ltd is probably the most glaring example of the failure of our current marketplace, yet we’re all supposed to rush off and save the bloody planet. Bah Humbug!
tim,
I am not here to deny GW and the solutions by the experts. Besides, even if CO2 turns out not to be the big culprit, there’s still the fact that burning fossil fuels is bad for our health and such fuels are getting scarcer. That’s not the point. The point is we all need to understand implictly that firstly there is no such thing as a free marketplace, as distinct from a free market that operates within the deliberate constitutional construction of that marketplace. So we have inherited the current constitutional marketplace from the science of muddling through and inherited all its currnt outcomes. Doesn’t mean we can’t design another marketplace and allow the free market to reign within it.
OK all you GW evangelists, let’s put you to the test here to understand what I mean by a constitutional marketplace. Let’s suppose Al Gore is right when he says GG induced GW is the greatest threat to mankind/civilisation ever. Got that? Bar none, fix it quick or kaput!
OK, suppose in response we abandoned all forms of taxation, bar the taxation of fossil fuels. Now we might introduce some sensible complexity into that taxation regime like taxing coal, oil, gas, etc quantity wise on the basis of the most efficient amount of energy per Kg of CO2 produced for each type. ie say in the most efficient burning process for each. Hence we produce a scale of taxation based on their dreaded CO2 output, which is levied per Kg or Litre as it is mined or extracted. That’s simply it. We’ve all agreed upon the overall level of taxation we need to raise to support the level of Govt transfers and services we want(no going off on other tangents here)and now its carbon taxes only to do that. I put it to you that this constitutional marketplace would achieve the solution to GW faster than any other one you can think of, and at the same time allow the free market to work and avoid the ever present threat of bureacratic tyranny.
The question is- right now, do you believe such a drastic change in ‘our’ constitional marketplace is necessary and what would be the broad pluses and minuses of this particular constitution over our present one? In other words what outcomes could we expect and why would some of these be better or worse than what we have at present?
I’ll kick it off. I think this would be a huge shift in the labour/capital share as taxing fossil fuels taxes the life blood of capital and not labour. That would effectively raise the returns to physical labour in particular, a problem which some of our most uneducated face at present. Unemployment would be negligible IMO, because these people are overrepresented there. So it should promote equality and banish the obesity epidemic eh?
Imagine, just that marketplace eh? Use fossil fuels by flying in jets, running the pool pump, the dishwasher, the aircon, the big SUV and the govt has a drip straight into the jugular(to be used for appropriate redistributive govt spending naturally) You get your gross pay/return/profit in your hand, with no income or company tax (bye bye 10000 pages of the income tax act and all those ATO staff, not to mention the legal/accounting industry that’s built up around it). No tax distorting, deductible incentives for the Sanitariums, or the Churches, Synagogues or Mosques or their non secular schools. No incentives to borrow and negative gear housing at the expense of first home buyers. No need to tell them what to build, and what sort of water heaters or light globes to use in them or what sort of SUVs to park in the driveway eh? What’s wrong with any of that eh luvvies?
observa: “that would effectively raise the returns to physical labour in particular…”
Interesting proposal. Amongst other things, just think what it would do for the rickshaw industry.
observa, I apologise if I misinterpreted your first comment.
I can see your point here, but I disagree with it for two major reasons.
Firstly, if you abandon all taxation and replace it with carbon taxation, the rich will have a heck of a lot more money in their pockets. This is likely to lead to greater spending on consumption, travel, etc, even if those activities are more expensive. Unless your carbon tax is stupendously high, pricing most of humanity out of even the most basic commodities, it’s not going to have the impact you suggest. Without doing the calculations, I would be surprised if it didn’t in fact lead to an increase in emissions as those in the OECD, and the richer people in India and China, spend more on polluting activities.
Secondly, to take you back to your point about accepting that climate change is the most pressing issue we face, my belief is that we must therefore promote solutions that are radical enough to deal with it but not so radical that they make the majority of people throw us out with the bathwater.
Your proposal, imho, is of exactly the kind that will cause people to switch off, deciding that we’re all a bunch of loons who are using the climate campaign to further our own radical political agendas.
On the other hand, proposing:
- a modest carbon tax, with the funds hypothecated to energy efficiency upgrades and renewables R&D&C;
- a feed-in law for renewables;
- an immediate moratorium on new coal infrastructure or upgrades of any kind;
- a transfer of subsidies from fossil fuels to renewables; and
- a major investment in public transport
can be seen as legitimate policy proposals that can, over the course of a couple of decades, transform our economy from high carbon to close to zero carbon.
