Sorry, Kyoto Signatories, Emissions Traders, Carbon Taxers, Homo Oeconomicus Won’t Save the Climate – Part 3

By Michael Hoexter

[Part I] [Part II] [Part III] [Part IV]

7.  Outline of An Actually-Effective Climate Policy

Actually-effective climate policy, which might be called a comprehensive climate and energy policy, then has the following components:

1)    National Carbon Mitigation Plan:  National carbon mitigation plans (reduce emissions of greenhouse gas emissions to zero or below) commissioned by individual governments that outline the high-level designs of a zero-net-carbon infrastructure for projected 2050 energy and transportation demand in a particular nation.  Such plans should assume no technological breakthroughs but deployment of existing technologies or foreseeable successor generations of these technologies.  For each nation these plans will look quite different depending on existing infrastructure, natural resources, cultural preferences, and geography.  The plan will include targets for carbon mitigation via land use changes and energy conservation.  Such climate plans should include alternative technological and land-use scenarios which would also estimate the carbon emissions required to build those various scenarios.  A scenario with the highest likelihood of success (defined below) would be chosen first with regular check-points built-in for progress as well as preparation for fall-back scenarios in case of bottlenecks closing down paths and new developments opening up new paths.  Such a plan will need to be built around durable social values, ensuring its resilience to both natural and man-made challenges and changes.  In-built into planning would be a “no-regrets” policy, if in the face of well-tested innovations, substantial changes will yield a better social and environmental outcome.  However, implementation of the plan cannot be shelved or delayed on the basis of speculative claims of improved outcomes by pursuing new and untried innovative technologies.

2)    National Carbon Budget: The effectiveness of the plan will be measured according to achieving milestones that are successively smaller “tranches” of a national carbon emissions budget that in total are harmonized with international carbon budget goals.  The current (generous) budget of the UN’s IPCC is that we as a species will need to emit less than 469 gigatonnes of carbon dioxide equivalent (“equivalent” means accounting for other greenhouse gas emissions including methane in the budget) to remain below 2 degrees Celsius (ca. 3 degrees Fahrenheit) warming.  Keeping warming at lower levels and remaining substantially below budget is preferable.  Via a political process this number would need to be divided between nations ideally based on population, but realistically including, current emissions intensity (and therefore the distance to zero net emissions), assuming the latter means that this emissions intensity is paired with current economic benefits.  The degree to which current emissions by one economic sector or another are being used to produce goods and infrastructure that will cut emissions in the future has not been widely discussed but must be taken into consideration in developing this climate policy (i.e. “embedding” or transforming of carbon emissions in durable infrastructure on the path to achieve zero-emissions).

3)    Yearly Carbon Budgets: The rate at which those annual tranches of allowable emissions decrease year upon year will depend on the degree to which:

  1. Emissions-intensive investments in infrastructure are concentrated earlier or later in the plan
  2. The timing and size of such emissions investments “balance out” with reduced emissions in subsequent years.
  3. The degree to which technical innovation can be anticipated in the future that will reduce the emissions-intensitivity of the use of concrete and steel.
  4. The degree to which conservation and even geoengineering processes can reduce carbon in the air, buying time for reconstruction or enabling deeper earlier cuts

4)    Coordination of International Efforts to Address the Global Climate Crisis:  My proposal/projection is that nations must craft their own individual carbon mitigation and adaptation plans but nevertheless, at some point in the process, coordinate or harmonize with other nations to create effective international agreements under the auspices of the UN.  As proposed below in “Policy Drivers”, this international coordination will at first be an uncoordinated “bottom up” movement of those nations that are most concerned or effected by the climate crisis imposing carbon tariffs on imported goods.  Eventually such unilateral actions will spur a process where effective multilateral deals can be formed that do not compromise the efforts in individual nations to create the necessary zero net-carbon emitting society that is required for limiting damage to the ecosphere upon which all nations depend..

