Archives for 2007

Fourteen years after the Clinton health care debacle, Americans may finally be ready to accept and adopt universal health care, Paul Krugman argued in his New York Times column last Friday, Sept. 21.

There was another political debacle in 1993, over the Clinton btu tax, a levy on all forms of energy, with a surcharge on gasoline and other petroleum products. The tax’s ignominious defeat in favor of a watered-down version has helped poison the well for taxing carbon and/or gasoline ever since. Here we juxtapose Krugman’s actual column on health care with an imagined column we’d like to see him write on "climate care" later this year or next. Our hypothetical version uses Sen. Clinton as a foil only because she is so used in Krugman’s piece.

Health Care Hopes By PAUL KRUGMAN The New York Times, Sept. 21, 2007	Climate Care Hopes By the CARBON TAX CENTER The New York Times, March 21, 2008??
All the evidence suggests that it has finally become politically possible to give Americans what citizens of every other advanced nation already have: guaranteed health insurance. The economics of universal health care are sound, and polls show strong public support for guaranteed care. The only thing we have to fear is fear itself.	All the evidence suggests that it is becoming politically possible to give Americans what citizens of every other advanced nation already have: a revenue-neutral carbon tax. The economics of a carbon tax whose revenues are returned to the public are sound, and polls show growing support. The only thing we have to fear is fear itself.
Unfortunately, there’s a lot of that around.	Unfortunately, there’s a lot of that around.
True, one kind of fear seems, provisionally, to have been overcome: the timidity of Democratic politicians scarred by the failure of the original Clinton health plan.	True, one kind of fear seems, provisionally, to have been overcome: the timidity of Democratic politicians scarred by the failure of the original Clinton Btu tax in 1993.
To see how much things have changed, consider Hillary Clinton’s evolution. Just 15 months ago, The New York Times reported that "her plans to expand coverage are tempered and incremental," and that "she continues to shy from the ultimate challenge: describing what a comprehensive Democratic health care plan would look like."	To see how much things have changed, consider Hillary Clinton’s evolution. Just 15 months ago, the famously cautious Senator parried questions about taxing carbon by citing her support for the less controversial (but less effective and equitable) carbon cap-and-trade route for putting a price on carbon emissions.
Indeed, when she was asked how costs might be controlled, she demurred: "It depends on what kind of system you’re devising. And that’s still not at all clear to me, what the body politic will bear."	Indeed, nothing in Clinton’s history of defending entitlements suggested that she would ever tell Americans that cheap fossil fuels stood in the way of both climate protection and energy security.
But that was then.	But that was then.
John Edwards broke the issue of health care reform open in February, when he proposed a smart and serious plan for universal health insurance — and bravely announced his willingness to pay for the plan by letting some of the Bush tax cuts expire. Suddenly, universal health care went from being a distant progressive dream to something you could actually envision happening in the next administration.	Connecticut Senator Chris Dodd broke the issue of taxing carbon open in 2006, when he made a "corporate carbon tax" a centerpiece of his own presidential bid. Campaigning in Iowa, Dodd forthrightly stated, "As long as it’s cheaper to use fossil fuels, we’re not going to move to these alternative technologies and fuels," It took time, but more quickly than many thought possible, the American people came to agree.
Senator Clinton delayed a long time before coming out with her own plan — a delay that created a lot of anxiety among health care reformers, and may, as I’ll explain in a minute, be a bad omen for the future. Still, this week she did deliver a plan, and it’s as strong as the Edwards plan — because unless you get deep into the fine print, the Clinton plan basically is the Edwards plan.	Sen. Clinton delayed a long time before coming out with her own carbon tax — a delay that created anxiety among climate campaigners. Behind the scenes, however, Clinton’s policy wonks were ironing out crucial details, including protecting American families without diluting the price incentives that bring about carbon reductions. The plan she delivered this week is as strong as the 2007 Dodd plan — maybe stronger.
That’s not a criticism; it’s much more important that a politician get health care right than that he or she score points for originality. Senator Clinton may be politically cautious, but she does understand health care economics and she knows a good thing when she sees it.	That’s not a criticism; it’s much more important that a politician get climate care right than that he or she score points for originality. Senator Clinton may be politically cautious, but she does understand climate care economics and she knows a good thing when she sees it.
