Because coal has the highest carbon content per Btu, it is
taxed at the heaviest rate under a straight carbon tax.
Archives for 2007
Dingell Joins Carbon-Tax Ranks
The Democratic Party’s top power broker on energy policy, Rep. John Dingell (D-Mich.), threw his considerable political weight behind a carbon tax today, upending the Congressional debate on climate and energy and boosting the prospects for a tax on carbon emissions. Dingell, who chairs the House Energy and Commerce Committee, came out foursquare for a national carbon tax in an op-ed article in the Washington Post.
Obama Extols Carbon Tax
This Q&A is from an interview with Grist magazine, published July 30. While Obama’s positive words about a carbon tax are encouraging, shouldn’t his next step be to ditch the substitute and go for the real thing?
Q. Do you believe that we need a carbon tax in addition to a cap-and-trade program?
A. I believe that, depending on how it is designed, a carbon tax accomplishes much of the same thing that a cap-and-trade program accomplishes. The danger in a cap-and-trade system is that the permits to emit greenhouse gases are given away for free as opposed to priced at auction. One of the mistakes the Europeans made in setting up a cap-and-trade system was to give too many of those permits away. So as I roll out my proposals for a cap-and-trade system, I will price permits so that it has much of the same effect as a carbon tax. [Emphasis added]
Rep. Dingell Insists He’s for Carbon Tax
From The Los Angeles Times, July 23, 2007
He means business with carbon tax
Re "Dingell’s roadblock," editorial, July 18:
Several points raised in your editorial deserve clarification, chiefly the assertion that I’m designing a carbon tax bill with the intention of seeing it fail. Never in my "distinguished half a century in the House" have I introduced legislation that I did not believe was worthy of my colleagues’ consideration and the
public’s support.
For months, I’ve been discussing a carbon emissions fee as one option for reducing carbon dioxide and other greenhouse gas emissions. While it may not be the most popular option, I agree with The Times that a carbon tax would be the most effective available option to fight global warming. Also, I have voted for gasoline taxes in the past and will continue to do so. I don’t have a point to prove. I have a job to do, and I am doing it.
REP. JOHN D. DINGELL
(D-Mich.)
Who is Daniel Sperling and why is he saying bad things about carbon taxes?
Yesterday’s Los Angeles Times ran an odd op-ed calling carbon taxes an ineffectual antidote to global warming. Unlike other critiques that brand carbon taxes as politically unpalatable, this one argued that they’re simply not up to the job of cutting carbon emissions:
“Carbon taxes — taxes on energy sources that emit carbon dioxide (CO2) — aren’t a bad idea. But they only work in some situations. Specifically, they do not work in the transportation sector, the source of a whopping 40% of California’s greenhouse gas emissions (and a third of U.S. emissions).”
I’ve known Daniel Sperling, the author of the op-ed, for decades. As the long-time director of the Institute of Transportation Studies at UC-Davis, Dan probably knows as much about automotive engineering as anyone in the world. What’s more, he’s conscientious, tireless and concerned.
So why do I think he’s wrong about carbon taxes? Actually, Dan is part right, but his message is wrong. Let me explain.
It’s been clear for awhile that carbon taxes won’t make a huge dent in carbon emissions from gasoline — relative to their impact on the biggest source of U.S. carbon dioxide: coal-fired electricity generation. There are three reasons:
- Gasoline has less carbon per btu than coal.
- Engines make better use of their btu’s than do power plants.
- Americans are less behaviorally sensitive to higher prices for gas than for electricity.
When we ran the numbers here at the Carbon Tax Center, we found out just how much gasoline would underperform while electricity overachieved under a level carbon tax. Using Colorado as a test case, we estimate that a statewide carbon tax would draw 60% of all of its carbon reductions from the electricity sector (which is responsible for 42-43% of that state’s CO2), but only 10% from gasoline (which accounts for 20% of emissions).
So we agree with Dan on some key facts. But we think he’s let his natural pessimism about price incentives (he’s an engineer, after all) run a bit amok.
For one thing, the low (10% or less) price-sensitivity for gasoline Dan cites (from his own UC-Davis study) is short-run only. The long-run price-elasticity of gasoline demand is invariably much higher since it can reflect long-term investment decisions — by households in buying more efficient vehicles, by automakers in designing and producing them, and by everyone in making location decisions that reduce driving.