5)    Climate Adaptation Plan: Alongside a climate mitigation plan, given the trajectory of warming and expectable climate effects, a climate adaptation plan will need to be put in place that prioritizes which investments are needed to address the oncoming effects of climate change without endangering the massive effort to address the root cause of those changes, i.e. mounting emissions and greenhouse gas concentrations.   Adaptation includes responses to sea-level rise, species extinctions, drought, flooding, weather-related disasters, and water shortages.  As monetarily sovereign governments are not constrained by financial concerns but are constrained by real limits in natural, human, and existing cultural-material resources, the balance of adaptation vs. mitigation (the higher priority) will revolve around how to find as many synergies as possible in a combined effort to protect people now and to protect them from future disasters.  One promising area, perhaps exceptional, is the potential of offshore windfarms to reduce the intensity of storms while producing zero-emissions electrical power.  Beyond these, some painful and unpopular tradeoffs will probably be necessary, devoting resources preferentially towards ultimate causes.

6)    Geo-engineering Research and Technology Evaluation: Further consideration and research into “geo-engineering” plans and technologies as a subordinate to, not a substitute for, reduction of emissions and leaving fossil fuels in the ground.  Geo-engineering is generally defined as a proposed technological process that is meant to directly cool the earth or directly remove carbon from the air.  Some types of geoengineering, like increasing the reflectivity of manmade surfaces like roadways and roofs are considered uncontroversial.  More controversial types of geo-engineering, such as “air capture”, encouraging plankton growth, or “cloud brightening” have been treated by some as an implied “license to emit carbon” which would never justify its development or use.  However, any effective climate plan is also an effort at “geo-engineering” in the broad sense of asserting human control over the concentration of human-emitted greenhouse gases in the atmosphere and global temperatures.  The side-effects of geo-engineering schemes will need to be reviewed as a means to buy time for building a zero-emissions society, a process that itself involves emissions.  Considered outside of a massive effort to cut carbon emissions, geoengineering processes with foreseeable but unintended disruptive potential for ecosystem functioning or those that divert substantial real resources from mitigation efforts are unacceptable, unethical and potentially criminal.

7)    Voluntary Energy Conservation: Promotion of voluntary energy conservation efforts within government and the private sector (households and businesses) through a combination of moral appeals, social recognition, building of enabling infrastructure and institutions (low or zero-emissions public transportation, bicycle and walking facilities, urban and suburban densification, telecommunications and telepresence facilities, ride sharing and carpooling) and incentives.

8)    Revision of Social Contract: Restructuring the social “deal” between government and the population to cushion ordinary people from the effects of the transition period to a zero-net carbon emitting society.  The hardships of the transitional period may involve reduced access to or higher costs of conveniences, emissions-intensive pastimes, planned or unforeseen shrinkage of some economic sectors, and a planned “degrowth” of emissions-intensive sectors of the economy or perhaps the entire economy in GDP terms.  The “deal’ would include guaranteed access to jobs at a living wage via mandated “job guarantee”, guaranteed access to job retraining and continuing education for new job roles, guaranteed health care, and increased Social Security payments/public pensions for retirees.   Additionally, targeted subsidy and infrastructure building programs will focus on stabilizing prices for food and water supplies and, as part of the main carbon mitigation efforts, energy costs per household via efficiency retrofits and conservation efforts.  Reviving or constructing new local cultural institutions, downtowns, and community centers will help people re-develop local culture and reduce the demand for long distance travel for entertainment.

9)    Carbon Mitigation Policy Drivers:  Surveying the requirements in the national climate plan, policy drivers will be put into place to implement the plan (this is the reverse of carbon pricing/emissions trading advocates who allow the policy driver to dictate the shape of the future society).  Deciding on the general type of policy drivers required will involve some a priori decisions based on a reality-based assessment of which goods and services will be best provided or funded by government, those that will be delivered and/or funded by the private sector, and those that are some mixture of the two. The notion that one would consider equally the delivery of goods and services by the public sector contradicts the current neoliberal orthodoxy which has lamed existing climate policy proposals. In the case of the US, the provision of key pieces of electrical transmission infrastructure (a supergrid to enable exploitation of onshore and offshore wind and solar resources) and electrified rail infrastructure as well as urban infrastructure for denser and climate-resistant development would be key components of government’s responsibilities.  The decisions in this area will necessarily be the result of a political process but ultimately economic constraints will necessarily intervene: the household sector will not have the means to pay the corporate sector to build these massive projects via use fees and some must be provided by governments’ ability to spend on deficit.  Likely policy components include:

