06/23/2010 by James Handley
On Monday, Dr. Laurie Geller, director of the National Academy of Sciences’ new blue-ribbon climate change report, briefed the Citizens’ Climate Lobby’s National Conference, kicking off CCL’s Washington lobby week. Part I of NAS’s report stresses the strong evidence and broad scientific consensus that Earth’s surface is warming due to human-caused fossil fuel burning. NAS recommends further research on managing impacts on ecosystems, food production, public health and climate policy.
Part II, “Limiting the Magnitude of Future Climate Change” calls for immediate, urgent action; its top recommendation is to “Adopt an economy-wide carbon pricing system.” It also urges additional clean energy R&D, research into how behavior and technology interact and incentives for low greenhouse gas energy technologies. Part III, on adaptation, suggests responses to the inevitable consequences of climate change already in motion. Recommendations include: “develop hot weather early warning systems” as Philadelphia has done, and “Alaska: Retreat from the Coast” beginning the process of relocation from areas where thawing and erosion are rendering present settlements untenable.
Lester Brown, whose book “Plan B 4.0” is an inspiring blueprint for a sustainable, low-carbon future, also addressed the CCL conference. Brown reminded listeners that the Japanese attack on Pearl Harbor sparked President Roosevelt to call on industrialists to convert automobile and steel manufacturing into wartime production, leading to victory in WWII. Brown sketched a similarly broad transformation away from fossil fuels and toward efficiency and renewables that is now urgently needed to avert climate disaster — a far more profound threat to our security than Japanese invasion was in 1942. Brown stressed that a gradually and predictably-rising carbon tax is a key policy needed to drive the energy transformation required for climate stability essential to human civilization.
06/14/2010 by Charles Komanoff
In an Oval Office interview last Friday with Politico columnist Roger Simon, President Obama likened the Gulf oil disaster’s impact on the national psyche to that of 9/11:
In the same way that our view of our vulnerabilities and our foreign policy was shaped profoundly by 9/11, I think this disaster is going to shape how we think about the environment and energy for many years to come.
Unfortunately, judging from the portions of the interview published by Politico over the weekend, we shouldn’t expect this reshaping to include a carbon fee or similar tax on dirty energy.
Obama did stress the environmental costs:
I have no idea what new energy sources are going to be available, what technologies might drive down the price of renewable energies. What we can predict is that the availability of fossil fuel is going to be diminishing; that it’s going to get more expensive to recover; that there are going to be environmental costs that our children, … our grandchildren and our great-grandchildren are going to have to bear.
Yet there was nothing in the Politico interview to match the seeming commitment to legislating a carbon emissions price that the President made in his June 2 energy speech in Pittsburgh, as reported in the New York Times:
If we refuse to take into account the full cost of our fossil fuel addiction — if we don’t factor in the environmental costs and national security costs and true economic costs — we will have missed our best chance to seize a clean energy future. The votes may not be there right now, but I intend to find them in the coming months.
Needless to say, it’s a long shot that renewable technologies will ever be able to undercut fossil fuels in price unless at least some of those environmental and security costs are factored into coal and oil prices, as the Christian Science Monitor noted in an editorial published the same day that Politico interviewed the President.
06/3/2010 by James Handley
An inter-agency panel estimated this week that each additional (metric) tonne of CO2 emitted into Earth’s atmosphere inflicts at least $21 in damage to agricultural productivity, human health, property damage from flooding, and the value of ecosystem services lost due to climate change. (According to EPA, the U.S. emitted 5.6 billion tons of CO2 in 2008.) The panel, representing the consensus of 12 federal agencies, provided its climate damage analysis for use in cost/benefit calculations assessing major federal actions, including regulatory changes.
The panel applied “conservative” assumptions: a relatively high (3%) discount rate which tends to downplay the present value of future damage, they excluded large categories of costs such as military intervention or humanitarian assistance to failed states, and gave only minimal consideration to potential catastrophic climate tipping points. Even with those assumptions holding damage figures down, their mid-range assessment supports a $21/t initial CO2 price rising by 2050 to $45 in low-risk scenarios and to $136 in their high-risk scenario. The analysis can be seen as a low-end “benchmark” that will only go up as we learn more about (and can better quantify) climate damage. And it clearly underlines the need for a carbon tax of at least $21/t and rising, to reflect more of the true cost of CO2 pollution and create economy-wide incentives to minimize climate damage.
