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."

Reported for the Carbon Tax Center by James F. Handley

[Ed. note — two days after the Capitol Hill briefing, on Thurs. Sept. 18, the House Ways and Means Committee heard testimony on optimal pricing of carbon emissions, including a forceful presentation from carbon tax advocate New York City Mayor Michael Bloomberg; watch this space for CTC’s report.]

At least one Washington politician dares to say “tax” out loud — a carbon tax, no less.

Representative John Larson (D-Conn.) headlined a Capitol Hill panel discussion Tuesday and came out swinging for a revenue-neutral carbon tax. Larson, a member of the Democratic House leadership and the tax-writing Ways and Means Committee, called carbon taxing the most effective way to curb greenhouse gas emissions. Addressing a briefing organized by Clean Air – Cool Planet and the Energy and Environment Study Institute, the five-term Congressman invoked his constituents at Auggie & Ray’s Diner in East Hartford: “They know climate protection comes with a price tag — they want transparency up-front so they know what to expect and can plan ahead. And they want a fair, level playing field.”

Both a carbon tax or the auctioning of permits under a carbon cap-and-trade system would generate huge streams of revenue which would come under the jurisdiction of Ways and Means. The Committee has scheduled a hearing tomorrow, Sept. 18, on revenue recycling, and Larson will be on hand, presumably putting the spotlight on the American Energy Security Trust Fund Act he introduced in August 2007.

Speaking to an overflowing House banquet room, Larson, shown at right, called a carbon tax “simple, efficient, straightforward and effective” and said it will be a boon to the economy if the revenue is recycled to reduce or eliminate distortionary taxes. Following Larson, a politically diverse panel of economists — Robert Repetto, Robert Shapiro, Terry Dinan, and Ken Green — discussed ways to maximize the “double dividend” — benefits to climate and to the economy from recycling revenue from either a carbon tax or the auction proceeds of cap-and-trade.

Several noted the most egregious flaws of the defeated Lieberman cap-and-trade bill: it would have given away emission permits and auction revenues, mainly to fossil fuel industries, rather than recycling auction revenues downstream to consumers. Panelists noted that energy firms pass their costs downstream to consumers — who will need assistance. Only Repetto, of the UN Foundation, preferred cap-and-trade over a carbon tax, but with either, he wants a tax-shift — auctioning all permits and dedicating revenues to reduce other taxes.

Shapiro, a former Undersecretary of Commerce, warned of the costs and instability from price volatility under cap-and-trade, citing the U.S. acid rain program whose permit prices slosh around as much as 80% and the similarly volatile EU climate program which has achieved zero net greenhouse gas reductions. The morning after a disastrously volatile day on Wall Street, Shapiro called volatility the enemy of rational planning and efficient economic decision-making. Shapiro advocates recycling 90% of carbon tax revenue with the remaining 10% dedicated to R&D on low-carbon alternatives.

Dinan, author of a series of weighty CBO studies on climate policy documenting the advantages of a carbon tax, suggested ways to move cap-and-trade closer in efficiency to a carbon tax, for example by adding safety valves to limit price volatility. She underscored the efficiency advantages of applying revenues to reduce distortionary taxes such as payroll taxes, vs. distributing revenues equally with pro rata dividends. But Dinan and the new RFF study caution that unlike a straight dividend approach, tax-shifting out of payroll taxes would be acutely regressive, mainly because many low-income people, including elderly and the unemployed, don’t pay payroll taxes and thus wouldn’t benefit from payroll tax reductions. In contrast, dividends would go to everyone, equally, thus benefiting a clear majority of less-well-off individuals and households.

Ken Green, AEI resident economist and scientist who has written extensively about the “double dividend” from reducing distortionary taxes with carbon revenues, is rare among conservatives for supporting strong medicine to combat climate change. Because our entire society and every activity in it is built around energy consumption, changing energy prices will have profound effects, he noted, some of which must be offset. Green warned that politicizing climate change legislation or otherwise attempting to favor some constituents over others will “torpedo” the serious effort that is needed. Cap-and-trade hides the truth that we must use prices to change consumption patterns, said Green, and it will breed cynicism and undermine public support for climate protection. The public needs to understand that although fossil fuel prices will rise, they will be “made whole” as a group.

