Canada Day Resolution: Don’t Let the Politicians Do Your Thinking For You

07/3/2008 by Charles Komanoff

Canada Day Resolution: Don't Let the Politicians Do Your Thinking For You (Globe & Mail column)

A Convenient Tax - June 2008

06/27/2008 by Daniel Rosenblum

We launched the Carbon Tax Center seventeen months ago to inform and engage the public about the need for and benefits of revenue-neutral carbon taxation. Coincidentally, that same week the United States Climate Action Partnership, a coalition of mainstream environmental organizations, major electricity generators and giant industrial corporations, announced its formation and legislative agenda: a federal carbon cap-and-trade system. To state the obvious, USCAP has a lot more money and political clout than we do. Not surprisingly, USCAP managed to buy a tremendous amount of press and political support for its cap-and-trade program.

Our strategy at CTC has been simple. We provide an objective source of carbon tax and cap-and-trade related facts, economic arguments and news. We let the public know about the broad support for a carbon tax from economists and opinion leaders across the political spectrum. We were confident the public and Congress would eventually recognize that a revenue-neutral carbon tax is far superior to cap-and-trade for a variety of efficiency and equity reasons that we set forth in an issue paper on our Web site and in a variety of debates and other forums. We expected that Americans would see that the cap-and-trade scheme proposed in bills such as Lieberman-Warner is essentially a tax, with the revenue doled out to special interests. We were betting that once cap-and-trade was revealed as a hidden tax proposal, its putative political advantage over a straightforward carbon tax would vanish.

Events are proving us right. Cap-and-trade’s aura of inevitability evaporated in the U.S. Senate this month. Why? Because, just as we predicted, Senators balked at the cap-and-trade bill’s complexity, its windfall profits for carbon polluters and the feeding frenzy to distribute the revenues in classic pork-barrel fashion.

We don’t buy the notion that in rejecting cap-and-trade, the Senate is defying the public outcry for an effective response to global warming. As John Tierney wrote in his New York Times science blog, “Maybe a better deal — and a better policy — will emerge from this failure.” Tierney emphasized that James Hansen, the NASA climate scientist who has been so outspoken on the imminence of global warming, now backs a “tax-and-dividend approach” with carbon revenues “divided equally, so that people who use less energy than average — like lower-income people — would get back more than they spend.” As Tierney pointed out, “Refunding money directly removes the temptation for Congress to treat … carbon-reduction revenues as a chance to dispense trillions of dollars worth of favors — as proposed in last week’s bill, which was aptly dubbed ‘pork-and-trade.’”

Sound familiar? It should. Hansen’s proposal is the same revenue-neutral carbon tax the Carbon Tax Center has been urging all along. In fact, if you’ve been keeping up with our posts you may have noticed that CTC adopted the tax-and-dividend terminology several weeks ago, a switch we picked up from Peter Barnes’ excellent work on cap-and-dividend.

Meanwhile, as readers of our posts and our “Latest News” headlines surely know, the real action on revenue-neutral carbon pricing is in Canada. Liberal Party Leader Stéphane Dion has transformed the climate debate in Canada with his proposal for a $15.4 billion, 4-year “Green Shift.” Read our post on the subject for a quick summary, the Green Shift Handbook for the details and our “Latest News” for reaction to the Green Shift in Canada and around the world. And on Tuesday (July 1), British Columbia inaugurates the Western Hemisphere’s first substantial and comprehensive carbon tax — a day after it distributes dividend checks from the revenue-neutral tax to households and businesses.

A tremendous opportunity awaits. The failure of the Lieberman-Warner cap-and-trade scheme has created a huge opening for a better and more workable method for putting a price on carbon. Splits within USCAP have re-emerged. In a powerful speech on June 25, Lewis Hays, III, Chairman and CEO of FPL Group (a member of USCAP), reiterated his support for a carbon fee stating, “[T]he simplest and most effective way to price carbon is with a continuously escalating fee – or a ‘tax’ as the big carbon emitters like to call it. Under a carbon fee that starts modestly and rises steadily over time, companies will find it more and more expensive to use dirty fuels.”

To take advantage of the opportunity and to capitalize on the post-election window in which new policy ideas can command serious attention, the Carbon Tax Center is organizing a conference in Washington, D.C. this November. Our goals are to:

• increase public awareness of the environmental and economic advantages of a carbon tax over other policies to reduce greenhouse gas emissions;

• place carbon taxes higher on the U.S. Congressional agenda;

• enable carbon tax advocates to forge connections with one another:

• address obstacles (political, economic, and scientific) to enacting a U.S. carbon tax, and to discuss the ideal form of such a tax;

• recognize leaders who have publicly advocated a U.S. carbon tax; and

• discuss lessons learned from the Green Shift proposal in Canada.

We are assembling a terrific roster of speakers and participants. James Hansen has already agreed to speak, and we anticipate many more leading voices on climate change and carbon pricing.

We need your financial help to make our conference happen and to continue our essential work. You can contribute to CTC in three ways, two of which are tax-deductible:

Tax-deductible:

Write a check or money order to ELPC (Environmental Law & Policy Center), writing Carbon Tax Center in the memo line; mail it to ELPC at 35 East Wacker Drive, Suite 1300, Chicago, IL 60601. ELPC is CTC's fiscal sponsor.

or

Make an on-line contribution via Groundspring by clicking on the DONATE NOW box on our website, www.carbontax.org.

