In its just released Policy Options for Reducing CO2 Emissions, the non-partisan Congressional Budget Office confirms the superiority of carbon taxes over various types of cap-and-trade schemes. The CBO concludes that:

A tax on emissions would be the most efficient incentive-based option for reducing emissions and could be relatively easy to implement. If it was coordinated among major emitting countries, it would help minimize the cost of achieving a global target for emissions by providing consistent incentives for reducing emissions around the world. If other major nations used cap-and-trade programs rather than taxes on emissions, a U.S. tax could still provide roughly comparable incentives for emission reductions if the tax rate each year was set to equal the expected price of allowances under those programs.

Responding to interest in cap-and-trade programs, the CBO study "explores ways in which policymakers could preserve the structure of a cap-and-trade program but achieve some of the efficiency advantages of a tax." In other words, the CBO recognizes that a carbon tax is the "gold standard" and then tries to figure out how to reduce the disadvantages of cap-and-trade.

If Congress in its wisdom decides to approve a cap-and-trade program, it should make that program as similar as possible to the carbon tax "gold standard." But why settle for second best?

Are cracks appearing in the United States Climate Action Partnership?

How long can USCAP keep up the appearance of agreement on the need for cap-and-trade when there are disagreements within the USCAP membership regarding such fundamental issues as whether a carbon tax is preferable to cap-and-trade and whether allowances should be auctioned or given away as windfalls based upon past pollution?

A December 16 article in the Miami Herald, Cleaning Up the Climate, suggests that tensions within USCAP are beginning to be difficult to ignore. The article noted that Lewis Hay, chairman and chief executive officer of FPL Group (Florida Power & Light), is a supporter of what he euphemistically calls a carbon fee. According to the article:

At one energy conference, Jim Rogers, Duke Energy’s chief executive, noted that Hay ”is saying fee but he means tax.” Hay responded that if his colleagues wanted to fight, "I have a Jerry Springer bouncer backstage.”

Again according to the article, Hay “erupted with an uncharacteristically irate outburst” when a Senate subcommittee approved the Lieberman-Warner legislation that includes provisions creating a cap-and-trade program that gives away some of the allowances to utilities.

Hay believes that giveaways would favor the polluters. Better for the government to auction off the credits, so each utility need buy only what it needs. Hay issued a statement saying the bill "would reward the country’s biggest emitters of carbon dioxide with billions of dollars of free allowances that they don’t need. . . . That’s like giving a bigger rebate to those of us who dump the most trash on our sidewalks.”

Rogers at Duke Energy maintains that the big coal plants need a lot of free allowances to start off, or their customers might be unduly burdened by dramatically higher electric bills.

Meanwhile, the Natural Resources Defense Council urges senators to "reduce the total amount of emissions allowances polluters are given for ‘free.’" NRDC is apparently not arguing that all allowances should be auctioned, but at least it wants to limit the windfalls to industry.

Tensions will inevitably increase as USCAP begins to move past its broad statement of principle and recommendations. In fact, in an October 23 letter from USCAP to Senators Lieberman and Warner, USCAP explicitly noted that it does not yet have a position on a number of fundamental issues:

The Act includes much more detailed provisions than contained in the Call for Action. USCAP members are continuing to discuss the issues raised by a number of these provisions, such as:

• Scope of coverage and complementary policies and measures.
• Sector-specific emission reduction timelines and targets.
• Allocation of allowances.
• Cost containment measures.
• Credit for early action.
• Domestic offsets.
• International offsets.
• Relationship of state and federal GHG programs.
• Implementation of the GHG registry.
• Addressing disproportionate economic impacts.

It’s going to be interesting watching USCAP attempt to find common ground on issues such as the allocation of allowances. Will it support the windfalls in the current draft of Lieberman-Warner (see Friends of the Earth analysis)? How will it address “disproportionate economic impacts”? Will USCAP recommend auctioning all allowances and returning all of the revenues to those who incur the costs of cap-and-trade (similar in some ways to a revenue-neutral carbon tax)? Will it recommend an increase in the already huge windfalls to polluters included in Lieberman-Warner? Or, will it be unable to reach a consensus? Stay tuned.

Photo: Terry Bain / Flickr

New polls are showing increasing support for carbon taxes as concern about climate change grows. We’re pleased with these results, but we’re frustrated that as yet no polls have included questions that would indicate whether support for revenue-neutral carbon taxes exceeds that for carbon taxes for which the revenue uses are either unspecified or earmarked. While we strongly suspect the answer would be Yes, it would be helpful to have our suspicions confirmed by actual polling data.

The most recent poll, a Field Poll published on Nov. 9, reports that a majority of Californians are in favor of a carbon tax. Some 72% support a carbon tax on business, although this declines to 53% if the tax were to result in Californians’ paying higher prices for goods and services. Support for the tax grows to 65% if the tax revenues are spent solely on reducing greenhouse gas emissions.

