2007 – Page 4

Carbon Tax Center

Pricing carbon efficiently and equitably

Archives for 2007

Time for a Carbon Tax

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Michael Riordan invited us to publish the following Opinion Piece, which was originally published in the San Francisco Chronicle on March 23, 2007. Michael is the co-author of The Solar Home Book. He teaches the history of science and technology at Stanford University and University of California, Santa Cruz. Thanks, Michael!

Time for a Carbon Tax?

By Michael Riordan

It balms my bleeding liberal heart to witness a conservative president from Texas and a Republican governor of California promoting renewable energy. Also known as alternative energy, it was widely advocated by environmentalists after the 1970s energy crisis and heartily embraced by President Jimmy Carter and Gov. Jerry Brown. But President Bush’s oil-patch friends ridiculed renewable energy as impractical, and it faded from the national agenda during the Reagan years — to be resurrected only recently. Perhaps the time has finally come to revive yet another radical idea: a carbon tax, which charges anyone who burns fossil fuels for the problems that ensue.

Of course, the word "tax" sends shudders across the political spectrum, but it shouldn’t, especially when the only good alternative is another hot-button word, "subsidy."

During the late 1970s, tax credits and other subsidies encouraged ill-considered technologies, such as solar-heating panels on roofs, that didn’t make much economic sense. Some renewable-energy advocates argued that governments should not subsidize any sources of energy — whether fossil fuel, solar, wind, biofuels or nuclear. Just get out of the economic way and let market forces determine the outcome — and penalize detrimental energy sources by taxing them accordingly.

Today, a different dynamic is operating. Global warming, then regarded as a distant possibility, is widely accepted in scientific — and, increasingly, business — circles as a looming threat that we must confront. In the wake of Hurricane Katrina, a majority of the U.S. population regards global warming as fact, caused by human introduction of carbon dioxide into the atmosphere. All of us are contributing by burning fossil fuels, and we are just beginning to witness the terrible consequences.

Thus, a rational course of action is to penalize those who burn fossil fuels — all of us — and use the revenues to implement solutions. This tactic would discourage actions detrimental to the environment and encourage energy alternatives, which could range from energy-efficiency measures to carbon-removal methods to renewable-energy sources.

A carbon tax on our gasoline purchases, for example, would automatically penalize owners of gas-guzzlers while promoting hybrid and flex-fuel automobiles. The average miles-per-gallon of U.S. cars would steadily rise in response to such a measure, as individuals take this added cost into account when making purchases.

The real key to widespread acceptance of a carbon tax, is to put the money directly to use on solving our energy problems — not just pour it into the general fund, where it can be diverted. Carbon taxes could pay for loans or even grants for insulation and double-glazing of windows in older homes, especially in cases where owners cannot afford to make such improvements. They can fund much-needed research and development on ways to capture and remove carbon dioxide or subsidize power companies that begin to take such measures with their emissions. They can support tax credits to homeowners who install solar cells, as California is doing through its Million Solar Roofs program. They can fund much-needed research on converting agricultural waste, wood chips and switchgrass to biofuels, or to solve the knotty problems of fuel-cell automobile engines and compact hydrogen-storage systems.

As Americans consume about 9 million barrels of oil daily for transportation, a dime-per-gallon gas tax thus would yield nearly $14 billion annually for such purposes. This amount does not include taxing coal, oil and natural gas burned in electrical power plants or for heating our homes and office buildings, which would probably add twice that amount.

A small carbon tax applied across the board, wherever fossil fuels are burned, thus would yield more than $50 billion a year to help address global warming. We already do something like this with the gasoline taxes that go directly into highway construction and repair. It is not all that new of an idea.

Spending these funds wisely, of course, will require some kind of responsible governmental decision-making body. Given the politics and corruption that often swirl around large pools of money, this will not be easy. But with openness, vigilance and leadership, it can succeed.

Meanwhile, renewable energy sources would begin to flourish. It would finally become economical to tap the vast supplies of renewable energy that course through our communities daily. Just imagine solar-cell panels on millions of homes converting the sunlight shining on them into thousands of megawatts of electricity fed back into the power grid. And the local construction jobs thus created will be awfully difficult to export to China or India.

Achieving this worthwhile goal cannot happen without courageous political leadership, for few can stomach a new tax. That is why so many politicians, including Sen. Dianne Feinstein, D-Calif., favor a "cap-and-trade" emissions-trading scheme, whereby companies are allowed to emit limited amounts of carbon dioxide, but can trade these allowances like stocks and bonds.

