Europe Has Had Trouble Handling Its Carbon Market

06/20/2008 by Charles Komanoff

Europe Has Had Trouble Handling Its Carbon Market (NYT)

National “EJ” Coalition Blasts Cap-and-Trade, Backs Carbon Tax

06/13/2008 by Charles Komanoff

Condemning carbon trading as “fraught with uncertainties, lack[ing] transparency and creat[ing] large opportunities for emitting facilities to engage in fraud,” a national coalition of environmental justice organizations has called for a federal carbon tax to address “the most critical issue of our time” — the climate crisis.

The June 2 statement from the Climate Justice Leadership Forum is the latest sign of mounting disaffection with the top-down push for carbon cap-and-trade. It is particularly significant because the 28 signatory organizations, which span the country from Anchorage to New Orleans and from Oakland to New York City, have been the spearhead of a rising movement by communities of color to crack open the historically affluent and white U.S. environmental lobby, much of which has backed the cap-and-trade approach to pricing carbon emissions.

Moreover, CJLF’s endorsement of “an equitable carbon tax” serves notice that lower-income and “minority” constituencies are concluding that the disproportionate impacts of carbon taxes and other user fees can (and must) be reversed through progressive use of the tax revenues. Indeed, the group’s statement declares that:

An equitable carbon tax must be set high enough to encourage emissions sources to make financial investment in technological controls and energy efficiency, and to begin researching and developing clean, renewable energy options.

A carbon tax cannot remain static and should not merely track inflation but should rise over time so that resource conservation and development of clean renewable energy can continue to be an attractive alternative to fossil fuel use.

Despite agreeing on the desirability of carbon taxes, CJLF and CTC differ on the important question of revenue treatment. The Carbon Tax Center wants 100% of carbon tax revenues to be returned to Americans via either tax-shifting or regular “dividends” to safeguard less affluent families who, on average, consume less energy than the wealthy. In contrast, the Climate Justice Leadership Forum urges:

Program revenue from a carbon tax should be used to fund programs designed to wean the economy off fossil fuel; should provide assistance for vulnerable workers and communities working to transition to the new economy; should include subsidies for energy efficiency that prioritize low- income communities and communities of color, particularly those living in vulnerable areas (coastal zones, floodplains, artics, urban areas).

CTC strongly supports such efforts but wants them funded from general revenues to avoid the horse-trading that could otherwise “raid” the carbon tax revenues and reduce dividends available to families. Still, our tactical difference with CJLF pales beside our shared perspective on the importance of enacting carbon taxes instead of carbon cap-and-trade.

Here’s part of CJLF’s critique of carbon cap-and-trading:

A cap and trade system creates a volatile market that does not create business incentives to invest in new technologies because prices of emissions credits could be less than the price of new technologies. A cap and trade system makes economic planning difficult because the market price, lacking regulation, is not consistent and is difficult for businesses to predict.

In contrast, CJLF unequivocally supports carbon taxing:

A carbon tax carbon reduction system has been found by scientists, economists, policymakers and regulatory analysts to be the most efficient means to reduce carbon emissions.

A carbon tax can insure predictability and create immediate incentives for emitters to invest in new cleaning technology for polluting facilities.

Signatories to the CJLF statement are listed below (as of June 1). As we see it, the coalition's statement is both a milestone in climate advocacy and an indication that with growing public exposure, support for carbon pricing is slipping away from cap-and-trade and moving toward carbon taxing.

