Thank you.
Whether we use a cap and trade system or any other type of economic instrument—either putting in a charge, a levy, a tax, or a cap and trade, or whatever you want to do—basically what it does is distribute the risk differently. So with a cap and trade system, if you design it one way, you know exactly how many emissions you're going to get. You're not too sure how much it's going to cost you to get there. If you put in a tax, you know roughly how much you're going to pay per emission and therefore what kind of technological and behavioural response you're going to get, but you don't know the exact level of emissions you're going to get.
You can, of course, marry the two systems by having a cap and trade system, where the cap is something that you can buy your way out of at a relative price, with somebody becoming the issuer of permits.
So I think in some sense that there are big advantages, whatever approach you use, in having as broad a mandate as possible for this; hence, the continental approach—in part because it allows you to find what the cheapest ways of reducing greenhouse gas emissions are by the people who actually know a lot more about this than people sitting in offices like me, or public servants. I have no qualms about that. So I think it puts the onus of action where there's the most information to deal with it.
So whether you go with a cap and trade system or something else, the key thing is to design it in a way that will allow the individuals who participate in it to find the cheapest way of addressing the problem.
The second thing is to try to have this as coordinated as possible, in the sense that what you don't want to have is what we tend to observe now, this plethora of little states, and little cities in some cases, taking initiatives on problems that are, as we've put it, planetary or continent-wide, at least. So I think it's important to find a way where you can act in an integrated fashion at the level of the continent, but also within individual countries, so that we're not redoing different things.
In some sense, the question of who should be leading this is a bit of a moot issue, because it really depends on which instrument you pick and what kinds of constraints you put on the instrument. If you basically have a permit system, where you don't freely allocate anything but where everybody has to bid within an auction system, it doesn't really matter who administers it. In a big-picture sense, you can probably create an agency and let them do it, even if it's a private sector agency under some government oversight.
More importantly, the issue, I think, is that you shouldn't try to do too much with a single instrument. That's the kind of problem we've run into for the last 15 years, at the very least, with this policy. We've tried to design a large final emitter system that was so complicated in how it was supposed to work, in terms of the allocation of permits and permissions and all kinds of things, that they essentially cratered in on themselves. It was too complicated to administer. If you think there are distributional problems and you don't like how the burden is shared, and you feel there are poverty issues, for example, or competitiveness issues, use other tools to deal with those. Don't try to lump too much onto the one tool that you want to use to deal with the problem at hand.