Hansen Lays It Out: "Yes, A Carbon Tax."

James Hansen, the NASA climatologist who for two decades has led the worldwide scientific community in sounding the alarm over global warming, yesterday issued a ringing call for a U.S. carbon tax-and-dividend in a speech to Congressional staff in Washington, DC.

Here’s Hansen’s prescription, courtesy of Andy Revkin’s NY Times blog, Dot Earth:

Hansen_chesapeakeclimate.jpgIf politicians remain at loggerheads, citizens must lead. We must demand a moratorium on new coal-fired power plants. We must block fossil fuel interests who aim to squeeze every last drop of oil from public lands, off-shore, and wilderness areas. Those last drops are no solution. They yield continued exorbitant profits for a short-sighted self-serving industry, but no alleviation of our addiction or long-term energy source.

Moving from fossil fuels to clean energy is challenging, yet transformative in ways that will be welcomed. Cheap, subsidized fossil fuels engendered bad habits. We import food from halfway around the world, for example, even with healthier products available from nearby fields. Local produce would be competitive if not for fossil fuel subsidies and the fact that climate change damages and costs, due to fossil fuels, are also borne by the public.

A price on emissions that cause harm is essential. Yes, a carbon tax.

Hansen is equally clear about what to do with the carbon tax revenues: 

Carbon tax with 100 percent dividend is needed to wean us off fossil fuel addiction. Tax and dividend allows the marketplace, not politicians, to make investment decisions.

Carbon tax on coal, oil and gas is simple, applied at the first point of sale or port of entry. The entire tax must be returned to the public, an equal amount to each adult, a half-share for children. This dividend can be deposited monthly in an individual’s bank account.

As to the impact on struggling families, Hansen recognizes that the carbon dividend stands to benefit the vast majority of the non-rich because they use less energy than the wealthy:

Carbon tax with 100 percent dividend is non-regressive. On the contrary, you can bet that low and middle income people will find ways to limit their carbon tax and come out ahead. Profligate energy users will have to pay for their excesses.

Why not have the government invest carbon tax revenues in promising energy technologies? For one thing:

Demand for low-carbon high-efficiency products will spur innovation, making our products more competitive on international markets. Carbon emissions will plummet as energy efficiency and renewable energies grow rapidly. Black soot, mercury and other fossil fuel emissions will decline. A brighter, cleaner future, with energy independence, is possible.

For his other reason, Hansen, a native Iowan, assumes full-throated populist voice:

Washington likes to spend our tax money line-by-line. Swarms of high-priced lobbyists in alligator shoes help Congress decide where to spend, and in turn the lobbyists’ clients provide “campaign” money.

Ironically, as Hansen was addressing the briefing (organized by Massachusetts Representative Edward Markey), detailed quantitative support for his carbon tax prescription was coming from a well-placed Washington economist. A new report by former U.S. Under Secretary of Commerce for Economic Affairs Robert Shapiro calls for a federal carbon tax starting at $14 per metric ton of CO2 in 2010 and rising steadily to $50 in 2030 (equivalent to $82 with inflation).

Ninety percent of the carbon tax revenues would be recycled via rebates on payroll taxes to employees and employers, or their equivalent in direct payments to households. The remaining 10% would go to energy and climate-related R&D and new technology deployment. Using the U.S. Energy Department’s NEMS consulting model, Shapiro concludes that the nearly revenue-neutral carbon tax would reduce CO2 emissions by 30% below non-taxed levels while shaving only eight-tenths of one percent off future (2030) GDP.

The report, Addressing Climate Change Without Impairing the U.S. Economy: The Economics and Environmental Science of Combining a Carbon-Based Tax and Tax Relief, was published by the U.S. Climate Task Force, a project of Shapiro’s Sonecon economic advisory company.

Photo: Flickr / chesapeakeclimate.

Comments

  1. says

    The only quibble I have is I don’t think the rate proposed by Shapiro et al is nearly high enough to get us where we need to go, e.g., at least 30% less GHG emissions by 2030. So what is the GDP is 4%-5% less in 2030 than otherwise? I think the average person would care less than the immediate benefits, particularly the vast majority of people who use less than the mean amount of fossil fuel energy. Like all economic estimates, a 4% or 5% difference is well within the estimating error (what long range economic forecast has ever been completely accurate, e.g., within statistical bounds?) If anything, a carbon tax would stimulate all sorts of technological and business innovation in the U.S., helping create a large export industry that would quickly offset any alleged decline in living standards.