To get a bit closer to the point again, this is also why I disagree with Robert’s belief that a carbon tax is all we need – no other policies are necessary. I believe that, to have a real impact on emissions, the tax would have to be so high that it would both price many people out of the market and be politically unatainable.
Well you never know, we might see the odd rickshaw on our streets, certainly among the burgeoning bicycles and small scooters, step thru motorcycles, mini electric cars and the like, not to mention the huge swing to public transport. Nevertheless if we are supposed to reduce fossil fuel use to 40% 0f 1990 levels, it’s quite clear more human physical exertion is on the agenda. Would it take us back to garbos manually lifting the bins again, or manual street sweepers (I remember that) who knows, but manual labour would be in huge demand again no doubt.
However the exercise is to imagine what such a constitutional marketplace might look like and is it the best you can think of to solve many of the problems you foresee at hand. When you begin to do that seriously, I suspect you’re about to tread the logical path I have journeyed over. Or are you all completely comfortable that I’ve outlined already the constitutional marketplace that does that? ie THE solution is all about GW, GW and nothing but GW.
observa, I’d point you to another post I’ve just been perusing with great amusement: http://larvatusprodeo.net/2007/03/31/petard-watch/
You’re creating a lovely straw dragon here, so to speak.
No-one except you is promoting a solution that is “all about GW, GW and nothing but GW.”
Seems to me that big problems are more often fixed by whittling them down into sets of solveable small ones, rather than trying to institute the Giant Sea Change.
For instance — what are the stats on GHGs generated by mammoth industrial use, as opposed to by personal use?
If someone has made a scientifically valid calculation target of 30% reduction over 30 years, then presumably it’s possible to know what, roughly, the actual numerical tonnage targets would be. Then, maybe you go…
Adaptation to solar panels: 3 percent reduction.
Increased personal fuel efficiency: 4 percent.
Increased industrial efficiency: 4 percent.
Reduction in rice farming, cattle farming, and human population increase: 3 per cent.
Increased forestation: 3 per cent.
Zoning and tax regulations to reward those who make extra-large reductions: 5 per cent.
And so on.
True about the straw dragon, it’s all about GW tim, but bear with me and perhaps we can slay it bit by bit as jpz suggests.
Well not exactly bit by bit, but inexorably, every second of every hour of every day and that’s what market forces do better than any bureaucratic quantity controls. History screams at us that the latter is a sure fire recipe for tyranny, which is why it will be resisted fiercely.
The carbon tax only marketplace I sketched had some obvious attractions, particularly if you believe Al Gore’s dire warning. However it doesn’t take much to see a couple of real flaws in it. Picking on only carbon to tax is probably too drastic and hence we would need to tax resource use more generally too. The rickshaw comment is also pertinent here, implying a substantial drop in living standards, if we are to reduce fossil fuel use so dramatically. It’s what largely separates us from the third world now. Whilst carbon taxing would certainly soak the rich lifestyle more, it most likely wouldn’t be enough to redress a steep fall in material wefare generally. More so as we moved to more general resource taxing. Nevertheless there are some huge pluses in abandoning income tax completely and substituting for carbon taxing, as well as resources. Would you agree?
I disagree that fossil fuels are what set us aside from third world countries. It’s not the fuels themselves, but the energy they provide. The reason we are rich now and they are poor has a lot to do with the productivity increases that came with mechanisation in the industrial revolution. It is purely an accident of history that it was coal that powered the revolution. Now we can go beyond coal and improve welfare and living standards while drastically reducing our use of fossil fuels.
Sure, we’ll have to do some things differently. I reckon we’ll have to use public transport, walk or cycle a fair bit more, but I do that already and find it has dramatically improved my lifestyle to walk to and from work instead of cramming myself into a car or bus. We’ll probably also have to do a lot less flying. But that’s not necessarily a huge impact on living standards. It’s inconvenient, sure, but not that important. I imagine we’ll also have to eat less meat. Again, a lifestyle choice that may make some people unhappy, but is not the end of the world.
Anyway, all up, it’s simply not the case that we have to go back to the dark ages in order to stop using fossil fuels and stop climate change. I have every confidence that if we decide to do it, we can reach 30% cuts by 2020, or even more, and close to 100% cuts in a country like Australia by 2050, and see an increase in productivity, an increase in gross national happiness, create more jobs, and generally improve our economic position.
I just don’t think that your suggestion is necessary. It certainly raises an interesting philosophical point – if we were to start creating a new market system from scratch, what might it look like. Maybe there’s the place for that in a separate post here? Anyone?