Approximately 65% of those polled also favor the idea of a cap-and-trade system. However, those stating a preference for cap-and-trade were not asked the follow-up question about higher prices that was asked of carbon tax supporters, even though increases in prices due to cap-and-trade would be similar to those from a carbon tax.

Similar results were obtained in a recent BBC poll of 22,000 people in 21 countries. In 14 of the countries, "a majority (61% on average overall) say it will be necessary to increase energy costs to encourage conservation and reduce carbon emissions." The poll found that 74% of Americans support paying a higher tax on coal and oil if the revenues are used to promote efficiency or to develop new fuels; but, unsurprisingly, Americans are divided if the revenues are not used for those purposes, with only 46% supporting such a tax. The poll did not ask about support for a revenue-neutral tax that would encourage conservation, reduce carbon emissions AND return the money to all Americans. Most Would Pay Higher Energy Bills to Address Climate Change Says Global Poll, World Public Opinion.Org, Nov. 5.

Image: Mario Zucca Illustration / Flickr.

New York Mayor Michael R. Bloomberg will declare his support today for a national carbon tax, according to a report posted this morning on the New York Times City Room blog by metro reporter Sewell Chan:

Mayor Bloomberg plans to announce today his support for a national carbon tax. In what his aides are calling one of the most significant policy addresses of his second and final term, the mayor will argue that directly taxing emissions of carbon dioxide and other greenhouse gases that contribute to climate change will slow global warming, promote economic growth and stimulate technological innovation — even if it results in higher gasoline prices in the short term.

Mr. Bloomberg is scheduled to present his carbon tax proposal in a speech this afternoon at a two-day climate protection summit in Seattle organized by the United States Conference of Mayors. (A copy of the speech was provided to The New York Times by aides to the mayor; the full text is available here, along with the complete Times story.)

With his speech today, Mayor Bloomberg joins former Vice-President Al Gore as the nation’s leading advocates of a carbon tax to cap and reduce carbon emissions from fossil fuels. French President Nicolas Sarkozy called last week for a national carbon tax on global-warming pollutants and a European levy on imports from countries not complying with the Kyoto Protocol to reduce emissions. In September, U.S. Rep. John Dingell, the powerful chair of the House Commerce Committee, proposed a hybrid carbon tax combining a straight carbon tax on coal, oil and natural gas with a surcharge on gasoline and jet fuel.

In his Seattle remarks, Bloomberg hones in on the key advantage of a carbon tax over a carbon cap-and-trade scheme — price certainty:

Both cap-and-trade and pollution pricing present their own challenges – but there is an important difference between the two. The primary flaw of cap-and-trade is economic – price uncertainty. While the primary flaw of a pollution fee is political, the difficulty of getting it through Congress. But I’ve never been one to let short-term politics get in the way of long-term success. The job of an elected official is to lead – not to stick a finger in the wind. It’s to stand up and say what we believe – no matter what the polls say is popular or what the pundits say is political suicide.

From where I sit, having spent 15 years on Wall Street and 20 years running my own company, the certainty of a pollution fee – coupled with a tax cut for all Americans – is a much better deal. It would be better for the economy, better for taxpayers and – given the experiences so far in Europe – it would be better for the environment. I think it’s time we stopped listening to the skeptics who say, “But for the politics,” and start being honest about costs and benefits. Politicians tend to prefer cap-and-trade because it obscures the costs. Some even pretend that it will lower costs in the short run. That’s nonsense. The costs will be the same under either plan – and if anything, they will be higher under cap-and-trade, because middlemen will be making money off the trades…

For the money, a direct fee will generate more long-term savings for consumers, and greater carbon reductions for the environment. And I don’t know about you, but when the economists say one thing and the politicians say another, I’ll go with the economists.

Emphasizing that “Employment is good, pollution is bad,” Bloomberg says that Congress should “use the revenue from pollution pricing to cut the payroll tax,” thus joining Mr. Gore as well as the Carbon Tax Center in seeking a revenue-neutral carbon tax. Bloomberg then closes with this powerful rhetorical flourish:

There are also logistical issues with cap-and-trade. The market for trading carbon credits will be much more complex and difficult to police than the market for the sulfur dioxide credits that eliminated acid rain. And there are political issues – because the system is subject to manipulation by elected officials who want to hand out exemptions to special interests. A cap-and-trade system will only work if all the credits are distributed from the start – and all industries are covered. But this begs the question: If all industries are going to be affected, and the worst polluters are going to pay more, why not simplify matters for companies by charging a direct pollution fee? It’s like making one right turn instead of three left turns. You end up going in the same direction, but without going around in a circle first.

Bloomberg’s support of a U.S. carbon tax is philosophically consistent with his big current local initiative, a congestion pricing plan to improve mobility, economic activity and the quality of life in the Manhattan Central Business District by charging an entry fee for motor vehicles. A carbon tax and congestion pricing both embody the principle that safeguarding “the commons” — our air, water and public space — requires that we exact from ourselves a commensurate price for uses that damage or deplete it.

In July, we posted an essay on Grist drawing the links, which we reproduce in full further below.