The Edwards and Clinton plans as well as the slightly weaker but similar Obama plan achieve universal-or-near-universal coverage through a well-thought-out combination of insurance regulation, subsidies and public-private competition. These plans may disappoint advocates of a cleaner, simpler single-payer system. But it’s hard to see how Medicare for all could get through Congress any time in the near future, whereas Edwards-type plans offer a reasonable second best that you can actually envision being enacted by a Democratic Congress and signed by a Democratic president just two years from now.	The Dodd and Clinton plans as well as the similar Obama plan achieve climate-care coverage through a phased-in tax on the carbon content of coal, oil and natural gas. These plans may disappoint advocates of a new Manhattan Project who want massive government spending on renewable solar and wind plants, hybrid cars and mass transit. But these politically popular programs, Clinton discovered, actually carry less carbon-reducing bang for the same investment buck. Only taxing-up the price of fossil fuels can create the clear, rapid, across-the-board incentives needed to propel a massive shift to clean alternatives.
To get there, however, would require overcoming a lot more fear.	To get there, however, required overcoming a lot more fear.
There won’t be a serious Republican alternative. The health care plans of the leading Republican candidates, such as they are, are the same old, same old: they principally rely on tax breaks that go mainly to the well-off, but will supposedly conjure up the magic of the market. As Ezra Klein of The American Prospect cruelly but accurately puts it: "The Republican vision is for a world in which the sick and dying get to deduct some of the cost of health insurance that they don’t have — and can’t get — on their taxes."	The genius in Sen. Clinton’s climate-care plan was to insist that the carbon tax revenues be rebated. Clinton dusted off the Alaska Permanent Fund model, which divvies up North Slope oil revenues equally among the state’s residents. She showed how that approach makes a carbon tax progressive, since each income bracket uses more energy (and emits more carbon) than lower groups on the ladder. "Revenue-neutral" proved more potent politically than both "no new taxes" and a Manhattan Project for energy.
But the G.O.P. nominee, whoever he is, won’t be trying to persuade the public of the merits of his own plan. Instead, he’ll try to scare the dwindling fraction of Americans who still have good health insurance by claiming that the Democrats will take it away.	But the G.O.P. nominee, whoever he is, probably won’t be trying to persuade the public of the merits of his own plan. Instead, he’ll try to scare Americans by repeating the word "tax" over and over and ignoring the revenue-neutrality built into the Democrats’ carbon tax.
The smear-and-fear campaign has already started. The Democratic plans all bear a strong resemblance to the health care plan that Mitt Romney signed into law as governor of Massachusetts, differing mainly in offering Americans additional choices. But that didn’t stop Mr. Romney from denouncing the Clinton plan as "European-style socialized medicine." And Fred Thompson claims that the Clinton plan denies choice — which it actually offers in abundance — and relies on "punishment" instead.	The smear-and-fear campaign has already started. The Clinton carbon tax bears a strong resemblance to the revenue-neutral carbon tax championed by Romney adviser and former Bush (43) Administration chief-economist Greg Mankiw. Indeed, a carbon tax is supported by economists and opinion leaders across the political spectrum, from the American Enterprise Institute to Friends of the Earth. But that didn’t stop Mr. Romney from denouncing the Clinton plan as "just one more Democratic tax."
These attacks probably won’t be effective enough to prevent a Democrat from winning next year. But that won’t be the end of the story: even if the Democrats take the White House and expand their Congressional majorities, the insurance and drug lobbies will try to bully them into backing down on their campaign promises.	These attacks probably won’t be effective enough to prevent a Democrat from winning this year. But that won’t be the end of the story: even if the Democrats take the White House and expand their Congressional majorities, the coal and utility lobbies will try to bully them into backing down on their campaign promises.
That’s why the long delay before Senator Clinton announced her health care plan made supporters of universal care, myself included, so nervous — a nervousness that is not completely assuaged by the fact that she finally did deliver. It’s good to know that whoever gets the Democratic nomination will run on a very good health care plan. What remains is the question of whether he or she will have the determination to turn that plan into reality.	That’s why the long delay before Senator Clinton announced her climate care plan made supporters of a carbon tax, ourselves included, so nervous — a nervousness that is not completely assuaged by the fact that she finally did deliver. It’s good to know that whoever gets the Democratic nomination will run on a very good climate care plan. What remains is the question of whether he or she will have the determination to turn that plan into reality.

Epilogue: Sen. Clinton made the rounds of the Sunday morning political talk shows following her health plan rollout. Carbon tax advocates shouldn’t hold our breath till Rep. Dingell gets invited to discuss his innovative "hybrid" carbon tax. Let’s organize instead.

With a mighty creak of long-rusted hinges, a door is finally opening in Washington. The present Congress will apparently be asked to consider a carbon tax.

The measure — actually, a hybrid carbon and petroleum tax — will be introduced by the powerful chairman of the House Committee on Energy and Commerce, Rep. John Dingell (D-Michigan).

