Search Results for “revenue ” – Page 40

Carbon Tax Center

Pricing carbon efficiently and equitably

Search Results for: revenue

Sprint vs. Marathon — A New Frame for Cap vs. Tax

By

Guest Post by James Handley

We’ve heard Sen. Obama, Sen. Clinton and even some environmental leaders like the Sierra Club’s Carl Pope suggest that a cap and trade system for greenhouse emissions would be equivalent to a carbon tax if permits under a cap were auctioned. While it’s certainly crucial not to give away free permits to polluters, an auction alone won’t make cap and trade as effective, fair, easy to implement or transparent as a revenue-neutral (and gradually-increasing) emissions fee or “carbon tax.”

In February, a Congressional Budget Office study compared the two approaches, concluding that “a tax would be roughly FIVE times as effective at reducing greenhouse gas emissions as a fixed cap.” Read that again. Better yet, read the report.

CBOE_Trading_Floor.jpgWhy is setting a price (or tax) for emissions more efficient than a cap? Because reducing greenhouse gas emissions is more like a marathon than a sprint. The cost of cutting emissions tends to go up with each additional reduction, while the benefit remains essentially constant. (Every ton of CO2 has the same heat-trapping effect.)

So spending a lot to meet a fixed “cap” in one month doesn’t help as much as spending that same money to make larger (cheaper) reductions over a longer time. Setting a price for emissions creates the incentives for our economy to become a marthoner. We face a long race and we have to run it smoothly and efficiently. No point in exhausting ourselves on jackrabbit leaps.

The CBO report explored ways to modify a cap and trade system to make it more efficient (more like a tax), including auctioning permits and a “safety-valve” to limit the unpredictable and destructive price spikes that led to the collapse of the RECLAIM cap and trade program for smog emissions in southern California.  Similar price spikes are now showing up in the European greenhouse gas emissions trading system.

But why introduce the middle-men — the traders who create and profit (or lose) from speculative volatility and skim money off the table?  They’re already circling like hungry piranhas.

Northeastern states are setting up a (complex) Regional Greenhouse Gas Initiative (RGGI), a cap and trade system. Initially, the cap is set higher than emissions levels and permits are auctioned off. Then the cap will be tightened, limiting supply, driving permit prices up. Like musical chairs — take one away each round.

Earlier this week, ClimateWire reported (subscription required):

Trades conducted in anticipation of the Northeast’s nascent greenhouse gas trading market reveal a bullish attitude among traders… possibly prompted by the specter of federal pre-emption.

According to consultancy Point Carbon, at least two [large] transactions have occurred well above the market’s reserve price, sending the first concrete price signals to states, utilities and traders awaiting the nation’s first binding emissions cap.

That’s surprising because with supply exceeding demand, the price of permits should be near zero. Why are the bidders jumping? ClimateWire continues:

Veronique Bugnion, managing director of Point Carbon, said that “the price might reflect expectations of a federal cap-and-trade system, as credit prices under a federal system are projected to be much higher and the possibility of pre-emption exists. Traders might see the federal system’s potential to absorb RGGI as more likely than the possibility of RGGI’s overgenerous cap depressing prices.”

Similarly, carbon prices on the Chicago Climate Exchange have shot up since Super Tuesday, when it became evident that all three presidential candidates supported a national emissions cap (ClimateWire, April 7).

Traders could also be taking their RGGI cues from that market, Bugnion said. High credit prices would give states more revenue to spend on energy efficiency, but they could also hurt ratepayers, she added. “Too much money is not necessarily a good thing,” she said.

Traders’ expectations and Bugnion’s comment reveal much about the difference between cap-and-trade systems and a revenue-neutral carbon tax.

Proponents of trading schemes like RGGI appear willing, even eager, to hit (electricity) ratepayers in the wallet to fund state energy efficiency programs. While these programs have proven highly valuable in reducing institutional barriers that impede energy efficiency, the effect is typically regressive. Low-income people spend a larger share of their incomes on utilities (and energy in general) than those of high income.

Cap-and-trade could be revenue-neutral. Auction revenues could be distributed per capita (like the Alaska Permanent Fund) instead of allocated to state energy-efficiency programs. Then cap-and-trade would be income-progressive in the same way as the revenue-neutral carbon tax (advocated by the Carbon Tax Center), increasing its equity and potentially broadening its appeal. Everyone would receive the same dollar distribution, making those with below average fossil fuel consumption net gainers. (And the average is skewed high: the wealthy generate many times more greenhouse emissions through SUV’s, McMansions and jet-setting than the lady in the one-room flat who takes the bus.)