We do take issue with Mayor Bloomberg on one important detail. He says, “People are going to keep buying gas whether it costs $1 a gallon or $2.75 a gallon — or even more — because the demand for gas is inelastic.” While gasoline is the least price-elastic of fuels — around 0.4 in the long run and less than half that much in the short run — demand for gas has some price-sensitivity, as we demonstrate elsewhere on this site. Comparing 2007 with 2004 (first 9 months for each), for example, U.S. economic activity (GDP) grew 8.4% yet gasoline usage is up only 2.7% — indicative of a 0.10-0.15 (short-run) price-elasticity, when factored against the 35% inflation-adjusted increase in gas prices over the same period.

In the longer term, carbon taxes will further conserve gasoline by stimulating a constellation of actions favoring proximity over sprawl and otherwise concentrating economic and human activity in cities. Indeed, the primary CO2-reducing aspect of Mayor Bloomberg’s congestion pricing program resides not so much in the cars it will take off the road in and en route to midtown, as in creating the wherewithal for New York City to absorb a million more people who otherwise might take up residence in Sprawlsville, USA.

From Grist, July 15, 2007: Valuing the Commons — The connection between congestion pricing and carbon taxes, by Charles Komanoff

Every so often there arises an environmental controversy that tests the capacity of Americans to face reality. One such case is emerging in New York City, where Mayor Michael R. Bloomberg has proposed a “congestion fee” on cars and trucks driving into Manhattan.

Backers from the mayor on down tout the fee as a cure-all: it will unsnarl traffic, relieve pollution and create a revenue stream to upgrade subways and buses, while also cutting global warming emissions.

These claims are a bit overstated. More probably there will be a single-digit increase in traffic speeds, a one percent drop in emissions citywide,
and perhaps a $400 million revenue infusion for a transportation system whose annual costs top $30 billion.

But even though the immediate benefits of the congestion charge are relatively modest, the act of imposing such a charge is transformative in itself.

The real significance of the congestion charge is this: it establishes the principle that safeguarding “the commons” — our air, water and public space — requires that we exact from ourselves a commensurate price for uses that damage or deplete it.

The congestion charge puts our money where our mouth is.

Although it has mostly gone unstated, the congestion charge rests on ironclad economic logic: street space, being both coveted and finite, has a value; hence, our failure to charge a price for its use in effect substitutes rationing by waiting, for rationing by pricing — which is why New York, Los Angeles, and every city in between have traffic jams.

Accordingly, a congestion charge that confronts those of us who would drive with the cost of traffic delays we impose on each other isn’t just one means of reducing congestion — it’s the only way to do so.

Mayor Bloomberg could place traffic cops at every intersection, airlift every double-parked car and truck, and make the subways free — and gridlock would reappear within a week, as the improvement in traffic flow attracted drivers now deterred by the too-crowded roads.

The only way to permanently open up road space is to impose some form of road valuation, and Mayor Bloomberg’s pricing plan, while blunt and imperfect, is a very good start. Most important of all, though, it establishes the principle.

Much the same applies to the prevailing green paradigm for combating global warming. It’s essentially a scattershot approach built around individual technological fixes: rooftop solar cells, low-wattage fluorescent lights, high-mileage automobiles and so on.

What’s missing — crucially, fatally missing — is a valuation of the atmosphere’s limited capacity to absorb carbon emissions without damaging the climate. Just as the high value of street space in New York demands a congestion fee, the high value of a carbon-stable atmosphere demands a fee on carbon use — i.e., a carbon tax.

This isn’t to say that tech fixes don’t have their place. They will be needed to help get off carbon, just as car and truck alternatives such as expanded subway service, exclusive bus and bicycle lanes, and, in New York, a cross-harbor rail freight tunnel, must supplement the congestion fee. But without congestion charges and revenue-neutral carbon taxes that in effect reward every traffic-busting or carbon-reducing choice, the fixes and alternatives will be systematically underused.

The obvious, first-order, unmediated choices that will reduce congestion and carbon are things that no one can make money from — things like fewer and shorter trips, smaller homes, turning stuff off. Congestion charges and a carbon tax will cause people to make these choices, and that is the only way killer traffic and killer climate change will be brought under control. It won’t happen just by subsidizing technological fixes whose investors have the advantage of an effective lobby.

What, then, is standing in the way of congestion fees and a national carbon tax? The power of an entrenched minority, for one thing. In New York City, fewer than one in 20 working residents drives toll-free into the intended congestion charging zone, but they know who they are and are not shy about protecting their self-awarded entitlement to a toll-free commute.

Conversely, the benefits of congestion pricing will be broadly distributed but not life-changing. Indeed, judging from polls, many New Yorkers don’t even realize they are potential beneficiaries.

“Losers cry louder than winners sing,” wrote University of Michigan professor Joel Slemrod in explaining the near-impossibility of overhauling the U.S. tax code, and the What is more, the benefits from road fees or carbon taxes aren’t just diffuse; because they lie in the future they are by necessity uncertain.

