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Pricing carbon efficiently and equitably

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This page contains archival material bearing on efforts to advance carbon taxing or other carbon pricing at the U.S. national (federal) level.

It begins with federal legislative proposals from roughly 2008 to 2015, in reverse chronological order. Further below is material from Democratic presidential-nomination campaigning from 2019.

Unfortunately, CTC hasn’t been able to keep up with more recent (post-2015) carbon tax legislation — not that there’s been much to report in this arena. We recommend Mike Aucott’s July 2022 post , A Novel Way to Price Industrial Carbon Emissions, along with our new page about the Inflation Reduction Act of 2022. Although in many ways the IRA is the antithesis of carbon pricing — it aims to make clean energy cheaper rather than to make dirty (fossil) energy costlier — it was a landmark legislative achievement and may eventually open the door to federal legislation to price carbon emissions.

Federal Legislation (through 2015)

Climate Protection and Justice Act

On December 10, 2015, a day before the close of the UN climate summit in Paris, Senator (and presidential candidate) Bernie Sanders introduced the “Climate Protection and Justice Act.” His bill would impose a charge of $15 per metric ton (“tonne”) of CO2 emitted from fossil fuel combustion, with the fee taking effect in 2017. It would then rise at an average annual rate of $3.22/tonne, reaching $73 by 2035. At that point the tax trajectory would change to a percentage basis, growing by 5% annually until attaining a level of $150/tonne in 2050. Proceeds from Sanders’ proposed carbon tax would be returned to households making less than $100,000/year, a rebate of roughly $900 in 2017, rising to $1,900 in 2030. Revenue would also fund investments in energy efficiency and low-carbon energy.

Sanders’ press release claims his measure would reduce U.S. CO2 emissions to 80% below 1990 levels by 2050. The results of seven major integrated assessment models reported by the Stanford Energy Modeling Forum suggest that a more aggressive carbon price trajectory, rising to roughly $440/ton, would be needed to accomplish this ambitious 80% reduction target by 2050, in the absence of major technological breakthroughs. Nevertheless, model results become increasingly murky as time horizons grow more distant. In any event, Senator Sanders is the first (and, as of January 2016, the sole) candidate in the 2016 presidential race to endorse an explicit and rising tax on carbon pollution.

On April 22, 2015, Earth Day, Rep. John Delaney introduced a discussion draft of his “Tax Pollution, Not Profits Act” that would establish a tax $30 per metric ton of carbon dioxide or carbon dioxide equivalent, increasing each subsequent year at 4% above inflation. Delaney’s proposal would apply revenues to reduce the corporate tax rate to 28%, provide monthly payments to low-income and middle-class households and fund job training, early retirement and health care benefits to coal workers. At an Earth Day AEI event discussing his bill, Rep. Delaney took the bold step of suggesting his proposal for a simple economy-wide carbon tax could replace the EPA Clean Power Plan.

American Opportunity Carbon Fee Act of 2014

On November 19, 2014, Sen. Sheldon Whitehouse (D-RI), renowned for his weekly “Time To Wake Up” speeches on the Senate floor, introduced the “American Opportunity Carbon Fee Act.” This bill would impose fees on both CO2 and non-CO2 greenhouse gases, including fugitive methane from shale gas wells and coal mines, at their CO2-equivalent rates. AOCFA includes a border tax adjustment to impose equivalent climate pollution fees on imported goods from nations that have not enacted their own.

AOCFA pegs its pollution fee to U.S. EPA’s estimate of the “social cost of carbon” currently, $42/ton CO2, and would rise by only 2% annually in real terms. The Carbon Tax Center’s 7-sector price-elasticity spreadsheet model projects that the proposed starting price of $42 per ton of CO2 would quickly reduce US emissions by about 15%. But the bill’s subsequent 2% annual real price increases would barely stem the rising emission tide due to increased affluence, resulting in essentially flat emissions rather than a declining curve.

Our blog post, New Senate Bill Would Build Polluter Pays Principle into Climate Action, has more on Sen. Whitehouse’s bill.  Sen. Whitehouse and co-sponsor Brian Schatz (D-HI) re-introduced an updated version in June 2015.