Under either a revenue-neutral carbon tax or revenue-neutral cap-and-trade, all consumers would feel the pull of rising fossil fuel prices as incentives to reduce emissions by conserving energy and switching to alternatives. The price on carbon emissions would spur entrepreneurs to offer products and services to save energy and switch to alternatives. The market, not special interests, would decide the winners.  (It’s dicey to pick winners when the technology race has just begun. That’s how we wound up with ethanol subsidies that encourage rainforest burning for corn production.)

But even then, two big problems with cap-and-trade will remain: price spikes and fat-cat traders.

The “safety valve” is a way to blunt cap and trade’s price spikes — simply open the valve if the price hits a pre-determined limit. Helpful, but a long way from a tax: the smooth, even marathon pace that gets us to the finish line. Plus, the safety valve eliminates the emissions reduction “certainty” touted by cap-and-trade proponents.

And the traders. As the ClimateWire article shows, they’re ready to eat our lunch. Why should we build those transaction costs into our system? (And many of those  costs will be hidden and would provide opportunities for gaming the system.)

Remember, it’s a marathon. We can’t afford the jackrabbit starts of price spikes and the extra weight of traders.

Photo: Flickr / Heartr3.

NYC "Congestion" Failure Provokes Questions on Carbon Pricing

By

Aerial Traffic Manhattan_1.jpgThe year-long effort to enact congestion pricing in New York City had a lot going for it:

  • Traffic congestion is roundly despised. Gridlock has few defenders.
  • NYC’s mass transit system, the asserted beneficiary of revenues from the traffic fee, is riding a 25-year upswing and is understood to be the linchpin of the city’s prosperity.
  • A broad coalition of business, labor and environmental groups supported and actively campaigned for congestion pricing.

The demise of the pricing plan — it passed the City Council last week but wasn’t brought up for a vote in the State Legislature yesterday — is prompting much hand-wringing in the City. The New York Times today decried the powerful Speaker of the State Assembly for failing to throw his weight behind the proposal. The blogs, from the estimable Streetsblog ("covering the Livable Streets Movement") to the Times’ dot Earth, are asking what pricing’s defeat says about the fate of other, larger issues, from livable urban streets to the campaign to stop climate change.

There’s soul-searching at the Carbon Tax Center as well. Having argued last year that congestion pricing and carbon taxing were thematically linked — both entail valuing the commons to preserve it; both appear income-regressive but can be made strongly progressive by fairly and effectively allocating the revenues — we’re obliged to ponder what the failure of congestion pricing portends for carbon taxes in America.

We’ve already posted a Top 10 Reasons piece to Grist. It’s a bit on the lite side, but it makes some salient points, such as this:

Misplaced emphasis on climate: Hitching congestion
pricing to climate protection, even in part, was disingenuous. The anticipated traffic reductions would have eliminated no more than 1% of NYC’s CO2. The emphasis should have been on cutting the scourge of traffic, whose theft of time, sanity, and safety from New Yorkers outweighs the climate damage from CBD-bound tailpipes by a couple of orders of magnitude.

(That was reason #10; it would probably rank higher on this blog.)

Our Grist post elicited a number of candid, private replies. Here are three worth pondering (edited, and with the names redacted):

A chemical engineer and policy analyst who worked with congestion pricing theorist and Nobel Laureate Bill Vickrey, honed in on the winners/losers conundrum:

The central problem policy problem, both here and around the world, continues to be that the losers from any policy change know who they are and are always far better organized than are the winners. Indeed, some winners are bamboozled into thinking that they will be losers. Nowhere is this more true than with congestion pricing — invariably this has been opposed by a majority before introduction but is warmly welcomed by a majority afterwards.

This is why political leadership is so important. Such leadership emerges in New York only very rarely if ever and is one of the reasons New York continues to decline relative to other states.  History tells us that this has long been true however; consider how T.R. got on the national ticket with McKinley in 1900.

A writer on transportation and public spaces blamed congestion pricing’s messenger:

Appalling though this setback is, I think it has its up-side — Bloomberg
is not really the champion you want for this kind of fundamental
change.  He (your reason #3) never really "got it" in anything other than a
gaudy, intellectualized fashion and, as you say, certainly never put in the work needed to make this
real. The plan was
never properly linked to specific, pre-visualized, and fully explained transit
and other benefits (your reason #2); and for all of Bloomberg’s newly-donned, enviro-conning
green robes he is planning a Manhattan top-heavy with the swaggerers
(your #6 reason). So I think your 10 reasons actually boil down to 1: the
Mayor.

