Archives for March 2007
While the heft behind the US Carbon Action Partnership might suggest that American business is united behind a "cap-and-trade" program, the reality is that a split is opening up as the flaws in cap-and-trade become apparent. FPL Group, which owns Florida’s largest utility and is also the world’s leading wind power producer and operator of the planet’s two largest solar fields, announced on March 31 that it supports a carbon tax (which it refers to as a "fee"). FPL stated that "cap and trade" would result in a "giant food fight over these [carbon] allowances," invite fraud, such as that which has marred similar programs in Europe, and result in volatile carbon pricing. According to FPL CEO Lewis Hay III, "We think the big winners in a trading scheme will all be the investment bankers." FPL Suggests Carbon Fee to Control Gas Emissions, MiamiHerald.com, March 31, 2007.
Ten days earlier, in the debate in Australia over how to cut greenhouse gas emissions, ExxonMobil broke ranks with both industry and government by citing the carbon tax’s advantages over cap-and-trade. Quoting directly from an article in the Australian, Exxon Advocates Tax over Carbon Trading:
ExxonMobil warns that trading systems risk having a highly volatile carbon price that will make it difficult for business to make long-term investments to cut carbon emissions.
It notes that given that tackling climate change needs a global response, a tax is potentially simpler to apply internationally than making countries agree to an international trading system. It also says that some economists believe a tax would be more transparent and less bureaucratic.
While The Carbon Tax Center disagrees with much of ExxonMobil’s stance on climate change, we think the company is right about the advantages of a carbon tax over cap-and-trade.
In A Convenient Windfall: Global Warming’s Big Cash Dividend, published on March 23, 2007 at www.commondreams.org, Peter Barnes makes the excellent points that “we need to make polluters pay for fouling the atmosphere” and that “we’ll earn an enormous cash windfall if we fight global warming the right way.” Unfortunately, his “right way” is a cap-and-trade program.
As Barnes acknowledges, polluters are arguing that they should receive future carbon emission permits free of charge to avoid being hurt by a cap and trade program. In fact, they have received free allowances under existing cap-and-trade programs for NOx and SO2 and they have good reason to expect that they will receive free allowances if there is a carbon cap-and-trade program. Barnes is correct that “there’s real-world evidence that privatizing the climate windfall would be a serious mistake” and that when the European Union gave out free carbon emissions permits to coal-burning utilities, “the undisputed results were windfall profits for the utilities, higher prices for everyone else, and zero public benefit.”
Barnes concludes that the permits should be auctioned rather than given away. The danger is obvious. When it comes to making deals in Congress, the coal-mining companies and the companies burning coal have tremendous clout and the inevitable result will be a cap-and-trade program with the allowances given to the polluters along with the cash windfall.
The good news is that we really can earn an enormous cash windfall by fighting global warming the right way. That right way is by implementing a carbon tax, which is superior to cap-and-trade programs for all the reasons set forth in our issue paper on Carbon Taxes vs. Cap-and-Trade.
Here’s how Greenwire led its story on former Vice-President Al Gore’s appearance this morning before the House Committee on Energy and Commerce:
In a historic hearing appearance today before two House subcommittees, former Vice President Al Gore urged Congress to immediately freeze U.S. greenhouse gas emissions and reduce them 90 percent by mid-century.
Gore also called on lawmakers to tax the carbon content of fuels as a way to put the global warming issue before Americans.
"I fully understand that this is considered politically impossible, but part of our challenge is to expand the limits of what is possible,"
Gore also suggested that the United States push for the next global warming treaty to begin in 2010, two years before the expiration of the Kyoto Protocol.
By using 2010 as a start point for the next treaty, the next U.S. president could "use his political chits" to get the country in an "all-out sprint" to reduce its own emissions.
Congress should also set up a "carbon neutral" federal mortgage company to support "green" homes, ban sales of incandescent light bulbs and impose a moratorium on new coal-fired power plants built without the technology to capture and sequester carbon dioxide.
Gore’s appearance before the House Energy and Commerce and Science and Technology subcommittees drew standing-room-only crowds. It also filled several overflow rooms to
watch the testimony of the Tennessee Democrat.