Two widely respected transportation economists at UC Irvine, Ken Small and Kurt Van Dender, looked at pretty much the same gasoline data as Dan and observed the same low (under 10%) short-run price-elasticity. Unsurprisingly but importantly, Small and Van Dender found gasoline’s long-run price-elasticity to be much higher, approximately 40%.
Using that figure, and making assumptions similar to Sperling’s about the potential for substituting lower-carbon fuels, we find that a ramped-up carbon tax that increased the price of gas 10 cents a gallon every year for a decade would reduce CO2 emissions from motor vehicles further and faster than the Low-Carbon Fuels Standard Sperling touts in his op-ed.
Again using Colorado as a test case, the same carbon tax would eliminate more than five times as much CO2 in the electricity sector and almost three times as much in “other” sectors (trucking, space heating, aviation, etc.). Indeed, that tax, which in carbon terms tacks on a charge of $37 per ton (or $10 per ton of CO2) each year for 10 years, would lop off almost 40% from that state’s carbon emissions by 2020. And the revenue stream would be enormous — enough to permit the legislature to zero out the widely disliked state Sales Tax and Business Personal Property Tax by the fifth year, even while providing generous per-resident and per-employee rebates, supplementing the federal Earned Income Tax Credit to assist low-income families, and financing targeted investment in energy efficiency and renewable energy.
We’ll grant the point made by Dan (or the Times’ editors) at the top of his piece: Taxes on CO2 emissions alone won’t get us where we need to go. We’ll need judicious and creative incentives and regulations in addition to a carbon tax, and the Low-Carbon Fuel Standard that Dan is helping advance in California fits that bill. But let’s stop the nay-saying over carbon taxes. They’re the powerful tailwind America needs to get our carbon emissions down equitably, efficiently and immediately.
Photo: Tony.Gonzalez’s photostream (Flickr)
A Convenient Tax — Issue #2
Welcome to the second issue of A Convenient Tax, the Carbon Tax Center’s newsletter, summarizing our progress in April and May. (For Issue #1, click here.)
The big carbon-tax developments this spring have been (i) the first overt expressions of Congressional support for a carbon tax, (ii) a torrent of criticism of the competing “cap-and-trade” approach by editorial writers and other opinion leaders, and (iii) a significant increase in CTC’s visibility on the national stage.
Congressional Support for a Carbon Tax
Two milestones were reached in the national political arena in April.
First, California Democrat Fortney “Pete” Stark, the second-most senior member of the House Ways & Means Committee, introduced the first carbon-tax bill in Congress in a generation. The Save Our Climate Act, filed on April 26 and co-sponsored by Rep. Jim McDermott (D-Wash.), would impose a $10 per ton (of carbon) charge on coal, petroleum and natural gas when the fuel is either extracted or imported. The charge would increase by $10 every year until U.S. carbon dioxide emissions have dropped 80 percent from 1990.
Prior to introducing the Save Our Climate Act, Rep. Stark’s staff reached out to CTC for guidance on carbon tax administrative and technical issues, as well as the optimal tax level, While the tax rate in the bill is several times less than what CTC is urging, we support it as an essential first step in the long legislative process, especially since the ramped-up tax in future years would tip millions of future carbon-critical decisions in land use, manufacturing and household purchasing toward carbon-conserving alternatives.
How quickly the Stark bill receives a hearing will depend on both the national political climate and the interest shown by other Ways & Means members. CTC has met with staff for other Committee members, as well as for Reps. McDermott and Stark, to review fine points and to convey the message that support for carbon taxing is growing in the grass roots.
In the other political milestone, Sen. Chris Dodd has built a strong carbon tax plank into his presidential election platform. Sen. Dodd, a Democrat who has represented Connecticut in the Senate since 1980, is making a Corporate Carbon Tax the centerpiece of his plan to eliminate 80% of U.S. greenhouse gas emissions by 2050.
“I don’t know how we can possibly talk about honestly getting to the [carbon] number we need to get to if you’re going to just dance around [the tax],” Dodd said as he campaigned in New Hampshire in April. “Price is the last real barrier.” Sen. Dodd has forthrightly put a carbon tax on the home page of his campaign Web site. In fact, on May 31 Sen. Dodd released a new television ad to run in Iowa and New Hampshire that promotes what he refers to as “a courageous corporate carbon tax to transform American industry.” CTC regards the senator’s corporate carbon tax as a lead-in to a universal carbon tax that can propagate incentives for carbon reductions throughout our economy.
