One of the most sensible ways of putting a price on emissions is the fee and dividend scheme devised by James Hansen of Columbia University. It is also probably the most acceptable for those on the right which would prefer a fiscally neutral approach. I hadn’t realised that there is already a fee and dividend scheme in place in British Columbia. This scheme is described by Dana Nuccitelli’s column in the Guardian: http://www.theguardian.com/environment/climate-consensus-97-per-cent/2013/jul/30/climate-change-british-columbia-carbon-tax?goback=%2Egde_1140337_member_262157446. It seems to work. True, one swallow does not make a summer, but even one swallow is better evidence of summer than a waxwing -they visit in the winter.
It would not take much to adapt the EU ETS to a fee and dividend scheme, with all the additional benefits of being an ETS – i.e. definitive emissions targets and a market mechanism.
It just takes two steps:
(1) To eliminate the free allocation so that all issuance of allowances is by government auction
(2) To redistribute the auction proceeds to residents of the auctioning country.
The elimination of the free allocation is already in process. By 2027 it will be gone even under the current rules. 2027 is too long to wait, so that should be speeded up.
Then we need to get governments to agree to give back auction proceeds to their people rather than pocket them. You probably don’t need to change the EU ETS Directive for this – governments could make the rebate via their own annual budget legislation.
Assume 2 billion EUAs are sold annually. Assume a price of 10 euro. Assume 500 million EU residents. That’s a 40 euro cheque for every woman, man and child in the EU.
So here is a system which is fiscally neutral, has a quantified emissions target, has a market mechanism, and gives everyone a little smile once a year. Policy makers in member states and Brussels should get working on it immediately.