Fortunately, we are beginning to get the needed leadership in California, thanks to an inspired governor working across the aisle with Democrats on energy issues. What better legacy could President Bush leave when he departs from office in two years?

A Convenient Tax – Issue #1

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(Note: We’ve changed the newsletter’s name. While the “truth” about global climate change may have been inconvenient, the carbon tax for combating it is straightforward, transparent and simple to administer — in a word, convenient! — CK & DR)

Welcome to the first issue of A Convenient Tax, the Carbon Tax Center’s newsletter. It’s been a very successful initial two months. Here are highlights.

Our Successful Launch

In just two short months the Carbon Tax Center (“CTC”) has established a strong presence in Washington DC, New York City, within the environmental community and throughout the Blogosphere. Here’s a quick snapshot of what CTC has accomplished since our Jan. 22 start.

  • Created the first Web site (www.carbontax.org ) devoted to taxing carbon emissions.
  • Formed a working partnership with veteran Washington (DC) environmental advocates who are committed to advancing a carbon tax in the current (110th) Congress and enacting one as soon as possible.
  • Provided technical assistance to legislative staff of a senior House Ways & Means Committee member (and gained a higher tax level in his anticipated carbon tax bill).
  • Raised probing questions about the “cap-and-trade” approach advocated by some large environmental groups and corporations, while maintaining a united front on the necessity of putting a price on carbon emissions,
  • Presented the case for “Carbon Taxes First” to an overflow Capitol Hill briefing organized by the Environmental and Energy Study Institute (EESI), and at other meetings in New York, Washington and Westchester County (NY).
  • Developed a preliminary analysis suggesting that CTC’s proposed 10-year phased-in $370/ton carbon tax (ramped up by $37/ton, the equivalent of a 10c/gallon addition to petroleum prices, each year) could reduce U.S. emissions of carbon dioxide by at least one-third.
  • Shared information and strategy with carbon tax advocates in several dozen states, including developers of carbon tax proposals for Colorado, New York and Washington, DC.

CTC Media Highlights

  • CTC’s comprehensive, accessible web site attracts 100-150 visits a day from across the USA as well as Canada, Europe, Asia and Australia, making www.carbontax.org the #2-ranked site on Google for those searching “carbon tax,” surpassed only by Wikipedia. Note: On April 12 we leapfrogged Wikipedia, making us #1 on Google.
  • Prominent and complimentary coverage of CTC’s launch in the online version of the New York Times in late January, in Times columnist John Tierney’s Science Blog.
  • Time Magazine‘s use of CTC’s estimate of the carbon-reduction impact of a carbon tax in its Global Warming Survival Guide (under solution #5: Pay The Carbon Tax ).
  • Strong presence in online discussions of carbon taxes and cap-and-trade, including repeated mentions of CTC in Gristmill and Slate.
  • Attack on carbon taxing and CTC by climate deniers at Accuracy In Media.

Going Forward

The climate debate “has shifted incredibly quickly,” wrote New York Times economics columnist David Leonhardt this week, and “the political debate now revolves around what … action should be [taken].” The next two years are 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.”
  • Gradually 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.

While CTC’s action plan will necessarily remain flexible, we anticipate engaging in the following activities during the next one to two years:

  • 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 seeking to build on Boulder’s partial carbon tax adopted last November.
  • 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.

That’s how things look at this juncture (April 1, 2007). It’s clear to us 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 all 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

Barnes on A Convenient Windfall

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In A Convenient Windfall: Global Warming’s Big Cash Dividend, published on March 23, 2007 at www.commondreams.org, Peter Barnes makes the excellent points that “we need to make polluters pay for fouling the atmosphere” and that “we’ll earn an enormous cash windfall if we fight global warming the right way.” Unfortunately, his “right way” is a cap-and-trade program.

As Barnes acknowledges, polluters are arguing that they should receive future carbon emission permits free of charge to avoid being hurt by a cap and trade program. In fact, they have received free allowances under existing cap-and-trade programs for NOx and SO2 and they have good reason to expect that they will receive free allowances if there is a carbon cap-and-trade program. Barnes is correct that “there’s real-world evidence that privatizing the climate windfall would be a serious mistake” and that when the European Union gave out free carbon emissions permits to coal-burning utilities, “the undisputed results were windfall profits for the utilities, higher prices for everyone else, and zero public benefit.”

