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.

Time for a Floor on Gas Prices?

06/9/2008 by Daniel Rosenblum

High gasoline prices are ravaging rural Americans, particularly families with low incomes that drive relatively long distances in gas-guzzling pick-up trucks and vans. As described in today’s front-page New York Times story Rural U.S. Takes Worst Hit as Gas Tops $4 Average:

Here in the Mississippi Delta, some farm workers are borrowing money from their bosses so they can fill their tanks and get to work. Some are switching jobs for shorter commutes.

People are giving up meat so they can buy fuel. Gasoline theft is rising. And drivers are running out of gas more often, leaving their cars by the side of the road until they can scrape together gas money.

Now imagine that Congress had enacted a revenue-neutral carbon tax years ago. Instead of the current high gasoline prices combined with huge profits for the oil industry, we would have high gasoline prices offset by large dividends being returned to all Americans. And, if the revenue-neutral carbon tax had been phased in slowly as recommended by the Carbon Tax Center, drivers would have had time to adjust to the higher costs by purchasing more fuel-efficient vehicles and changing their driving habits.

That’s a missed opportunity with devastating economic consequences. What do we do now? Provide a gasoline-tax holiday to reduce the price at the pump? Impose a carbon tax and increase the price of gasoline? The gas tax holiday idea was a cheap political stunt that was effectively rejected by the voters in North Carolina and Indiana, and by most politicians.

Should gasoline prices be increased further now? Maybe not. While a carbon tax on other fossil-fuels is still necessary, maybe it’s time to just maintain the status quo on gasoline prices.

Seventeen months ago the Carbon Tax Center proposed phasing in a revenue-neutral carbon tax that would have resulted in a ten cent a year increase in gasoline taxes for each of ten years. A $1 increase in gasoline taxes after ten years would have resulted in a somewhat lower increase in gasoline prices since the full amount of the tax would not have been passed through to consumers.

We have already seen prices increases far in excess of those which would have resulted from the CTC proposed carbon tax. The good news is that we are seeing just the type of positive results we expected. People are buying smaller and more efficient cars and they are changing their driving habits. The bad news is that there has been no carbon tax dividend to help people deal with the higher prices. The oil companies and the oil producing countries aren’t giving back any of their profits.

Now is the time to maintain high gas prices and to lock in efficiency gains by using a carbon tax to create a “floor” gasoline price. If market forces (or and end to market distortions) results in lower oil prices, gasoline taxes would maintain the current pump price. Prices would remain the same, but the gasoline taxes would be returned to all Americans through a carbon tax dividend.

Coincidentally, the Tampa Tribune today published a powerful editorial favoring a carbon tax over cap-and-trade, stating:

A better way to approach the problem is to put a direct tax on carbon, then return the extra revenue to the public through lower income taxes and more federal support of proven technologies, such as public transit. Instead of trying to pick winners and losers in the private sector, Congress should increase grants for university research in clean energy.

While the Carbon Tax Center prefers a carbon tax dividend to federal support of what Congress might consider to be “proven technologies,” we welcome the Tampa Tribune’s support of carbon taxes and its recognition that such taxes make sense even with current gasoline prices:

Consider how effectively the higher price of gasoline this year has begun to change behavior. Ridership on Hillsborough's transit system, HART, is up 7.2 percent this year. Sales are strong for smaller cars. Motor scooters are selling like hotcakes.

But consumers are right to be angry. They're getting no help making the transition to a lower-carbon life. The profits from expensive oil are going to big oil companies, foreign producers and speculators, while most of us see our standard of living fall.

It’s time to use a revenue-neutral carbon tax and dividend to maintain the environmental benefits of today’s high gasoline prices, but to redirect the cash flow from the oil industry to all Americans.

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

06/7/2008 by Charles Komanoff

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

Toward a Richer, Greener Canada

06/6/2008 by Charles Komanoff

Toward a Richer, Greener Canada (Canadian Liberal Party leader Stephen Dion writing in the National Post)

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)

Revenue Recycle: Lessons (or not) from Europe

03/25/2008 by Charles Komanoff

Today's New York Times turned over a patch of its most coveted space -- on its op-ed page -- to a curious essay. On Carbon, Tax and Don’t Spend is vexing and even a tad bipolar, in one moment calling a carbon tax "glamorous" (who knew?), but in the next insinuating that a revenue-neutral carbon tax could be a big no-no for the U.S.

The article's big idea is that carbon tax revenues should be allocated to industry as lump-sum incentives to invest in cutting carbon, rather than returned to households to offset higher prices for energy and products. To support this thesis, the author points to carbon-taxing Scandinavia, where Denmark, the only country to dedicate carbon tax revenues to industry, is also the only one where CO₂ emissions have plummeted.

