Carbon Tax Confusion
07/6/2007 by Daniel Rosenblum
Carbon taxes led the editorial page at two national papers this week, and both stressed the central imperative of raising fossil fuel prices to fight global warming.
"Putting a crimp on global warming can't be done solely by promoting new energy technologies and voluntary conservation," said the Christian Science Monitor. "Consumers of oil and coal need a direct tax shock."
In the same vein, The New York Times asked that readers keep "one fundamental point in mind: we are now using the atmosphere as a free dumping ground for carbon emissions. Unless we — industry and consumers — are made to pay a significant price for doing so, we will never get anywhere."
We agree, and we applaud. Yet both papers stopped far short of full-throated endorsements of a national carbon tax. The Times editorial gave a clear nod to a carbon cap-and-trade system. The Monitor mostly bemoaned the hurdles to a carbon tax rather than push for overcoming them.
What gives?
How about faulty analysis (Monitor) and timidity plus wishful thinking (The Times)?
The Monitor's editorial conflates a carbon tax with a gasoline tax:
A carbon tax would, of course, raise the price of gasoline and home heating/cooling.
No wonder that no presidential candidate endorses [a carbon tax], especially with gas prices hovering around $3 a gallon.
Hillary Clinton says a gas tax is "hardly politically palatable at this moment."
The last time Congress raised the gasoline tax was in 1993. In the Senate, Gore cast the deciding vote. At the next election in 1994, the GOP won big on Capitol Hill. Politicians took note.
Whew! That's no small confusion. A carbon tax is not, repeat, not, a gasoline tax. Only a little more than one-fifth of U.S. carbon emissions come from gasoline (two-fifths are from making electricity). For every dollar raised from gasoline, a carbon tax would bring in four dollars from other petroleum products, natural gas and coal. (See CTC Slideshow, slide #23.)
This makes not just the impacts but also the politics of a carbon tax very different from those of a gasoline tax. A carbon tax can do a lot of good on CO2 and climate without coming down on like a ton of bricks on the family car(s). Moreover, households that burn lots of gasoline — and feel they have little scope to cut back soon — don't necessarily also guzzle coal-fired electricity.
Unlike a gas tax, a carbon tax is multi-dimensional. CTC will try to help the Monitor internalize the difference. We'll also work to correct their oversight of Sen. Chris Dodd, who has made a "corporate carbon tax" a centerpiece of his presidential campaign.
The Times' bow to cap-and-trade, meanwhile, genuflects to the 1993 Clinton btu tax debacle:
Over a decade ago, the Clinton administration floated the sound idea of a tax on the carbon content of various fuels, like coal and oil. A tax on carbon, the main greenhouse gas, would cause energy prices to rise, thereby curbing consumption and providing a powerful incentive to invest in alternatives. The revenue from the tax could be used, in part, to subsidize the higher energy costs for low-income Americans. But the idea went nowhere, and new taxes remain a political nonstarter, at least for now.
Goodness, that was fourteen years ago! Must we remind The Times of the sea changes in climate science and politics (not to mention post-9/11 awareness of the costs of oil)?
Coincidentally, or not, the early 1990s was also the era in which the U.S. cap-and-trade system for sulfur emissions kicked in, establishing the precedent cited by The Times as well as the U.S. Climate Action Partnership. But as we've noted elsewhere, the market for cutting acid rain pollutants bears as much resemblance to a carbon market as did a French mud hut to the Palace of Versailles, seeing as how a carbon market will be two orders of magnitude larger than the market in sulfur emissions.
We at the Carbon Tax Center would love to be able to endorse a cap-and-trade for carbon, even as a respectable second-best approach. For that to happen, however, cap-and-trade would have to be a lot less opaque, regressive, long-lead-time, subject to manipulation, and volatile than we, and many others, expect.
The closer one looks at both, the clearer the choice of a carbon tax over cap-and-trade becomes. We invite both the Monitor and The Times to look closely at AEI's cogent new paper and the LA Times' magnificent Memorial Day editorial. Courage, friends.