During Q&A an audience member noted the consensus for a carbon tax but asked panelists how a tax would provide the certainty that is often touted as the chief advantage of cap-and-trade. Shapiro suggested that carbon tax levels may need to be adjusted periodically to assure that emissions targets are being met. Green contended that powerful incentives for cheating and market manipulation will render cap-and-trade’s emissions certainty largely illusory. He called cap-and-trade a government-mandated constraint on supply, likening it to OPEC’s mission to limit oil supply to support prices. Just as in OPEC, cap-and-trade will bring irresistible temptation to cheat by selling outside the system and will eventually destroy public confidence, Green said.

Photo courtesy of Clean Air – Cool Planet

Guest post by Wyatt Boyd, an intern at the Carbon Tax Center and graduate student in Columbia University’s Climate and Society Program
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It usually doesn’t take long for conversations about carbon taxes to turn to “emissions migration.” Won’t a U.S. carbon price, it is asked, simply push coal-fired power plants, factories and jobs out of the country? It turns out, however, that the issue of emissions migration perfectly illustrates the merits of revenue-neutral carbon taxes.

During an internship with the Carbon Tax Center this summer, as part of my graduate work at Columbia University, I prepared a working paper that weighs the costs and benefits of a carbon tax and emissions migration. My main finding is that the risks of not pricing carbon far outweigh the possible pitfalls of carbon taxes. Click here to see a copy of my paper, Global Emissions Migration and a Revenue Neutral Carbon Tax.

My paper demonstrates that the gloom and doom about America’s industries packing their bags and heading for low-cost countries in Asia or elsewhere at the first serious sign of a U.S. carbon price is grossly exaggerated. In fact, if carbon taxing leads the U.S. to reward labor and income more, and greenhouse gas emissions less, the opposite is more likely to occur. Placing a clear and certain price signal on carbon, which by the way is elusive with a cap and trade design for all the reasons described in an issue paper prepared by the Carbon Tax Center, has huge implications for the 10 trillion dollars of new capital the IEA estimates will be available for energy investments by 2030. With a revenue neutral tax, capital will neither be left sitting on the sidelines waiting for the rules to be clarified, or, still worse, locked up in soon to be obsolete or outlawed dirty coal plants. Instead, with clean energy a clear winner on their balance sheets thanks to a tax shift, U.S. firms will capture a huge new competitive advantage in the “next big thing” in the global economy – clean, carbon-free energy. The new investments will create many new middle-income jobs at home and contribute to a sustainable infrastructure driven boom. According to the excellent new book Earth: The Sequel by Fred Krupp, President of the Environment Defense Fund, clean tech typically provides twice the jobs per investment as traditional nuclear or coal plants. The costs of not enacting a carbon tax are millions of jobs lost and trillions of dollars of new investments stuck in limbo in the coming decades. The people who harp on emissions migration rarely mention this sobering opportunity cost to not pricing CO2. 

Our country’s dependence on foreign oil creates huge economic, environmental and national security issues.   Reliance on dirty coal is an environmental disaster, with new coal plants locking us into either intolerable emissions or the need to throw away money by shutting the plants before the end of their useful lives. By providing a powerful new incentive for clean energy development and deployment, the United States will not just see new investment and sustainable economic growth for decades to come, but get way ahead of the innovation curve in key areas like concentrated solar – and export these technologies to the world! Technologies like solar thermal, direct current transmission lines and clean coal + carbon capture are rapidly maturing today. The problem is they have to compete with coal, which is literally and figuratively as cheap as dirt, when its true costs are not factored into its price. Alas, with our current stagnant and backwards energy plan, Germany and Japan are dominating the field of clean tech (about 90% market share) while the U.S. sits paralyzed for lack of responsible public policy. The real issue is not emissions migration, a drop in the bucket compared to the torrent of new investments and development that would flow from a revenue neutral price on carbon. The real issue is when will the U.S. stop searching high and low for excuses and scapegoats like emissions migration, and develop a real energy plan?

Photo: Flickr / cjohnson7

In a major address yesterday, Al Gore asked his fellow citizens to accept the challenge "for America to be running on 100 percent zero-carbon electricity in 10 years." The press coverage only hints at the power and importance of the speech. Summarizing or paraphrasing the speech isn’t enough. See and listen to it yourself, or just read it, by clicking here.

If you don’t have the time, here’s my favorite part:

Of course, we could and should speed up this transition by insisting that the price of carbon-based energy include the costs of the environmental damage it causes. I have long supported a sharp reduction in payroll taxes with the difference made up in CO2 taxes. We should tax what we burn, not what we earn. This is the single most important policy change we can make.

Here is Gore’s conclusion:

So I ask you to join with me to call on every candidate, at every level, to accept this challenge – for America to be running on 100 percent zero-carbon electricity in 10 years. It’s time for us to move beyond empty rhetoric. We need to act now.

