A CO2 budget for citizens? In theory ‘not really stupid’, but the implementation is ‘crazy’

How can we become more sustainable in such a way that everyone can afford it? Barbara Baarsma, economist at Rabobank and professor of applied economics at the University of Amsterdam, this week answered the “incredibly important and necessary” question.

At BNR Nieuwsradio and then talk show The 1st she argued for a personally negotiable CO2-budget: citizens and companies receive a certain amount of emission rights, which together do not cause more than 1.5 or 2 degrees of global warming. These rights are for sale. People who consume less, for example because they live smaller, can earn some extra money from people who consume a lot – for example because they live in a big house with a swimming pool and sauna. Money flows from rich to poor.

It is a ‘thought experiment’, said Baarsma, prompted by a government that does not choose the best solution: a CO2-treasure. “This cabinet’s climate policy,” she said, “consists of many billions to go green. Only: it’s a carrot, and you also need a stick to beat it with. Otherwise you won’t get anywhere.”

Her idea met with great opposition. “Let’s put it like it is: the elite are looking for ways to stop global warming without changing their own way of life,” tweeted SP MP Mahir Alkaya. “So this is just a plea for evening out, isn’t it?” objected opinion leader Sander Schimmelpenninck to the critics. “Yes, of course you don’t understand.”

Old piece of theory from the barn

Baarsma’s idea is not new: Meteorologist and forecaster Gerrit Hiemstra proposed it last year in an interview in That Financial Newspaper – resulting in the same Twitter storm. And Hiemstra had also reused the idea. “It was already circulating in the European Commission in the 1990s,” says Johan Albrecht, professor of economics at Ghent University and author of the book. Climate neutral in 2050?. “Back then, they thought of a kind of extra bank card, where CO2-credits from families were stored, and you had to use them to, for example, refuel.” It was “obviously” impractical, he says – there was no internet back then.

We must recognize that our current consumption pattern is unsustainable. This is hereby emphasized.

Jaap Tielbeke author’s book ‘A better environment doesn’t start with yourself’

Baarsma retrieves an old piece of theory, says emeritus professor of environmental economics Aart de Zeeuw (Tilburg University). According to environmental economists, pollution can be reduced in two ways. Both paths require that there must be a price for citizens and businesses.” One way (and according to almost all economists the best) is to introduce that price with a tax: a CO2that is, honey. You just don’t know in advance how much the pollution will be reduced. In other words: at what price do you achieve the desired effect. Road pricing, which the government wants to introduce in 2030, is a form of CO2-treasure.

The second way is the plan for a CO2-budget. “You determine the budget in advance, cut it into pieces, and then a market and a price in that market is automatically created,” says De Zeeuw. “In theory, such a system with tradable emission rights is superior, because then you kill two birds with one stone: you know exactly how much is emitted in total, and the price is an incentive to become more sustainable.”

For companies, this theory has been put into practice with the emissions trading system in the EU. For citizens, however, it is totally impractical, say economists. “Implementing it is crazy,” says De Zeeuw. “You need a huge control system. And how are you going to calculate the exact emission of all those things and activities?”

In addition, there are many other measures that are relatively easy to implement and have proven to be effective, says Dirk Bezemer, professor of economics and business at the University of Groningen. “Petroleum tax, solar panels on all public roofs, abolition of the subsidy to the fossil fuel sector of 17.5 billion That is the low hanging fruit. Those things are not happening now, because of all kinds of interests. That is the real problem that we should focus on. This proposal does not add much value.”

“Disregard” political reality

Nevertheless, says Johan Albrecht, the idea for a CO2budget “not really stupid”. “We have had international climate policy for thirty years, and it is very complex, especially in Europe. Yet energy-related emissions in Europe are still barely falling, by just 1.1 percent between 2014 and 2018. This is because emissions in the transport sector and among households have increased.”

If Europe wants to achieve its goal of reducing emissions by 55 percent by 2030 compared to 1990, “why not in an unconventional way?”

“It’s a wonderful drawing board solution,” says Jaap Tielbeke, journalist and author of the book A better environment doesn’t start with you. “A solution that only an economist can come up with: We just do the math and let the market do its job, and then all is well. But that is a misunderstanding of the political and socio-economic reality. For example, the lobby of major polluters is very powerful. And how do we deal with historical emissions, which are mainly emitted by rich countries? You have to deal with all these kinds of things if you want to introduce something like this.”

Purely as a thought experiment, it might be valuable, he believes. “We have to recognize that our current consumption pattern is unsustainable. This is emphasized by this.”

also readThe price of a tonne of CO2 can make or break the climate

Professor Bezemer also believes that it is a disadvantage that the responsibility for sustainability with a CO2budget is allocated to the public. The energy transition, he says, will not be done from scratch. “It’s a popular idea because people can tell stories with it: we should all drink oat milk, that idea. But this transformation must be coordinated. The responsibility lies with institutions with systemic relevance: the government and companies.”

The climate problem is largely a distribution problem

Cees Withagen emeritus professor of environmental economics VU

The energy transition is by definition about political and ethical issues, say economists. It is about justice, about what kind of society we want. “The climate problem is largely a distribution problem,” explains Cees Withagen, emeritus professor of environmental economics (Det Frie University). “Between rich and poor countries, and between rich and poor people in countries. That’s why it’s very good to think about redistribution and look at the impact of policies on income groups. These are political choices.”

The transition must be ‘inclusive’

According to Johan Albrecht, the energy transition must be an ‘inclusive project’. “Who drives a Tesla around? It’s the high incomes. The low incomes must also be able to benefit, otherwise you end up with a dichotomy in society. So we must not only look for the right price instruments for the private market; the government must also ensure for green public facilities.”

The plan for a CO2the budget also allows for such questions: after all, it redistributes money from rich to poor, because people who consume little can sell their emission allowances. That very element kicked many people to the sore leg. But to what extent does this redistribution method differ from e.g. equalization through income tax? And don’t rich people always have more opportunities than others? The effects on inequality in society, economists say, depend entirely on how one does it. All an even number of allowances may seem reasonable, but it probably isn’t. “If you’re poor, you might live in a very energy-inefficient home,” says Johan Albrecht. “And you don’t have the means to make it more sustainable. Rich people have it and can then save rights. So why give them free rein? You should give them to the poor group. Most economists argue for selective measures.”

There are much better methods

Inequality also has many dimensions. You can look at inequality in income, wealth, but also in freedom of lifestyle – and the latter is increasing because of CO2budget plan. Rich people can then afford to continue with their way of life, while poorer people have an incentive to become more sustainable. “And that’s not exactly where the problem lies,” says Bezemer. “Nearly half of global emissions are caused by the richest 10 percent in the world.”

According to economists, the best way to redistribute money is through taxes on income and wealth. And not indirectly, through tradable emission rights. “I don’t think poor people would be very happy either,” says Aart de Zeeuw. “‘We can’t fly, but we’ll get some money to pay our electric bill, yes please!'”

In fact, he says, there are for the two dreamed effects of such a CO2budget, sustainability and redistribution, so much better methods. And ultimately any solution for the energy transition, including the dreamed CO2tax, lead to new inequalities. It can be countered with taxes.

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