- Environmental Taxation and the Double Dividend (Lawrence Goulder, Stanford, 1994). Seminal articulation of the dual benefits of replacing taxes on income and work with taxes to discourage pollution.
- When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets (Ian Parry, Roberton Williams & Lawrence Goulder, Resources for the Future, 1998). General equilibrium modeling demonstrates economic efficiency benefits of pollution taxes with revenue “recycling” to reduce marginal rates of pre-existing distortionary taxes.
- Clean Energy And Jobs: A comprehensive approach to climate change and energy policy (James P. Barrett & J. Andrew Hoerner, Economic Policy Institute, 2002).
- A Proposal for a U.S. Carbon Tax Swap (Gilbert Metcalf, Brookings, 2007).
- Caps vs. Taxes (Kevin Hassett, Steven Hayward, Ken Green, AEI, 2007).
- U.S. Federal Climate Policy and Competitiveness Concerns: The Limits and Options of International Trade Law, Joost Pauwelyn, Duke U., 2007). WTO rules permit “border tax adjustments” (import tariffs) to harmonize domestic carbon taxation. [Updated, March 2012.]
- Smart Taxes: An Open Invitation to Join the Pigou Club (Greg Mankiw, Harvard, 2008).
- Policy Options for Reducing CO2 Emissions (Congressional Budget Office, 2008). “[T]he net benefits (benefits minus costs) of a [carbon] tax could be roughly five times greater than the net benefits of an inflexible cap.”
- CO2 Price Volatility: Consequences and Cures (Brattle Group, January 2009).
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On Modeling and Interpreting the Economics of Catastrophic Climate Change (Martin Weitzman, Harvard, 2009).
- Addressing Climate Change Without Impairing the US Economy (Robert Shapiro, US Climate Task Force, 2008).
- On The Merits of A Carbon Tax (Ted Gayer, Brookings, Testimony to Senate Env’t & Nat’l Res. Committee, 2009).
- The Design of a Carbon Tax (Gilbert Metcalf & David Weisbach, Harvard Envt’l Law Rev, 2009).
- Carbon taxation – a forgotten climate policy tool? (Global Utmaning [Sweden], 2009)
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Carbon Tax and Greenhouse Gas Control: Options for Congress, (Jonathan Ramseur & Larry Parker, Congressional Research Service, 2009). Options for design and implementation of U.S. carbon tax to match emissions reductions from Lieberman-Warner (cap & trade) bill without price volatility, speculation and offsets.
- How Climate Policy Could Address Fiscal Shortfalls (Adele Morris & Ted Gayer, Brookings, 2010).
- A Balanced Plan to Stabilize Public Debt and Promote Economic Growth (William Galston, Brookings & Maya MacGuineas, Committee for a Responsible Federal Budget, 2010). Recommendations include a broad-based carbon tax with proceeds to reduce payroll taxes and for deficit reduction.
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Carbon pricing in Washington (Yoram Bauman, Sightline Institute, 2010). Quantitative economic and climate policy “blueprint” for Carbon Washington revenue-neutral carbon tax proposal.
- Moving U.S. Climate Policy Forward: Are Carbon Taxes the Only Good Alternative? (Ian Parry & Roberton Williams, Resources for the Future, 2011).
- Revising the Social Cost of Carbon, (Frank Ackerman & Elizabeth Stanton, E3 Network, 2011).
- Carbon Taxes, An Opportunity for Conservatives (Irwin Stelzer, Hudson Institute, 2011).
- Fiscal Solutions: A Balanced Plan for Fiscal Stability and Economic Growth, Peterson Foundation & American Enterprise Institute, 2011). As part of comprehensive reform, recommends replacing ethanol subsidies and greenhouse gas regulations with a $26/tonne CO2 (and CO2-eq) tax, rising 5.6% annually. (p 25.)
- The Potential Role of a Carbon Tax in U.S. Fiscal Reform (Brookings, 2012)
- Offsetting a Carbon Tax’s Costs on Low-Income Households (CBO, 2012)
- Considering a U.S. Carbon Tax: Frequently Asked Questions (Resources for the Future, 2012)
- Carbon Tax Revenue and the Budget Deficit: A Win-Win-Win Solution? (MIT, August 2012)
- It’s Time for a Carbon Tax (Elizabeth Kolbert, The New Yorker, Dec. 10, 2012)
- Fiscal Policy to Mitigate Climate Change (IMF, 2012)
- The Many Benefits of A Carbon Tax (Adele Morris, Brookings, 2013)
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Carbon Taxes and Corporate Tax Reform (Donald Marron & Eric Toder, Urban-Brookings Tax Policy Center, 2013)
- Reaffirming the Case for a Briskly Rising Carbon Tax (James Handley, Carbon Tax Center, June 2013)
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Changing Climate for Carbon Taxes: Who’s Afraid of the WTO? (Jennifer Hillman, German Marshall Fund, Climate Advisors, American Action Forum, July 2013).
- Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality? (Martin Weitzman, Harvard Project on Climate Agreements, January 2014).