Managed Carbon Price Act of 2014 

On May 28, 2014, Rep. McDermott (D-WA) introduced H.R. 4754, a direct and transparent measure to phase out free dumping of climate pollution into our atmosphere. The 21-page bill would steadily raise the cost of climate pollution, enabling investments in renewable energy and efficiency to compete effectively with continued extraction and burning of dirty fossil fuels.

McDermott’s pollution tax would start modestly at $12.50/tonne (metric ton) of CO2 and rise annually by the same amount ($12.50/tonne), reaching $125/tonne CO2 within a decade. The result, according to CTC’s carbon tax spreadsheet model, would be a one-third reduction in U.S. carbon pollution in the tax’s tenth year, vis-a-vis actual U.S. emissions in 2005. By 2030, the target year for the heralded new EPA-White House Clean Power Plan, the McDermott pollution tax would be reducing U.S. CO2 emissions by an estimated 2,051 million metric tons per year, or nearly 6 times the 355 million tonne reduction we have estimated for that year from the Clean Power Plan.

McDermott Graph

Rep. McDermott’s Managed Carbon Price Act of 2014 compared to June 2014 EPA “Clean Power” proposal

Obviously, a carbon tax like that in the McDermott bill requires an act of Congress — a far more difficult process (though administratively simpler) than the EPA plan. Nevertheless, the nearly 6-fold difference between their respective CO2 reductions is instructive, illustrating both the narrow scope of the EPA plan and the vast reach of carbon taxing.

Other Key Features of McDermott’s Managed Carbon Price Act:

  • Dividend: Returns 100% of revenue to individuals as equal (pro rata) “dividends.”
  • Other greenhouse gases: The five other major GHG’s, including methane, are taxed at their CO2 climate-damage equivalence.
  • Border Tax Adjustments: HR 4754 would tax the climate pollution of imported goods at the same rate as domestic goods, creating strong and growing incentives for other nations to tax climate pollution while protecting U.S. manufacturers from unfair competition by countries that do not tax climate pollution.

Sanders-Boxer “Climate Protection Act”

On February 14, 2013, Senators Bernie Sanders (I-VT) and Barbara Boxer (D-CA) introduced the Climate Protection Act. Sanders-Boxer would  impose an economy-wide tax on CO2 pollution, starting at $20/T CO2 and rising over a decade to $33/T CO2. We estimate that this price signal and trajectory would induce a 12% reduction in CO2 emissions over the course of a decade. The measure includes border tax adjustments to protect domestic industry and encourage other nations to enact their own carbon taxes. Sen. Sanders posted a rousing op-ed in the Huffington Post in July 2014 in support of his and Sen. Boxer’s bill.

The Progressive “Back to Work” Budget

The House Progressive Caucus has also included a carbon tax in its 2014 Better Off Budget proposal. The tax would start at $25/T CO2 and rise 5.6% annually, raising $1.1 trillion in revenue between 2014-2023.

Earlier Carbon Pricing Proposals

Carbon Tax Proposals:

Rep. Stark (D-CA) introduced H.R. 594 “Save Our Climate Act of 2009″ (1/15/09):

  • A carbon-content tax on fossil fuels starting at $10/ton CO2
  • Increasing by $10 every year.
  • Upstream:  Fossil fuels taxed they enter the U.S. economy (i.e., at the production or importation level).
  • Revenue use: not specified.
  • Exports credited for carbon tax.

Rep. Larson (D-CT) introduced H.R. 1337 “America’s Energy Security Trust Fund Act of 2009″ (3/5/09):

  • A carbon-content tax on fossil fuels starting at $15/T CO2.
  • Increasing by $10 each year, but in any year that EPA-identified emission targets (based on reaching 80% below 2005 emissions by 2050) are not met, the tax would increase by $15.
  • We have estimated the carbon-reducing impact of the Larson bill, using CTC’s 4-Sector Carbon Tax Impact Model. Projected emissions reduction trajectory would meet 80% by 2050.
  • Upstream (at production or importation).
  • Revenue use:
    • 1/6 of first year’s revenue for clean energy technology research (funding amount remains fixed at tax rate increases),
    • 1/12 (declining to zero over 10 years) for affected industry transition assistance,
    • All remaining revenue distributed to individuals. Returns payroll taxes via a federal income tax credit. In the first year, payroll taxes on the first $3,800 of earnings returned; amount of returned revenue rising with the tax rate. Social Security recipients receive a 10% supplement.
  • Border Adjustments: carbon equivalency fee on carbon-intensive goods imported from non-carbon taxing nations.  Exported goods credited for carbon tax.

