Carbon Offsets: A Small Price to Pay for Efficiency (NYT – Robert Frank – Economic View)
Archives for May 2009
The Climate Gap — Poor, Minorities Hardest Hit by Climate Change (New America Media)
Washington, DC: Like moles, countless industry lobbyists popped up to beg for free allowances as the House Energy & Commerce Committee drafted the Wax-a-mole, oops, Waxman-Markey cap-and-trade bill. By the bill’s unveiling in mid-May, the moles had gobbled up an astonishing 85% of the allowance pie and were promised 2 billion tons of carbon “offsets,” (up to 75% from outside the U.S.) effectively postponing serious U.S. carbon reductions for over a decade while demolishing the vaunted “emissions certainty” of the “cap.”
A lion’s share (35%) of allowances would go to utilities (effectively, to coal), with other slices for natural gas companies, oil refiners, “energy-intensive” industries and the “clean coal” money pit. While the bill provides a sliver or two for low-income energy assistance and energy efficiency, it also features the Orwellian inclusion of nuclear, garbage-burning, and coal-mine waste in its “renewable” energy handouts. Along with the allowance giveaway, the bill tosses a juicy new market for carbon allowances to the sharks on Wall Street.
Ironically, during the Waxman-Markey markup, British Columbia Premier Gordon Campbell and his centrist Liberal Party were sailing to re-election in what his opponents billed as a referendum on his revenue-neutral carbon tax. Campbell, an avowed fiscal conservative, stood firmly behind his year-old carbon tax, gaining support from many of the Province’s leftist New Democrats and Greens.
BC’s carbon tax in a nutshell:
· No offsets.
· No allowances and no give-aways.
· All revenues distributed to households and businesses via dividends and tax cuts.
· No trading.
· No bubble.
And, again: Campbell won re-election.
In the face of cap-and-trade’s failure to reduce emissions in the European Union, Waxman-Markey’s defenders argue that the Europeans just didn’t do it right. They gave away too many allowances, their “cap” was too loose. Did Waxman-Markey avoid those flaws? No, it scaled them up.
Cap-and-trade advocates contend that Waxman-Markey is the best our political system can deliver, implying that U.S. voters are too browbeaten to accept the inconvenient truth that building a low-carbon economy requires predictably raising the relative price of fossil fuel over alternatives and conservation. So, they say, we have to “hide the price,” build in a trove of cheap offsets and pretend that this will magically lead to reductions… later. Yet the bill’s 2020 cap is so innocuous that the 2009-2020 reduction rate in emissions implies only a 46% drop by 2050, not the promised 80%, as CTC’s Charles Komanoff pointed out in this space last week.
Waxman-Markey advocates insist this can be fixed, down the road. But as Gar Lipow pointed out in Grist last week, once a system as complex and heavily-lobbied as this is entrenched, the infestation will be nearly impossible to eradicate. Every interest that has gotten a piece of the pie — the free-allowance holders, the traders, the purveyors of offsets — will be invested in the status quo, whether or not it yields real reductions. Subsidies to the corn-to-ethanol industry (started in the name of “energy independence”) are just one example of a government program that serves no useful purpose but which will not die because its lobbyists maintain an intravenous feed of taxpayer life support.
Instead of handing out allowances to fat cats, British Columbia’s revenue-neutral carbon tax distributes revenues to families and businesses. Rep. Larson’s America’s Energy Security Trust Fund Act of 2009 would do likewise. Across the aisle, the GOP’s Rep. Inglis recently introduced a similar “Raise Wages / Cut Carbon” bill.
Once Waxman-Markey is reported out of the Energy & Commerce Committee, it will be “scored” by the Congressional Budget Office for budget implications and referred to other House committees, including Ways & Means, which has been considering ways to bypass trading altogether and just set a predictable price on carbon. At more than 900 pages, it’s doubtful that anyone has carefully scrutinized the bill. Ways & Means members understand the volatility problem of emissions trading and have heard about the specter of subprime carbon, but most other members aren’t yet on the learning curve.
We have our work cut out: members of Congress need to be educated about the fatal flaws in the Waxman-Markey approach, and encouraged to consider the more transparent and effective alternatives that Ways & Means has introduced.
Photo: “Whac-a-Mole” by Thomas Hawk (flickr)
The Costs of Cap-and-Trade (NYT– Green Inc.)
Campbell’s Carbon-Tax Win a ‘Watershed Event in Canadian Politics’ (Macleans)
India Climate Activists Push for Carbon Tax (ClimateWire via NYT)
Obama and Cap-and-Trade on Legislative Tightrope (NYT)
Coal, Nuke, Waste Industries Lobby to Redefine ‘Renewable Energy’ (NYT)
(Originally posted on May 21 on Grist, under the title, Waxman-Markey: ‘80% less by 2050’ is too hard, let’s do 46%.)
I’ve read humongous books in my time, most memorably Cloudsplitter, Russell Banks’ magisterial cinderblock-sized novel of John Brown, the anti-slavery warrior whose “Bloody Kansas” campaign in the 1850s helped provoke the Civil War.