  1. A $100/metric tonne carbon dioxide equivalent carbon tax/fee, ascending on a yearly basis by $10/metric tonne levied on all fossil fuels according to their carbon content with a fixed per-person rebate (“dividend”)  to counteract its regressivity (differential impact on those with lower incomes) and provide an income supplement for those who use less carbon-intensive goods and services.  A carbon tax or fee on livestock emissions will start at $20/metric tonne carbon dioxide equivalent and ascend at an equal rate.
  2. Harmonized carbon tariffs imposed on imported goods for which no equivalent level of carbon tax or price has been levied in their country of origin.  Such tariffs may be adjusted by an exporting nation’s level of development, so as to allow for greater “permissiveness to emit” for less developed countries.  Ultimately such an approach may lead to the step-wise development of an international carbon “deal” and internationally harmonized carbon tariffs, though building from the individual initiatives of nations most committed to climate action.
  3. Government planning and funding of key pieces of zero-net-carbon infrastructure, including electrified railway build-out, high-voltage transmission networks for renewable energy.  The assignment of these projects to the public sector have to do with providing consumers and businesses with lower use fees for the electrical and transport services than would otherwise need to be imposed by private sector actors who would have to recover the financial costs of building the infrastructure plus profit.
  4. Federal government subsidies of regional and local public transit capital infrastructure projects for electric-drive vehicles (battery electric bus, light-rail) as well as operational subsidies to increase frequency of public transit, which would decrease as the ratio of costs from fare-box revenues increases with higher utilization.
  5. Feed-in-tariffs which guarantee cost recovery plus a reasonable profit for household, cooperative, and business investments in renewable energy electric generators.  Feed-in-tariffs are paid for via a surcharge on the rate-base, which while raising the price of electricity per kilowatt-hour, encourage energy efficiency and conservation (i.e. using less kilowatt-hours).
  6. Incentives for non-carbon energy storage and direct use of renewably generated electricity on site (reducing demand for fossil energy from the grid).
  7. Investment tax credits for the building of new or retrofitting existing buildings to the Passivhaus (passive house) standard to reduce building energy use by 50-80% depending on climate zone and building use.
  8. Investment tax credits for appropriate use of renewable materials like wood in construction and durable goods to reduce use of high emissions materials like steel and concrete and fix carbon via sustainable regrowth of forests or plant matter.
  9. Revision of zoning codes to encourage urban and suburban density and transit oriented development.  Federal government subsidies for local governments to build public amenities in transit-accessible “central places”.
  10. A government employment program that guarantees employment and a living wage for all those willing to work, deployed in part to tasks such as reforestation and assisting with energy retrofits where the private sector does not provide services or has inadequate resources to meet the demands of the national climate plan and the incentives it puts in place.
  11. Increase in government funding of research and development of zero-carbon energy generation, storage and efficient utilization/energy efficiency.
  12. Foundation and funding of a zero net-carbon agricultural prototype program.  Scope would include agricultural machines, transportation, breeds of plant, animal, cultivation and land management techniques. Subsequent build-out of necessary infrastructure to create zero net greenhouse gas emissions from agriculture.
  13. Funding a national, or joint funding of an international, program of testing of safer, proliferation-resistant nuclear fission reactor prototypes to generate electricity, especially those reactor designs that utilize nuclear waste for fuel.
  14. Continued funding of international efforts to develop a feasible fusion reactor.

10) Stepwise, Orderly Liquidation of Fossil Fuel Industries and Infrastructure:  An effective climate plan is and will continue to be with high probability a political-economic confrontation with the fossil fuel industries, even as they know and may wish for, a simple, low value carbon tax as a sop to climate action.  Rather than an “all of the above” energy policy, climate action necessitates a disfavoring of fossil fuels and a favoring of non-fossil alternatives.  Instead, depending on the nation involved, climate action means dismantling the political and economic might of the fossil fuel industries by isolating their political representatives, political influence campaigns and lobbyists as well as bringing to light their preparations to profit from fossil fuel use beyond the constraints of carbon budgets.   In countries that might qualify as petro-states, a category which includes incipiently the United States and Canada, this process will be more involved.