Another writer on public policy was more pessimistic:

Your article suffers from a logical flaw. It’s fine to point out certain errors that were made. But the important issue, which you don’t address, is whether the congestion pricing plan would have passed even if such mistakes had been avoided. To me, the answer can be summed up in just three words: nein, nyet, no. After all, U.S. politicians have been talking about energy and related issues for more than three decades, and yet not one meaningful action has been taken. So why
would you expect the congestion plan to fare any better? I know I’ve said it before, but the U.S. system is in a state of rigor
mortis.

But a Bronx-born mathematician contributed this upbeat closing:

The amazing thing is that it went as far as it did in terms of being taken seriously — you and your colleagues should congratulate yourselves on that. After all the automobile is the holy icon of U.S. culture and the NY State Legislature has been notorious for being so ineffectual (how long did it take them to bring the divorcelaws into the 20th century?). So you at least had a very respectable showing and can try again.

OK, readers, what do you think about the defeat of congestion pricing in New York and its implications for taxing carbon emissions? Please post.

Photo: Flickr / dogseat.

U.S. Gasoline Demand Dropping (Finally!)

By

On the same day that real crude oil prices broke a 28-year record, the Wall Street Journal heralded a long-awaited drop in U.S. gasoline consumption.

The Journal’s lead story today, Americans Start to Curb Their Thirst for Gasoline, was a powerful rebuttal of the notion that gasoline use is inelastic, and a vote of confidence in carbon tax advocates who have insisted that rising fuel prices will dampen energy demand.

Female_Bicycle_Commuter__NYC_2007.jpgHere are excerpts from the Wall Street Journal story, spiced with our commentary.

As crude-oil prices climb to historic highs, steep gasoline prices and the weak economy are beginning to curb Americans’ gas-guzzling ways.

In the past six weeks, the nation’s gasoline consumption has fallen by an average 1.1% from year-earlier levels, according to weekly government data.

That’s the most sustained drop in demand in at least 16 years, except for the declines that followed Hurricane Katrina in 2005, which temporarily knocked out a big chunk of the U.S. gasoline supply system.

This time, however, there is evidence that Americans are changing their driving habits and lifestyles in ways that could lead to a long-term slowdown in their gasoline consumption.

Economists and policy makers have puzzled for years over what it would take to curb Americans’ ravenous appetite for fossil fuels. Now they appear to be getting an answer: sustained pain.

Of course, unlike the pain of "market-driven" high prices, the pain of socially mandated carbon pricing would be offset by rebating the revenue or tax-shifting.

Over the past five years, the climb in gasoline prices, driven largely by the run-up in crude oil, hardly seemed to dent the nation’s growing thirst for the fuel.

Conventional thinking held that consumption would begin to taper off when gasoline hit $3 a gallon.

But $3 came and went in September 2005, and gasoline demand didn’t flinch. Consumers complained about the cost of filling their tanks, pinched pennies by shopping at Wal-Mart, and kept driving.

Economists who study the effects of gasoline prices on demand say consumers tend to look at short-term price spikes as an anomaly, and don’t do much to change their habits. They might spend less elsewhere to compensate, or take short-term
conservation measures they can easily reverse, such as driving slower or taking public transportation, but the impact is minimal.

Regular gasoline prices jumped to $2.34 a gallon at the end of 2006, up 62% from 2003, according to the EIA. Yet demand continued to grow at an average 1.1% a year. Consumers were better able to absorb the increase because it was spread over
four years, and the economy was doing fairly well.

Then again, annual demand growth of just 1% while the economy was expanding at 3% was strong evidence of at least some short-run price-elasticity.

Today, a weakening economy is intensifying the effects of high gasoline prices… The combination of forces is prompting Americans to cut back on driving, sometimes taking public transportation instead. It’s also setting the stage for what may be a long-term slowdown in gasoline demand by forcing Americans to become more fuel-efficient faster.

"If you think about the fact that U.S. motorists are responsible for one out of nine barrels of oil consumed in the world…and that consumption is no longer growing the way it used to, that’s a major structural change in the market," says Adam Robinson, analyst with Lehman Brothers.

The longer gasoline prices remain high, the greater the potential consumer response. A 10% rise in gasoline prices reduces consumption by just 0.6% in the short term, but it can cut demand by about 4% if sustained over 15 or so years, according to studies compiled by the Congressional Budget Office.