Editorial Writers Back Tax, Take Whacks at Cap-and-Trade
When we two (Charles & Dan) resolved last fall to form the Carbon Tax Center, we looked forward to tangling with anti-tax ideologues on the Right and advocates of state intervention on the Left, not to mention Flat-Earthers who deny climate change altogether. We never anticipated that we would be debating with our friends and allies in the environmental community, but that became inevitable when, just before we launched announced the CTC, four large environmental organizations teamed up with major corporations to back carbon cap-and-trade regimes through the U.S. Climate Action Partnership.
CTC has no quarrel with the notion of tradeable emission allowances. In fact we credit the sulfur dioxide permit program enacted as part of the 1990 Clean Air Act Amendments with helping drive down acid rain emissions from power generation. But the scale and complexity of the carbon problem positively dwarf those of sulfur. (Block That Metaphor Department? We have likened the disparity to the difference between a French mud hut and the Palace of Versailles, in an article in Gristmill; and to the difference between a Mozart sonata and a Wagnerian opera, in an invited
post on the on-line Portfolio magazine.) Our fear is that with so many billions at stake, any carbon cap-and-trade program will necessarily be beset by crippling delays, inside-dealing and favoritism run wild. The result will be to disgust and disillusion the American public so that it turns against putting a price on carbon emissions altogether.
On this score, CTC finds itself in fine company. In just the past two months, outspoken criticisms of carbon cap-and-trade proposals have been published in Reason magazine, the Financial Times (U.K.), the Los Angeles Times, and the New York Times Science Section “TierneyLab” blog, to name just a handful. Of critical importance, each piece has been effusive in its support of a carbon tax. As we were posting this newsletter, the right-of-center American Enterprise Institute weighed in with an extraordinarily cogent report comparing a carbon tax with cap-and-trade that unambiguously backs carbon taxing as “the superior policy option.”
These testimonials are collected on our Supporters and Tax vs. Cap pages. The L.A. Times editorial is especially noteworthy. The sole editorial in the May 28 (Sunday) edition, the 1,600-word Time To Tax Carbon made as resounding a case for a carbon tax – both in preference to cap-and-trade and for its capacity to stimulate carbon-reducing investment and innovation – as we’ve seen. Here’s one passage:
A carbon tax simply imposes a tax for polluting based on the amount emitted, thus encouraging polluters to clean up and entrepreneurs to come up with alternatives. The tax is constant and predictable. It doesn’t require the creation of a new energy trading market, and it can be collected by existing state and federal agencies. It’s straightforward and much harder to manipulate by special interests than the politicized process of allocating carbon credits.
Reading manifestos like this, it’s hard to resist the feeling that a shift is underway from cap-and-trade to a carbon tax. Indeed, a few days after the L.A. Times ran its editorial, an editor at a popular environmental blog wrote to say:
It’s been a slow process of education for me. What brought me around to my pro-tax position is, ironically, my libertarian streak. The essential libertarian insight is that complexity and bureaucracy are invitations to corruption. Big business will try their best to game the system. We know that. Politicians will be subject to lobbying and financial support. We know that. So the best route is the one that minimizes complexity and bureaucracy.
Since the biggest rap against a carbon tax has been its lack of popular support, “conversions” to the carbon tax camp such as that above could have a snowball effect, as each new adherent makes success more plausible. Part of our job at the Carbon Tax Center is to help the world see how rapidly the snowball is growing. We hope to have more to report in future newsletters.
CTC’s Visibility Continues to Grow
- CTC co-director Dan Rosenblum appeared on the Newshour with Jim Lehrer – a substantive interview enabling Dan to make the case for a carbon tax to an aware nationwide audience. Click here to see the interview.
- Articles by CTC co-director Charles Komanoff in Gristmill,
Common Dreams, and Conde Nast’s Portfolio.com,
along with quotes in the New York Times and the Detroit Free Press. - We surpassed Wikipedia to become the leading site on Google for those searching “carbon tax.” CTC’s Web site, www.carbontax.org continues to
receive almost 1,000 visits each week from across the USA as well as Canada, Europe, Asia and Australia.
Other CTC Highlights from April and May:
We are continuing to provide technical and logistical support to advocates organizing for state-level carbon taxes in Colorado, Washington State, New York State and California. We have greatly improved our state-level spreadsheet model for estimating the CO2 reductions and revenue generation from different levels of carbon taxes. The model now allows for time lags in demand response, and it reflects supply-side incentives (toward lower-carbon fuels and power generation) as well as demand-side conservation. We hope to “grow” the model to the national level and post it on our Web site soon.
