One Cheer for the Guardian’s Divestment Campaign

The worldwide fossil fuel divestment campaign got a huge boost this week when Guardian editor Alan Rusbridger boldly thrust his paper into the fray. Britain’s most respected newspaper is urging readers to sign a petition by 350.org demanding that the Gates Foundation and the Wellcome Charitable Trust divest from the world’s top 200 fossil fuel companies within five years.

Divestment can’t loosen the fossil fuel stranglehold without a carbon tax.

Combined, the two charities manage over $70 billion in assets. Both say they consider climate change a  serious threat. But last year the Gates Foundation invested at least $1 billion of its holdings in 35 of the top 200 carbon reserve companies, while the Wellcome Trust invested $834 million in fuel-industry mainstays Shell, BP, Schlumberger, Rio Tinto and BHP Billiton.

We’re both elated and concerned by Rusbridger’s audacious move. Elated that this distinguished and brave journalist has thrown down the gauntlet to the global fossil fuel industry. But concerned that this divestment campaign may raise false hopes.

As Matthew Yglesias articulated last year in a thoughtful piece on Slate, divestment by socially responsible investors, universities and even governments won’t starve capital flows to fossil fuel corporations anytime soon. That’s because in a global market, every share of stock we activists dutifully unload will be snatched up in milliseconds by some trader who can bank on humanity’s continued dependence on fossil fuels to continue generating profits.

South Africa’s historic divestment campaign — the one that helped topple Apartheid and enshrined divestment as a tool against oppression  — was paired with a UN-sponsored boycott of South African goods. Not just aiming at the supply of capital but destroying the demand for goods sheared the Apartheid regime’s economic lifeline to the rest of the world more than either policy could have done alone.

No, we’re not suggesting a global boycott of fossil fuels. Rather, we point to the Guardian’s campaign to reiterate that the best and maybe only broadly effective way to reduce fossil fuel demand (which is the point of a boycott) is with a carbon tax. Economists agree on that policy prescription just as strongly as climate scientists agree on the diagnosis. And national-level carbon taxes can be designed to draw our or any nation’s global trading partners into carbon taxing, which means that a move by a big economy to impose a carbon tax will trigger a wave of followers.

So by all means, divest. The cultural and perhaps political opprobrium that divestment can spark is long overdue for the fossil fuels industry. But let’s not assume that divestment alone will break the chains of fossil fuel dependence. Even with the Guardian’s welcome campaign, the world still needs a transparent price on carbon pollution to strangle demand for fossil fuels by replacing them with non-carbon alternatives.

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Last modified: March 19, 2015

British Columbia’s Carbon Tax Architects Speak

A new report from a British Columbia think tank reveals the inside story behind B.C.’s successful tax on CO2 pollution. “How to Adopt a Winning Carbon Price, Top Ten Takeaways from Interviews with the Architects of British Columbia’s Carbon Tax,” published by Clean Energy Canada, draws on extensive interviews with senior government officials, elected representatives and a broad range of experts who helped shape or respond to this groundbreaking policy.

BC C-TX RPT CVRBritish Columbia inaugurated its carbon tax on July 1, 2008 at a rate of $10 (Canadian) per metric ton (“tonne”) of carbon dioxide released from coal, oil and natural gas burned in the province. The tax incremented by $5/tonne annually, reaching its current level of $30 per tonne of CO2 in July 2012. At the current U.S.-Canadian dollar exchange rate (1.00/0.80), and converting from tonnes to short tons, the B.C. tax now equates to around $22 (U.S.) per ton of CO2.

In the tax’s initial four years (2008 to 2012), CO2 emissions from fuel combustion in British Columbia fell 5% — or 9% per capita, considering the province’s 4.5% population growth over that span. [NB: These figures are revised downward from the original version of this post; see editor’s note at end.] During the same period, emissions from the rest of Canada increased slightly. Revenue from the tax has funded more than a billion dollars worth of cuts in individual and business taxes annually, while a tax credit protects low-income households who might not benefit from the tax cuts. [Read more…]

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Last modified: March 18, 2015

Conservatives: Unpriced Carbon Pollution is Theft — Milton Friedman Would Tax It

Free dumping of CO2 pollution into the atmosphere is nothing less than “theft” from future generations who stand to suffer from unabated global warming, declared University of Chicago economist Steve Cicala at a symposium last week in honor of the conservative icon Milton Friedman. “It is theft,” said Cicala. “That’s a loaded term, but if someone else has a better term for taking something from someone without their consent and without compensating them, I’d be happy to hear it.”

E&E News reports that Cicala and former Obama White House adviser Michael Greenstone, who holds the Friedman chair at the U. of Chicago and directs its Energy Policy Institute, asserted that “if the late free-market economist Milton Friedman were alive today, he’d probably support pricing carbon.”

Free-Market Economist Milton Friedman
Free-Market Economist Milton Friedman

According to E&E, Cicala and Greenstone argued that,

Friedman… would have viewed climate change as a negative externality associated with burning fossil fuels and would have believed that society was entitled to recover its losses from those who emit carbon to advance their economic interests… While there is a market for the products that are associated with greenhouse gas emissions — like electricity, fuel and steel — there is no market for the pollution inflicted by their manufacturers on the public. [Read more…]

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The Thin Reed Supporting the White House’s “Legacy” Climate Plan

Post hoc, ergo propter hoc

I took Latin in high school, and I loved unraveling classic phrases like After this, therefore because of this ― a common logical fallacy that attributes event B to event A because A preceded B.

Okay, so that’s not quite what Politico and the New York Times did this week when they linked the sharp drop in power plant emissions in the Northeast U.S. from 2005 to 2012 (“B”) with the regional CO2 trading system known as RGGI (“A”). But they came pretty close:

Politico: Nine Northeastern states already take part in a regional trading network that puts an economic price on their power plants’ carbon output . . . The Northeastern states saw their power plants’ carbon emissions drop more than 40 percent from 2005 to 2012, the trading network told EPA in December — without any of cap-and-trade critics’ apocalyptic expectations for such a system.

The Times: The regional program [RGGI] has proved fairly effective: Between 2005-12, according to program officials, power-plant pollution in the northeastern states it covered dropped 40 percent. [Read more…]

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