The Best Climate Policy You've Probably Never Heard Of

Current strategies to combat climate change aren't working. Carbon emissions are still increasing. But there is a way forward that would actually reduce carbon emissions--a way that's simple and transparent and that would enable long-term planning for policy makers, as well as greater security for the general public. Spoiler alert: there's a hitch.

Before exploring this alternative pathway, let's take a brief look at three current strategies to halt global warming that, despite good intentions, are not working.

Without cap-and-ration, the world's policy makers will most likely continue to dither with proposals that appear to reduce emissions without actually doing so.

Solutions involving energy substitution aren't working. While the world is increasing the levels of solar and wind power in its overall energy mix, annual growth in total energy usage still exceeds these renewable additions except in years of severe economic recession. Solar and wind are just supplementing, not displacing fossil fuels. So, despite significant spending and policy effort, we're pumping more CO2 into the atmosphere now than we were just a few years ago (probably just not quite as much more as we would if no substitution efforts had been undertaken).

Divestment isn't working. The idea is ingenious: if activists can starve the fossil fuel industry of capital by persuading institutional investors to stop buying shares in companies like ExxonMobil, and by talking banks into loaning no more money for extraction projects, then production rates for oil, coal, and natural gas should eventually fall. It's a worthy effort, but in spite of heartening successes at getting pension funds and university endowments to back away from investments in the oil, coal, and gas industries, those industries are finding plenty of money to fund projects.

Finally, taxing carbon isn't working. Nearly 50 countries have some form of price on carbon, either through carbon taxes or emissions trading schemes. Economists generally agree that carbon taxes should eventually work; but, so far, the taxes haven't been high enough, or enacted in enough places, to actually turn the tide. Also, a tax gives no guarantee of actual reduction in fossil fuel usage, since money can simply be created by government borrowing and spending to subsidize the higher cost to fuel purchasers.

Many would argue that these are the best available means for turning the tide against climate change, and that we just need to try harder. Perhaps incremental progress could be made by doubling down on building solar panels, waging divestment campaigns, and lobbying for stiffer carbon taxes. But why not consider a policy that could achieve something beyond incremental success?

Here's an altogether different approach, one that has received little attention from climate scientists, activists, or policymakers. The essence of the plan is simplicity itself: just directly reduce fossil fuel production and consumption. I mentioned at the outset that there's a hitch, and I'll get to that in a moment. But first, let's explore the idea in a little more detail.

Directly reducing global production of oil, coal, and natural gas might best be accomplished through a process with three concurrent elements.

First element: through international treaty, legally cap the total amount of coal, oil, and natural gas that can be produced globally each year. Then allocate (i.e., ration) production volumes to companies and countries proportionally, based on historic production rates using the last ten years' averaged production statistics. Each company or country would have the right to trade or sell any part of its annual production quota to any other company or country; thus, the fuel industry as a whole could adjust its investments to take advantage of higher-grade resources or more efficient production techniques. Production caps would decline annually, with the rate of decline set by a global Committee on Climate Change, whose deliberations would be based on scientific consensus, independent of government. Coal would be phased out fastest, then oil, then natural gas (in view of the relative carbon intensity of these fuels).

Second element: tax windfall profits of the fossil fuel industry globally. With production caps in place, prices for coal, oil, and gas would likely rise, with increasing profits (per unit of output) going to fuel industries. Tax those profits at a high rate, and distribute the revenue as rebates to people with low incomes who have no current alternative to fuel usage, and to crucial commercial energy users such as farmers, to help with higher energy bills; also use the revenue to fund energy-efficient and low-carbon alternative energy infrastructure, supplying it preferentially to countries, communities, and households with low incomes. Also use the money to help localities transition to lower-energy and more resilient ways of meeting people's basic needs for food, housing, and transportation.

Third element: don't just ration production; ration consumption as well--at the national level. This gets more complicated. Rather than diving into the weeds here, I'll briefly describe (at the end of this article) an already well-thought-out energy rationing system. Why ration consumption? Because doing so will make it much easier for individuals, businesses, and governments to adapt fairly to changing energy availability. Rationing has a long and mostly successful history in helping societies adapt in times of scarcity, and as a tool in alleviating poverty.

