Author’s note, Dec. 22, 2010: Video and Powerpoints of Hansen, McKibben, the Congressmembers, the carbon-pricing “debate” and other sessions are now available at this page of the Pricing Carbon conference Web site.

Forgive us if this post is a bit breathless. We’re still reeling from the energy we experienced at the Pricing Carbon conference this past weekend at Wesleyan University.

Over 500 people participated in the panels, workshops and strategy meetings, which began Friday evening and continued into Sunday afternoon. A majority were students, including 175 members of Students For a Just and Stable Future, a dynamic activist organization that began in Massachusetts and has spread across New England. Non-students were well represented too, with activists, policy professionals and concerned citizens from two dozen states and Canada. Opinion was unanimous — among presenters and participants alike — that the conference was a vital and worthwhile experience. And as of Sunday morning, Wesleyan’s IT staff had counted 33,000 hits to their site streaming conference video.

We’re sifting through videos, photos and notes from presentations which featured four members of Congress, renowned climate scientist James Hansen, author-advocates Bill McKibben and Peter Barnes, activists including Cecil Corbin-Mark, Tim DeChristopher and Bill Shireman, Wesleyan professors Gary Yohe and Barry Chernoff (director of Wesleyan’s new College of the Environment, the conference host and co-sponsor), and CTC’s own James Handley and Charles Komanoff.

Here’s a handful of quotes from the Congressmembers:

I’m the proud author of that bill, America’s Energy Security Trust Fund Act, and I will be proud to introduce it again in the next Congress. — Rep. John Larson (D-CT)

I’m a carbon tax person. — Rep. Jim McDermott (D-WA)

Biblical Law says, “You keep your stuff on your property.” We need to say to coal and oil, “Keep your stuff on your property.” — Rep. Bob Inglis (R-SC)

The Republicans have done us a favor — they’ve given us two years to think, two years to build a movement.” — Rep. Bob Filner (D-CA)

I didn’t need to come up here. There are no votes for me here. I came up here and you gave me faith. Now you need to be thinking about how you’re going to get meetings like this in every part of the country. — Rep. Jim McDermott (D-WA)

Veteran activist Ted Glick, policy director of the Chesapeake Climate Action Network, summed it up neatly:

There was a positive and energetic spirit throughout the conference. One reason for this was the conscious structuring of the conference to maximize opportunities for participation by all of those in attendance; e.g., by limiting the amount of time for speakers in plenaries and workshops, to allow for more time for questions and dialogue.

It was also because the co-sponsoring groups and many of the people who participated believe that the demise of the cap and trade model for comprehensive climate legislation opens up the possibility that a much better approach to pricing carbon and reducing greenhouse gas emissions can now become the preferred national approach. And it was due to the positive combination of a cross-section of older activists, scholars, political leaders and heads of organizations interacting with large numbers of students and youth seriously interested in and passionate about the climate issue.

Click here for the Wesleyan Statement of Carbon Pricing Principles. Come back to this page shortly after Thanksgiving for a sign-on page; links to conference Powerpoint presentations, photos and videos; and, for conference participants, a Google news-group to help us stay connected and strengthen the movement to price carbon emissions efficiently, equitably and transparently.

Dear Friend —

A carbon tax was always going against the grain — against the presumption that the most straightforward and effective approach to carbon emissions pricing couldn’t prevail over America’s special-interest politics and tax aversion — and against the smart money that insisted on hiding the price and buying off the opposition.

Well, the insiders’ cap-and-trade strategy has crashed and burned, but we carbon tax advocates are still standing and still facing a headwind. But we see a shift on the horizon: we’re convening a national conference next month at Wesleyan University in Connecticut designed to rally public and political support for effective and fair carbon taxing. And we’re asking you to help us make the Nov. 19-21 Pricing Carbon Conference a turning point at which a growing coalition of U.S. climate advocates unites under the banner of a revenue-neutral carbon tax.