  1. Removal of All Fossil Fuel Subsidies – While the ideal of a free, unsubsidized market in the primary energy for society is a harmful economic fantasy, the continued subsidization of fossil fuel extraction and processing contradicts the highest ethical priorities we have as a society, including the limitation of damages to the climate system. As in this climate policy proposal we should subsidize what has positive knock-on effects and remove subsidies from and tax those economic activities that impose high costs on society and the environment.
  2. A 5% Surtax on Capital Gains from Fossil Fuel Investments– Trading of investments in fossil fuels will be disincentivized by a 5% additional tax on capital gains associated with sales of stocks in companies that are primarily involved in fossil fuel extraction, refining, transport and sales.
  3. New Fossil Fuel Transport, Processing and Delivery Infrastructure Ban – In the United States and elsewhere, various parts of the fossil fuel industries are expanding their infrastructure in the hope of extracting all of their fossil fuel reserves, including the more “difficult” raw materials that require more effort to remove from the ground as well as process.  An effective ban would halt this process.  If after such a ban, supplies of these fossil fuels were to become limited in a way that impairs the process of decarbonizing the economy, the ban could be partially lifted.  Such a ban makes sense in combination with immediate conservation measures that could cut demand for fossil fuels by 30% or more.  Such a ban would not cover the replacement of existing facilities to comply with safety regulations.
  4. Fossil Fuels Exploration Ban – As above, this ban would put a halt on activities like fracking or deep-water drilling but could be partially lifted if for some reason critical shortages developed.  An anticipated reduction in supply could be met as well by conservation measures and therefore makes the most sense in the context of a concerted national plan.
  5. Fossil Fuel Infrastructure Liquidation and Brownfield Remediation Plans – The fossil fuel industries are leaving and will leave large industrial facilities as well as large polluted areas in its wake, as their business is liquidated in an orderly manner over the next couple decades.  In one likely scenario, the industry will after the institution of a serious carbon policy be abandoned by investors and be unable to both funds it operations and remediate its environmental liabilities.  Government may have to nationalize, run, and eventually dismantle and remediate the rump industry as we make the transition to clean energy.  A requirement of continued operations in the beginning of an actually-effective carbon policy, would be the industry to create a two-decade long plan for the orderly winding down of its operations, facilities, and invest 10% of its remaining profits in research into remediating the damages of fossil fuel extraction, refining, and transportation.

11) Inflation Management and Currency-Stabilization Measures.  The implementation of these plans as well as sustaining other aspects of public sector functioning during the transition to a zero net-carbon emissions economy will require large increases in public spending by monetarily sovereign governments as well as those local, regional or national governments that do not control their own currencies (Euro-Zone countries are notably the latter).  While monetarily sovereign governments are not financially constrained by taxes collected, they face the potential of spurring inflation or currency devaluation by spending more than they tax under some economic conditions.  This deficit spending injects more effective demand into the economy for real goods and services that may or may not become relatively scarce.  Furthermore these plans involve increases in demand for building materials that may become then relatively supply-constrained in comparison to consumer goods or other components of most inflation measures.  If, in addition, goods and services are imported from other nations, for which in addition there may be supply constraints as demand rises for zero-carbon alternatives, the value of the importing country’s currency influences then the relative price of imported goods.  Inflation is not an across-the-board increase in prices but a constructed measure of “basket” of goods that in net decrease or increase in prices.  Therefore both currency-valuation and inflation can be addressed either by supply or demand side measures, specifying on either side a particular type of good or service.

