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Pricing carbon efficiently and equitably

Join the Earth Day Climate “Revival” This Sunday

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There are good reasons, ranging from corporate sponsorship to vapidity, to have been cynical about recent Earth Day observances. But there are even more compelling reasons — the imminence of the climate crisis and the recent gain in denialists’ political standing — to put cynicism aside and come to Washington this Sunday for what organizers hope will be the “largest climate rally ever.”

Earth Day’s original national coordinator Denis Hayes and the Earth Day Network are aiming for a 40th anniversary revival of the “spirit of 1970” that catapulted environmentalism into public consciousness, launching a decade of environmental reforms, winning landmark legislation, and birthing the modern environmental movement.

The list of speakers is impressive for its heft and diversity. They include:

  • Climate scientist James Hansen
  • Filmmaker James Cameron (Avatar; Titanic) and author Margaret Atwood (The Handmaid’s Tale; The Blind Assassin)
  • Business executives from Siemens and Phillips, and union leaders from the AFL-CIO and the SEIU
  • Rainbow Coalition leader Jesse Jackson and NAACP V-P for advocacy Hilary Shelton
  • Evangelical creation-care advocate Rev. Richard Cizik
  • Climate-policy blogger Joe Romm

Plus a stellar roster of musicians including Bob Weir, Mavis Staples, Willy Colon, Booker T, and Sting

And the program’s diversity includes sharp differences over climate policy. Hansen in recent years has moved beyond climate science to climate politics, becoming the most visible (and perhaps most aggressive) U.S. advocate of fee-and-dividend — a federal carbon tax whose revenues would entirely be returned, per capita, to the American people. For his advocacy and his criticism of carbon cap-and-trade, Hansen has been censured by Romm, the climate blogger for the Center for American Progress, which is closely linked to cap-and-trade advocates in the Democratic Party and the mainstream environmental movement.

On Sunday, these differences can and should be put aside. As Romm did in his blog on the rally, we defer to Denis Hayes’ post on Grist:

Humanity must swiftly abandon dirty energy sources and switch to safe, clean, decentralized, renewable energy sources like solar, wind, and geothermal. The world, led by America, must abandon the appallingly inefficient way it uses energy and swiftly embrace the most efficient new housing, transport, and industrial processes that exist. We Americans must slash our politically risky and economically catastrophic dependence on the oil wealth of nations that don’t like us very much.

A necessary—though not sufficient—common denominator is to establish a price on carbon that reflects the costs of climate disruption, blowing the tops off mountains, and acidifying the world’s oceans. We must place a firm cap with no loopholes on the amount of carbon fuels we consume each year and ratchet that cap down at a prescribed rate every year in the future until we hit something very close to zero. Only a federal law can accomplish this goal.

If this were easy, we would have begun a quarter century ago. The junk science, climate-denying interest groups are rich, powerful, and ruthless. But sooner or later they will lose. Sooner is better

They will lose for the same reason that IBM and Control Data lost to Microsoft, Apple and Dell. They will lose for the same reason that Ma Bell—the most powerful monopoly in the world—lost to cellular upstarts and Internet-telephony. They lost because their thinking was anchored in the past instead of envisioning the future

The junk science, climate-disruption-denying interest groups will lose because 19th century answers won’t solve 21st century problems.

At some point, this climate-disrupting madness has to start to stop. Come to the Mall between the Capitol Building and the White House on Sunday, April 25. Bring your spouse, your parents, your kids, your neighbors, your friends, your co-workers, your congregation, your bowling league. Vote with your bodies on April 25th at the largest climate rally ever.

While we at the Carbon Tax Center differ with Denis’s emphasis on a cap — we’re convinced that only a carbon tax or fee can give U.S. entrepreneurs, investors and families the clear price signal they need to move to clean technologies, fuels and lifestyles — we salute Denis’s 40 years of advocacy (some of which is on fine display in the documentary Earth Days that PBS is airing this week).

We also salute the late Sen. Gaylord Nelson of Wisconsin, who more than any other individual conceived Earth Day (originally as a national day of teach-ins on the environmental crisis) and whose staff hired Denis Hayes to co-ordinate it.