Rep. Inglis (R- SC) introduced H.R. 2380, “Raise Wages, Cut Carbon Act of 2009’’ (5/13/09):

  • Upstream carbon tax.
  • Starting at $15/T CO2 rising to $100 in 30 years.
  • All revenue used to reduce payroll tax rate.  (Contrast with Larson bill which would exempt first ~ $3,800 earned from payroll tax.)
  • Tax reduction split between employer and employee.
  • Border Adjustments: equivalent tax on imports, exports credited.

“Managed Market” Proposal

Rep. Doggett (D-TX) introduced H.R. 1666 “Safe Markets Development Act of 2009″ (3/23/09):

  • Cap-and-trade program to reduce greenhouse gas emissions from covered sources from 6.153 billion metric tons in 2012 to 253 million in 2050.
  • Treasury to auction 100% of allowances quarterly.
  • Board (6 members, appointed by President) to set targets for allowance prices, manages quarterly auctions by changing supply of allowances to maintain a smooth price path through 2019, oversees secondary markets (not clear how).
  • Covered entities may bank up to 5% of allowances from a calendar year.
  • Revenue use: not specified.

Cap and Trade Proposal:

Reps. Waxman (D-CA) and Markey’s (D-MA) “American Clean Energy Security Act” (7/7/09):

ACESA included a cap-and-trade title, including 2 billion tons of offsets (up to 75% international) effectively delaying domestic U.S. emissions reductions by at least a decade. The bill would have given away 85% of allowances, auctioning only 15%. (Grist summary here.)

“Cap and Dividend” Proposals:

Senators Cantwell (D- WA) and Collins (R-ME) introduced the Carbon Limits and Energy for America’s Renewal (CLEAR) Act (12/11/09):

While retaining a “cap” and limited trading, CLEAR would avoid the most profound flaws of the Waxman-Markey bill (passed by the House) and the Kerry-Boxer bill (which stalled in the Senate).  CLEAR would set a floor and ceiling (“collar”) on carbon allowance prices, authorize only “covered entities” to hold allowances and would not allow offsets to be used in place of allowances.  CLEAR proposed to “recycle” 75% of revenue directly to households, contrasting sharply with the cap-and-trade bills’ give-away of carbon revenue and its equivalent in free allowances to an array of special interests and energy projects.  With Sen. Susan Collins’ (R-ME) co-sponsorship, CLEAR began as a bipartisan proposal.

CLEAR purported to preclude a secondary market (or “derivatives”) in carbon allowances.  But analysts raised doubts about whether the bill could prevent large energy users  from contracting to hedge against seasonal and cyclical price swings. Also, the low price range of bill — $7 to $21 per ton of CO2 in the initial year, 2012, rising each year at approximately 6% above inflation — is not nearly sufficient to achieve the needed emissions reductions. CTC’s Carbon Tax Model suggests that this price trajectory would only lead to a 7.5% drop in U.S. CO2 emissions from 2005 levels in 2020. Instead of a substantial price signal, the bill relied heavily on subsidies for clean-energy investment which would come from the 25% of revenue not returned to households.  CLEAR’s goal was emissions reductions of 20% from a 2005 baseline by 2020. CLEAR’s price collar would have made carbon prices more predictable, closer to a carbon tax than other cap-and-trade proposals. But its $7 – 21 range was wide enough to allow significant volatility that could discourage investment in alternatives and efficiency while generating profits for speculators. Potential volatility combined with CLEAR’s low price meant that its price signal would be “noisy” and small — not the clear upwardly trending price signal that would most strongly encourage low-carbon energy.

Finally, a volatile price would have made linkage to international carbon markets (or carbon taxes) needlessly complex or even impossible.

Rep. Van Hollen (D-MD) introduced H.R. 1862 “Cap and Dividend Act of 2009″ (1/1/09):

  • CO2 Cap. Fossil fuel producers, importers surrender permits for CO2 emissions each year. Permits decline annually, leading to an 85% reduction below 2005 CO2 emissions from covered entities by 2050.
  • 100% auction of permits
  • Permits tradeable.
  • Volatility-limiting measures: Unlimited banking. Borrowing if permit prices increase more than 100%.
  • Revenue use: Funds distributed monthly in equal amounts to those with a social security number.
  • Border Adjustments: Exporters credited, importers pay “carbon equivalency fee.”

