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Frequently Asked Questions: Note:
We are currently adding new questions and answers about Carbon
Share. •What are the Principles behind Carbon Share? • The sky belongs to all of us. The atmosphere is a commons, we all breathe the same air. • If the atmosphere has economic value, that value belongs to everyone, equally. • Industry should pay to use the atmosphere, and revenues for be used to reduce emissions and compensate citizens for its use. How Carbon Share Works: Carbon Share can work alongside an auction-dividend capped system. In an auction, permits are sold, and revenues are returned to consumers as a cash dividend. Consumers could opt-in to receive the share instead, and deposit the share in a brokerage account. • Who is eligible to receive a carbon share? Citizens over age 18 who have resided in the state for 1 year. • How do individuals receive the shares? Distribution will be based on the Alaska Permanent Fund's distribution system. The State of Alaska distributes proceeds from leasing state land to oil companies by wiring the money directly to the individual's bank account, or by mailing a check. Another possibility is to have the share reside electronically on a debit card. When you do your state taxes, if you choose to receive the share, the State replenishes the card each year. • What if people forget to cash their share, or the share gets lost in the mail? Will the economy grind to a halt? If many people retire their shares, the price of shares will rise, encouraging people to sell. In this sense, the problem is self-correcting. Also, the state may auction unreedemed shares after a certain waiting period. This is one way that Carbon Share and an auction can co-exist. Funds raised by the auction of unclaimed shares could pay for the administration of the Carbon Share disbursement and enforcement of the cap, and net proceeds could be set aside for energy efficiency programs, and other state programs that reduce greenhouse gas emissions and have a public goods component. • What options are there for cashing the share? The typical places to cash a share could be banks and brokerages. The Alaska Permanent Fund wires disbursements directly to people's bank accounts. Other options could be the post office, check cashing businesses, or other businesses formed specifically to collect shares for re-sale. • Do any banks or brokerages support Carbon Share? We
are doing outreach to banks and the financial services industry.
When we find those who support it, we will list them on the Endorsements
page. Their support is very important to the success of the
program. We assume the services provided would be a new source
of profits for the industry. If you have contacts in the banking
or financial services industry, please contact us. • Would all businesses need to purchase Carbon Shares in order to do business in California? No. Only upstream businesses- the businesses which produce or import fossil fuels into the California economy would need to purchase Carbon Shares. Retailers such as gas stations would not need to purchase Carbon Shares. Consumers would not need to purchase Carbon Shares. By regulating at the point where fossil fuels enter the economy, there is no need to regulate further downstream in the economy, and there are fewer businesses to regulate. • Who is a carbon importer? Any entity that brings burnable carbon (from underground, or biomass, or by pipeline, tanker, train or truck) into the state economy. Utilities are considered importers of the carbon content of the electricity they import from out-of-state. •
What about companies that have taken early action to reduce
emissions? • Which government agency would be in charge? There are many options. The California Air Resources Board (CARB) will have some role in monitoring the carbon content of the fuel the producers and importers have sold during that year. Regional Air Districts may have play an enforcement role. Registering citizens to receive the shares could be tied to voter registration (if it is decided that shares should only go to citizens over age 18), the Franchise Tax Board (the California Income Tax database), or have an independent process. Additionally, a new semi-autonomous agency called the Sky Trust could coordinate the various functions of this program. •
How will the system be enforced? • Will it cost the State money to administer Carbon Share? A giveaway of emission rights to the fossil fuel industry would bring in no revenues to the state to pay for administration and enforcement of the cap. By contrast, auctioning (selling) permits to industry would bring revenues which could be used for those purposes. Carbon Share could be implemented in combination with a state-run auction. The State would auction unclaimed emission rights. Funds raised by the auction would pay for administration of the Carbon Share disbursement and enforcement of the cap, and net proceeds could be set aside for energy efficiency programs, and other state programs that reduce greenhouse gas emissions and have a public goods component. • Why do we need a carbon market? Why not just use regulations to force the companies to reduce emissions? State regulation can set standards, promote certain technologies, or prohibit certain behavior. If the State could achieve its reduction goal through regulations alone, then there would be no need for a market. But most people believe a market will be necessary. If there is going to be a carbon market, it is in everyone’s best interest to have a market that values the environment and the public trust. A well-designed carbon market can provide incentives throughout the economy for behavior that reduces carbon. A market can accomplish some things that regulations can’t. For example, when the State mandated that cars emit fewer greenhouse gases (AB1493), Detroit sued. But, when gasoline prices went up, and consumers responded by buying high-mileage cars, Detroit had no choice but to make fuel efficient cars. A change in the price of gasoline accomplished what regulations could not. • How does this relate to a Carbon Tax? We
advocate for both a carbon fee, and a cap and auction system.
The carbon fee could be an early action measure taken by the California Air Resources Board. It would help them learn some of the administrative and economic issues around an economywide auction. A price floor would reduce the price volatility on the low end of permit prices. If permit prices fall too low, businesses will hesitate to make long term investments in low-carbon technologies. A price floor from a fee, rising over time, will ensure that investments made now will reduce costs for businesses in the future. For the cap and trade system, permits must be auctioned, and the money recycled to consumers. So the bad news for companies is that they will pay to pollute. The good news for them is that they will pass on the costs to consumers anyway. The bad news for consumers is that prices will rise. The good news is that revenues from permit auctions will be returned to them through rebates or dividends.