Not deductible:

Write a check or money order to Carbon Tax Center and send it to our New York City mailing address: CTC, 636 Broadway, Room 602, New York, NY 10012.

Please be as generous as you can, and please donate today. Thank you.

Sincerely,

Charles Komanoff
Dan Rosenblum

Dion: “Make Polluters Pay and Put Every Single Penny Back into the Hands of Canadians”

06/20/2008 by Daniel Rosenblum

Canada’s Liberal Party Leader Stéphane Dion yesterday dramatically transformed the debate in Canada over how to reduce greenhouse gas emission by proposing a $15.4 billion “Green Shift” over a four-year period. The proposed revenue-neutral carbon tax shift puts a significant price on carbon and demonstrates the type of leadership that’s yet to emerge in the United States.

Introducing the carbon tax shift, Dion eloquently explained:

The Liberal Green Shift is as powerful as it is simple. We will cut taxes on those things we want more of such as income, investment and innovation. And we will shift taxes to what we all want less of: pollution, greenhouse gas emissions and waste. We need to make polluters pay an put every single penny back into the hands of Canadians.

The Green Shift Plan will be good for the environment and good for the economy. Good for the planet and good for your wallet. We need to make real progress in the fight against climate crisis, and at the same time make our economy more competitive. While energy prices continue to rise, we need to encourage energy efficiency.

            Some have said that nobody would have the courage or the political will to
            do what we believe is right. We need to do it. We will do it.

Dion’s message and a detailed description of the Green Shift can be found in the Green Shift Handbook, easily downloaded from the Green Shift web page. The Green Shift will begin with an immediate $10 per tonne tax on carbon and steadily rise by an additional $10 per tonne each year, reaching $40 per tonne within four years.

The tax will apply at the wholesale level to all fossil fuels based upon their respective carbon content. The tax will not apply to gasoline at the pump, since the existing excise tax on gasoline at the pump is already the equivalent of $42 per tonne of carbon.

Revenue-neutrality is a key element of the Green Shift, which clearly states that “For every dollar raised in taxes there will be a dollar returned to Canadians in tax cuts.” The Auditor General will ensure the Green Shift’s revenue-neutrality.

The Green Shift will return the “pollution dividend” to Canadians through:

• Significant, broad-based income tax reductions, increasing each year as the pollution tax revenue rises;

• Reforms to the tax system to make it fairer for low-income Canadians, including;

o Introducing a new, universal child tax benefit worth $350 per child, per year,
on top of all existing child benefits;

o Replacing the existing $1,000 employment credit with a $1,850 refundable
employment credit targeting those making less than $50,000 per year;

o Enriching the Working Income Tax Benefit, making it available on the first
dollar earned; and

o Making the Disability Tax Credit refundable;

• Additional support for rural and Northern Canadians, with every rural Canadian receiving, up front, an annual Green Rural Credit of $150;

• A boost in the Northern Residents Deduction for those living in Northern
  Canada;

• Broad-based corporate tax reductions;

• Small-business income tax reductions;

• Accelerated capital cost allowances for green technologies; and

• Better research and development incentives.

The Green Shift is already receiving massive press coverage in Canada, a small sample can be found in our “Latest News” column. And as the press coverage makes clear, the stakes are high for both the environment and for Dion and the Liberal Party’s political future. Dion Stakes His Future on Being Greenest of Them All, according to the Globe and Mail. The attacks by Dion’s political opponents have already begun. See, for example, the Vancouver Sun story Dion's 'Green Shift' Debuts to Heavy Fire, “The Conservative government and the New Democratic Party assailed Liberal Leader Stephane Dion's proposed national carbon tax Thursday as a crazy and irresponsible plan….”

Canadian environmentalists have been far more supportive. According to an article in today’s Montreal Gazette, Greenpeace offered qualified support for the Green Shift arguing the price should be even higher, Équiterre says it’s the type of policy it could support and the Sierra Club Canada’s executive director said, "The benefit of a carbon tax is that it can be applied quickly, thereby raising the price of carbon emissions sooner; cap-and-trade systems have their benefits but they do take longer to implement properly."

That’s CTC’s response, too. We applaud Dion’s political courage, but we prefer a higher carbon tax. We fully support the concept of revenue neutrality and like the “shift” and “dividend” language, although we would prefer more direct return of the revenues through a Green Shift/carbon tax dividend or offsetting tax reductions. We applaud Dion’s targeting of Green Shift/carbon tax revenues to low-income rural energy users, necessary for both equity and political reasons. Finally, we’re intrigued that the Green Shift does not tax gasoline at the pump, although we expect that some portion of the tax will be passed through to retail customers. As we noted in a post last week, gasoline prices have already increased as much in the last year as we proposed for the next ten years. A floor on gasoline prices maintained by a revenue-neutral carbon tax might be appropriate.

There will be plenty of time to carefully examine the details of the Green Shift and, we’re sure, plenty of lessons to be learned about both the substance of the Green Shift and the politics of promoting a carbon tax. Stay tuned!

Photo of Stéphane Dion: http://www.liberal.ca/glance_e.aspx

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.

Tory Attack on Carbon Tax is Dishonest: Economist

06/10/2008 by Charles Komanoff

Tory Attack on Carbon Tax is Dishonest: Economist (Canadian TV)

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.

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 Global Warming Is Helping Democrats Win the Heartland

06/5/2008 by Charles Komanoff

How Global Warming Is Helping Democrats Win the Heartland (The New Republic)

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)