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Carbon Tax Offers Super Powers to Super-Committee

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With a $1.5 trillion budget “canyon” to leap across, the new “super-committee” would be wise to summon the special elastic power of a gradually-rising carbon tax.

After prolonged high-wire suspense and partisan brinksmanship, President Obama and Congress agreed in early August to establish the twelve-member “Joint Select Committee on Deficit Reduction” to tackle the budget deficit and the national debt. The “super-committee,” as the JSC was instantly dubbed, comprises six Representatives and six Senators, three chosen by the leadership of each party in each chamber.

The JSC’s mission is to agree on $1.5 trillion in deficit reduction steps to be undertaken over the next decade. These spending cuts or revenue enhancements are to constitute a second installment beyond the $917 billion in cuts agreed to in the bargain to raise the debt ceiling. The JSC is to deliver its recommendations to Congress on Nov. 23, with the House and Senate required to vote the entire package “up or down” a month later. If the JSC cannot agree on deficit reduction steps of the required magnitude, or if Congress fails to adopt them, that will trigger $1.2 trillion of automatic cuts divided equally between domestic and military spending.

To be sure, Washington’s obsession with putting our faltering economy on an austerity diet is deeply troubling to Keynesians, including the Carbon Tax Center. Nevertheless, the fix is in, so let’s examine how a carbon tax could be made part of the debt and deficit solution.

The JSC’s options fall into three categories:

1) More budget cuts, which would contract the economy, compounding unemployment and speeding our descent into another recession,

2) Raising revenue by reforming the tax code, for instance by closing loopholes or reducing tax “expenditures” (i.e., tax exemptions that function as government grants), or

3) Finding new sources of tax revenue.

Given the Herculean dimensions of the super-committee’s task, the JSC may find itself pressing all three buttons. In the revenue category, there’s been some discussion of a “value added tax,” but less about a carbon tax or a Tobin (financial transactions) tax both of which have strong policy advantages.

Last year, William Galston of Brookings and Maya MacGuineas of the Committee for a Responsible Federal Budget included a carbon tax in their report, A Balanced Plan to Stabilize Public Debt and Promote Economic Growth. Also in 2010, Congressional Budget Office founder Alice Rivlin reportedly suggested a carbon tax to both the Simpson-Bowles commission, and the Rivlin-Domenici commission. Unfortunately, her recommendation didn’t make it into either final report, even though well-known economists Gilbert Metcalf and William Nordhaus conveyed the same recommendation to the Simpson-Bowles commission. Now the advent of the JSC with its $1.5 trillion mandate and short deadline has dialed up the pressure to look for revenue sources.

How much would a carbon tax reduce deficits? In May, the deficit-hawkish Peterson Institute hosted a fiscal summit in Washington, at which four out of six leading think tanks, including the conservative American Enterprise Institute, suggested pricing carbon as a way to raise government revenue. AEI recommended a carbon tax starting at $26 per ton and growing by 5.6 % per year after that. According Peterson, the proposal would raise $161 billion per year by 2020, enough to reduce the federal budget deficit by 22% that year. They point out that this is greater than the savings from raising the national retirement age to 70 and would reduce the deficit the same amount as eliminating all foreign aid and federal funding for education.

The Carbon Tax Center’s model shows that a more aggressive carbon tax proposed by Rep. John Larson, rising each year by an average of $12.50 per ton of CO2, would generate about $475 billion of new revenue by the tenth year. This would eliminate around 80% of that year’s CBO-projected deficit while reducing U.S. carbon emissions by 30%. Moreover, the mere expectation of a gradually-rising carbon price will reduce the risks and increase the returns to investors in low- and zero-carbon energy and energy efficiency, as former Federal Reserve economist Alan Blinder pointed out last winter in the Wall Street Journal. In other words, simply enacting a carbon tax – even one with a “grace period” prior to startup – would provide a stimulus to a key technology sector (not to mention one in which the U.S. is falling behind China and Germany).

Aside from the carbon tax rate, what other design criteria need to be weighed for a carbon tax to reduce both deficits and CO2 emissions? Economist Gilbert Metcalf recommends a tax covering not just CO2 but other greenhouse gases: methane, nitrous oxide, fluorinated gases and sulfur hexafluoride. Metcalf, a Tufts University economist now serving the Treasury Department, argues that this more broadly-based tax would achieve much greater emissions reduction, particularly in the early years, by inducing replacement of climate-damaging refrigerants and solvents with more benign substitutes – an easier task than rapidly phasing out fossil fuels.

What about the potentially regressive effects of carbon or GHG taxes on modest-income households? When Chad Stone, chief economist at the Center on Budget and Policy Priorities, analyzed the Waxman-Markey cap-and-trade bill in 2009, he concluded that only 15% of the permit revenues would be needed to compensate households in the bottom 20% of the income range for the price increases induced by carbon pricing. Presumably, this finding holds for a simple carbon tax as well. (The revenue could be distributed in a monthly or even weekly “lump sum” by electronic funds transfer). To build in this protection for the most vulnerable, we should reduce estimates of revenue available for deficit reduction by about 15% to provide funding for low income assistance.

