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CapGlobalCarbon and basic income: How could climate action be coupled to economic empowerment?

Note: this article assumes that you are already up-to-speed on what CapGlobalCarbon is. See here to get a quick overview, or here for a short video explainer of Cap and Share, the main component of CGC.

On Wednesday, the process of Britain leaving the EU began. Many in the UK believe that the EU was disempowering to ordinary Britons. Many others feel that it created far more opportunities than it denied. People in different parts of Britain have different, but equally strong, attitudes to Brexit, and the country may fragment as a result.

Brexit is happening in the context of a global economy is that is fragile and extremely vulnerable to collapse. And then there’s the biggest danger of all: we’re veering towards climate catastrophe.

During Theresa May’s speech, I was at a community festival in a small village near my home in rural France. (I’m in Irish citizen but can live in France, thanks to the EU.) The sun was shining. It was a relatively cheery day for a place that has suffered from depopulation and where the most noticeable activity tends to be bored-looking local teenagers zooming around on their motorbikes. Attendees at the festival included two families of refugees from Afghanistan and Syria, with a total of seven small children.

It’s often pointed out by EU supporters that countries within the EU have managed to avoid going to war for many decades now. That’s no mean feat. However, countries outside its borders have been less fortunate, and the policies and practices of the world’s wealthier countries and blocs, including some EU members, bear considerable responsibility for this.

It seems that the war in Syria was at least partly triggered by climate change, and the Afghan turmoil has a lot to do with geopolitical manoevering and a scramble by wealthy countries for mineral access, including access to oil.

All around this area of southern Burgundy Marine Le Pen glares down at us, steely-eyed, from her election posters. Contrary to what one might expect, Le Pen actually advocates an energy transition away from fossil fuels and the stimulation of local economies. Unfortunately though, her main focus seems to be on trying to ‘pacify France’ by throwing ever more police and army onto the streets and building more prisons.

So just how should we react to the chaos and instability of the world today? Should we try to turn our backs and insist that it’s not our problem – regardless of what history and current events might indicate – and that the best option is to cultivate our swagger, and to treat those who have been unlucky enough to be caught up in conflicts with hostility? Or should we insist that progress can only be made by adhering to rules about trade that are based on dubious premises, that downplay the extreme danger of reliance on fossil fuels, and that reinforce the privileges of the elite at the expense of everyone else?

Perhaps our choices aren’t so limited. Perhaps a much wider vision of the world is possible. Happily, some people in the UK are thinking along those lines, and they have many allies elsewhere.

Recently I was honoured to be invited to participate on a panel discussing practicalities at the first-ever World Basic Income conference. The conference was held in Salford, UK, on February 4, in a jammed Sacred Trinity Church.

I won’t go into the details of why universal basic income is a good idea here – that’s amply covered elsewhere. The focus of this article will be on the potential relationship between meaningful, concrete action on climate change and the breaking of fossil fuel dependency – brought about through CapGlobalCarbon – on the one hand, and basic income on the other.

As discussed elsewhere on this site, CGC could be a significant support in establishing a global basic income. That’s because it helps to answer one of the first questions that basic income advocates generally get asked: where would the money for a basic income come from?

A couple of the conference speakers in Salford suggested that the funds for basic income should come from income tax or other existing taxes. This idea makes some people uneasy, though. They worry that either existing benefits would be cut back to compensate, or else that income tax would be increased in order to provide enough funding, and that that might discourage people from working or hiring.

In contrast, CGC would provide funding that would be free of either of these dangers. That’s because it’s based on the idea that the atmosphere ought to be managed as a commons. Everyone who participates in a commons – in this case, everyone in the world – is automatically entitled to the benefits from that.

The income from CGC isn’t the only potential commons-based source of basic income. Other sources exist too, and indeed, it will be necessary to tap at least some of them for a basic income to be sustainable in the longer term, for reasons I’ll get into further below.

However, first let’s take a quick look at the nitty-gritty of the funding we might fairly expect from a CGC-based basic income, and also at what that might mean for energy prices and the economy.

A floor price to establish a global basic income

The World Basic Income website suggests a modest initial basic income of $10 per month per person as a starting-point. This couldn’t guarantee a living but it could make a significant difference to the lives of many people in low-income countries, particularly families with children.

Under CGC, a Global Climate Commons Trust would auction permits to fossil fuel producers. If we want to establish a basic income of at least $10 per month per person, we’d therefore need to set a floor price for the auction of production permits that would provide the correct amount of revenue. The ability to set a floor price could be specified in the Trust’s Deed.


