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, gave an answer to that “incredibly important and necessary” question this week.
At BNR Nieuwsradio and then talk show On 1 she argued for a personally tradable CO2-budget: citizens and companies receive a certain amount of emission rights, which together cause no more than 1.5 or 2 degrees of global warming. Those 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 large house with a swimming pool and sauna. This is how money flows from rich to poor.
It is a ‘thought experiment’, said Baarsma, prompted by a government that does not opt for the best solution: a CO2-tax. “This cabinet’s climate policy,” she said, “consists of many billions to go green. Only: that’s a carrot, and you also need a stick to hit with. Otherwise you will get nowhere.”
Her idea met a lot of resistance. “Let’s put it as it is: the elite are looking for ways to stop global warming, without wanting to change their own lifestyle,” SP MP Mahir Alkaya tweeted. “So this is just a plea for leveling, isn’t it?” opinion maker Sander Schimmelpenninck objected to the critics. “Yeah, of course you don’t understand that.”
Old piece of theory from stable
Baarsma’s idea is not new: meteorologist and weather forecaster Gerrit Hiemstra suggested it last year in an interview in It Financial Newspaper – resulting in the same Twitter storm. And Hiemstra had also recycled the idea. “It was already circulating at the European Commission in the 1990s,” says Johan Albrecht, professor of economics at Ghent University and author of the book. Climate neutral in 2050?. “At the time, people thought of a kind of extra bank card on which CO2-credits from families were kept and you had to use them for refueling, for example.” It was “of course” impracticable, he says – there was no internet then.
We must recognize that our contemporary consumption pattern is unsustainable. This is emphasized by this.
Jaap Tielbeke author book ‘A better environment does not start with yourself’
Baarsma gets an old piece of theory from her stable, says emeritus professor of environmental economics Aart de Zeeuw (Tilburg University). According to environmental economists, you can reduce pollution in two ways. Both ways assume that there must be a price for citizens and companies.” One way (and according to almost all economists the best) is to introduce that price with a levy: a CO2so tax. You just don’t know in advance how much pollution will be reduced. In other words: at what price you achieve the desired effect. Road pricing, which the government wants to introduce in 2030, is a form of CO2-tax.
The second way is the plan for a CO2-budget. “You determine that budget in advance, cut it into pieces and then a market is created and a price on that market automatically,” says De Zeeuw. “In theory, such a system of 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 European Union. For citizens, however, it is totally impracticable, economists say. “Implementing that is crazy,” says De Zeeuw. “You need a huge system of control. And how are you going to calculate the exact emissions of all those things and activities?”
Moreover, 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. “Kerosene tax, solar panels on all public roofs, abolishing the subsidy for the fossil sector of 17.5 billion. That’s the low hanging fruit. Those things don’t happen now, because of all kinds of interests. That’s the real problem that we should be focusing on. This proposal does not add much value.”
‘Disregarding’ 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 only 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 does not start with you. “A solution that only an economist can come up with: we just make a calculation and let the market do its work and then everything will be fine. 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 those kinds of things if you want to introduce something like that.”
Purely as a thought experiment, it might be valuable, he thinks. “We have to recognize that our current consumption pattern is unsustainable. This is accentuated by this.”
Read alsoThe price of a ton of CO2 can make – or break the climate
Professor Bezemer also thinks it is a disadvantage that the responsibility of sustainability with a CO2budget is allocated to the public. The energy transition, he says, will not happen from the bottom up. “That’s a popular idea, because people can tell stories with it: we’re all going to drink oat milk, that idea. But this transformation must be coordinated. 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 by definition revolves around political and ethical questions, say economists. It’s 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 (Free University). “Between rich and poor countries, and between rich and poor people within countries. That is why it is very good to think about redistribution and to look at the impact of policies on income groups. Those are political choices.”
Transition must be ‘inclusive’
The energy transition, according to Johan Albrecht, must become an ‘inclusive project’. “Who drives a Tesla around? Those are the high incomes. The low incomes must also be able to benefit, otherwise you will get a dichotomy in society. So we don’t just have to look for the right price instruments for the private market; the government must also provide green public facilities.”
The plan for a CO2budget also provides for such questions: after all, it redistributes money from rich to poor, because people who consume little can sell their emission rights. Precisely that element kicked many people against the sore leg. But to what extent is this method of redistribution different from, say, leveling through income tax? And don’t rich people always have more options than others? The effects on inequality in society, economists say, depend entirely on how you do it. Everyone an equal amount of allowances may seem fair, but it probably isn’t. “If you’re poor, you may be living in a very energy-inefficient home,” says Johan Albrecht. “And you don’t have the means to make it more sustainable. Rich people do have that and can then save rights. So why give them free rights? 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 increases due to the 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 is precisely not where the problem lies,” says Bezemer. “Almost half of global emissions are caused by the 10 percent richest in the world.”
According to economists, the best way to redistribute money is through taxes on income and wealth. And not indirectly, through salable emission rights. “I don’t think poor people would be very happy either,” says Aart de Zeeuw. “‘We can’t fly but we do get a little money to pay our electricity bill, well thanks!'”
Actually, he says, there are for the two dreamed effects of such a CO2budget, sustainability and redistribution, so much better methods. And eventually every solution for the energy transition, including the dreamed-up CO2levy, lead to new inequalities. It can be combated with taxes.