If legislators choose to compensate a larger income range from the effects of a carbon tax, then of course, a greater share of revenue will be needed. But because of the strong upward skew in carbon use over the income range, the revenue needed to compensate lower and even modest income levels is substantially less than their proportion of the population, leaving a large portion available for deficit reduction.

Both the Domenici-Rivlin and the Simpson-Bowles deficit commissions considered a so-called “Value Added Tax.” A VAT is a sales tax applied at every level, which would particularly burden retailers and is likely to be even more regressive than a carbon tax. Europeans routinely refer to the EU’s VAT as a nuisance to business – it must be factored into virtually every business transaction – and punishment of the poor. Moreover, VAT’s have no climate or other social benefits, aside from being a source of revenue. When the energy and climate benefits of a carbon tax are compared to gumming up our economy with a VAT that “sticks” to everything, a carbon tax looks sleek, maybe even sexy.

A carbon tax should also be structured to protect energy-intensive industries in relation to overseas competitors. In their 2009 paper, “Design of a Carbon Tax,” Gilbert Metcalf and David Weisbach articulated a simple structure for harmonizing border tax adjustments that, consistent with the WTO’s prohibition on discriminatory taxes, would apply a carbon-equivalent import duty to energy-intensive commodities such as steel, aluminum, paper, chemicals and cement, along with finished products containing them. If a foreign manufacturer could show that its process is less carbon-intensive than production in the U.S., then its harmonizing carbon tax would be reduced.

Harmonizing taxes would incentivize our trading partners to enact their own carbon taxes – in effect, we would be taxing their carbon-intensive exports for them until they enacted their own carbon taxes. With a rising U.S. carbon price, the incentive for our trading partners to enact carbon taxes would rise as well.

In summary, a rising carbon tax offers the JSC an attractive revenue stream for deficit reduction, obviating the need for more onerous and regressive levies such as Value Added Taxes. Low income households could be protected from disproportionate regressive effects by setting aside 15% of carbon tax revenues. And with WTO-sanctioned border tax adjustments, a carbon tax will not disadvantage U.S. industry and will spur much-needed innovation, investment and job growth in low-carbon energy and efficiency in the U.S. It will also encourage establishment of a global carbon price with commensurate global emissions reductions.

The super-committee will need nothing short of super powers to leap across a $1.5 trillion chasm. A carbon tax can provide the extra “bounce” of a substantial and growing revenue stream along with the clear, predictable price incentives needed for sound climate policy and a healthy and growing clean energy sector.

Photo: Flickr — Chanchanchepon

Obama’s Clean Electricity Standard: “A Menu Without Prices”

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Neither “climate” nor “global warming” made it into President Obama’s State of the Union address, but energy policy was front and center. Obama called for a “Clean Electricity Standard” for utilities. So, what’s a CES, and what would it mean for climate?

The CES concept derives from state “Renewable Energy Standards” that require electric utilities to commit to supply a specified fraction of their power from a menu of renewable sources, including wind, solar, geothermal and hydro, along with “nega-watts” gained by retrofitting homes and businesses. Most RES’s also include less “pure green” elements like biofuels, however.

State RES programs appear to have helped renewables gain a foothold on some U.S. grids, though the levels are nowhere near the 19% combined share that wind and solar generation attained in Spain last year. In June 2009, the Senate Energy and Natural Resources Committee approved a bipartisan bill that would have set a national renewable standard rising to 15% by 2021. Environmental groups criticized its weak standard and its provision to increase drilling off the Florida coast. Despite pleas by committee chairman Jeff Bingaman (D-NM), the RES bill never reached the Senate floor.

A White House “fact sheet” released just after Tuesday’s address sketches Obama’s CES. It’s effectively an RES with a watered-down menu that adds nuclear, “clean coal” and natural gas to the options for utilities. The fact sheet doesn’t provide details, but CES isn’t a new concept. Sen. Lindsey Graham circulated a draft CES bill last January that reads like a tamer version of cap-and-trade for the utility sector. Instead of cap-and-trade’s pollution “allowances,” CES’s currency is clean electricity credits. Instead of providing a foothold for renewables as an RES would do, the CES framework would put renewables into competition with (already subsidized) nuclear, (thermodynamically-challenged) “clean coal” (a.k.a. carbon capture and sequestration) and natural gas. It effect, it’s a menu without prices.

Let’s look at the new fuels and technologies that Obama’s CES would add to the RES menu:

Nuclear: Aside from well-documented impacts from uranium mining, reactor accidents, weapons proliferation and radioactive waste, nukes have been handed vast subsidies and allowed to operate by special rules for a half a century. Why should fledgling (and genuinely clean) renewables be made to compete against a favored technology that has never been taken off federal life support?

