Carbon Tax Center

A Convenient Tax — Issue #3

11/8/2007 by Charles Komanoff

Welcome to the latest issue of CTC's newsletter, A Convenient Tax, summarizing the Carbon Tax Center's progress in advancing carbon taxes in the United States. (For Issue #2, click here.)

These are heady times for CTC. Each week, and sometimes every day, brings a major development in carbon pricing. Sometimes it has our fingerprints, and sometimes it's a product of our work to establish a carbon tax as "the gold standard" way to put a price on carbon (as The New York Times quoted us last week).

In Just the Past Two Weeks …

New York's Mayor Bloomberg delivered a powerful plea for a revenue-neutral carbon tax in a speech to the U.S. Conference of Mayors last Friday. Here's the lede of The Times' on-line account:

Mayor Michael R. Bloomberg announced today his support for a national carbon tax. In what his aides called one of the most significant policy addresses of his second and final term, the mayor argued that directly taxing emissions of carbon dioxide and other greenhouse gases that contribute to climate change will slow global warming, promote economic growth and stimulate technological innovation — even if it results in higher gasoline prices in the short term.

Echoing the Tax vs. Cap page on our Web site: Bloomberg noted that cap-and-trade is at risk from gaming, profiteering and volatility, while a straightforward carbon tax offers the essential attribute of price certainty. What is more, Bloomberg spoke as the former businessman he is:

Having spent 15 years on Wall Street and 20 years running my own company, the certainty of a pollution fee — coupled with a tax cut for all Americans — is a much better deal. It would be better for the economy, better for taxpayers and — given the experiences so far in Europe — it would be better for the environment. I think it's time we stopped listening to the skeptics who say, "But for the politics" and start being honest about costs and benefits. Politicians tend to prefer cap-and-trade because it obscures the costs. Some even pretend that it will lower costs in the short run. That's nonsense. The costs will be the same under either plan — and if anything, they will be higher under cap-and-trade, because middlemen will be making money off the trades. A direct fee will generate more long-term savings for consumers, and greater carbon reductions for the environment.

By 10 a.m. last Friday, CTC's blog had a link to the Times' story, framing Bloomberg's speech in terms of swelling political support for carbon taxing. Since then, AP, Reuters and Newsweek (in a cover story this week) have reported on Bloomberg's carbon-tax call.

We can't say whether the mayor took his cue from us, or the center-right American Enterprise Institute (which issued its own report in June backing carbon taxes), or from his own internal compass. But back in July, in a piece on Gristmill, we linked Bloomberg's NYC congestion pricing initiative with carbon taxing. We also drew Rep. John Dingell's attention to the parallels, during a conversation with him last month (see below).

The big development the previous week was President Nikolai Sarkozy's promise to consider a French revenue-neutral carbon tax and his urging that Europe examine the option of a European levy on imports from non-carbon-taxing countries. Sarkozy's pledge puts pressure on the United States to do the same, a point made by New York Times columnist Roger Cohen as President Sarkozy arrived in the U.S. this week for meetings with President Bush.

Next Week

Special Invitation to NYC-area readers: CTC co-director Dan Rosenblum will be featured at a NYC Bar Association "Tax vs. Cap" debate in mid-Manhattan next Tuesday morning, Nov. 13. Go here for location, time and registration.

Congressional Support Grows for a Carbon Tax

In our last newsletter we reported on carbon tax bills introduced by Representatives Stark (D-CA) and Larson (D-CT). The two have now joined forces, with Rep. Stark and eight other members co-sponsoring the Larson bill. (Our Bills page has a list of the 10 sponsors and a summary of both bills.)

We stopped by Rep. Larson's office recently in Washington and were deeply impressed with his staff's and Mr. Larson's commitment to a carbon tax. The news that Rep. Larson, the fifth highest member of the Democratic House leadership, will be participating in the United Nations Climate Change Conference in Bali next month is also heartening.

Eclipsing this, however, is the hybrid carbon tax proposal floated by the venerable John Dingell, a member of the House of Representatives since 1955 and long-time chair of its Commerce & Energy Committee. Rep. Dingell's staff reached out to us in late June for help estimating the carbon, petroleum and revenue impacts of a carbon tax that also included a surcharge on gasoline and jet fuel. Over the ensuing three months we refined our tax impact model (see below) and ran at least a dozen scenarios, which we discussed with his staff in a stream of telephone discussions and e-mails.