• Who sets the price of carbon? No one. The price of carbon is set by the carbon market. The market is driven by the demand of carbon importers and the supply of carbon certificates. The price per ton of carbon could decrease if industry reduced emissions ahead of the cap. Or, it could increase if industry demand for entitlements exceeded supply. A price floor through a carbon fee provides a long-term price signal to encourage long term investments in low-emitting technologies. •
What is likely to be the trend in carbon prices? • Will fuel prices rise? What about the value of my Carbon Share? The price of carbon-based fuels will rise under any cap-and-trade system. Under Carbon Share, these price increases will be offset by the cash residents receive from selling shares. Modest consumers of carbon-based energy will come out ahead. Only high energy users will pay more. Here's how Shares are calculated: • The total amount of statewide carbon emissions under the cap is divided by the number of citizens to determine number of tons per share. •Then, the tons per share is multiplied by price of carbon to give each share its value. • Given the recent market price of carbon of $11.50/ton, each California consumer's share could be worth about $190. Here are some projected numbers for California:
Notes:
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How will Carbon Share effect the state's economy? • Is auctioning carbon permits to companies the same as a tax? No. When the state sells or leases assets owned by the public to private companies, it is not a tax. The Federal Government's auction of the telecommunications broadcast spectrum is a license, not a property right. • Is Carbon Share the same as the UK proposal for personal carbon allowances (also called Domestic Tradable Quotas (DTQs))? No. Personal carbon allowances and DTQs, which are being discussed in the UK and whose supporters include David Milliband, are completely downstream systems. Each consumer's carbon consumption is tracked and rationed by a credit card. The point of regulation is at the consumer level. By contrast, in Carbon Share, the point of regulation is upstream, at the fossil fuel importer and producer level. Consumer carbon levels are not explicitly rationed. There is only one consumer transaction involving carbon emissions permits per cycle: the selling of the share for cash to companies via banks. • Why not issue Carbon Share or dividend as a coupon which can only be redeemed for compact flourescent lightbulbs, hybrid cars, or Energy Star rated appliances? Some argue that California law requires that revenues raised by a fee must be used to mitigate the problem the fee is meant to solve. Funds could not be diverted to other uses. It is unclear how this impacts a consumer rebate for increased fossil fuel prices. The increased price of fossil fuels will make inefficient products more expensive. Making the share only redeemable for certain products may decrease the political support for the rebate. (The same goes for substituting a tax rebate for a share redeemable for cash.) On the other hand, the share could be made redeemable for both cash and for transit passes or other public goods, and local government agencies could offer special deals to incentivize the use of the share this way. • Why would you want to shield consumers from price increases in fossil fuels? Isn't making fuel expensive the best way to change consumer behavior? The main reason is that an increase in the price of fuel is regressive, meaning that it impacts poor people more than rich people. Although fuel price increases will have positive environmental effects, we suggest social policy to make the impacts more fair. A per capita rebate, such as Carbon Share, would alleviate some, but not all, of the impact. High carbon emitters would still pay more. • Do you have any other recommendations for the California Carbon Market? Yes. Here are 3 recommendations: 1) Regulate as far upstream as possible: The farthest upstream companies are fossil fuel producers and importers. Permits would be needed at the dock when an oil tanker unloads, or at the pipeline. It is the simplest way to address emissions from the transportation sector (California's largest source of emissions). Upstream can alleviate the mandatory reporting requirements for most businesses, while still producing a price signal throughout the economy. The upstream point of regulation may also protect consumers. 2) Auction 100% of the permits. New York, Vermont, and Massachusetts are auctioning 100%. An auction avoids the problem of overallocation seen in other giveaway systems like the ETS. Auctioning avoids lobbying for preferential treatment. Every carbon emitter is treated equally. Auctioning rewards early action, since early actors would need fewer permits. 3)
Compensate citizens for disproportionate impacts by allocating
a per capita dividend (Sky Trust) or Carbon Share. The
per capita allocation benefits low-income consumers (who typically
consume less fossil fuel). A per capita approach reinforces the
fact that the Sky is a shared Commons.
· Reduces carbon emissions statewide · Creates a genuine market for carbon emission permits · Pays cash to every state resident · Makes corporate emitters pay for their pollution · Offsets higher energy prices residents will pay. · Covers all carbon emissions, not just selected industries. · Avoids windfall profits to corporate emitters . · It is simple, fair and market-based. · It makes it politically possible to reduce carbon emissions to the level required for climate stability.
For more information about how Carbon Share works, click here. Click here for A Citizen's Guide to Carbon Capping, a Powerpoint presentation by Peter Barnes.
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Carbon
Share works alongside the Climate
Protection Campaign.
For more information, contact Mike Sandler (707) 529-4620 or email mike [at] carbonshare.org. |