Coal-fired power station
Coal-fired power station

The failure of the COP15 negotiations in Copenhagen in December 2009 was in the air, as the $CO_2$ I would say. The issue is complicated by the divergences between industrialized and developing countries, between those who must take on the greatest responsibilities and therefore take on most of the economic and social costs resulting from a serious policy of reducing emissions.


There seems to be a convergence on one thing only and that is the emission control and reduction regulation called Cap-and-Trade. The regulation was put in place to reduce acid rains due to $SO_2$ emissions. It is based on the determination of a maximum level of the emission cap by each country and the trade of the right to emit between those who exceed the fixed quota and those that keep it below the cap. Dr. James Hansen, of the Columbia University, one of the first scientist to bring the problem of global warming to the attention of the public and the American political class, argues that this system is unable to obtain the minimum results necessary to avoid the consequences of the climate change.


In an article (see ref. [1]) published in December 2009, Hansen describes the negative aspects of the Cap-and-Trade regulation and proposes an alternative regulation called Fee-and-Dividend or tax and divide. According to Hansen, Cap-and-Trade is insufficient and tends to stabilize the level of emissions rather than reduce it. Given that the price of emission allowances remains high as long as the emissions are high, there would be less interest in reducing them on the part of countries that have allowances to sell. Furthermore, the system can be avoided by transferring the most polluting productions to these countries and substantially remaining, as far as total $CO_2$ emissions are concerned, at the current state of “business as usual”. The Cap-and-Trade would substantially favor only those who control the trading of shares on the market, that is Wall Street, and would pass the cost on citizens through the increase in the price of fossil fuels, without any counterpart. The Fee-and-Dividend proposed by Hansen, on the other hand, consists in the taxation of fossil fuels at the source based on the $CO_2$ content and in the payment of a dividend to each citizen. It has been calculated that an American family of 4, at current consumption levels and with a tax of \$US 115 per ton of CO2, would make about \$US 9000 per year. The dividend collected would allow a sensible family to invest in energy efficiency and alternative sources and would reduce the cost due to the increase in the price of fuels and products compared to the less sensible family. The advantages of the Feed-and-Dividend compared to the Cap-and-Trade therefore consist in a greater simplicity of execution, in offering a strong stimulus to reduce consumption and to invest in new, more efficient technologies. Ultimately it avoids the addition of the cost of the transactions on which the Cap-and-Trade is based that will be managed by the banks. Perhaps it is precisely for this reason that very few have heard of the regulation proposed by Hansen.

Climate Change Recap, Part 1: Causes and Effects


  1. James Hansen - Sack Goldman Sachs Cap-and-Trade