Market-Based Energy Policy Would Aid U.S. – Exxon CEO (Reuters)

Honest Carbon Tax Is Simplest and Best Green Plan (WSJ letters)

Money and Lobbyists Hurt European Efforts to Curb Gases (NY Times)

UN Suspends Leading Carbon-Offset Firm (Nature News)

EU Carbon Trading System Brings Windfalls for Some, with Little Benefit to Climate (International Herald Tribune)

Taxing Cow Gas (The American Prospect)

The Taxmen Cometh (Gristmill)

News Release / For immediate release
Contacts:  Stephen Kent, skent@kentcom.com, 914-589-5988 / Nick Berning, NBerning@foe.org, 703-587-4454

[Washington DC – December 9, 2008] At a Capitol Hill briefing today, NASA’s lead climate scientist, senior economists and environmental leaders urged Congress to move swiftly to enact a national carbon tax to reduce carbon emissions before they push Earth’s climate system past its “tipping point” into accelerating ecological and social collapse.

After the resounding defeat of the Boxer-Lieberman-Warner cap-and-trade bill last spring, the carbon tax has emerged as a viable competitor to a cap-and-trade system. As Congress begins to ponder climate legislation widely expected in 2009, advocates at today’s briefing made the case for taxing carbon as a more effective and economically viable way to curb emissions while stimulating the economy. They argued the considerable revenues carbon taxes would raise should be revenue-neutral, and be returned to taxpayers either through direct distribution or cutting taxes such as payroll taxes.

The public briefing for members of Congress and their staffs was sponsored by the Environmental and Energy Study Institute (EESI), the Carbon Tax Center, the Climate Crisis Coalition, Friends Committee on National Legislation and Friends of the Earth.

“A price on emissions that cause harm is essential,” said Dr. James Hansen, Director, Goddard Institute of Space Studies, National Aeronautics and Space Administration and a leading voice on understanding and redressing climate change. He urged “a carbon tax on coal, oil and gas… applied at the first point of sale or port of entry” to encourage fuel conservation and switching to low-carbon alternatives.

“A Carbon tax with 100 percent dividend [direct revenue distribution to individuals] is needed to wean us off fossil fuel addiction,” Hansen argued.

“Tax and dividend allows the marketplace, not politicians, to make investment decisions. It is also non-regressive. Low- and middle-income people will find ways to limit their carbon tax and come out ahead. 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.”

Rep. John Larson (D-CT), recently elected as chair of the House Democratic Caucus and the sponsor of a carbon tax bill introduced into the House last year, hosted the briefing. He said, “Climate change is the great challenge of our time. As we in Congress tackle this challenge it is important that we not just pass legislation, but pass the right legislation. What I have proposed is legislation that would tax bad behavior like polluting and return that money to average Americans through a payroll tax reduction. Any legislation will create winners and losers. In this case, the winners should be the American people.”

Economist Gilbert Metcalf of Tufts University, author of A Green Employment Tax Swap: Using A Carbon Tax to Finance Payroll Tax Relief, recommended a carbon tax just under $17/ton of CO2. This would nearly double the average price of coal, the most carbon-intensive fossil fuel, leading to fuel substitution and process improvements that would reduce coal burning by 32%. Petroleum products would increase in price by nearly 13% and natural gas by just under 7%, he estimates. Metcalf advocates dedicating carbon tax revenues to eliminate the payroll tax on the first $3,660 earned by each worker. He calculates that this would equate to an average 11% reduction in payroll taxes, with greater percentage reductions for lower-paid workers. Payroll tax reduction would stimulate job growth, something the economy now urgently needs.

“In general, taxes on labor supply discourage labor and create economic losses to workers over and above any taxes collected,” Metcalf explaned. “Tax reductions can encourage additional labor supply either on the intensive margin (hours worked) or the extensive margin (the decision to enter the labor force). The Green Employment Tax Swap encourages additional labor supply.”

Robert Shapiro, former Undersecretary of Commerce, now head of SonEcon, a Washington, DC consulting firm, and co-chair of the U.S. Climate Task Force, criticized cap-and-trade proposals as clumsy, complex, volatile and ineffectual ways to tax carbon emissions: “The only reason anyone is talking about cap-and-trade now is because the U.S. (at Al Gore’s urging) insisted on cap-and-trade in Kyoto [in 1997]. Mr. Gore has since abandoned cap-and-trade and is now calling for a carbon tax to replace other taxes. Caps just aren’t working.”

Under the European Union’s carbon cap, CO2 reductions have been “negligible and very costly,” Dr. Shapiro said. Exemptions (e.g., for coal-fired power plants in Germany) “overwhelm the cap.” China and India have strongly rejected cap-and-trade. In contrast, he argued, a U.S. carbon tax would encourage our trading partners to tax carbon themselves to avoid forfeiting revenues on their exports to us (WTO rules would otherwise permit the US to tax imports for carbon).

