EGROM FALCUOR!
Bravo! to Ingrid Jackson for speaking truth to power at Tuesday's Presidential "debate." After pointing out how fast Congress moved in the face of an economic crisis, Ingrid asked the candidates what they would do in their first two years to address the climate crisis and create green jobs. Interviewed afterwards, she said neither candidate responded with the sense of urgency she feels. Ingrid, I'm with you!
Obama promotes "clean" coal, technically "carbon capture and sequestration" or CCS. The idea: "capture" the CO2 released from burning coal, then pump it into empty gas formations deep in the Earth where we hope it will stay-- forever. If these processes are even possible on a large scale, we know from thermodynamic calculations that they'll require vast amounts of energy. (Think about separating gases and about pumping them long distances and deep into the Earth or the oceans.) Estimates by the Nobel-prize winning IPCC suggest that CCS would require 30 - 60% more energy than otherwise would be needed to make electricity. The additional energy and capital cost of CCS equipment would push electricity costs up roughly 80 - 120%. But right now, wind power is available to consumers in many states for about 15% more than dirty coal power. Here in DC, it's called "Power Choice." So wind is already cheaper than "clean" coal is expected to be for electricity generation. And the cost of wind energy should decline as we scale up. Conversely, capturing and sequestering carbon from "clean" coal is likely to become more costly (both in dollars and energy) as the easy and close places to store CO2 underground are filled up and we have to pump waste CO2 further and deeper.
McCain advocates drilling and nuclear. (Is nuclear better than Bush, Palin and Homer Simpson's "Nuke-you-lar"? Sorry, couldn't resist.) Nobody would operate a nuclear power plant in the US without insurance. And no insurance company writes policies to cover the huge damages of a nuclear disaster, at least not at prices utilities could profitably afford. So Congress committed our tax dollars to insure the owners of nukes. The nuclear power industry would not exist if it had to buy adequate insurance at market prices. The risk is too vast. If the insurance companies won't cover nuclear, why are we willing to take such risks? Not convinced? Read about the Chernobyl nuclear disaster.
Hats off to Ingrid. Too bad our choice is between a) Obama's "clean coal": mountaintop removal, toxic air and water with staggering costs and b) McCain's nuclear: uranium mining and processing, radioactive air and water, with the risk of accidents like Chernobyl and the intractable problem of nuclear waste disposal for a few million years. How about c) wind, solar , geothermal and conservation, please? How about pricing carbon pollution to push everyone -- the entire energy market -- towards conservation, renewables and yes, Ingrid, green jobs?
Why do candidates avoid mentioning conservation? The U.S. wastes about half the fuel we burn. What about insulating our houses, turning off lights, turning down thermostats and avoiding aggressive driving? What about flying a lot less? (A 4,000 mile round-trip produces approximately eight tons in CO2-equivalent gases per passenger. Roughly the same amount of CO2 produced yearly, per person, to power the average American car and supply heat and electricity for the average home.)
When will major party candidates level with us? As environmental scientist, ethicist and population activist Paul Erlich points out, it's time to re-think what it means to have a good life. Can't we be happier with more love, more learning, more community, and less waste, less stuff, less travel, less of everything we've been told to by advertising to buy. And what about the old idea we should only buy what we have money for?
Ingrid may be too young to have heard John Lennon's song "Gimme Some Truth" but that's what she was very earnestly asking for. We didn't hear much truth about the climate crisis in the debate, but maybe her question will remind us to keep asking. We're running out of time.
Thursday, October 9, 2008
Tuesday, September 23, 2008
"Fierce Urgency" of Climate Crisis compels Carbon Tax
Effective climate policy finally got a hearing on Capitol Hill last week.
The "fierce urgency" of the climate crisis compels effective action, warned Rep. John Larson (D-CT) at Thursday’s House Ways and Means Committee’s packed hearing on climate change revenue measures. Hurricane Ike’s devastation of coastal Texas imparted deeper meaning to Martin Luther King’s phrase. Witnesses pointed to storm-related damage as one of many ways in which failure to reduce the greenhouse gas emissions that drive global warming will destroy ecosystems and economies alike.
New York Mayor Bloomberg kicked off a day of testimony calling for revenue-neutral carbon tax as the most effective and transparent way to "use capitalism" to create the incentives for everyone to reduce fossil fuel use and for development and implementation of low-carbon alternatives.
Earlier in the week, a panel of politically-diverse economists recommended distributing revenue from either a cap-and-trade auction or a carbon tax to individuals rather than doling out the funds (or equivalent in pollution permits) to energy firms.
The focus on effective policy rather than the tired refrain of denial and delay felt refreshing, even inspiring. Expert panels discussed potentially effective measures like a carbon tax with a direct dividend; the discussion has moved beyond clumsy and ineffectual cap-and-trade measures that have dominated for years and which have produced no greenhouse gas reductions in Europe.