It’s true that support for climate action is polling at near-record lows. But while part of that is due to the economy along with the highly orchestrated campaign of climate denialism, the spectacle of polluter giveaways under cap-and-trade has also convinced many that there’s no equitable way to price carbon emissions. We aim to turn that sentiment around, and show Americans that a national carbon tax with the revenues returned equally to U.S. households via “green checks” — carbon “fee-and-dividend,” as James Hansen terms it — can arrest the climate crisis while enhancing most families’ financial well-being. (Coupling those green checks with strategic “tax shifting” would be equally fair and effective.)

We’ve lined up an impressive and diverse roster of speakers for the conference, including Jim, Bill McKibben, Juliet Schor, Brent Blackwelder, Peter Barnes, Bill Shireman, two nationally known leaders from the environmental justice community, Cecil Corbin-Mark and Angela Johnson Meszaros, and members of Congress from both sides of the aisle. (A more complete list with links to speaker bios is here.)

As co-host of the conference, Wesleyan’s College of the Environment is providing additional experts including economist Gary Yohe along with world-class facilities for the conference presentations and discussion forums.

Now we need your help: to pay for speakers’ travel and lodging; for buses to bring delegates from New York, Boston and Washington; and for advertising and publicity to ensure that the halls are packed and the proceedings are communicated far and wide. We’re also eager to assist a growing number of young climate activists seeking “scholarship” assistance with travel and lodging. These are the people whom we will be counting on to take our mission forward. And they are also the people who will likely be most inspired by participating in the conference.

Your check, made out to “Wesleyan University” and mailed to The Price Carbon Campaign, P.O. Box 125, South Lee, MA 01260, will go entirely for conference organizing and will be tax-deductible. To contribute on-line, go to www.citizensclimatelobby.org.  On the right, select the lower donate button (tax-deductible donation).  Please fill out the form in its entirety.  In the second address line, enter: pricing carbon, then hit continue. (Citizens Climate Lobby is a conference sponsor.) As always, you can contribute to the Carbon Tax Center via the “Donate Now” button elsewhere on this Web site.

Every successful revolution — in policy as well as politics — has begun with a small band of people who nurtured a new idea that went against the grain. A carbon tax that transparently and unmistakably builds the costs of climate damage into the price of fossil fuels is no different. This is our moment, and the Wesleyan “Pricing Carbon” conference is our vehicle for seizing it. Please write your check today and be as generous as you can.

Best wishes … and thanks!

Charles Komanoff (director, Carbon Tax Center)

PS: Of course, we’d love to have you join us at the conference. To register, click here: www.pricingcarbon.org or click the REGISTER NOW button higher up on this page. You can also call (413) 243-5665.

Photo: Flickr / Carlos Gotay Martínez

On Monday, Dr. Laurie Geller, director of the National Academy of Sciences’ new blue-ribbon climate change report, briefed the Citizens’ Climate Lobby’s National Conference, kicking off CCL’s Washington lobby week.  Part I of NAS’s report stresses the strong evidence and broad scientific consensus that Earth’s surface is warming due to human-caused fossil fuel burning. NAS recommends further research on managing impacts on ecosystems, food production, public health and climate policy.

Part II, “Limiting the Magnitude of Future Climate Change” calls for immediate, urgent action; its top recommendation is to “Adopt an economy-wide carbon pricing system.”  It also urges additional clean energy R&D, research into how behavior and technology interact and incentives for low greenhouse gas energy technologies.  Part III, on adaptation, suggests responses to the inevitable consequences of climate change already in motion.  Recommendations include: “develop hot weather early warning systems” as Philadelphia has done, and “Alaska: Retreat from the Coast” beginning the process of relocation from areas where thawing and erosion are rendering present settlements untenable.

Lester Brown, whose book “Plan B 4.0” is an inspiring blueprint for a sustainable, low-carbon future, also addressed the CCL conference. Brown reminded listeners that the Japanese attack on Pearl Harbor sparked President Roosevelt to call on industrialists to convert automobile and steel manufacturing into wartime production, leading to victory in WWII. Brown sketched a similarly broad transformation away from fossil fuels and toward efficiency and renewables that is now urgently needed to avert climate disaster — a far more profound threat to our security than Japanese invasion was in 1942. Brown stressed that a gradually and predictably-rising carbon tax is a key policy needed to drive the energy transformation required for climate stability essential to human civilization.