Like most economists, Shapiro said he strongly prefers price-based policies such as carbon taxes, to quantity-based carbon caps, because the taxes are simple and predictable as well as difficult to evade. A cap on quantity necessarily makes energy prices more volatile, and the resulting price spikes are economically disruptive, harming productivity and undermining support for the system. For example, Shapiro noted that Southern California’s “RECLAIM” cap-and-trade system for smog emissions crashed due to price spikes during the state’s electricity crisis.

James Hoggan, a public policy specialist from British Columbia who chairs Canada’s Suzuki Foundation, outlined the steps leading to British Columbia’s successful implementation of its carbon tax in July, and explained the national dimensions of the carbon tax in Canada. “The Canadian experience with carbon taxes is politically daunting: a federal party that proposed such a tax just lost a fall election, and a provincial party that introduced a carbon levy last summer faces potential defeat next May. But close analysis shows these politicians got in trouble not for what they did, but for how they did it.”

From Canada’s experience, Hoggan drew the lesson that emphasizing “revenue recycling” or the revenue-neutral configuration of the carbon tax helps distinguish it from conventional taxes and garners more public support. He cited polling data suggesting that a majority of Canadians support a transparent revenue-neutral carbon tax as evidence that carbon taxation could be popular with voters.

The Carbon Tax Center was launched in January 2007 to give voice to Americans who believe that taxing emissions of carbon dioxide — the primary greenhouse gas — is imperative to reduce global warming.

The Environmental and Energy Study Institute is a non-profit organization established in 1984 by a bipartisan, bicameral group of members of Congress to provide timely information and develop innovative policy solutions that set us on a cleaner, more secure and sustainable energy path.

The Climate Crisis Coalition was founded in 2004 to create awareness and convey a sense of urgency about the climate crisis and broaden the constituency of the climate action movement. Its approach to climate change links issues of environmental, social and economic equity.

The Friends Committee on National Legislation is the largest peace lobby in Washington, DC. Founded in 1943 by members of the Religious Society of Friends (Quakers), FCNL staff and volunteers work with a nationwide network of tens of thousands of people from many different races, religions, and cultures to advocate social and economic justice, peace, and good government. FCNL is nonpartisan.

Friends of the Earth is the U.S. voice of the world’s largest grassroots environmental network, with member groups in 77 countries. Since 1969, Friends of the Earth has fought to create a more healthy, just world.

NOTE TO EDITORS AND PRODUCERS: Experts quoted in this press release are also available for phone or in-person interviews. Interviews may be requested by contacting Stephen Kent, skent@kentcom.com (914) 589-5988.

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Yes, You Change the Climate, Mr. Obama (New Scientist)

The Carbon Tax Center’s Capitol Hill briefing is just two days away (Dec. 9), and we couldn’t have choreographed a more turbocharged buildup than the one provided over the past few days by The New York Times and The Wall Street Journal.

Thomas Friedman’s column in today’s Times, The Real Generation X, is his most full-throated call ever
for a carbon tax. It’s a welcome return to his  earlier editorializing in favor of carbon taxing from his recent slight tilt toward cap-and-trade (emphases added):

It makes no sense to spend money on green infrastructure — or a bailout of Detroit aimed at stimulating production of more fuel-efficient cars — if it is not combined with a tax on carbon that would actually change consumer buying behavior.

Many people will tell Mr. Obama that taxing carbon or gasoline now is a
“nonstarter.” Wrong. It is the only starter. It is the game-changer. If you want to know where postponing it has gotten us, visit Detroit. No carbon tax or increased gasoline tax meant that every time the price of gasoline went down to $1 or $2 a gallon, consumers went back to buying gas guzzlers. And Detroit just fed their addictions — so it never committed to a real energy-efficiency retooling of its fleet. R.I.P.

If Mr. Obama is going to oversee a successful infrastructure stimulus, then it has to include not only a tax on carbon — make it revenue-neutral and rebate it all by reducing payroll taxes — but also new standards that gradually require utilities and home builders in states that receive money to build dramatically more energy-efficient power plants, commercial buildings and homes. This, too, would create whole new industries.

Demonstrating the bipartisan support for carbon taxes from across the political spectrum, the Friedman op-ed followed two powerful Wall Street Journal columns this week.  A Dec. 3 op-ed by Ralph Nader and Toby Heaps, We Need a Global Carbon Tax, subtitled, "The cap-and-trade approach won’t stop global warming." makes a compelling case for pricing carbon emissions via a tax rather than a trading scheme:

A global carbon tax levied on a relatively small number of large sources can be monitored by satellite and checked against the annual surveillance of fiscal and economic polices already carried out by IMF staff. Thus, the accounting involved is much more precise and much less subject to the vagaries of corruption and conflict over which industries and companies get their free handouts of carbon credits — carbon pork — than in a cap-and-trade system.