The deniers and delayers got their appearance; Heritage Foundation's David Kreutzer asserted that nothing the U.S. could do would matter and that climate legislation is too costly. Maybe that's progress; industry shills seem to have moved from denying the climate crisis to quibbling about the cost. (Gargantuan storms like Katrina and Ike are hard to ignore so they're changing the subject to money.)
The conservative / industry line on global warming closely tracks their half-century old script on smoking and lung cancer. No surprise, it's the same crowd. Their game plan:
1) Deny. "Smoking doesn't cause cancer." ("Global warming is a hoax.")
2) Generate controversy: "You can't prove smoking causes lung cancer." ("You can't prove global warming is real.")
3) Blame the victim. "It's your fault, there are warnings on the label — why did you start? You could have quit." ("It's your fault, you're addicted to oil, you should be "energy independent".)
4) Assert that it's impossibile to do anything. "Banning or restricting smoking wouldn't matter, people would smoke anyway." ("Pricing or regulating greenhouse gas emissions and developing alternatives won't matter, the Chinese and Indians will burn coal anyway.")
5) Argue cost-benefit; assert that it's too expensive to do anything. "Tobacco is very profitable. Regulation costs more than our profits and would put poor tobacco farmers out of business. ("Fossil fuels are necessary for economic growth, serious action to reduce their use would destroy our economy and hurt poor people.")
6) Bankruptcy. (Coming attractions.) "We're bankrupt and can't pay for the harm we've caused." (Bankruptcy is depolyed only after executives and the savvy "insider" shareholders have taken their money out of the company or out of the country. It's standard strategy in Superfund cases -- the polluters delay while they move their assests, then leave taxpayers stuck with the cleanup bills.)
Science will prevail, but climate change grows exponentially and irreversibly, so if industry shills like Heritage can stall for a few more years, it will be too late to save much of civilization or Earth's biodiversity.
Socrates said "There is no evil but ignorance." Heritage is doing its best to keep us in the dark. The Committee gave them their say, but maybe their script is finally wearing out.
It's not a question of whether the U.S. acts alone, it's whether the world's largest economy takes the lead in pricing carbon emissions. As Dr. Frank Ackerman of the Stockholm Environment Institute put it, “If the U.S. leads, the world will follow, but if we don’t, the worst consequences” can be expected.
The "fierce urgency" of the climate crisis compels effective action, warned Rep. John Larson (D-CT) at Thursday’s House Ways and Means Committee’s packed hearing on climate change revenue measures. Hurricane Ike’s devastation of coastal Texas imparted deeper meaning to Martin Luther King’s phrase. Witnesses pointed to storm-related damage as one of many ways in which failure to reduce the greenhouse gas emissions that drive global warming will destroy ecosystems and economies alike.
New York Mayor Bloomberg kicked off a day of testimony calling for revenue-neutral carbon tax as the most effective and transparent way to "use capitalism" to create the incentives for everyone to reduce fossil fuel use and for development and implementation of low-carbon alternatives.
Earlier in the week, a panel of politically-diverse economists recommended distributing revenue from either a cap-and-trade auction or a carbon tax to individuals rather than doling out the funds (or equivalent in pollution permits) to energy firms.
The focus on effective policy rather than the tired refrain of denial and delay felt refreshing, even inspiring. Expert panels discussed potentially effective measures like a carbon tax with a direct dividend; the discussion has moved beyond clumsy and ineffectual cap-and-trade measures that have dominated for years and which have produced no greenhouse gas reductions in Europe.
The deniers and delayers got their appearance; Heritage Foundation's David Kreutzer asserted that nothing the U.S. could do would matter and that climate legislation is too costly. Maybe that's progress; industry shills seem to have moved from denying the climate crisis to quibbling about the cost. (Gargantuan storms like Katrina and Ike are hard to ignore so they're changing the subject to money.)
The conservative / industry line on global warming closely tracks their half-century old script on smoking and lung cancer. No surprise, it's the same crowd. Their game plan:
1) Deny. "Smoking doesn't cause cancer." ("Global warming is a hoax.")
2) Generate controversy: "You can't prove smoking causes lung cancer." ("You can't prove global warming is real.")
3) Blame the victim. "It's your fault, there are warnings on the label — why did you start? You could have quit." ("It's your fault, you're addicted to oil, you should be "energy independent".)
4) Assert that it's impossibile to do anything. "Banning or restricting smoking wouldn't matter, people would smoke anyway." ("Pricing or regulating greenhouse gas emissions and developing alternatives won't matter, the Chinese and Indians will burn coal anyway.")