In a 40-minute opening statement, Gore described what he said is a budding political movement for new climate change policies. He presented 516,000 online signatures he had gathered on his Web site and touted 100 new contacts per second in the last few days since soliciting comments in anticipation of his House testimony.
"This is building, and it’s building in both parties," Gore said.
Gristmill’s David Roberts has a handy summary of Gore’s 10-point legislative proposal here. Gore’s #2: Start a long-term tax shift to reduce payroll taxes and increase taxes on CO2 emissions. His #3: Put aside a portion of carbon tax revenues to help low-income people make the transition. (#1: An immediate "carbon freeze" that would cap U.S. CO2 emissions at current levels, followed by a program to generate 90% reductions by 2050.)
Small world dept: Not so many years ago, geophysicist grad student Kevin Vranes and I were part of an intrepid band of New Yorkers marking sites where pedestrians and cyclists were run over by car drivers, as part of a campaign against vehicular dominance of the streets. Now we’re both in the thick (?) of the climate debate. Kevin has published a terrific account of reactions to Gore’s testimony today before the Senate Environment & Public Works Committee, in the Colorado University Science blog Prometheus. Note particularly his recitation of the keen interest in carbon pricing and taxing shown by Montana Democrat Max Baucus and New York Democrat Hillary Clinton.
My one correction to Kevin’s valuable report: Keivn, this may have been the first time you heard Gore urge a tax on carbon emissions, but the former V-P has been calling for a carbon tax (with a tax-shift out of payroll taxes) for some time. See details here.
Photo: flickr / Oscar H Mataquin
Close to 150 Congressional staffers, policy types and lobbyists jammed a Senate hearing room yesterday for a briefing on carbon taxes and cap-and-trade systems featuring CTC’s Charles Komanoff, along with Terry Dinan of the Congressional Budget Office and James Barrett of Redefining Progress.
The briefing was sponsored by the Environmental and Energy Study Institute. Attendance at EESI briefings generally runs between 75 to 100, and the packed house for the March 14 panel was taken as a sign of surging interest in carbon pricing.
Charles’s presentation may be accessed here. It’s an updated and more concise version of the PowerPoint on our Home Page.
This post was contributed by Kevin Bell of Convergence Research, specialists in energy, water and transportation technical and policy analysis. — CTC
As yet another case of cowboy diplomacy on the part of the Natural Resources Defense Council and Environmental Defense recedes in the rear-view mirror, it’s important to look ahead to what is at stake here.
In a little less than two years, our current Federal executive branch will be replaced. Chances are that for the first time, we will see serious movement (as well as serious posturing) on a Federal level about limiting greenhouse emissions. The problem is that the stakes are enormously high, and the window of opportunity for doing something that will actually make a difference is very small — less than a generation, probably less than a decade. We don’t get a mulligan if we blow this.
Many of our nation’s most polluting industries are acutely aware of this political calculus, and are moving to get in front of the issue. The first effort out of the gate is the US Climate Action Coalition. In addition to NRDC and ED, it includes perennial favorites like PG&E, Duke Energy, FPL, Caterpillar, GE, BP, Alcoa, and more.
Now, all of these corporations are looking for policy certainty before making infrastructure plays that they will have to live with for most of this century. Some of them buy into the idea that climate change is the single biggest threat that we as a species face in this next century, and that we need to act like it (I would put BP in this category). Others are simply looking for a way to make a financial killing, or evade having to actually do very much. Of course, every party in this coalition intends to dominate the debate over how we actually go about substantially reducing greenhouse gas emissions in the United States.
So, what are they calling for? Their twelve-page “solutions-based” PR piece, A Call for Action, is long on rhetoric and short on specifics. But the specifics that are there should make you sit up and take notice.
The short-term and mid-term suggested target reductions, not to put too fine a point on it, are lame: 10%-30% reductions from current levels by, oh, around 2025. To put that in context, California plans to reduce emissions 15% from current levels by 2020, and 80% by 2050. The UK committed to 20% reductions below 1990 levels by 2010 a decade ago (they will probably get close to, but not quite hit that target). Both the UK and Germany have committed to further reductions on the order of 40% by 2025 if — and this is a very important if — the US makes a similar commitment.