Clean Coal: It’s a fairy tale. And not just because most coal can’t be mined without leaving a toxic mess or because of the conventional pollutants released by burning coal. “Capturing” CO2, if it can even be done, will require vast amounts of energy, which means mining and burning even more coal for the same desired net output. The thermodynamic minimum to capture CO2 from a coal-fired power plant appears to be a quarter to a third of the energy output. Not surprisingly, carbon capture and sequestration on a commercial scale doesn’t exist anywhere, and its development in the U.S. is overwhelmingly funded by tax dollars — which should tell us something about its viability. While Obama hasn’t spelled out what would qualifiy as “clean” coal, Sen. Graham’s CES proposal set a low standard: coal-fired power plants capturing just 65% of CO2 qualify.

Gas Rig in Pennsylvania Marcellus Shale Region

Natural Gas: For decades, this fuel has been looked to as a “transition fuel” from dirtier coal and petroleum — a view that continues today, but which overlooks a few inconvenient truths. Natural gas is methane (CH4), each molecule of which in the atmosphere traps Earth’s heat 72 times as effectively as a molecule of carbon dioxide. Even adjusting for methane’s shorter residence time in the atmosphere, both the IPCC and the U.S. government put the relative 100-year GHG impact of a molecule of methane released to the atmosphere at 25 times that of CO2. While the point is to burn gas as fuel, not release it, gas distribution systems are vast and they leak, with the average U.S. leak rate estimated to be 1.4% or more, a rate that cancels out much of natural gas’s apparent climate advantage over coal. And as many residents of Pennsylvania and New York are learning, the process of extracting gas (“hydrofracking”) from the Marcellus Shale formation underneath their homes and communities can irreparably contaminate ground and surface water.

There’s a larger point to be made here as well. Utility investment in nukes, gas-fired power plants or CCS for coal expands the array of sunk costs that tilts the market toward incumbent fuels and technologies and away from true zero-carbon sources like wind and solar. And of course, the supply of gas isn’t exactly unlimited, even with hydrofracking and Alaska gas pipelines. There are other claims on natural gas as well, such as replacing imported (and higher carbon) oil for fuel in vehicles, as T. Boone Pickens has suggested.

In contrast, a carbon tax, as proposed by Rep. John Larson (D-CT) and former Rep. Bob Inglis (R-SC), would put climate costs on utilities’ energy menu and ensure that their choices reflect those costs. In proportion to their carbon content per unit of energy, coal would be taxed more heavily than oil which would be taxed more than gas, while true renewables like wind and solar would pay no carbon tax and nuclear taxed only indirectly, and modestly, through its fuel cycle. A carbon tax would provide truth in pricing to biofuels, too; the price of ethanol, for example, would reflect its fossil fuel inputs — gas for fertilizer and distillation. A steadily-rising carbon tax would allow utilities to predict an expected rate of return for renewable generation facilities, thus reducing the risk of those investments. While it’s true that a CES would take away some of dirty coal’s price advantage, it wouldn’t spur a steady stream of investment in renewables since they would have to compete against nukes, gas and so-called “clean coal.”

Does Obama’s CES have political legs? Senator Lisa Murkowski, ranking Republican on the Senate Energy and Natural Resources Committee quipped after the State of the Union that “the devil is in the details.” She’s likely to scrutinize how much CES might boost the market for Alaskan gas that would be delivered to the Lower 48 by the Denali and Trans-Canada pipelines. And Sen. Graham surely wants a big slice for nukes. And corn belt Senators will want to further subsidize distilling corn (grown with fertilizer made from natural gas) into ethanol… Whether renewables can eke out anything in that crowd will depend very much on details such as how the “clean energy credits” are allocated. But it’s guaranteed to be far less than the boost to renewables from a straight carbon tax.

Photos: Google Images

Should Carbon Pricing Advocates Support the Cap-and-Dividend Bill?

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Last month’s Pricing Carbon Conference at Wesleyan U. featured a debate over three competing approaches for pricing carbon emissions, each of which is embodied in bills introduced in the 111th Congress:

The Conference also offered a workshop comparing two ways to return revenues raised by a carbon tax or by selling carbon emission permits:

  • a regular “dividend” or “green check” sent to all U.S. households; vs.
  • a series of periodic reductions in payroll taxes.

Cap-and-Dividend proponent Peter Barnes, flanked by NRDC's Dan Lashof (left) and Carbon Tax Center's Charles Komanoff (right), at the Wesleyan Pricing Carbon conference.

As hoped, the Conference has sparked a flurry of substantive and strategic discussions. For example, cap-and-dividend advocate Peter Barnes is imploring us to align the Carbon Tax Center with the CLEAR cap-and-dividend bill introduced in December 2009 by Senators Cantwell (D-WA) and Collins (R-ME).

The CLEAR bill is backed by a coalition of largely grassroots organizations, who view it as a way to achieve a guaranteed reduction in emissions without the political compromises and anti-consumer aspect of cap-and-trade with offsets. We hold Peter and his coalition partners in high regard. Their cap-and-dividend concept is certainly a quantum improvement over the cap/trade/offset model that some of the mainstream environmental groups rode to defeat (again) in 2009-2010. Yet both the concept and the particulars of the CLEAR bill fall far short of what we at CTC believe is required in carbon-pricing legislation.