Related CTC Blog Posts and News Items:

2020 presidential campaign

Last update: June 11, 2019

Inslee demands DNC rescind its climate-debate ban

Washington Gov. Jay Inslee used his June 11 appearance on “Democracy Now” (downloadable MP3) to demand the Democratic National Committee withdraw its threat to exclude from its forums any presidential candidate who participates in non-DNC-sanctioned debates.

Inslee addressed the DNC stance at the start of his 30-minute interview with Democracy Now hosts Amy Goodman and Juan Gonzalez (the segment begins at minute 13:00 of the program). The interview focuses, as does Inslee’s campaign, on climate change but it also ranges across related topics such as immigration, health care and economic development.

Biden climate plan includes a fee on carbon pollution . . . and carbon tariffs

Former V-P and current Democratic front-runner Joe Biden “proposes that Congress pass a law by 2025 to establish some form of price or tax on carbon dioxide pollution, a policy championed by most economists as the most effective way to fight climate change,” the New York Times reported on June 4.

Though Biden did not specify a dollar level for a carbon tax, and a 2025 launch date appears very far off, his climate plan, which goes far beyond a carbon price, was applauded by some activists. “He put out a comprehensive climate plan that cites the Green New Deal and names climate change as the greatest challenge facing America and the world,” Varshini Prakash, executive director of the Sunrise Movement, told the Times. “The pressure worked.”

The Biden plan also includes “carbon tariffs” on imported goods, according to the Times. Such a measure presumes a U.S. carbon tax, since carbon tariffs would be levied on the excess of domestic U.S. carbon taxes relative to other countries’ own carbon price. (For more on carbon tariffs see our Border Adjustments page.)

Dems: 8 out of 18 strongly for taxing carbon emissions

A year and a half out, the 2020 presidential campaign has already paid more attention to climate change than any previous election — perhaps even every previous election combined. (Bill McKibben surveyed the depressing history as part of an election preview for Politico.)

The best news of all is that voters are speaking up. In an April 2019 Monmouth University Poll of Iowa Democrats, climate change ranked second among issues of concern, albeit far behind health care. (Environmental concerns generally also ranked fairly high, which may also reflect climate concern.) The June 4 Times article cited above (re Biden) quoted a Democratic pollster proclaiming, “Climate change is an incredibly important issue for the Democratic base right now. It’s about the future, and it’s something that [President Trump] has made worse in the minds of the Democratic base.”

The candidates — well, the Democrats, anyway — are responding:

The dozen candidates shown above have pledged to campaign free of fossil fuel contributions, according to Oil Change International

Only three candidates have explicitly endorsed a carbon tax, however. Aside from Biden, Former Maryland representative John Delaney  was an original cosponsor of the Energy Innovation and Carbon Dividend Act of 2018, which largely followed Citizens’ Climate Lobby’s fee-and-dividend template. And South Bend, Indiana, mayor Pete Buttigieg made an articulate case for the same approach in an appearance on the Tonight Show (beginning at 6:15):

There’s also a plan called a carbon tax and dividend. Basically you set a price on things that put carbon into the atmosphere, but then you can rebate that back out to the American people so most of us would actually be better off if we did it. Meanwhile it would help change the economic incentives so that you’d see less activity that hurts the environment. Because the true cost is not reflected in the price of, for example, energy that comes from coal. If you were facing the true cost of it you’d have to set that price a lot higher.

Most of the field has been tiptoeing around the issue, perhaps fearing, in the words of New York Times columnist David Leonhardt, that carbon taxes “focus people’s attention on the short-terms costs of moving away from dirty energy” instead of on the benefits of clean energy.

But if they aren’t running on carbon pricing, at least some of the candidates aren’t running away from it, either. In April 2019, when the Times surveyed the announced Democratic candidates (18 at the time) on climate change, it found seven who “put their weight firmly behind a carbon tax”: Cory Booker, Pete Buttigieg, Julián Castro, John Delaney, Kirsten Gillibrand, Marianne Williamson and Andrew Yang. (Presumably, Biden has joined the ranks.)

