A planetary crisis “threatening the young and unborn” compels a “substantial, gradually-increasing carbon tax with all revenue distributed directly as monthly ‘dividends’ to each household,” Dr. James Hansen told Congress today.

Hansen, director of NASA’s Goddard Institute for Space Studies and the unofficial dean of climate scientists, testified that measurements of Earth’s historical climate sensitivity to atmospheric CO2 make clear that rising levels are now driving our climate into ranges that will have lethal consequences. Current concentrations of 385 ppm amplify dangerous feedback mechanisms such as loss of reflective ice surfaces and release of methane gas from permafrost, he said. Atmospheric concentrations must be brought below 350 ppm as quickly as possible, Hansen stressed, specifically rejecting the target of 80% reductions by 2050 advocated by leading environmental groups.

Hansen testified at a House Ways & Means Committee hearing this morning, kicking off debate in Congress over legislation to help the U.S. achieve deep cuts in carbon emissions through a cap-and-trade system, a carbon tax, or perhaps a hybrid approach. Hansen and Union of Concerned Scientists geochemist Dr. Brenda Ekwurzel both testified in favor of vigorous action, although they differed on the cap vs. tax question. A third witness, University of Alabama professor John Christy, argued for a go-slow approach.

Hansen told the committee that a transparent carbon tax with direct dividend would “spur rapid replacement of our inefficient infrastructure” and lead to an “efficient phase-out of coal.” He strongly criticized cap-and-trade proposals, calling caps “hidden taxes,” contending that they would undermine essential price signals through price volatility while enriching traders and lobbyists at the expense of the public. He predicted that cap-and-trade could lead to "blackmail" by electricity suppliers, who would force the public to choose between meeting emissions targets and blackouts, and pointed out that the European Union’s cap-and-trade system has failed to reduce carbon emissions.

UCS’s Ekwurzel testified that acidification has already diminished the oceans’ ability to absorb more carbon dioxide — a development that will accelerate global warming. She advocated a “cap and invest” program in which emission permits are auctioned and the proceeds used to finance energy efficiency and renewable energy.

Christy’s appearance was sponsored by Republican members of Ways & Means. He testified that cloud effects outweigh human effects on climate, and contended further that any U.S. actions to reduce emissions would be overwhelmed by emissions from China and India, both of which have rejected carbon caps. He suggested that the best way to reduce CO2 emissions is a massive nuclear power construction program.

Committee Chairman Charles Rangel, who represents Manhattan’s Harlem neighborhood and parts of the Bronx, asked Hansen about the effects of a carbon tax on low-income households. Hansen explained that under his proposal to distribute 100% of carbon tax revenues to U.S. residents, a steadily increasing tax reaching $115 per ton of CO2 would result in estimated dividends of $9,000 per two-child household, assuming that adults got one “share” and each of the first two children got one-half. [Ed. note — Using CTC’s carbon tax impact model, we estimate that a $115/ton carbon tax would provide the average family of four with a $7,500 annual dividend.] Hansen noted that because households that use below-average amounts of fossil fuel would receive more in dividends than they paid in higher energy costs, his program would help the vast majority of middle- and lower-income Americans. Hansen also cited Congressional Budget Office findings that carbon taxes are five times as efficient as caps at reducing emissions.

UCS’s Ekwurzel argued that retrofitting homes and  transportation would be a better use of carbon cap revenue than direct dividends. However, she did not address whether “breaching” strict revenue-neutrality on behalf of energy efficiency and renewables might unleash a torrent of less benign uses of the cap or tax proceeds. For his part, Christy seconded Hansen’s view that a carbon tax would be  more transparent than a carbon cap-and-trade system.

Rep. Dave Camp (R-Mich.) and several other Republican members branded carbon caps as hidden taxes. They insisted that the Ways & Means Committee assert jurisdiction over any cap or carbon tax legislation.

Rep. Sander Levin (D-Mich.) responded to Christy’s testimony, saying “nobody is talking about the U.S. acting alone.” Hansen explained that the U.S. could use “average carbon content data” to set tariffs on goods from countries that didn’t enact their own carbon taxes. A U.S. tax with harmonizing tariffs would encourage trading partners to enact their own carbon taxes to negate tariffs and capture tax revenue themselves, he said.

Connecticut Democrat John Larson cited Friends of the Earth’s recent report describing carbon trading as potentially the world’s largest “dark, unregulated” derivatives market and asked why anyone should think that auctioning tradeable permits wouldn’t lead to “a speculative mess.”

