Earth on fire from climate change

There are warning signs in relation to popular consent for the ‘net zero’ project. And we don’t need particularly long memories to recall the risks of there being two parallel national conversations about an important issue based on very different views. As with Brexit, certain politicians stand ready to exploit opposition to climate change just at the time when we start to get to the pointy end of reducing emissions, when the less visible actions have largely been carried out, and people will start to have to make more far reaching changes to their daily lives.

Carbon pricing is a potential flash point. We have many different carbon pricing instruments already in the UK – the Emissions Trading Scheme, Road Fuel Duty, the Climate Change Levy to name just some, but they are either very well established, or largely invisible to consumers. On the one hand environmentalists would argue that they are neither high enough, comprehensive enough, or straightforward enough. On the other, suggestions of applying carbon pricing to domestic gas or to meat produce outrage.

In this context I suggest 3 steps to help build consent for the harder next steps which are to come.

  1. Use carbon pricing where it ‘works’ (to reduce emissions) rather than where it just ‘hurts’.
  2. Target a carbon dividend where it is deserved and where you get ‘bang for your buck’ in terms of a reaction.  This means focusing it on the young who are those who will lose out most from climate change.
  3. Give everyone an immediate financial stake in the net zero project – a small income from the state calculated as a share of that part of the economy which is long term sustainable and which will build in a measurable way as the transformation, of which they are part, takes place.

This is more realistic (and ultimately better) than more ambitious, but politically and economically unfeasible schemes such as a high pan-economy carbon tax or a universal basic income.

Use carbon pricing where it works rather than where it hurts

It’s the emissions, stupid. The point of a carbon tax – or – since it amounts to very much the same thing – a cap and trade systems such as the UK Emissions Trading System – is to reduce emissions in the most effective and efficient way. This has already worked well in sectors such as electricity, where UK  industry players have had the resources and capability to swap out coal for renewables given appropriate incentives through carbon pricing within a wider favourable policy mix. But applying a carbon price of £100 a tonne of CO2 emitted to domestic gas, and thus adding £250 to the average domestic gas bill is unlikely to reduce emissions much at all. Changing to heat pumps will still require prohibitive levels of investment (and disruption) and even with the correct carbon pricing may still be as expensive as gas to run. The main effect of the carbon pricing here would be to encourage a few better off people to replace their boilers, but to make many more  people £250 a year poorer, and angrier – possibly setting back the entire net zero project. Other policy tools are required to address problems such as domestic heating. We need to be tactical in our use of carbon pricing, focusing where we can actually hope to move emissions down.

Carbon dividends where they’re deserved and get bang for buck

A carbon dividend is often advocated as a tool to build consent for a carbon tax. The difficulty with the idea is that the taxes raised from carbon pricing don’t go very far when spread across everyone. The result is a large number of people with a very small benefit who will make less noise than those who see themselves losing from the tax. Mark Jaccard writes very convincingly about how this really played out in Canada – the poster child for carbon tax and dividend schemes – in his book The Citizen’s Guide to Climate Change.

We might get a better result if we target the proceeds of a tax on a smaller group along with a compelling narrative as to why.

The big losers from climate change are the young. They will see the worst effects, and they will live with them much longer. These are the people who should be compensated for the damage climate change is doing through receiving the proceeds of a carbon tax. In addition;

  1. the young have also been particularly hard hit by Covid from every angle – disruption to education, loss of jobs and prospects – and so are in particular need of a boost right now; and
  2. Support for the young is generally quite popular politically. Pensioners, who are heavily represented at the polls, but will barely see the effects of climate change themselves, may right now be quite receptive to support for the younger generation

Give everyone a more immediate stake in the net zero project

Whatever one’s personal view on the importance of dealing with the climate catastrophe, one shouldn’t assume that everyone shares that urgency. Less than 1 in 3 people see climate change as one of the three most important issues facing the country.  And if you are as yet unconvinced by the extent of the climate problem, your support for either the regulatory or economic costs of tackling it is going to be limited.

There are a number of good ways of addressing this challenge – from constant communication to the stressing of the more immediately apparent co-benefits of many actions which mitigate climate change.

This is another strategy, built on the widespread human desire to participate in a successful project, and the equally widespread appreciation of a steadily increasing source of income.

We are looking to build an economy and a society which is sustainable.  We want everyone to buy into that. An oft reported comment in the Brexit context – that’s your GDP, not ours – illustrates how many people don’t really buy in; for many it’s not ‘our’ GDP – and its not ‘our’ net zero either. How do we tackle this?  Let’s agree a measure of our economic progress towards a green economy – call it sustainable GDP. And then distribute – from tax revenues – a small share to every working age adult in the country.  This makes progress apparent now – in a way which avoiding a catastrophe at some point in the future isn’t.

I have written more about these and other related ideas is in my recent paper with the think tank Radix – Money For Nothing?

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