“I disagree that fossil fuels are what set us aside from third world countries. It’s not the fuels themselves, but the energy they provide.”
I certainly meant that by implication tim. To what extent reducing fossil fuel use(down to 40% of 1990 levels)will impact material wellbeing is certainly a moot point, but that energy is the great facilitator of the MDC lifestyle, along with the technology and socioeconomic system that has grown up around it. To turn that Titanic around is what I’m talking about at a very macro level here. As you say “It certainly raises an interesting philosophical point – if we were to start creating a new market system from scratch, what might it look like.”
We have to do that and now. That is not what is happening if you listen to our national political debate at present. It’s still all about light bulb, solar panel subsidy, Kyoto, planting trees skirting around the edges. What has any of it achieved so far?
Now I could have asked the following question of any group of people say 10 years ago before the current GW alarm- ‘Essentially do you think that if all the countries of the world were as successful at utilising their natural resources as we are now, for their material well being, our world would be a better place?’ The answer was always the same or a very uncomfortable shuffling and a change of subject. As I said before, the new GW evangelism does nothing to address that, simply because the embracers are going off on tangents. Get the constitution of the marketplace right, ie get them by the market ghoulies and their hearts and minds will follow. The rest is delusional, feel good, pledge signing and moral badge wearing. Feel good stuff for emotional kiddies, rather than rational adults. We have known about the overall problem, since it dawned upon us when men kicked the moon and we glanced back at spaceship earth with them then and subsequently as our satellites and computers collected the increasing evidence. What we have not done is address the problem in any sensible, systematic and rational way. To do that you have to look at the constitution of our marketplace. If you do that properly it’s not hard to devise one which sees as much, if not more incentive to invest in a John Walmsley sanctuary, as it is in rows of Tuscan boxes. The ‘free’ market can easily do that. In fact it can negate the need for Govts to be involved in protecting the environment whatsoever. I also believe that if you build a better mousetrap (constitutional marketplace) the world will beat a path to your door(emulate). It’s time a country like Australia did that and showed them the way. If not us who then? Zimbabwe??
Tim, it’s an interesting question as to whether market capitalism is compatible with the required cuts in greenhouse – this article (sent around by another member of Teh Hivemind) discusses it in some detail.
I tend towards the view that while capitalism is hardly the be-all and end-all of human existence, I don’t think that mitigation of global warming demands the wholesale abandonment of it. If I have time I might turn it into a post.
Tim, clearly, a carbon tax won’t be the only governmental response. Public transport is a government responsibility, so governments will have to respond to increased demand. Planning is also a government responsibility. The government is a not insubstantial energy consumer on its own. And so on.
As to the cost, what you seem to not be grasping is that the cost of changing to low-carbon technologies will have to be paid, one way or the other, and eventually it will be worn by individuals. It’s a question of whether the government decides how to do it, or individuals and companies decide as a group how to do it.
While the market doesn’t always beat centralized government decision-making, it does tend to more often than not.
Just listen to tim staing the obvious here-
“Sure, we’ll have to do some things differently. I reckon we’ll have to use public transport, walk or cycle a fair bit more, but I do that already and find it has dramatically improved my lifestyle to walk to and from work instead of cramming myself into a car or bus. We’ll probably also have to do a lot less flying.”
Fine but how on earth are you going to get us all to do that? Start passing laws about how many kilometres each person can drive per day? You know issue them with carbon credit cards(like the Brit Environment minister suggested?) and when they’ve run out they walk or hitch or something? How on earth are you going to bureaucratically control what, how and for whom in the brave new quantity control world and still keep our sanity let alone some semblance of freedom? Simply by sitting down quietly and redesigning the Rawlsian constitutional marketplace we have from first principles and then going for it. Anything else is an exercise in noble futility like Chavez’ Venezuela. Besides he’s funding that with fossil fuel for chrissakes.
Actually it’s not just designing from first principles, it’s also from a wealth of history and experience.
“Firstly, if you abandon all taxation and replace it with carbon taxation, the rich will have a heck of a lot more money in their pockets.”
