Skip navigation
Share via:
This proposal was moved to: U.S. Carbon Price 2015

Pitch

Fossil Carbon emission is reduced by a DEC (Distributed External Costs) rationing system running orthogonally to market economy. No price!


Description

Summary

Climate Change induces Distributed External Costs (DEC).

But DEC quantifies the first articles of the Universal Declaration of Human Rights. Being wealthy has nothing to do with my right to induce DEC (like drinking water or emitting CO2) and my duty to keep them sustainable (like limiting emissions).

A free market doesn't reduce DEC. It pushes their growth instead. It also prevents "Codes of conducts" by making better agents poorer.

So when full DEC bans (1952 London smog) is not possible, the "Polluter Pays Principle" (PPP) is usually applied: Pigovian Taxes (tobacco products) or Permits Trade (acid rains).

But PPP has flaws:

  • it increases inequities by pressuring lower incomes while preserving the most influent individuals,
  • it legitimates bad behaviors ("I paid not to change"),
  • it looks shady (another new tax!) when no clear loss compensation or counteraction is funded.


PPP flaws are blatant regarding carbon.

  • No price can be high enough to be incentive while being low enough to preserve economy and poorest people.
  • Future impacts are priceless (venus syndrome)
  • No counteraction (geoengineering) is fundable yet.

 

Beside PPP, other popular proposals (neo-protectionism, living wages)  could make DEC mitigation even harder.

Our solution is a true alternative. It consists in setting up a DEC rationing system which will work orthogonally to a market economy.

  • every individual periodically receives a same quantity of DEC permits as tokens .
  • every agent (business/individual) gives back tokens when its activity induces DEC.
  • in between, token exchanges are unsupervised. Producers freely get tokens from consumers and partially relay them to providers.
  • every good in practice gets 2 values on the price tag ($ and tokens) and consumers make choices accordingly.


Note this solution doesn't create a new market place. Tokens are not a currency. They are literally priceless (ones doesn't sell vital rights).

Note that to be viable, the system should replace all Pigovian Taxes beside carbon.


Category of the action

Reducing consumption


What actions do you propose?

Introduction

Global Warming (GW) is a typical case of Distributed External Costs.

Some externalized costs -like London smog of 1952- have been successfully reduced by Law enforcement and adequate bans. But this can't be transposed to GW mitigation as fossil fuel consumption is currently inherent in most human activities.

Another way to reduce externalized costs consists in Pigovian Taxes or Permits Trade. These approaches are both derived from the popular "Polluter Pays Principle" (PPP). And applied to GW, they lead to Carbon Tax or Emissions Trading solutions.

The PPP failure

The first step to this proposal is to demonstrate how wrong the PPP turns out to be.

  •  PPP fails to curb the everyday life of socially most influent people/business (because they are too rich).
  •  Quite the contrary, PPP legitimates bad individuals/businesses behavior. "I pay so to keep my way of life / business plan".
  •  PPP collected money usage sounds phony. Concerning GW, it obviously can't be seen as a compensation of:

    - the dramatic effects of GW to exposed people, lands and wild-life... as the whole idea looks terrible.
    - the global and extremely distributed effects of GW on food production and other critical aspects of human life. They are priceless!
    - the possible investments which have ben imagined so far to counteract GW. They all look fishy, unrealistic and risky: Geoengineering, CO2 capture technologies, nuclear backed energy transition, etc.

  •  PPP is a catalyst for social inequity. If applied to lowest incomes, it increases poverty and riots. On the other hand, PPP has little but no impact on highest incomes. PPP may only curb economical decisions of middle class agents. But how unfair it looks!
  • In addition, PPP is likely to be seen as a new attempt to finance irresponsible governments. Its mechanism is way too shady to be educative.


In all honesty, there have been some notorious success stories where PPP obtained good enough results: Tobacco product taxes might be seen as such a PPP success. Unfortunately, the story won't repeat itself for fossil fuel taxes. There is no CO2/$ conversion ratio which may be high enough to be incentive as people will still buy the next iGadget even with a doubled price, and simultaneously low enough to be accepted by already pressured economies. Doubling transportation prices right now would certainly lead to an economical collapse.

In summary, PPP is an inefficient, probably harmful solution regarding fossil fuel usage reduction.

That being said, it's important to note that a "Basic Income" (or Living Wages or other proposals of this kind) can't correct the defectiveness of PPP. Quite the contrary, a Basic Income for everyone might likely reinforce the consumption of hardly-renewable resources or fossil fuels.