In this post, we contrast the CLEAR bill with the approach taken by Rep. Larson (D-CT) and 12 co-sponsors in their carbon tax bill, America’s Energy Security Trust Fund Act, which Mr. Larson pledged at Wesleyan to re-introduce in the new Congress that convenes in January.

The CLEAR Bill at a Glance

Like all cap-based bills, the CLEAR bill relies on a declining “cap” in the number of carbon emission permits to be auctioned to emitters. In CLEAR’s case, the promised decline (relative to 2005 emissions) would be 20% in 2020, 30% in 2025, and so forth, finally reaching an 83% drop by 2050. CLEAR would return 75% of the revenues from the permit auctions to all U.S. residents, with each getting an identical amount. The remaining 25% of revenue would be placed in a “Clean Energy Reinvestment Trust Fund” (CERT) for appropriation by Congress, ostensibly to “green energy” investments, mitigation, adaptation and transition assistance.

As a brake on price volatility, and to provide a modicum of price predictability, CLEAR sets a floor and ceiling on the prices of the carbon emission permits: the floor is set at $7 per ton of CO2 rising at 6.5% annually plus the rate of general inflation, with the ceiling at $21/ton, rising at 5.5% plus inflation. The floor is intended to protect investments in low-carbon measures by ensuring that fossil fuel prices include at least a minimum charge for their carbon emissions, while the ceiling is intended to shield consumers from too-rapid price rises. When the ceiling is hit, a “safety valve” in the CLEAR bill triggers auctions of additional permits at the ceiling price; the revenue from these supplemental permits is added to the CERT fund.

CLEAR’s Biggest Problem: Its Cap Hides a Much-Too-Low Price

The Carbon Tax Center has modeled the price levels needed to achieve particular emissions reductions. Our conclusion, using historical energy price-elasticity data, is stark: the CLEAR bill’s emissions reductions targets cannot be achieved within the bill’s low price ceiling. When we conveyed this finding at a meeting with Sen. Cantwell’s staff in early 2010, the response was even more stark: “We don’t intend to use (CO2) prices to reduce emissions.” — a statement that appears to deny the fundamental role of prices in driving changes in behavior.

The apparent disconnect between CLEAR’s emission targets and its price ceiling means that the ceiling price would be hit frequently, perhaps even continuously. This in turn would open the safety valve and cause the auctioning of supplemental emission permits, whose revenue would fund CERT. In effect, then, as the cap tightened, CLEAR would function like a low carbon tax (with the level set at the safety valve auction price), an increasing share of whose revenues would flow to the CERT fund. The initial promise of returning 75% of revenue would recede as the cap tightened and an increasing share of revenue went to the CERT fund. In this respect, CLEAR might even come to resemble the “Breakthrough” proposal for a low carbon tax to fund RD&D, albeit with less specificity about which technologies Congress might choose to subsidize and less clarity about the expected CO2 prices.

The CERT Fund—Big Dogs Eat First, But Can They Reduce Emissions?

Needless to say, the same interests that wrote themselves free allowances under the Waxman bill would use their political muscle to divide up the CLEAR bill’s CERT fund. Thus, no one should be surprised if “clean coal,” ethanol and other “incumbent” energy interests garnered a lion’s share of the CERT fund’s supposed “clean energy investments.”

Nevertheless, CLEAR proponents appear to assume that the CERT fund would achieve near-miraculous reductions in carbon emissions. Our modeling indicates that because CLEAR’s price level is held so low, the bill would have to rely on the CERT fund to achieve more than half of its mandated 2009-2020 emissions reductions. Indeed, with its low (5.5%) annual increase rate, CLEAR’s $21 ceiling price would rise to only about $35 in a decade; that’s less than a third of the 2020 price in the Larson bill. No wonder Larson is projected to reduce emissions by 30% by harnessing the power of real price signals, whereas the CLEAR bill would have to rely on unspecified (and likely pork-laden) energy “investment” simply to achieve a reduction of 20%.

The Vast Costs of Hiding the Price

The main (political) appeal of a cap seems to be to hide the price. Yet hiding the price from investors and households guarantees that caps will be far less effective than direct pricing mechanisms at inducing investment in low-carbon energy and efficiency. The Brattle Group, a well-respected economics consultancy, studied the price volatility in the European Union’s Emissions Trading Scheme and concluded, first, that the noisy, hidden price signal there delayed investment in alternative energy by a decade; and, second, that the cap-derived CO2 price would have to rise roughly twice as high to get the same emissions reductions as an explicit tax.

Moreover, as we saw in the acrimonious and puerile debate over the Waxman bill, “hide the price” leaves everybody with an Internet link free to speculate on the cost of the legislation, with estimates ranging from astronomical (by those opposing action) to microscopic (by those claiming that “cost controls” such as offsets would avoid the need for significant CO2 prices). The result of “hide the price” in 2009-10 was a confused public and a stymied Congress. There’s no reason to expect a clearer discussion if cap systems continue to be the preferred way to price carbon emissions.