  1. Raising top income bracket tax rates, capital gains, and inheritance taxes; introducing a 1% financial transactions tax – while these are usually argued for by the current generation of political progressives as ways to reduce the federal budget deficit or more realistically as a means to achieve greater social equality,  in the transition to a net zero carbon economy, the reduction of demand via taxation from top tax brackets will reduce certain aspects of inflationary pressure, including on capital goods like housing.  A financial transactions tax will remove some of the interest in speculative investments and also reduce higher incomes and disposable income among higher tax brackets.  In addition, raising these tax rates will increase demand for the green investment tax credits (in building and retrofitting buildings to a high energy efficiency standard) to direct private capital to socially productive uses.
  2. Building and Managing Infrastructure for Local Non-Monetary Economies and Conservation Efforts – Non-monetary economies exist alongside all existing monetary economies and at times of stress and transition they can buffer the effects of downturns or shrinkage in the monetary economy.   Most notably within households and in neighborhoods goods and services are created and delivered most often without monetary exchange.  If degrowth in the growth-dependent monetary economy is targeted, the non-monetary economy would need to grow substantially if living standards, measured in non-GDP terms, were to be maintained.  These economies also would if effective in satisfying the population’s needs and wishes reduce monetary demand for goods and services and therefore inflation pressures.  However contra the current idealization in both the technology and the green public spheres regarding the “sharing economy”, informal economies can also be a place of unregulated super-exploitation of the self, of family members, and the environment, sometimes even harboring slave labor.  Without encouraging utopian fantasies about life outside the “cash nexus”, providing infrastructure for cooperative ventures such as community gardens or community centers with cultural facilities will enable the non-monetary economy to develop but also abuses within the non-monetary economy to be more easily exposed and remediated.  Also evaluations of the actual climate impacts of the cooperative/non-cash economy would need to be made, in order to further support its growth as a climate solution.
  3. Taxation of Non-Critical Uses of Strategic Building and Manufacturing Materials – A tax on concrete and steel as applied to uses not directed at zero- or near-zero net carbon infrastructure or building would reduce demand for these materials and also drive construction activity towards critical infrastructure and building projects.
  4. Climate Protection Bond Program – Similar to the WWII war bonds program, a bond purchase program would enable a government guaranteed savings program for individuals that would absorb demand during the time in which government would be pumping demand into the economy and postponing that private sector demand to future years. There is no need for the fiction that this “finances” government spending but simply is a guaranteed tax-free savings program that helps the economy during a critical period.
  5. Subsidy of Infrastructure to Support Food Production and Fresh Water Delivery – Keeping food and water accessible during the transition period will be critically important for a number of reasons, including the impingement of the effects of a changing climate.  A new infrastructure will be required to maintain access to fresh water as well as creating food sheds that do not require fossil fuel inputs and minimal water.  Such infrastructure provided by government, while on the one hand would have a stimulatory effect on the economy but would be focused on reducing business or local/regional government costs to deliver food and water.
  6. Limitations on Private Lending/Currency Creation by the Private Banking System – It is increasingly being recognized by monetary authorities, including the Bank of England, that banks create money and temporary spikes in effective demand in boom times, by making loans to borrowers.  Those who advocate for a steady-state economy have proposed that endogenous money, the technical name for bank’s money creation, is incompatible with such an economy as these lending practices lead to economic growth that often does not add to social well-being and an out-of-control ecological footprint for society.  They and others have proposed 100% reserve banking (i.e. banks lending only as much as they have reserves) as a way to limit this practice, while then passing liquidity control in the economy fully to government fiscal policy and the central bank.   Despite inevitable political resistance, some limitations on private bank’s control of liquidity, be they 100% reserve banking or other methods,  are critically important for currency stability (inflation control and exchange rate control) during a time when we necessarily will have large scale injection of liquidity into the economy by government.

12) Non-GDP Measurement/Targeting of Socioeconomic Well-Being –  From a number of different perspectives, analysts are agreeing that economic target-setting via GDP growth is a key driver of the depletion of the resources of the earth, including of course the depletion of the buffering capacity of the atmosphere.  The call for planned “degrowth” is a one proposal to lessen impacts immediately though is not totally consistent with the project of transforming society in a durable manner, which would require differential growth and degrowth of different sectors for the transitional period.  In material terms, the only sustainable solution in the long run would be a steady-state economy, which would require, though, given the current planetary emergency in terms of global warming and rapid extinction of co-evolved species, a transformation of the energy and transport infrastructure and large changes in land-use and cultivation techniques in rapid order.  There are then two periods within which economic and social progress would need to be measured with I believe different instruments used for each period.  The measures used during the period of transition would anticipate the future steady-state society:

  1. Measurement and Targeting of Socioeconomic Well-Being During Transition Period –  Economic progress will be measured during the transitional period by meeting carbon budget goals combined with maintaining social welfare using either a single rating such as the Genuine Progress Indicator or a “dashboard” composite rating of social welfare that includes nutrition, health, mental well-being, and restoration/preservation of natural systems.  A measurement using a GDP-like indicator would look to maximize growth of sectors like renewable energy and energy efficiency while minimizing those sectors that block the move towards sustainability (fossil fuel industries and predatory lending)
  2. Measurement and Targeting of Socioeconomic Well-Being In Future Steady State Economy – indicators of social progress or welfare would look to remain within a range of acceptable values rather than maximize or minimize performance.

(You can access a complete PDF of this multipart series here.)

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