Barnes concludes that the permits should be auctioned rather than given away. The danger is obvious. When it comes to making deals in Congress, the coal-mining companies and the companies burning coal have tremendous clout and the inevitable result will be a cap-and-trade program with the allowances given to the polluters along with the cash windfall.

The good news is that we really can earn an enormous cash windfall by fighting global warming the right way. That right way is by implementing a carbon tax, which is superior to cap-and-trade programs for all the reasons set forth in our issue paper on Carbon Taxes vs. Cap-and-Trade.

Gore Affirms Support for Carbon Tax

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Here’s how Greenwire led its story on former Vice-President Al Gore’s appearance this morning before the House Committee on Energy and Commerce:

In a historic hearing appearance today before two House subcommittees, former Vice President Al Gore urged Congress to immediately freeze U.S. greenhouse gas emissions and reduce them 90 percent by mid-century.

Gore also called on lawmakers to tax the carbon content of fuels as a way to put the global warming issue before Americans.

"I fully understand that this is considered politically impossible, but part of our challenge is to expand the limits of what is possible,"
Gore said.

Gore_Capitol_Hill_21_March_07.jpgGore also suggested that the United States push for the next global warming treaty to begin in 2010, two years before the expiration of the Kyoto Protocol.

By using 2010 as a start point for the next treaty, the next U.S. president could "use his political chits" to get the country in an "all-out sprint" to reduce its own emissions.

Congress should also set up a "carbon neutral" federal mortgage company to support "green" homes, ban sales of incandescent light bulbs and impose a moratorium on new coal-fired power plants built without the technology to capture and sequester carbon dioxide.

Gore’s appearance before the House Energy and Commerce and Science and Technology subcommittees drew standing-room-only crowds. It also filled several overflow rooms to
watch the testimony of the Tennessee Democrat.

In a 40-minute opening statement, Gore described what he said is a budding political movement for new climate change policies. He presented 516,000 online signatures he had gathered on his Web site and touted 100 new contacts per second in the last few days since soliciting comments in anticipation of his House testimony.

"This is building, and it’s building in both parties," Gore said.

Gristmill’s David Roberts has a handy summary of Gore’s 10-point legislative proposal here. Gore’s #2: Start a long-term tax shift to reduce payroll taxes and increase taxes on CO2 emissions. His #3: Put aside a portion of carbon tax revenues to help low-income people make the transition. (#1: An immediate "carbon freeze" that would cap U.S. CO2 emissions at current levels, followed by a program to generate 90% reductions by 2050.)

Small world dept: Not so many years ago, geophysicist grad student Kevin Vranes and I were part of an intrepid band of New Yorkers marking sites where pedestrians and cyclists were run over by car drivers, as part of a campaign against vehicular dominance of the streets. Now we’re both in the thick (?) of the climate debate. Kevin has published a terrific account of reactions to Gore’s testimony today before the Senate Environment & Public Works Committee, in the Colorado University Science blog Prometheus. Note particularly his recitation of the keen interest in carbon pricing and taxing shown by Montana Democrat Max Baucus and New York Democrat Hillary Clinton.

My one correction to Kevin’s valuable report: Keivn, this may have been the first time you heard Gore urge a tax on carbon emissions, but the former V-P has been calling for a carbon tax (with a tax-shift out of payroll taxes) for some time. See details here.

Photo: flickr / Oscar H Mataquin

Full house for Carbon Tax pitch on Capitol Hill

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Close to 150 Congressional staffers, policy types and lobbyists jammed a Senate hearing room yesterday for a briefing on carbon taxes and cap-and-trade systems featuring CTC’s Charles Komanoff, along with Terry Dinan of the Congressional Budget Office and James Barrett of Redefining Progress.

EESI_Crowd.jpgThe briefing was sponsored by the Environmental and Energy Study Institute. Attendance at EESI briefings generally runs between 75 to 100, and the packed house for the March 14 panel was taken as a sign of surging interest in carbon pricing.

Charles’s presentation may be accessed here. It’s an updated and more concise version of the PowerPoint on our Home Page.

Cap-and-Trade: Part of the Solution or Part of the Problem?

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This post was contributed by Kevin Bell of Convergence Research, specialists in energy, water and transportation technical and policy analysis. — CTC

As yet another case of cowboy diplomacy on the part of the Natural Resources Defense Council and Environmental Defense recedes in the rear-view mirror, it’s important to look ahead to what is at stake here.