Going Forward
The next two years
will be the crucial period during which competing policies to reduce carbon emissions will be examined for their effectiveness, cost and political viability. CTC’s strategic goals focus on shaping that debate and properly framing the issues by:
- Working with environmental organizations and other allies to solidify support for the concept of “putting a price on carbon.”
- Educating opinion leaders, grassroots organizations and decision-makers that while cap-and-trade is also a vehicle to put a price on carbon, carbon taxes are far superior because they provide a more predictable and less volatile price and are transparent, immediate, universal and equitable.
We anticipate engaging in these activities during 2007-2008:
- Continuing to develop intellectual ammunition on key issues including revenue recycling, tax equity, “co-benefits” of a carbon tax (e.g., for national security), and the potential “bang” for each carbon tax “buck.”
- Providing technical assistance to opinion leaders, grassroots organizations and decision-makers, including
responding to requests for technical information from political campaigns. - Assisting local and state-level carbon tax initiatives.
- Spearheading a sign-on statement by economists and other experts calling a tax on carbon emissions more effective, transparent and equitable than a carbon cap-and-trade regime.
- Working with a broad coalition of interest groups (labor, environmental, economic justice, national security, etc.) to support carbon taxes through a national sign-on statement and other actions.
It’s clear that CTC is proving its effectiveness every day. But we can’t continue to play our essential role without your financial help. We heartily thank those of you who have already donated to CTC. We ask carbon tax supporters who are not yet
CTC contributors to become so today.
You can contribute to CTC in three ways, of which two are tax-deductible:
- Tax-deductible:
Write a check or money order to ELPC (Environmental Law & Policy Center), writing Carbon Tax Center in the memo line; mail it to ELPC at 35 East Wacker Drive, Suite 1300, Chicago, IL 60601. ELPC is CTC’s fiscal sponsor. - Tax-deductible :
Make an on-line contribution via Groundspring by clicking on the DONATE NOW box on our website, www.carbontax.org. - Not deductible:
Write a check or money order to Carbon Tax Center and send it to our New York City mailing address: CTC,
636 Broadway, Room 602, New York, NY 10012.
Just as a carbon tax now will send climate-appropriate price signals to businesses and individuals and help lock in low-carbon investment for the long haul, your financial support today will enable CTC to build on our current successes and
chart a growth trajectory. Please be as generous as you can, and please donate today. Thank you.
Sincerely,
Charles Komanoff
Daniel W. Rosenblum
Is Cap-and-Trade Big Green’s Dead-End?
When we resolved late last year to create the Carbon Tax Center, we thought our big battles would be fought with climate-crisis deniers, plus occasional skirmishes with doctrinaire leftists decrying attempts to graft carbon taxes onto an unjust social and economic structure. Little did we dream that our most contentious disputes would be with fellow environmentalists who had made up their minds that carbon taxing is a political no-sale and that cap-and-trade is the only feasible way to put a price on carbon emissions. (For background on carbon tax v. cap-and-trade see our issue paper on the subject.)
So it’s with some surprise and dismay that we find ourselves debating “tax vs. cap” with the most outspoken Big-Green member of the U.S. Climate Action Partnership, Environmental Defense. The latest round, in May, has played out in the electronic pages of Gristmill. Here in chronological order are
- CTC’s Gristmill post of May 22, 2007 (also posted on Common Dreams)
- ED’s Response on Gristmill, also dated May 22, 2007
- CTC’s Riposte to ED.
We welcome your comments.
— Charles Komanoff, Dan Rosenblum
Strange Bedfellows in Climate Politics
by Charles Komanoff
Did lefty pundit Alexander Cockburn and corporate behemoth General Motors secretly agree to swap climate positions?
It looks that way. GM, swallowing hard, recently joined the U.S. Climate Action Partnership, the elite enviro-business coalition pushing cap-and-trade — a so-called “market-based system” for controlling carbon dioxide emissions. Meanwhile, the famously acidic Cockburn lacerated global warming orthodoxy in his column in the Nation magazine, deriding it as a “fearmongers’ catechism [of] crackpot theories” ginned up by “grant-guzzling climate careerists” and opportunistic politicians looking to ride the greenhouse “threatosphere” all the way to the White House. (Whew!)