5) Argue cost-benefit; assert that it's too expensive to do anything. "Tobacco is very profitable. Regulation costs more than our profits and would put poor tobacco farmers out of business. ("Fossil fuels are necessary for economic growth, serious action to reduce their use would destroy our economy and hurt poor people.")
6) Bankruptcy. (Coming attractions.) "We're bankrupt and can't pay for the harm we've caused." (Bankruptcy is depolyed only after executives and the savvy "insider" shareholders have taken their money out of the company or out of the country. It's standard strategy in Superfund cases -- the polluters delay while they move their assests, then leave taxpayers stuck with the cleanup bills.)
Science will prevail, but climate change grows exponentially and irreversibly, so if industry shills like Heritage can stall for a few more years, it will be too late to save much of civilization or Earth's biodiversity.
Socrates said "There is no evil but ignorance." Heritage is doing its best to keep us in the dark. The Committee gave them their say, but maybe their script is finally wearing out.
It's not a question of whether the U.S. acts alone, it's whether the world's largest economy takes the lead in pricing carbon emissions. As Dr. Frank Ackerman of the Stockholm Environment Institute put it, “If the U.S. leads, the world will follow, but if we don’t, the worst consequences” can be expected.
Monday, August 4, 2008
Like The“Boy Named Sue,” Carbon Tax Advocates Battle Bias Against Name
In his hit "A Boy Named Sue," Johnny Cash sang of a boy whose father named him “Sue” and left him to make his way in the world. “Sue” grows up seeking revenge on his papa. They finally meet in a barroom brawl, and Sue gains the upper hand. But he spares the life of the man who saddled him with a girl’s name after his dad explains, “I knew you'd have to get tough or die. And it's the name that helped to make you strong."
Carbon tax advocates understand how "Sue" felt. We’re often ignored or ridiculed, and have to fight to be taken seriously. “Life ain’t easy for a boy named Sue.”
While carbon taxes are ignored, life has been easy for the competing carbon-reduction scheme known as cap-and-trade. Big Green groups like Environmental Defense and the Natural Resources Defense Council have strongly backed cap-and-trade, as have some major corporations seeking to promote their green credentials and secure prime seats at the bargaining table. Politicians seem loathe to mention carbon taxes. John McCain and Barack Obama (as well as Hillary Clinton) support a carbon cap-and-trade system. Few members of Congress dare to support a carbon tax.
Yet economists across the political spectrum are virtually unanimous: a revenue-neutral carbon tax would reduce emissions far more effectively than a cap-and-trade system. Some even suggest that cap-and-trade's complexity and volatility would cause it to fail altogether. Nevertheless, the political class insists that the public will never accept anything called a “tax.” And so, in a classic self-fulfilling prophecy, Congress hasn’t seriously entertained a carbon tax and media coverage is almost entirely focused on cap-and-trade.
Across the border, the picture is quite different. The leader of Canada’s (centrist) Liberal Party, Stéphane Dion, is advocating a carbon tax re-framed as a ”Green Shift” that would tax fossil fuels and redistribute the revenues to taxpayers by reducing other taxes and direct payments. Dion and the Liberals are taking plenty of flak for advocating a tax, but, like Johnny Cash’s “Sue,” they’re hitting back hard, pointing out that a revenue-neutral tax is not a government money grab but an effective and progressive way to nudge the economy toward a low-carbon diet. Dion’s plan would bind the government to return every dollar collected for carbon pollution to Canadians via other tax cuts, annually verified by the Auditor General. Canada’s third largest province, British Columbia, started a revenue-neutral carbon tax this July, and other provinces are considering following suit.
Cap-and-trade advocates don’t broadcast the inconvenient truth that higher fuel prices are an element of both cap-and-trade and carbon tax systems, and indeed, that a price on carbon emissions is central to any serious policy to combat global warming. Advocating a carbon tax, Canadian environmentalist David Suzuki puts it this way: “We pay $90 at ton to put garbage into landfills – yet we act as if the atmosphere is limitless and don’t pay a price for [dumping carbon into] it. That doesn’t make any sense.”
Cap-and-trade would reduce emissions — and raise prices — by gradually reducing the number of pollution permits. This would require setting up a whole new market with its own currency (auctioned, tradeable permits) and a regulatory bureaucracy dedicated to overseeing the new market and its participants. Setting up and managing such a bureaucracy is an enormously high price to pay just to avoid saying the word "tax" or having to explain a “revenue-neutral carbon tax.”
To many environmental advocates conditioned by years of “settle for what we can get” politics, advocating a policy called a tax is about as appealing as being a boy who has to explain why his name is “Sue.”