Hiding the price under a cap also complicates international harmonization. As we described in a post here in March 2009, and “Report from Copenhagen: Forget carbon targets, just set a price” an explicit carbon tax with border tax adjustments can be an effective incentive for other nations to enact their own carbon taxes to garner the tax revenue that their carbon-taxing trading partners will otherwise collect on imports at the border.

CLEAR’s Flimsy Wall Around Wall Street

The CLEAR bill seeks to avoid inducing speculative secondary markets by fiat: prohibiting entities that buy or sell emission permits from buying and selling carbon derivatives. It also would require CFTC, FERC and FTC to promulgate regulations on CO2 emissions trading. But as the Congressional Budget Office, Robert Shapiro and other economists have concluded: because of the energy industry’s need for insurance against wild price swings, the use of hedging instruments is unavoidable in the large and volatile CO2 markets that are inherent when setting a price indirectly using a cap. It appears inevitable that a secondary market would emerge overseas, if not illicitly onshore.

CLEAR’s Big Contribution: Revenue Return

The CLEAR bill did perform a great service by bringing revenue return via “dividends” into public discussion, at a time when Waxman-Markey proposed what amounted to a 40-year earmark of carbon revenues. (W-M would have allocated 85% of allowances, overwhelmingly to “incumbent” energy interests – effectively, a hidden, volatile and regressive tax.) CLEAR would at least start with 75% revenue return, although as discussed, that fraction would diminish as the cap tightened and the price ceiling was hit. Nevertheless, revenue return via a “dividend” or “green check” offers transparency and accountability that could help build political support for carbon emissions pricing.

On the other hand, returning revenue via reduced taxes on workers, as Rep. Larson proposes, would also avoid regressivity while offering the additional advantage of employment stimulus. This kind of tax-shifting seems to be a key ingredient in the continued political and economic success of the carbon tax in British Columbia and its effectiveness has been widely recognized here, too. Cutting payroll taxes has been praised by the Congressional Budget Office as one of the most cost-effective ways to reduce unemployment. The bipartisan “Hire Now” Act, co-sponsored by Senators Hatch and Schumer, effective in March 2010, eliminated the first six months of payroll taxes on employers that hire the unemployed.

While pro rata “dividends” offer appealing transparency and simplicity, the potential for a “job-creating carbon tax” to cut payroll taxes while de-carbonizing our economy seems no less attractive, particularly with officially-measured unemployment persisting above 10%. Though we conclude that CLEAR bill is too flawed to serve as effective carbon pricing legislation, it did at least jump-start the much-needed debate about revenue return. For that, Senators Cantwell and Collins and CLEAR’s supporters deserve high praise.

Photo: Wesleyan University

From Wesleyan: An Energized Call to Price Carbon

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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.

More than 500 people attended the Pricing Carbon conference.

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)

Conference-goers swarmed Rep. Inglis after his talk.

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.

A Tragic Tale of "Hide the Price"

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This week’s New Yorker (Oct 11) features an excruciatingly twisted tale. “As the World Burns, How the Senate and the White House missed their best chance to deal with climate change” reports how Senators Kerry, Graham and Lieberman took deal-cutting to new heights — or depths — to put across their carbon cap-and-trade-with-offsets bill. In pursuit of their holy grail — a cap to reduce U.S. CO2 emissions 17% by 2020 (but just 8% below last year’s level; and their cap would have relied heavily on unverifiable international and domestic offsets) — the “Three Amigos” offered deals to anyone who’d listen, including expanded offshore drilling (whose hazards inconveniently re-surfaced just weeks later in the BP disaster); more subsidies for nukes; de-regulation of toxic pollutants including heavy metals like mercury; special arrangements for the gas, coal and oil industries; and free “allowances” to help utilities buy their way out of the cap.

The fascinating and heartbreaking narrative can be read as an indictment of the Senate and the power of the fossil fuel industries. The scene of Sen. Kerry seeking a deal with natural gas baron T. Boone Pickens — who in 2004 “swiftboated” Kerry out of a possible presidential victory — is particularly pathetic. But there’s an ironic nugget missing from the story.

In February, at a meeting with Sen. Kerry, climate scientist Dr. James Hansen urged the Massachusetts Democrat to quit “hiding the CO2 price” under cap-trade-offset “gimmicks.” Instead, Hansen insisted, Kerry should propose a direct fee on CO2 pollution, assuring fairness and popular support by returning revenue via equal monthly “green checks” to every citizen. Kerry insisted, “I know what can pass the Senate.” As the New Yorker article’s title suggests, the Senator knew no such thing … and the result was tragic.

The tale of climate legislation isn’t over, though; people do learn from experience. Can we move beyond the mirages of cap-trade-offset to a transparent “carbon fee and green check” or “carbon fee with payroll tax cut”? With atmospheric CO2 at 388 ppm and rising, there’s no time to lose.

Arising from the Senate’s Ashes?

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And now, ve may begin?

Readers of a certain age, and a certain literary bent, will recognize the words of Alexander Portnoy’s psychiatrist, spoken at the close of Philip Roth’s transgressive 1969 novel, Portnoy’s Complaint.