Panel: Number-crunching

Let’s crunch the numbers for that floor price. Since the permits would be required for fossil fuel production, rather than consumption (emissions), the initial calculations below refer to tonnes of oil produced, or tonnes of oil equivalent produced in the case of natural gas and coal, rather than tonnes of CO2.

The most up-to-date fossil fuel production statistics I could find were published by BP in their statistical review for 2016, which gives figures for 2015.

Total world fossil fuel production in 2015, according to BP: 4361 (oil) + 3200 (gas) + 3830 (coal) = 11391 million tonnes, or 11.391 billion tonnes.

Fossil fuel production per capita = 11.391 billion tonnes/7.4 billion people = 1.54 tonnes per person.
To generate $10 per month/$120 dollars per year per person, we would therefore need to charge an average of $78 per tonne of fossil fuel produced.

I say “average” because the exact figure would vary depending on the type of fossil fuel. Coal releases more greenhouse gases than oil, and natural gas less. In fact they could be subdivided far more into different types of coal and different oil derivatives, but to keep things as simple as possible here we’ll just stick to three main categories. 

A bit more number-crunching, based on figures from the US’s Energy Information Administration and on fossil fuel prices from the first week of Feburary 2017, indicates that natural gas permits would need to be roughly $56 per tonne of oil equivalent – making for a 43% price increase; oil permits would be $73 per tonne – a 19% price increase; and coal permits would be by far the most expensive, at $104 per tonne of oil equivalent, which would make for a 141% price increase. (these figures would vary, of course, depending on the current prices of fossil fuels).

It may be helpful to state this in terms of the price of CO2, since that’s a more standard measure used for calculating carbon fees. Taking the $78-per-tonne-of-oil-equivalent average, and using figures from the US’s (soon to be abolished) EPA, we get a carbon price of $25 per tonne in order to establish a global basic income of $10 per month.


We can see from the panel on number-crunching that our floor price for the basic income would be an average of $25 per tonne of carbon, with variations for different kinds of fossil fuels (coal would be the most expensive and natural gas the least).
It’s interesting to compare this with the figures suggested by in Citizen’s Climate Lobby’s Fee and Dividend proposal in the US, which has gained some bipartisan support. Fee and Dividend has two important similarities with CGC: it would impose a fee on fossil fuel extraction; and it would the share out the revenue from the fee on a per-capita basis (it also has two important differences with CGC: it would not impose a binding cap on extraction – so there is a risk that emissions would not actually be reduced under Fee and Dividend; and the revenue would only go to US citizens).

Fee and Dividend would start by imposing a $10 per tonne carbon fee, with an increase by $10 each year. So within three years, its carbon price would higher than CGC’s floor carbon price of $25 per tonne. Of course, in the case of Fee and Dividend, the revenue from a carbon tax would be distributed among US citizens only. So Fee and Dividend would effectively transfer ‘ownership’ of a fairly large chunk of the atmosphere from a hundred or so fossil fuel companies to all US citizens. (This is obviously an improvement over the current situation but, in our view, doesn’t go far enough. CGC would go further, transferring ‘ownership’ to everyone in the world.)

In any case, as we’ve seen in the panel on number-crunching, the effect on fossil fuel prices of a floor price of $25 per tonne of CO2 would vary widely, with coal being by far the hardest hit. It’s important to bear in mind however that increased energy costs borne by households would be offset by the income that they would receive. Indeed, most households would be better off, and many considerably so.

Uncertainties

There are a few other things to bear in mind here too. One is that the production figures in the real world will vary – as mentioned above, the ones in this article are estimates based on already-somewhat-outdated 2015 energy production statistics.

More broadly: obviously we can’t tell exactly how the economy will respond to changing circumstances. Under CGC, overall production of fossil fuel will be diminishing, which could push permit prices up. Meanwhile, human population will likely continue to rise over the next few decades, and this would lower the per-capita share of revenue unless the floor price is adjusted accordingly.

Another very important point to remember with regard to CGC and basic income is that any revenue from carbon needs to be considered as finite. The overall aim of climate action is to eliminate fossil fuel extraction (and other greenhouse gas sources) within the next few decades, and once that elimination happens, there’ll be no more fossil fuel permits to auction. So right from the start, we’ll need to plan for a more stable, permanent source of basic income funds.