The details remain to be ironed out, and the general proposal I've just outlined could be modified in various ways. For example, production permits could be sold rather than allocated, with revenue distributed the same way as windfall profit taxes. What's important is the basic mechanism: cap and ration fossil fuel production, while also rationing consumption.

Why is cap-and-ration better than just calling for more funding of green infrastructure? Substitution strategies are based on the underlying assumption that reducing fossil fuel consumption will threaten economic growth, while installing more low-carbon energy sources will support economic growth. But will we in fact be able to maintain economic growth by building more solar panels and wind turbines while cutting fossil fuels usage? That's controversial: many people (including some environmentalists) think renewables aren't up to the job. Others say renewables can power us to a new age of energy abundance. The approach described here does not take sides in that debate. The fact is, burning fossil fuels releases greenhouse gases that are triggering catastrophic climate change. Therefore, the important thing is to reduce fossil fuel extraction and combustion. If we can enjoy solar-and-wind-powered economic expansion at the same time, that would certainly make a lot of people happy. But if we can't, then we should remember that fossil fuels are finite and depleting anyway. We will have to make do with shrinking amounts of them at some point. Why not deliberately engineer the decline now, in time to avert climate catastrophe, and in a way that's controllable, fair, and predictable? Then, if economic pain actually does ensue from living with less oil, coal, and gas, we can cooperatively limit and manage that pain.

By now you probably see the hitch. Getting the world's governments to agree on anything at all is challenging, and negotiating a global agreement typically takes years of hard effort. Getting every country to sign up to produce and use less of the very fuels that have driven economic growth over the past century or two would be extraordinarily difficult. In contrast, current global climate agreements have been easier to forge, because they just focus on pledges to lower emissions--and those pledges are hedged on all sides by carbon trading schemes, carbon offsets, and poorly funded aspirational plans for building renewable-energy or carbon-capture infrastructure. The result: actual emissions keep rising.

The challenges in reaching a global cap-and-ration agreement include, for example, convincing fuel exporting nations like Saudi Arabia to give up significant sources of national revenue, or talking coal-dependent nations like China into agreeing to phase out coal more quickly than other fossil fuels. But those are difficulties that will have to be faced one way or another anyway, if real progress (by whatever means) is to be made in lowering global emissions.

Further, a global cap-and-ration agreement would be harder to achieve than a global carbon tax. Yet, it would be arguably far better than a carbon tax, as there could be no gaming of the system by subsidizing fossil fuels on one hand while taxing them on the other. Emissions would decline because fossil fuel production and usage would decline. Simple and foolproof.

After contemplating the likely roadblocks in gaining universal buy-in to a global cap-and-ration scheme, it's easy to adopt a cynical attitude that says, in effect: "That's what we'd do if we were a rational species able to think ahead and give up immediate gratification in favor of long-term survival. But we're not, so we're headed for climate doom." As I document in my recent book Power, the capacity for self-limitation exists everywhere in nature; further, human societies through the ages have found innumerable ways to restrict population growth and consumption of natural resources in order to stay within environmental limits. Sometimes those efforts have been insufficient and societies collapsed as a result, but self-limitation is always a real option nevertheless. So, if we are capable of restraining aspects of our own behavior that are ultimately self-destructive, why aren't we doing that now with regard to carbon emissions? There are likely many explanations. But one reason may simply be that the single strategy that would actually work to avert catastrophe--cap-and-ration--is not part of the public discussion.

If cap-and-ration is a good idea, then it should occur independently to many people. It already has; in fact, it's difficult to say who came up with it first. Aspects of cap-and-ration can be found in proposals and publications going back decades, including my 2006 book The Oil Depletion Protocol, which suggested a global cap-and-ration scheme as a way to avert economic disruption not just from climate change, but from oil depletion as well (the book was based on a proposal by geologist Colin Campbell). Years earlier, British economist David Fleming came up with an energy rationing system called Tradable Energy Quotas (TEQs), which I'll describe below. However, it really matters little who deserves the credit; what's important is whether the plan is workable.