True and I’d also suggest still the same fossil fuel endowed wealth they have now. So what if the tradeoff for abandoning income tax and all its monumental vagaries was an annual nett wealth tax to cover that? Forget trying to equalise things up by trying to pin down the income earning unit(company, partnership, trust, individual,etc) and then aiming for some equity in the rates. Have a wealth threshold and then tax wealth on a sliding scale above that. Essentially deem a rate of return, like the pension assets test and the wealthy have to pay accordingly (I’ve got a very important exemption for that particular liability later)
Forget about any transition problems for now and concentrate on the big picture of our ideal Rawlsian marketplace for a moment. Besides agreement on even piffly Kyoto is no snack either. Focus, focus, focus…
observa, isn’t the choice that we become self-limiting, not because it costs us more, but because we think it is the right thing to do in order to sustain a liveable planet, OR we find a techno-fix so that energy is created without emitting carbon.
Broadly speaking, that is.
If you are against quantity limits, do you think it’s OK for some households in Bribane to be using up to 37,000 litres of water per day inspite of level 4 restrictions without penalty.
“isn’t the choice that we become self-limiting, not because it costs us more, but because we think it is the right thing to do in order to sustain a liveable planet,”
Presumably then Brian we can leave it all up to individual altruism and self control, perhaps with a bit of moral nagging thrown in for good measure. How’re we doing?
As for your water problem in Brisbane all I can say again is how are the quantity controls doing, in the absence of scarcity pricing? OK, say you want to intervene with ‘reasonable’ quantity controls. Now suppose in my neighbourhood we’re all green thumbs who like to grow fruit, veges and flowers altruistically for our far flung relatives neighbours and friends. Then there are the market gardeners who want to do it for a living/profit. How do you propose to ration out the water bureaucratically between us all Brian? Would limiting use per meter do that efficiently and fairly? In Adelaide we have a shortage not because we can’t pay, but because someone allocated the upstream Murray Darling water to rice and cotton growers. Now the problem is, as Robert has so succinctly warned about GG caps, our govts can scarcely afford to buy them back for city use or environmental flows. So much for quantity caps/rationing and how did the Soviets do eh?
Concentrate here. We haven’t said we’re going to scrap social security/transfer payments or govt public spending to equalise outcomes. We’re focussing on how best to raise that income in a socially/environmentally sensible way, that impacts the truer social costs, where at the moment the private costs are not reflecting that. Also to help us all change our behaviour less obtrusively.
observa, I guess what it comes down to is that I agree in principle it would be excellent to redesign the marketplace substantially. I wish I had the expertise to work out what a better one might really look like. However, I return to my point that what you are talking about is a very very long term strategic shift in the way our society operates and what i think we agree we are facing is a very short term need to radically cut emissions. I just don’t think those two mesh.
THe point that I think you and some others are making is that climate change presents us with a once in a century opportunity to make massive changes to our society and governance. That may well be the case. But can we achieve those changes in short enough order to stop runaway climate change? I doubt it.
further to that, I again make the point that hopefully Robert will post to that effect and we can have that debate in that context. I think we’ve gotten off the topic of this post.
Robert, I totally grasp that the cost will be born by someone, and inevitably that someone will be all of us as consumers and/or taxpayers. The point I am making is that, as with many such changes, there will be very substantial economic upsides, as well. This is what so many people forget – and have done since Nordhaus did his original economic modelling over a decade ago. Let’s talk about the economic impacts of shutting down coal, but totally ignore any economic benefits of efficiency, investment in RE manufacturing, etc. I’m not saying you’re doing that, but I don’t think most people have truly grasped that fact.
I think of it like PJK’s recession we had to have
There’ll be massive changes which will undoubtedly make some people (maybe even most people) unhappy for a while. But in the end, everyone will come to realise that it bought us all a better world.
I reckon the biggest problem with Keating’s reforms is that he failed to seel their upsides effectively because he assumed everyone understood them. We can do it better than that. Proper Just Transitions processes, bringing the benefits to the areas most impacted, etc.
Observa, I’m just looking at Brisbane water as an interesting parallel.
We are facing very precise regulations under Level 5 where for example you can clean your car windows and mirrors, but you can’t wipe the bird shit off the duco. This is seen to be unreasonable and will probably change.
The Water Commission has been monitoring usage and they’ve found peole in general are co-operating and trying to do the right thing. Household usage has reduced substantially but has to go further to 140 litres per person per day, inside and outside of the house. I think we are around 180 litres pppd now. This compares with 205 litres inside plus 205 litres outside pppd before restrictions.
So they are using incentives, publicity, appeals for cooperation, but backed by regulations and penalties.
They’ve found that 100,000 households or about 10% are apparently not cooperating and some of these are using tens of thousands of liters per day. The plan is to write to them with a please explain and then have some dialogue where there extenuating circumstances are assessed. That ends with bureaucrats making judgements and if the reasons are found wanting and the behaviour doesn’t change there will be penalties and even water being physically rationed.