But just as the boy named Sue was tough inside, a carbon tax is straightforward and plays no favorites. The underlying idea is simple: reduce carbon emissions by imposing a comprehensive tax on coal, oil and gas where they enter the economy. The tax must be high enough and increase steeply and predictably enough to affect consumer and business expectations and behavior via the pull of price signals. As the tax pushes the cost of coal power above that of wind energy, entrepreneurs will build, and consumers will purchase power from windmills, not coal mines and coal-fired power plants. When heating bills exceed the cost of attic insulation and energy-conserving windows along with the hassle of installing them, homeowners and landlords will hire renovators instead of paying the higher fuel and utility bills. When airfares exceed the cost to build and run a network of high-speed trains, perhaps Congress will get busy and authorize it.
During the debate leading up to the defeat of the Lieberman-Warner cap-and-trade bill in June, proponents argued that a cap with auctioned permits would generate revenue just as a tax would, and that these revenues could be allocated to alternative energy projects and other "good works." But this idea has three serious flaws:
1. Congress favors powerful corporations and other big campaign donors, so unsurprisingly Lieberman-Warner would have given out the auction revenue as subsidies for ethanol, nukes, "clean coal" research, and "transition adjustments" for the same fossil fuel industries that would have paid for pollution permits
2. It's far too early in the technology race for Congress or anyone else to know which technologies will work the best for reducing greenhouse gas emissions. In contrast, a tax on carbon pollution would set the market to work on finding, developing and deploying those technologies.
3. Because poor families spend a larger fraction of their incomes on utilities and fuel, both a carbon tax and cap-and-trade would disproportionately impact lower income people unless linked to a dividend or tax shift to distribute the revenue to everyone. Rich people (who fly more, drive bigger vehicles and live in larger and multiple homes) burn far more fossil fuel than poor people, so the rich would pay most of the revenue into a carbon tax, while a dividend would spread that money equally over all income groups. The Carbon Tax Center figures that the bottom 2/5 of households would be net gainers under a carbon tax with dividend, while the middle quintile would break even and the top 2/5 would pay more carbon tax than their dividend. Under a carbon tax-and-dividend, we'd all pay higher prices for fossil fuel but we'd all get the same dividend. So those who use less than their share of fuel (lower income folks and those who learn to reduce carbon impacts) would pay out less in increased prices than they would receive in dividends. We'd be PAID to conserve the carbon recycling capacity of the atmosphere while the wasters at the top were penalized.
The bottom line: a carbon tax with dividend (or tax shift) will push everyone to reduce fossil fuel use without hammering the poor.
Unless the U.S. and other nations attach strong, clear price signals to carbon emissions, we won’t develop and implement low-carbon technologies. Instead, the world will continue to waste energy and spew carbon, and global warming will cascade into a chaotic and unmanageable avalanche. A revenue-neutral carbon tax is the right medicine for this grave condition. It would be tragic if its jarring name kept the best medicine on the shelf while the patient languished and perished.
Carbon tax advocates understand how "Sue" felt. We’re often ignored or ridiculed, and have to fight to be taken seriously. “Life ain’t easy for a boy named Sue.”
While carbon taxes are ignored, life has been easy for the competing carbon-reduction scheme known as cap-and-trade. Big Green groups like Environmental Defense and the Natural Resources Defense Council have strongly backed cap-and-trade, as have some major corporations seeking to promote their green credentials and secure prime seats at the bargaining table. Politicians seem loathe to mention carbon taxes. John McCain and Barack Obama (as well as Hillary Clinton) support a carbon cap-and-trade system. Few members of Congress dare to support a carbon tax.
Yet economists across the political spectrum are virtually unanimous: a revenue-neutral carbon tax would reduce emissions far more effectively than a cap-and-trade system. Some even suggest that cap-and-trade's complexity and volatility would cause it to fail altogether. Nevertheless, the political class insists that the public will never accept anything called a “tax.” And so, in a classic self-fulfilling prophecy, Congress hasn’t seriously entertained a carbon tax and media coverage is almost entirely focused on cap-and-trade.
Across the border, the picture is quite different. The leader of Canada’s (centrist) Liberal Party, Stéphane Dion, is advocating a carbon tax re-framed as a ”Green Shift” that would tax fossil fuels and redistribute the revenues to taxpayers by reducing other taxes and direct payments. Dion and the Liberals are taking plenty of flak for advocating a tax, but, like Johnny Cash’s “Sue,” they’re hitting back hard, pointing out that a revenue-neutral tax is not a government money grab but an effective and progressive way to nudge the economy toward a low-carbon diet. Dion’s plan would bind the government to return every dollar collected for carbon pollution to Canadians via other tax cuts, annually verified by the Auditor General. Canada’s third largest province, British Columbia, started a revenue-neutral carbon tax this July, and other provinces are considering following suit.