The implied 0.4 long-run price-elasticity noted above is precisely the level we (CTC) assume in our 4-sector carbon tax impact model, which may be downloaded here.

As consumers make major spending decisions, such as where to live and what kind of vehicle to drive, they are beginning to factor in the cost of fuel. Some are choosing smaller cars or hybrids, or are moving closer to their jobs to cut down on driving. Those changes effectively lock in lower gasoline consumption rates for the future, regardless of the state of the economy or the level of
gasoline prices.

Anne Heedt, of Clovis, Calif., has been moving toward a more fuel-efficient lifestyle for the past few years. She owns a Toyota Prius hybrid but takes her bike on errands when weather permits.

"We’re not always going to have the same accessibility to gasoline that we’ve had in past decades, so we do have to start thinking about what we’re going to do over the next 50 years," said the 31-year-old Ms. Heedt, who used to work at a
medical office but is between jobs.

Way to go, Anne. You should be CTC’s poster child!

The housing boom encouraged the development of far-flung suburbs, contributing to longer commutes. Now developers are building more walkable neighborhoods close to city centers and public transit, and Americans are beginning to migrate back toward their workplaces, city planners and other experts say.

David Hopper, who lives in the rural community of Markleville, Ind., is preparing to move to a new house in Plainfield, cutting his commute to Indianapolis to 15 miles from 47 miles. Mr. Hopper decided to move closer to the city last summer, when gas prices hit
$3.40 a gallon in his area.

Together, Anne’s and David’s examples suggest the broad range of ways in which individuals respond to carbon-pricing signals. It’s heartening to see this reporting in a major paper like the Journal.

Pinched consumers also are speeding up their shift to more fuel-efficient cars. Sales of large cars dropped by 2.6% in 2006 and by 10.5% in 2007. In January, they plummeted 26.5% from a year earlier, according to Autodata Corp.

Car dealers are selling fewer minivans and large sport-utility vehicles. In fact, only small cars and smaller, more fuel-efficient SUVs, are showing a rise in sales. Small-car sales in January were up 6.5% from a year earlier, while sales of crossover vehicle grew 15.1%, Autodata Corp. says.

These trends evidently deepened in February. The New York Times reports that sales of SUV’s and pickups in the U.S. fell 14% last month, vs. a 5% drop in car sales.

Music to our ears. Meanwhile, the The Times is reporting that crude oil prices finally surpassed the historical inflation-adjusted peak from April 1980. How sad for Americans that the record-high price includes fabulous "rents" for oil owners and extractors. How much better instead to tax carbon fuels and re-allocate the revenues to American families.

Photo: bicyclesonly / Flickr

Bloomberg Out, Nader In U.S. Presidential Race

By

Michael Bloomberg has made it official. “I am not — and will not be — a candidate for president,” New York City’s mayor said in an op-ed in today’s New York Times.

bloomberg_hires.jpgThe article ends months of speculation that Bloomberg, a self-made billionaire who has emphasized a managerial, non-partisan approach to governing, would enter the race as an independent.

Bloomberg’s announcement robs the U.S. election campaign of an outspoken supporter of a national carbon tax. In a highly publicized speech to the U.S. Conference of Mayors last November, which we reported here, Bloomberg proclaimed his strong preference for a carbon tax over a carbon cap-and-trade scheme:

[T]he certainty of a pollution fee — coupled with a tax cut for all Americans — is a much better deal. It would be better for the economy, better for taxpayers and — given the experiences so far in Europe — it would be better for the environment… [W]hy not simplify matters … by charging a direct pollution fee? … a direct fee will generate more long-term savings for consumers, and greater carbon reductions for the environment.

[A carbon tax is] like making one right turn instead of three left turns. You end up going in the same direction, but without going around in a circle first.

Bloomberg made similar remarks favoring carbon taxes over cap-and-trade at the UN Framework Conference on Climate Change in Bali in December.

For carbon tax advocates, the potential silver lining is that Bloomberg might now refocus on gaining city and state legislative approval for his plan to cut traffic and fund transit through a congestion fee to drive into Manhattan.

The conceptual and political parallels are strong between municipal congestion pricing and national carbon taxing. Both entail ending free exploitation of “the commons”; both demand a clear commitment to invest or return the revenues progressively; and both require mobilizing the multitude of citizens, who often don’t grasp that they stand to benefit, to clamor more loudly than the polluting minority whose entitlement is threatened. A congestion pricing win in New York City could undercut the notion
that a carbon tax is politically impossible.

