-------- Original Message --------
Subject: 	Larry Elliott on cap and share in Guardian and response
Date: 	Mon, 25 Aug 2008 10:07:04 +0100
From: 	Brian davey <[log in to unmask]>
Reply-To: 	[log in to unmask]
To: 	Undisclosed.Recipients: ;



Can a dose of recession solve climate change?

Subverting the growth-at-all-costs model is appealing but not politically 
feasible
 
Larry Elliott, economics editor 

The Guardian, 
 
Monday August 25 2008
 
Britain has just suffered its weakest period of growth since the recession of 
the early 1990s. The economy "ground to a halt" in the second quarter of the 
year - the worst performance since the first quarter of 1992. The signs are 
that the news will get even more grim in the second half of this year.
Note the deliberate use of language. In the world of conventional economics, 
countries suffer periods of weak expansion but enjoy spells of strong growth. 
When the economy fails to grow that is axiomatically a worse performance than 
when it does. It is "grim" news that Britain may fulfil the technical 
definition of recession - two consecutive quarters of negative growth - in 
the second half of 2008.

This may strike some as a strange way of looking at things. Sure, the global 
economy is slowing. But what's so bad about that? Is it, in fact, bad news 
that the world economy will no longer grow at its recent rate of 5% a year? 
And if the answer to that question is "no", wouldn't it be good news if this 
modest retrenchment was turned into a full-blown slump? Indeed, why stop 
there? Shouldn't those who fear for the future of the planet pursue something 
akin to the Great Depression of the 1930s? 

It's an interesting thought. Logically, if the obsession with growth at all 
costs has increased emissions to the point where rising temperatures pose a 
threat to mankind's existence (as many experts believe) then a prolonged 
period of slow or negative growth will limit the damage to the environment. 
At the very least, it would provide a breathing space to come up with an 
international agreement on how to tackle the problem.

There are many reasons why it is not quite as simple as that. My rudimentary 
understanding of the science of climate change is that concentrations of 
greenhouse gases have been building up over many decades, and you can't 
simply turn them off like a tap. Even a three- or four-year 1930s-style 
global slump would have little or no impact, particularly if it was followed 
by a period of vigorous catch-up growth. On a chart showing growth since the 
dawn of the industrial age 250 years ago, the Great Depression is a blip. 
Similarly, Britain's trade deficit always comes down in recessions because 
imports go down, but then widens again once the economy returns to its trend 
rate of growth.

Politically, recessions are not helpful to the cause of environmentalism. 
Climate change is replaced by concerns about unemployment and stimulating 
growth. To be fair, politicians respond to what they hear from voters: Gordon 
Brown's survival as prime minister depends on how well his package of 
economic measures is received, not on what he does or doesn't do to limit 
greenhouse gases.

Looking back, it is clear that every advance in the green movement has 
coincided with period of strong growth - the early 1970s, the late 1980s and 
the first half of the current decade. It was tough enough to get world 
leaders to make tackling climate change a priority when the world economy was 
experiencing its longest period of sustained growth: it will be mightily 
difficult to persuade them to take measures that might have a dampen growth 
while the dole queues are lengthening. 

Those most likely to suffer are workers in the most marginal jobs and 
pensioners who will have to pay perhaps 20% of their income on energy bills.
Hence, recession does not offer even a temporary solution to the problem of 
climate change and it is a fantasy to imagine that it does. The real issue is 
whether it is possible to challenge the "growth-at-any-cost model" and come 
up with an alternative that is environmentally benign, economically robust 
and politically feasible. Hitting all three buttons is mightily difficult but 
attempting to do so is a heck of a lot more constructive than waiting for 
industrial capitalism to collapse under the weight of its own contradictions.

Richard Douthwaite, author of the Growth Illusion in the 1990s, has come up 
with one possible way forward, which he calls Cap and Share. His analysis 
begins with three propositions - firstly that there needs to be a ceiling on 
carbon emissions at their current level; secondly, that rising oil and gas 
prices are leading to windfall gains - so-called economic rents - for oil 
producing countries and energy companies; and thirdly, that this 
redistribution of wealth will have the same sort of detrimental impact on the 
global economy and its tottering financial system as the first wave of 
petro-dollars from the Opec countries in the 1970s and early 1980s.

According to Douthwaite, most oil fields were developed on the assumption of 
oil prices at $20 (£10) a barrel. Last year, the cost of crude averaged $64 a 
barrel, and Douthwaite estimates that half of the $1,975bn paid for oil last 
year was a "scarcity" rent to fossil fuel producers. That represented a loss 
of income of $150 to each person on the planet. Oil prices look certain to 
average well over $70 a barrel in 2008, and at $120 a barrel, Douthwaite says 
oil producers would be making excess profits worth around 6% of global 
output.

"The problem with that is that the producers are not buying and consuming 
anything like that part of the world's production," he added. "Instead, they 
are either lending the rent out through the wholesale money markets or using 
it to buy stakes in banks or property in heavily oil dependent countries."
Douthwaite's idea is that everybody should get their fair share of the rent 
that derives from the scarcity of fossil fuels. There would be a new world 
energy agency with the task of cutting carbon emissions and it would do so by 
issuing permits for the amount of CO2 it believed consistent with this 
objective. These permits would be scarcer than the supplies of fossil fuels, 
which would raise their price. Consumers would realise their share of the 
economic rent from the sale of such permits to the oil producers. People in 
the poorest parts of the world, with low energy consumption, would gain most.

The proposal is certainly an alternative to the "growth-at-all-costs model" 
and has definite economic attractions - the avoidance of a slump caused by 
the ferocious squeeze on energy consumers. Whether it is politically feasible 
is another matter. Douthwaite believes his scheme may be considered 
hopelessly utopian. Sadly, he may be right.

Cap & Share: Richard Douthwaite feasta.org

[log in to unmask]

Dear Sir,

Larry Elliott seems to write off the idea of a global Cap and Share (C&S) 
arrangement as a nice idea but hopelessly utopian ("Can a dose of recession 
solve climate change?" Guardian August 25th). However, given the perilous 
economic and climate predicament, it would surely be better to try to 
envisage a credible process that could bring it about.

A step by step approach to a global system might be initially through national 
cap and share arrangements. C&S is being considered as a possibility in 
Ireland for controlling non ETS emissions and it could be in other countries 
too. In countries adopting "Cap and Share" energy suppliers would have to buy 
permits to sell fuels, based on their carbon content, directly from the same 
populations who are increasingly hard pressed by rising energy prices.  If  
found to work in a number of individual countries C&S could provide an 
operational model for a number of energy importing countries who might then 
adopt it in a joint arrangement in dealings with the major fossil fuel 
exporting countries. It is in any case not in the interests of these fossil 
fuel exporters to earn such high rental incomes that they crash the world 
economy - what would become of the value of their "sovereign wealth funds", 
invested in western banks and stock markets, if they did that? A global deal 
redistributing energy rents, while cutting carbon, could provide an important 
part of an energy and climate package so desperately needed for post 2012.

Politicians are increasingly seeing that to make emissions control palatable 
citizens will have to share carbon revenues. They are beginning to see carbon 
revenues as a pot to dip into to cope with fuel poverty. Cap and share 
schemes in individual countries whose schemes were subsequently harmonised 
would be logical next steps.

Yours sincerely

Brian Davey
Cap and Share Britain