Last week’s NY Times Sunday Magazine featured Nobel prize-winning economist Paul Krugman’s take on climate economics.  Krugman notes that climate modelers have gained “enormous credibility” by successfully predicting the past 20 years of global warming.  He concludes that climate trends over decades (which wash out short-term weather fluctuations), show that “the planet is indeed warming” which will lead to “massively disruptive events, like the transformation of the Southwestern United States into a permanent dust bowl over the next few decades.”

Krugman calls for the use of economic tools to curb the climate threat.  He deftly articulates how (“Pigovian”) taxes discourage pollution by placing some of the “externalized” cost of pollution back on polluters, without the inefficiency and intrusiveness of regulations.  He notes that a “cap-and-trade system produces the same incentives to reduce pollution… with the price of licenses effectively serving as a tax on pollution.”  He explains:

A pollution tax… imposes costs on the private sector while generating revenue for the government. Cap and trade with auctioning… is just like a tax.  [But current legislative proposals] involve[s] handing out licenses to existing players, so the potential revenue goes to industry instead of the government… as a way to partly compensate some of the groups whose interests would suffer if a serious climate-change policy were adopted.  This can make passing legislation more feasible.

Krugman also acknowledges Dr. Hansen’s (and our) point that cap/trade punishes individual initiative to reduce GHG emissions.  But Krugman never mentions the possibility of a carbon tax with revenue returned directly to the public, which should do even more to make passing legislation feasible and would avoid the volatility, manipulation and the need for “offsets” that effectively eviscerate the “emissions certainty” of a cap. Moreover, returning revenue to consumers rather than supporting “incumbent technologies” would encourage consumers to make the choices needed to speed our transition to a green economy.

Krugman confronts the problem of discounting the cost of future climate damage. Normal discounting (typically applied to business investments) drastically reduces the present value of future gains or losses; such discounting thus supports only small investments and low carbon taxes to avoid future climate damage. Siding with Sir Nicolas Stern, Krugman concludes that such large discounting is unfair to future generations; it effectively assumes away the potential for global catastrophe.  Thus, despite his political judgment about cap-and-trade, Krugman’s reasoning supports the view that a substantial carbon price with a serious ramp-up is needed.

The growing movement for transparent carbon pricing to combat global warming reached a major milestone this week: Progressive Democrats of America, the nationwide grassroots voice for progressive values founded in 2004, has strongly endorsed direct carbon pricing to create incentives for a transition to renewable, low-carbon energy. PDA also advocates “recycling” substantial carbon revenues to households to counteract the potentially regressive effects of carbon pricing and to build long-term public support for carbon pricing

PDA played a key role in the Democratic Party’s surge in the 2006 mid-term elections, as well as in the Democrats’ 2008 victories. Its board includes prominent members of the Progressive Caucus as well as peace, labor and civil rights advocates. PDA says that it seeks to reclaim the Democratic Party as a voice for the people by educating, organizing, and lobbying within as well as outside the Party. Its statement follows:

Global Warming Policy Statement, adopted Oct. 19, 2009. (Footnotes omitted.)

No issue is more of a threat to civilization than the accelerating menace of catastrophic climate destabilization.  To avert this disaster, we must make a collective, long-term investment in a new energy infrastructure in order to protect the welfare of future generations.

Focus group research shows that the “…public has come to view clean energy as an immediate and long lasting economic driver,…something that is vitally important to the health of our economy.”  Scientists call for urgent action: “Continued growth of greenhouse gas emissions, for just another decade, practically eliminates the possibility of near-term return of atmospheric composition beneath the tipping level for catastrophic effects.”

PDA calls on the President and Congress to lead boldly in reducing our country’s oil dependence and use of fossil fuels by investing in walkable, bikeable communities, efficient public transportation, energy conservation technologies and alternative energy development, which all create good-paying and dependable jobs.

