Carbon Tax Center

U.S. Carbon Trading Market Could Be Lucrative – or Perilous

09/20/2007 by Daniel Rosenblum

The Daily Report, a Georgia-based "timely and indispensable guide to everything happening in the legal world," ran a provocative story today.

A U.S. Carbon-Trading Market Could Be Lucrative—or Perilous touches on just how complicated it will be to set up a cap-and-trade market. But the focus is on who will benefit most. The environment? There’s not much discussion of how effectively a cap-and-trade scheme will reduce emissions, but there are telling observations on who will get rich.

For those whose interest in climate change is secondary, the good news about carbon cap-and-trade is that:

It won’t just create work for environmental, energy trading and regulatory attorneys. It also will generate hours for those whose practices encompass business transactions and litigation, capital markets, project finance and even white-collar crime. Already, it’s lining the pockets of lobbyists in the nation’s Capitol and the 17 states that are moving even faster than the federal government toward considering regulation and trading of greenhouse gases, implicated as a cause of global warming.

Climate change deniers won’t be thrilled, but there’s good news for others:

For climate-change skeptics and deniers, it’s no doubt a frustrating time to be watching the 110th Congress. But for businesspeople and lawyers — regardless of their views on whether the Earth is warming and why — it’s nothing short of the opportunity of the century.

“The saying in Washington is anytime there’s a new program, the lawyers are the ones who get rich first,” says Charles A. Patrizia, a Paul, Hastings, Janofsky & Walker attorney who’s spent three decades inside the Beltway.

The good news, again for lawyers, is that there will be work to spread throughout the law firm:

If and when the U.S. government imposes carbon emissions restrictions, says Jones Day’s Holden, the amount of legal work generated by those regulations will be significant.

“The transactional side is going to be huge; the regulatory side, the litigation side is quite big; there’s patent, intellectual property; the international law side,” he says. “It’s hard to find an area of law that isn’t going to be impacted by a regulatory program that not only affects every manufacturing facility, but … [affects] all the products that go into what is manufactured.”

Will the focus of the interest groups that stand to gain from cap-and-trade be on the most efficient ways to reduce greenhouse gas emissions? Will the lawyers, traders, coal companies and others put aside their self-interest because a revenue-neutral carbon tax would provide more greenhouse gas emission reductions sooner, more efficiently and less expensively? Don’t hold your breath!

Photo: Krispy*Kreme / Flickr

Carbon Future(s) – A U.S. Carbon-Trading Market Could Be Lucrative—or Perilous

09/20/2007 by Daniel Rosenblum

Carbon Future(s) – A U.S. Carbon-Trading Market Could Be Lucrative—or Perilous (Daily Report)

Carbon Taxes, Oil Spike Will Spur Efficiency – Lehman

09/19/2007 by Daniel Rosenblum

Carbon Taxes, Oil Spike Will Spur Efficiency – Lehman (Reuters)

Know New Taxes

09/19/2007 by Daniel Rosenblum

Know New Taxes (Op-Ed – San Francisco Chronicle)

An Even Greener Car – But Still a High Price Without a Carbon Tax

09/17/2007 by Daniel Rosenblum

Interesting post in today’s Gothamist about a far "greener" car than those described in today’s New York Times (referenced in CTC’s previous post).

The Gothamist points out that:

The Smart car has arrived in the States, and measuring at 8 feet and 8 inches long and 5 feet wide, the minuscule vehicle got some big attention in the Big Apple this week.

The car is around 3 feet shorter than the Mini Cooper, and could probably fit inside most of the gas guzzling SUVs in town. The 1800-pounder will hit the market stateside in early 2008, but will anyone want it? Business Week reports "Its base price is $12,000, and it’s hard to beat the fuel efficiency of about 40 miles per gallon."

The question is whether buyers will fork over $12,000 for such a tiny car when they can get a much bigger car without spending much more. When a carbon tax internalizes the societal costs of carbon dioxide emissions, the Smart Car is going to look a lot more attractive to buyers.

Photo via the Gothamist and Cloudy Thought’s Flickr.

Green Cars Are on the Way – All We Need Is a Carbon Tax So People Will Buy Them

09/16/2007 by Daniel Rosenblum

According to Showing Off the Power of Green in the September 16 New York Times, European automobile manufacturers are finally beginning to produce cars with reduced carbon dioxide emissions. 

The industry seems chastised, genuinely repentant, and ready to take
some responsibility — environmental responsibility — for its profligate
ways. The European auto industry in particular has been stung by
criticisms from environmentalists and government regulators that it has
been wasting precious resources and has lost the edge in environmental
leadership to the Japanese. So, the 2007 Frankfurt show aims to prove
just how “green” European carmakers can be.