In a little less than two years, our current Federal executive branch will be replaced. Chances are that for the first time, we will see serious movement (as well as serious posturing) on a Federal level about limiting greenhouse emissions. The problem is that the stakes are enormously high, and the window of opportunity for doing something that will actually make a difference is very small — less than a generation, probably less than a decade. We don’t get a mulligan if we blow this.

Many of our nation’s most polluting industries are acutely aware of this political calculus, and are moving to get in front of the issue. The first effort out of the gate is the US Climate Action Coalition. In addition to NRDC and ED, it includes perennial favorites like PG&E, Duke Energy, FPL, Caterpillar, GE, BP, Alcoa, and more.

Now, all of these corporations are looking for policy certainty before making infrastructure plays that they will have to live with for most of this century. Some of them buy into the idea that climate change is the single biggest threat that we as a species face in this next century, and that we need to act like it (I would put BP in this category). Others are simply looking for a way to make a financial killing, or evade having to actually do very much. Of course, every party in this coalition intends to dominate the debate over how we actually go about substantially reducing greenhouse gas emissions in the United States.

So, what are they calling for? Their twelve-page “solutions-based” PR piece, A Call for Action, is long on rhetoric and short on specifics. But the specifics that are there should make you sit up and take notice.

The short-term and mid-term suggested target reductions, not to put too fine a point on it, are lame: 10%-30% reductions from current levels by, oh, around 2025. To put that in context, California plans to reduce emissions 15% from current levels by 2020, and 80% by 2050. The UK committed to 20% reductions below 1990 levels by 2010 a decade ago (they will probably get close to, but not quite hit that target). Both the UK and Germany have committed to further reductions on the order of 40% by 2025 if — and this is a very important if — the US makes a similar commitment.

But the “money quote” is in the discussion on mechanisms on page 8. Rejecting the idea of a uniform carbon tax out of hand, the report outlines a cap-and-trade solution and then says:

A significant portion of allowances should be initially distributed free to capped entities and to economic sectors particularly disadvantaged by the secondary price effects of a cap including the possibility of funding transition assistance to adversely affected workers and communities. Free allocations to the private sector should be phased out over a reasonable period of time.

A few days ago I was asked to elaborate on why implementation of the Clean Air Act and the failure of Phase One of the European Carbon Exchange are great examples of how to do the wrong thing with mitigating carbon.

Briefly, the biggest mistake of the Clean Air Act was exempting existing coal-fired powerplants from best available control technology rules. Originally seen as a temporary concession to dirty utilities with obsolete powerplants near the end of their useful lives, it has become a permanent fixture of the emissions landscape, killing hundreds of thousands of people and wasting the time of brilliant advocates that would have been far better spent dealing with issues like climate change. Grandfathering is a terrible idea. There is no chance, politically, that such a concession would “be phased out over a reasonable period of time.”

Furthermore, the decision to give sulfur dioxide credits away to polluters, instead of going to a 100% market-driven auction system, represented a huge subsidy (and another terrible precedent) for the nation’s dirtiest utilities. Make no mistake, this is the deal that NRDC/ED’s partners in USCAP are aiming for.

Phase One of the Euro Carbon Exchange failed for two reasons: each country was allowed to make its own estimate of its greenhouse emissions, and tradable carbon credits were given, for free, to the industries in each of those countries. The three countries that actually underbid (UK, Spain, Slovenia as I recall) had to actually pay. For the rest of the Eurozone, it was free money right up to the point where everybody realized that the market was awash in surplus carbon credits, and the price dropped by 95%. They did learn a lot about how much carbon each country actually generates, and Phase Two should be tighter. But less than 10% of the available credits in Phase Two will actually be in open auction.  Once again, the vast bulk of credits will be given away to polluting industries, something that my sources in the UK government describe as a straight-up political power play by Europe’s largest corporations.

That’s the reality we’re all up against as we start to gear up for the critical fight to reduce global warming. What is troubling is that NRDC and ED have already signed onto Alcoa’s and Duke Power’s position on climate change, before the real discussion has even started.

For better or worse, NRDC and ED are the go-to national environmental organizations that corporations want to talk to. Occasionally the outcome has been positive. More often the result has been catastrophic. But always NRDC and ED seem fixated on a style of cowboy diplomacy that forecloses a substantive and genuinely progressive outcome, often for years to decades.