“There is nothing more difficult to take in hand,” Machiavelli observed in The Prince, “than to take the lead in the introduction of a new order of things … the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the old conditions, and lukewarm defenders in those who may do well under the new.”

That is why enacting the Bloomberg congestion plan is so hard, and so necessary. America’s civic polity is stuck in traffic, so to speak. Getting it moving again will require us to imagine something other than permanent stalemate and act upon that vision.

Photo: National 911 Memorial / Flickr.

French President Nicolas Sarkozy, appearing alongside Al Gore at an environmental forum in Paris, today called for a national
"carbon tax" on global-warming pollutants and a European levy on imports from countries outside the Kyoto Protocol, according to Agence France-Presse.

Following are excerpts from AFP’s report posted on the Web in the last hour:

Wrapping up a four-month forum on the environment that brought together the government, industry and the green lobby, Sarkozy said he would consider shifting part of France’s tax burden from labour to pollutants, a key demand of environmentalists.

"We need to profoundly revise all of our taxes… to tax pollution more, including fossil fuels, and to tax labour less."

Addressing European Commission head Jose Manuel Barroso, who had taken the podium before him, Sarkozy urged Europe to "examine the option of taxing products imported from countries that do not respect the Kyoto Protocol."

As Europe was setting tough standards on its producers for the benefit of the global climate, it was unfair for their competitors to be exempted, he argued.

"I suggest to you that in the next six months, the European Union discuss the implications of this unfair competition," he said.

Guest of honour at the ceremony, the Nobel-winning former US vice president Al Gore paid a powerful tribute to the forum — pledged by Sarkozy before his election in May — saying it was a "tremendous boost" for global efforts to fight climate change.

"Today you become known as a great friend of the people of this planet," said Gore , 59, who won the 2007 Nobel Peace Prize for his efforts to raise awareness about climate change. The Kenyan green advocate Wangari Maathai, Nobel winner in 2004, was also present.

Sarkozy endorsed a raft of measures to slash
France’s greenhouse-gas emissions, cut pollution and foster biodiversity, hammered out at a series of round tables over the last
two days of the forum.

"Your ideas, I make them my own. I will support them and I will carry them out," Sarkozy told participants.

Pledges ranged from a freeze on the building of new highways and airports, to a
vast plan to shift freight traffic from road to rail, to a commitment to try to slash pesticide use by half within 10 years in Europe’s
biggest farm producer.

Tramway and TGV high-speed train networks are to be extended, and drivers coaxed into buying cleaner cars through bonuses and penalties.

Sarkozy promised a nationwide push to improve the energy efficiency of all new and existing buildings.

Asked to rule on the divisive issue of a carbon tax, Sarkozy pledged to study the creation of a "climate-energy tax", "in exchange for an alleviation of labour taxes", but was careful to reassure French business leaders there would be no increase in overall taxation.

Environmentalists suggest such a tax, calculated from the greenhouse gases emitted to produce and market goods, would be "painless" for consumers and business, starting at a few cents per litre of fuel.

France’s star environmentalist Nicolas Hulot, who pushed green issues to the top of the agenda of the last presidential campaign, said he was "happy and confident" following
Sarkozy’s speech.

Arnaud Gossement, spokesman for France Nature Environment, an umbrella group of 3,000 associations, also reacted positively.

"For the first time, we have a president who does not pit economy, growth and ecology against each other… even though he was elected on a pro-growth platform," he said.

Laurence Parisot, the head of the French employers federation, MEDEF, said Sarkozy’s speech was "well balanced" but that it was too soon to judge the impact on business.

Photo: Feuillu / Flickr

A major new report commissioned by the governments of China and Brazil has called for a carbon tax — or a carbon cap-and-trade system that would also impose a carbon price.

Lighting the Way: Toward a Sustainable Energy Future, authored by leading scientists and
energy experts from 13 countries including Russia, India, Canada,
Kenya, Egypt, Japan, and the U.S., along with Brazil and China, calls for "a wide variety of policy instruments [including] market incentives such as a price or cap on carbon emissions (which can be especially effective in influencing long-term capital investment decisions)." (The quote is from Section 4, The Role of Government and the Contribution of Science and Technology. Our Quote of the Week is drawn from the final "Conclusion" section, Lighting the Way.)

How high a price? Here’s what the report authors, who were assembled by the InterAcademy Council, a group representing the world’s 150 scientific and engineering academies, and were chaired by Nobel Laureate Stephen Chu, Director, Lawrence Berkeley National Laboratory, and José Goldemberg, Professor, University of São Paulo, Brazil, had to say:

Opinions vary as to the level of price signals that are warranted, but many experts believe that a price on the order of US$100–150 per ton of carbon equivalent emissions (in other widely used units, US$27–41 per ton of carbon dioxide equivalent emissions) may be necessary to overcome current cost differentials for many low- and non-carbon technologies and to stimulate the large-scale changes that will be required to eventually stabilize atmospheric concentrations of greenhouse gases.

