Provide cheaper fuel to cover most people's needs. Even for heavier energy users, the cheaper fuel should cover a significant part of their consumption. In the end, everyone who is not far above the average consumption can end up saving money.
It will create awareness - Citizens will be made aware of their responsibility by seeing more clearly how they contribute to global warming and pollution in general. The allowance level will act as a benchmark making it more apparent to people how well or bad they are performing environmentally. This will make the challenge of lowering emissions more concrete, and therefore, easier to work towards.
It will empower citizens
to profit directly from their efforts, both in terms of changing habits towards less energy intensive patterns as in investment in more efficient technology. It will depend solely on each person’s individual decisions how much he or she saves (either through less travelling, through travelling more efficiently, or through choosing other means of transport), and therefore, it will be in each person’s hands exactly how much ‘profit’ they might make. Obviously, this ‘profit’ can be maximised by choosing the appropriate moment to sell excess allowances, but everyone will be guaranteed at least the fixed buy-back price, so some financial gains will always be there.
To have a double impact in the fight against global warming - Citizens more concerned with global warming than with financial gains will be able to retain their saved allowances instead of selling them on. By keeping these allowances from the market they reduce the total allowances available and make non-savers pay the full surcharge more often. This effectively allows individuals to have a double effect by saving and by also directly sanctioning non-savers. The fact that the State will have to buy the allowances from them should actually be a good deal for the State, as the more people cash in the more people will be likely to have to pay the surcharge. (Note: any extra taxes beyond paying for the scheme’s costs should be applied also in environmental initiatives such as sponsoring switching to more efficient cars and appliances for low income groups, support for renewables, etc.)
It will use market mechanisms to redistribute wealth to lower income groups
In principle, lower income citizens will be less likely to have cars, and if they do, they are more likely to have smaller and fewer cars. They are also more likely to travel less for leisure for example (as well as have smaller houses with less appliances, in case the system gets applied also to residential energy use). If one accepts this tenet, then it is clear that through this scheme, they will be somewhat rewarded for the fact that they pollute less in absolute terms. Because they pollute less they will use up less allowances and will therefore be able to receive an extra income, and this income will be higher the harder they work at saving energy themselves, namely, by changing habits.
It will provide an extra source of income for the general public - in principle, the allowances should be set at a level that will not be as low as to discourage individuals from actually trying to be more energy efficient. This means that it should be possible at least for a middle-class person to actually profit financially from the system, given an acceptable amount of effort. This does not, of course, negate that the system tends to favour those most needy.
It will internalise, at least in part, the cost of polluting. In this sense it is an approach to implementing the polluter-pays principle. The cost to society of fighting global warming is purposefully unevenly distributed so as to penalise more the higher polluters (either through demanding a larger improvement in efficiency, or through taxing them for the luxury of polluting).
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