Let’s come to the Mall this Sunday and make our voices heard for climate sanity and the central policy measure that can take us there: a federal, revenue-neutral carbon tax.

Memo to Sen. Kerry: Climate Science Includes Economics

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U.S. climate activists are gleeful at Sen. John Kerry’s demolition of a sometime climate skeptic at a Senate Finance Committee hearing on Tuesday, and justly so. Ken Green, a resident scholar for the corporate-financed American Enterprise Institute, won the respect of carbon tax advocates two years ago, when he co-authored an AEI report that powerfully made the case for a revenue-neutral carbon tax over a cap-and-trade system. But as an invited witness on Climate Change Legislation: Considerations for Future Jobs, Green attempted to argue that Earth’s ecosystems and human civilization could safely accommodate a global temperature rise of 2 degrees Celsius, though he admitted that any larger temperature rises would be dangerous. Kerry skillfully “outed” Green as an amateur in climatology who had published no peer-reviewed studies and could point to none to support his climate blandishments.

The interchange, summarized in a 6½-minute video assembled by Joe Romm at Climate Progress, showcases Sen. Kerry’s skill as a cross-examiner and reveals just how flimsy and muddled the case questioning the climate crisis really is. Lost in the euphoria, however, is evidence of the Senator’s own confusion — not on the need to act to avert climate catastrophe, but on the workings of competing means of pricing carbon emissions.

John_Kerry_The_Minnesota_IndependentIn an earlier part of this week’s hearing, Sen. Kerry repeated a point he made in an August 4 Finance Committee hearing on Climate Change Legislation: Allowance and Revenue Distribution: a carbon tax wouldn’t reduce emissions, Kerry claimed, because polluters would “just pay the tax,” whereas a cap would force them into making the desired reductions.

Of course, as anyone versed in climate economics knows, and as the economist-witnesses explained in August, a carbon price of, say, $20/ton would produce the same emissions reductions whether the price was set by traders in a carbon market or directly via a fee on fossil fuel producers. Under a cap with a $20/ton permit price, emitters would have no greater (and no less) incentive to reduce emissions than they would under a $20/ton tax. Reductions that can be made for up to $20 per ton will be made in either system because they will yield the same savings — as permits that wouldn’t need to be purchased under a cap, or as taxes that wouldn’t have to be paid under a tax. Similarly, reductions costing more than the set price won’t be made because it will be cheaper to “just buy the permits” (to adapt Sen. Kerry’s phrase), or “just pay the tax.”

Under either system, then, emitters retain the flexibility to make reductions when those reductions are cheaper than the carbon price and to pay the allowance cost or tax if that turns out to be cheaper. That flexibility about where, when and how to make reductions is why either a carbon cap or tax is more efficient than source-specific regulations which would force emissions reductions at times and places where they’re more expensive and would miss some reductions that were cheaper.

In the August hearing, Sen. Kerry questioned whether American businesses and households would actually respond to higher fuel and energy prices. In doing so, Sen. Kerry overlooked the vast body of evidence quantifying price-elasticity in virtually every sector of the U.S. economy. He also had evidently forgotten what happened during the summer of 2008 when gasoline hit $4/gallon: traffic congestion eased, carpools, buses and trains filled up, and SUV sales tumbled. And that was only the short-term effect of a price spike; a long-term, predictable carbon emissions price increase would allow sound business planning and create incentives for long-term investment in energy efficiency and low-carbon alternatives.

And that points to a key reason that cap-and-trade is an inferior way to set a price on carbon: the price signal under a cap would be “noisy” due to both volatility and the fact that the price must be “revealed” through the market workings of the cap rather than being stated, explicitly, in the tax code. That noise means that with cap-and-trade it takes a higher price for the economy to “hear it” and respond, even if the general trend is upward.

Sen. Kerry is on solid ground relying on peer-reviewed climate science. But his ongoing misunderstanding of the workings of carbon pricing is almost as shocking as the AEI witness’s misrepresentation this week of climate science. It’s past time for both sides to get it right: The consequences of unmitigated climate change will be grave, whereas clear, simple, predictable carbon pricing is essential to catalyzing the solutions.

Photo: Flickr / The Minnesota Independent