This is a generational moment. A moment when we decide our own path and our collective fate. I’m asking you – each of you – to join me and build this future. Please join the WE campaign at wecansolveit.org.We need you. And we need you now. We’re committed to changing not just light bulbs, but laws. And laws will only change with leadership.

On July 16, 1969, the United States of America was finally ready to meet President Kennedy’s challenge of landing Americans on the moon. I will never forget standing beside my father a few miles from the launch site, waiting for the giant Saturn 5 rocket to lift Apollo 11 into the sky. I was a young man, 21 years old, who had graduated from college a month before and was enlisting in the United States Army three weeks later.

I will never forget the inspiration of those minutes. The power and the vibration of the giant rocket’s engines shook my entire body. As I watched the rocket rise, slowly at first and then with great speed, the sound was deafening. We craned our necks to follow its path until we were looking straight up into the air. And then four days later, I watched along with hundreds of millions of others around the world as Neil Armstrong took one small step to the surface of the moon and changed the history of the human race.

We must now lift our nation to reach another goal that will change history. Our entire civilization depends upon us now embarking on a new journey of exploration and discovery. Our success depends on our willingness as a people to undertake this journey and to complete it within 10 years. Once again, we have an opportunity to take a giant leap for humankind.

Canada Day — the First of July — is observed "not only throughout the nation, but also internationally." This year, Canada’s third-most populous province is giving the world extra cause to celebrate: on July 1, British Columbia becomes the first state or province in the Western Hemisphere with a comprehensive, revenue-neutral carbon tax.

The BC carbon tax starts at a level of $10 (Canadian) per metric ton of carbon dioxide, equivalent to 2.41 (Canadian) cents per litre of gasoline. In U.S. terms and at current exchange rates, that’s $8.91 per short ton, or just under 9 cents per gallon of gas. The rate rises by $5 in each of the next four years, reaching $30 Canadian per tonne (U.S. $26.73 per ton) in 2012.

The tax is revenue-neutral. As we reported in April, the province’s Finance Ministry has dedicated the revenues to four tax reduction measures:

• A new Climate Action Credit will pay lower-income BC’ers $100 per adult and $30 per child per year.

• The bottom two personal income tax rates have been reduced by 2% on the first $70,000 in earnings.

• The corporate income tax rate has been reduced to 11% from the current 12%.

• The small business tax rate has been cut to 3.5% from 4.5%.

Each provision will expand in tandem with the tax rate. And, showing impressive political pitch, the ministry last week preceded the tax with what it calls “an immediate Climate Action Dividend” — $100 for every man, woman and child in British Columbia — via dividend checks sent to province residents.

The BC program has catalyzed an intensive discussion of carbon taxes across Canada. Liberal Party Leader Stéphane
Dion is staking his party’s campaign to replace the Conservative government on a carbon tax featuring a $15.4 billion, four-year Green Shift. Canadians are receiving, and participating in, a national tutorial on carbon pricing, “tax vs. cap” and revenue-neutrality.

The BC tax is modest. One
source says it will deliver less than a tenth of the province’s legislated greenhouse gas reductions for 2020. That’s partly because abundant hydropower has obviated the need for fossil fuels to generate electricity. (Memo to BC: please consider an excise tax on electricity; power surpluses from price-induced conservation could be sold into the grid, with revenues flowing to the Climate Action Dividend.)

Still, the tax is a giant step — even a leap. At midnight tonight, North America will have its first large-scale, socially-mandated carbon price. Millions of carbon-impacting decisions will begin to be made with at least some recognition of the climate-curing effect of reduced carbon emissions.

Starting now, BC residents who use less carbon than average will be rewarded with an income boost. With luck, the province’s ruling Liberal Party will be rewarded as well by voters for showing courage, vision and populist appeal. And perhaps in the not too distant future the U.S. will take a page from its northern neighbor’s play book and supplement its imports of ice-hockey players and Canadian Club with something even more sustaining.

Graph: Flickr/paradigm4.

James Hansen, the NASA climatologist who for two decades has led the worldwide scientific community in sounding the alarm over global warming, yesterday issued a ringing call for a U.S. carbon tax-and-dividend in a speech to Congressional staff in Washington, DC.

Here’s Hansen’s prescription, courtesy of Andy Revkin’s NY Times blog, Dot Earth:

If politicians remain at loggerheads, citizens must lead. We must demand a moratorium on new coal-fired power plants. We must block fossil fuel interests who aim to squeeze every last drop of oil from public lands, off-shore, and wilderness areas. Those last drops are no solution. They yield continued exorbitant profits for a short-sighted self-serving industry, but no alleviation of our addiction or long-term energy source.