The article describes new cars from Mercedes, BMW, Volkswagan, Porsche and G.M. Opel, as well as cars from Asian manufacturers such as Nissan and Hyundai, that demonstrate that "green" cars are on the way.  OK, "green car" is something of a oxymoron, but the manufacturers are coming out with cars with significantly reduced carbon dioxide emissions.  The big question is whether people will buy them and the problem is obvious; people don’t have an economic incentive to reduce the carbon emissions from their cars when they don’t have to pay anything to spew carbon dioxide into the atmosphere.  The answer is equally obvious; a carbon tax will internalize the costs of vehicle carbon dioxide emissions and help to move "green" cars from the showroom to the streets.  Of course, even greater benefits will occur when a carbon tax provides an incentive for people to drive less, bike more, walk more and travel by public transportation.  

One Answer to Global Warming: A New Tax — Gregory Mankiw’s Compelling Arguments in the NYT

09/15/2007 by Daniel Rosenblum

Gregory Mankiw, former chairman of the current president’s Council of Economic Advisers, current adviser to presidential candidate Mitt Romney, Harvard professor and long-time advocate of a carbon tax presents a compelling argument for a carbon tax in the business section of today’s New York Times business section (Sept. 17).

The thrust of Mankiw’s op-ed, One Answer to Global Warming: A New Tax, is that there is a "broad consensus" among "policy wonks" that "if we want to reduce global emissions of carbon, we need a global carbon tax. Q.E.D." The problem is the "yawning gap that needs to be bridged … between policy wonks and political consultants."

Mankiw notes that using a Pigovian tax (one that internalizes the societal costs of economic activity) to address global warming is an old idea which was proposed as far back as 1992 by former President’s Reagan’s chief economic adviser. As our Supporters pages illustrate, backing for a carbon tax exists across the political spectrum. The problem is the "T" word; and that problem also extends across the political spectrum. As Mankiw puts it:

Those vying for elected office, however, are reluctant to sign on to this agenda. Their political consultants are no fans of taxes, Pigovian or otherwise. Republican consultants advise using the word “tax” only if followed immediately by the word “cut.” Democratic consultants recommend the word “tax” be followed by “on the rich.”

Mankiw contends that a carbon tax is preferable to other carbon-reducing options such as mandated increased fuel efficiency and cap-and-trade schemes. Unlike with cap-and-trade, the carbon tax revenues can be used to leave the distribution of total tax burden approximately unchanged. A carbon tax would also be much easier to negotiate on a global scale.

Mankiw concludes:

Convincing China of the virtues of a carbon tax, however, may prove to be the easy part. The first and more difficult step is to convince American voters, and therefore political consultants, that “tax” is not a four-letter word.

Mankiw is smart and persuasive. As an adviser to Mitt Romney, can he convince Romney to support a carbon tax?

Photo: Flickr / Fort Photo.

One Answer to Global Warming: A New Tax

09/15/2007 by Daniel Rosenblum

One Answer to Global Warming: A New Tax, article by Harvard professor and chair of the President’s Council of Economic Advisers, 2003-2005 and current adviser to presidential candidate Mitt Romney (New York Times)

A Livelier Web Site

09/12/2007 by Charles Komanoff

Welcome to CTC 2.0 — the Carbon Tax Center’s new-look Web site.

If you’re a returning visitor, you’ll notice a host of changes, hopefully all good. Our well-liked but slow-loading Slideshow is gone from the Home Page (you can still link to it here). The page choices on the Nav Bar menu are clearer and more logical. Our stances on key issues, like why carbon taxes won’t raise your tax bill or drawbacks of cap-and-trade schemes, are accessible directly from the Home Page. So are a rotating handful of nifty graphs, as well as our Quote of the Week.

Even more important, our Blog now begins on the Home Page as well, making it easier for you to read our take on breaking issues and to comment back. We hope the result will be a Blog that’s livelier and more interactive, leading to more fruitful exchanges of views, ideas and strategies for moving carbon taxing forward.

If you’re a new visitor, welcome to the site. Look around, read up on the issues, fortify yourself with arguments, and join the discussion.

To visitors old, new and in between, thanks for coming by. Let us know what you like (or don’t) about the site and how you think it could be improved. If you’ve got a Blog piece for us, send it (via info@carbontax.org). If you’re moved to contribute to our work, please do so. Your contribution (yes, it can be tax-deductible) sustains our commitment and supports our work.

