Why taxes on carbon pollution are essential, what’s happening now, and how you can help


Our new video, “An Earthling’s Guide to Taxing Carbon,” shows how a carbon tax works and why the U.S. and other nations must make taxing carbon the central policy to combat climate change:

 

Earth’s climate is changing in costly and painful ways. 2014 was the globe’s hottest year on record, and the dozen warmest have all come after 1997, as this graphic shows all too clearly.

Global warming not happening? Look again.
Global warming not happening? Look again.

Yet the transition from climate-damaging fossil fuels to energy efficiency, renewable sunlight and wind energy is slow and halting. The Number One obstacle is that the market prices of coal, oil and gas don’t include the true costs of carbon pollution. A briskly rising U.S. carbon tax will transform energy investment, re-shape consumption, and sharply reduce the carbon emissions that are driving global warming.

  • A carbon tax is an “upstream” tax on the carbon contents of fossil fuels (coal, oil and natural gas) and biofuels.
  • A carbon tax is the most efficient means to instill crucial price signals that spur carbon-reducing investment. View our spreadsheet to see just how fast emissions will fall at different tax levels.
  • A carbon tax will raise fossil fuel prices — that’s the point. The impact on households can be softened through “dividends” (revenue distributions) and/or reducing other taxes that discourage hiring and investing (“tax-shifting or swapping”).
  • Carbon taxing is an antidote to rigged energy pricing that helps fossil fuels destabilize earth’s climate. Unlike cap-and-trade, carbon taxes don’t create complex and easily-gamed “carbon markets” with allowances, trading and offsets.
EPA power plant rule can't hold a candle to economy-wide CO2 charge.

EPA power plant rule can’t hold a candle to an economy-wide CO2 charge.

Latest from the Blog:

A Carbon Tax Can Carry Earth Day’s Legacy

April 22, 2015 by Charles Komanoff Comments (0)

In 1970 I was teaching math in a New York City suburb. On Earth Day I stood at a highway off-ramp with members of the high school ecology club. One of their signs read, “The Earth is a Closed Garage.” Another said, “Make Polluters Pay.”

There’s been some progress since then. Breathing New York’s air, once equated to smoking two packs of cigarettes a day, is many times safer. Wind turbines now provide five percent of the nation’s power, and electricity produced with solar cells rose ten-fold in the past three years. Driving has flatlined nationwide over the past decade, partly because Americans are strapped but also because the intoxication with cars is wearing off.

That’s great news for the environment, but it’s not nearly enough for climate. CO2 levels are still rising inexorably. Ditto global temperatures, polar ice melting and extreme weather. Emissions need to be cut radically even as seven-and-a-half billion people strive for prosperity.

For that to happen, prices of fossil fuels have to reflect the climate costs of carbon pollution. The way to do this, of course, is with carbon taxes:

To demystify carbon taxes and showcase their appeal, we’re rolling out the Carbon Tax Center’s first video. It explains how a carbon tax will transform investment, re-shape consumption and sharply reduce carbon emissions. As the video shows, no other policy can match its reach or simplicity. No other policy can be replicated globally, from China to Chile to Chad.

A carbon tax is no mere “technical fix.” It’s both a symbol and a means for us to respect nature and each other.

The central messages on Earth Day 1970 were to abide by nature’s limits and make polluters pay. On this Earth Day, let’s spread the word about a carbon tax. Let’s educate and organize so that the U.S. and other nations make taxing carbon the central policy to combat catastrophic climate change and sustain the Earth we love.

FacebookTwitter

Carbon Tax Polling Milestone: 2/3 Support if Revenue-Neutral

April 15, 2015 by Charles Komanoff Comments (12)

For more years than I care to count, the Carbon Tax Center beseeched pollsters to take Americans’ temperature on revenue-neutral carbon taxes. Time and again we explained that polling about carbon taxes had to incorporate the option of returning revenues to households ― as most carbon tax bills would do. Otherwise, the tax came off as all stick and no carrot, and about as appealing to most folks as a cold shower.

Finally, a Stanford University-Resources for the Future poll asked that question. The results, released today, show that two-thirds of Americans support making corporations pay a price for carbon pollution, provided the revenues are redistributed, i.e., made revenue-neutral. The poll’s finding is the most powerful indication yet that the public is warming to carbon taxation as the premier policy for combating climate change.