There is an advantage with water in that it is a monopoly resource that can be limited on the supply side. But water is cheap. A guy on acerage can buy 13,000 litres for $100. He’s not on town water, the dam is nearly dry. Maybe he’ll buy 130,000L of Brisbane drinking water and water his lawn.
Controlling carbon is clearly more difficult.
But someone pointed out that self-monitoring would be easier if we knew the carbon content of everything we buy and use, and had a meter on our kitchen wall that told us how we were doing day by day in electricity and gas usage.
Interesting article from Gittins which may inform debate:
http://www.theage.com.au/news/business/carbon-trading-is-still-the-best-lever-despite-tax-fans/2007/03/30/1174761754882.html
Sorry, hit play before I was quite ready, so to speak.
I intended to point out that Gittins makes 2 key points – firstly that the difference between carbon taxation and carbon trading is that taxation puts determination of price above determination of end result, while trading does the opposite. Secondly that taxes are unpopular, therefore trading is where it’s at politically.
This latter, I believe, is why McKibbin calls his scheme emissions trading when anyone who cares to look can see it’s actually a tax…
Gittins nails the difference as “In principle, it should be much of a muchness. In practice, it depends on which worries you more: getting the price wrong or getting the quantity wrong.”
What he fails to take into account is that you can get the price and the quantity wrong by attempting the cap method as selling water rights to the Murray Darling has shown. Then as Robert points out the Govt can’t afford to buy its way out of the mess. Fair enough to set a global carbon cap based on todays use and say reduce it by 2%/year.(like some capital reducing bond) In other words you auction off so many current tonnes of CO2 emissions, the purchaser knowing full well that each tonne today will be reducing in quantity each year to 2050 by say 2% until the 60% reduction target is reached. Is that what’s being proposed with emission permits for trade, because if it is I know what I’d be doing with my money. Buying into that scarcity right now. That’s the true way a cap and trade has to apply here. You have to play God right now and globally set the target and if you did, immediately wear the costs of that carbon auction being passed on to consumer electorates. Every super Company and managed fund and every investor would want a slice of the one way action right now. The world would hock itself to pay for the new God given, annually decreasing rights.
That’s not what’s being proposed at all, as far as I can tell and on top of that what profits us to save the world from GW, only to chop it all up for Tuscan boxes?
Then there is the problem of actually policing the emissions rights as has been pointed out with water quantity controls. If we’d allowed resource taxing to increase the price of water, as the drought progressed, we wouldn’t be where we are now, just like price sorted out the banana scarcity.
I haven’t read a lot about emissions trading, but that is how I’ve imagined it should work. Except that you wouldn’t need to reduce it by say 2% over 30 years to reach 60% for two reasons. Firstly, as emissions became scarcer the price could go up more than the percentage reduction.
Secondly, at some point non-emitting sources of energy become competitive. Once they do their competitiveness increases even more because of scale and the R&D they would then attract.
But yes the consumer ultimately pays. But we’ve got to do it because we’ve got to do it, not just if we can afford it.
But in a democracy if the process does cause pain and limitations on life-style we’ll only do it if we see the need. Melting ice-sheets, droughts, floods and sea level rises might make the need obvious, but later than optimal as a trigger or threat. Which brings us back to individual wants vs the common interest.
“..that is how I’ve imagined it should work. Except that you wouldn’t need to reduce it by say 2% over 30 years to reach 60% for two reasons….”
Logically you would have to have the total pre-determined decrease in the initial permits to be auctioned Brian. If govts could change the issue rules by whim, they’d only get away with it once. Your points about increased pricing causing alternatives takeup are valid, but surely that would be taken into account by buyers at the auction and hence the initial price(allowing for their imperfect knowledge here). Now the question arises as to how much they would discount the initial price they are prepared to pay, for the likely impact on long term price you mention. Would it be swamped in their reckoning, by the thought of population increase and historically increasing per capita demand over such a long period? I’d punt that way pesonally myself and anticipate massive capital gain. Such a global auction would be the main game in town, particularly for China flush with cash. Policing these (declining)emissions quotas aside for one moment, just what happens to a world based on such warrants if halfway through their life it’s realised GG emissions are not the real culprit? The effects you point out are a good case for upfront carbon taxes, albeit with honesty to the public and some tax relief elsewhere. (What about ditching income tax I hear you say?)
I’m still convinced that Robert’s caution is valid here and the real answer lies in the overall constitution of the marketplace. I reckon I have a pretty good one in mind too.