Five others said they were “willing to consider” a carbon tax, according to the Times: Jay Inslee, Amy Klobuchar, Beto O’Rourke, Tim Ryan, Eric Swalwell.

In  May 2019, Citizens Climate Lobby posted a more detailed survey, Which 2020 candidates support carbon pricing?, with thumbnails of eight Democratic candidates as well as two possible Republican challengers to President Trump.

Sanders is said to “demote” carbon taxing

A Climatewire story in early June examined the reticence of climate hawk and erstwhile carbon tax proponent Sen. Bernie Sanders to express support for carbon taxing in 2019. Though the story, Sanders demotes carbon taxes. Here’s what it means for Dems, leads with the Vermont senator, it finds a similar reluctance across much of the Democratic field.

First, about Sanders:

His [Sanders’] 2020 presidential campaign still focuses on global warming, but gone are the regular broadsides over carbon pricing. Missing, too, is any reference to carbon taxes in the climate section of his official campaign website. Instead, Sanders has chosen to emphasize the Green New Deal when talking about climate change — a shift that underscores how much the politics of global warming have transformed in a few short years. Part of that, perhaps, is a broader decline in enthusiasm for carbon pricing among left-leaning politicians and activists.

Climatewire also notes:

Sanders’ shift in focus is striking. During the 2016 campaign, Sanders repeatedly hammered Clinton over her unwillingness to get behind a tax on carbon emissions. “I would ask you to respond. Are you in favor of a tax on carbon?” he asked in one debate. Later — after Clinton had sewn up the Democratic nomination — Sanders pressed to include carbon taxes in the party’s 2016 platform in part by appointing longtime environmentalist Bill McKibben to the drafting committee.

(We reported those 2016 developments in two posts, What the Sanders-Clinton Clash over a Carbon Tax Says about Democrats and Climate Change, and Democratic Platform Vote Was a Win for Carbon Taxes.)

The Climatewire story concludes with a curious but revealing quote from an advisor to Congressmember and Green New Deal spearhead Alexandria Ocasio-Cortez. “I feel we’re very locked into what we can do when we lead with a carbon tax,” says Andrés Bernal. The operative word is “lead,” as the story implies by noting that Bernal’s statement “doesn’t mean [he] doesn’t see carbon taxes as part of the equation at some point.”

Even so, any “lock-in” would be in the realm of politics, not policy. A carbon tax was never going to be a stand-alone, but rather both a market-pulling force and a pay-for, as this site has pointed out practically since its founding in early 2007, most recently in the April post by CTC policy associate Bob Narus, Green New Dealers Should Embrace a Carbon Tax.

Beto O’Rourke

On April 29, former Texas representative Beto O’Rourke surprised everyone by being first out of the Democratic gate with a comprehensive climate policy. His four-part plan includes:

  • Immediate executive and regulatory actions ranging from controlling methane leakage and building efficiency standards to “clean” government procurement
  • $1.5 trillion in spending (paid for by taxes on the wealthy and corporations), leveraging an additional $3.5 trillion in non-government spending, on clean energy investments and R&D
  • A 2050 target date for net-zero emissions
  • Efforts to protect communities, agriculture and military installations from the impacts of climate change

O’Rourke doesn’t use the term “carbon tax,” but he does promise a “legally enforceable standard” for meeting the 2050 deadline, explaining:

This standard will send a clear price signal to the market to change the incentives for how we produce, consume, and invest in energy, while putting in place a mechanism that will ensure the environmental and socio-economic integrity of this endeavor — providing us with the confidence that we are moving at least as quickly as we need in order to meet a 2050 deadline.

That language seems to envision some form of carbon pricing.

Jay Inslee

On May 3, Washington Governor Jay Inslee released his “100% Clean Energy for America Plan” in several media (video, Web page, 8-page pdf). Carbon pricing isn’t mentioned. Excerpts from the Inslee campaign’s Web page:

Governor Jay Inslee’s 100% Clean Energy for America Plan will achieve 100% clean electricity, 100% zero-emission new vehicles and 100% zero-carbon new buildings. This plan will empower America to make the entire electrical grid and every new car and building climate pollution-free, at the speed that science and public health demand.

The 100% Clean Energy for America Plan is the first major policy announcement in Governor Inslee’s Climate Mission agenda – a bold 10-year mobilization to defeat climate change and create millions of good-paying jobs building a just, innovative and inclusive clean energy future, with meaningful targets and plans for execution based on his experience as a governor. Governor Inslee will announce additional major planks of his detailed climate plan in the coming weeks.

