Pricing carbon equitably and efficiently
News Release / For immediate release
Contacts: Stephen Kent, email@example.com, 914-589-5988 / Nick Berning, NBerning@foe.org, 703-587-4454
NASA Lead Climate Scientist, House Democratic Caucus Leader, Senior Economists and Environmental Leaders Urge Revenue-Neutral Carbon Tax as Best Way to Curb US CO2 Emissions and Boost American Low- and Middle-income Families
[Washington DC – December 9, 2008] At a Capitol Hill briefing today, NASA’s lead climate scientist, senior economists and environmental leaders urged Congress to move swiftly to enact a national carbon tax to reduce carbon emissions before they push Earth’s climate system past its “tipping point” into accelerating ecological and social collapse.
After the resounding defeat of the Boxer-Lieberman-Warner cap-and-trade bill last spring, the carbon tax has emerged as a viable competitor to a cap-and-trade system. As Congress begins to ponder climate legislation widely expected in 2009, advocates at today’s briefing made the case for taxing carbon as a more effective and economically viable way to curb emissions while stimulating the economy. They argued the considerable revenues carbon taxes would raise should be revenue-neutral, and be returned to taxpayers either through direct distribution or cutting taxes such as payroll taxes.
The public briefing for members of Congress and their staffs was sponsored by the Environmental and Energy Study Institute (EESI), the Carbon Tax Center, the Climate Crisis Coalition, Friends Committee on National Legislation and Friends of the Earth.
“A price on emissions that cause harm is essential,” said Dr. James Hansen, Director, Goddard Institute of Space Studies, National Aeronautics and Space Administration and a leading voice on understanding and redressing climate change. He urged “a carbon tax on coal, oil and gas… applied at the first point of sale or port of entry” to encourage fuel conservation and switching to low-carbon alternatives.
“A Carbon tax with 100 percent dividend [direct revenue distribution to individuals] is needed to wean us off fossil fuel addiction,” Hansen argued.
“Tax and dividend allows the marketplace, not politicians, to make investment decisions. It is also non-regressive. Low- and middle-income people will find ways to limit their carbon tax and come out ahead. 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.”
Rep. John Larson (D-CT), recently elected as chair of the House Democratic Caucus and the sponsor of a carbon tax bill introduced into the House last year, hosted the briefing. He said, “Climate change is the great challenge of our time. As we in Congress tackle this challenge it is important that we not just pass legislation, but pass the right legislation. What I have proposed is legislation that would tax bad behavior like polluting and return that money to average Americans through a payroll tax reduction. Any legislation will create winners and losers. In this case, the winners should be the American people.”
Economist Gilbert Metcalf of Tufts University, author of A Green Employment Tax Swap: Using A Carbon Tax to Finance Payroll Tax Relief, recommended a carbon tax just under $17/ton of CO2. This would nearly double the average price of coal, the most carbon-intensive fossil fuel, leading to fuel substitution and process improvements that would reduce coal burning by 32%. Petroleum products would increase in price by nearly 13% and natural gas by just under 7%, he estimates. Metcalf advocates dedicating carbon tax revenues to eliminate the payroll tax on the first $3,660 earned by each worker. He calculates that this would equate to an average 11% reduction in payroll taxes, with greater percentage reductions for lower-paid workers. Payroll tax reduction would stimulate job growth, something the economy now urgently needs.
“In general, taxes on labor supply discourage labor and create economic losses to workers over and above any taxes collected,” Metcalf explaned. “Tax reductions can encourage additional labor supply either on the intensive margin (hours worked) or the extensive margin (the decision to enter the labor force). The Green Employment Tax Swap encourages additional labor supply.”
Robert Shapiro, former Undersecretary of Commerce, now head of SonEcon, a Washington, DC consulting firm, and co-chair of the U.S. Climate Task Force, criticized cap-and-trade proposals as clumsy, complex, volatile and ineffectual ways to tax carbon emissions: “The only reason anyone is talking about cap-and-trade now is because the U.S. (at Al Gore’s urging) insisted on cap-and-trade in Kyoto [in 1997]. Mr. Gore has since abandoned cap-and-trade and is now calling for a carbon tax to replace other taxes. Caps just aren’t working.”
Under the European Union’s carbon cap, CO2 reductions have been “negligible and very costly,” Dr. Shapiro said. Exemptions (e.g., for coal-fired power plants in Germany) “overwhelm the cap.” China and India have strongly rejected cap-and-trade. In contrast, he argued, a U.S. carbon tax would encourage our trading partners to tax carbon themselves to avoid forfeiting revenues on their exports to us (WTO rules would otherwise permit the US to tax imports for carbon).
Like most economists, Shapiro said he strongly prefers price-based policies such as carbon taxes, to quantity-based carbon caps, because the taxes are simple and predictable as well as difficult to evade. A cap on quantity necessarily makes energy prices more volatile, and the resulting price spikes are economically disruptive, harming productivity and undermining support for the system. For example, Shapiro noted that Southern California’s “RECLAIM” cap-and-trade system for smog emissions crashed due to price spikes during the state’s electricity crisis.