Nader and Heaps go on to provide "three reasons why countries, such as China and India, that have traditionally resisted any notion of a common responsibility to make current polluters pay would do well to enlist in this effort (emphases added)."

First, while there is
no limit on the downside for missing a hard cap, with a carbon tax you
just pay as you go. If a fast-growing
country like China accepted an emissions cap and then overshot it, they
would have to purchase carbon credits on the international market. If
they missed their target by a lot, carbon credits would be scarce, and
purchasing them would suck dry their foreign exchange reserves in one
slurp. That’s why a carbon tax is much easier to swallow and, anyway,
through the power of the price signal, it would produce the same
desired result as a hard cap.

Second,
administering billions of dollars of carbon credits in a cap-and-trade
system in an already chaotic regulatory environment would invite a civil war between interest groups seeking billions in carbon credit handouts and the regulator holding the kitty.
By contrast, a uniform tax on CO2 emissions levied at a small number of
large sites would be relatively clear-cut. During the Montreal Protocol
talks in the 1980s, India smartly balked at a suggestion to phase out
CFCs in certain products and not in others because of the chaos that
would result from the ambiguity.

Third, key people in China read
our newspapers. They see the ominous clouds of protectionism under the
guise of environmentalism in bills like Lieberman-Warner and they don’t
want to be harmed; neither should we, given the trillions of dollars of
Treasury bills they hold. Showing compliance with a harmonized
carbon tax at a small number of large bottleneck points would be
child’s play compared to the chaos of cap-and-trade.

That was Wednesday. On Friday, the Journal raised its own profile with an editorial, Some Carbon Candor: A climate guru rebukes his mates on cap and trade.

The "climate guru," of course, is Dr. James Hansen, director of NASA’s Goddard Institute of Space Studies, and headliner of our Hill briefing this Tuesday.
The Journal noted that "Mr. Hansen endorses a straight carbon tax as
the only ‘honest, clear
and effective’ way to reduce emissions, with the revenues rebated in
their entirety to consumers on a per-capita basis. ‘Not one dime should
go to Washington for politicians to pick winners,’ he writes."

The Journal editorial continues with a clear statement of its preference for a carbon tax over cap-and-trade (emphases added):

The
risks of fossil fuels remain speculative, but if they really are the
apocalypse of Mr. Hansen’s prophecies, then the cleanest remedy is a
tax. That would raise energy and all other prices as the incentive for
new technologies and investments. But a tax would be neutral,
eliminating the market distortions caused by subsidies and regulation,
and the proceeds could be used to offset other taxes. The
transition to a world in which growth is not tied to carbon would still
be long and extremely expensive, but a tax would be the least painful
way to get there.

"A tax should be called a tax," Mr. Hansen writes. "The public can understand this and will accept a tax if it is clearly explained and if 100 percent of the money is returned." Clearly the man is not standing for elective office.
Beltway
sachems prefer posturing that disguises the cost of rising energy
prices, such as cap and trade. This "subterfuge," as Mr. Hansen terms
it, shifts the direct burden onto businesses, which then pass it along
to consumers. Congress may flatter itself that it is saving mankind,
but what the Members really want is a cap-and-trade windfall that they
can redistribute in the green pork of Mr. Obama’s "new energy
economy," whatever that means.

To be fair, carbon tax revenues could also end up as green pork. But
the transparency of a carbon tax — from the candor in its name to its frank acknowledgment of its impact on energy prices — militates in
favor of a revenue-neutral outcome in which the revenues are
distributed or tax-shifted to American families rather than skimmed off
by political and corporate rentiers.

Why the carbon tax trifecta this week? While
we can’t know precisely what led Mr. Friedman to go all out today for a carbon tax (rather than cap-and-trade), perhaps the financial meltdown has played a big
part  by opening up political space for bold action and discrediting the notion of creating another trillion-dollar market in
arcane securities. As for The Journal, while it might prefer to to
stifle any move toward carbon emission pricing, its
straightforward arguments for the relative efficacy of carbon taxing
over a cap-and-trade scheme are welcome.

In any event, the setting couldn’t
be more propitious for our carbon tax briefing this Tuesday, which the
Carbon Tax Center has organized along with the Climate Crisis
Coalition, the Environmental and Energy Study Institute, Friends of the
Earth, and the Friends Committee on National Legislation. As a side-benefit, the media buzz might help convince C-Span to provide live
video. The briefing,
featuring not only Dr. Hansen but other climate-policy experts Gilbert
Metcalf, Robert Shapiro and James Hoggan, hosted by Rep. John Larson
(D-Conn.), who was just elected chair of the House Democratic Caucus,
and moderated by FoE president Brent Blackwelder, is in Rayburn House
Office Building B318 and runs from 9:00 a.m. to 11:30 a.m. Tuesday. We
hope to see you.

Photo: Flickr / kakariki.