I’d been planning to talk at the World Basic Income conference about the need for a land value tax, both to eventually replace CGC as a source of basic income, and to help to ensure that basic income revenue didn’t trigger speculation on land and property inflation. But conveniently enough the speaker who immediately preceded me, Hillel Steiner of the University of Manchester, gave a thorough overview of the benefits of this kind of tax, which like CGC is a commons-based source of revenue.

Following on from Steiner’s arguments I’d suggest that one of the requirements for introducing CGC to a country should be that the groundwork be laid for also introducing a land value tax. This groundwork would need to include assessments of the value of land, something which still hasn’t been done even in some industrialised countries. So it would be a medium-to-long-term project, but it would need to be factored in right from the beginning.

Escaping oil dependency

One final thought about the knock-on effects of CGC (or fee and dividend, or any other carbon fee): there is a real risk of triggering an economic crash by fiddling around with energy prices without careful planning and preparation. A recent article on the Feasta site argues that even a relatively modest rise in oil prices could send us over the edge into economic chaos and infrastructure breakdown. This is because the world economy is very heavily dependent on cheap transport, which, in turn, is still very heavily dependent on oil. Additionally, our debt-based financial system relies on continual economic growth in order to survive, so it is highly vulnerable to any disruption of economic activity.  

While some argue that oil prices are low at present because of a lack of demand, others believe that they’re low because the market can’t bear a higher price, since the easily-attainable energy is running out fast.

Several speakers at the World Basic Income conference talked about the move towards automation in the world economy and the need for a basic income to ensure that everyone will still be able to get by, even if much of the world’s menial work is done by robots and there are far fewer paid jobs. An alternative scenario, though, is that a dearth of easily-accessible oil will lead the debt-based financial markets to collapse, which would lead to widespread bankruptcies and severe disruption. If that happens there wouldn’t be enough energy available to fuel robots, let alone develop that type of technology further.
This possibility doesn’t take away from the need for a basic income though – rather the reverse.

In order to ward off the risk of economic collapse, we’ll need to figure out how to bring about a transition from a high-fossil-fuel, heavily-transport-based economy to a zero-fossil-fuel, much more localised economy, in the short to medium term.  If a basic income frees up a bit of time for people ‘on the ground’ to work intensively on revitalising their local economies – in the full knowledge that a collapse could potentially cut off the income, at least for a while, and that that needs to be planned for – that’s surely a good thing. (It would also help to follow the advice of the Positive Money campaign, and make money issuance debt-free).

Empowerment

What could people receiving basic income do to help revitalise their communities, in order to build resilience and ward off the possibility of economic collapse? Their focus would likely be on very concrete actions such as planting orchards and setting up seed banks, the kinds of things advocated by the Transition movement. These actions are best carried out by people within communities who are most likely to know exactly what’s needed – as, indeed, with many, if not most, development projects.

One of the more memorable moments of the World Basic Income conference was in a video shown by Steven Janssens of the NGO Eight. In it, a group of villagers in Uganda were informed that they would receive a basic income, as part of a pilot scheme. They were told that the money was theirs and that they knew best what to do with it. The response was cheers and clapping. You got the impression that they were tired of being told what to do by outsiders, and that the basic income, and the empowerment it represents, made a very refreshing change. Their reaction is backed up by the popularity of the widespread Latin American social transfer schemes, and of existing schemes elsewhere in Africa.

The need for autonomy is very profound – and likely universal – and also explains the motivation of many Brexit voters and Trump supporters. But the Ugandans’ reaction is based on something that’s really happening, rather than a promise made by politicians that seems unlikely to be honoured.

Some might argue that, while basic income is a good idea, the risk of economic collapse means that we shouldn’t introduce CGC at all and should look elsewhere for revenue for basic income.

However, even given the risk of collapse, there still needs to be a cap on fossil fuel production. Why is that? Because climate change is an existential threat. It’s true that an economic collapse would cause a decline in greenhouse gas emissions – perhaps even a steep one – but we certainly shouldn’t hope for that. A gentler transition is far preferable, and a basic income, and a judiciously-applied CGC, would help to bring that about.

We need to look beyond individual countries’ and elites’ short-term interests and instead focus on the real priorities. If we manage to do so, we might just stand a chance of overcoming some extremely fundamental challenges. And as a side-benefit, we might also find that some of the perceived differences between us aren’t as significant as we’d thought.

If you’re interested in helping with CGC, please email us at info@capglobalcarbon.org . World Basic Income can be contacted at info@worldbasicincome.org.uk.

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