04/26/2010 by James Handley
Earth Day weekend’s headlines set the stage: “Sen. Graham Walks Away from Climate and Energy Bill” and “Climate consensus collapses in Senate.”
Speaking at the Earth Day rally, Friends of the Earth President Erich Pica called for everyone to “use less stuff,” looked to a future beyond fossil fuels and urged Congress to “get serious” about climate. In turn, Dr. Hansen pointed to our “false economy of cheap fossil fuels” and proposed a “People’s Climate Stewardship Act” — a steadily-rising carbon fee with revenue returned to Americans. Rep. Chris Van Hollen (D-Md.) spoke immediately following Dr. Hansen. Afterwards, Dr. Hansen and I congratulated Van Hollen for his “dividend” proposal to return carbon revenue to Americans. Van Hollen thanked Dr. Hansen and agreed: a price on carbon is essential; a fee with revenue return is the “cleanest” way. He said, “I will work with you” and encouraged us to continue educating the public and pressing for bipartisan support.
Here’s Dr. Hansen’s report: Earth Day on the Mall.
04/18/2010 by James Handley
Wall Street banking firm Goldman Sachs intentionally sold “toxic” mortgage-backed assets to clients to generate fees and bonuses, according to fraud charges filed by the Securities and Exchange Commission Friday. (Washington Post, 4/17.) SEC’s suit alleges that Goldman vice president Fabrice Tourre wrote: “The whole building is about to collapse anytime now,” in an e-mail months before creating and marketing the mortgage-backed investment. (Goldman denies that they “bet against… clients.”)
And, earlier this week, police in Spain arrested nine people for alleged fraud involving trading of carbon credits.
Carbon “offsets,” like mortgages underlying the investments Goldman marketed, vary tremendously in quality and value. GAO has reported that verification of offsets in the EU’s carbon trading system has been spotty; many have little or no value. The incentives that apparently led Goldman to oversell repackaged subprime mortgages would also prevail in a cap-and-trade carbon market, setting the stage for another bubble and collapse. The SEC’s case is a loud, clear warning to Congress: Skip the markets, traders, volatility, offsets and fraud; set a predictable, rising carbon price directly.
04/13/2010 by James Handley
Last week’s NY Times Sunday Magazine featured Nobel prize-winning economist Paul Krugman’s take on climate economics. Krugman notes that climate modelers have gained “enormous credibility” by successfully predicting the past 20 years of global warming. He concludes that climate trends over decades (which wash out short-term weather fluctuations), show that “the planet is indeed warming” which will lead to “massively disruptive events, like the transformation of the Southwestern United States into a permanent dust bowl over the next few decades.”
Krugman calls for the use of economic tools to curb the climate threat. He deftly articulates how (“Pigovian”) taxes discourage pollution by placing some of the “externalized” cost of pollution back on polluters, without the inefficiency and intrusiveness of regulations. He notes that a “cap-and-trade system produces the same incentives to reduce pollution… with the price of licenses effectively serving as a tax on pollution.” He explains:
A pollution tax… imposes costs on the private sector while generating revenue for the government. Cap and trade with auctioning… is just like a tax. [But current legislative proposals] involve[s] handing out licenses to existing players, so the potential revenue goes to industry instead of the government… as a way to partly compensate some of the groups whose interests would suffer if a serious climate-change policy were adopted. This can make passing legislation more feasible.
Krugman also acknowledges Dr. Hansen’s (and our) point that cap/trade punishes individual initiative to reduce GHG emissions. But Krugman never mentions the possibility of a carbon tax with revenue returned directly to the public, which should do even more to make passing legislation feasible and would avoid the volatility, manipulation and the need for “offsets” that effectively eviscerate the “emissions certainty” of a cap. Moreover, returning revenue to consumers rather than supporting “incumbent technologies” would encourage consumers to make the choices needed to speed our transition to a green economy.
Krugman confronts the problem of discounting the cost of future climate damage. Normal discounting (typically applied to business investments) drastically reduces the present value of future gains or losses; such discounting thus supports only small investments and low carbon taxes to avoid future climate damage. Siding with Sir Nicolas Stern, Krugman concludes that such large discounting is unfair to future generations; it effectively assumes away the potential for global catastrophe. Thus, despite his political judgment about cap-and-trade, Krugman’s reasoning supports the view that a substantial carbon price with a serious ramp-up is needed.