After lo these many years, they popped into my head today as I read that Senate Democrats had finally thrown in the towel on an energy bill that would have included a partial cap-and-trade provision for limiting carbon emissions from power plants. The bill, written by Senators John Kerry and Joe Lieberman, was touted by Washington insiders and some major environmental groups as this year’s last hope for federal climate legislation. Yet it would have relied on carbon offsets and other dodges to postpone the day of reckoning with true, visible carbon emissions pricing — the cornerstone of meaningful climate policy.

Instead, reported the New York Times, Senate Democrats will pursue a limited bill aimed at increasing oversight of oil drilling and tightening energy efficiency standards — with no direct assault on climate-destabilizing CO2. (For a later Times story amplifying the first, click here.)

Yes, now, we may begin — “we” being Americans who care about climate, sustainability, and Earth — to unite around a climate approach that is effective, equitable and transparent enough to win the support of our fellow citizens and a Congressional majority.

I’m referring of course to the idea advanced by climatologist Jim Hansen as fee-and-dividend and by the Carbon Tax Center as a revenue-neutral carbon tax, by which fossil fuel extractors and importers pay the U.S. Treasury fees pegged to the carbon content of the coal, oil and gas they take from the ground or bring into U.S. ports, and the Treasury distributes the revenues to all Americans via equal monthly dividends (“green checks”), or by tax-shifting from regressive taxes such as payroll taxes.

The Senate’s antipathy to even the partial cap-and-trade proposed by Sen. Kerry will doubtless be spun as indicating that for the foreseeable future the well for climate legislation has been poisoned. The Carbon Tax Center says that the opposite may be true: with cap-and-trade out of the way at last, the political well can begin to be de-toxified so that the effective, equitable and transparent carbon fee-and-dividend can be seriously considered.

For this to happen, however, the Big Green groups like EDF and NRDC that for years have dominated climate discourse among environmentalists, and that convinced Congressional Democrats and the White House that the only way to “put a price on carbon” in America was via carbon cap-and-trade, will have to abandon that approach and allow others, and themselves, to try a fresh start.

It will be said that cap-and-trade failed because Fox News and other climate deniers branded it as “cap-and-tax” and, therefore, a carbon tax (or fee) cannot possibly succeed. And it is true that carbon cap-and-trade was looked to, years ago, as a way to build on the success of acid rain cap-and-trade, win over Republican free-marketers, and put a price on carbon without having to parade the dreaded t-a-x word before the public.

In the event, though, carbon cap-and-trade did none of these things.

Instead, Big Green’s pursuit of carbon cap-and-trade tethered the climate movement to complex financial instruments and branded us as servants of Wall Street elites. It opened the legislative floodgates to off-the-charts Beltway deal-making that rightly repulsed the public. Perhaps most importantly, the co-optation of climate advocacy by the cap-and-traders robbed us of the high moral ground we might have shared with abolitionists, suffragists, labor agitators and civil rights workers — true American heroes who fought to liberate our society of oppression and injustice.

If you’re in the climate movement, you recognize that fossil fuels’ assault on Earth’s climate is an ultimate form of oppression and injustice: of rich against poor, of the profligate against the frugal, of the present against the future. Ending this assault will require concerted action on many fronts; and it starts by internalizing the climate-damage costs of coal, oil and gas into their prices, so that the free ride for fossil fuels is ended and all of the alternatives, from energy efficiency, renewable energy and low-carbon fuels to conservation-based behavior and mindfulness toward energy consumption, may compete fairly and effectively.

Political action to accomplish this must be done in bright sunlight, not in Beltway shadows.

Cap-and-trade, let us hope, is dead. And now, we may begin!

Photo: Flickr / generica.

The Three Newest Flaws in Cap-and-Trade

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Democratic Senators Barbara Boxer (CA) and John Kerry (MA) are expected to introduce their long-awaited climate-change bill tomorrow. As the Houston Chronicle reported last weekend, the bill was delayed for months “by negotiations aimed at appeasing moderate Democrats worried that new emissions caps could impose hefty economic costs on the energy industry, struggling manufacturers and coal mining.”

The Boxer-Kerry bill is expected to be modeled after the Waxman-Markey bill that squeaked through the House in June. This means it will employ the cap-and-trade architecture that underpinned the 1997 Kyoto Accords and has been the cornerstone of the U.S. Big Green lobby’s legislative offensive on climate ever since.

[Addendum: The 821-page Boxer-Kerry “Clean Energy Jobs and American Power Act” was introduced Sept. 30. Go here for text, or here for section-by-section summary. — C.K., Oct. 1.]

Cap-and-trade has been attacked on many grounds: lack of a clear price signal, inherent complexity, and necessary reliance on trading mechanisms that would unleash a pandora’s box of financial machinations that could destabilize global finance. Of late, three new objections have surfaced against cap-and-trade as an “architecture” for reducing greenhouse gases. Each is worth considering as the Senate begins tackling climate legislation in earnest.