Alaska Community Action on Toxics, Anchorage AK • Arbor Hill Environmental Justice Corporation, Albany, NY • Asian Pacific Environmental Network, Oakland, CA • California Environmental Rights Alliance, Los Angeles, CA • Clark Atlanta University Environmental Justice Resource Center, Atlanta, GA • Communities for a Better Environment, Los Angeles, CA • Community Coalition for Environmental Justice, Seattle, WA • Community In-power and Development Association, Port Arthur, TX • Connecticut Coalition for Environmental Justice, Hartford, CT • Deep South Center for Environmental Justice at Dillard University, New Orleans, LA • Detroiters Working for Environmental Justice, Detroit, MI • Environmental Justice Action Group, Buffalo, NY • Environmental Justice Climate Change Initiative, Oakland, CA • Environmental Research Foundation, New Brunswick, NJ • For a Better Bronx, Bronx, NY • Harambee House Inc., Savannah, GA • Indigenous Environmental Network, Bemidji, MN • Jesus Peoples Against Pollution, Jackson, MS • Just Transition Alliance, San Diego, CA • Land Loss Prevention Project, Durham, NC • National Black Environmental Justice Network, Washington, D.C. • National Community Revitalization Alliance, Washington, D.C. • New Jersey Environmental Justice Alliance, Trenton, NJ • New York City Environmental Justice Alliance, New York, NY • People Organizing to Demand Economic & Environmental Rights (PODER), San Francisco, CA • Southwest Network for Economic and Environmental Justice, Albuquerque, NM • United Puerto Rican Organization of Sunset Park (UPROSE), Brooklyn, NY • WE ACT for Environmental Justice, Harlem, NY 

Photo: Flickr / Brooke Anderson.

NY Cap-and-Trade Plan Delayed Again

06/10/2008 by Charles Komanoff

NY Cap-and-Trade Plan Delayed Again (Albany Times Union)

Hansen on Next Climate Steps: Charge Polluters; Pay People

06/8/2008 by Charles Komanoff

Hansen on Next Climate Steps: Charge Polluters; Pay People (dotEarth; updated, w/ slideshow)

C.A.R.E. — Cap & Auction, Rebate Everything

06/7/2008 by Charles Komanoff

C.A.R.E. -- Cap & Auction, Rebate Everything (Gristmill)

Boxer the Trapper (of Global Warming Deniers)

06/7/2008 by Daniel Rosenblum

Guest Post by James Handley

I'm a bit surprised that Republicans fell into Boxer's trap so predictably. With a slim Democratic majority in the Senate and a promised presidential veto, the Lieberman-Warner (“Climate Security”) bill never had a chance. Senate Environment and Public Works Committee Chair Barbara Boxer forced a vote so the environmental score-keepers could notch one up for the Ds and one down for the Rs.

The bill was deeply flawed -- Friends of the Earth, Greenpeace and a coalition of other progressive environmental groups point out that it would GIVE AWAY most of the carbon emission permits to polluters. Instead, these groups advocate auctioning ALL permits. Both Hillary Clinton and Barack Obama also support 100% auction. So Lieberman-Warner was already way behind the political curve.

The bill would have auctioned a minority of permits. Who would the lucky revenue winners have been? Mostly big (polluting) energy corporations.

Rep. Markey (D-Mass) introduced a House bill to auction 97% of permits and distribute revenue to individuals, while Sen. Corker (R-Tenn) offered similar amendments in the Senate: worthy improvements that didn’t get serious consideration (yet).

Lieberman-Warner was a trial balloon, but more than that, it was a trap to entice the howling dogs who deny the climate problem out into the open so Democrats and environmental groups can campaign against them. As legislation, it's a failure. As political strategy, it lured them out and slapped shut with the alacrity of a mouse trap. I can't help wondering why the Republican leadership didn't try to improve the bill (or at least fake doing so) instead of obstructing it. There's plenty to improve on (like moving from cap-and-trade to a carbon tax and requiring revenue-neutrality) and they could have avoided being tarred as Neanderthal global warming deniers.

Boxer's political trick worked and may provide the Democratic Party with real political benefits as voters register their impatience in November. Unfortunately, the focus on a poorly-designed bill and the failure to consider constructive changes resulted in a wasted opportunity.

