Really Bad Carbon Emissions Plan #91: Personal Emissions Trading

If there were any doubt that old fashioned Tory moralism is alive and well in (temporarily) Labor England, this crazy idea should dispel it. It plays on the “personal responsibility” trope at the expense of any hope of getting the job done fairly and efficiently. To wit:



1. If you have a national cap, you have a national cap. Enforce it and people’s carbon emissions have to fall in line according the laws of arithmetic.

2. How on earth are you going to put carbon prices on each and every personal decision, especially if you take life-cycle and indirect effects into account? After all those years of Maggie channeling Hayek you’d think the basic lessons of the socialist calculation debate would have rubbed off.

3. The more upstream the cap, the more flexible and efficient the system will be. Capping each individual’s consumption is as downstream as you can go. Upstream capping means that the advantages of shifting the economy across sectors, technologies and the like would be transparent and seamless: if the higher cost of carbon results in an investment in rail transport being more productive than one in highways, you can transfer the resources and adjust in a lower-cost way to the cap. If you have separate caps for separate activities this visibility and flexibility is lost.

4. And the whole scheme is based on the misperception that an economy-wide carbon tax—or even better, an economy-wide cap—bleeds households. Yes, of course, taking money from households would do this, and the tax/cap would function much like a regressive sales tax. But wait: the money has to go somewhere. The simple solution is to give it back on an equal per capita basis. This reimburses the public and turns a regressive transfer into a highly progressive one. Much more sensible, I would say, than moralism run amok.