Paving the way for CapGlobalCarbon: a labelling programme

Note: this article assumes that you are already up-to-speed on what CapGlobalCarbon is. See here to get a quick overview, or here for a short video explainer of Cap and Share, the main component of CGC.

In previous articles on this website we’ve described a couple of existing models that we think could provide useful lessons for CGC.

We’ve looked at an international movement, organised by a group of NGOs, which has made significant progress in eliminating something that is noxious – landmines – from the world. 

Also, since we know that the atmosphere is our collective responsibility, we’ve explored the voluminous research on existing commons – collectively-managed common pool resources – around the world which present useful guidelines, based on a vast quantity of practical experience, concerning the framework that CGC would need to use.

In this article we’ll have a different focus: we’ll look at how CGC could be established in the first place. (There’s some discussion of how CGC could be implemented on this website already, but there’s plenty of room for more. This article is intended as a contribution to that.) So we’ll examine a different kind of model that could act as a kind of stepping-stone towards implementing CGC fully.

Implementation is a question that tends to come up again and again with regard to CapGlobalCarbon. Given the close link between GDP and fossil fuel consumption and the political weight of fossil fuel lobbyists – plus, not uncoincidentally, a marked reluctance on the part of governments to take legally binding action to end fossil fuel use – how could a project like CGC possibly gain any traction?

One strategy for the short term, which might seem counter-intuitive at first, would be to bypass state governments and approach the fossil fuel companies themselves to see if any of them would be willing to sign up to a labelling programme that would pave the way for CGC.

To be eligible for this programme, they would have to undertake to completely transform their activity over the next few decades, achieving a one hundred percent transition to renewable energy by 2050 at the latest.  In addition to the radical structural changes that would require, they would also commit to paying the Trust (or whoever is running the programme) annually for a limited number of fossil fuel extraction permits (and this money would be a precursor for the share in CapGlobalCarbon).

Finally, they would also allow external monitors to verify that their production did not surpass the limits dictated by the number of extraction permits they bought from the Trust each year.

These companies would most likely pass on higher prices to consumers as a result of having to buy the permits, but they would be able to claim the ethical high ground as compared to fossil fuel producers who didn’t sign up. Moreover, the higher prices would be partially offset by the distribution of the share. Not only that: the increased prosperity that many people around the world would experience as a result of getting their part of the share would also help to offset any decrease in GDP brought about by the reduced fossil fuel consumption. The more companies on board, the higher the share would be, and this would also lead to increased pressure on nonconforming companies to join in.

phase-out label The companies could label their fossil fuel so that consumers know that it’s backed up with permits. One could argue that there are precedents for this such as certified organic food, sustainable fisheries and sustainable forestry.

However, we need to tread carefully because there’s an important difference between labelling fossil fuels and these ecolabelling schemes: they promote things that are desirable. It would be greenwashing to imply that fossil fuel consumption is in any way sustainable or responsible. So the the choice of label is important. Something like ‘transition fuel’ or ‘phase-out fuel’ seems clear and fair.

My colleague Erik-Jan Van Oosten has commented that this programme could help the fossil fuel divestment movement by enabling those afraid to make the leap to complete divestment to instead achieve it gradually, by first divesting only from unlabelled fuels. As he says, “a municipality can decide that in their community only fossil fuels carrying a label can be sold….governments can now use their policy instruments to increase the use of labelled fuel and phase out the non-labelled fuels. Taxing the non-labeled fuels more, or subsidizing the labeled fuels, can help that country to reach its CO2 reduction targets.”

Before approaching the companies, it would be necessary to have the programme’s structure up and running, either by establishing the Global Climate Commons Trust or by arranging for some other institution to handle the administrative tasks. There would need to be sufficient funding and support from other organisations for the programme administrator to be able to handle three things: the sale of the permits to the companies, the monitoring and the distribution of the share.  And this funding would have to come from somewhere other than the fossil fuel companies.

You might well wonder why fossil fuel companies would have any interest in signing up to this labelling programme. Why would they voluntarily make such drastic changes to the way they operate – and also hand over what would probably be a substantial amount of money to the Trust, every year?

There are a few reasons why it might just happen. One is that within the fossil fuel companies themselves there are probably quite a few individuals who are getting increasingly worried about climate change and want to do something about it. CGC would provide a clear roadmap – clear both to themselves and to observers from outside – to enable that to happen.

Another, already mentioned above, is that the companies could get brownie points for (relatively) good behaviour.

There’s also what Erik calls the risk perspective. He writes “currently the fossil fuel companies take a huge gamble that we will not address climate change (meaning they can extract everything). This could change through what is now called a carbon bubble burst, a sudden realisation by the market that 80% of all fossil fuel reserves are worthless, bankrupting all fossil fuel producers instantly. CapGlobalCarbon offers stability: until 2050 you can sell at least some product, provide plenty of time for the company to change course into another sector (or gradually shrink) and save its reputation, and ask a premium as the willingness to pay is a bit higher, and most of all: not become a victim of the carbon bubble burst as the 80% of fossil fuels that need to stay in the ground are not on your balance sheet.”

Finally, the labelling approach could be presented as an offer that’s very hard to refuse. This is because of a fourth precedent for CGC which we’ll discuss in more detail our next post in this series:  climate litigation.

Quite simply, if fossil fuel companies declined to comply with the labelling programme, they could be threatened with legal action. Of course, they could opt to brazen things out and see what happens when they are brought to court . But they might prefer to save face – and possibly also save a great deal of money – and sign up for labelling instead.

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