Since PPP is the only principle followed by developed countries so far, they have failed to limit distributed costs like greenhouse gas emissions. Quite the contrary, they tend to increasing such costs by selecting businesses and individuals which replace their activities by cheaper alternatives with huge uncountable distributed impacts. Examples are countless: toxic financial products, dangerous materials, child labor, toxic wastes, clear water wastage, etc.

That's also why a "Code of Conduct" approach is hypocritical when thus who follows the code are comparably getting poorer and pushed out of the main economical streams and decision centers.

Other proposals which must be regarded with suspicion are "Local Currencies" and new protectionism proposals. They might lead to multiple isolated market places, making harder to limit excesses of the System as a whole.

The fact is that distributed expenses should not been considered as a thing of individual freedom and free will. This is not a choice. This is ONE duty: the duty not to exceed reasonable amount of distributed expenses. This is also ONE right; the right to consume clear water and clean air, to get a living space and public services, to emit CO2 and various wastes that will be neutralized by natural or man-made processes.

As a matter of fact, these Distributed Expenses is a quantification of the first three articles of the Universal Declaration of Human Rights. We are all born with a free and equal right to life, without discrimination.

  • So one should not earn extra rights to pollute and consume scarce vital resources because one is a powerful leader or a successful businessman.
  • One should not loose such rights because one is unemployed and is living in a disadvantaged area.
  • This is why PPP is wrong. This is why completing PPP with a Basic Income is even worst! it would achieve to convert basic freedom and human rights into money making, turning the whole approach intro "I bargain human life" level of wrongness.


Rejecting PPP as a whole leads to a single conclusion. GW and other comparable Distributed Costs MUST NOT be controlled by free market any more.

The proposal

Our solution consists in completing the free market with a rationing system for a specific kind of costs. That is Distributed Costs (DC).

The key of this proposal is to count DC with a dedicated unite. This will NOT be a price unit but rather a rationing unite, somehow comparable with ration stamps. Think tokens.

This "orthogonal" system lays upon an existing market place and works as is:

  • everyone receives an Universal Distributed Cost Permit. It's a quota distributed by a governmental organization. It's measured with a new rationing "orthogonal" unite, that is tokens.
  • this quota represents a right to generate DC and the duty not to generate too much of them.  Let's call it the "Distributed Costs Permit" (DCP).
  • when the activity of a business or an individual generates DC, it must acquire this right by giving back an amount of DCP tokens to the government. This constraint replaces Permits Trading and Pigovian Taxes.
  • Token exchange between agents (consumers, producers, intermediates) are free and unsupervised. Business may ask tokens from their clients. People may donate tokens to non-profit organizations. And so on.
  • A business obviously needs to ask for tokens from its clients so to pay back its providers.
  • In other words, every good has now "2 values on its price tag": a traditional price and a token selling value.


People learn to buy things by considering two values: one price measured in money; and the DCP selling value in tokens.

Trading DCP for money is allowed. In theory, tokens may be accumulated. In practice, it would be almost impossible unless the government is not serious enough (too much token emitted relatively to the rationing objectives). A form of inflation may prevent token capitalization (10% raise per month for both individual quota and action taxes).

The $/token trading market is consequently negligible. As tokens likely limit vital activities, people can't spare them. So they can't sell them. The right way to understand this absence of trading is not that tokens are too precious but that these tokens are not valuable. They don't materialize a value but rights and duties. None wants to lose vital rights and get additional duties for money. In sane enough countries, a lot of concepts lay "orthogonally" with the  market. For example, I can't pay to kill my neighbor. There's no conversion rate between my neighbors's life and $$$. The same reasoning may be applied to tokens in a fuzzy way.

Note poorest people may improve their everyday life thanks to tokens. Products may get Pigovian-Taxe-Free while their consumption being controlled by the token system.

Here are examples of services which may now become cheaper, and even totally free relatively to the conventional market thanks to subsidization:

  • clear water,
  • basic food,
  • public transport,
  • basic health support,

etc.

In parallel, here are examples of products and services which will be notably rationed by token transactions without threatening the poorest social classes:

  • clear water,
  • meat and other energy-incentive food,
  • fossil fuel,
  • roads,
  • garbage and gray water disposal,
  • public transport,
  • free health support,

etc.

 


Who will take these actions?

This proposal is organized around a new governmental organization.

This organization distributes permit tokens to individuals, that is people, you, me, everybody... No token are directly given to firms or business. Only end consumers directly receive tokens.

The core idea of this proposal is that the amount of tokens given to each citizen is the same for everyone. It's the Universal Distributed External Cost Permit.