Photo: Big Daddy 72 / Flickr
Charles, you’re quite right in advocating for a national carbon tax, yet as your post notes, the political will to push for it doesn’t yet exist. It’s similar to what we face here in NYC, where congestion pricing is being fiercely resisted. Global warming response doesn’t get enough of a buy-in, so the Bloomberg administration is focusing on quality of life and asthma reduction. As we’ve discussed, I think that we should also raise the real threat of fuel price and supply volatility to build motivation for congestion pricing, carbon taxes, and other sensible measures to reduce fossil fuel use.
Besides its widely discussed benefits, congestion pricing is also an excellent and crucial energy security measure. Most of its critics and supporters implicitly assume that the price of gas will remain basically stable, but a growing number of observers, including military analysts and national security advocates, worry that even slight disruptions to our oil imports will cause abrupt price spikes to over $100 a barrel, leading gasoline and heating oil prices to rise to over $5 per gallon. Gasoline prices could rise suddenly for many reasons: an attack on Iran causing a blockade of the Straits of Hormuz, the shipping channel for over a third of the world’s oil, turmoil in Nigeria or Venezuela, terrorist attacks on oil shipping and refining infrastructure, or Gulf Coast hurricanes. Even without a crisis, the U.S. Government Accountability Office warns that depleting world oil supplies, combined with rising demand, will make energy markets increasingly volatile - and supply disruptions inevitable.
Our addiction to oil and our growing dependence on imported fuel are dangerous security liabilities with severe economic consequences if the flow of foreign oil is disrupted. Now it’s not just environmentalists calling for massive increases in energy conservation and renewable energy – it’s the Council on Foreign Relations and the Army Corps of Engineers. A new Pentagon study warns that the military must take immediate steps toward running on alternative and renewable fuels or the US military’s ability to respond to hot spots around the world will become "unsustainable in the long term". We can imagine what those Pentagon analysts might tell outer-borough commuters. How would a sharp spike in oil prices affect trucks bringing groceries to supermarkets? Winter heating fuel prices? The restaurants and theaters dependent on tourists? Fire, police, ambulances, and garbage trucks? Would commuters still choose to drive into Manhattan, or would they flock to mass transit?With the threat of price shocks and fuel shortages, efforts to shift our transit needs to less fuel-guzzling modes is as vital to our future as NYPD’s anti-terror task force. By getting more drivers out of cars and onto mass transit, congestion pricing increases our economic resiliency. Can it be reframed? Congestion pricing could be more accurately called the transit relief fund, the mass transit incentive, or the rush hour fee, according to Joe Brewer, research fellow at George Lakoff’s Rockridge Institute. It could also be called security pricing.
While we need both short-term and long-term responses, the critical starting point of all energy policy should be rapid energy conservation planning. The newly released Sierra Club NYC report, “Moving New York City toward Sustainable Energy Independence” – available at www.beyondoilnyc.org - urges PlaNYC and City Council to follow San Francisco and Portland, Oregon, already creating municipal plans for energy volatility. Highway speed limits, reduced public transit fees, car pooling, telecommuting, and compressed work weeks of fewer but longer days are some responses recommended by the International Energy Agency and the engineering firm Parsons Brinkerhoff.
Many of the issues raised by congestion pricing critics will enhance PlaNYC implementation as they are addressed, but opponents should consider future energy scenarios and connect the dots. With the matter reframed, perhaps they will join efforts to implement congestion pricing as a step in moving NYC toward better mass transit, and beyond oil. Dan Miner, Sierra Club NYC Group, energy committee chair
“Moving NYC Toward Sustainable Energy Independence” has been endorsed by a number of groups, including New York Public Interest Research Group, INFORM, Hudson River Sloop Clearwater, the Pace Energy Project and Sustainable South Bronx. It was cited as a Report of the Day by Gotham Gazette.
Comment by Dan Miner — July 7, 2007 @ 8:46 am
problems with carbon trading…
http://www.sinkswatch.org/pubs/Durban%20DeclarationSeptember%202006%20leaflet.pdf
"As representatives of people’s movements and independent organisations, we reject the claim that carbon trading will halt the climate crisis."
Comment by socialscientist — July 7, 2007 @ 12:40 pm
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