Written by Pascal Buehrig, IMS, and Margaux Carron, International officer of Young Green Liberals (Switzerland)

Updated Visions and Leading Examples

Which colour comes to your mind when you think about sustainability? Chances are your first thought arrives at “green”. When the German liberals drafted their first concept for sustainable development in their “Freiburger Thesen” half a century ago though, they coined their vision “blue”: prosperity through choice and accountability in dealing with our natural resources that constitute a fundamental right and commitment alike. For too long, liberals (and non-liberals) have given up this call when it felt like a truth too inconvenient to be told to constituents. LYMEC, in contrast, put a recent Europe-wide turnaround among European liberals firmly back on their agenda. Our resolution on “Adoption of CO2 Taxes and Tariffs by the EU”, passed on the last Spring Congress, revives the “Blue Growth” vision with new ideas that resonate with proposals for a “Climate Income System” by the economist and climate advocate communities.    

Listen to science: giving and taking within our carbon budget

The adopted Resolution — The Adoption of C02 Taxes and Tariffs by the EU — emphasises many of the positions that have become integral to liberal thought: there is a limited budget left for CO2 emissions to stay under a potentially catastrophic threshold. In other words, whoever wants to have another piece from this shrinking cake must compensate for it. Only then we can sustain the natural capital for the generations after us. As a result, everyone in the entire economy needs to pay, from producers, importers to end-consumers. To realize this goal, the Emission Trading System (ETS) shall be complemented with a stable tariff on fossil fuels, no matter where they are from. But how can we make such a system scalable and socially bearable? Another LYMEC proposal refers to a cash-back system which, like in Canada or Switzerland, should disburse these revenues back to the citizens!

Tax Shift instead of Tax Lift - a solution called “Climate Income System”

James Collis, chairperson of Citizens’ Climate Europe (CCEU) boils the larger policy vision called Climate Income System (CIS) down to its essence: “An ambitious economy-wide price on emissions is the most effective way to reduce emissions, while public support and social equity can be assured through a direct payback of the revenues to citizens.” In order to avoid global free-riding on the back of the European Union, CCEU supports an effective and well-designed carbon border fee or Carbon Border Adjustment Mechanism. And they are in good company with these demands: since 3,500 US economists supported the “Statement on Carbon Dividends” by the Climate Leadership Council and William Nordhaus’ awarding of the Nobel Prize in 2018, the scientific community has been in overall agreement that the world needs a properly designed tax shift.

Now, why then has this knowledge not gone mainstream in politics so far? For one, conservatives and industry lobbying groups have long lamented that charging for emissions will drive energy-intensive and trade-exposed industries out of Europe (a real issue called “carbon leakage”). Moreover, voices from across the political spectrum have become louder in warning about disproportionate damage to lower incomes. Another understandable concern since we have seen the political turbulence brought along by the Yellow Vests movement in France. Finally, our envisioned reform could successfully invalidate these two most important concerns that have justified all kinds of stumbling blocks to emission pricing. 

Switzerland, the policy example in our midst

The good news is that the vision of LYMEC is not merely a blueprint. We already have a neighbour that is pursuing many policies similar to the EU and has on top realised in parts some of our core ideas: Switzerland! Since 2008, the Confederates have been pricing emissions - from energy production through EU-linked emission trading, and from thermal power plants burning oil or gas through a separate C02 levy - of which the latter has been set at a sky-high 90 EUR per ton of emissions. Finally, two thirds of the revenues from the levy flow back to citizens and businesses directly: for the former group through discounts on their health-insurance payments, for the latter as an allowance for payroll taxes. The rest comes back at an indirect but earmarked benefit through building refurbishments.

The country high up in the Alps is even host to the International Climate Income Alliance (ICIA), operated by the independent Cleantech21 Foundation. “Our mission is to promote CIS as the emission pricing policy instrument of choice. CIS excels because it is simple, fair and effective. It is increasingly gaining attention from different stakeholders”, says founder Nick Beglinger, accentuating the maturity their vision has already reached among experts and continually in real-life politics. On top of this, the policy was prominently featured in the latest annual report of the Carbon Pricing Leadership Coalition (CPLC), a World-Bank initiative. The most recent controversies around Swiss climate policy could not shake this foundational agreement. Instead, ICIA sees new opportunities to bring Climate Income in Switzerland to its full potential. 

Taking back momentum - Climate Income is an idea that has come to stay

A Climate Income System has the potential to disrupt climate policy in all of Europe, and beyond. It reconciles our values with those of many other party groups. All polluters pay their fair share to compensate for the footprint they leave - nobody is left behind, and the government sends out strong forward guidance without turning into a planning behemoth, imposing ever-new taxes to grow funds for politicians or regulating businesses to the bureaucrat's letter. 

Although the way for climate policy will remain contested among liberals, our friends in Switzerland proved to be vanguards for a moonshot to an economy where creating natural and financial value can go hand in hand - the “Blue Growth” economy!

References

• LYMEC Policy Book 1992-2021, updated on the Spring Congress 2021
• Economists’ Statement on Carbon Dividends organized by the Climate Leadership Council
• International Climate Income Alliance (ICIA)
• Citizens’ Climate Lobby (CCL) Europe
• Cleantech21 Foundation Switzerland
• ‘Matterhorn goes Paris: Emission Pricing and Policy Reforms in Switzerland’; policy analysis by CCL Europe

About the authors:

Margaux Carron is Swiss and member of the Green Liberal Party since 2011. After being elected as Town Counciler for the town of Nyon, she took up various roles in the party and is today International Officer to LYMEC for the Young Green Liberals Switzerland.

Pascal Buehrig is a financial economist by education. As an investment consulting, he helps pension funds and endowments strengthen their bargaining position. His deep-felt concerns centers around every possibility to address social issues by reshaping markets, including economic inequality, capital market regulation, fighting climate change or providing affordable housing. Besides LYMEC, he writes as a blogger on a variety of other platforms, and participate in policy papers within the German Liberals as well as the nonpartisan think tanks.