Economists from left to right agree that the gold standard for effective climate policy is a revenue-neutral carbon tax with dividend. Maybe the spectacular crash of Lieberman-Warner will help us start that much-needed discussion after the election.

How About a Cap-and-Trade Dividend?

06/5/2008 by Charles Komanoff

How About a Cap-and-Trade Dividend? (Robert Reich in Wall Street Journal)

Not Deficit-Neutral, Revenue-Neutral

06/3/2008 by Charles Komanoff

Guest Post by James Handley

Senator Barbara Boxer proudly labels her Climate Security Act “deficit-neutral.” But what our country needs is a climate deal that’s revenue-neutral.

The CSA (co-sponsored by Boxer with Senators Lieberman & Warner) is a cap-and-trade bill mandating government-issued permits for every source that emits carbon dioxide into the atmosphere. The number of permits would shrink gradually, thus forcing down emissions. But who gets the trillions in revenues from the government’s auctions of the permits?

Actually, only about half of the permits would be auctioned under the CSA. In 2012, the initial year, 69% would be given away to emitters. Even as late as 2050, 21% of the permits would be handed out to polluters. All told, CSA authorizes the biggest legislated transfer of wealth in U.S. history.

Opponents of the giveaway have been gathering strength for months and demanding auctioning 100% of the permits. They include Friends of the Earth (“Fix or Ditch Lieberman-Warner”), presidential candidates Clinton and Obama, and a new group, Cap and Dividend, that wants auction revenues distributed to taxpayers as dividends. As the Congressional Budget Office suggested in a recent report  (summarized here), combining 100% permit auctioning with ironclad revenue recycling would go a long way to making cap-and-trade more effective and equitable. Indeed, these steps would eliminate two of the four major inefficiencies of cap-and-trade, bringing it much closer to a carbon tax with dividend. (The remaining two, uncontrolled price spikes and profiteering by traders, would be banished by a revenue-neutral carbon tax with dividend.)

But CSA isn’t revenue-neutral, it’s just deficit-neutral. Boxer’s Senate Environment and Public Works Committee has a slew of ways to distribute hundreds of billions in permit revenues to special interests rather than returning it to individuals or using it to reduce other taxes.

In its present form, CSA’s giveaways include carbon capture and sequestration (which under the most optimistic scenario would ensure that electricity from coal costs more than wind power) and nuclear power (whose historical annual subsidies exceeded cumulative subsidies for wind until recently). And, of course, big bucks to help biofuels pursue their apocalyptic trifecta of increasing greenhouse gas emissions, driving up food prices and leveling rainforests.

The alternative is obvious; making cap-and-trade revenue-neutral by distributing the auction revenues to taxpayers. An amendment to the Climate Security Act offered by Sen. Bob Corker (R-Tenn) would at least dispense some of the revenue via taxpayer dividends, thus offsetting some of the impacts of higher prices on households. Other amendments proposed by Corker would prohibit permit giveaways and also bar emitters from bypassing permit requirements by buying cheap offsets overseas, a practice that has been badly abused in the EU’s carbon cap-and-trade system.

So why are some Democrats calling Sen. Corker’s amendments “poison pills” that would prompt them to kill the legislation? Are Corker's worthy changes to Boxer-Lieberman-Warner truly beyond the pale of our political system? Or are both parties ideologically wedded to subsidies and hostile to returning carbon-pricing revenues to individuals?

At least, and at last, a global warming bill is to be debated on the Senate floor. Perhaps the best outcome would be for this deeply-flawed first attempt to die and make way for a real discussion of a carbon tax with dividend.

Photo: Flickr / Ma-Eh

Debate on Climate Bill Is a Challenge for Candidates

06/2/2008 by Charles Komanoff

Debate on Climate Bill Is a Challenge for Candidates (NY Times)

Industries Allied to Cap Carbon Differ on the Details

06/2/2008 by Charles Komanoff

Industries Allied to Cap Carbon Differ on the Details (NY Times)