<em>Outside NRDC's New York City headquarters, Sept. 24</em>

Outside NRDC's New York City headquarters, Sept. 24

The first concerns what has heretofore been billed as cap-and-trade’s greatest virtue: its foundation on a quantified emission target, i.e., a “cap.” Alas, the nature of a cap is to be fixed, and therefore not adaptable to changing circumstances — including, now, the sudden drop in U.S. emissions.

As everyone knows, the Great Recession has shrunk economic activity in the United States. And fossil fuel burning and CO2 emissions have been shrinking particularly fast. Consider just one sector, albeit a key one: coal-fired electric power generation.

Until very recently, coal-fired power plants were responsible for almost a third of all U.S. emissions of carbon dioxide. This year, however, the bottom has fallen out.

First-half 2009 figures released last week by the Energy Information Administration show an almost 13% drop in electricity generation from coal and an attendant 11% drop in the physical tonnage of coal burned to make power vis-à-vis the first half of 2008, as coal has absorbed the entire unprecedented 5% drop in overall electricity production. By my calculations, this six-month drop in coal burning alone has already translated to 106 million fewer metric tons of carbon dioxide, singlehandedly reducing total annual U.S. emissions by almost 2%. If continued through December, the 2009 decline in coal burning would cut U.S. emissions by 3% from 2005 levels, thereby achieving, in one sector, almost a fifth of the Waxman-Markey target of reducing 2020 emissions by 17%,

Yes, emissions will eventually “rebound” as economic recovery takes hold. But not all of the lost output will be made up. Moreover, some observers, The Earth Policy Institute’s Lester Brown among them, believe that much of the sudden drop in coal-fired and other emissions is due to emerging structural factors such as fuel-efficiency standards, the liftoff in renewable energy, and more widespread awareness of the perils of oil dependence. These developments too are cutting the Waxman-Markey 17% target down to size. While in theory this “stature gap” could be restored by writing a tougher target into the Senate bill, in practice it’s unlikely the bar will be raised this fall, or ever. If so, the vaunted “emissions certainty” in cap-and-trade will lock in a hollow achievement.

The second new flaw, variously referred to as the “voluntary reductions conundrum” or the “virtue dilemma,” concerns the prospect that under a cap-and-trade regime, any “extra” steps to reduce CO2 emissions stand to be canceled out by corresponding increases in emissions that the cap enables somewhere else. In effect, any action to, say, ride a bike instead of driving (or, on a larger scale, to create a bicycling infrastructure that can replace thousands of car trips), or to permit a wind-turbine farm whose output allows the grid to cut back on fossil-fuel generation, ends up creating “room” under the cap that lets other parties increase driving or coal-burning and emit the “saved” emissions.

The mechanism for this perverse consequence of a carbon cap would be a decrement in the auction price of allowances due to the increment in bicycling or wind output, encouraging a corresponding increment in driving or fossil-fuel power generation elsewhere within the capped entity. In effect, the celebrated cap in cap-and-trade dictates an emissions equilibrium that, in turn, vitiates any given decarbonizing measure which, absent the cap, would have reduced emissions.

The implication is troubling, to say the least. No more could one promote a proposed renewable-energy or energy-efficiency project as a climate-saver, if its fossil-fuel-saving virtue will be offset by an equal helping of fossil-fuel vice somewhere else. At the same time, a dirty-energy project (or failure to implement a clean one) could be justified on the grounds that the resulting propping up of allowance prices will enable other low-carbon investments or behaviors to come into being and pick up the slack. The idea that “the cap will provide” turns out, it seems, to be a two-edged sword.

The third and last cap-and-trade flaw attracting notice concerns transnational fungibility. Shorn of its recondite name, it denotes the difficulty if not impossibility of establishing a normative quantity-reduction target for greenhouse gases. In a nutshell, if the U.S. were to establish an emissions reduction goal of 17%, or any other number, for 2020 or any other future year, by what criterion should that target be deemed appropriate for any other country? After all, the United States emits twice as much CO2 per capita as comparably wealthy countries in Europe, and, of course, 5 to 20 times as much per person as China, India, Brazil, et al. (And this comparison doesn’t reflect the even greater disparities in historical or aggregate emissions.)

Needless to say, this problem of fungibility, or its lack, doesn’t apply to a carbon tax. A U.S. carbon tax of so many dollars per ton of CO2 might or might not be the “optimal” level, but it would at least translate fairly and equally across borders, disadvantaging manufacturers in every nation more or less equally. Moreover, as Elaine Kamarck has pointed out, many countries lack the administrative capacity to manage a cap-and-trade system, whereas most governments can at least collect taxes.

Nor would a carbon tax be beset by flaws #1 or #2. The impacts of a carbon tax on U.S. investment decisions, infrastructure provisions and personal behaviors will be relatively unaffected by aggregate contractions in emissions. Moreover, unlike cap-and-trade, a carbon tax won’t undercut virtue but will reinforce it, since each and every elimination of emissions will be rewarded by a corresponding reduction in the tax.

