The Citizen’s Guide to Carbon Capping What you can do to climate change.

The Citizen’s Guide to Carbon Capping

What you can do to climate change

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“To stabilize the earth’s climate, global emissions would need to peak in the next 10 years and then fall at more than 5% a year, reaching 70% below current levels by 2050.”

— Sir Nicholas Stern Former chief economist, World Bank

I. What is carbon capping?

• Carbon capping is a market-based way for states to combat climate change.

What is carbon capping?

• The state ‘caps’ total CO2 emissions and issues that number of emission permits annually.

• The number declines from year to year until a safe level of emissions is reached.

• Companies must acquire permits in order to emit CO2 or bring carbon into the state.

• Carbon capping is a market-based way for a state to combat climate change.

• Companies must acquire permits in order to emit CO2 or bring carbon into the state.

• Companies can buy and sell permits.

• Assures predictable, deep, long-term emission reductions

Why carbon capping is better than carbon taxing

• Gets politicians off the hook for higher energy prices(market, not government, sets prices)

• If done right, protects household purchasing power

Five things you should know about carbon capping:

• Carbon capping is a form of rationing

• Carbon capping is a form of rationing• Capping carbon creates economic value

• Carbon capping is a form of rationing• Capping carbon creates economic

value• After carbon is capped, there are 3

ways to create a carbon market

ways to create a carbon market• Carbon in = carbon out

ways to create a carbon market• Carbon in = carbon out• The sky belongs to all of us

Carbon capping is a form of rationing.

• Everyone must use less, or buy someone else’s

World War II

• War-time rationing was temporary

World War II

• Because of global warming, carbon rationing must be

permanent

World War IIRATIONING GIVES YOU YOUR FAIR SHARE

Do with less –so they’ll havea planet!

A permanent rationing system must be

• Fair

• Transparent

• Fair

• Transparent

• Simple to administer

• Fair

• Transparent

• Simple to administer

• Durable

Carbon capping creates economic value.

• Without a cap, the value of carbon = 0.

• With a cap, the value of carbon > 0.

• Because of the law of scarcity, as the supply of carbon permits decreases, their economic value rises.

Less pollution = greater value.

• Because of the law of scarcity, as the supply of carbon permits decreases, their economic value rises.

• When valuable new property rights are created, who gets those rights is a political issue.

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Carbon in = carbon out

Think of a garden sprinkler.

Water in = water out

If you want to save water, what do you do?

Now consider how carbon flows through your state.

well or mine

pipeline tanker

into sky

If you want to reduce carbon flow, what do you do?

well or mine

pipeline tanker

into sky

If you want to reduce carbon flow, what do you do?

well or mine

pipeline tanker

into sky

Once carbon is capped, there are 3 ways to start a carbon

market:

• Polluter grandfathering

market:

• State auctioning

market:

• State auctioning

• Distributing shares to residents

Polluter grandfathering

• Emission permits are given free to historic polluters

• The more a corporation polluted in the past, the more free permits it gets year after year

• The receiving corporations can sell their permits or raise their prices to capture the value of the permits

• Result: windfall profits for historic polluters

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State auctioning

• Instead of giving away valuable permits for free, the state auctions them for whatever the market will

State auctioning

• Instead of giving away valuable permits for free, the state auctions them for whatever the market will

• The state uses the auction revenue for:- Rebates to consumers– Investment in new energy infrastructure– Other public goods

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Distributing carbon shares to residents

• The state distributes one carbon share to each resident

• Residents can- Redeem their share at any bank for cash– Hold on to their share for future redemption– Retire their share from the market forever

• Banks sell shares to carbon emitters or importers.*

* A carbon importer is any entity that brings carbon into the state.

The sky belongs to all of us.

• The earth’s atmosphere is a gift of creation

• The atmosphere performs many valuable services:• waste absorption• climate regulation• fresh water replenishment• UV protection

• If anything is a commons, it is the atmosphere(we all breathe the same air)

• If the atmosphere has economic value, that value belongs to everyone.

II. After carbon is capped, what then?

Polluter State Distribute

Grandfathering Auction Shares

Which way is best?

After carbon is capped, what then?

Polluter Grandfathering

• There is no public benefit from polluter grandfathering.

• The economic value of the atmosphere is entirely captured by shareholders of polluting corporations.

• Polluters’ windfalls would be so large (and they’d rise as the cap declines) that public support for carbon rationing would collapse.

State Auctioning

• The government auctions oil rights. Why shouldn’t it auction sky rights?