During a recess in the hearing, Peter Barnes of Cap and Dividend and Mike Tidwell of Chesapeake Climate Action Network asked Hansen if he would support legislation to cap emissions and recycle revenue via a direct “dividend” to households. Hansen replied, "I don’t see what a cap gets you. We need maximum reductions as soon as possible and a tax gets that."

Committee members asked one cogent question after another. Rep. Jim McDermott (D-Wash.) focused on volatile prices under a cap, which he said would discourage clean energy entrepreneurs. Rep. Chris Van Hollen (D-Md.), a strong supporter of cap-and-dividend, asked about revenue-recycling, noting Hansen’s testimony that a carbon price will need to be high enough to affect behavior and purchasing decisions. Rep. Doggett noted that Exxon now supports a carbon tax after years of climate-change denial.

Hansen stressed the importance of a dividend to ensure continued political support as carbon prices rise. He urged Congress to direct the National Academy of Sciences to report on climate science as a way to end the debate over anthropogenic global warming once and for all. 

After the hearing, I had the good fortune to join Dr. Hansen for lunch. I asked him about clean coal. He said “there is no such thing as clean coal, and there never will be.”

Links to testimony
Hansen: http://waysandmeans.house.gov/hearings.asp?formmode=view&id=7577
Erwurzel: http://waysandmeans.house.gov/media/pdf/111/ekw.pdf
Christy: http://waysandmeans.house.gov/media/pdf/111/ctest.pdf

Photo: Flickr / World Development Movement.

Reported by CTC Washington representative James Handley. Watch this space (and see postscript below) for CTC’s analysis of the USCAP "Blueprint." Meanwhile, read these parallel critiques of USCAP:

• Joseph Romm of the Center for American Progress, via his Climate Progress blog, NRDC and EDF endorse the weak, coal-friendly, rip-offset-heavy USCAP climate plan.
• Statement by Robert Shapiro, director, U.S. Climate Action Task Force, "Policy Experts on U.S. CAP Endorsement of Cap-And-Trade: Right Intent, Wrong Policy — Climate Task Force supports carbon tax as best policy to reduce nation’s greenhouse gas emissions"
  
• Greenpeace Staff Blog: CEOs Guilty of Crimes Against Humanity Seek A Plea Bargain.

The U.S. Climate Action Partnership unveiled its cap-and-trade-based Blueprint for Legislative Action to a half-empty House Cannon Caucus Room Thursday morning. Arriving at the 9 a.m. event, attendees viewed a podium in front of an array of 18 chairs (each with bottled water) marked with names of CEOs and heads of EDF, NRDC, Pew Center, Nature Conservancy and WRI.

At 9:20, the suited “chorus” filed in, taking their assigned places. General Electric CEO Jeffrey Immelt introduced what he described as a “diverse panel” of CEOs and NGO heads. (All but Ursula Burns of Xerox is white; all but three are male. All seemed past the half-century mark.)

Each had a brief speaking role. Jonathan Lash of the World Resources Institute stressed cap-and-trade’s “flexibility and predictability,” saying the blueprint addresses impacts on consumers and includes provisions for emissions offsets to “limit volatility.”

According to the Environmental Defense Fund’s Fred Krupp, “A mandatory cap is the backbone” of USCAP’s proposal to reduce US greenhouse gas emissions from 2005 levels by 80% by 2050, with half the reductions occurring by 2030.  Charles Holliday of DuPont said the plan would maintain competitiveness of U.S. firms. David Crane of NRG Energy touted its “fairness” in “spreading costs through the economy.”  “All components of the plan are linked,” Pew’s Eileen Claussen proclaimed. To “manage price spikes” she pointed to provisions for “banking of emissions allowances,” availability of “strategic verifiable offsets” and a “reserve pool.”

John Deere’s Robert Lane stressed offsets -– credits for 1.5 billion tons of CO₂ reduction activities that would not otherwise be undertaken in sectors not subject to the cap. He noted that USCAP’s blueprint allocates “free permits initially… phasing them out.”  John Rowe of nuclear giant Exelon trumpeted renewable portfolio standards for utilities to encourage building “the lowest carbon energy” — nuclear. He said 40% of the free allowances would go to electric utilities at the distribution level — where, he asserted, cost savings would be passed to consumers.

Burns described Xerox’s early GHG emissions reductions and pointed out the blueprint’s rewards for early actions. Frances Beinecke of the Natural Resources Defense Council called the blueprint a way to “help solve both the economic crisis and the climate crisis” by “regulating all major sources, while funding energy technology research and deployment,” a “stimulus,” she said, along with clean fuel vehicle regulations.