PDA supported 2008’s “climate principles letter” circulated in the House of Representatives.  To repeat and expand upon its goals, we agree that climate/energy legislation should meet these criteria:

1. Reduce greenhouse gas emissions on a long-term trajectory that will avoid the worst effects of global warming;

2. Transition the United States to an efficient, clean energy economy by putting a price on carbon that will guide investment and personal decisions on every level and lead the world with both incentives and example;

3. Recognize and minimize any adverse economic impacts from global warming legislation and build political support for a price on carbon pollution by “recycling” carbon pricing revenues directly to households; and

4. Aid communities and ecosystems vulnerable to harm from global warming.

To help achieve these goals, PDA supports revenue-neutral direct carbon pricing over carbon trading.

Direct carbon pricing:

1. Can push America toward an efficient, clean energy economy, and reduce greenhouse gas emissions on a long-term trajectory, by providing a gradually-increasing price on carbon pollution;
2. Can minimize adverse economic impacts of legislation by “recycling” a substantial portion of carbon revenue to households through a direct “carbon dividend” or a payroll tax reduction;
3. Can provide revenue to aid communities and ecosystems vulnerable to harm from global warming;
4. Reduces the need for complex and difficult-to-verify regulations and cannot be gamed in a multi-trillion dollar unregulated secondary energy trading market;
5. Eliminates offsets, which are difficult to measure and substantiate;
6. With WTO-sanctioned border tax adjustments would create immediate incentives for international implementation, as all countries have a taxing mechanism in place but few (if any) can manage a complex carbon trading system;
7. Can be set at levels to form the basis for international cooperation and treaties to reduce greenhouse gases to levels consistent with the findings of the IPCC; and
8. Would maintain the EPA’s authority to regulate carbon emissions.

The Carbon Tax Center welcomes PDA to the movement for a clear, simple, effective and fair carbon-pricing system as a key component of climate policy.

“If we can design a policy that is transparent and easy for people to understand, puts an effective price on carbon, and reimburses average Americans for all or nearly all of their increased energy costs, we have a chance to reverse climate change in a timely manner.” So concludes political scientist Elaine Kamarck, PhD, lecturer in public policy at the Kennedy School of Government, and former head of the national performance review “reinventing government” (1993-97) in the Clinton Administration.

Kamarck’s new paper, “Addressing Climate Change: The Politics of the Policy Options,” begins by reviewing three decades of evolving public consciousness about global warming. She reminds us that cap-and-trade didn’t start as the front runner. In his 1992 book “Earth in the Balance,” Al Gore proposed a carbon tax with revenue used to reduce other taxes, an approach backed by most economists and policy analysts. But two events changed this; the apparent success of the acid rain (SO2) cap-and-trade program written into the 1990 Clean Air Act, and the political failure of Clinton’s BTU tax.

Kamarck points out the key factors behind the success of the acid rain cap-and-trade program: only a few hundred sources had to be “capped,” SO2 scrubber technology was readily available, and deregulation of rail freight prices slashed the cost of western low-sulfur coal. She notes that these factors don’t apply to carbon emissions. Curbing CO2 will require a vast array of new technologies at both the energy production and user levels, along with widespread behavioral changes. Beyond the technology differences, the number of entities regulated in a carbon control system would be many times larger than for acid rain.

Kamarck concludes that policymakers have taken the wrong lesson from the failure of the BTU tax proposal. The measure was complex, for example, taxing gasoline at a higher rate than other fossil fuels without a clear rationale. Policymakers could not answer basic questions about its effect, specifically about its cost to consumers. Kamarck says politicians incorrectly concluded they couldn’t touch tax policy; in fact, we generally accept the idea of “sin” taxes, for example on cigarettes, as both good health policy and an appropriate way to generate revenue.

Complexity, exceptions and inability to demonstrate effectiveness are very serious political disadvantages of cap-and-trade that began to surface as the Lieberman-Warner bill failed in the Senate. Kamarck observes that these drawbacks are becoming even more glaring as the Waxman-Markey bill works its way through the legislative process. Whereas politicians must be able to answer constituents’ question What will this cost me?, the complexity of cap-and-trade invites opponents to make outrageous claims about the cost that are almost impossible to persuasively refute. Moreover, in the wake of the collapse of the financial system, the public is extremely wary of trading systems that appear capable of wreaking financial havoc.

