The Ethics of Emissions Trading

Abstract

This article defends three ethical arguments against emissions trading. The first argument alleges that emissions trading is morally objectionable, because it ‘commodifies’ the atmosphere. The second argument involves various objections to attaching prices to units of emissions – loosely speaking, the objection is to pricing that which is priceless or should not be priced. The third argument turns on the idea that if a large cut in emissions is to be made by society overall, everyone should ‘do their bit’ by making a particular kind of sacrifice rather than paying others to do it instead. Some general conclusions concern the limitations of confining the analysis to idealised emissions trading, the difficulty in separating ‘economistic’ thinking about policy delivery from policy choice and the need to focus questions of justice on consumers rather than on producers.

Keywords:

• emissions trading
• carbon trading
• ethics
• justice
• commodification

Notes

Caney (2010). All references to Caney are to this article.

See Houghton (2004: Chapters 2–3) for an introduction to the role played by the different ‘greenhouse gases’.

See Lohmann (2006: 73–86) for an excellent account of the evolution of these claims in practice.

This is a simplification. It is often said that atmospheric carbon dioxide has a lifetime of at least 100 years before being fully re-absorbed by other carbon sinks in the biosphere. But this is misleading, because there are multiple flows making up the carbon cycle, and the flow rates have themselves been affected by human activity (Houghton 2004: Chapter 3). Nevertheless, over policy-relevant time scales of up to 100 years, it is reasonable to treat CO₂ emissions as simply accumulating in the atmosphere.

It might seem that ideal trading schemes must, by definition, involve the cap being set at the optimal level. But as defined here, ideal trading schemes do not involve an assumption of omniscience. They are ‘ideal’ in that they are in some sense the best schemes available, given current scientific knowledge. In light of this constraint, it is unclear if the ‘optimal’ cap is well defined at all, because there is no consensus among climate scientists on the target for stabilised atmospheric CO₂ concentration. Even if this target can be agreed upon, we will most likely fail to achieve it, in practice, through our choice of cap, given the pervasive uncertainties in climate science and economics.

It is worth noting that both inter-country inequality and intra-country inequality of wealth are at historically unprecedented levels, and the trend is for inequality to rise further.

This claim is an implication which Caney draws from his claim (iii), which he associates with ‘market instruments … to protect the environment’ (p. 206), including emissions trading schemes. Caney's claim (iii) is the view that ‘the market is a reliable instrument for protecting what has value’ (p. 206).

See Spash (2010) for an influential recent discussion.

‘But whatever the number chosen, there is an important consequence of having a single number – and that is consistency. If the same number is applied across the range of policies – as it should be, since the social cost of a tonne of carbon is roughly the same wherever it is emitted – then the outcome should ensure that the substitution effects are efficient. The corollary of this point is that since existing policies implicitly assume a social cost of carbon, and since these assumptions vary enormously, current policies are likely to be very wasteful’ (Helm 2003: 353).

Without trading, the new technology provides a cost saving on all units of abatement required to meet the regulatory standard. With trading, the firm will be buying some permits and, therefore, abating less. Hence, the total abatement cost saving from adoption of a new technology is reduced and with it the incentive to adopt (Malueg 1989).

Aviation activities are expected to be included in the EU emissions trading scheme from 2012. For the sake of simplicity, the following discussion imagines a trading scheme for aviation emissions in isolation, rather than integrated with trading in emissions from other sectors.

This kind of revenue recycling does not imply that we can achieve equal net burden sharing among consumers across the globe. It is a blunt instrument for redistribution which does not address intra-country burden inequalities: poorer citizens in rich countries incur a greater burden than their richer compatriots when they (indirectly) buy a permit, because money is worth more to them.

For arguments linking the notion of sacrifice to incommensurability and the rejection of the possibility of trade-offs, see Lukes (1996).

The obvious group that could avoid behavioural change while a severe reduction in global emissions is achieved is the super-rich. There are so few of them that their lavish use of carbon does not imperil the global target. As discussed below, the super-rich undoubtedly would avoid behavioural change under any economic instruments designed to achieve it, because for all politically feasible levels of tax or permit distribution, their preferences are essentially price insensitive.

Caney and others have suggested that Sandel focuses on ‘intrinsic’ reasons for civic responsibility (Caney, p. 221 note 29). But Sandel's definition of intrinsic in these contexts is broad; essentially, it is a portmanteau term covering all reasons other than the argument about market exchanges being coercive in conditions of severe inequality: ‘The argument from corruption is intrinsic in the sense that it cannot be met by fixing the background conditions within which market exchanges take place. It applies under conditions of equality and inequality alike’ (Sandel 1998: 95). Although Sandel does in one place (p. 108–9) distinguish intrinsic and instrumental versions of the conception of republican citizenship which justifies the argument from corruption, the distinction plays only a minor role in his analysis. The emphasis is firmly on showing how problematic cases of commodification cannot be resolved by attending to the ‘background conditions’ of inequality – in other words, that problematic cases of commodification raise problems of corruption and not (just) coercion. Throughout, Sandel's use of the argument from corruption considers the specific consequences of commodification in each case: ‘the argument from corruption has to be made in a different way, case by case. It must be shown how, in each case, market valuation and exchange degrades or corrupts important values or ends that non-market practices may embody’ (p. 105–6). His recent work, such as the 2009 Reith Lectures, adopts the same contextualised approach.