Current proponents of cap-and-ration (in some form or other) include:

• Stan Cox, US author of The Green New Deal and Beyond, and a book on the history of rationing, Any Way You Slice It.
• Kevin Anderson, British climate scientist, who told the BBC in 2009: "When you have something essential like energy that you can't ration just on price--you have to ration it in a more equitable way."
• Jason Hickel, British economic anthropologist and author of Less Is More: How Degrowth Will Save the World.
• Peter Kalmus, US climate scientist and author of Being the Change.
• The UK's Fleming Policy Centre, headed by Shaun Chamberlain.
• Larry Edwards, engineer and co-author with Stan Cox of a key article in Solutions Journal titled "Cap and Adapt: Failsafe Policy for the Climate Emergency."
• Seth Klein, Canadian author, public policy researcher, and team lead with the Climate Emergency Unit.
• The Irish environmental economics organization FEASTA, which advocates "Cap Global Carbon" and "Cap & Share."

Discussions about cap-and-ration at the governmental level have included officials from Britain and Ireland; but, so far, those talks have been only exploratory, with no commitments for action or even further study.

The purpose of this article is to raise general awareness about cap-and-ration as an option. If there is to be any chance of its implementation, the plan will require the initial buy-in of environmental organizations, then the general public, and finally policy makers.

If cap-and-ration proves to be politically unattainable, then we should be honest with ourselves about the consequences. Without cap-and-ration, the world's policy makers will most likely continue to dither with proposals that appear to reduce emissions without actually doing so. Horrific consequences from those emissions will ensue. And young people around the world, whose lives will be tragically impacted, will give up on policy solutions and look for other strategies. Some may turn to industrial sabotage as a way to save the last vestiges of a livable climate.

A final, timely note: there are currently calls to embargo Russian oil and gas exports in the wake of the Ukraine invasion. Russia produces roughly a tenth of world oil, so such an embargo would have significant economic and geopolitical implications. From a climate standpoint, choking off Russia's exports might accomplish approximately what a global production cap would--though not in a context of cooperation and planning, but rather in one of competition and conflict. And there would likely be no effort toward energy equity via consumption rationing, and no mechanism for further production cuts. In short, it's about as bad a means to cut global oil production as could be imagined, delivering the same pain as a production cap but few of the side benefits and lots of extra risks.

Above, I promised a longer discussion of what might be involved in a national energy consumption rationing program, and that's probably a good way to end this article. Here is a short description of David Fleming's Tradable Energy Quotas (with most of the wording borrowed from the TEQs website).

Tradable Energy Quotas (TEQs): What They Are and How They Would Work

Rationing of fossil fuel consumption at the national level could be done by way of tradable energy quotas, or TEQs, a system initially suggested by the late British economist David Fleming over two decades ago. TEQs have been discussed and researched by the British government. The system would work as follows.

Each adult would be given an equal free entitlement of TEQs units each week. Other energy users (Government, industry, etc.) would bid for units at auction. When buying fuel or electricity, units corresponding to the amount of energy purchased would be deducted from the buyer's TEQs account; they would still need to pay for the energy. All fuels and electricity supplies would carry a "carbon rating" in units, with one unit representing one kilogram of carbon dioxide--or the equivalent in other greenhouse gases--released in the fuel's production and use. This would determine how many units are needed to make an energy purchase (thus giving a competitive advantage to low-carbon energy). If a person used less than their entitlement of units, they could sell the surplus. If they needed more, they could buy them. All buying/selling would take place at a single national price, which would rise and fall in line with demand. The total number of units available would be set out in the annual TEQs Budget, which would be integrated with fossil fuel production caps. Government would itself be bound by the TEQs system; its role would be to support the country in thriving on the available energy. Since the national TEQs price would be determined by national demand, it would be transparently in everyone's interest to reduce their energy demand, and to work together, encouraging a national sense of common purpose.