numbers, not adjectives — D. J. C. MacKay
by Carl Edward Rasmussen, 2023-10-02
The Voluntary International Carbon Alliance (VICA) is a proposal for a mechanism to enable accelerated international cooperation between nations to effectively, substantially and immediately reduce carbon emissions. It's a simple, concrete climate coalition of the willing, intended to co-exist with, not replace, other climate initiatives such as the UN FCCC Paris Agreement.
Rising up to the climate change challenge is primarily a question of how to cooperate on a global scale. Unfortunately, although there is widespread agreement that effective measures are urgently needed to avoid some of the worst effects of global warming, there is a severe lack of action. There are no adequate mechanisms enabling implementation. For example, the Paris Agreement has goals, but inadequate pledges to meet them, and no persuasive routes to remedy these deficiencies.
There seems to be an unspoken prevalent view, that this state of affairs is inevitable, and that the nature of climate change is so multi-faceted that no good mechanisms can be devised or that progress will necessarily be very slow. This page argues that by thinking clearly and systematically about the problem, good mechanisms can emerge. These won't address every possible aspect of the problem, but they'll lead to a much better situation than we have presently. We mustn't let the perfect be the enemy of the good.
Real progress on global warming requires a confluence of concepts, including from science, economics, sociology and ethics. But we also need to make sure we don't get bogged down by details. Therefore simple and explicit principles must prevail; the VICA proposal is based on three simple guiding principles.
Increasing carbon dioxide, or CO2, in the atmosphere, for example by burning fossil fuels, increases the average surface temperature of the earth, via the greenhouse effect. The higher temperature has many effects, collectively known as climate change, which are detrimental to human living conditions globally, including sea level rise, widespread flooding, wildfires etc. To preserve living conditions we must limit the temperature rise, and therefore limit the atmospheric concentration of CO2. It isn't yet clear what that limit will be. The lower the limit, the less drastic the effects of climate change. What ever the limit, there is a residual atmospheric CO2 budget, namely the difference between the current concentration and the eventual limit. This residual budget should be thought of as a resource.
By definition, a resource is something which is desirable, and which exists in limited quantity; both of these criteria clearly apply: it's desirable because it allows us to do things like eg flying fossil fuel powered aircraft and it's limited because of the fixed budget. It's perhaps slightly odd that it is the relative absence of something which represents the resource, opposite the situation eg in a mine where the presence of ore is the resource. But this oddity won't matter. Another, more interesting feature is that the resource doesn't have a location. As soon as a quantity of CO2 is released into the atmosphere it gets mixed in and distributed throughout the entire atmosphere, for practical purposes we can think of this as happening instantaneously.
Typically, the ownership of a resource is determined by its location. But who owns a resource like the relative absence of CO2 in the atmosphere, which doesn't have a location, or is located everywhere? This question isn't meant in a legal sense, but in an ethical and moral sense. Currently, there is no well articulated answer to this question. A reasonable view may be that the atmosphere belongs equally to all of us. It may be difficult to envisage reasonable alternatives to this view. From here on, we're going to adopt as our first guiding principle the ethical view that the atmospheric resource belongs to all of us.
And how are the rights to use the residual CO2 budget resource currently being managed? Well, in short, it's not. Anyone can use this resource by emitting CO2 into the atmosphere, free of any cost. Although not explicitly phrased in this way, our current system works if the atmosphere was shared between us all, but the price for using the CO2 resource being set to zero.
For some resources it may be appropriate to associate a zero cost. But for the atmospheric CO2 resource we are facing the problem that it is being dangerously over-exploited. Which is causing global warming. So, maybe we should not have a system where this price is set to zero, but instead set it to something higher? This is essentially the idea in the VICA proposal. Our second guiding principle will be that economic incentives are effective and powerful at driving action and change. But how would this work in practise?
Since no-one can force a free nation to do anything, the implementation will be governed by our third guiding principle that participation is voluntary. In order to explain the mechanism, let's initially assume that all nations decide to be members, and leave the question of why they may want to become members to one side for a few minutes. Let's also initially fix the price at US$ 100 per ton of CO2.
The alliance works on a yearly cycle: at the end of every year, each country pays a fee for their CO2 emissions for that year. The fee is their total emissions as defined by UN FCCC CO2 accounting rules, multiplied by the price, US$ 100 per ton. The alliance then immediately re-distributes the entire funds in proportion to the population in each country. This distribution reflects the fact that all people collectively own the resource.
What is the effect of the alliance? It is easy to see, that a country whose per capita emissions are equal to the global average would have their fee equal to their payout, so no effect whatsoever. At the moment, the global average per capita emissions are about 5 tons per person per year. For countries with lower per capita emissions than the global average, the fee would be smaller than the payout, resulting in a net annual income. Conversely, countries with larger than average per capita emissions would pay a larger fee than the payout, and would therefore face a net cost. Note, that it is only the per capita emissions that play any role in the scheme, there is no inherent advantage or penalty associated with size. Notice also, that irrespective of whether a country was a net contributor or a net benefactor of the alliance, the scheme produces a strong economic incentive to release less CO2. Specifically, if a country reduces their emissions faster than the average of the members, their fee will reduce more than their payout, thus creating a virtuous economic pressure. Thirdly note that the alliance would be most expensive to join for countries with a high per capita emission rate, countries who tend to be quite wealthy. Less developed economies who tend to emit less per capita CO2 would benefit economically.
