Cap and Share

This infographic shows the main components of CapGlobalCarbon, the global version of Cap and Share.

Cap and Share, also known as Global Climate Plan, is a policy instrument that aims at tackling the double challenge of climate change and extreme poverty. It consists of capping greenhouse gas emissions through a system of tradable quotas, while redistributing the revenue generated equally among human beings.

Design

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.”

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 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.

Feasta has set out the case for the introduction of Cap and Share globally on the CapGlobalCarbon website. it has produced discussion papers on the logistics of rolling out such a system through a partnership between blocs of countries in the Global North and Global South. These include a 2020 proposal to transform the European ETS into a Cap and Share system, and a 2022 one to build out a Cap and Share system from the existing Beyond Oil and Gas Alliance.

A diagram which sets out the basic process of 'classic' Cap and Share

For Cap and Share to function effectively it would need to be accompanied by a suite of other policy measures. These are explored in Feasta's 2012 publication "Sharing for Survival: Restoring the Climate, the Commons and Society". The book includes a paper by the late economist Richard Douthwaite, entitled "Time for some optimism about the climate crisis".

In addition, detailed information about the Global Climate Plan - its rationale, principles, implementation and effects - can be found in Adrien Fabre’s book entitled “A Global Plan to End Climate Change and Extreme Poverty” published in 2024 and publicly available.

Economic assessment

This solution is based on the polluter pays principle, a fundamental principle in economics, first introduced by Pigou (1920). 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, and that this has been repeatedly confirmed for Ireland. 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.

The NGO that developed Cap and Share, Feasta, argues that while it is definitely a good idea to shift the tax burden away from labour and towards capital, a carbon tax is not the optimal instrument for this purpose. Carbon taxes do not establish a predictable level of emissions cuts, unlike a cap, and can be vulnerable to short-term political pressures such as an increase in the price of oil, since a country's tax policy is usually adjusted each year in the annual Budget. Feasta suggests that if a carbon tax were to be introduced, it would work best in tandem with Cap and Share. The two policies could be used to help countries fine-tune their responses to climate change and Peak Oil.

Feasta also advocates the introduction of a land-value-based tax, which they believe could be used as a substitute for taxation on labour and could therefore have a similar effect on the market to a carbon tax.

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 Commission).

Cap and Share and renewable energy

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. 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.

See also

• 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

External links

• The Global Climate Plan: A Global Plan to End Climate Change and Extreme Poverty
• The Climate Cooperation wiki
• Cap and Share website
• Feasta (The Foundation for the Economics of Sustainability)
• nef (the new economics foundation)
• The Global Commons Institute
• Global Redistribution Advocates