At this point, cap-and-trade seems to have little going for it other than institutional inertia. Let us hope that all of its drawbacks are closely and fairly scrutinized in the Senate debate now set to begin.

Photo: David Pine, rising tide north america

What Can Replace Faltering Cap-and-Trade?

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Is Waxman-Markey doomed? Revulsion at the special favors and sheer complexity built into the 1,400-page bill that squeaked through the House in June has been building nationwide this summer. Now, a Washington Post editorial signals the impending collapse of not just the bill but of cap-and-trade as the central mechanism for controlling U.S. greenhouse gas emissions.

The Post wrote earlier this week:

The rancorous debate over health reform has given voice to considerable uneasiness among Americans. Many are worried about how a new system will be paid for in an economy that has unraveled, and they are anxious about a kudzu-like expansion of an already unwieldy bureaucracy. Given the herculean effort it will take to get President Obama’s vision of reform through Congress, we’re not convinced that the Senate will have the stomach to tackle cap-and-trade legislation this fall. The growing agitation within the chamber over the creation of another complex system to buy, sell and trade pollution credits only adds to our doubts. (emphasis added)

As the Post editorial noted:

capitol_afagen1The House barely passed the American Clean Energy and Security Act (a.k.a. Waxman-Markey) in June. The 1,400-page bill has a potpourri of measures ranging from new efficiency and renewable energy standards to a cap-and-trade provision that gives away 85 percent of the pollution allowances to various interests. The Senate is proving to be a much tougher sell. Last week, four Democratic senators — Blanche Lincoln (Ark.), Ben Nelson (Neb.), Kent Conrad (N.D.) and Byron L. Dorgan (N.D.) — called on the leadership to strip cap-and-trade completely from the bill that Majority Leader Harry M. Reid (D-Nev.) hopes to start stitching together next month. This comes days after 10 moderate Democratic senators from coal and manufacturing states sent a letter to President Obama warning that they would not go along with any cap-and-trade regime that didn’t “maintain a level playing field for American manufacturing.” (emphasis added)

The fact that the epicenter of discontent is the coal-dependent “heartland” region indicates that Waxman-Markey has been more heavily attacked from the Right than the Left — as the Post itself signaled through its editorial title “Cap and Rage” and subtitle, “The fight over health-care reform could hobble climate-change legislation.” As we see it, the Big Green groups that steered Congress onto the  cap-and-trade path and also failed to insist on 100% permit auctioning and at least near-revenue neutrality share blame for the virulent attacks. Their stance helped turned the House bill into a perfect target for caricature as a “cap-and-tax” bill or “cap-and-trade tax” that would push hard-pressed American families, businesses and industries over the financial edge.

Nevertheless, the Post reports that:

Dropping cap-and-trade from the Senate bill is considered a non-starter by Mr. Reid and environmental advocates for two reasons. First, a long-stated goal of congressional leaders and the president himself is to have emissions-limiting legislation passed and signed into law in time for international climate talks in Copenhagen in December. Second, there is no Plan B. The leadership has put all of its eggs in the cap-and-trade basket.

Fortunately, the Post hastened to remind Majority Leader Reid that there is indeed a Plan B:

Yet there are other options worthy of consideration. Yes, we’re talking about a carbon tax. It would be relatively simple to devise and easy to implement. It would require no new bureaucracy, and the revenue generated could be rebated to the taxpayer in any number of ways — through a payroll tax reduction, for instance. (emphasis added)

The Post editorial acknowledged:

We know we are running counter to Washington’s tax-averse conventional wisdom. But we are not alone in our support of the carbon tax. There were three such bills in the House [including the Larson bill, which is more than 95% revenue-neutral and, with an upward-adjustable tax rate, is the most “cap-like” but without the politically toxic “trade” aspect]. One of the inventors of the cap-and-trade concept, Thomas Crocker, told the Wall Street Journal last week that he favors a carbon tax because he believes it’s easier to enforce.

The editorial concluded:

If Congress fails to pass cap-and-trade legislation, it will rapidly approach a fork in the road in addressing global warming. Members can sit back while unelected bureaucrats at the Environmental Protection Agency follow through on their moves toward regulating greenhouse gas emissions as a pollutant under the Clean Air Act. Or they can entertain a carbon-based tax designed to reduce emissions and give the money back to taxpayers in an equitable manner. A decision on which path to take is bearing down upon us. Not only are the global warming dangers facing the planet reaching the tipping point, but there will also be no climate agreement in Copenhagen without strong leadership in words and deeds from the United States. As the Senate forges ahead, nothing should be off the table.

We agree, of course, that nothing should be off the table. The demise of Waxman-Markey won’t be pretty, but it should spur all who grasp the criticality of the climate crisis to unite behind the quickest, fairest and most effective means to reduce U.S. greenhouse gas emissions: a national, revenue-neutral carbon tax.

Photo: Flickr / afagen.

Action Alert: Overhaul or Scrap ACESA

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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.

pigs_at_trough_james_dennettThere 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.

Wanted: Cloudsplitter

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(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.

spiral-cash-_-fpsurgeons-photostreamWorse, 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