Cap-and-trade advocates don’t broadcast the inconvenient truth that higher fuel prices are an element of both cap-and-trade and carbon tax systems, and indeed, that a price on carbon emissions is central to any serious policy to combat global warming. Advocating a carbon tax, Canadian environmentalist David Suzuki puts it this way: “We pay $90 at ton to put garbage into landfills – yet we act as if the atmosphere is limitless and don’t pay a price for [dumping carbon into] it. That doesn’t make any sense.”
Cap-and-trade would reduce emissions — and raise prices — by gradually reducing the number of pollution permits. This would require setting up a whole new market with its own currency (auctioned, tradeable permits) and a regulatory bureaucracy dedicated to overseeing the new market and its participants. Setting up and managing such a bureaucracy is an enormously high price to pay just to avoid saying the word "tax" or having to explain a “revenue-neutral carbon tax.”
To many environmental advocates conditioned by years of “settle for what we can get” politics, advocating a policy called a tax is about as appealing as being a boy who has to explain why his name is “Sue.”
But just as the boy named Sue was tough inside, a carbon tax is straightforward and plays no favorites. The underlying idea is simple: reduce carbon emissions by imposing a comprehensive tax on coal, oil and gas where they enter the economy. The tax must be high enough and increase steeply and predictably enough to affect consumer and business expectations and behavior via the pull of price signals. As the tax pushes the cost of coal power above that of wind energy, entrepreneurs will build, and consumers will purchase power from windmills, not coal mines and coal-fired power plants. When heating bills exceed the cost of attic insulation and energy-conserving windows along with the hassle of installing them, homeowners and landlords will hire renovators instead of paying the higher fuel and utility bills. When airfares exceed the cost to build and run a network of high-speed trains, perhaps Congress will get busy and authorize it.
During the debate leading up to the defeat of the Lieberman-Warner cap-and-trade bill in June, proponents argued that a cap with auctioned permits would generate revenue just as a tax would, and that these revenues could be allocated to alternative energy projects and other "good works." But this idea has three serious flaws:
1. Congress favors powerful corporations and other big campaign donors, so unsurprisingly Lieberman-Warner would have given out the auction revenue as subsidies for ethanol, nukes, "clean coal" research, and "transition adjustments" for the same fossil fuel industries that would have paid for pollution permits
2. It's far too early in the technology race for Congress or anyone else to know which technologies will work the best for reducing greenhouse gas emissions. In contrast, a tax on carbon pollution would set the market to work on finding, developing and deploying those technologies.
3. Because poor families spend a larger fraction of their incomes on utilities and fuel, both a carbon tax and cap-and-trade would disproportionately impact lower income people unless linked to a dividend or tax shift to distribute the revenue to everyone. Rich people (who fly more, drive bigger vehicles and live in larger and multiple homes) burn far more fossil fuel than poor people, so the rich would pay most of the revenue into a carbon tax, while a dividend would spread that money equally over all income groups. The Carbon Tax Center figures that the bottom 2/5 of households would be net gainers under a carbon tax with dividend, while the middle quintile would break even and the top 2/5 would pay more carbon tax than their dividend. Under a carbon tax-and-dividend, we'd all pay higher prices for fossil fuel but we'd all get the same dividend. So those who use less than their share of fuel (lower income folks and those who learn to reduce carbon impacts) would pay out less in increased prices than they would receive in dividends. We'd be PAID to conserve the carbon recycling capacity of the atmosphere while the wasters at the top were penalized.
The bottom line: a carbon tax with dividend (or tax shift) will push everyone to reduce fossil fuel use without hammering the poor.
Unless the U.S. and other nations attach strong, clear price signals to carbon emissions, we won’t develop and implement low-carbon technologies. Instead, the world will continue to waste energy and spew carbon, and global warming will cascade into a chaotic and unmanageable avalanche. A revenue-neutral carbon tax is the right medicine for this grave condition. It would be tragic if its jarring name kept the best medicine on the shelf while the patient languished and perished.
Thursday, May 8, 2008
Great week for truth in carbon pricing
Three heartening developments:
Obama gained high ground by acknowledging the inconvenient truth: reducing fossil fuel prices in the face of climate catastrophe isn't a good idea.
British Columbia initiated a revenue-neutral carbon tax with dividend to create incentives for a more carbon-efficient economy.
Two courageous EPA enforcement attorneys exposed the manipulations and failures of cap-and-trade.
Maybe good politics and good policies are beginning to align.
Along with Al Gore and NASA's Dr. James Hansen, economists from left to right (Rob Shapiro, Bill Nordhaus to Greg Mankiw and Ken Greene) agree: pricing greenhouse gas emissions is a necessary first step in any effective effort to combat global warming. And like the EPA whistleblowers, they agree that a revenue-neutral carbon tax would work much better than cap-and-trade.