It is important … to emphasize … that establishing in every market that there eventually will be an emissions price—in the range of US$100–150 per avoided metric ton of carbon equivalent (US$27–41 per ton of carbon dioxide equivalent)—is more important than establishing exactly the number of years in which such a transition will occur. For many countries, pragmatic considerations are likely to argue for a phased and multi-pronged approach, wherein an initial carbon price signal is gradually increased over time and complemented by other policies to address remaining market barriers and accelerate the commercialization of more efficient,
lower-carbon technologies.

(from Section 4.3 The importance of market signals)

Without indicating a preference, the report states clearly that the carbon price must come about from either a carbon tax or a cap-and-trade system, which it compares clearly and fairly here.

In putting its imprimatur on the report, the Chinese government has taken a major step in dismantling what The New York Times earlier this year called "an alliance of denial [in which] China and the United States are using each other’s inaction as an excuse to do nothing" about the global climate crisis.

Co-chairs of the InterAcademcy Council are Bruce Alberts, Past President, U.S. National Academy of Sciences, and Lu Yongxiang, President, Chinese Academy of Sciences.

Photo: nataliebehring.com / Flickr

Fourteen years after the Clinton health care debacle, Americans may finally be ready to accept and adopt universal health care, Paul Krugman argued in his New York Times column last Friday, Sept. 21.

There was another political debacle in 1993, over the Clinton btu tax, a levy on all forms of energy, with a surcharge on gasoline and other petroleum products. The tax’s ignominious defeat in favor of a watered-down version has helped poison the well for taxing carbon and/or gasoline ever since. Here we juxtapose Krugman’s actual column on health care with an imagined column we’d like to see him write on "climate care" later this year or next. Our hypothetical version uses Sen. Clinton as a foil only because she is so used in Krugman’s piece.