On close examination, this "finding" turns flimsy. The fly in the ointment is that while all four Scandinavian countries have indeed levied some form of carbon tax since the early 1990s, in each case the tax levels so far have been on the "lite" side, making it difficult to tie changes in emissions to specific tax and revenue policies.

Sweden, for example, taxes carbon at $150 per ton (that's a hefty $41 per ton of carbon dioxide), as we report elsewhere on this site, but fuels to generate electricity are untaxed, and industries pay only 50%. Denmark's carbon tax is $14 per ton of CO₂, reports Alan Durning of Sightline Institute; while that's not chicken feed -- it equates to around half-a-buck per gallon of gasoline -- it's still insufficient to account for more than a fraction of Denmark's carbon reductions, especially considering that, as in Sweden, industry in Denmark is taxed at only half the going rate.

Denmark has trimmed CO₂ emissions impressively. The Times op-ed puts the drop in per-capita emissions at 15% from 1990 to 2005; using regression analysis, which infers the trend line from all the annual data points instead of just the first and last, we calculated the per-capita drop at 15% using EIA data and 18% using CDIAC data. This decline is heartening, but we're inclined to ascribe it primarily to Denmark's aggressive pursuit of wind power (which now accounts for over 20% of electricity generation), steep taxes on coal-fired electricity (not quite a carbon tax though with similar impact) and ongoing promotion and enabling of bicycle transportation, which now accounts for 24% of urban trips by vehicle, nationwide.

Our big beef with the article is with its use of Norway as a lesson in failed carbon taxing. Unlike Denmark, Norway doesn't dedicate carbon tax revenues to industry, and per capita emissions have risen 43%. Ergo, implies the author, carbon taxing with revenue return is tantamount to allowing producers "to continue polluting while handing over cash to the government." Not only is that argument a non sequitur, its premise may be shaky if Norway's carbon accounting hasn't been adjusted for oil infrastructure and exports, which have grown enough recently to make Norway the world's third largest oil exporter.

We'll concede that countries with sturdy safety nets and small carbon taxes can probably get away with directing the tax revenues to industry or other agents for low-carbon investment. But for big carbon taxes in the USA, we think a revenue-neutral tax with revenue recycling will be imperative to keep not only poorer Americans but much of the middle class from being pushed to the wall.

Notwithstanding our dissatisfaction with the op-ed, we regard the author, Monica Prasad of Northwestern University, as an interesting thinker. Her new paper on which she based her essay, Taxation as a Regulatory Tool: Lessons from Environmental Taxes in Europe, is a provocative work that uses behavioral economics as a window for evaluating taxes and other policies for curbing carbon emissions. It's worth careful study, by us and by you.

Photo: Flickr / Less Salty.

Revenue-Neutrality or Eliminate the AMT?

10/19/2007 by Daniel Rosenblum

The Carbon Tax Center recommends that a carbon tax be revenue-neutral for both equity and political reasons, as discussed in an issue paper on this site. We recognize, of course, that Congress will inevitably see carbon tax revenues as the funding source for a variety of needs such as: paying for advanced technology, energy efficiency and renewables to reduce greenhouse gas emissions; providing Americans with decent health care; or, at the other extreme, paying the huge costs of the disastrous war in Iraq.

Carolyn Lochhead, writing in the San Francisco Chronicle this week, describes other possibilities in her column excerpted below:

Rep. Charlie Rangel, chair of the House Ways and Means Committee, is hunting for $1 trillion to repeal the alternative minimum tax. Sen. Barack Obama, like every Democratic candidate, wants to end global warming.

One day, someone's going to put two and two together and discover that East Bay Rep. Pete Stark's carbon tax could address global warming and budget troubles at the same time.

San Francisco pols are ahead of the curve, proposing a gas tax -- a close cousin of the carbon tax -- to fight global warming.

Of course a carbon tax is about as popular in Washington as leprosy. Obama, like most Democrats, is still talking about making "polluters pay," as if only businesses burn fossil fuels, not those people you see driving cars and living in houses.

In policy circles, a carbon tax is a no brainer, embraced by lefties like Stark and conservatives like former Bush economic advisor Gregory Mankiw. It's a highly efficient way to reduce demand for fossil fuels and induce alternative energy supplies by using market forces. That's also why it gags politicians: it incorporates the true cost of fossil fuel consumption in prices. Polluting consumers would pay too.

But politicians like the money it could raise. Mankiw estimates that a $1 a gallon gasoline tax could bring in $100 billion a year; a carbon tax could generate much more by hitting all fossil fuels.

Meanwhile, the onrushing baby boom retirement is about to bankrupt the country -- nevermind the alternative minimum tax that promises to swallow 23 million more people this year unless Rangel miraculously finds his $1 trillion.