(This post first ran on Gristmill, under the headline,
Can the Promise of a New Political Landscape Include a U.S. Carbon Tax?,
with the subhead, Advocates launch the Price Carbon Campaign.)
What do the defeat of the Lieberman-Warner cap-and-trade bill, the burst of the oil-price bubble, the Wall Street meltdown, the promise of a new political landscape in the wake of the fall elections, and the exigencies of the climate crisis have in common
To the Carbon Tax Center and our partners at the Climate Crisis Coalition, these events together augur for a resurgence of interest in, and potential political support for, the “gold standard” for carbon pricing: a national, revenue-neutral carbon tax.
- The ignominious defeat of Lieberman-Warner, which collapsed in June under its 800-page weight, made crystal-clear that any carbon cap-and-trade system will be dysfunctionally complex, will take agonizingly long to put in place, and will fall prey to massive special-interest ripoff.
- Political prospects for creating trillions of dollars’ worth of tradeable carbon emission permits have been further damaged by the Wall Street debacle and the resulting backlash against insider speculation and profiteering.
- Retreating prices for oil and other fossil fuels strengthen not just the need, but also the political wherewithal for taxing fuels for their carbon content.
- The success of the movement to elect Barack Obama to the presidency signals an era of new possibilities in which, just possibly, shibboleths such as “no new taxes” may get tossed into history’s dustbin — particularly if carbon taxes are made revenue-neutral via tax-shifting or revenue distribution.
To pivot off this moment, CTC and CCC today, with other allies, have launched the Price Carbon Campaign.
The campaign begins with three elements:
- an online petition to the Obama administration and Congress calling for serious consideration of a national carbon tax during the first hundred days of the new Washington regime;
- a letter-writing campaign to members of Congress. Your letter will be directed not only to your Senators and member of Congress (keyed by your zip code), but also to House and Senate leaders who hold sway over climate and tax legislation; and
- a congressional briefing on carbon taxes focusing on the environmental, economic, economic-efficiency, logistical, and political benefits of a national carbon tax.
The briefing, featuring NASA lead climatologist (and carbon tax advocate) James Hansen, economists Gilbert Metcalf and Robert Shapiro, and Canadian public affairs expert James Hoggan, and hosted by Rep. John B. Larson (D-Conn., 1st district), is set for a House Ways and Means Committee hearing room (Rayburn H.O.B., Room B-318) on Tuesday morning, Dec. 9.
For further details on the briefing, click here.
We hope to generate thousands of signatures and letters between now and Dec. 9, so please visit the Price Carbon Campaign now.
Photo: Flickr / patrix.
Steven Hales says
A portion of carbon taxes will be spent on what? Oh that’s right more carbon based fuels. So the theoretical lowering of carbon intensity is much less than a carbon tax would have you believe. A revenue neutral tax only keeps aggregate demand at the same level in period 0. In successive periods there are leakages back to the carbon economy. More efficient use of cabon fuels will increase their use over time. There is a rebound even in the face of carbon taxes. Carbon taxes have to be sufficiently high and above the rate of technological improvement to be effective in the long run. This means that demand destruction and the premanent lowering of aggregate demand is the only way to get long run reductions in carbon fuel use.
Alternative fuels are too inefficient to replace gasoline. IOW we will spend more as measured by percent of GDP to produce these fuels. I believe that alternatives at present are unsustainable if we want to maintain our current lifestyle and consumption patterns.
I say no to carbon taxes and yes to petroleum. Let technology catch up to your dreams then ask if carbon taxes are necessary.
Charles Komanoff says
Your points are important but overdone, in my view. The share of carbon tax dividends (or tax-shifted revenues) that will be spent on fossil fuels will be around the same as the current share — 7-8% of GDP. The remaining 92-93% will be spent elsewhere. Reflecting your "rebound effect" in the modeling is important, but it doesn’t appreciably change the extent to which taxing the carbon content of FF’s is likely to reduce their use.
Our (CTC’s) proposed carbon tax is indeed high, after the ramp-up, and our rate of phase-in is well in excess of the rate of technological improvement.
Your last point — "say no to carbon taxes and yes to petroleum" — is incomprehensible to me and is antithetical to environmental and political sustabinability, in my view.
Thanks for writing.
Steven Hales says
Thanks for the reply. First a bit of history to see if rebound is possibly real.
When you compare petroleum consumption and overall energy consumption between the periods 1949-1977 and 1978-2007 you find that the rates of increase measured in percent changes have reversed positions:
Percent Change in Consumption
This reversal means the rates of efficiency improvements have been greater in the petroleum sector while overall energy consumption has increased at 2.7 times the rate of petroleum consumption. This seems to show that the Jevons Paradox applies in the macro case in the sense that the income effects from the increased efficiency of petroleum consumption has expanded the consumer’s consumption space which increase in consumption has an energy content.
As you say if to be effective a carbon tax must keep the consumer’s consumption space constant by keeping ahead of efficiency improvements. If substitutes for carbon based fuels can allow for decreasing energy intensity then consumer welfare will not be harmed. However, if the substitutes cause increasing energy intensity then a greater share of GDP will be accounted for by the energy sector and consumer welfare will be harmed. I believe that these two scenarios revolve around relative energy densities of the different energy sources.
Turning now to petroleum consumption patterns in the US over the past 60 years we find a remarkable interplay between diffusion of innovations, regulation and price. The storm of innovation that resulted between 1973 and 1984 unleashed a flood of efficiencies that resulted in a remarkable reduction in the rate of consumption growth allowing the fleet grow and miles driven to explode. These were off the shelf technologies and were able to alter the path of consumption from a blistering pace between 1949 and 1977 of 220% growth to a rate from 1978 to 2007 that saw petroleum consumption rise by only 10%. If simple relationships can produce such a remarkable result in 30 years what will the market, regulation and technology achieve in the next 30 years? I think reduced petroleum consumption is the answer even in the face of increases in population and the size of the fleet. You can see a flattening of petroleum consumption beginning in 2004 and a slight decline into 2007 even before the sharp rise in price this year. Some of this decline is the ramping of ethanol production but it also seems to point to a possible turning point in the diffusion of new innovations like hybrids and even direct injection not to mention the use of new and lighter materials and better aerodynamics.
Before implementing a carbon tax I think we need to see if we have a similar reduction in quantity demanded of petroleum in our current recession that we had between 1978 and 1983 when quantity demanded fell from 6.9 billion barrels in 1978 to 5.6 billion barrels in 1983. If we do see a similar reduction consumption will fall to around 6 billion barrels per year by 2013, a reduction of 20%. I think this is beyond the wildest dreams of most environmentalists. If consumption patterns follow past recoveries as new innovations diffuse and as the fleet is turned over, after 2013 we should see a much flatter growth curve and we shouldn’t return to current rates of consumption for over 25 years. A simple tweak of regulations and tax incentives could move the consumption curve to a flatter or even declining trajectory. This is why I say yes to petroleum and no to carbon taxes.
Remember that after this recession is over the decrease in quantity demanded of petroleum will fall disproportionately on OPEC and not on the US. At $50 per barrel our current acount deficit would fall by about $75 billion per year.