Cap and Share

This framework for phasing out fossil fuel production was originally devised by Feasta in 2005 and 2006. Cap and Share calls for fossil fuel production to be capped at its current level and then diminished year by year at a rate fast enough to guarantee a global emission trajectory in line with the Paris Agreement goals. The IPCC refers to ‘Cap and Share’ as a policy mechanism used for “distributing emissions permits on an annually declining basis with legislation to prohibit the overshoot of established carbon budgets.”{{cite book |doi=10.1017/9781009325844.003 |chapter=Point of Departure and Key Concepts |title=Climate Change 2022 – Impacts, Adaptation and Vulnerability |date=2023 |pages=121–196 |isbn=978-1-009-32584-4 }}

Cap and Share has two main variants. In the variant currently promoted by Feasta along with several other organizations and economists (see section ‘Support from economists and the population’ below), companies in carbon-intensive sectors would be obliged to buy permits for their production (or imports, in a non-global system) each year, and the funds generated by the permit sales would then be shared out to the population on a per-capita basis. The sale of the permits could be done by auction. A floor price might be necessary to ensure that adequate funds would always be raised to ensure the functionality of the system.

These cash transfers, if distributed per-capita, would be economically progressive because the wealthy - who tend to use more fossil fuels - would be obliged to pay compensation to everyone else for this, while those who use fewer fossil fuels - who tend to be lower-income - would gain financially. For example, in his 2024 book “A Global Plan to End Climate Change and Extreme Poverty”, Adrien Fabre proposes that the revenues generated by a Cap and Share system could be used to fund a global basic income for all individuals over the age of 15. In the initial years, this transfer is estimated at €44 per month, an amount sufficient to lift the 700 million people living on less than €2 a day out of extreme poverty. According to Fabre, the revenue is expected to increase in the first decades of implementation before gradually declining as global emissions approach net zero. The Plan would involve a redistribution equivalent to 1.2% of global GDP, transferred from the 29% of the population with a carbon footprint above the global average to the 71% with a lower carbon footprint. As a result, 71% of the global population would benefit financially from the Global Climate Plan, while losses for those contributing more would rarely exceed 2.5% of their income.

Image:Capandshare02outline.jpg

This solution is based on the polluter pays principle, a fundamental principle in economics, first introduced by Pigou (1920){{Cite book |last=Pigou |first=Arthur Cecil |title=The Economics Of Welfare |publisher=Macmillan and Co. |year=1920 |location=London}}. It holds that external costs - such as the damage caused by climate change - should be borne by those responsible, namely greenhouse gas emitters. This can be achieved through a carbon tax or a carbon market. By imposing a cost on emissions, the carbon price incentivises polluters to either reduce their polluting activities or decarbonise, as these alternatives become comparatively more affordable. The revenues generated from emissions pricing should be used in ways that maximise societal benefit. In the context of climate change, the simplest solution would be to distribute these revenues equally, effectively granting each person an equal emissions permit.

If the future were known with certainty, then the economic implications of Cap and Share would equal the economic implications of a carbon tax with lump sum recycling—that is, the carbon tax revenue would be used to send every household a cheque in the post. Some argue that lump sum recycling is an inferior way to recycle the revenue of environmental taxes,{{cite journal |last1=Goulder |first1=Lawrence H. |title=Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis |journal=Journal of Environmental Economics and Management |date=November 1995 |volume=29 |issue=3 |pages=271–297 |doi=10.1006/jeem.1995.1047 |bibcode=1995JEEM...29..271G |doi-access=free }} and that this has been repeatedly confirmed for Ireland.{{cite report |last1=Bergin |first1=Adele |last2=FitzGerald |first2=John |last3=Kearney |first3=Ide |title=The Macro-Economic Effects of Using Fiscal Instruments to Reduce Greenhouse Gas Emissions (2001-EEP/DS8-M1) Final Report prepared for the Environmental Protection Agency |date=2004 |url=https://www.esri.ie/publications/the-macro-economic-effects-of-using-fiscal-instruments-to-reduce-greenhouse-gas |publisher=Environmental Protection Agency }}{{pn|date=June 2025}}{{cite journal |last1=Conefrey |first1=Thomas |last2=Fitz Gerald |first2=John D. |last3=Valeri |first3=Laura Malaguzzi |last4=Tol |first4=Richard S.J. |title=The impact of a carbon tax on economic growth and carbon dioxide emissions in Ireland |journal=Journal of Environmental Planning and Management |date=September 2013 |volume=56 |issue=7 |pages=934–952 |doi=10.1080/09640568.2012.709467 |bibcode=2013JEPM...56..934C }} The rationale is that with the carbon tax revenue coming into government coffers, it could be directly spent by the government rather than distributed to the population via cheques, and that other kinds of taxation, such as labour taxation, could be decreased correspondingly. It is argued that this would have a positive effect on GDP since there would be a greater incentive for firms to increase employment, and that it would also positively affect social equity, since labour taxes are regressive by nature.