- Design of Economic Instruments for Reducing U.S. Carbon Emissions, (Carbon Tax Center, submitted to Senate Finance Committee, January 2014).
- Tax Policy Issues in Designing a Carbon Tax (Donald B. Marron and Eric J. Toder, Urban-Brookings Tax Policy Center, May 2014).
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A Carbon Tax in Broader U.S. Fiscal Reform: Design and Distributional Issues, Adele Morris (Brookings) and Aparna Mathur (American Enterprise Institute), C2ES, May 2014.
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Temperature impacts on economic growth warrant stringent mitigation policy, Frances C. Moore, Delavane B. Diaz (Nature Climate Change, January 2015). When climate change is allowed to affect economic growth in the DICE Integrated Assessment Model, its estimate of the Social Cost of Carbon may exceed $220/T CO2.
- How to Adopt a Winning Carbon Price — Top Ten Takeaways from Interviews with the Architects of British Columbia’s Carbon Tax (Clean Energy Canada, 2015).
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Putting a Price on Carbon: A Handbook for U.S. Policymakers, Kevin Kennedy, Michael Obeiter, Noah Kaufman (World Resources Institute, April 2015).
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Energy Subsidy Reform, Lessons and Implications (International Monetary Fund, May 2015).
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Taxing Carbon: What, Why, and How, by Donald Marron, Eric Toder, and Lydia Austin, (Tax Policy Center, June 2015).
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Global Carbon Pricing: We Will If You Will (September 2015). E-book compilation of eight papers by David J. C. MacKay, Richard Cooper, Joseph Stiglitz, William Nordhaus, Martin L. Weitzman, Christian Gollier & Jean Tirole, Stéphane Dion & Éloi Laurent, Peter Cramton, Axel Ockenfels & Steven Stoft. The authors, from a variety of viewpoints and disciplines, conclude that negotiating an explicit global price on carbon pollution would help unlock global climate negotiations by aligning national self-interest with the global goal of rapidly reducing greenhouse gas emissions.
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After Paris: Fiscal, Macroeconomic, and Financial Implications of Climate Change (IMF discussion draft, January 2016).
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The Carbon Tax Revenue Menu
Getting the politics to align for a carbon tax requires the right blend of honey and vinegar. For years, advocates’ and opponents’ attention alike has focused on the vinegar – the tax part. Lately, though, we’ve noticed growing interest about how to best spread the honey — the potentially huge revenues a carbon tax would generate. Here’s a primer on the options: what they are, how they would work, their merits and drawbacks, and who’s pushing them hardest.
Setting the initial tax rate at $15/T CO2 and increasing it by that amount each year (reflecting the maximum carbon tax rate and ramp-up of Rep. Larson’s bill) we estimate that the Treasury would take in approximately $80 billion in revenue in the first year. (This calculation uses the Carbon Tax Center’s spreadsheet model.) This amount would rise each year, though at slightly less than a linear rate as carbon reductions kicked in, reaching around $600 billion by the tenth year.
The allure of carbon tax revenue also offers a growing incentive for other nations to match a U.S. carbon tax in order to avoid WTO-sanctioned border tax adjustments, capturing the revenue themselves. Indeed, Brookings economist Adele Morris calls a carbon tax a “two-fer” because along with a growing revenue stream would come substantial CO2 emissions reductions. For the U.S., based on historic price-elasticities, CTC’s model projects a 30% reduction in climate-damaging CO2 emissions by the tenth year, compared to 2005 levels.
Six hundred billion (again, that’s the projected take in the tenth year from an ambitious carbon tax) is a lot of revenue, equivalent to around a quarter of federal tax receipts. As Ian Parry and Roberton Williams recently explained in “Moving U.S. Climate Policy Forward: Are Carbon Taxes the Only Good Alternative?” (Resources for the Future), the efficiency advantages of a carbon tax depend on using the revenue wisely. Not surprisingly, there are loads of claimants. Here’s a guide to the most prominent ones, sequenced more or less from the political left to right:
a) “Dividend.” Climate scientist James Hansen contends that to support a steadily-rising CO2 price, the public needs to see the money — every month. He calls his proposal “fee & dividend.” Senators Cantwell (D-WA) and Collins (R-ME) introduced the “CLEAR” bill which uses “price discovery” via a cap to set its carbon tax which would begin at a price between $7 and $21/T CO2, increasing 5.5% each year. CLEAR would return 75% of revenue via direct “dividends” and dedicate the remaining 25% to a fund for transition assistance and reduction of non-CO2 emissions. Rep. Chris Van Hollen (D-MD) also introduced a cap & dividend bill in the Ways & Means Committee. It relies on a cap to set the CO2 price indirectly, aiming for 85% reductions (over 2005 levels) by 2050. Because of its similar emissions trajectory, we’d expect Van Hollen’s bill to generate similar revenue to Rep. Larson’s bill: roughly $80 billion in the first year, rising to about $600 billion within a decade. Both the CLEAR bill and the Van Hollen bill bear the intellectual and organizing stamp of social entrepreneur Peter Barnes, who founded “Cap & Dividend,” and Peter’s allies including the Chesapeake Climate Action Network.