Because I'm convinced that a gradually-increasing revenue-neutral carbon fee would stimulate our entire economy towards efficiency and renewables (and create incentives for our trading partners to follow suit) I volunteer for the Carbon Tax Center.
We have much work ahead to build support for a carbon fee and dividend system, but after this week, I have hope.
Obama gained high ground by acknowledging the inconvenient truth: reducing fossil fuel prices in the face of climate catastrophe isn't a good idea.
British Columbia initiated a revenue-neutral carbon tax with dividend to create incentives for a more carbon-efficient economy.
Two courageous EPA enforcement attorneys exposed the manipulations and failures of cap-and-trade.
Maybe good politics and good policies are beginning to align.
Along with Al Gore and NASA's Dr. James Hansen, economists from left to right (Rob Shapiro, Bill Nordhaus to Greg Mankiw and Ken Greene) agree: pricing greenhouse gas emissions is a necessary first step in any effective effort to combat global warming. And like the EPA whistleblowers, they agree that a revenue-neutral carbon tax would work much better than cap-and-trade.
Because I'm convinced that a gradually-increasing revenue-neutral carbon fee would stimulate our entire economy towards efficiency and renewables (and create incentives for our trading partners to follow suit) I volunteer for the Carbon Tax Center.
We have much work ahead to build support for a carbon fee and dividend system, but after this week, I have hope.
Tuesday, March 18, 2008
Carbon Footprint
"Big Foot" (NEW YORKER, 2/25/08) by Michael Specter, describes the complexities of calculating the "carbon footprint" (climate impact) of various food products. Specter also described the similarly complex "cap and trade" system often discussed as a way to reduce greenhouse gas emissions.
My response, published 3/24/08:
Specter notes that we need price incentives to reduce greenhouse-gas emissions. But there’s a simpler alternative to cap and trade, which is a complex (and volatile) system. A carbon tax levied on fossil fuels as they enter the economy (through importation or extraction from the earth) would allow the prices of goods and services to reflect their carbon footprint; and a Congressional Budget Office study concluded that the net benefits of a tax could be roughly five times as high as the net benefits of an inflexible cap. Simple, fair, direct, and, perhaps most important, predictable.
James Handley
Washington, D.C.
My response, published 3/24/08:
Specter notes that we need price incentives to reduce greenhouse-gas emissions. But there’s a simpler alternative to cap and trade, which is a complex (and volatile) system. A carbon tax levied on fossil fuels as they enter the economy (through importation or extraction from the earth) would allow the prices of goods and services to reflect their carbon footprint; and a Congressional Budget Office study concluded that the net benefits of a tax could be roughly five times as high as the net benefits of an inflexible cap. Simple, fair, direct, and, perhaps most important, predictable.
James Handley
Washington, D.C.
Monday, March 10, 2008
Who will say the "T" word?
Enjoyed a delicious lunch with economist Ken Green at the (conservative) American Enterprise Institute two weeks ago. Green and his AEI colleagues published a terrific analysis: "Climate Change, Caps vs. Taxes" concluding that a carbon tax would be a "no regrets" economic policy creating a level and stable playing field. A tax would avoiding the scramble for polluting rights inherent in a "cap and trade" system and would provide incentives for everyone to reduce greenhouse gas emissions. And it would not handicap the US compared to our trading partners as a "cap" would.
While Green is most concerned about damage to the economy, I'm most concerned about run-away climate change. But we agree from both perspectives that a carbon tax would be far better than "cap and trade," the only approach most politicians and environmental groups even mention.
Last month, in "Policy Options for Reducing CO2 Emissions" the Congressional Budget Office concluded that emissions reductions under a tax would be roughly five times as high as those under inflexible cap. Incentives for innovation are one of the key benefits of pricing emissions. CBO found that a tax would create the needed incentives better and sooner than cap and trade.
Cap and trade systems are a (complex) way to create new markets to trade the right to pollute. A carbon tax is a (simple) way to use EXISTING markets to create incentives to reduce carbon emissions and to maintain the resources (rainforests, for example) to sequester carbon. Both will increase fossil fuel prices. A tax would increase fossil fuel prices predictably and gradually, emissions trading would add volatility and unpredictabilty to prices.
So why aren't the mainstream environmental groups and the politicians even talking about a carbon tax? They seem afraid we'd hang them for mentioning the "T" word.