When Mr. Dingell released his proposal on the evening of Sept. 26, we were ready with a blog post on both our Web site and Gristmill, branding the idea a "hybrid carbon tax," praising Dingell's vision, and quantifying the impacts. We've also taken the fight to those of our fellow environmentalists who have let their battles with Dingell over car mileage standards blind them to what Dingell calls The Power in the Carbon Tax. (For the record, we strongly support tougher CAFÉ standards but we regard the hybrid carbon tax as an even bigger breakthrough.) Mr. Dingell expressed his gratitude in a phone call last month. (Click here to participate in a public poll on Dingell's hybrid carbon tax on his Web site.)

Needless to say, a carbon tax bill won't pass Congress until 2009 at the earliest — public education is needed non-stop until the White House and Congress resolve to make carbon pricing a central element in climate policy. CTC is laying the intellectual and political foundation now for action in 2009.

Carbon Tax Research — National and State

Seeking out and advancing knowledge about carbon taxes is a big part of our mission. To analyze Rep. Dingell's draft proposals, we scaled up our state-level carbon tax spreadsheet into a national 4-Sector Model — so-called because it disaggregates the U.S. carbon economy into four discrete pieces (electricity, automobiles, airlines and "other"). The model now encompasses the entire U.S. and includes the capability to model a supplemental tax on petroleum products (gasoline and jet fuel, in this case). Advocates and legislative staff in Colorado, Washington State, Oregon, California and Minnesota are currently using it to estimate impacts of state-level carbon taxes.

Much is still to be done on the modeling front. Our next steps are to incorporate "upstream" carbon costs in fuel prices and to reconcile our more-conservative model results with the "bigger bang" predicted by carbon tax supporters at the American Enterprise Institute and several resource think-tanks. We're also stepping up our cataloging of carbon pricing research. Work at universities and think tanks is proliferating, and we want to establish CTC as the foremost English-language clearinghouse.

Media Continue to Rely on the Carbon Tax Center

Maybe it's our revamped Web site. Or maybe carbon taxing is moving into the mainstream. Or both. CTC has been in the news a lot lately. Some recent highlights: mentions in two separate on-line New York Times articles on the same day (Friday, Nov. 2), in the news story reporting on Mayor Bloomberg's carbon-tax address in Seattle, and in an analytical piece, The Real Climate Debate: To Cap or to Tax? • publication of a feature story on carbon taxes in Tikkun magazine • mentions in Conde Nast's Portfolio.com, Forbes.com, the Minneapolis Star-Tribune and literally hundreds of environmental and climate blogs. • We maintained our standing as the leading site on Google for those searching "carbon tax." • Our Web site continues to receive over 500 visits each week.

Going Forward

The next eighteen months are shaping up as the period in which competing policies to reduce carbon emissions will be examined for their effectiveness, cost and political viability.

CTC's strategic goal continues to be to shape that debate and properly frame the issues by working with environmental organizations and other allies to solidify support for the concept of putting a price on carbon, while educating and inspiring opinion leaders, grassroots organizations and decision-makers to go for the "gold standard" of carbon taxes rather than settling for the less predictable, less transparent, less universal and less equitable cap-and-trade approach.

As The Times noted last week:

"Making the price predictable is the most significant move you can make to control global warming," says Charles Komanoff, a long-time environmental economist who [with Dan Rosenblum] has recently started the Carbon Tax Center as an advocacy group. "It would tilt literally billions of energy critical decisions toward using less carbon."

If you agree, please help us as we develop the intellectual ammunition, provide technical assistance, assist local, state and federal carbon tax initiatives, energize a broad coalition of interest groups, and mobilize public support for fair and effective carbon taxes.

CTC is proving its effectiveness daily. To continue playing our essential role, we need your financial help. We gratefully thank all of you who have already donated to CTC. We ask carbon tax supporters who are not yet CTC contributors to become so today.

You can contribute to CTC in three ways, of which two are 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.

• Tax-deductible:

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
Daniel W. Rosenblum