Thank you. — Charles Komanoff & Dan Rosenblum

Valuing the Commons: Congestion Pricing’s Hidden Payoff

09/11/2007 by Charles Komanoff

A momentous debate is under way in New York City over the prospect of bringing "congestion pricing" — a concept proven in London, Stockholm and Singapore — to America’s largest and most gridlocked burg. The issue has great resonance for carbon taxing, as I argue in this piece, a slightly different version of which appeared in Gristmill in July. — C.K.

Every so often there arises an environmental controversy that tests the capacity of Americans to face reality. One such case is the Cape Wind dispute, in which well-connected Cape Codders are battling to keep a large array of non-polluting windmills out of Nantucket Sound. Another is emerging in New York City, where Mayor Michael R. Bloomberg has proposed a “congestion fee” on cars and trucks driving into Manhattan.

Backers from the mayor on down tout the fee as a cure-all: it will unsnarl traffic, relieve pollution and create a revenue stream to upgrade subways and buses, while also cutting global warming emissions.

These claims are a bit overstated. More probably there will be a single-digit increase in traffic speeds, a one percent drop in emissions citywide, and perhaps a $400 million revenue infusion for a transportation system whose annual costs top $30 billion.

But even though the immediate benefits of the congestion charge are relatively modest, the act of imposing such a charge is transformative in itself.

The real significance of the congestion charge is this: it establishes the principle that safeguarding “the commons” — our air, water and public space — requires that we exact from ourselves a commensurate price for uses that damage or deplete it.

The congestion charge puts our money where our mouth is.

Although it has mostly gone unstated, the congestion charge rests on ironclad economic logic: street space, being both coveted and finite, has a value; hence, our failure to charge a price for its use in effect substitutes rationing by waiting, for rationing by pricing — which is why New York, Los Angeles, and every city in between have traffic jams.

Accordingly, a congestion charge that confronts those of us who would drive with the cost of traffic delays we impose on each other isn’t just one means of reducing congestion — it’s the only way to do so.

Mayor Bloomberg could place traffic cops at every intersection, airlift every double-parked car and truck, and make the subways free — and gridlock would reappear within a week, as the improvement in traffic flow attracted drivers now deterred by the too-crowded roads.

The only way to permanently open up road space is to impose some form of road valuation, and Mayor Bloomberg’s pricing plan, while blunt and imperfect, is a very good start. Most important of all, though, it establishes the principle.

Much the same applies to the prevailing green paradigm for combating global warming. It’s essentially a scattershot approach built around individual technological fixes: rooftop solar cells, low-wattage fluorescent lights, high-mileage automobiles and so on.

What’s missing — crucially, fatally missing — is a valuation of the atmosphere’s limited capacity to absorb carbon emissions without damaging the climate.

Just as the high value of street space in New York demands a congestion fee, the high value of a carbon-stable atmosphere demands a fee on carbon use — i.e., a carbon tax.

This isn’t to say that tech fixes don’t have their place. They will be needed to help get off carbon, just as car and truck alternatives such as expanded subway service, exclusive bus and bicycle lanes, and, in New York, a cross-harbor rail freight tunnel, must supplement the congestion fee.

But without congestion charges and revenue-neutral carbon taxes that in effect reward every traffic-busting or carbon-reducing choice, the fixes and alternatives will be systematically underused.

The obvious, first-order, unmediated choices that will reduce congestion and carbon are things that no one can make money from — things like fewer and shorter trips, smaller homes, turning stuff off.

Congestion charges and a carbon tax will cause people to make these choices, and that is the only way killer traffic and killer climate change will be brought under control. It won’t happen just by subsidizing technological fixes whose investors have the advantage of an effective lobby.

What, then, is standing in the way of congestion fees and a national carbon tax? The power of an entrenched minority, for one thing. In New York City, fewer than one in 20 working residents drives toll-free into the intended congestion charging zone, but they know who they are and are not shy about protecting their self-awarded entitlement to a toll-free commute.

Conversely, the benefits of congestion pricing will be broadly distributed but not life-changing. Indeed, judging from polls, many New Yorkers don’t even realize they are potential beneficiaries.

“Losers cry louder than winners sing,” said University of Michigan professor Joel Slemrod in explaining the near-impossibility of overhauling the U.S. tax code, and the same holds true for the congestion fee and the carbon tax.

What is more, the benefits from road fees or carbon taxes aren’t just diffuse; because they lie in the future they are by necessity uncertain.

“There is nothing more difficult to take in hand,” Machiavelli observed in The Prince, “than to take the lead in the introduction of a new order of things … the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the old conditions, and lukewarm defenders in those who may do well under the new.”

That is why enacting the Bloomberg congestion plan is so hard, and so necessary. America’s civic polity is stuck in traffic, so to speak. Getting it moving again will require us to imagine something other than permanent stalemate and act upon that vision.

Photo: SkyShaper / Flickr