Cap and Share advocates argue that it is impossible to guarantee that emissions reduction targets will be reached by using a purely price-based mechanism for emissions reduction. From their perspective, a definite, substantial decrease in greenhouse gas emissions, carried out in an equitable way so that the poor are not adversely affected, is well worth a possible decrease in GDP (a highly problematic instrument for measuring wellbeing, as underlined by the Stiglitz-Sen-Fitoussi CommissionStiglitz, Joseph E., Amartya Sen, and Jean-Paul Fitoussi. “Report by the Commission on the Measurement of Economic Performance and Social Progress.” Paris: Commission on the Measurement of Economic Performance and Social Progress, 2009. [https://ec.europa.eu/eurostat/documents/8131721/8131772/Stiglitz-Sen-Fitoussi-Commission-report.pdf. https://ec.europa.eu/eurostat/documents/8131721/8131772/Stiglitz-Sen-Fitoussi-Commission-report.pdf.]).

The policy options that are most likely to impact the electricity sector are economic policies focused on mitigating the threat of climate change. These options could include a cap and share program, carbon tax, or subsidies. Nuclear, solar, wind, and hydroelectric power industries are all likely to become more attractive options if governments implemented economic consequences on utilizing fuel sources that expel carbon dioxide.{{Cite web|title=Game Changers for Nuclear Energy {{!}} American Academy of Arts and Sciences|url=https://www.amacad.org/publication/game-changers-nuclear-energy/section/9|access-date=2021-02-13|website=www.amacad.org}} To support innovation in renewable energy sectors, and nuclear power specifically, the process of development must be economically viable enough for countries to support the adoption of renewable energy for the long term.{{Cite web|title=La innovación en energía nuclear deberá enfocarse en la viabilidad económica|url=http://untref.edu.ar/mundountref/innovación-energía-nuclear-%20viabilidad-económica|access-date=2021-02-13|website=untref.edu.ar|language=es}}

• Cap and dividend
• Carbon tax
• Economics of global warming
• Emissions Reduction Currency System
• Emissions trading
• Georgism
• Greenhouse Development Rights
• Personal carbon trading, an alternative approach to allocating emissions rights directly to individuals
• Pigovian tax

{{Reflist|2}}

• [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4850808 The Global Climate Plan: A Global Plan to End Climate Change and Extreme Poverty]
• [https://web.archive.org/web/20101123042955/http://www.climatecooperation.org/ The Climate Cooperation wiki]
• [http://www.capandshare.org Cap and Share] website
• [https://web.archive.org/web/20200524135648/http://www.feasta.org/ Feasta] (The Foundation for the Economics of Sustainability)
• [https://web.archive.org/web/20061108210758/http://www.neweconomics.org/gen/ nef] (the new economics foundation)
• [http://www.gci.org.uk/ The Global Commons Institute]
• [https://global-redistribution-advocates.org/ Global Redistribution Advocates]

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Category:Emissions trading

Category:Climate change policy

Category:Irish inventions