Moving from fossil fuels to clean energy is challenging, yet transformative in ways that will be welcomed. Cheap, subsidized fossil fuels engendered bad habits. We import food from halfway around the world, for example, even with healthier products available from nearby fields. Local produce would be competitive if not for fossil fuel subsidies and the fact that climate change damages and costs, due to fossil fuels, are also borne by the public.

A price on emissions that cause harm is essential. Yes, a carbon tax.

Hansen is equally clear about what to do with the carbon tax revenues: 

Carbon tax with 100 percent dividend is needed to wean us off fossil fuel addiction. Tax and dividend allows the marketplace, not politicians, to make investment decisions.

Carbon tax on coal, oil and gas is simple, applied at the first point of sale or port of entry. The entire tax must be returned to the public, an equal amount to each adult, a half-share for children. This dividend can be deposited monthly in an individual’s bank account.

As to the impact on struggling families, Hansen recognizes that the carbon dividend stands to benefit the vast majority of the non-rich because they use less energy than the wealthy:

Carbon tax with 100 percent dividend is non-regressive. On the contrary, you can bet that low and middle income people will find ways to limit their carbon tax and come out ahead. Profligate energy users will have to pay for their excesses.

Why not have the government invest carbon tax revenues in promising energy technologies? For one thing:

Demand for low-carbon high-efficiency products will spur innovation, making our products more competitive on international markets. Carbon emissions will plummet as energy efficiency and renewable energies grow rapidly. Black soot, mercury and other fossil fuel emissions will decline. A brighter, cleaner future, with energy independence, is possible.

For his other reason, Hansen, a native Iowan, assumes full-throated populist voice:

Washington likes to spend our tax money line-by-line. Swarms of high-priced lobbyists in alligator shoes help Congress decide where to spend, and in turn the lobbyists’ clients provide “campaign” money.

Ironically, as Hansen was addressing the briefing (organized by Massachusetts Representative Edward Markey), detailed quantitative support for his carbon tax prescription was coming from a well-placed Washington economist. A new report by former U.S. Under Secretary of Commerce for Economic Affairs Robert Shapiro calls for a federal carbon tax starting at $14 per metric ton of CO2 in 2010 and rising steadily to $50 in 2030 (equivalent to $82 with inflation).

Ninety percent of the carbon tax revenues would be recycled via rebates on payroll taxes to employees and employers, or their equivalent in direct payments to households. The remaining 10% would go to energy and climate-related R&D and new technology deployment. Using the U.S. Energy Department’s NEMS consulting model, Shapiro concludes that the nearly revenue-neutral carbon tax would reduce CO2 emissions by 30% below non-taxed levels while shaving only eight-tenths of one percent off future (2030) GDP.

The report, Addressing Climate Change Without Impairing the U.S. Economy: The Economics and Environmental Science of Combining a Carbon-Based Tax and Tax Relief, was published by the U.S. Climate Task Force, a project of Shapiro’s Sonecon economic advisory company.

Photo: Flickr / chesapeakeclimate.

Guest Post by James Handley

In its just released Policy Options for Reducing CO2 Emissions, the non-partisan Congressional Budget Office confirms the superiority of carbon taxes over various types of cap-and-trade schemes. The CBO concludes that:

A tax on emissions would be the most efficient incentive-based option for reducing emissions and could be relatively easy to implement. If it was coordinated among major emitting countries, it would help minimize the cost of achieving a global target for emissions by providing consistent incentives for reducing emissions around the world. If other major nations used cap-and-trade programs rather than taxes on emissions, a U.S. tax could still provide roughly comparable incentives for emission reductions if the tax rate each year was set to equal the expected price of allowances under those programs.

Responding to interest in cap-and-trade programs, the CBO study "explores ways in which policymakers could preserve the structure of a cap-and-trade program but achieve some of the efficiency advantages of a tax." In other words, the CBO recognizes that a carbon tax is the "gold standard" and then tries to figure out how to reduce the disadvantages of cap-and-trade.

If Congress in its wisdom decides to approve a cap-and-trade program, it should make that program as similar as possible to the carbon tax "gold standard." But why settle for second best?

Are cracks appearing in the United States Climate Action Partnership?

How long can USCAP keep up the appearance of agreement on the need for cap-and-trade when there are disagreements within the USCAP membership regarding such fundamental issues as whether a carbon tax is preferable to cap-and-trade and whether allowances should be auctioned or given away as windfalls based upon past pollution?