But this "tax" is more like a user fee. When we pay our water bills, we pay for disposal and treatment of the waste water-- a sewer fee for every gallon of water we use. It reminds us not to waste water-- because there are costs of bringing the water to us, and there are costs of taking the waste away. Similarly, carbon tax (or fee) is a way to build in some of the cost of disposal of greenhouse gases into the atmosphere and would put non-fossil fuel energy sources, like wind, on a more equal footing. (A very small carbon tax would very quickly make wind cheaper than coal as a source for electricity generation.) We could use carbon tax funds to provide incentives for preservation of tropical rainforests, the biggest carbon sinks on Earth, which are now being burned to clear land for (government-subsidized) biofuels and beef.
A carbon tax can be revenue-neutral. The Carbon Tax Center suggests a "progressive tax shift" -- distributing an equal share of the carbon tax revenue to every tax payer. Those who use more than the average of fuel would pay more tax than their share (refund) payment. Those of us who use less than average would get a bonus. Everyone who spends money would have incentives to choose less carbon-intensive products and services because prices would reflect carbon footprint.
How to break the sound barrier on carbon taxes? If the Carbon Tax Center, the CBO and the AEI all agree that they'd work so much better than cap and trade, can't we at least start a political discussion about carbon taxes? The silence is deafening, and at least to me, a bit maddening.
While Green is most concerned about damage to the economy, I'm most concerned about run-away climate change. But we agree from both perspectives that a carbon tax would be far better than "cap and trade," the only approach most politicians and environmental groups even mention.
Last month, in "Policy Options for Reducing CO2 Emissions" the Congressional Budget Office concluded that emissions reductions under a tax would be roughly five times as high as those under inflexible cap. Incentives for innovation are one of the key benefits of pricing emissions. CBO found that a tax would create the needed incentives better and sooner than cap and trade.
Cap and trade systems are a (complex) way to create new markets to trade the right to pollute. A carbon tax is a (simple) way to use EXISTING markets to create incentives to reduce carbon emissions and to maintain the resources (rainforests, for example) to sequester carbon. Both will increase fossil fuel prices. A tax would increase fossil fuel prices predictably and gradually, emissions trading would add volatility and unpredictabilty to prices.
So why aren't the mainstream environmental groups and the politicians even talking about a carbon tax? They seem afraid we'd hang them for mentioning the "T" word.
But this "tax" is more like a user fee. When we pay our water bills, we pay for disposal and treatment of the waste water-- a sewer fee for every gallon of water we use. It reminds us not to waste water-- because there are costs of bringing the water to us, and there are costs of taking the waste away. Similarly, carbon tax (or fee) is a way to build in some of the cost of disposal of greenhouse gases into the atmosphere and would put non-fossil fuel energy sources, like wind, on a more equal footing. (A very small carbon tax would very quickly make wind cheaper than coal as a source for electricity generation.) We could use carbon tax funds to provide incentives for preservation of tropical rainforests, the biggest carbon sinks on Earth, which are now being burned to clear land for (government-subsidized) biofuels and beef.
A carbon tax can be revenue-neutral. The Carbon Tax Center suggests a "progressive tax shift" -- distributing an equal share of the carbon tax revenue to every tax payer. Those who use more than the average of fuel would pay more tax than their share (refund) payment. Those of us who use less than average would get a bonus. Everyone who spends money would have incentives to choose less carbon-intensive products and services because prices would reflect carbon footprint.
How to break the sound barrier on carbon taxes? If the Carbon Tax Center, the CBO and the AEI all agree that they'd work so much better than cap and trade, can't we at least start a political discussion about carbon taxes? The silence is deafening, and at least to me, a bit maddening.
Monday, January 28, 2008
Business Roundtable dares to say "Carbon Tax"
Last Thursday, I attended a Senate Foreign Relations Committee hearing on Climate Change. James L. Connaughton, Chair of the White House Council on Environmental Quality testified that while the Bush Administration is concerned about climate change, we must be careful in choosing policies to reduce greenhouse gas emissions to avoid harming our economy. He asserted that the Administration has been leading the fight against climate change and that in some instances it has been more aggressive than Congress. Senator Kerry and others questioned this, and in particular pointed out that last December, Bush's veto threat forced Congress to drop standards requiring electric ultitlies to generate a fraction of their electricity from renewable energy. (Thus, Bush killed the most powerful climate change element of the House energy bill.)
Conservation International testified that 20 - 25% of greenhouse emissions come from burning tropical rainforests. What they didn't say is that rainforest clearing is driven by demand for land to grow biofuels and by demand for grazing land for beef production. Question biofuels! Skip a few meat meals this week!
To me, the most interesting testimony came from John Castellani of the Business Roundtable. (BR is an association of the CEOs of the largest corporations in the US.) Castellani outlined BR's criteria for selecting an appropriate policy to reduce greenhouse gas emissions: Cost-effectiveness, flexibility, use of markets, encouraging innovation and technological solutions, minimizing complexity and transaction costs, transparency, predictability, minimizing market distortions.