Meanwhile, another prominent American who supports carbon taxes declared his presidential candidacy. Ralph Nader, the consumer advocate and  anti-corporate crusader who turned 74 yesterday, entered the race last weekend as an independent candidate.

Nader_at_BYU_Alt_Commencement.jpgWhile Nader has been roundly criticized and even ridiculed as a spoiler and perennial candidate (Nader was the Green Party candidate for president in 1996 and 2000, and he ran as an independent in 2004), his campaign platform includes unambiguous support for a carbon tax. “Adopt a carbon pollution tax” is Issue #6 on Nader’s campaign issues page, Twelve Issues That Matter for 2008.

As a non-profit organization, CTC can’t endorse candidates for elective office. We are non-partisan by temperament as well. We anticipate that Nader’s candidacy could become a double-edged sword with respect to carbon taxes, elevating carbon taxing’s visibility but also hurting its credibility among Americans who have grown disaffected with him.

What do you think?

Behind British Columbia's Carbon Tax

By

We reported last week that British Columbia will implement a carbon tax of $10 per metric ton of carbon on July 1, rising in $5/tonne annual increments to reach $30 in 2012.

In both scope and size, the tax leapfrogs North America’s other, modest carbon taxes, in Quebec and the City of Boulder, Colorado. How did the tax come about? CTC supporter Jurgen Hissen filed this account from Vancouver.

The idea for a carbon tax came from the top ranks of the BC government. It wasn’t foisted upon them. I think they were actively seeking ways to justify it to the citizenry.

BC Liberals — who aren’t connected to Canada’s national Liberal Party — have always been pro small-government. When they came into office in 2001, they cut taxes and government spending extensively. BC Liberals have also historically emphasized personal responsibility and environmental issues, and a carbon tax (a consumption tax) is pretty consistent with that.800px_British_Columbia_legislature_building_roof_close_up.jpg

After meeting last year with California Governor Arnold Schwarzenegger, BC Premier Gordon Campbell resolved to set carbon reduction targets for BC. Suggestions of a carbon tax began circulating, but the real push likely came from Carole Taylor, Campbell’s finance minister.

In late 2007, Taylor assembled a committee, the Select Standing Committee on Finance and Government Services, to collect public input on the budget. The committee issued a questionnaire to every household in the province; how to tackle climate change covered three of the six questions, and two of them were what pollsters would call “leading”:

The Province currently provides tax incentives to encourage the purchase of hybrid vehicles [… etc.]. What tax changes would you make to encourage environmentally responsible choices? and

What tax changes would you make to discourage British Columbians from activities that contribute to greenhouse gas emissions?

Clearly, the government was looking to rationalize carbon taxes. The response was favorable, and crucial, not to mention broad-based. A carbon tax was backed by business leaders, a group of 60 economists from BC universities, and key religious leaders.

Taylor, the finance minister, reported getting 700 letters in support of a carbon tax (about 10 of those were mine, I think), and only about 160 opposed — a fact she cited on the day she announced the tax.

CTC invites readers from British Columbia or elsewhere to write with further details/insights on the development of BC’s carbon tax as well as potential implications for other provinces and the U.S.

Photo: Wikipedia

California Leads with Proposed Carbon Fee!

By

California, with a well-deserved reputation for leading the way on environmental protection, has done it again. Last week the Bay Area Air Quality Management District proposed a carbon fee that would apply to all Air District-permitted facilities emitting greenhouse gases. While the proposed fee is tiny — 4.2 cents per metric ton of carbon dioxide equivalent, versus the $10.00 per ton of CO2 tax we propose to be incremented each year — imposing the fee would lay a foundation for substantial carbon taxes in the future.

As proposed, the carbon fee is not revenue-neutral; it is designed to recover some costs associated with Climate Protection Program activities related to stationary sources. The small sums that would be collected don’t appear to warrant returning the money to Bay Area residents. If the fee is increased later on, the logic for making it revenue-neutral would be stronger.

According to a story in the Feb. 9 San Jose Mercury News, the proposal has elicited strong support from the Sierra Club. The Club’s executive director, Carl Pope, got it right when he stated, “There are costs associated with emitting carbon dioxide, and the people who emit it should pay the costs."

The Bay Area AQMD’s jurisdiction is all of Alameda, Contra Costa, Marin, San Francisco, San Mateo, Santa Clara and Napa Counties plus portions of Solano and Sonoma Counties. Click here to see the full proposal. Comments on the draft rule are due March 7.

