The Skinny on Fossil Fuel
Fossil fuels are carbon energies. Those carbon energies are gas, natural gas, oil and coal. Don’t forget: shale gas (a.k.a. horizontal drilling and hydro fracking) is also included in this mix. So, when we hear talk about carbon taxation, that’s what it is referring to: our use of gas, natural gas, oil, and coal for heating, electricity, cooking and automobile use.
Since (if not quietly decades before) the momentous Paris Climate Accord in December 2015, where 195 nations (all except Nicaragua and Syria) agreed to support collective action to mitigate further warming of the planet, carbon pricing has been in the news, actively discussed, and prominently argued but with very scattered momentum. California has led the U.S. ‘pack of States’ in passing cap-and-trade legislation. Oregon has a cap-and-trade bill in its House but looks to need more business support than it currently enjoys. We can also look to Canada, a fundamentally more progressively-inclined country than America, to see that two of its largest Provinces (Quebec and Ontario) have cap-and-trade programs in place, the most recent one (Ontario) passed in late spring of last year. Through the Western Climate Initiative (WCI), established in 2008, U.S. States and Canadian Provinces are working together to combat climate change by linking their individual cap-and-trade “markets” to make them more robust, accepted, and give them broader reach. Come 2018, Ontario’s, Quebec’s and California’s cap-and-trade markets will be linked. Europe is a decade ahead of N. America on the implementation of a cap-and-trade system for its participating members (currently 31 countries: 28 EU members plus Iceland, Liechtenstein and Norway), having ratified its own emissions trading system (EU ETS) in 2003, with the formal launch in 2005.
Carbon Tax vs. Cap-and-Trade
In an earlier post, I detailed the difference between a Cap-and-Trade system versus a ‘simple’ Carbon Tax. I noted Cap-and-Trade schemes are much more prevalent (and fundamentally more palatable legislatively) because they are considered a market-driven approach to curbing greenhouse gas (GHG) emissions that cause climate change. Another way of saying the same thing: cap-and-trade programs support the neoclassical economic paradigm of how markets should operate and work that is nearly globally accepted today. Cap-and-trade regulates high-GHG gas emitters, namely targeted, pollutive industries, and ideally, forces them to change the way they do business and/or employ new technologies that reduce GHG emissions into the atmosphere.
What’s the Difference Between the Two?
Carbon taxation is simpler but has a much higher hurdle to jump politically. Taxation can be on high-carbon users, emitters, carbon refiners, distributors or end-users…or some combination of the above. A carbon tax is a straight tax on the use of carbon inputs (gas, oil, natural gas, and coal). In capitalist-driven economies, straight taxes are labelled bad, and not welcome. There’s a reason there are so many lobbyists camped out in Washington, D.C., clamoring to have dinner with Legislators and these days, Scott Pruitt, Head of the U.S. EPA. There are two necessary twists of the carbon tax, as I mentioned in an earlier post, that are necessary and critical for overall public (and ultimate legislative support): the tax must be high or significant enough to curb carbon use and the revenues raised from the tax must be earmarked and allocated towards individuals and communities most directly affected by energy price hikes the carbon tax will actualize.
A Third: Carbon Footprints
Now, there is a third type of carbon-reducing scheme that has been batted around the globe in various iterations for a while. It targets individuals. You may have heard of the carbon footprint initiative. It can be analyzed and tracked by both individuals and organizations. And, there is great worth in doing so. It provides some “Ah ha” moments where a minor change in behavior or organizational process can produce large carbon use reductions.
A Fourth? CarbonX
I was just recently introduced to another type of carbon market by Jim Newcomer. It’s being called a “peer-to-peer carbon trading company”. The platform is CarbonX, founded by two brothers and one son of the companies ConsenSys and Blockchain, employing Block Partners as strategic advisors to the new initiative. CarbonX states that its goal is to “encourage individuals to make smart choices about their carbon consumption” or “invest in carbon reduction programs and then distribute offsets via major retailers and brands as loyalty tokens, helping to incent people to make carbon-friendly decisions in their day-to-day purchases of goods and services.” CarbonX utilizes Ethereum, similar to Bitcoin but more secure and ‘democratized’, a cryptocurrency payment methodology. You can read more about CarbonX here.
Questions to Ponder
Here are my questions to you. Are Bitcoin and now Ethereum (launched in 2015) the new Paypal alternatives? Are they here to stay? How many of you use these cryptocurrency systems to buy and exchange goods and services online (and offline, for that matter)? Do you think this new currency can be the critical mechanism to change people’s behaviors in how they view, use, and buy goods and services that are carbon-free or at a minimum, carbon-neutral (i.e., any carbon inputs are offset so that the total effect on the atmosphere is zero)? And/or do you believe this CarbonX platform has the ability to more forcefully nudge retailers and manufacturers of consumer products to adopt organizational systems, processes and practices that will progressively make carbon energy use obsolete?
Contact Kate Gaertner today to see what Triple Win Advisory can do to help your business and industry increase sustainability to result in a “triple win” for company profit and long-term competitive advantage, societal well-being, and successful environmental pollution mitigation.
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