Jim Rogers of Duke Energy, the third largest U.S. coal-burner, asserted that “We must find a way to remove CO₂ emissions from coal,” noting accelerating construction of coal fired power plants in China. He touted the blueprint’s use of auction revenue to fund Carbon Capture and Sequestration research, funding “not subject to the whims of Congress.” He said the blueprint would “require” all new coal fired power plants after 2015 to capture at least 50% of carbon.

Peter Darbee of Pacific Gas & Electric noted that energy-efficiency is the most cost-effective energy “source” and the cheapest way to reduce GHG emissions, costing about 2 cents per kilowatt-hour. The blueprint urges Congress and states to enact regulatory standards, expand rebates for buildings that outperform codes, and enact tax and regulatory incentives for consumers to improve efficiency. Darbee urged “decoupling” of utility earnings from power generated to encourage them to help customers conserve. James Mulva of Conoco-Phillips explained that the USCAP blueprint makes fuel providers “responsible” for reductions in the transportation sector and that it includes performance measures for vehicles.

Noting that forest destruction generates 20% of global GHG emissions, Mark Tercek of Nature Conservancy applauded the blueprint’s “verifiable” offsets to credit forestry projects to capture CO₂. George Noland of Siemens pointed to the plan’s goal of 40-45% reduction of GHG emissions from commercial buildings through design improvements and smarter technology. Jeff Sterba of PNM Resources touted USCAP coalition’s diversity and consensus. Lewis Hay of Florida Power advocated measures to put renewables on a “level playing field,” and Preston Chiaro of mining combine Rio Tinto argued that the plan would motivate other governments to follow.

Reporters asked about the cost of the plan. Claussen contended that its costs can’t be assessed in isolation because the plan would revitalize a new economy — for example, by encouraging building of wind power. I asked the panel why the blueprint didn’t follow President-elect Obama’s pledge of 100% auction of permits and instead sought permit giveaways ("allowances"). Darbee replied that the free permits would go to electricity distribution utilities, which would ensure that consumers benefited from them.   A reporter from Time magazine asked what the target carbon price would be; Claussen said a Carbon Market Board would decide, and that the plan is intended to avoid “a dash for (natural) gas.”

Another reporter asked about EPA authority and federal preemption of state efforts already underway to reduce GHG emissions; Krupp replied that they had not taken a position on EPA or preemption. Asked if coalition members will support the plan jointly or lobby individually, the panel indicated that there will be agreements on some elements and divergences on others.

WRI’s Lash concluded the session: “The economy will recover but without serious steps, the climate will not.” The panel then rushed out to join the first climate legislation hearing of the 111st Congress, before Rep. Waxman’s Energy & Commerce Committee.

Photo: Flickr / James Morrison.

Postscript, after reading USCAP’s vague "blueprint" (few numbers, no graphs):

Does Thirst for Offsets, Allowances Unite "Diverse" USCAP Coalition?

Offsets (1.5 billion tons domestic and 1.5 billion abroad) overwhelm the cap.  When the smoke clears, USCAP’s blueprint amounts to a source of funds for offsets.  Retaining tropical forests as carbon sinks instead of burning them is crucial (and deserves funding), but USCAP would sell "indulgences" for U.S. emissions without "repentance": no reason to reduce.  (See Hill Heat’s graph showing the huge bubble of additional emissions that USCAP’s offsets would accommodate.)

USCAP’s free allowances to downstream electricity distribution utilities would mute (obliterate?) the price signal, reducing incentives for electricity users to conserve and upgrade.

A "cap with free allowances" worked for the acid rain SO2 cap-and-trade program by pressing utilities to install scrubbers and shift to low sulfur coal without passing SO2 permit costs through to consumers.  CO2 is different– we don’t have a way to burn coal without producing CO2.  (Yes, we might someday, but even DOE’s rosy estimates say capture and sequestration would require ~ 1/3 more fuel.) 

Conservation is the cheapest "source" of energy and GHG reductions.  Gradually-rising prices, via a tightening cap without free allowances, or better yet a rising carbon tax, would push all levels of the economy to become the laboratory for efficiency and low-carbon innovation.  For a strong enough price signal without crippling the economy, an offsetting tax shift or "dividend" is needed to dampen the "income effect" (but not the incentive to conserve or substitute) of that price hike.  That’s where auction money (or carbon tax revenue) should go: all the way downstream to households.

In short: Huge offsets mean USCAP’s plan wouldn’t press U.S. industry to shift to renewables (e.g., by building wind capacity) and its free allowances mean consumers wouldn’t have reason to reduce demand anytime soon.  Pretty close to a "nothing-burger."