But there’s less here than meets the eye. For as the inconvenient details of cap-and-trade schemes start to surface, USCAP is looking less and less like a CO2 control lobby and more like a corporate club seeking to cash in on the rising clamor against free carbon spewing. And Cockburn, it turns out, has been raining on the climate crisis parade for years.
Let’s dispense with Cockburn first. His Nation column is infested with nakedly inverted syllogisms, such as: Al Gore is alarmed by global warming, but Al Gore backed nuclear power as a congressman, ergo alarm over global warming is a ruse to push nukes. Or, The New York Times is alarmed by global warming, but The New York Times whitewashed the Bush Administration’s Iraq WMD lies, ergo alarm over global warming is a lie.
But Gore and the Times are easy targets. The heavyweight in the room is the international climate-science community. To take them down, Cockburn disingenuously recycled a charge by Science magazine’s global warming reporter, Richard Kerr, that “climate modelers have been ‘cheating’ for so long it’s almost become respectable.” It’s yet more illogic: Climate modelers cheat, which makes climate models part and parcel of the “reflexive squawk of the greenhouse fearmongers,” which makes global warming a hoax.
Worse, in the time scale of climate modeling, that “cheating” remark Cockburn lifted is positively ancient. It’s the lead from a May 16, 1997 Science article by Kerr heralding the first climate model to replicate actual climate records without fudge factors, developed at the National Center for Atmospheric Research. And much as the first four-minute mile back in the 1950s unleashed a torrent of sub-four-minute miles, NCAR’s breakthrough triggered a tidal wave of modeling progress that has largely done away with the fudge factors, along with the yawning error bars that surrounded the old forecasts. Twenty-three different models, all unfudged, support the terrifying new finding from the Intergovernmental Panel on Climate Change that the current trajectory toward doubled CO2 levels will raise the mean global temperature above the pre-industrial level by six-and-a-half degrees Fahrenheit, give or take a mere degree.
No doubt Cockburn would deride this forecast as “hysteria” propounded by IPCC “functionaries and grant farmers.” But perhaps it’s time for Alex to take playwright Harold Pinter’s advice to Bush to “look in the mirror chum.” After all, this is the same Cockburn who, in a nutty 2005 paean to his “aging fleet of 50s and 60s era Chryslers” provocatively titled “The Virtues of Gas Guzzling,” proclaimed: “I don’t believe in any effective role of man-made CO2 in global warming, a natural cyclical trend.” Cockburn then dug his hole deeper, writing that oil itself “doesn’t come from dead dinosaurs and kindred organic matter [but] is a renewable, primordial soup continually manufactured by the Earth under ultrahot conditions and tremendous pressures.” Earth to Alex: where does contrarianism end and madness begin?
But if Cockburn pretty much begs to be dismissed, the boys at the U.S. Climate Action Partnership are sober as pinstripes. From Shell to DuPont, from GE and now GM to the Natural Resources Defense Council and Environmental Defense, the 27-member USCAP is mustering a high-octane campaign (some would call it a stampede) to re-fashion the holy grail of climate protection — attaching a stiff price to carbon pollution — as an emissions-trading poker table with a billion-dollar minimum. Thanks in large part to USCAP, a half-dozen carbon cap-and-trade bills are circulating in Congress, and the A-list of Washington carbon-trading acolytes includes House Speaker Pelosi and Senators (and presidential contenders) McCain, Obama, and Clinton.
Yet cap-and-trade seems a curiously unpromising way to put a price on carbon. Making fossil fuels cost more portends a radical overhaul of the American way of life: people will drive and fly less, industries will rise and fall, cities will redevelop and suburbs will stop sprawling. To make that transition requires a pricing mechanism that’s simple, transparent, and equitable. A straightforward, ecumenical carbon tax meets that standard; devilishly complex cap-and-trade does not. The old Hollywood maxim that a story line can’t exceed 25 words should disqualify cap-and-trade systems from the get-go. And as Americans get wind of the legions of legal and financial functionaries swarming around carbon trading, they’ll likely feel disillusioned if not hoodwinked — and ripe for a reversion to unfettered carbon-burning.
There’s no mystery to General Electric’s and General Motors’ embrace of cap-and-trade. Daily, the climate handwriting on the wall grows clearer, and corporate America knows it’s only a matter of time before it is made to pay for using — and making products that require consumers to use — climate-altering fossil fuels. And unlike a carbon tax, which would resist gaming and could be started quickly, a cap-and-trade system would take years to formulate as powerful interests carved up the revenue pie.