Health Care Hopes By PAUL KRUGMAN The New York Times, Sept. 21, 2007	Climate Care Hopes By the CARBON TAX CENTER The New York Times, March 21, 2008??
All the evidence suggests that it has finally become politically possible to give Americans what citizens of every other advanced nation already have: guaranteed health insurance. The economics of universal health care are sound, and polls show strong public support for guaranteed care. The only thing we have to fear is fear itself.	All the evidence suggests that it is becoming politically possible to give Americans what citizens of every other advanced nation already have: a revenue-neutral carbon tax. The economics of a carbon tax whose revenues are returned to the public are sound, and polls show growing support. The only thing we have to fear is fear itself.
Unfortunately, there’s a lot of that around.	Unfortunately, there’s a lot of that around.
True, one kind of fear seems, provisionally, to have been overcome: the timidity of Democratic politicians scarred by the failure of the original Clinton health plan.	True, one kind of fear seems, provisionally, to have been overcome: the timidity of Democratic politicians scarred by the failure of the original Clinton Btu tax in 1993.
To see how much things have changed, consider Hillary Clinton’s evolution. Just 15 months ago, The New York Times reported that "her plans to expand coverage are tempered and incremental," and that "she continues to shy from the ultimate challenge: describing what a comprehensive Democratic health care plan would look like."	To see how much things have changed, consider Hillary Clinton’s evolution. Just 15 months ago, the famously cautious Senator parried questions about taxing carbon by citing her support for the less controversial (but less effective and equitable) carbon cap-and-trade route for putting a price on carbon emissions.
Indeed, when she was asked how costs might be controlled, she demurred: "It depends on what kind of system you’re devising. And that’s still not at all clear to me, what the body politic will bear."	Indeed, nothing in Clinton’s history of defending entitlements suggested that she would ever tell Americans that cheap fossil fuels stood in the way of both climate protection and energy security.
But that was then.	But that was then.
John Edwards broke the issue of health care reform open in February, when he proposed a smart and serious plan for universal health insurance — and bravely announced his willingness to pay for the plan by letting some of the Bush tax cuts expire. Suddenly, universal health care went from being a distant progressive dream to something you could actually envision happening in the next administration.	Connecticut Senator Chris Dodd broke the issue of taxing carbon open in 2006, when he made a "corporate carbon tax" a centerpiece of his own presidential bid. Campaigning in Iowa, Dodd forthrightly stated, "As long as it’s cheaper to use fossil fuels, we’re not going to move to these alternative technologies and fuels," It took time, but more quickly than many thought possible, the American people came to agree.
Senator Clinton delayed a long time before coming out with her own plan — a delay that created a lot of anxiety among health care reformers, and may, as I’ll explain in a minute, be a bad omen for the future. Still, this week she did deliver a plan, and it’s as strong as the Edwards plan — because unless you get deep into the fine print, the Clinton plan basically is the Edwards plan.	Sen. Clinton delayed a long time before coming out with her own carbon tax — a delay that created anxiety among climate campaigners. Behind the scenes, however, Clinton’s policy wonks were ironing out crucial details, including protecting American families without diluting the price incentives that bring about carbon reductions. The plan she delivered this week is as strong as the 2007 Dodd plan — maybe stronger.
That’s not a criticism; it’s much more important that a politician get health care right than that he or she score points for originality. Senator Clinton may be politically cautious, but she does understand health care economics and she knows a good thing when she sees it.	That’s not a criticism; it’s much more important that a politician get climate care right than that he or she score points for originality. Senator Clinton may be politically cautious, but she does understand climate care economics and she knows a good thing when she sees it.
The Edwards and Clinton plans as well as the slightly weaker but similar Obama plan achieve universal-or-near-universal coverage through a well-thought-out combination of insurance regulation, subsidies and public-private competition. These plans may disappoint advocates of a cleaner, simpler single-payer system. But it’s hard to see how Medicare for all could get through Congress any time in the near future, whereas Edwards-type plans offer a reasonable second best that you can actually envision being enacted by a Democratic Congress and signed by a Democratic president just two years from now.	The Dodd and Clinton plans as well as the similar Obama plan achieve climate-care coverage through a phased-in tax on the carbon content of coal, oil and natural gas. These plans may disappoint advocates of a new Manhattan Project who want massive government spending on renewable solar and wind plants, hybrid cars and mass transit. But these politically popular programs, Clinton discovered, actually carry less carbon-reducing bang for the same investment buck. Only taxing-up the price of fossil fuels can create the clear, rapid, across-the-board incentives needed to propel a massive shift to clean alternatives.
To get there, however, would require overcoming a lot more fear.	To get there, however, required overcoming a lot more fear.
There won’t be a serious Republican alternative. The health care plans of the leading Republican candidates, such as they are, are the same old, same old: they principally rely on tax breaks that go mainly to the well-off, but will supposedly conjure up the magic of the market. As Ezra Klein of The American Prospect cruelly but accurately puts it: "The Republican vision is for a world in which the sick and dying get to deduct some of the cost of health insurance that they don’t have — and can’t get — on their taxes."	The genius in Sen. Clinton’s climate-care plan was to insist that the carbon tax revenues be rebated. Clinton dusted off the Alaska Permanent Fund model, which divvies up North Slope oil revenues equally among the state’s residents. She showed how that approach makes a carbon tax progressive, since each income bracket uses more energy (and emits more carbon) than lower groups on the ladder. "Revenue-neutral" proved more potent politically than both "no new taxes" and a Manhattan Project for energy.
But the G.O.P. nominee, whoever he is, won’t be trying to persuade the public of the merits of his own plan. Instead, he’ll try to scare the dwindling fraction of Americans who still have good health insurance by claiming that the Democrats will take it away.	But the G.O.P. nominee, whoever he is, probably won’t be trying to persuade the public of the merits of his own plan. Instead, he’ll try to scare Americans by repeating the word "tax" over and over and ignoring the revenue-neutrality built into the Democrats’ carbon tax.
The smear-and-fear campaign has already started. The Democratic plans all bear a strong resemblance to the health care plan that Mitt Romney signed into law as governor of Massachusetts, differing mainly in offering Americans additional choices. But that didn’t stop Mr. Romney from denouncing the Clinton plan as "European-style socialized medicine." And Fred Thompson claims that the Clinton plan denies choice — which it actually offers in abundance — and relies on "punishment" instead.	The smear-and-fear campaign has already started. The Clinton carbon tax bears a strong resemblance to the revenue-neutral carbon tax championed by Romney adviser and former Bush (43) Administration chief-economist Greg Mankiw. Indeed, a carbon tax is supported by economists and opinion leaders across the political spectrum, from the American Enterprise Institute to Friends of the Earth. But that didn’t stop Mr. Romney from denouncing the Clinton plan as "just one more Democratic tax."
These attacks probably won’t be effective enough to prevent a Democrat from winning next year. But that won’t be the end of the story: even if the Democrats take the White House and expand their Congressional majorities, the insurance and drug lobbies will try to bully them into backing down on their campaign promises.	These attacks probably won’t be effective enough to prevent a Democrat from winning this year. But that won’t be the end of the story: even if the Democrats take the White House and expand their Congressional majorities, the coal and utility lobbies will try to bully them into backing down on their campaign promises.
That’s why the long delay before Senator Clinton announced her health care plan made supporters of universal care, myself included, so nervous — a nervousness that is not completely assuaged by the fact that she finally did deliver. It’s good to know that whoever gets the Democratic nomination will run on a very good health care plan. What remains is the question of whether he or she will have the determination to turn that plan into reality.	That’s why the long delay before Senator Clinton announced her climate care plan made supporters of a carbon tax, ourselves included, so nervous — a nervousness that is not completely assuaged by the fact that she finally did deliver. It’s good to know that whoever gets the Democratic nomination will run on a very good climate care plan. What remains is the question of whether he or she will have the determination to turn that plan into reality.

Epilogue: Sen. Clinton made the rounds of the Sunday morning political talk shows following her health plan rollout. Carbon tax advocates shouldn’t hold our breath till Rep. Dingell gets invited to discuss his innovative "hybrid" carbon tax. Let’s organize instead.