The public is also properly skeptical about a policy whose effectiveness requires the rest of the world to follow suit. Since cap-and-trade systems depend on well-developed regulatory and enforcement systems that are far beyond the capacity of many governments, the prospects for an international system based on cap-and-trade are tenuous, Kamarck concludes. In contrast, most nations have a reasonably effective tax collection system that could be used to administer a carbon tax.

Under any carbon pricing system, revenue recycling is essential, Kamarck concludes, not just for the poorest quintile as Waxman-Markey provides, but for virtually everyone, in order to put the policy on a broad political footing. She refutes cap-and-trade architect Robert Stavins’ assertion that giveaways of allowances don’t affect the integrity or effectiveness of an emissions cap. She cites the European Union’s experience where emitters overestimated past emissions to garner more free allowances which led to a very loose cap. That, in turn, brought about virtually negligible carbon prices with virtually no effect on emissions. Indeed, investment in new coal-fired power plants has increased in the EU, a sign that investors expect carbon permit prices to remain low.

Don’t assume that Waxman-Markey can be made effective, fair and transparent enough to be enacted, Kamarck warns. She suggests we start now to work out an effective system under which we can answer the question How much will it cost? with enough certainty to win enactment. Her, and our “Plan B” is, of course, a revenue-neutral carbon tax which as she points out was the original “Plan A.”

The House of Representatives is scheduled to vote later this week on the “American Clean Energy and Security Act of 2009” (H.R. 2454, “Waxman-Markey” or “ACESA”). We cannot endorse the bill. The hundreds of provisions in ACESA’s 1,000-plus pages do not add up to the steps needed to avert catastrophic climate disruption. Moreover, the bill’s emissions trading provisions create vested interests that would block future reforms.

A growing chorus of environmental and progressive voices is urging Congress to overhaul or scrap the bill. For example, the Progressive Democrats of America and Friends of the Earth are urging their supporters and members of Congress to oppose Waxman-Markey. To see their action alerts, click here and here.

There is little hope of shifting to a low-carbon economy without a clear, transparent price on carbon emissions. While ACESA’s proponents claim that its cap-and-trade provisions “put a price on carbon,” the Congressional Budget Office (CBO) estimates that CO2 allowances would rise to only $26 per ton a decade from now. That equates to a puny 26 cents a gallon of gasoline — in ten years! And ACESA neutralizes increases in the price of coal-generated electricity by giving 35% of the pollution permits to local electricity distribution companies (LDCs) with instructions to pass on that value to consumers.  If utilities pass through allowance value to customers, that will suppress the all-important price signal, and if utilities keep the free allowances they’ll reap a windfall.

The Carbon Tax Center advocates revenue recycling to protect consumers, particularly those with lower incomes, while still providing an effective price signal. In contrast, ACESA’s free allowances to LDCs would not only mute the price signal, but would enrich commercial and industrial firms that use 60% of electricity.

Effective climate legislation is urgently needed, and the upcoming Copenhagen treaty negotiations plus EPA’s process to regulate greenhouse gas emissions have created a much-needed sense of urgency in Congress. But ACESA’s complex, opaque and volatile cap-and-trade provisions are the wrong way to start an international system of carbon pricing. Trying to link cap-and-trade systems across borders would lead to instability, incentivize lax regulation and enforcement, and promote outright fraud as countries compete to become the cheapest supplier of allowances and offsets. We believe that clear U.S. commitments to specific emissions reductions and to funding for international efforts would set the stage for meaningful negotiations far more effectively than trying to build an international treaty around the convoluted structures embodied in ACESA.

As if these major flaws aren’t enough, ACESA has these as well:

1) Weak cap further weakened by offsets: ACESA’s greenhouse gas pollutant standard represents reductions of only 1-4% below 1990 levels by 2020, and 68-71% below 1990 levels by 2050. The Intergovernmental Panel on Climate Change concluded that the industrialized nations must cut far more aggressively to maintain atmospheric CO2 levels at or below 450 parts per million to avoid severe climate impacts including widespread drought, deadly storms, pervasive flooding, and sea level rise inundating entire cities and triggering massive refugee crises.