Moreover, that revenue pie — a concomitant of “putting a price on carbon” — will eventually total hundreds of billions of dollars a year. Yes, the carbon price has to be high to internalize the costs of climate damage and for renewable solar and wind power and energy efficiency to be in position to displace and ultimately eliminate fossil fuels. Under a carbon tax, those revenues would be known in advance and could be dedicated to public purposes such as progressive tax-shifting and transition support for affected communities. In contrast, the costs of cap-and-trade systems are likely to become a hidden (and regressive) tax as dollars flow to market participants.
The more interesting question is why some big environmental groups are pushing carbon cap-and-trade. One reason is precedent: Environmental Defense conceived emissions trading in the 1980s and spent years convincing utilities and Congress to make it the vehicle for cutting acid rain pollutants (though in truth that “market” bears as much resemblance to a carbon market as did a French mud hut to the Palace of Versailles). In addition, at the time the green groups were laying the groundwork for USCAP — before Gore’s movie and before the Republicans lost their hold on Congress — the more politically dicey carbon tax alternative may have appeared out of reach. Settling for cap-and-trade may have seemed more sensible than vying for a carbon tax and coming away empty-handed.
Of course, there’s nothing to stop the “green” members of USCAP from pointing to the new facts on the ground and throwing in with the smaller but fast-growing carbon tax forces. No one should hold their breath, however. NRDC, ED, and their partners have invested too much institutional capital in building bridges to big business.
Dig deeper, moreover, and a harder truth emerges. NRDC and ED have gotten very skilled — and grown very prosperous — at cutting deals. What began benignly 20 years ago, with the groups persuading utility regulators to fund innovative energy-efficiency programs, appears to have mushroomed into a perceived entitlement to speak for environmentally concerned citizens, meaning most of us, while being accountable only to their own trustees.
This top-down style, in which “the ways that work,” to borrow ED’s slogan, are formulated in private and presented to the community as a fait accompli, won’t do with something as momentous as putting a price on U.S. carbon emissions. The stakes are too high in both dollars and lives for the environmental position to be decided by a handful of green groups, no matter how accomplished or well-meaning. The path to carbon pricing must be debated and ratified in the open, not negotiated in certified-green offices.
Cockburn knows this. Hell, it was Counterpunch’s reporting on those backroom utility deregulation deals in the 1990s that helped alert advocates like me to Big Enviro’s aversion to the democratic process. C’mon Alex, dump the ‘59 Imperial and the climate crisis conspiracy theorizing. You needn’t enlist with the Carbon Tax Center, but the members-only push for cap-and-trade is a worthy target. Load up and let ‘er rip.
Charles Komanoff, an economist and environmental activist, co-founded the Carbon Tax Center earlier this year.
Response from Environmental Defense: Top-down or bottom-up, the goal is cutting carbon
The following is a guest essay from Tony Kreindler of Environmental Defense, in response to Charles Komanoff’s post from earlier today, “Strange bedfellows in climate politics.”
—–
Charles Komanoff’s post is entertaining, but a lot of what he says is wrong. His main proposition is that unlike “devilishly complex” cap-and-trade, a carbon tax is straightforward approach that will resist gaming by special interests. That raises a few questions: is there anything straightforward about the U.S. tax code? Has anyone ever gamed that system? Are there “no legal and financial functionaries” swarming around taxpayers?
Those questions aside, the fact is that a cap is the only way to guarantee the emissions cuts scientists say we need to avert the worst impacts of climate change. No one knows what level of carbon tax will produce what level of emissions cuts — and the science is pretty clear that we need to cut emissions by 80% from current levels by mid-century or we’re in trouble. Guess wrong on a tax and we’re all co-starring in a big-budget disaster movie.
Finally, a carbon cap can pass Congress and a tax can’t, so if we agree climate change is extremely urgent, we don’t have time to waste. Which brings us to the big corporations in USCAP. I’m sure they’ve all got a mix of reasons for pushing strong action on climate, but their motivations aren’t important — getting something passed into law is. There’s little doubt that the USCAP companies can help us get something passed.
Komanoff is worried about the process; we’re worried about cutting carbon emissions enough to avert a real environmental, economic, and human disaster. Top-down, side-to-side, stand-on-our-heads-till-we’re-blue — however it happens, the important thing is getting it done.
Rejoinder to Environmental Defense: Cap-and-Trade Is Looking Like Duck-and-Cover
Can any of ED’s three main points
stand up to scrutiny?