Two weeks later came Phase 2 — Inslee’s Evergreen Economy Plan.  The 38-page plan defies easy summarization, but highlights include:

  • a Rebuild America Initiative to upgrade buildings
  • a $90 billion green bank to support clean energy projects
  • a $3 trillion infrastructure program
  • a clean manufacturing program, including federal procurement standards
  • greatly expanded clean-energy R&D
  • higher wages, benefits and union rights for clean-energy workers

All told, Inslee proposes spending $300 billion per year, leveraging another $600 billion in private investment , for a total of $9 trillion over a decade. No word yet on where he plans to get that $300 billion/year. “I have plans,” he told us at a Manhattan meet-and-greet the same day he released the proposal.

Not surprisingly, Inslee is winning the David Roberts Primary:

To put it bluntly, Inslee is writing a Green New Deal. . . . This isn’t just a campaign play, it’s a document the next Democratic president is going to want in-hand when the time comes to get to work.

Alexander Kaufman at Huffington Post also has a good summary of Inslee’s plan.

Kerry-Lieberman “climate” bill is worse than nothing

By

“Is this the Climate Treaty You Came For?” George Monbiot asked hundreds of activists at the Copenhagen Klimaforum last December. Monbiot, a prolific reporter for The Guardian (U.K.) on climate, and author of Heat, offered this reply: “The UN isn’t even asking the right questions yet.” Green energy is still trying to “out-subsidize” dirty energy. “The Kyoto agreement isn’t curbing demand for fossil fuels.”

Alberta Tar Sands Mine

As one example, Monbiot pointed to tar sands mining wrecking boreal forests in Canada, a nation ostensibly “capped” by Kyoto. Monbiot agreed that unlike subsidies and “caps,” a revenue-neutral carbon tax would effectively curb demand while creating broad incentives for efficiency and increased supply of low-carbon energy.

Yesterday, the climate advocacy group 1 Sky held a conference call with Sierra Club’s climate and energy lobbyist David Hamilton. David pondered an updated version of Monbiot’s query: “Is the cap in the Kerry-Lieberman American Power Act worth the cost” in terms of subsidies for dirty energy and huge compromises including more offshore drilling. Hamilton called this a “cosmically difficult question.”

Not for me. Here’s why:

First and foremost, in dollars, Kerry-Lieberman is overwhelmingly a dirty energy subsidy bill with crumbs tossed to “green” energy. More money (loan guarantee, tax breaks, insurance subsidies) for nukes, “clean coal,” oil companies, and highways. As documented by Earth Track and Taxpayers For Common Sense, K-L’s “buy everyone off” approach means inducing more demand for energy, which in turn means driving drilling anywhere and everywhere, blowing up more Appalachian mountaintops, and maintaining and extending America’s military presence around the world:  An addict’s frenzy for yet another “fix” of cheap fossil fuels.

For the utility sector, K-L relies on a “cap” with trading and offsets, ceding to traders (i.e. Wall St.) the authority to set carbon prices. In the transportation fuel sector, K-L at least uses a more direct approach of selling allowances at a price established by the utility permit auctions, thus limiting somewhat the problems from trading. (Oil companies don’t like volatility, either.) Yet nowhere does the bill set the clear, briskly-rising price on CO2 pollution essential to create incentives for efficiency and low-carbon energy development across the economy.

Deepwater Horizon Oil Spill (5/1/10)

K-L gives offshore drilling the green light. While K-L purports to let states “veto” drilling in previously-protected waters up to 75 miles off their coasts, it offers them a whopping 37.5% share of revenues generated by offshore oil and gas activity — no strings attached. How many cash-strapped states will resist cries to “drill, baby, drill” in coastal and marine areas already under stress from pollution, over fishing, ocean acidification and warming? And this virtual “bribe” to drill will run afoul of long-standing domestic and international maritime law holding that coastal waters (and revenue from leasing) belong to the entire nation, not just the adjacent state.