A December 16 article in the Miami Herald, Cleaning Up the Climate, suggests that tensions within USCAP are beginning to be difficult to ignore. The article noted that Lewis Hay, chairman and chief executive officer of FPL Group (Florida Power & Light), is a supporter of what he euphemistically calls a carbon fee. According to the article:

At one energy conference, Jim Rogers, Duke Energy’s chief executive, noted that Hay ”is saying fee but he means tax.” Hay responded that if his colleagues wanted to fight, "I have a Jerry Springer bouncer backstage.”

Again according to the article, Hay “erupted with an uncharacteristically irate outburst” when a Senate subcommittee approved the Lieberman-Warner legislation that includes provisions creating a cap-and-trade program that gives away some of the allowances to utilities.

Hay believes that giveaways would favor the polluters. Better for the government to auction off the credits, so each utility need buy only what it needs. Hay issued a statement saying the bill "would reward the country’s biggest emitters of carbon dioxide with billions of dollars of free allowances that they don’t need. . . . That’s like giving a bigger rebate to those of us who dump the most trash on our sidewalks.”

Rogers at Duke Energy maintains that the big coal plants need a lot of free allowances to start off, or their customers might be unduly burdened by dramatically higher electric bills.

Meanwhile, the Natural Resources Defense Council urges senators to "reduce the total amount of emissions allowances polluters are given for ‘free.’" NRDC is apparently not arguing that all allowances should be auctioned, but at least it wants to limit the windfalls to industry.

Tensions will inevitably increase as USCAP begins to move past its broad statement of principle and recommendations. In fact, in an October 23 letter from USCAP to Senators Lieberman and Warner, USCAP explicitly noted that it does not yet have a position on a number of fundamental issues:

The Act includes much more detailed provisions than contained in the Call for Action. USCAP members are continuing to discuss the issues raised by a number of these provisions, such as:

• Scope of coverage and complementary policies and measures.
• Sector-specific emission reduction timelines and targets.
• Allocation of allowances.
• Cost containment measures.
• Credit for early action.
• Domestic offsets.
• International offsets.
• Relationship of state and federal GHG programs.
• Implementation of the GHG registry.
• Addressing disproportionate economic impacts.

It’s going to be interesting watching USCAP attempt to find common ground on issues such as the allocation of allowances. Will it support the windfalls in the current draft of Lieberman-Warner (see Friends of the Earth analysis)? How will it address “disproportionate economic impacts”? Will USCAP recommend auctioning all allowances and returning all of the revenues to those who incur the costs of cap-and-trade (similar in some ways to a revenue-neutral carbon tax)? Will it recommend an increase in the already huge windfalls to polluters included in Lieberman-Warner? Or, will it be unable to reach a consensus? Stay tuned.

Photo: Terry Bain / Flickr

New polls are showing increasing support for carbon taxes as concern about climate change grows. We’re pleased with these results, but we’re frustrated that as yet no polls have included questions that would indicate whether support for revenue-neutral carbon taxes exceeds that for carbon taxes for which the revenue uses are either unspecified or earmarked. While we strongly suspect the answer would be Yes, it would be helpful to have our suspicions confirmed by actual polling data.

The most recent poll, a Field Poll published on Nov. 9, reports that a majority of Californians are in favor of a carbon tax. Some 72% support a carbon tax on business, although this declines to 53% if the tax were to result in Californians’ paying higher prices for goods and services. Support for the tax grows to 65% if the tax revenues are spent solely on reducing greenhouse gas emissions.

Approximately 65% of those polled also favor the idea of a cap-and-trade system. However, those stating a preference for cap-and-trade were not asked the follow-up question about higher prices that was asked of carbon tax supporters, even though increases in prices due to cap-and-trade would be similar to those from a carbon tax.

Similar results were obtained in a recent BBC poll of 22,000 people in 21 countries. In 14 of the countries, "a majority (61% on average overall) say it will be necessary to increase energy costs to encourage conservation and reduce carbon emissions." The poll found that 74% of Americans support paying a higher tax on coal and oil if the revenues are used to promote efficiency or to develop new fuels; but, unsurprisingly, Americans are divided if the revenues are not used for those purposes, with only 46% supporting such a tax. The poll did not ask about support for a revenue-neutral tax that would encourage conservation, reduce carbon emissions AND return the money to all Americans. Most Would Pay Higher Energy Bills to Address Climate Change Says Global Poll, World Public Opinion.Org, Nov. 5.

Image: Mario Zucca Illustration / Flickr.