The similarly supersized Waxman-Markey bill couldn’t be more different – not just in genre, but in attitude. Where Brown gave his life to abolish slavery, the “American Clean Energy and Security Act of 2009” seems intent on postponing Americans’ day of reckoning with climate-damaging fossil fuels.
In a bid to pick up support from coal state Democrats, Waxman and Markey this week pruned their cap-and-trade “20% by 2020” greenhouse gas (GHG) reduction target to 17%. The actual reduction will almost certainly be even less, thanks to the bill’s generous “offset” provisions and the economic collapse that has pushed emissions way below levels from the 2005 base year.
Worse, if a larger share of the GHG reductions comes from “other” greenhouse gases such as methane and nitrous oxide, then reductions from fossil fuel burning will be disproportionately smaller. While that won’t necessarily hurt the climate, it will mean that many of the ancillary but vital benefits from reducing carbon emissions, such as reduced oil dependence and diminished environmental destruction from coal mining, will be watered down.
To make my points, I’m going to go quantitative and speak of emissions in “CO2 equivalent terms,” in which emissions of methane and other GHG’s are scaled up to reflect their true heat-trapping capacities. All figures are in millions of metric tons (“Tg” or trillion grams). Ready?
Total U.S. GHG emissions in 2005 were 7,130 Tg, of which 6,074 Tg was carbon dioxide. A 17% reduction (Waxman-Markey’s 2020 target) requires trimming that by 1,033 Tg to reach 5,042 Tg. But I estimate that due to contractions in driving, flying and use of electricity, CO2 emissions this year will be just 5,770 Tg, or roughly 300 Tg less than in the 2005 base year. Hence, the required reduction from 5,770 to 5,042, which is 728 Tg, is just 12.6% of current emissions. That’s one-fourth less than Waxman-Markey’s advertised 17%.
Worse, non-CO2 emissions, which accounted for 1,056 Tg in 2005, are probably fertile territory for quick and cost-effective fixes. If that component could be shrunk at twice the overall target rate, i.e., by 34%, it would contribute 359 Tg of the necessary 1,212 Tg total reduction. This would allow a mere 853 Tg of CO2 to be cut from the 2005 base year, or only 549 Tg to be cut from this year’s estimated CO2 emissions of 5,770 Tg. The latter drop, a paltry 9.5%, could be gotten with annual reductions averaging just 0.9%. And of course the use of offsets will dilute those reductions even further.
Let’s round that 0.9% annual CO2 reduction rate from 2009 to 2020, to 1%, and take it out to 2050. At that rate, in 2050 CO2 emissions would have fallen from today’s levels by only one-third. Even if non-CO2 GHG emissions were completely eliminated, total U.S. emissions of greenhouse gases in 2050 would still be down by less than half (46%) from those in the 2005 base year. There’s a world of difference, alas, between that and the ostensible 80% reduction.
I ran a few of these numbers past a journalist I know who follows climate policy. He replied that “The political deal was to eviscerate short-term drivers [reductions and price rises] in order to get a long-term framework in place.” Maybe so, but what’s troubling is that the first GHG reductions are supposed to be easier to get than the last. Not to mention that U.S. environmentalists once had pretensions of making our country a model for the world, and weren’t going to settle for anything less than science-driven reductions.
I know, I know, investments take time to bear fruit, and the bulk of the reductions to mid-century will come via economies of scale and tech breakthroughs and societal tipping points. But at this stage that’s a matter of faith as much as of empirical evidence (as well as a subject for a separate post). And, last time I checked, Congress had not abolished the Law of Diminishing Returns and its corollary about low-hanging fruit.
Some say that Waxman-Markey, while imperfect, is at least a step on the road toward ridding society of fossil fuels. With the anemic numbers shown here, it smacks more of accommodation than abolition. Our atmosphere still awaits its John Brown.
On the same day this was posted to Grist, the Economist ran an editorial, Compromise has enfeebled America’s cap-and-trade bill. A carbon tax would be better, roundly criticizing the Waxman-Markey bill. While the entire editorial is worth reading, the conclusion is particularly trenchant:
The weakening of this bill illustrates one of the central problems with cap-and-trade systems. They are complex, obscure and therefore susceptible to horse-trading. A chunk of allowances can be handed out to one lobby, a sliver to another, and soon the system’s effectiveness has been sliced away. The corresponding attraction of a carbon tax, which this newspaper has always supported, is its simplicity. The government sets the rate. Everybody can see what it is. Voters get transparency. Businesses get certainty. And the government gets a large chunk of revenue—not to be sniffed at in these difficult times.
This is an important moment. Thanks to much effort on the part of many well-intentioned people, America is prepared to legislate to control carbon. The country needs to seize this opportunity and introduce a simple carbon tax. Sceptics will howl about the initial cost, but it will be transparent and far, far cheaper than the impact of serious climate change.
Photo: Flickr / fpsurgeons photostream
Weak Medicine (Economist editorial on Waxman-Markey)