With a mighty creak of long-rusted hinges, a door is finally opening in Washington. The present Congress will apparently be asked to consider a carbon tax.

The measure — actually, a hybrid carbon and petroleum tax — will be introduced by the powerful chairman of the House Committee on Energy and Commerce, Rep. John Dingell (D-Michigan).

Today Dingell posted on his Web site a summary of the bill, which he began drafting in June. The current version would phase in, each year for five years, a charge of $10 per ton of carbon content of coal, oil and natural gas; plus an additional 10 cents/gallon for gasoline and jet fuel (kerosene). By the end of the five-year period the charges would reach $50/ton of carbon plus 50 cents/gallon of gasoline and jet fuel. These equate to 63 cents a gallon of gas and 90 cents for one hundred kilowatt-hours assuming the nationwide average fuel mix.

Dingell is asking the public for comments. Here’s ours: we think the bill is terrific. In line with what we said when we founded the Carbon Tax Center, and as Dingell himself wrote last month in the Washington Post, "[S]ome form of carbon emissions fee or tax … would be the most effective way to curb carbon emissions and make alternatives economically viable."
Moreover, as we elaborate below, his supplemental tax on gasoline and jet fuel has the look of genius.

How much carbon and petroleum would Dingell’s hybrid carbon tax eliminate? A lot, if you change one key parameter; instead of
halting the tax after year 5, continue ramping it up. If the tax works and the impacts on families and businesses can be offset through tax-shifting and rebates, why stop?

We examined a 20-year ramp-up — starting Dingell’s "10/10" tax in 2008 and continuing through 2027 to a level of $200 per ton of carbon plus $2/gallon on gasoline and jet fuel. Here’s where the U.S. would be in the representative year 2025:

• Carbon dioxide emissions would be down by 1.55 billion metric tons from projected levels, a 20% drop — a decrease equivalent to current emissions from England, France and Italy combined.
• Petroleum consumption would be 4.5 million barrels a day less than otherwise, an 18% decrease from projected usage, and more than 10% greater than Iran’s current production.

Moreover, these reductions could be supplemented by savings from other targeted policies and programs to reduce use of petroleum, natural gas and coal-fired electricity. (Indeed, a companion section of Dingell’s bill will call for phasing out the federal tax deduction on mortgage interest on very large homes, thus ending a subsidy through which middle and working class families subsidize gargantuan sprawl homes for the wealthy.) No other single policy measure — not broader CAFÉ standards, not a national Renewable Energy Standard, not a massive biofuels push, and certainly not a new generation of subsidized nuclear power plants — can produce nearly the carbon and petroleum savings promised by the Dingell hybrid carbon tax, provided it extends beyond the initial five-year period.

The brilliant touch in the Dingell bill is the supplemental tax on gasoline and aviation fuel. Dingell obviously grasps that a carbon tax alone can’t end America’s dangerous oil dependence. A straight carbon tax falls most heavily on coal, both because coal’s carbon content is so high and because electricity, the form in which coal’s energy is delivered, is more price-elastic than gasoline.

Using CTC’s four-sector spreadsheet model, which looks individually at electricity (40% pf U.S. CO2 emissions), gasoline (21%), jet fuel (4%) and "other" (35%), we estimate that without the annual 10¢/gallon levy on gasoline and jet fuel, the oil savings in 2025 would be nearly 40% smaller — 2.8 million barrels a day vs. 4.5 mbd. The hybrid tax thus saves 60% more petroleum, and
20% more CO2, than a straight $10/ton-a-year carbon tax.

Is the Dingell tax set at the best level? We would like to see it higher — considerably higher. The U.S. economy and America’s millions of vulnerable households could almost certainly handle a steeper ramp-up, provided the tax was made revenue-neutral. The climate crisis demands more than just the provisional $10 rate; CTC has been urging a $37/ton-a-year tax. But getting started at all is a tremendous step, and Dingell’s clear-sightedness and courage, in a Congress little characterized by either, deserve our
admiration.

What should be done with the revenue from the hybrid carbon tax? Needless to say, the quantities are enormous — $180 billion
annually after Dingell’s initial five years, and much more if the ramp-up is extended. While CTC strongly favors the revenue-neutral route, Rep. Dingell has his own ideas for using the revenues — as will just about everyone else.

For now, we urge you to read Dingell’s Web statement and post a comment on his site and at other sites that cover climate, energy, oil, national security, and politics. Having a legislator of Dingell’s stature even float a carbon-tax trial balloon is a very important and positive development — possibly a breakthrough. There’s a lot riding on it. Be heard.

Sept. 27 addendum: Two carbon-tax bills have already been submitted to the House Ways & Means Committee in 2007: the Stark-McDermott Save Our Climate Act
and the Larson American Energy Security Trust Fund Act. The Dingell proposal is certain to give these bills some of the prominence they deserve.