Today Dingell posted on his Web site a summary of the bill, which he began drafting in June. The current version would phase in, each year for five years, a charge of $10 per ton of carbon content of coal, oil and natural gas; plus an additional 10 cents/gallon for gasoline and jet fuel (kerosene). By the end of the five-year period the charges would reach $50/ton of carbon plus 50 cents/gallon of gasoline and jet fuel. These equate to 63 cents a gallon of gas and 90 cents for one hundred kilowatt-hours assuming the nationwide average fuel mix.

Dingell is asking the public for comments. Here’s ours: we think the bill is terrific. In line with what we said when we founded the Carbon Tax Center, and as Dingell himself wrote last month in the Washington Post, "[S]ome form of carbon emissions fee or tax … would be the most effective way to curb carbon emissions and make alternatives economically viable."
Moreover, as we elaborate below, his supplemental tax on gasoline and jet fuel has the look of genius.

How much carbon and petroleum would Dingell’s hybrid carbon tax eliminate? A lot, if you change one key parameter; instead of
halting the tax after year 5, continue ramping it up. If the tax works and the impacts on families and businesses can be offset through tax-shifting and rebates, why stop?

We examined a 20-year ramp-up — starting Dingell’s "10/10" tax in 2008 and continuing through 2027 to a level of $200 per ton of carbon plus $2/gallon on gasoline and jet fuel. Here’s where the U.S. would be in the representative year 2025:

• Carbon dioxide emissions would be down by 1.55 billion metric tons from projected levels, a 20% drop — a decrease equivalent to current emissions from England, France and Italy combined.
• Petroleum consumption would be 4.5 million barrels a day less than otherwise, an 18% decrease from projected usage, and more than 10% greater than Iran’s current production.

Moreover, these reductions could be supplemented by savings from other targeted policies and programs to reduce use of petroleum, natural gas and coal-fired electricity. (Indeed, a companion section of Dingell’s bill will call for phasing out the federal tax deduction on mortgage interest on very large homes, thus ending a subsidy through which middle and working class families subsidize gargantuan sprawl homes for the wealthy.) No other single policy measure — not broader CAFÉ standards, not a national Renewable Energy Standard, not a massive biofuels push, and certainly not a new generation of subsidized nuclear power plants — can produce nearly the carbon and petroleum savings promised by the Dingell hybrid carbon tax, provided it extends beyond the initial five-year period.

The brilliant touch in the Dingell bill is the supplemental tax on gasoline and aviation fuel. Dingell obviously grasps that a carbon tax alone can’t end America’s dangerous oil dependence. A straight carbon tax falls most heavily on coal, both because coal’s carbon content is so high and because electricity, the form in which coal’s energy is delivered, is more price-elastic than gasoline.

Using CTC’s four-sector spreadsheet model, which looks individually at electricity (40% pf U.S. CO2 emissions), gasoline (21%), jet fuel (4%) and "other" (35%), we estimate that without the annual 10¢/gallon levy on gasoline and jet fuel, the oil savings in 2025 would be nearly 40% smaller — 2.8 million barrels a day vs. 4.5 mbd. The hybrid tax thus saves 60% more petroleum, and
20% more CO2, than a straight $10/ton-a-year carbon tax.

Is the Dingell tax set at the best level? We would like to see it higher — considerably higher. The U.S. economy and America’s millions of vulnerable households could almost certainly handle a steeper ramp-up, provided the tax was made revenue-neutral. The climate crisis demands more than just the provisional $10 rate; CTC has been urging a $37/ton-a-year tax. But getting started at all is a tremendous step, and Dingell’s clear-sightedness and courage, in a Congress little characterized by either, deserve our
admiration.

What should be done with the revenue from the hybrid carbon tax? Needless to say, the quantities are enormous — $180 billion
annually after Dingell’s initial five years, and much more if the ramp-up is extended. While CTC strongly favors the revenue-neutral route, Rep. Dingell has his own ideas for using the revenues — as will just about everyone else.

For now, we urge you to read Dingell’s Web statement and post a comment on his site and at other sites that cover climate, energy, oil, national security, and politics. Having a legislator of Dingell’s stature even float a carbon-tax trial balloon is a very important and positive development — possibly a breakthrough. There’s a lot riding on it. Be heard.

Sept. 27 addendum: Two carbon-tax bills have already been submitted to the House Ways & Means Committee in 2007: the Stark-McDermott Save Our Climate Act
and the Larson American Energy Security Trust Fund Act. The Dingell proposal is certain to give these bills some of the prominence they deserve.