Weak greenhouse gas reduction goals in ACESA are further undermined by the two billion tons of carbon “offsets” available annually — up to two-thirds from international sources. If fully utilized, these offsets will allow U.S. emissions to keep increasing until at least 2040. Moreover, carbon offsets are difficult to monitor and enforce, raising serious doubt about their environmental value. [Ed note: As of 6/24, ACESA’s offset provisions have been further weakened by the Agriculture Committee.]

2) Weak Renewable Energy Standard: ACESA’s Renewable Energy Standard (RES) appropriately focuses on electric utilities and originally mandated that 25% of U.S. electricity come from renewable sources by 2025. That made sense, since the coal-fired electricity sector is the U.S. largest emitter of greenhouse gases. The bad news is that the mandate has now been watered down to just 15% by 2020, a level barely greater than “business-as-usual.” In addition, ACESA now defines “renewable energy” to include waste incineration and also authorizes a “Clean Energy Deployment Administration” to fund dirty energy like nuclear power and coal.

3) Handouts for the Coal and Oil Industries: Through free allowances and a hidden utility tax, the coal industry would receive approximately $150 billion over the lifetime of the bill for “deployment” of carbon capture and sequestration (CCS) technology that presently doesn’t exist and for technological and economic reasons may never materialize. Even if feasible and economical, CCS would require far more coal to be mined, transported and burned to produce the same amount of electricity. Coal mining is destroying communities throughout Appalachia and in other coal mining regions. In addition, ACESA would also give approximately $24 billion to oil refiners under the pretext that the world’s most profitable industry needs still more financial assistance.

4) ACESA over-compensates trade-exposed energy-intensive industries: ACESA allocates 15% of allowances to energy-intensive trade-exposed industries at least through 2025. While some industries merit protection from competitors in unregulated markets, a number of studies indicate that these industries can improve energy efficiency within a few years and that ACESA’s assistance is roughly double the additional cost that energy intensive firms would face.

5) Pre-emption of EPA Authority: ACESA would pre-empt EPA’s authority to regulate sources of greenhouse gas emissions under the Clean Air Act, while also overriding stronger laws at the state and regional levels. By disabling this regulatory backstop, ACESA thus ensures that its failure as climate policy will be catastrophic.

Overhaul or Scrap ACESA

The need to address climate change is urgent, but that urgency should not be used as an excuse to pass seriously flawed legislation. Congress should skip ACESA’s complexities and go back to the drawing board to develop a revenue-neutral carbon tax, managed price or cap-and-dividend approach.

Photo: James Dennett / Flickr.

(Originally posted on May 21 on Grist, under the title, Waxman-Markey: ‘80% less by 2050’ is too hard, let’s do 46%.)

I’ve read humongous books in my time, most memorably Cloudsplitter, Russell Banks’ magisterial cinderblock-sized novel of John Brown, the anti-slavery warrior whose “Bloody Kansas” campaign in the 1850s helped provoke the Civil War.

The similarly supersized Waxman-Markey bill couldn’t be more different – not just in genre, but in attitude. Where Brown gave his life to abolish slavery, the “American Clean Energy and Security Act of 2009” seems intent on postponing Americans’ day of reckoning with climate-damaging fossil fuels.

In a bid to pick up support from coal state Democrats, Waxman and Markey this week pruned their cap-and-trade “20% by 2020” greenhouse gas (GHG) reduction target to 17%. The actual reduction will almost certainly be even less, thanks to the bill’s generous “offset” provisions and the economic collapse that has pushed emissions way below levels from the 2005 base year.

Worse, if a larger share of the GHG reductions comes from “other” greenhouse gases such as methane and nitrous oxide, then reductions from fossil fuel burning will be disproportionately smaller. While that won’t necessarily hurt the climate, it will mean that many of the ancillary but vital benefits from reducing carbon emissions, such as reduced oil dependence and diminished environmental destruction from coal mining, will be watered down.

To make my points, I’m going to go quantitative and speak of emissions in “CO2 equivalent terms,” in which emissions of methane and other GHG’s are scaled up to reflect their true heat-trapping capacities. All figures are in millions of metric tons (“Tg” or trillion grams). Ready?

