Allocation of tradable allowances to all, to drive the energy transition

An obvious solution confronted with an almost universal denial

Pierre Calame, June 2021

In France in 2019-2020, a panel of 150 randomly selected citizens are working for six months, within the Citizens’ Climate Convention, to develop proposals to drive the energy transition and preserve the climate in line with the French government’s repeated international and national commitments. Four months after the beginning of this process, which is radically innovative in French political culture, and after the hearing of numerous experts, the panel has not had any opportunity to be presented, and a fortiori to debate, a systemic solution that is nevertheless obvious if we want to reconcile the effective conduct of the transition and social justice: that of allocating each year to each resident on the territory an equal number of « carbon points » corresponding to a right to emit CO2.

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1. Why is this an obvious solution and the only one that reconciles efficiency and social justice?

The strategies adopted, notably through taxation, have always failed. This is the case of carbon taxation, which has led to transfers of production to other countries and subsequently to social revolts such as the yellow vests. The increase in prices essentially affects the poorest populations and leads to the need to set up a redistribution mechanism. This rationing of energy poses a debate on the very principle of an emission ceiling. If we take a closer look at energy emissions as such, it is important to highlight « grey energy », which corresponds to the consumption of imported goods and services, and not only the emissions on French soil. The solution of quotas is the only valid one, implying an equal distribution based on the ability of the richest to sell a part of their « share of the cake ».

2. If this measure is so obvious, why is it the subject of a real « law of silence »?

The definition of quotas and their reduction year after year implies a duty of efficiency. However, political leaders refuse to accept this criterion and do not want to sacrifice economic growth. The need to establish a new development model and way of life is apparent. It is possible to explain the « law of silence » with the axiom of money. It is the idea that everything can be substituted for everything. It is the idea that the increase in the price of energy will cause people to change their consumption habits. The very idea of quotas is being put to the test in the public space. The system, based on the sale of carbon credits, is being questioned because it still participates in the domination of rich countries over the poorest. Despite changing their production system, rich countries and companies prefer to transfer their carbon credits to the poorest countries.

3. The fundamental logic of tradable allowances

The allowance system requires carbon traceability to function. This mechanism is made easier by several developments :

The generalization of electronic money thanks to bank cards and payment by telephone.
Corporate accounting with a monitoring obligation that even gives rise to a law of the same name in order to monitor the practices of suppliers and subcontractors.
The new technology of « block chains » with, for example, bitcoin

The poorest families are those with the lowest energy efficiency. The cost of energy is translated for them by fuel poverty. However, they will be the first beneficiaries of the quota system which will allow the increase of household income thanks to the sale of points. The major problem of the energy transition lies in the existence of projects with sufficient profitability and not the money available. The current problem is the inability to reduce our energy consumption.

4. The transition period and the management of trade with the outside world

This section looks at the extension of the quota system to the European level. To this end, three unification processes are at work :

The unification of accounting standards: this involves a financial approach and a valuation of companies « at market value ».
Negotiations on standards: the plurality of standards is perceived as a major obstacle to international trade.
The generalization of chain of custody studies: we are approaching the obligation of traceability.

Carbon points are obtained through the sale of goods and services. If the sale is on the national market, the carbon points are contributed by the customers. If it is a sale abroad, there are no carbon points from the customer to the supplier.

5. Links between this systemic proposal and the proposals under discussion at the Convention

The concept of allowances induces an obligation of result, which leads governments to ignore this concept. There are recommendations under discussion at the Convention that address the broader environmental issue. They suffer from two defects : the difficulty of imposing them as such and the lack of measurement of their real scope. Finally, the energy transition calls for a more profound transformation of the educational system. Indeed, it is essential to educate the younger generations about environmental problems and issues. Finally, what seems most important would be to initiate an evolution of the law of political responsibility and its enlargement. As political irresponsibility is almost total today, we must aim for political responsibility in the legal field in particular. In the 21st century, the great change in responsibility is to move from a responsibility for means to a responsibility for results.