A momentous debate is under way in New York City over the prospect of bringing "congestion pricing" — a concept proven in London, Stockholm and Singapore — to America’s largest and most gridlocked burg. The issue has great resonance for carbon taxing, as I argue in this piece, a slightly different version of which appeared in Gristmill in July. — C.K.

Every so often there arises an environmental controversy that tests the capacity of Americans to face reality. One such case is the Cape Wind dispute, in which well-connected Cape Codders are battling to keep a large array of non-polluting windmills out of Nantucket Sound. Another is emerging in New York City, where Mayor Michael R. Bloomberg has proposed a “congestion fee” on cars and trucks driving into Manhattan.

Backers from the mayor on down tout the fee as a cure-all: it will unsnarl traffic, relieve pollution and create a revenue stream to upgrade subways and buses, while also cutting global warming emissions.

These claims are a bit overstated. More probably there will be a single-digit increase in traffic speeds, a one percent drop in emissions citywide, and perhaps a $400 million revenue infusion for a transportation system whose annual costs top $30 billion.

But even though the immediate benefits of the congestion charge are relatively modest, the act of imposing such a charge is transformative in itself.

The real significance of the congestion charge is this: it establishes the principle that safeguarding “the commons” — our air, water and public space — requires that we exact from ourselves a commensurate price for uses that damage or deplete it.

The congestion charge puts our money where our mouth is.

Although it has mostly gone unstated, the congestion charge rests on ironclad economic logic: street space, being both coveted and finite, has a value; hence, our failure to charge a price for its use in effect substitutes rationing by waiting, for rationing by pricing — which is why New York, Los Angeles, and every city in between have traffic jams.

Accordingly, a congestion charge that confronts those of us who would drive with the cost of traffic delays we impose on each other isn’t just one means of reducing congestion — it’s the only way to do so.

Mayor Bloomberg could place traffic cops at every intersection, airlift every double-parked car and truck, and make the subways free — and gridlock would reappear within a week, as the improvement in traffic flow attracted drivers now deterred by the too-crowded roads.

The only way to permanently open up road space is to impose some form of road valuation, and Mayor Bloomberg’s pricing plan, while blunt and imperfect, is a very good start. Most important of all, though, it establishes the principle.

Much the same applies to the prevailing green paradigm for combating global warming. It’s essentially a scattershot approach built around individual technological fixes: rooftop solar cells, low-wattage fluorescent lights, high-mileage automobiles and so on.

What’s missing — crucially, fatally missing — is a valuation of the atmosphere’s limited capacity to absorb carbon emissions without damaging the climate.

Just as the high value of street space in New York demands a congestion fee, the high value of a carbon-stable atmosphere demands a fee on carbon use — i.e., a carbon tax.

This isn’t to say that tech fixes don’t have their place. They will be needed to help get off carbon, just as car and truck alternatives such as expanded subway service, exclusive bus and bicycle lanes, and, in New York, a cross-harbor rail freight tunnel, must supplement the congestion fee.

But without congestion charges and revenue-neutral carbon taxes that in effect reward every traffic-busting or carbon-reducing choice, the fixes and alternatives will be systematically underused.

The obvious, first-order, unmediated choices that will reduce congestion and carbon are things that no one can make money from — things like fewer and shorter trips, smaller homes, turning stuff off.

Congestion charges and a carbon tax will cause people to make these choices, and that is the only way killer traffic and killer climate change will be brought under control. It won’t happen just by subsidizing technological fixes whose investors have the advantage of an effective lobby.

What, then, is standing in the way of congestion fees and a national carbon tax? The power of an entrenched minority, for one thing. In New York City, fewer than one in 20 working residents drives toll-free into the intended congestion charging zone, but they know who they are and are not shy about protecting their self-awarded entitlement to a toll-free commute.

Conversely, the benefits of congestion pricing will be broadly distributed but not life-changing. Indeed, judging from polls, many New Yorkers don’t even realize they are potential beneficiaries.

“Losers cry louder than winners sing,” said University of Michigan professor Joel Slemrod in explaining the near-impossibility of overhauling the U.S. tax code, and the same holds true for the congestion fee and the carbon tax.

What is more, the benefits from road fees or carbon taxes aren’t just diffuse; because they lie in the future they are by necessity uncertain.

“There is nothing more difficult to take in hand,” Machiavelli observed in The Prince, “than to take the lead in the introduction of a new order of things … the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the old conditions, and lukewarm defenders in those who may do well under the new.”

That is why enacting the Bloomberg congestion plan is so hard, and so necessary. America’s civic polity is stuck in traffic, so to speak. Getting it moving again will require us to imagine something other than permanent stalemate and act upon that vision.

Photo: SkyShaper / Flickr