State Auctioning

• Auctioning avoids windfalls for polluters.

State Auctioning

• Auctioning avoids lobbying for preferential treatment. Every carbon emitter is treated equally.

State Auctioning

• With auction revenue, the state can invest in new energy infrastructure.

State Auctioning

• With auction revenue, the state can invest in new energy infrastructure.

• With auction revenue, the state can return money to consumers (who will pay higher energy prices).

Distributing Carbon Shares

• Government is a creation of the people. The people’s right to the sky therefore precedes the government’s.

• By redeeming carbon shares for cash, households can offset higher energy prices. This protects the state’s economy against a loss of purchasing power.

• Carbon conservers come out ahead, while carbon guzzlers pay more. Good behavior is thereby rewarded.

• Because carbon shares will rise in value as the cap declines, carbon rationing will be politically sustainable.

• Residents can retire shares from the market, speeding the reduction of CO2 emissions.

III. Lessons from Europe

Lessons from Europe

To meet its Kyoto Protocol commitments,

the European Union capped carbon emissions

and set up an emission trading system.

BUT…

The European emission trading system:

• Grandfathered permits to polluters

• Covers less than half the carbon in the economy

• Does nothing to protect consumers

• Has high administrative costs

• And caps that are too high

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Gas Bill

For German Firms, New Emissions Caps Roil Landscape

_______

To Prepare for Kyoto Protocol, EU Embarks on Road Test; Industry Responds Slowly

The Price of Electricity Jumps ____

Carbon dioxide also is padding the

profits of RWE and other utilities, be-cause they have been able to raise elec-tricity rates to more than cover the new costs. Manufacturers that use a lot of juice are fuming. “The utilities get a huge amount of windfall profits, and the energy users get windfall costs,” com-plains Markus Weber, a manager respon-sible for CO2-allowance trading at steel-maker ThyssenKrupp AG. Germany’s experience with Europe’s new emission constraints holds impor-tant lessons for countries that want to curb emissions of CO2, a product of fossil fuel combustion that contributes to glo-bal warming. In Germany, the caps are starting to

‘The utilities get windfall profits, energy users get windfall costs.’

— Wall Street Journal, 9/11/06

£1bn windfall from carbon tradingRoger Harrabin BBC News environment correspondent

Power firms could make a £1bn windfall profit from the EU Carbon Emissions Trading Scheme

The windfall is likely because many firms have benefited from increases in electricity prices brought about by the scheme without needing to make any extra investment in return.

Conservative environment spokesman Peter Ainsworth said: "The problem will not be sorted out until the market is made to work properly by forcing firms to bid for their permits instead of being allowed to lobby government for them free of charge.”

IV. California Carbon Share

A carbon capping system that’s fair, simple and durable

How It Would Work

• Air Resources Board sets long-term carbon budget

How It Would Work

• Each year, it issues budgeted number of carbon shares to state residents over 18

How It Would Work

• Residents take shares to banks and receive cash

How It Would Work

• Banks sell shares in carbon market

How It Would Work

• Carbon importers purchase shares to cover their imports

How It Would Work

• Carbon importers purchase shares to cover their imports

• Climate Registry verifies importers’ reports

Advantages

• Covers all carbon entering the state

Advantages

• Offsets higher energy prices residents will pay

Advantages

• Avoids windfall profits to polluters

Advantages

• Market-based and simple to administer

Advantages

• Makes it politically possible to reduce carbon emissions to the level required for climate stability

Advantages

• Makes it politically possible to reduce carbon emissions to the level required for climate stability

• Allows residents to donate shares to non-profits that retire them permanently

Can the state distribute less than 100% of the shares to residents?

Frequently asked question

Can the state distribute less than 100% of the shares to residents?

The state may withhold a portion of the shares and auction them directly into the carbon market, using the revenue for clean energy, mass transit, bike paths and other public goods.

Frequently asked question

For more information

• CALIFORNIAwww.carbonshare.ca.org

• NEW YORKwww.carbonshare.ny.org

• MASSACHUSETTSwww.carbonshare.ma.org

• MINNESOTAwww.carbonshare.mn.org

• OREGONwww.carbonshare.or.org

• VERMONTwww.carbonshare.vt.org

Stopping climate change one state at a time.

Sites listed do not exist.

The Citizen’s Guide to Carbon Capping What you can do to climate change.

carbon capping

carbon market carbon

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carbon taxing slide

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form of rationing slide

economic value slide

number of emission

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