A momentous debate is under way in New York City over the prospect of bringing "congestion pricing" — a concept proven in London, Stockholm and Singapore — to America’s largest and most gridlocked burg. The issue has great resonance for carbon taxing, as I argue in this piece, a slightly different version of which appeared in Gristmill in July. — C.K.

Every so often there arises an environmental controversy that tests the capacity of Americans to face reality. One such case is the Cape Wind dispute, in which well-connected Cape Codders are battling to keep a large array of non-polluting windmills out of Nantucket Sound. Another is emerging in New York City, where Mayor Michael R. Bloomberg has proposed a “congestion fee” on cars and trucks driving into Manhattan.

Backers from the mayor on down tout the fee as a cure-all: it will unsnarl traffic, relieve pollution and create a revenue stream to upgrade subways and buses, while also cutting global warming emissions.

These claims are a bit overstated. More probably there will be a single-digit increase in traffic speeds, a one percent drop in emissions citywide, and perhaps a $400 million revenue infusion for a transportation system whose annual costs top $30 billion.

But even though the immediate benefits of the congestion charge are relatively modest, the act of imposing such a charge is transformative in itself.

The real significance of the congestion charge is this: it establishes the principle that safeguarding “the commons” — our air, water and public space — requires that we exact from ourselves a commensurate price for uses that damage or deplete it.

The congestion charge puts our money where our mouth is.

Although it has mostly gone unstated, the congestion charge rests on ironclad economic logic: street space, being both coveted and finite, has a value; hence, our failure to charge a price for its use in effect substitutes rationing by waiting, for rationing by pricing — which is why New York, Los Angeles, and every city in between have traffic jams.

Accordingly, a congestion charge that confronts those of us who would drive with the cost of traffic delays we impose on each other isn’t just one means of reducing congestion — it’s the only way to do so.

Mayor Bloomberg could place traffic cops at every intersection, airlift every double-parked car and truck, and make the subways free — and gridlock would reappear within a week, as the improvement in traffic flow attracted drivers now deterred by the too-crowded roads.

The only way to permanently open up road space is to impose some form of road valuation, and Mayor Bloomberg’s pricing plan, while blunt and imperfect, is a very good start. Most important of all, though, it establishes the principle.

Much the same applies to the prevailing green paradigm for combating global warming. It’s essentially a scattershot approach built around individual technological fixes: rooftop solar cells, low-wattage fluorescent lights, high-mileage automobiles and so on.

What’s missing — crucially, fatally missing — is a valuation of the atmosphere’s limited capacity to absorb carbon emissions without damaging the climate.

Just as the high value of street space in New York demands a congestion fee, the high value of a carbon-stable atmosphere demands a fee on carbon use — i.e., a carbon tax.

This isn’t to say that tech fixes don’t have their place. They will be needed to help get off carbon, just as car and truck alternatives such as expanded subway service, exclusive bus and bicycle lanes, and, in New York, a cross-harbor rail freight tunnel, must supplement the congestion fee.

But without congestion charges and revenue-neutral carbon taxes that in effect reward every traffic-busting or carbon-reducing choice, the fixes and alternatives will be systematically underused.

The obvious, first-order, unmediated choices that will reduce congestion and carbon are things that no one can make money from — things like fewer and shorter trips, smaller homes, turning stuff off.

Congestion charges and a carbon tax will cause people to make these choices, and that is the only way killer traffic and killer climate change will be brought under control. It won’t happen just by subsidizing technological fixes whose investors have the advantage of an effective lobby.

What, then, is standing in the way of congestion fees and a national carbon tax? The power of an entrenched minority, for one thing. In New York City, fewer than one in 20 working residents drives toll-free into the intended congestion charging zone, but they know who they are and are not shy about protecting their self-awarded entitlement to a toll-free commute.

Conversely, the benefits of congestion pricing will be broadly distributed but not life-changing. Indeed, judging from polls, many New Yorkers don’t even realize they are potential beneficiaries.

“Losers cry louder than winners sing,” said University of Michigan professor Joel Slemrod in explaining the near-impossibility of overhauling the U.S. tax code, and the same holds true for the congestion fee and the carbon tax.

What is more, the benefits from road fees or carbon taxes aren’t just diffuse; because they lie in the future they are by necessity uncertain.

“There is nothing more difficult to take in hand,” Machiavelli observed in The Prince, “than to take the lead in the introduction of a new order of things … the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the old conditions, and lukewarm defenders in those who may do well under the new.”

That is why enacting the Bloomberg congestion plan is so hard, and so necessary. America’s civic polity is stuck in traffic, so to speak. Getting it moving again will require us to imagine something other than permanent stalemate and act upon that vision.

Photo: SkyShaper / Flickr

The Democratic Party’s top power broker on energy policy, Rep. John Dingell (D-Mich.), threw his considerable political weight behind a carbon tax today, upending the Congressional debate on climate and energy and boosting the prospects for a tax on carbon emissions. Dingell, who chairs the House Energy and Commerce Committee, came out foursquare for a national carbon tax in an op-ed article in the Washington Post.