ED: A carbon tax can be gamed as easily as a carbon trading scheme.
CTC: A carbon tax may be subject to gaming, but cap-and-trade positively invites it. USCAP concedes that some allowances will be given out (not auctioned) at the outset, which means protracted, high-stakes negotiations (“a giant food fight,” a leading utility executive called it) over the free allowances that will be worth billions. How will these be allocated? What baseline year? Watch Earth burn as the polluters jockey for the baseline giving them the most allowances! With a carbon tax, by contrast, any tax preferences or exemptions will at least be visible and locked in, and thus potentially removable. This difference is part of why former Commerce Undersecretary Robert Shapiro wrote recently that carbon taxes, compared to cap-and-trade “are much less vulnerable to evasion and market manipulation, providing a more stable and transparent system for consumers and industry alike.”
ED: “A cap is the only way to guarantee the emissions cuts scientists say we need to avert the worst impacts of climate change. No one knows what level of carbon tax will produce what level of emissions cuts … Guess wrong on a tax and we’re all co-starring in a big-budget disaster movie.”
CTC: Thanks guys, but the movie has already started. Here’s what The Financial Times said about it last month: “Getting the amount of emissions a little bit wrong in any year would hardly upset the global climate. But excessive volatility or unduly high prices of quotas on carbon emissions might disrupt the economy severely. [Carbon] taxes create needed certainty about prices, while markets in emission quotas [i.e., cap-and-trade systems] create unnecessary certainty about the short-term quantity of emissions.” And how confident is ED that cap-and-trade won’t come without the dreaded “safety valve” (lift cap if price too high) that will blow its vaunted emissions certainty to smithereens?
ED: “A carbon cap can pass Congress and a tax can’t.”
CTC: A carbon tax may be the turtle, but as sure as the hare lost its lead, a cap will be sidelined for years as the financiers, lawyers and consultants work out the details — which they’ve been doing for four years and counting for the much-touted RGGI compact for capping Northeast U.S. utility emissions. That aside, the climate issue is moving very fast. We have a rare confluence of events that may actually make it possible to go the right route. It would be tragic to lock in an ineffectual approach that would block more effective action. A revenue-neutral carbon tax is no longer anathema, and it’s past time for ED and its brethren to give it the consideration it deserves.
West Virginia Coal Industry Admits a Carbon Tax Will Be Effective
“[B]urning coal is the most carbon-intensive way of generating electricity. If America introduces federal controls on carbon dioxide, coal will be penalised. ‘I hate a carbon tax,’ says Bill Rainey, president of the West Virginia Coal Association. ‘A carbon tax will kill us.'” (Quoted in Battle of the Mountain Tops, Economist.com)
Unless the carbon dioxide can be captured and sequestered, a carbon tax will indeed damage coal’s economics, relative to less carbon-intensive fuels and energy sources (natural gas, wind, solar, energy efficiency). That’s the idea. With CO2 sequestration, coal will not be taxed for its carbon, and coal mining will continue, with jobs for miners. Thanks to the WVCA’s Rainey for his implicit endorsement of a carbon tax.
Sen. Dodd: "Tax Corporate Carbon"
Dodd brings pollution tax proposal to NH
By JOHN DISTASO
Senior Political Reporter, (New Hampshire) Union Leader
Friday, Apr. 20, 2007
NASHUA – Connecticut Sen. Chris Dodd brought his call for a $50 billion tax on polluters from a Washington think tank to a New Hampshire kitchen table today.
Over coffee, juice, fruit and cake, he told 10 local political and clean energy activists his plan contains “tough but important steps” toward reducing greenhouse gas emissions.
The Democratic presidential candidate continued his “kitchen table” discussion series at the home of Paul and Wendy Johnson a day after unveiling an ambitious plan to cut 80 percent of all greenhouse gas emissions in the country by 2050.
His centerpiece is a “Corporate Carbon Tax,” which would produce revenues to fund research, development and production of renewable energy technologies and make them more affordable.
Several greenhouse gas-related bills and plans propose some form of a cap-and-trade system, aimed at reducing carbon dioxide emissions by allowing more efficient polluters to sell emission credits to less efficient polluters. Dodd supports that system, but said it only works if it is combined with a tax.
“I don’t know how we can possibly talk about honestly getting to the number we need to get to if you’re going to just dance around that issue,” Dodd said. “Price is the last real barrier.”