Total U.S. GHG emissions in 2005 were 7,130 Tg, of which 6,074 Tg was carbon dioxide. A 17% reduction (Waxman-Markey’s 2020 target) requires trimming that by 1,033 Tg to reach 5,042 Tg. But I estimate that due to contractions in driving, flying and use of electricity, CO2 emissions this year will be just 5,770 Tg, or roughly 300 Tg less than in the 2005 base year. Hence, the required reduction from 5,770 to 5,042, which is 728 Tg, is just 12.6% of current emissions. That’s one-fourth less than Waxman-Markey’s advertised 17%.

Worse, non-CO2 emissions, which accounted for 1,056 Tg in 2005, are probably fertile territory for quick and cost-effective fixes. If that component could be shrunk at twice the overall target rate, i.e., by 34%, it would contribute 359 Tg of the necessary 1,212 Tg total reduction. This would allow a mere 853 Tg of CO2 to be cut from the 2005 base year, or only 549 Tg to be cut from this year’s estimated CO2 emissions of 5,770 Tg. The latter drop, a paltry 9.5%, could be gotten with annual reductions averaging just 0.9%. And of course the use of offsets will dilute those reductions even further.

Let’s round that 0.9% annual CO2 reduction rate from 2009 to 2020, to 1%, and take it out to 2050. At that rate, in 2050 CO2 emissions would have fallen from today’s levels by only one-third. Even if non-CO2 GHG emissions were completely eliminated, total U.S. emissions of greenhouse gases in 2050 would still be down by less than half (46%) from those in the 2005 base year. There’s a world of difference, alas, between that and the ostensible 80% reduction.

I ran a few of these numbers past a journalist I know who follows climate policy. He replied that “The political deal was to eviscerate short-term drivers [reductions and price rises] in order to get a long-term framework in place.” Maybe so, but what’s troubling is that the first GHG reductions are supposed to be easier to get than the last. Not to mention that U.S. environmentalists once had pretensions of making our country a model for the world, and weren’t going to settle for anything less than science-driven reductions.

I know, I know, investments take time to bear fruit, and the bulk of the reductions to mid-century will come via economies of scale and tech breakthroughs and societal tipping points. But at this stage that’s a matter of faith as much as of empirical evidence (as well as a subject for a separate post). And, last time I checked, Congress had not abolished the Law of Diminishing Returns and its corollary about low-hanging fruit.

Some say that Waxman-Markey, while imperfect, is at least a step on the road toward ridding society of fossil fuels. With the anemic numbers shown here, it smacks more of accommodation than abolition. Our atmosphere still awaits its John Brown.

Addendum

On the same day this was posted to Grist, the Economist ran an editorial, Compromise has enfeebled America’s cap-and-trade bill. A carbon tax would be better, roundly criticizing the Waxman-Markey bill. While the entire editorial is worth reading, the conclusion is particularly trenchant:

The weakening of this bill illustrates one of the central problems with cap-and-trade systems. They are complex, obscure and therefore susceptible to horse-trading. A chunk of allowances can be handed out to one lobby, a sliver to another, and soon the system’s effectiveness has been sliced away. The corresponding attraction of a carbon tax, which this newspaper has always supported, is its simplicity. The government sets the rate. Everybody can see what it is. Voters get transparency. Businesses get certainty. And the government gets a large chunk of revenue—not to be sniffed at in these difficult times.

This is an important moment. Thanks to much effort on the part of many well-intentioned people, America is prepared to legislate to control carbon. The country needs to seize this opportunity and introduce a simple carbon tax. Sceptics will howl about the initial cost, but it will be transparent and far, far cheaper than the impact of serious climate change.

Photo: Flickr / fpsurgeons photostream

“For more than 20 years, I have supported a CO2 tax, offset by an equal reduction in taxes elsewhere. However, a cap-and-trade system is also essential and actually offers a better prospect for a global agreement, in part because it is difficult to imagine a harmonized global CO2 tax. Moreover, I have long recognized that our political system has special difficulty in considering a CO2 tax even if it is revenue neutral.” — Al Gore, quoted in New York Times, House Bill for a Carbon Tax to Cut Emissions Faces a Steep Climb, March 7.