Note, that members of the alliance are free to chose the process used to either raise funds to pay the fee or how to spend the income. These are considered internal affairs for each country to decide.
In the proceeding paragraph we simply assumed that all countries would chose to be members, that's not realistic. Non-members would play no role, wouldn't pay fees, and don't get payouts. The effect is that to brake even a country would have to have an emission equal to the average per capita emission of all members (not the global average), but otherwise everything remains unchanged.
But why would countries want to join the alliance? What is the incentive for membership? The scheme intrinsically provides two types of incentive:
At a high level, we've already completely described VICA. But it's worth adding a few more details which may be important in practice. The yearly cycle consists of three parts:
Are countries allowed to mutually "trade" emissions within VICA? No. But that would also be utterly pointless, because the price of emissions is identical for all countries.
VICA is intended to co-exist with, not replace, other climate initiatives, such as the UN FCCC Paris Agreement or the EU ETS (Emissions Trading System). Indeed, multiple initiatives will tend to mutually enhance each other. For example, existing individual national future net zero committments would align well with VICA, a country achieving net zero would pay a zero fee, but collect a payout generated by members not yet at net zero. Similarly, possible negative emissions, eg from Direct Air Capture (DAC) would reduce the fee (or even make it negative).
The simplicity governing the alliance is crucial. The alliance relies three simple guiding principles. The economic turnover relies on a single number, the price per ton of CO2. The price adaptation over time relies on a simple median vote. There is no need or room for any type of negotiation, which have crippled schemes in the past. Each year, every country is faced only with a simple binary choice: to join or not, a the predetermined price.
The fact that there is no long term commitment and all countries get re-invited to join every year is important. A persistent problem with addressing global warming is that many countries make promises about their behaviour far into the future, say 2030 or 2050, and then claim to be global leaders. This is bad, because it will take decades to verify whether the promisses are kept. Sadly, we don't have decades to spare. In contrast the VICA proposal is immediate.
How would the VICA dynamics likely evolve? Initially, countries with very low per capita emissions would likely join purely on account of the economic incentive, they would have nothing to loose. Once they had joined, it would be in their interest to encourage slightly higher per capita emission countries to join, since this would increase the average per capita emission of members, and thereby increase the payout. Countries with higher per capita emissions than the current members, would pay a cost to join, but they would be helping to reduce the problem of global warming. And if they thought that the alliance would likely expand further, their future cost would be smaller. The very top per capita emitters may only join if they believe strongly in the guiding principles, or by external pressure from alliance members. Note, that the alliance can be successful even without universal membership.
A strong requirement when cooperating with partners to achieve a common goal is mutually binding agreements. I will if you will. For example, two similar countries contemplating joining, may only wish to join if the other one joins too, in order to avoid unfair imbalance. Such conditions can naturally be accommodated in the joining phase. Conditions could be of the form, we will join if these other three contries join, or we will join if at least half of these twenty countries join, etc.
VICA is a simple and effective suggestion for a concrete mechanism to enable acceleration of international cooperation to lower global CO2 emissions. It is built on three simple guiding principles. Of course, some countries may not share these principles, they will be able to explain their views and decline membership annually. VICA avoids many of the pitfalls crippling alternatives.
In several ways. Most prominently by immediately re-distributing all fees. Also, there is no system of permits (as in ETS), there is no budget of permits that has to be set (as in ETS) and there are no choices to be made about which emissions to include (as in ETS). The entire VICA scheme is fully defined by setting a single number, the price per ton of CO2. Beside the price, there is nothing to negotiate.
That's right. VICA is only concerned with current emissions, and ignores historical contributions. Some countries may have contributed more to causing the climate crisis than others. But VICA doesn't claim to solve all issues with global warming, and can easily co-exist with other initiatives addressing these issues.
True. But there is no reason in principle why it couldn't be expanded in this way. But let's start as simple as possible.
This may be an unfair criticism. VICA simply says that a price is better than zero. That a system with an economic pressure to reduce CO2 emissions is better that one that doesn't.
Maybe. But the system has to be started in some way. US$ 100 is roughly equal to the current EU ETS (Emission Trading System) price. Is the proposed starting point reasonable? For example, a country like the UK has per capita CO2 emissions very close the global average of 5 tons per year. So the fee would be about US$ 500 per capita per year, equivalent to about 1.5% of UK GDP. The payout would obviously depend on what other countries were members. 1.5% of GDP is a large cost, but not an insurmountable one, if it really solves one of the most pressing problem facing humanity. And the economic pressure that the alliance creates should be big enough to really make it pay to reduce emissions. So, other prices may work as well, but the ball-park seems about right.