He said believes many heavy polluters want to transfer to cleaner technologies, “and this will be the incentive to do it.” Dodd said the carbon tax would provide the “additional resources to” help industries make the transition.
Speaking with reporters after the hour-long discussion, Dodd acknowledged his plan is controversial.
“But it’s an honest answer,” he said. “As long as the oil industries, the polluting industries, can make a lot of money at a lot less cost a barrel, they’re going to drive these other technologies out of the market. If I can make these alternative
energy sources financially competitive with sources that leaves us more dependent on the Middle East, endangers our environment, endangers our health, endangers our economy, then I think people, if they understand that, will accept it as a smart move.”
Dodd said, “It’s not going to happen miraculously. It’s going to happen because political leadership makes intelligent decisions about how to move us in that direction.”
Dodd, accompanied by his wife, Jackie, said he hosts kitchen table talks because, “while people want to hear what I have to say, it’s also very important that as a candidate, I see what the people I seek to represent have to say.” Dodd, a 26-year
senator, said the format has worked well for him during his Connecticut campaigns.
CTC addendum: Follow link for Sen. Dodd’s April 27 op-ed, A Corporate Carbon Tax, in the Boston Globe.
Industry Caught in Carbon Trading Smokescreen
Here’s the full text of this fascinating and timely story from the Financial Times. — C.K.
Industry Caught in Carbon ‘Smokescreen’ (Financial Times)
By Fiona Harvey and Stephen Fidler in London
Published: April 25 2007 22:07
Companies and individuals rushing to go green have been spending millions on ‘carbon credit’ projects that yield few if any environmental benefits.
A Financial Times investigation has uncovered widespread failings in the new markets for greenhouse gases, suggesting some organisations are paying for emissions reductions that do not take place.
Others are meanwhile making big profits from carbon trading for very small expenditure and in some cases for clean-ups that they would have made anyway.
The growing political salience of environmental politics has sparked a ‘green gold rush’, which has seen a dramatic expansion in the number of businesses offering both companies and individuals the chance to go ‘carbon neutral’, offsetting their own energy use by buying carbon credits that cancel out their contribution to global warming.
The burgeoning regulated market for carbon credits is expected to more than double in size to about $68.2bn by 2010, with the unregulated voluntary sector rising to $4bn in the same period.
The FT investigation found:
? Widespread instances of people and organisations buying worthless credits that do not yield any reductions in carbon emissions.
? Industrial companies profiting from doing very little – or from gaining carbon credits on the basis of efficiency gains from which they have already benefited substantially.
? Brokers providing services of questionable or no value.
? A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.
? Companies and individuals being charged over the odds for the private purchase of European Union carbon permits that have plummeted in value because they do not result in emissions cuts.
Francis Sullivan, environment adviser at HSBC, the UK’s biggest bank that went carbon-neutral in 2005, said he found ‘serious credibility concerns’ in the offsetting market after evaluating it for several months.
‘The police, the fraud squad and trading standards need to be looking into this. Otherwise people will lose faith in it,’ he said.
These concerns led the bank to ignore the market and fund its own carbon reduction projects directly.
Some companies are benefiting by asking ‘green’ consumers to pay them for cleaning up their own pollution. For instance, DuPont, the chemicals company, invites consumers to pay $4 to eliminate a tonne of carbon dioxide from its plant in Kentucky that produces a potent greenhouse gas called HFC-23. But the equipment required to reduce such gases is relatively cheap. DuPont refused to comment and declined to specify its earnings from the project, saying it was at too early a stage to discuss.
The FT has also found examples of companies setting up as carbon offsetters without appearing to have a clear idea of how the markets operate. In response to FT inquiries about its sourcing of carbon credits, one company, carbonvoucher.com, said it had not taken payments for offsets.
Blue Source, a US offsetting company, invites consumers to offset carbon emissions by investing in enhanced oil recovery, which pumps carbon dioxide into depleted oil wells to bring up the remaining oil. However, Blue Source said that because of the high price of oil, this process was often profitable in itself, meaning operators were making extra revenues from selling ‘carbon credits’ for burying the carbon.
There is nothing illegal in these practices. However, some companies that are offsetting their emissions have avoided such projects because customers may find them controversial.
BP said it would not buy credits resulting from
improvements in industrial efficiency or from most renewable energy projects in developed countries.
Additional reporting by Rebecca Bream
Copyright The Financial Times Limited 2007