Let’s examine Mr. Gore’s points:

Harmonization:  Mr. Gore has raised a crucial concern: Any carbon-reduction policies the U.S. enacts must quickly go global. Acting alone or counter to other nations’ efforts will not suffice.

In their seminal report last February, “Policy Options for Reduction of CO2 Emissions,” Peter Orszag (now Budget Director) and Terry Dinan of the Congressional Budget Office meticulously compared cap-and-trade with carbon tax options. They concluded that a carbon tax would reduce emissions five times more efficiently, primarily because of price volatility under a fixed cap.

CBO had no difficulty “imagining a harmonized global carbon tax.” Chapter 3 of the Orszag-Dinan report, “International Consistency Considerations,” describes straightforward ways to harmonize carbon taxes. If nations choose different carbon tax rates, border tax adjustments permitted under World Trade Organization rules authorize higher-taxing nations to enact tariffs to equalize tax rates on imported products to the same levels applied to similar domestically-produced products.

Indeed, Rep. John Larson’s new carbon tax bill employs precisely this strategy. In effect, the U.S. would collect and retain the revenue generated by equalizing carbon taxes on products imported from countries that haven’t enacted their own or whose carbon tax rate is lower than ours. That will provide a powerful incentive for our trading partners to follow our lead.

In contrast, under cap-and-trade, harmonization would require determining the implicit carbon price in a system where carbon prices are hidden and fluctuating. The CBO report observed, “Linking cap-and-trade programs would… entail additional challenges beyond those associated with harmonizing a tax on CO2.” The report noted, for example, that linked cap-and-trade programs could create perverse incentives for countries to choose less stringent caps so they could become net suppliers of low-cost allowances.

Or, the report continued, if a country that did not allow borrowing future allowances linked with a country that did, firms in both countries would have access to borrowed allowances. CBO concluded that “[O]ther flexible design features — such as banking, offsets, and a safety valve — would be available to all firms in a linked system should any one country allow its firms to comply in those ways.”

In short, national cap-and-trade systems would be nearly impossible to harmonize globally because different countries are likely to enact cap-and-trade systems with differing features that when linked would tend to defeat or de-stabilize each other. On the other hand, harmonization of domestic carbon taxes using border adjustments is a familiar and straightforward process for international trade and tax law experts under WTO.

Political Feasiblity: Gore also lamented that “our political system has special difficulty considering a carbon tax even if it is revenue neutral.” He has a point. After decades of anti-tax propaganda from the likes of Grover Norquist, Congress is understandably inclined to hide carbon pricing under a name like “cap-and-trade.” But when that first cap-and-trade price spike hits a public that was sold cap-and-trade as the un-tax, won’t its superficial naming advantage evaporate like morning dew? Will “cap-and-trade” still sound better than “revenue-neutral carbon tax” when we’re stuck with a slow, complex, costly and ineffective system?

Moreover, unlike cap-and-trade, a national carbon tax is showing signs of bipartisan support. One reason is that a carbon tax dispenses with the protracted drafting and wrangling inherent in cap-and-trade. British Columbia implemented its carbon tax in five months.

Cap-and-trade is “also essential”: Perhaps to newly-unemployed derivatives traders. But not for the rest of us. The Larson bill assures specific emissions reductions (as surely as with any other system) without the inherent problems of trading carbon derivatives. The bill automatically bumps up the carbon tax rate if emissions stray from an EPA-certified path to cut emissions by 80% from 2005 levels in 2050.

Yes, we can imagine, and yes, we must enact, a harmonized global carbon tax system. Al Gore and Jim Hansen persistently warn us: curbing the menace of uncontrolled climate change requires aggressive world-wide incentives to usher in efficiency and renewables. Price transparency and incentives for other nations to enact carbon taxes are crucial.

Rep. Larson has defied the naysayers; he has put the “t” word back on the table. Not a moment too soon.

Photo: Flickr / pbo31

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.