13 Dec 2008

CRAG Tax and Fund Scheme


The CRAG group I'm a member of is largely dead at the moment. To be fair, it never really took off, and I had misgivings about the system from the start.

I think it's because the method of reduction in our footprints lacks carrot and has too much stick. It basicly asks people to declare their carbon use and then trade down to a per-member cap. In other words, it's a straight cap and trade system. It doesn't work because the only incentive for people with high footprints is to leave before they have to pay up.

I have a different proposal based loosely around Oliver Tickell's Kyoto 2 proposals.

First of all, with a fluid membership, cap and trade in any form does not work - it's either all-in or none, with that kind of system. So what I'd suggest is a (voluntary) carbon tax and green investment/loans fund.

Each member that wishes may donate an amount (to be determined) for their fossil fuel usage and general conspicuous consumption activities. Basic living costs (rent/mortgage, a clothes allowance, food, water and sewage) would be fee-free and guilt-free, but any other expenditure would be included in a personal tally and regular donations into the collective kitty (I suggest a club account or similar) by monthly direct debit. The amount to be paid would be assessed by the accepted GRAG accounting rules.

Any member in good standing (say a year of monthly donations) may submit a funding request for an eco-project they wish to put into place to reduce their footprint. This might be some roof lagging, or cavity wall insulation, or a set of remote-controlled sockets, or even a new high-efficiency fridge or an electric car. The request can be for either a zero-interest loan for up to 100% of the project's cost, or a grant of up to 50% of the project's cost.

With their funding request they must supply evidence of past carbon use and financial costs related to the area the project is intended to address (e.g. house heating) and an estimate of future carbon use and spending based on the results of the project. Requests will be assessed on a bang-per-buck system, where the cheapest, biggest wins will be considered first. It is likely that the most profligate users will have the greatest opportunities for making savings, so this incentivises them to remain within the system.

The length of time a member stays within the system will only be a factor for when they may submit a request, and will not influence the spending decisions, which will be made in public with all factors published. There may be a case for limiting each member to one project per year.

Every project funded through the scheme via a grant will be subject to a profit-sharing system. Depending on the share of the cost funded, a proportion of all resulting savings for the first 5 years will be returned to the scheme.

That is, if a £1000 project received a 50% grant of £500, and resulted in savings to the owner of £10 per month in bills and a reduction in their carbon tax payments by a further £2 per month, then half these savings would accrue to the fund - i.e. his monthly contribution would go up by £4 per month - a net saving of £6 per month. The fund would recoup (in this case) £360 of the outlay.

All projects will need to supply evidence of their savings to monitor this, but this will be gathered as part of the normal CRAG accounting process. Other changes in circumstances or behaviour made by members, without the benefit of CRAG funding, should also be declared to avoid counting savings from other sources.

For loans, there is only the loan repayment (over a term of 5 years) to be added. If the £500 above had been a loan, monthly repayments would be £8.33, but the £12 savings would be entirely his - a net saving of £3.67 per month. The fund would eventually recoup all of the outlay.

Note that defaulters can be taken to small claims courts, and projects would be funded under signed contracts. Any member can opt out of their voluntary tax payments at any time, so long as they keep up any project repayments.

The whole would need to be managed by a small committee. I suggest 3 people, with one seat up for election each year. All members with an existing direct debit instruction are eligible to vote, and all members in good standing (12 months or more of payments) eligible to stand (except in the first year, obviously). The treasury would require 2 signatures from these three to draw any money, and all accounts (including a summary of each member's cash and carbon standings) would be published monthly.

  • Everyone has an investment in the success of the community.
  • A fluid membership can be managed.
  • High-polluters often have the easiest savings to make, and this system assists them to do so.
  • Sharing project experiences can generate ideas and accumulate knowledge.
  • Favourable deals can be negotiated with traders to delivery multiple projects.
  • As the fund accumulates wealth, and drives down emissions within the group, more ambitous projects become achievable.
  • Individual members can obtain capital for improvements in their carbon lifestyle without paying interest to disinterested institutions.