WC Archive

It's not hard to poke holes in the TEQs concept. Having to make certain purchases using two accounts (one for the money, the other for the carbon) is awkward, at best. Cheating would be rampant, and measures to cut down on it would inevitably lead to greater government monitoring of personal behavior. Theft of TEQs cards would be a problem. Both too-slow and too-fast compliance can upset the scheme, the first by pricing the remaining units out of the reach of all but the wealthiest, the second by pricing the remaining units so low as to create a perverse incentive for the hold-outs to stay hold-outs.

What TEQs (as well as DTQs and other, similar plans, such as "Personal Carbon Allowances") do correctly, however, is to identify an underlying positive approach to getting people to do the right thing with a commonly-held good (in this case, the environment).

Incentives to reduce carbon can take a number of forms. The moral incentive would be to remind people at every opportunity why they need to reduce their carbon outputs, so that the good-hearted and wise can do so; unfortunately, the "good-hearted and wise" do not constitute a sufficient plurality of us to make a real differnce. This is, more or less, the situation in which we now find ourselves.

Another option could be the negative incentive, wherein the emission of increasing amounts of carbon results in increasingly painful punishments, something that people will take active measures to avoid; unfortunately, punishments nearly always lead to resentments, and an effort not just to avoid the punishment but to get rid of the system of punishment. This is the "carbon tax" scenario, and while it has the advantage of being easy (in principle) to implement, its inherent regressivity and the broad cultural aversion to taxes pose significant challenges.

The remaining option would be the positive incentive, one making the desired behavior lead to rewards of some kind. This idea of a positive incentive underlies Fleming's call for TEQs: the better you are at avoiding carbon emissions, the more money you can make by selling your leftover quota units to other people.

But if TEQs aren't an optimal form of positive incentive, what is?

It's a difficult question to answer. Efficiency Tax Credits, for example, would be the positive-incentive mirror version of Carbon Taxes, giving people temporary (or even permanent) reductions of their taxes when they make certain high-efficiency purchases. It wouldn't have to be just hybrid cars and home insulation, either -- the tax credit could come from buying a bus pass, a home within a certain distance of work, or keeping net power use below a certain point. This, too, would lead to cheating, such as the creation of goods and services that met the letter but not the spirit of the law. And potentially large tax breaks are hard to imagine having a long life in a time of massive deficits.

It may be that we end up with a carbon tax scheme simply because it's simple to implement, and the mechanisms for avoiding its problems are familiar (e.g., low-income credits, compensatory reduction of other taxes). The one aspect of carbon taxes that will be harder to fix is something inherent to all "sin" taxes: if it's successful, it loses steam as a source of revenue. We see this happening right now with gasoline taxes -- proposals to change to miles-traveled taxes (instead of gallons-consumed) is a direct result of the growing popularity of high-mileage vehicles like hybrids.

Even if I don't fully support the TEQs idea just yet, I do have to give Fleming -- and the other proponents of tradable rations -- credit for trying to come up with a novel solution to the problem of excessive carbon emissions. TEQs may not be the final answer, but they may well point us in the right direction.