Should Emissions be Allocated Per Capita?

"Should Greenhouse Gas Permits be Allocated on a Per Capita Basis?" is an article by Eric Posner and Cass Sunstein appearing this year in the California Law Review. That is, should emissions cap per nation be assigned on the basis of the nation's population? Posner and Sunstein argue in the negative.

They begin their article by a lengthy and plodding exposition of the very different picture presented by per capita emissions and by national emissions. They would have done better to simply refer to David MacKay's illustration, I think.

By the end of 14 pages, the reader is expected to understand that China's total emissions exceed those of the US, but per capita emissions are only a sixth as high, while India's per capita emissions are barely a twentieth those of the US. Finally they assert the position they oppose:

With this background, we should be able to glimpse the intuitive argument on behalf of per capita allocations. Nations are not people; they are collections of people. A citizen of China should not be given emissions rights that are a small fraction of those of a citizen of the United States. Nor should a citizen of India be given emissions rights that constitute a small fraction of those of a citizen of Japan. Each person should count for no more and no less than one.

The opposite "end member" (as geoscientists like to say) of the spectrum of plausible models is the one where countries are allowed to emit in proportion to their existing emissions at some fixed recent date.

(Posner & Sunstein argue that this is close to the Kyoto model, which is peculiar given the reluctance of the US to participate. It would seem that such a model would fix a structural competitive advantage to the US for all time. That certainly isn't in line with the perceptions of Kyoto in the US, not just among the public but also among informed opinion. But that's neither here nor there for the present.

On the other hand, later in the paper they assert that the US would have borne half the costs of Kyoto had it signed, so I'm a bit confused on where they stand on this point, and on what the truth actually is.)

Other approaches are considered: a rather arbitrary per-nation distribution (wherein Luxembourg is a big winner and China and India the biggest losers) and a purely redistributive approach (where all initial permits are allocated to poor countries). C&S simplify these in a two-nation model.

The important point is that the number of permits issued is the control on emissions, and that actual emitting parties (individuals and industries, not nations) contribute a market cost on this constrained resource/right.

Those of us who'd prefer a simpler carbon tax apparently do not understand why this is preferable, but the consequences are rather the same - the nations must agree on who is allocated what fraction of future emissions, and the polluter pays something.

The essential question is - to whom should one remit the check? Should it go to the US government, say, or to the government of India? (This is the "trade" part of "cap and trade".)

On the cost side of the ledger, equal per capita emissions rights seems fairest.

C&S then identify three arguments against the per capita approach. The first comes from an observation that national per capita wealth is not correlated with national population. I have to say I have no idea what they are going on about here. Of course per capita allocations are per capita; national population has already been factored out. So this whole point seems wrong at the most elementary level. Hopefully I am missing something.

The second point proceeds from the point of view that because poor nations are more at risk from climate change, they get more benefit from the activity. Paying attention to the benefits side of the ledger moves the point of fairness back in favor of the richer countries, because they will have less to gain!

The third point is that allocations to poor nations will tend to go directly to the rich elites of the poor nations. (I have taken this into account in my repetition of my friend Mel's suggestion.) Even without this fix, I fail to see this as an argument against the ethics or practicality of a per-capita distribution of a carbon cap.

They then go on to list a couple of purportedly perverse consequences that might be set by a precedent of this sort. One is that governments would get a bigger slice of the pie as their populations increase, creating an incentive for increasing population! To this I say bollocks. Fix the population on which the allocations are made to the date of the start of the regime. Secondly, it creates an incentive for poverty! This is beyond bollocks.

Back in the days of the first incarnation of Ducks-In-A-Row Irene and I had a client, a small businessman who wouldn't bill his own customers because it would increase his tax liability. This is the same sort of "incentive". Except that even the worst run of countries isn't likely to be as confused as this fellow.

On the other hand, I guess important political scientists are that confused. What can you do?

OK, let me spell it out. Something that makes poor people slightly less poor is not an incentive to stay poor. Something that makes a rich person slightly less rich is not an incentive for the rich person to become poor. If finding a dollar on the ground is taxable at 20%, is that a reason for leaving the dollar on the ground? ("It's the principle of the thing, man!")

They do make a good point, though, here:

From an ex ante efficiency perspective, the best use of the surplus would be to reward the states that had taken steps in advance of the treaty to abate greenhouse gases.*' These states would probably be the European states that accepted binding emissions reductions under the Kyoto Protocol, though there are complexities here, since not all European states accepted meaningful reductions and others were simply taking advantage of independent technological and demographic changes in their country.

The larger point is that such a distribution would establish a precedent to the effect that when a global problem exists, states that respond quickly and in advance of a treaty will not be penalized. With this principle in place, states would be more likely to act quickly and to negotiate a treaty regime rather than drag their feet. For example, if states ever need to enter a new treaty that regulates cybercrime, they would know that first movers that have implemented controls that reduce dangers to other states would not be penalized and would even be rewarded in some way.

But then they go back to confusing people and countries with wild abandon:

Rather, our basic claim is that if these points are meant to provide a defense of the per capita approach, they run into serious difficulties. The reason is that the central objections to the welfarist argument rematerialize when faimess, understood in the ways sketched above, is our guide. First, to the extent that some of the most populous states are wealthy, the per capita approach is not fair at all since it has some of the same vices as the status quo approach. Second, per capita allocations have the disadvantage of giving large numbers of permits to highly populated nations that have relatively little to lose from climate change. Finally, it remains true that permits are allocated to the govemments of poor states, not to the citizens of poor states, and allocations to such govemments may not help those who are most in need.

I'm sympathetic to the third point, but the first two, again, seem completely confused to me.

So in the end I am left singularly unimpressed by Posner & Sunstein's arguments. I would simply call it a confusion between intensive and extensive quantities. They go on and on about the total population of countries as if this argued against per capita allocations, but of course, it argues for them. They spend a third of their paper on an elementary exposition best explained with MacKay's graphic (see link above) in a blink of an eye.

On the other hand, I have little difficulty agreeing with this conclusion of theirs:

In sum, the feasibility problem with the per capita approach is that it confiicts with the state system that currently organizes the world. States might well be willing to enter a climate treaty that mitigates climate change if the treaty creates restrictions that work off existing levels of greenhouse gas emissions. Doing so would serve their national interests. But given the current level of altruism that appears to exist, they are highly unlikely to adopt a distributive goal like that mandated by the per capita approach. To insist on the per capita approach, then, is most likely to subvert the best chance for a climate treaty and hence to render the climate change problem intractable.

Maybe so, but that's no reason for bogus arguments that such an unfortunate reality is the right thing. This confusion of the prescriptive and the descriptive seems to me to be a fundamental intellectual error of our time.

Perhaps we will not achieve the optimum, and some of the reasons are explained fairly cogently in Posner and Sunstein. But that is no reason to argue that optimum is other than a fair, per capita distribution; indeed arguments from what is politically feasible should not appear in an article discussing what solution is optimum from a given point of view.