James Hoggan, a public policy specialist from British Columbia who chairs Canada’s Suzuki Foundation, outlined the steps leading to British Columbia’s successful implementation of its carbon tax in July, and explained the national dimensions of the carbon tax in Canada. “The Canadian experience with carbon taxes is politically daunting: a federal party that proposed such a tax just lost a fall election, and a provincial party that introduced a carbon levy last summer faces potential defeat next May. But close analysis shows these politicians got in trouble not for what they did, but for how they did it.”
From Canada’s experience, Hoggan drew the lesson that emphasizing “revenue recycling” or the revenue-neutral configuration of the carbon tax helps distinguish it from conventional taxes and garners more public support. He cited polling data suggesting that a majority of Canadians support a transparent revenue-neutral carbon tax as evidence that carbon taxation could be popular with voters.
The Carbon Tax Center was launched in January 2007 to give voice to Americans who believe that taxing emissions of carbon dioxide — the primary greenhouse gas — is imperative to reduce global warming.
The Environmental and Energy Study Institute is a non-profit organization established in 1984 by a bipartisan, bicameral group of members of Congress to provide timely information and develop innovative policy solutions that set us on a cleaner, more secure and sustainable energy path.
The Climate Crisis Coalition was founded in 2004 to create awareness and convey a sense of urgency about the climate crisis and broaden the constituency of the climate action movement. Its approach to climate change links issues of environmental, social and economic equity.
The Friends Committee on National Legislation is the largest peace lobby in Washington, DC. Founded in 1943 by members of the Religious Society of Friends (Quakers), FCNL staff and volunteers work with a nationwide network of tens of thousands of people from many different races, religions, and cultures to advocate social and economic justice, peace, and good government. FCNL is nonpartisan.
Friends of the Earth is the U.S. voice of the world’s largest grassroots environmental network, with member groups in 77 countries. Since 1969, Friends of the Earth has fought to create a more healthy, just world.
NOTE TO EDITORS AND PRODUCERS: Experts quoted in this press release are also available for phone or in-person interviews. Interviews may be requested by contacting Stephen Kent, firstname.lastname@example.org (914) 589-5988.
Photo: Nick Berning.
Click here to access Berning’s slide show of the briefing.
David Collins says
Very impressive. My thanks to everybody involved in putting this on.
I have one quibble. Rep. John Larson (D-CT) is quoted saying, "What I have proposed is legislation that would tax bad behavior like polluting and return that money to average Americans through a payroll tax rebate." This comment misses one of the big advantages of the Carbon Tax: if set high enough, it removes the "sin" from burning CO2-producing fuels. The rich and the foolish pay the taxes and boost the disposable income for the poor and the prudent. More to the point, many CO2-producing activities are not necessarily "bad behavior". The actions of Good King Wenceslas, as celebrated in the famous carol (one of the many we try to shut our ears to while shopping in Temples of Mammon this time of year) come to mind.
Again, many thanks to all involved for producing this event.
Vane Lashua says
Dan Rosenblum’s presentation for the Climate Crisis Coalition / GCC program in Beacon on Saturday was a powerful primer on this critical issue and the importance of making the case for Carbon Tax legislation … and he enlisted a new group of advocates. The hearing was obviously a successful step toward educating the Congress and our new administration in the urgency of getting legislation on the books.
What an amazing event. It was very heartening to see so many articulate supporters of a carbon tax shift. I hope they find many powerful ears that will listen to them as the climate change policy debate heats up. I think people should understand very clearly that with a cap and trade system that there is an explcit tradeoff between unlimited price volatilty and guarenteed GHG reductions. There cannot be both, as a safety valve is maintained by issuing as many emissions permits as it takes to reduce the price below the ceiling. That is not a guarentee of emissions reductions, it is a more expensive and inefficient version of a tax. The alternative is to extend financial and price volatily across every economic sector that uses energy.
David Ocampo G says
I am delighted that the event took place. I am less than delighted with the tiny squeaks of silence the media have reported it with. One big source for concern is how the new administration is taking shape. Climate Czarina-in-Waiting Carol Browner has been sitting profitably on the board of APX, which makes money brokering climate indulgences, so there is no way she could be expected to look favorably upon the Carbon Tax. Really disturbing. One of the many beauties of the Carbon Tax is that it eliminates any need for such brokering. We can expect that not only will Ms Browner not be inclined to look favorably on a policy that would snatch the pen from the hand that signs checks for APX, but one and a half skillion other brokers will come a-running to her, and they have had access to her open ears for a Bushful of years. (It just now occurred to me that the Spanish word for "broker" is "corredor" which literally means "runner" — that they will be; indeed, they most likely already are.)
Glenn Page says
An informed politician that enter politics for the benefit of others and the country will support the carbon tax because it is fair and efficient. A politician entering politics for his/her own benefit is more likely to support cap and trade as it is a way to reward friends and pick winners. I would be most surprised and disappointed if the Obama administration does not chose the carbon tax.
I am quite impressed to see how fast the debate has grown in America lately. As a Frenchman I am expecting a lot from the new American administration, as much as I expected from Sarkozy’s promises to fight for a carbon tax in the EU. Even though many here in France believe nothing can be done without the USA – which is quite right, I which we would talk much more about carbon-pricing, in open actions as the ones the CTC has set up till now in the US. And we need your support!