Poll-Graphic-Pie-Chart-AltStanford and RFF commissioned the polling firm SSRS to interview 1,023 U.S. adults on climate-related issues in January. Two findings from the poll — that Americans of Hispanic descent are particularly climate-concerned, and that half of Republicans would favor a presidential candidate who supports fighting climate change — led to front-page New York Times stories. (Click here for the story on Hispanics and here for the story on Republicans.) The full poll was made publicly available today at a briefing at the National Press Club in Washington.

The poll was supervised by RFF university fellow Jon Krosnick, who has been polling Americans on climate change for two decades as head of Stanford’s Political Psychology Research Group. Its section on carbon taxation included these two questions: Read more…

FacebookTwitter

Climate Idealism Can’t Hold a Candle to Collective Action

March 30, 2015 by Charles Komanoff Comments (19)

Why do Copenhageners ride bicycles? The key reason, says Yale economist and best-selling author (“Irrational Exuberance”) Robert J. Shiller, is that Danes are idealists who resolved, after the oil crisis of the 1970s, “to make a personal commitment to ride bicycles rather than drive, out of moral principle, even if that was inconvenient for them.”

“The sight of so many others riding bikes motivated the city’s inhabitants and appears to have improved the moral atmosphere enough,” Shiller wrote in yesterday’s New York Times, that the share of working inhabitants of Copenhagen who bike has reached 50 percent.

From “Copenhagen: City of Cyclists” (2010), a report by the City of Copenhagen.

From “Copenhagen: City of Cyclists” (2010), a report by the City of Copenhagen.

In much the same way, Shiller argues, “asking people to volunteer to save our climate by taking many small, individual actions” may be a more effective way to bring down carbon emissions than trying to enact overarching national or global policies such as carbon emission caps or taxes.

Goodness. Rarely do smart people so badly mangle both the historical record and basic economics. I say “people” because Shiller attributes his column’s main points to a new book, “Climate Shock: The Economic Consequences of a Hotter Planet” by Gernot Wagner of the Environmental Defense Fund and Martin L. Weitzman, a Harvard economist. And I say “smart” because the three stand at the top of their profession. Shiller won the Economics Nobel in 2013, Weitzman is a leading light in the economics of climate change, and Wagner is highly regarded young economist.

But mangle they have (I haven’t seen the Wagner-Weitzman book but assume that Shiller represents it fairly).

Let’s start with the history, which is fairly well known to anyone versed in cycling advocacy, as I’ve been since the 1980s, when I spearheaded the revival of New York City’s bike-advocacy group Transportation Alternatives (as recounted here.) Copenhagen’s 40-year bicycle upsurge, and indeed much of the uptake of cycling across Denmark, Germany and the Netherlands, came about not through mass idealism but from deliberate public policies to help cities avoid the damages of pervasive automobile use while reducing oil dependence.

If idealism played a part at the outset it was a social idealism that instructed government to undertake integrated policies ­― stiff gas taxes and car ownership fees; generously funded public transit; elimination of free curbside parking; provision of safe and abundant bicycle routes ― that enabled Copenhageners to do what they evidently desired all along: to use bikes safely and naturally.

The telltale is in the graphic. Only one in eleven Copenhageners who cycle have environment and climate in mind. The majority do it because it’s faster than other ways to travel, and around a third of cyclists say they ride because it’s healthy, inexpensive and convenient ― belying Shiller’s meme of Danes idealistically choosing bikes despite their inconvenience vis-à-vis cars. Read more…

FacebookTwitter

For Bioenergy, Mandates and Subsidies Trump even Carbon Taxes

March 26, 2015 by James Handley Comments (3)

The Carbon Tax Center is often asked why a carbon tax is needed; wouldn’t removing tax subsidies be sufficient to let efficiency and renewables compete on even terms with fossil fuels?

Our stock answer is that the subsidies the tax code confers on fossil fuels (as well as on some other extractive industries) are peanuts compared to their environmental subsidies, especially free dumping of CO2 into the atmosphere. The needed market corrective is huge and can come about only via a significant tax on carbon pollution.