After the Election

By

Rex Nutting’s Market Watch commentary (see "Quote of the Week") properly criticizes the presidential candidates for coming up with Rube Goldberg energy plans instead of having the guts to show leadership by proposing to increase the price of fossil fuels. It’s a fair critique, but it’s the rare candidate who has Senator Dodd’s courage to propose a tax while running for office. 

After the election, when there is less concern about cheap shots distorting policy discussions just before voting, it will be far easier to consider the best approach to reducing greenhouse gas emissions.  After the election it will be possible to explain that a revenue-neutral carbon tax is a tax-shift, not a tax increase, and that will be good for both the environment and the economy. After the election it will be easier to get past the rhetoric and to recognize that both carbon taxes and cap-and-trade increase prices. After the election, when there is an opportunity for a relatively objective analysis,  citizens and elected officials will be able to compare a revenue- neutral carbon tax (which raises prices gradually with an upwards trajectory that gives families and businesses time to adjust by using energy more efficiently and substituting renewable energy for coal and other fossil fuels) to cap-and-trade (which produces volatile energy prices and, under most proposed legislation, huge windfalls for polluters). 

For now, we can wait until after the election.  Or, take a look at the headlines to the right of this page to learn about the more serious discussions taking place in Canada and Europe.  

Happy New Year from the Carbon Tax Center!

By

We established the Carbon Tax Center in January 2007. As we look back on our first year, we are thrilled by what we’ve accomplished.

CTC has established a reputation as the go-to web site for objective, non-partisan information on carbon taxes, with hundreds of hits almost every day. We have participated in conferences and debates in New York, Washington and Boston, we have appeared on national television, and we’ve been featured in newspapers, magazines and blogs. Congressional staff, academics, students and interested citizens of all stripes and from many countries have all turned to our site to get up to speed on a topic that is going to become increasingly vital as Congress and a new President grapple with reducing greenhouse gas emissions and limiting the damage from climate change.

peterbowers.jpgThe good news is two-fold. One, CTC has established a very solid foundation. Two, there is widespread support for revenue-neutral carbon taxes across the political spectrum from economists, business leaders, pundits and other opinion leaders. Just take a look at our Supporters page.

But we are not naïve. We know that powerful polluters who use the atmosphere as a free dumping ground are not going to give up that entitlement without a struggle. We know that cap-and-trade has well-connected advocates, many of them with a strong economic self-interest to favor their second-best alternative over carbon taxes. We know that carbon tax opponents have tremendous financial resources they will exploit to maintain their advantages.

And we are mindful that the “T” word is unpopular with politicians. Fortunately, awareness is growing that “putting a price on carbon” is an essential element of any successful strategy to significantly reduce greenhouse gas emissions. While debate continues over the two basic ways to put a price on carbon, a carbon tax or cap-and-trade, we remain convinced that the advantages of carbon taxes are becoming increasingly clear.

A legislated price on carbon is unlikely before a new Congress and President take office, providing time for careful examination of the relative merits of a carbon tax and cap-and-trade. We intend to use the time to frame the choice between an equitable revenue-neutral carbon tax and cap-and-trade schemes that provide huge windfalls to polluting industries and the financial community. This will help voters and elected officials grasp the huge benefits of the prompt reductions in greenhouse gas emissions that will result from an easily implemented revenue-neutral carbon tax, compared to the excruciatingly slow reductions that would result from the endlessly tendentious process of implementing a cap-and-trade scheme.

CTC intends to play a central role in the ongoing debate. To do so, we need your generous financial support. As you make your end-of-year contributions, please think of the Carbon Tax Center and click our Donate Now button or click here for instructions on making a contribution.

Thanks and Happy New Year!

Daniel Rosenblum
Charles Komanoff
Co-Directors

Photo: Peter Bowers / Flickr

Cracks in USCAP?

By

Are cracks appearing in the United States Climate Action Partnership?

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

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

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

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

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

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

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

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

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

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

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

Photo: Terry Bain / Flickr

Polling Shows Growing Support for Carbon Taxes

By

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

Clear Cut Voting Booth _ Mario Zucca Illustration_1.jpgThe most recent poll, a Field Poll published on Nov. 9, reports that a majority of Californians are in favor of a carbon tax. Some 72% support a carbon tax on business, although this declines to 53% if the tax were to result in Californians’ paying higher prices for goods and services. Support for the tax grows to 65% if the tax revenues are spent solely on reducing greenhouse gas emissions.

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

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

Image: Mario Zucca Illustration / Flickr.