And he listed the policy options as: carbon taxes, a cap and trade system or regulatory approaches. Yes, in that order.
BR's criteria closely match those of the Carbon Tax Center-- which concludes that carbon taxes would acheive those goals most effectively and fairly. Check out the Carbon Tax Center website which compares carbon taxes with cap and trade using very similar criteria to those the Business Roundtable suggests.
After the hearing, I talked with Castellani and put him in touch with the Carbon Tax Center and vice versa.
Isn't it interesting that the Business Roundtable seems more open to a carbon tax than the enviros or the members of the Senate Foreign Relations Committee? I guess they value transparency and predictability -- big advantages of carbon taxes over cap and trade which would create market volatility and hide the manipulations of those seeking exemptions or free permits. And cap and trade is extremely complex, as the Europeans who are laboring to implement a cap and trade system are finding.
Conservation International testified that 20 - 25% of greenhouse emissions come from burning tropical rainforests. What they didn't say is that rainforest clearing is driven by demand for land to grow biofuels and by demand for grazing land for beef production. Question biofuels! Skip a few meat meals this week!
To me, the most interesting testimony came from John Castellani of the Business Roundtable. (BR is an association of the CEOs of the largest corporations in the US.) Castellani outlined BR's criteria for selecting an appropriate policy to reduce greenhouse gas emissions: Cost-effectiveness, flexibility, use of markets, encouraging innovation and technological solutions, minimizing complexity and transaction costs, transparency, predictability, minimizing market distortions.
And he listed the policy options as: carbon taxes, a cap and trade system or regulatory approaches. Yes, in that order.
BR's criteria closely match those of the Carbon Tax Center-- which concludes that carbon taxes would acheive those goals most effectively and fairly. Check out the Carbon Tax Center website which compares carbon taxes with cap and trade using very similar criteria to those the Business Roundtable suggests.
After the hearing, I talked with Castellani and put him in touch with the Carbon Tax Center and vice versa.
Isn't it interesting that the Business Roundtable seems more open to a carbon tax than the enviros or the members of the Senate Foreign Relations Committee? I guess they value transparency and predictability -- big advantages of carbon taxes over cap and trade which would create market volatility and hide the manipulations of those seeking exemptions or free permits. And cap and trade is extremely complex, as the Europeans who are laboring to implement a cap and trade system are finding.
My first attempt at philanthropy
Last Saturday, my neighbor Marvin and I knocked on doors in our neighborhood to ask people if they had attic insulation.
I'd noticed that the snow melts off most people's rooftops while it lingers on mine. Why? I had insulation installed in my attic. The heat isn't leaking out and melting the snow on my roof.
My Mom and Dad gave me some money for Christmas. I decided to try to use it to reduce Greenhouse Gas emissions and save my neighbors some money. I negotiated a group discount from a local insulating company and I'm offering to make the 1/3 down payment on attic insulation for anyone who signs up. I put that information and explained how important attic insulation is on a flyer. My friend Marvin (who lives across the street) and I made the pitch to our neighbors. (Marvin's a carpenter and handyman -- he's offering to cut the openings in closet ceilings so the insulation can be blow in and then neatly close them up for $80.)
So I'm offering to pay the first $233 towards the $700 cost of attic insulation. I noticed my heating bills dropped about 1/3 when I had insulation put into my attic 17 years ago. That translates into about $120 a month in savings now.
Marvin was a good salesman--- and he's African American as many of my neighors are. He wanted people to know that I'm not trying to make money off them, that I really am just trying to do a good deed.
So far, no calls or e-mails. I'm a little surprised.
I'd noticed that the snow melts off most people's rooftops while it lingers on mine. Why? I had insulation installed in my attic. The heat isn't leaking out and melting the snow on my roof.
My Mom and Dad gave me some money for Christmas. I decided to try to use it to reduce Greenhouse Gas emissions and save my neighbors some money. I negotiated a group discount from a local insulating company and I'm offering to make the 1/3 down payment on attic insulation for anyone who signs up. I put that information and explained how important attic insulation is on a flyer. My friend Marvin (who lives across the street) and I made the pitch to our neighbors. (Marvin's a carpenter and handyman -- he's offering to cut the openings in closet ceilings so the insulation can be blow in and then neatly close them up for $80.)
So I'm offering to pay the first $233 towards the $700 cost of attic insulation. I noticed my heating bills dropped about 1/3 when I had insulation put into my attic 17 years ago. That translates into about $120 a month in savings now.
Marvin was a good salesman--- and he's African American as many of my neighors are. He wanted people to know that I'm not trying to make money off them, that I really am just trying to do a good deed.
So far, no calls or e-mails. I'm a little surprised.
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