K-L continues the pretense that coal can be made “clean” through thermodynamically-challenged “carbon capture and sequestration” by throwing an additional $2 billion/yr on top of the $2.4 billion in the 2009 stimulus package. CCS is a speculative technology that (if viable at all) will require burning at least 30% more coal per unit of net output to power the process of “capture” and “sequestration” of CO2 and building an additional facility roughly equal in size and cost to every coal-fired power plant. Plus, a huge new network of pipelines. Then there’s the problem of finding the underground capacity for permanently storing a few billion tons more CO2 every year… from now on.

K-L’s vaunted “cap” is a joke. A “cap” that adds 2 billion tons of offsets on top of an economy that generated 5.4 billion tons of CO2 last year means that even if the cap tightens a few percent each year, polluters will be able to buy (cheap) offsets instead of making reductions for the next two decades. By design (K-L calls it “cost containment”), CO2 prices will be set in the offset market, not by supply constraints of the “cap.” Charles K. Ebinger, Director of the Energy Security Initiative at the – Brookings Institution critiqued the bill forcefully:

“If we are trying to reduce carbon emissions in the U.S., let’s do it. Otherwise we simply are exporting capital and jobs [via offsets]. The [K-L] bill’s price on carbon is unlikely to be high enough to generate any real movement away from fossil fuels. Furthermore, the provisions… for trading in carbon are too complex and as written could allow gaming of the system. Energy security and climate change are issues of the most urgent national significance. We should not pretend that we can do it on the cheap with no pain, at no cost, and with no sacrifice for the greater national good.”

In short, as climate scientist Jim Hansen articulated on Earth Day, we will not address climate and energy security without raising the price of cheap, dirty energy. And if we’re serious about a meaningful and effective price, we must return revenue to U.S. workers and families.

Senator Kerry has been boasting about returning revenue, apparently in response to Senator Cantwell’s “CLEAR” bill that proposes returning 75% of revenue to citizens. But K-L’s revenue return has barely budged from that in the Waxman-Markey bill. K-L would return about half of revenue generated by allowance auctions in the utility sector (about 40% of CO2 emissions) through local distribution companies. In states with aggressive public utility commissions, consumers would see some reduction in the fixed charges on electric bills. But in poorly regulated states, which include many in the South, revenue return will be a big windfall for utilities. And since a majority of electricity usage is commercial or industrial, that leaves only a minority of the returned revenue for households. Bottom line: K-L returns only a small fraction of CLEAR’s 75% revenue return.

Still, the Big Green groups and their allies in the US Climate Action Partnership insist that K-L is “better than nothing.” And “we have to do something about climate now.” In exchange for an energy-giveaway bill masquerading as a climate bill, they’re in effect lobbying for dirty energy subsidies and for undercutting much of EPA’s authority to regulate greenhouse gases — an authority that these same groups once vigorously defended, and which was recently upheld by the Supreme Court.

Though K-L would leave intact EPA’s recently-finalized CAFE (automobile efficiency) standards, it would limit the Agency’s authority to mandate technology to cut CO2 emissions from stationary sources (e.g., coal power plants) and would confiscate EPA’s biggest Clean Air Act hammer, the National Ambient Air Quality Standards (NAAQS). The Center for Biological Diversity petitioned EPA to “cap” CO2 emissions using NAAQS under which states would develop and enforce plans to reduce GHG emissions. Some analysts suggest that states’ existing Regional Greenhouse Gas Initiatives (RGGIs) could be adapted and approved by EPA under NAAQS.

Cap-and-trade simply cannot achieve emissions reductions large enough to avoid climate catastrophe. The price signal is too murky to trigger the needed shifts to clean energy, and the revenue return is too meager to cover the needed price rises. Nor can it lead to an international price on CO2 pollution supported by trade agreements. Big Green’s insistence that “we have to pass Kerry-Lieberman or we won’t have any climate program” is specious, therefore, insofar as K-L itself is no more a climate program than was any other energy-giveaway bill in recent decades. We still need a carbon fee that returns all or nearly all revenues to citizens to gain and keep broad bipartisan and public support. Passing K-L will only make this difficult task harder by entrenching traders, offset purveyors and recipients of the bill’s dirty energy subsidies.

K-L presents no “cosmic difficulty” for me. Let’s book a grand, New Orleans-style funeral for cap/trade/offset where concerned citizens gather, take stock and start working for a People’s Climate Bill – a revenue-neutral carbon tax.

Photos: flickr– Google/SkyTruth, NASA Goddard