  2. JK says

    Does this model already include the massive impact on future GDP of climate change? Drought, flooding, forest fire, insect infestation, disease, species dislocation and extinction are very costly. All hypothetical to be sure, but these models should also include future costs of doing nothing. (Of course, in the short-term we will incur these environmental harms with or without a carbon tax. Therein is one of the big political problems we collectively face. Humans tend not to do a very good job at changing behavior now to benefit unborn generations.) 

  3. Joe Libertelli says

    As an observer of politics and, particularly, as a fan of UC Linguist George Lakoff and the Rockridge Institute (see http://www.rockridgeinstitute.org/ ) I would like to urge your consideration of renaming your organization and the thrust of your advocacy along the lines of the "Green Shift," as mentioned in a recent article on this site.  Unlike the phoney Republican use of "Clean Skies" when advocating more pollution, etc., this re-framing of what you’re now calling a "carbon tax" is particularly legitimate given your insistance that the impact would be revenue neutral.  Thus, this carbon tax is not a new tax in the way most people consider a "new" tax – an overall increase in what we must PAY in taxes.  Rather, it is a shifting from one means of collecting tax revenue to another – one that has a much greater societal benefit and, at the same time, less negative impact than over taxing income.  Frankly, I don’t think we’d "lose" any supporters from such a name change, while we’d likely open the door to many dead-set against "new" taxes.  And, I think, it would make the changes we seek much more palatable and possible for politicians from McCain to Obama to embrace.

  4. David Ocampo G says

    Mr. Libertelli:
     
    I have no quibble with your suggested "name shift" — and I agree it describes the CTC proposal well. However, I fear such a change might lead to accusations of slippery wordsmithing: status quoists are highly creative slimers. My visceral intuition is that getting the message out is more important than the name of the message ["A rose by any name would smell as sweet"].
     
    On another matter, I take considerable pleasure in how little diatribing by status quo shills there is on this website.
     

  5. David Collins says

    Dr Hansen speaks to the rising urgency of action on Global Warming. And just a day later, Sir Nicholas Stern did too, dourly noting that the costs of so doing have doubled over the past few years. 
     
    While the world’s leaders diddled, costs have doubled.
     
    The beauty of the Carbon Tax (or Carbon Tax Shift, as some would rather say) is that in empowers and inspires the mass of people, those who in the aggregate contribute the most to greenhousing the climate, are the best able to cut emissions by lifestyle adaptation and ingenuity without resorting to expensive Jetson-style technology (most of which needs much development, to be paid for by somebody else of course). The tax inspires taking action, and the dividends returned enable taking action. And these actions can be taken as soon as they are figgered out.
     
    How can this simple and powerful advantage be made manifest?

  6. B David says

    I agree with Mr. Libertelli; the importance of language in recruiting people to a new idea should never be underestimated. The vast majority of people have no knowledge or understanding of carbon taxes and many of them are looking for any excuse available to continue not knowing. If the word “tax” is the first thing they hear when they’re introduced to the concept of charging for the right to emit greenhouse gases, they’ll just tune it out and go back to fretting about the price of gasoline. We can reject Mr. Libertelli’s suggestion as wordsmithing or deceptive, but he’s simply being pragmatic. Who do you suppose will be the first member of Congress to tell the American people, at precisely the moment when they’re feeling oppressed and even victimized by new and unanticipated strains on their finances, that what they really need is a new tax?

  7. Michael McEachen says

    I also agree with the recommendation to rename the Carbon Taxd as something other than a tax. Most people’s conception of a "tax" is purely negative, and not without justification. There is near-universal distrust if not disgust with the current system with IRS’s collection of hard-earned money to be wastefully doled out to politically connected interests and waging unwinnable, illegal wars. A revenue-neutral carbon tax however is totally unrelated to this national tax&spend nightmare, and should not be sullied with a similar name. It needs a name that, in popular parlance, has the positive associations that it so deserves. Let’s face it: the voting public does not do subtlety very well, and do not want to have to get educated about a policy that sounds distasteful in its very name (may I direct you to "Bill’s" comment under the recent "Boxer the Trapper" post on this website for an example of a fairly typical layperson, sorry to say). Don’t underestimate the power that referring to Estate taxes as "Death" taxes had to catalize public support for a terribly regressive policy change. Let’s stop hobbling the Carbon Tax effort with its hateful (to laypeople) name for the sake of some high-minded notion of candidness. Let’s accept that language matters and adopt terminology that is worthy of this, most excellent, policy. I personally favor something like "Global Citizenship Dividend", but really almost anything would be an improvement on "Carbon Tax".