But the “money quote” is in the discussion on mechanisms on page 8. Rejecting the idea of a uniform carbon tax out of hand, the report outlines a cap-and-trade solution and then says:
A significant portion of allowances should be initially distributed free to capped entities and to economic sectors particularly disadvantaged by the secondary price effects of a cap including the possibility of funding transition assistance to adversely affected workers and communities. Free allocations to the private sector should be phased out over a reasonable period of time.
A few days ago I was asked to elaborate on why implementation of the Clean Air Act and the failure of Phase One of the European Carbon Exchange are great examples of how to do the wrong thing with mitigating carbon.
Briefly, the biggest mistake of the Clean Air Act was exempting existing coal-fired powerplants from best available control technology rules. Originally seen as a temporary concession to dirty utilities with obsolete powerplants near the end of their useful lives, it has become a permanent fixture of the emissions landscape, killing hundreds of thousands of people and wasting the time of brilliant advocates that would have been far better spent dealing with issues like climate change. Grandfathering is a terrible idea. There is no chance, politically, that such a concession would “be phased out over a reasonable period of time.”
Furthermore, the decision to give sulfur dioxide credits away to polluters, instead of going to a 100% market-driven auction system, represented a huge subsidy (and another terrible precedent) for the nation’s dirtiest utilities. Make no mistake, this is the deal that NRDC/ED’s partners in USCAP are aiming for.
Phase One of the Euro Carbon Exchange failed for two reasons: each country was allowed to make its own estimate of its greenhouse emissions, and tradable carbon credits were given, for free, to the industries in each of those countries. The three countries that actually underbid (UK, Spain, Slovenia as I recall) had to actually pay. For the rest of the Eurozone, it was free money right up to the point where everybody realized that the market was awash in surplus carbon credits, and the price dropped by 95%. They did learn a lot about how much carbon each country actually generates, and Phase Two should be tighter. But less than 10% of the available credits in Phase Two will actually be in open auction. Once again, the vast bulk of credits will be given away to polluting industries, something that my sources in the UK government describe as a straight-up political power play by Europe’s largest corporations.
That’s the reality we’re all up against as we start to gear up for the critical fight to reduce global warming. What is troubling is that NRDC and ED have already signed onto Alcoa’s and Duke Power’s position on climate change, before the real discussion has even started.
For better or worse, NRDC and ED are the go-to national environmental organizations that corporations want to talk to. Occasionally the outcome has been positive. More often the result has been catastrophic. But always NRDC and ED seem fixated on a style of cowboy diplomacy that forecloses a substantive and genuinely progressive outcome, often for years to decades.
We don’t have years to decades to get this one right. I really, really hope that NRDC and ED don’t end up being part of the problem.
Next Question, Please
‘Is the price of reversing global warming too high?’ asked Neal Conan, host of Talk of the Nation on NPR. Save for conservative columnist Jonah Goldberg – ‘I’m not worried about any problems the world will face 500 years from now,’ when prosperity will presumably cure all ills – Conan’s guests offered pragmatic replies.
‘We’re going to have to move over time to a carbon tax, because we need to send industry the right signals,’ said Dan Kammen, director of the Renewable and Appropriate Energy Laboratory at UC-Berkeley. ‘There are many ways to do a tax that are… progressive for the poor…. The poor will suffer disproportionately from climate change… and for the rich to sit around and say, ‘Well, let’s not invest,’ is really environmental racism.’
Barry Rabe, senior fellow at the Brookings Institution, shed light on what Paul Volcker recently called the ‘fundamentally false’ choice between carbon constraints and economic growth. According to Rabe, many states and nations that have already acted against global warming have seen their economies expand unabated, while governments that have sanctioned environmental business-as-usual have instead presided over business decline.
‘We’re positioned at a very interesting moment in the U.S., especially given the Congressional focus on [global warming], to think about what some of the policy solutions might be…. I hope that we can raise the level of discourse,’ said Rabe.
Kammen agreed, noting, ‘The thing we’re missing in the debate is to realize how good we are at innovating if we give ourselves the right signals…. Now, most of the money still goes to a fossil fuel-dominated economy, and that’s not good economic or environmental sense.’
(Posted by Dan for Geoff)