Ethanol refinery

Ethanol production has always been energy-intensive

But bioenergy presents a starkly different picture. As recently as a decade ago, bioenergy sources — biofuels for transportation and biomass for electricity — seemed to have gained full-fledged membership in the “renewable energy club” along with wind, solar, small hydro and geothermal energy. To boost bioenergy production, Congress endowed biofuels with subsidies that now amount to about $1 per gallon of ethanol and $2 per gallon of biodiesel.

Congress also enacted mandates that, if left in place, will compel a tripling of U.S. biofuel output by 2022. Biomass for electricity generation is also poised to gain a huge boost if the final version of EPA’s Clean Power Plan carries over a longstanding but highly questionable assumption that biomass burning is “carbon-neutral.”

Since that honeymoon, closer scrutiny of bioenergy’s lifecycle emissions has been revealing a complicated and far less promising picture. Biofuel production typically involves substantial fossil fuel inputs. Moreover, biofuel mandates and subsidies tend to push land out of other carbon-sequestering uses including food production. And closer study of biomass burning is calling into question the “carbon-neutral” assumption: that growing wood or other biomass captures the same amount of CO2 that subsequent burning for electricity generation releases.

We discuss these issues in detail — and with abundant links to the key literature — in our new “Carbon-Taxing Biofuels” page. While our views are still evolving, we think it’s clear that removing bioenergy subsidies and mandates and preventing EPA from letting electricity generators claim credit for biomass as carbon-neutral would do more to internalize the climate costs of bioenergy than even a hefty carbon tax.

It’s a thorny issue that will only grow more important. Take a look at our new page and let us know what you think.

Photo: Iowa State University Extension Service

FacebookTwitter

One Cheer for the Guardian’s Divestment Campaign

March 18, 2015 by James Handley Comments (5)

The worldwide fossil fuel divestment campaign got a huge boost this week when Guardian editor Alan Rusbridger boldly thrust his paper into the fray. Britain’s most respected newspaper is urging readers to sign a petition by 350.org demanding that the Gates Foundation and the Wellcome Charitable Trust divest from the world’s top 200 fossil fuel companies within five years.

Divestment can’t loosen the fossil fuel stranglehold without a carbon tax.

Combined, the two charities manage over $70 billion in assets. Both say they consider climate change a  serious threat. But last year the Gates Foundation invested at least $1 billion of its holdings in 35 of the top 200 carbon reserve companies, while the Wellcome Trust invested $834 million in fuel-industry mainstays Shell, BP, Schlumberger, Rio Tinto and BHP Billiton.

We’re both elated and concerned by Rusbridger’s audacious move. Elated that this distinguished and brave journalist has thrown down the gauntlet to the global fossil fuel industry. But concerned that this divestment campaign may raise false hopes.

As Matthew Yglesias articulated last year in a thoughtful piece on Slate, divestment by socially responsible investors, universities and even governments won’t starve capital flows to fossil fuel corporations anytime soon. That’s because in a global market, every share of stock we activists dutifully unload will be snatched up in milliseconds by some trader who can bank on humanity’s continued dependence on fossil fuels to continue generating profits.

South Africa’s historic divestment campaign — the one that helped topple Apartheid and enshrined divestment as a tool against oppression  — was paired with a UN-sponsored boycott of South African goods. Not just aiming at the supply of capital but destroying the demand for goods sheared the Apartheid regime’s economic lifeline to the rest of the world more than either policy could have done alone.

No, we’re not suggesting a global boycott of fossil fuels. Rather, we point to the Guardian’s campaign to reiterate that the best and maybe only broadly effective way to reduce fossil fuel demand (which is the point of a boycott) is with a carbon tax. Economists agree on that policy prescription just as strongly as climate scientists agree on the diagnosis. And national-level carbon taxes can be designed to draw our or any nation’s global trading partners into carbon taxing, which means that a move by a big economy to impose a carbon tax will trigger a wave of followers.

So by all means, divest. The cultural and perhaps political opprobrium that divestment can spark is long overdue for the fossil fuels industry. But let’s not assume that divestment alone will break the chains of fossil fuel dependence. Even with the Guardian’s welcome campaign, the world still needs a transparent price on carbon pollution to strangle demand for fossil fuels by replacing them with non-carbon alternatives.

FacebookTwitter