First learned about this in the excellent sci-fi novel The Ministry for the Future.
Maybe someone here can help me understand, what exactly is the point of "carbon quantitative easing" over a straightforward carbon exchange? Maybe the government buying and selling carbon allowances (out of thin air) on the exchange makes this "quantitative easing", but I would avoid implying it's monetary policy when it seems like it's clearly fiscal policy.
Even more confusing to me was how KSR's "carbon coin" plays into all this. It seems like dollars would work fine. Euros if you want. Introducing some new world currency just seems like it's throwing a huge wrench into an already controversial issue.
I think market-driven solutions to climate change are an exciting possibility, but I just didn't understand what he was going for here.
That said, I think my question is pretty basic and easy to anticipate, so I was disappointed I couldn't find it addressed in (relatively) simple terms.
As far as it being a "published" paper, my recollection is that it looked like the paper was self-published. I could be wrong about the self-publishing thing, but as far as I'm aware it's not published by any kind of reputable academic journal.
It seems far better to pay carbon dividends to people (only humans, not fictional people) and then charge for carbon emissions (not the extraction of fossil fuels; you’re welcome to pull it out and put it in a tank paying only the emissions of your extraction equipment, but when someone buys it to consume, they pay the carbon cost.)
Tweak the dividends and carbon costs as needed to achieve the balance of policy goals.
-- Joseph Heller, Catch-22
That said, I think I also prefer the idea of achieving these goals by tweaking the price of carbon. But again, maybe I'm missing something.
I read an article that suggested the government buy oil companies in order to manage their decline. Obviously nationalizing an industry is a huge deal and a pretty drastic step, but the argument seemed reasonable and if more lightheaded attempts to solve the climate crisis continue to fail I don't think that should be off the table.
At least in the U.S., extraction operations are usually organized as LLPs--more specifically MLPs, where partnership stakes are publicly traded. This means anybody can easily acquire drilling or extraction rights with a simple online transaction, just like they can with corporate stock.[1] Whatever flaws a pay-to-abstain system has will be exploited at least as fast as any other easily exploited financial incentive scheme.
Even excluding publicly traded MLPs, the market for buying + selling partnership interests in drilling operations is remarkably liquid, at least in the U.S. and especially for long-established fields such as in Texas or California, which are perhaps the operations that could most easily exploit a pay-to-abstain incentive scheme by, e.g., overestimating their reserves. (New fields would be even easier to overestimate, but that could in large part be addressed by avoiding the scheme entirely and simply preventing extraction ahead time--e.g. by stopping the sale of Federal mineral rights, or using environmental laws to prohibit extraction, which is more easily done before an extraction operation is established.)
[1] The reason for this is various tax incentives which make direct ownership stakes and their passthrough income and deductions the most profitable investment structure. But the Schedule Ks are really annoying when doing your taxes. AFAIU an MLP is similar to an REIT (Real Estate Investment Trust), the purpose of which is also to provide an easily traded investment providing passthrough income and deductions. REITs have become notorious for effectively accelerating the exploitation of flawed real state regulations, policies, and taxation. They're not per se bad, but more efficient financial markets cuts many ways.
I own the mineral rights to a plot that also has a house on it. It would suck for the house usage to drill for oil on that land and there might not be economically viable oil underneath (you only ever know statistically/via modeling until you drill)...
It does seem like a scenario where you don't really want the efficiencies markets discover, which is why I mentioned the nationalization option. Not to suggest that option should be taken casually, or wouldn't come with its own set of challenges.
Paying off the oil companies in this way means the end of the oil companies. They get a one-time cash infusion but that's it, no recurring revenue. Then no more oil companies to lobby against climate change. It's the only non-revolutionary route left, probably. Oil companies aren't just going to stop pumping oil and stop throwing the government around.
Markets have a limited ability to look ahead. It's like a greedy algorithm. You're finding a local maximum, but not necessarily a global one (or even one that won't melt the planet).
The most efficient choice at any given moment (even incorporating a correctly priced carbon tax) may be to continue drilling. But due to the very long term capital investments, investing in drilling today because it's the best option, also guarantees it will be the best option tomorrow. So maybe additional interventions are required to reset the path dependence?
I think a purely market based solution would probably figure things out eventually, but we should also consider ways to help the transient response be as minimally disruptive as possible.