The danger of complexity in climate policy.
Climate change is complex. The science, the economics, the politics are all deeply complex.
The solution is surprisingly simple - put a predictably rising price on the fossil-fuelled emissions that make up 77% of Australia’s carbon emissions and return the revenue to citizens so that they can afford the transition to zero carbon. Add border adjustments to keep our industries competitive overseas and that’s it! It’s called climate dividends.
This policy guides the phasing out of fossil fuels that comprise 77% of our emissions (excluding Land use and forestry) and accelerates the phasing in of the low- and zero-carbon technologies we need for our post-carbon economy.
It leaves governments free to concentrate on the remaining 23%, the non-fuel causes of climate change, and the vital task of removing historical emissions from the atmosphere to return us to a safe climate.
Where it gets complex
Of course, it isn't that simple, especially politically. But it doesn’t need to be nearly as complicated as it has become. Enormously complex systems have been and are being developed - trading systems, a safeguard mechanism, carbon markets, regulations and standards, finance instruments, offset markets, capture and storage, policies for each of the 8 sectors of the economy, etc.
The result is a complex mishmash of piecemeal policies that no one can fully understand and cannot be predicted to succeed. It has those who care about climate calling for "climate action" with little or no knowledge of what that means, to them or whoever they are asking.
What’s hiding behind complexity?
This complexity makes it much easier for those who wish to deny, delay or frustrate serious efforts to address the climate crisis. It also suits those who wish to exploit climate policies and game the system for their own benefit.
There are many ways to make money out of carbon markets, emissions trading and the financial instruments that underpin complex climate policy. Richard Branson suggested many years ago that climate change would only be solved if people could make money out of it, ignoring Einstein's epithet, "We cannot solve our problems using the same thinking we used when we created them."
And worst of all, complexity makes it easier to continue subsidies and other supports to fossil fuels. And it makes it possible to disguise the fact that fossil fuel subsidies are still increasing at an alarming rate in many countries, including Australia. See Ending Fossil fuel subsidies is essential for ending climate change
The consequences of complexity
Complexity makes it easy to have policies that attempt to mitigate climate change and not notice that they are being undermined by other policies that are prolonging it. It is like a driver braking to slow a car and pressing the accelerator at the same time. It means little or no progress is made, the damage continues and we run out of time to get emissions down fast enough. See Climate and Energy – competing policies
The Clean Energy Act enacted by Labor in 2012 and repealed by the Coalition in 2014 was a complex piece of legislation that few citizens understood. It was also difficult for people to see and experience the ways in which some of the revenue was being recycled back into the community to make it affordable, especially to low-income households. This made it easy to build the fear campaign that led to its demise. A key minister in the Gillard government told me he'd wished they had thought of the dividend.
The simple solution
The Climate Dividend is much simpler; it’s a single, economy-wide tax on the carbon content of fossil fuels, levied as far upstream and across as many emissions sources as possible (fossil fuels are responsible for 77% of emissions). Its simplicity means it creates fewer administrative burdens and makes compliance obligations clearer for those it covers.
Crucially, it also makes it more transparent and credible, as does the dividend deposited into citizens' bank accounts every month. The dividend is a tangible outcome of the policy and enables people to see how they are benefitting from the carbon fee. (Modelling by UNSW shows that three-quarters of the population will be better off financially, especially those on low income and attracts 73% community support.)
The main complexity arises from the border adjustments that are needed to protect against unfair competition from countries with no comparable carbon price. This will need to be addressed anyway when the EU and other nations introduce CBAMs (carbon border adjustment mechanism). Canada has implemented a temporary Output-based Pricing system for traded goods until CBAMs are established by major trading nations.
It will still require an education process that explains the purpose and value of the policy and is transparent about the degree to which the benefits, financial and environmental, will outweigh the costs. It will need to show how they will benefit from the slowing of climate change and the increased possibility of maintaining a liveable world.
Conclusion
Governments face enormous difficulties in dealing with climate politics. They can make it much easier for themselves by choosing a simple, transparent policy like carbon dividends to address the 77% of carbon emissions derived from fossil fuels. Carbon dividends have many other advantages for producers, industry, and consumers. Its simplicity should be attractive to any government wanting to break through the complex politics of climate.