We don’t have years to decades to get this one right. I really, really hope that NRDC and ED don’t end up being part of the problem.

Carbon Tax, not “Peak Oil,” Can Save Climate

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"It’s the fifth time to my count that we’ve gone through a period when it seemed the end of oil was near and people were talking about the exhaustion of resources," said Daniel Yergin, author of a Pulitzer Prize- winning history of oil, who cited similar concerns in the 1880s, after both world wars and in the 1970s. "Back then we
were going to fly off the oil mountain. Instead we had a boom and oil went to $10 instead of $100."

That’s from a front-page article, Oil Innovations Pump New Life Into Old Wells, in today’s New York Times. The article uses Chevron’s Kern River oil field near Bakersfield, CA, whose life has been extended by injections of high-pressured steam, as a template for how advancing technology and profit opportunities from today’s higher oil prices are combining to increase recovery rates at oil fields around the world.

Oil_Well.jpgThe bottom line: peak oil will come some day, but not soon enough to avert climate catastrophe. I’ve long maintained that "peak oil" wouldn’t be a climate lifesaver. In my first talk centered on carbon taxing, at the "Philly Beyond Oil" meeting in 2005, I noted that $70 crude would "stimulate conservation, extraction and substitution," and that only the first of this trio (conservation) would be a climate-helper. Quoting the trenchant economics writer Doug Henwood, I cautioned that there’s "no shortcut around political
agitation," which is why Dan Rosenblum and I founded the Carbon Tax Center earlier this year.

The Times article closes by quoting a Chevron engineer: "… peak oil is a moving target [and the supply of] oil is always a function of price and technology." True enough. Our task is to make the use of oil, coal and gas a function of a climate-aware price and technology.

At present, the fuel prices that determine the demand side of the equation include nothing for the climate damage resulting from
burning those fuels, resulting in vast overuse. Moreover, those feedback mechanisms I mentioned in my 2005 talk invariably overshoot the mark, resulting in the kind of wild price swings that Yergin described. These fluctuations drown out underlying movements toward higher prices, frustrating investment in low-carbon alternatives on both the demand and supply sides.

What to do? A tax on carbon fuels will internalize the costs of carbon damage and make manifest today the long-term trajectory of rising carbon-fuel prices. No other policy option — not cap-and-trade, not fuel efficiency standards, not subsidies for renewables — can do that.

Photo: RavenHawk / Flickr 

United Nations Foundation and Sigma Xi on Confronting Climate Change

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‘The world is experiencing climate disruption now and the increases in droughts, floods, and sea level rise that will occur in the coming decades will cause enormous human suffering and economic losses. The poorest are likely the most vulnerable. We imperil our children’s and grandchildren’s future if we fail to improve society’s capacity to adapt to a changing climate,’ according to Rosina Bierbaum, former Acting Director of the White House Office of Science and Technology Policy, announcing the findings of Confronting Climate Change: Avoiding the Unmanageable and Managing the Unavoidable. The report was prepared by the United Nations Foundation – Sigma Xi Scientific Expert Group on Climate Change, and released on Feb. 27.

‘The global-average surface temperature has already risen about 0.8 deg C [1.4 deg F] above pre-industrial levels and is projected to rise another 2-4 deg C [4-7 deg F] by 2100 if CO2 emissions and concentrations grow according to mid-range projections. Prudence dictates limiting the average temperature increase to no more than 2-2.5 deg C [3.6-4.5 deg F] above the pre-industrial level, and our report offers clear recommendations for achieving that goal,’ said John Holdren, the Teresa and John Heinz Professor of Environmental Policy, Harvard University, Director of the Woods Hole Research Center, and Board Chair of the American Association for the Advancement of Science.

The report recommends new global policy framework for mitigation that includes “mechanisms that establish a price for carbon, such as taxes or ‘cap and trade’ systems. A carbon price will help provide incentives to increase energy efficiency, encourage use of low-carbon energy-supply options, and stimulate research into alternative technologies. Markets for trading emission allocations will increase economic efficiency.”

At a New York Academy of Sciences forum on Feb. 27, Professor Holdren observed that although many people generally think a cap and trade system would be relatively easy to implement, the details of an effective cap and trade system would actually be quite complicated. Responding to concerns that a carbon tax could not be implemented because politicians fear the “T” word, Professor Holdren stated that a carbon tax is possible “with a modicum of political leadership.”