  8. JeandeTACA says

    Our french organisation is named TACA, for TAxe CArbone, so we are very interested in your comments, specially Michael’s.
    Which positive new name? ‘Carbon subsidies’, ‘free carbon move’, Carbon dividend’, ‘carbon effort’.
    To make this tax more understandable to laypeople, you should assess it in carbon kilo (the target should be somethiong like 1$ per carbon kilo, a carbon kilo is very close to 1 liter of gas), instead of CO2 ton like you use to do: who has ever bought 1 ton of CO2? On the contrary, everytime you buy 1 liter of oil or fuel for heating, you will send 1 carbon kilo in the atmosphere (close to 4 CO2 kilos)Thank you for your inputs 

  9. says

    A carbon "tax" need not be a tax at all, and indeed it should not be perceived or promoted as a tax. Why? Economic conservatives have long accepted as a fundamental principal that every business operation should be entitled to any profits after payment of its full costs. The problem is that we have traditionally subsidized pollutors by absolving them of any obligation to pay the costs of the environmental damage they inflict. The more they pollute, the more we subsidize them. And any time a resource is subsidized, it will always be overused. That’s how we got into this problem, and the way out is to start making pollutors pay for their environmental damage. And we can start with CO2 pollution.This isn’t a tax; it’s an environmental damage fee, and the amount of that fee should be set at our best estimate of the dollar equivalent of the damage. Don’t argue over how high a tax needs to be to discourage emissions by some arbitrary amount. That’s irrelevant. It shouldn’t be any higher than the dollar value of the damage it causes, and it also shouldn’t be any lower, except perhaps during a transitional introductory period. It’s a real cost, not an arbitrary tax like an income tax, and we’re just deciding to eliminate a long-standing subsidy of pollutors by making them pay all of their costs of production, and pass those costs on to their customers as they should have done all along.This idea will appeal to genuine economic conservatives who are guided by free enterprise philosophy and not just corporate self interest. They realize that subsidies distort economic decisions. Sure, there can be an argument for subsidizing something we want to encourage, but there is no excuse for subsidizing something we want to discourage.We need to spend a trivial few hundred million dollars a year to pay for perhaps a thousand academic researchers to come up with an estimate of the dollar value of the damage caused by each ton of carbon dioxide emitted. Some costs will be difficult to express in dollars, but it’s foolish to think we can avoid that problem by just closing our eyes and picking a tax rate that somehow "seems right." No rate per ton, whether tax or fee, can be justified unless it approximates our best guess of the damage translated into dollars. We need that estimate or we will just be waving our arms meaninglessly and ineffectually. As we are now.To ease the transition, we should start by assessing an environmental damage fee near the low end of the plausible range of damage, then as our estimates improve in precision each year, we should adjust (probably raise) the fee toward our then best estimate.How should the revenues be distributed? When we stop thinking of the fee as a tax, and realize that it is a compensation for real damage, the distribution issue ceases to be an arbitrary tax policy decision and we realize that the payments should go to those who suffer the damage, and that is probably everyone equally. Granted, we can’t pay those who aren’t born yet, so perhaps we should use some of the revenue to sponsor R&D on improved energy generation and conservation.This could easily be expanded to an international program, or perhaps even start that way. Cooperating nations would agree to adopt a fee rate developed by an international group of academic researchers. To avoid suffering a price disadvantage vs. non-cooperating nations in international trade, the cooperating nations would apply a uniform tariff on all imports from non-cooperating nations, set equal to, or a certain percent above, the amount of environmental damage fees that should have been paid for each particular product. This uniform tariff would not be arbitrary, and it would not set off an uncontrolled flurry of tariffs.OK, I’ll stop here. But please, let’s stop thinking of this as an arbitrary tax, or any kind of tax at all. It’s a natural cost of doing business that has, up to now, been 100% subsidized, and that has therefore been excluded from business’ routine decision-making. That has to stop.

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Last modified: June 24, 2008