The same organization also asks token-based taxes for the production or importation of fossil fuels. Wells and borders are severely controlled.
 Taxes are finely tuned so that a "business as usual" usage of fossil fuel would globally lead to collect a bit more tokens that what's actually distributed.

Oil producers or importers must ask for tokens to their clients. These clients ask for tokens to their own clients. And so on till the end consumers. In practice, every good or service is sold by exchanging both $ and tokens. The chain of transactions till the end consumers is unsupervised.


Where will these actions be taken?

The system is designed to work within the boundaries of a single nation where a consistent set of laws are applied inside clear and strong borders. The US or the EU may also be a candidate for such an evolution.

Why a sovereign nation with strong borders. Why not the whole UN?

  • reason 1) Distributed Cost Permits form a powerful tool for a government to curb any Distributed Cost such as the problematic consumption or alteration of non or badly renewable resources.

    However what's "green" or "social" depends on culture and point of views. Some people think women should not work. Some people think nuclear is healthy. There is a potential international drama within every topic.
     
  • reason 2) borders must be controlled. One apply token taxes on importation and exportation.

    For example, a company X imports a million of foreign smartphones. One computes a LCA of these goods to deduce a token-based tax. This importation tax is asked to the importer X, so to impact the token-selling value of these phones.

    Note this is not green protectionism because no $-taxes are applied. If some foreign R&D finds a way to build phones with less employees and operations, they'll win the market. But if a foreign phone production is CO2 hungry, these devices may sell less because of big token taxes.
     
  • Concerning exportations, the distributed costs of exported goods are forwarded to the importing nation so that it may be converted to their own DCP system. In absence of such a DCP system, the foreign country token balance is recorded for communication and statistics.

 


How much will emissions be reduced or sequestered vs. business as usual levels?

Let's suppose the government

  1. distributes 9 billion tokens per month (as 1000 tokens per person).
  2. collect tokens at carbon sources so that a non-mitigated extraction of fossil carbon would lead to collect 10 billion tokens per month.

 

As carbon producers/importers can't gather more tokens that what was given to end consumers, mitigation is guaranteed. 10% fossil carbon won't be emitted.

In practice, every person changes his way of life as will so to fit the quota he/she got.

  • eating less meat,
  • sharing their car to commute,
  • colder home temperature in winter
  • etc

 

One again, people are free to live as they want as long as their way of life fits in the quota.

 


What are other key benefits?

Tokens allow to control when an individual emit additional CO2 by himself (cutting and burning his own forest)

Tokens would as well control many activities unrelated with Fossil Carbons and Climate Change.

Here are a few DEC activities which may be more or less severally mitigated by the same system:

  • pets
  • smoking
  • public health service usage
  • trashing waste
  • risky loans
  • excessive geographical concentration of activities
  • risky transport
  • risky labor
  • etc.


Additionally, many resources which used to look renewable or infinite might be now controlled with our orthogonal system:

  • clear water,
  • sand,
  • copper,
  • fishery,
  • land usage,
  • etc.

 

All this without triggering riots and wars.

 


What are the proposal’s costs?

The foundation of the system is not so costly. An exception is the importation of high level products which requires to compute a lot of long, costly and controversial LCA.

 

LCA will increases the system cost dramatically.

 


Time line

One first gives people a large DECP quota in the couple of years after the system is enabled.

People learn how to manage their quota.

Abrupt contraction and economical collapse is avoided.

Then one slowly raises the token-based taxes for fossil carbon and people start being cautious about tokens expenses. The society enters a  transition phase to a carbon-free economy.

The tooled society may turn sustainable and fossil fuel free in less than 30 years.

 


Related proposals

What this proposal isn't

  • socialism/marxism. Business initiative is preserved;
  • anti-capitalism. Rich people may still exist and have a conspicuous but armless life;
  • liberal. It's just than duties and rights aren't measured with a currency
  • anti-liberal. Coercition is lower than what future societies will be if PPP is forced intoi people.
  • right / left wing tinted. For example, it might been as well been used to promote or discourage, says, Women Emancipation.
  • a parallel market place / an Alternative Currency.  Because there is no equivalence between DECP and prices like there is no equivalence between temperature and weight. Those are orthogonal values in a Cartesian coordinate system;
  • a Basic Income. A basic income may fuel DEC growth.
  • Green / neo-protectionism.
     

What this proposal is

This proposal generalizes Tradable Energy Quota (TEQS) / Personal Carbon Trading (PCA) to all kind of distributed external costs. Orthogonality makes tradale quota usable to address many social/environmental problems.


References

No reference were used. It's a plain new solution based on a simple reasoning which doesn't need any theorem or studies to be proven.