Climate Leadership Council-Carbon taxes Mk.2

We need to reduce carbon emissions, everybody knows that. Curbing and reducing current levels of Carbon Dioxide is pretty much the only way of reducing climate change. But how is the hard question; there have been a few attempted answers. The Climate leadership council (CLC) propose a Cap and Dividend system. Learning from the mistakes of the past, should be a good spring board for the CLC. Sadly there is still a lot of work to do in this field.

What is a Cap and Dividend? Well the Cap refers to limiting the total amount of carbon dioxide emissions a country produces in a year. The amount of Carbon dioxide emissions are broken down into smaller blocks which are auctioned to industry in that country. The dividend part means the income generated from the sale of these blocks is distributed to every member of the public equally, not taken as profit for the government as previous carbon taxes have suggested.

Previous criticism of these schemes have been ridiculed as ‘anti-business’ policy [1]. Something that would not sit well in the right wing governments of America or the UK. However this solution partly avoids this issue, as the government doesn’t profit from the scheme, and money is returned to the economy. Furthermore there would be no secondary markets, an opportunity to over produce Carbon Dioxide and take it out of the atmosphere through processes such as planting trees. This distracts from the long term aim of reducing Carbon Dioxide emissions by continuing processes which at point of production are not efficient.

So initially this seams to solve some of the problems Economists and Scientists have faced. Proponents may even tentatively suggest that it circumvents political disagreement as the Dividend rewards equally, regardless of economic status and social factors.

Sadly on close inspection this scheme falls short of a success. Small business seem to be ignored. There buying power in a national market, dominated by international concrete and steel manufactures would be small. At the least, partial adaption of this plan would be required before it would be successful for all. This could be done by breaking down the emissions into sectors, with Carbon limits for each sector. This would better preserve the buying power of smaller business. But this adds complication, lobby groups would be the first of many bodies who would debate and fight for there sector, soon eroding the success of any cap.

This scheme tries to distance it self from the penalising nature of the Tax, but at the end of the day is another cost of business. Perhaps a better way forward would be rewarding low carbon energy production such as wind turbines or solar panels on sight. But this bottom up approach requires long term thinking, these technologies have a high start up cost and strain the scope of politics. One example of this is the now unsubsidised industry of wind farms in the UK, which has now become a poor investment for a business to make. But all government funding is very vulnerable to political thinking, which changes on a 4 year cycle.

This isn’t a pessimists view, but a realists. Everyone has a vested interest in the success of a scheme like this, which is novelly achieved through a dividend. But for now it is back to the drawing board for CLC, hopefully it won’t be to long before workable solutions emerge.



  1. Tyler Cowen (2012), An Economist Gets Lunch: New Rules for Everyday Foodies, Penguin, (

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