b) Payroll tax rebate. Rep. John Larson’s “America’s Energy Security Trust Fund Act” pairs a carbon tax with rebates of payroll taxes on earnings. As articulated by Tufts University economist Gilbert Metcalf (now serving at the Treasury Department’s energy office), Larson’s proposal has the appeal of broad fairness. It would distribute revenue very evenly across both income and regions. Because Rep. Larson’s approach rebates payroll taxes via a credit on federal income taxes — it would rebate the payroll tax on the first $3600 of income in the first year, with that threshold and rising over time — it avoids tangling with the Social Security Trust fund.
Economist and former Undersecretary of Commerce Rob Shapiro supports the approach of a payroll tax rebate, arguing that cutting payroll taxes could spur job growth. Social entrepreneur Bill Drayton, founder of “Get America Working,” is also a strong advocate of using carbon revenue to cut payroll taxes in order to stimulate employment while reducing emissions. Al Gore captured the idea with the phrase, “tax what we burn, not what we earn.” Former Rep. Bob Inglis (R-SC) introduced the “raise wages, cut carbon” bill co-sponsored by Rep. Jeff Flake (R-Az). Conservative economists Greg Mankiw and Douglas Holtz-Eakin, both of whom have advised Republican presidents and candidates, have also supported shifting tax burdens from payrolls to carbon emitters. And the Progressive Democrats of America endorsed the Larson bill.
c) Deficit reduction. Brookings economists including Ted Gayer and Adele Morris have been pointing out the potential for climate policy to reduce deficits. While deficit reduction isn’t revenue return in the immediate sense that Dr. Hansen suggests, Morris points out that deficit reduction will benefit future taxpayers by paying down at least part of the nation’s debt, rather than letting it continue accumulating interest. In this way, she suggests, the impulse to help future generations via foresighted climate policy would have a natural fiscal correlative of reducing future tax burdens.
Supporters of applying carbon tax revenues to deficit reduction include MIT’s Michael Greenstone (chair of the Brookings Hamilton Project on climate and energy policy) and Alice Rivlin, founding director of the Congressional Budget Office, who co-chaired the Bipartisan Policy Institute’s alternative to the Obama deficit commission. Prof. Metcalf proposed a carbon tax to the commission, with revenue return as “transition assistance” in the early years, shifting to deficit reduction in later years. As Irwin Stelzer of the conservative Hudson Institute recently pointed out, when the options to close budget gaps sift down to unpopular alternatives such as a value added tax (regressive and annoying, as EU residents will attest) or curbing home mortgage deductions, a carbon tax may emerge with greater appeal. While Keynesians argue that the present weak economy militates against any net increase in taxes, a phased-in allocation of carbon tax revenues to deficit reduction such as Prof. Metcalf proposes may circumvent that objection.
d) Income tax cuts. Greg Mankiw has suggested cutting income taxes as an alternative to payroll tax cuts to return carbon tax revenues; those Form 1040’s could include a carbon rebate drawn from those revenues for every taxpayer. Revenue could be returned via a lump sum credit (which would be income-progressive) or by reducing income tax rates (arguably more stimulative of income-earning activity).
e) Corporate income tax (CIT) rate cut. At a recent AEI event “Whither the Carbon Tax,” AEI economist Kevin Hassett argued for a carbon tax paired with a reduction in the corporate income tax rate. The Wyden-Coates tax reform bill proposes to reduce top CIT rates and make up the revenue by closing numerous exemptions, indicating interest on the Hill. Adherents of CIT rate cuts point to IMF studies saying that U.S. CIT rates are among the world’s highest, asserting that these taxes are especially stifling of business activity and employment. Hassett and his AEI collegue Aparna Mathur argue that CIT’s are passed through as higher prices for consumers and passed back to the factors of production: labor (in the form of reduced wages) and capital (in the form of reduced corporate earnings). They estimate that using carbon tax revenue to cut the effective CIT rate would result in return of about 40% of revenue to wage-earners, which they assert would give the CIT to carbon tax shift a net progressive effect. Their conclusion may be a stretch, given that real wages have remained stagnant or fallen for decades while corporate profits are rising briskly, but a CIT cut has strong salience for conservatives and business leaders.
f) The sampler platter. The options listed above can be mixed and matched. In fact, British Columbia’s carbon tax (which started at $10/t CO2 in 2008 and rises $5/t each year — it notches up to $25 per metric ton on July 1) launched with a distribution of a $100 direct “dividend” to each taxpayer even before the carbon tax was levied, and is now returning revenue via cuts in payroll, income and corporate tax rates. Former BC Premier Gordon Campbell was re-elected to a third term in 2009 after enacting the carbon tax with this mix of revenue return measures, perhaps indicating that a diverse approach to revenue return can have broad and sustained appeal.
Each of the revenue options has important economic and political advantages as well as disadvantages. At the June 1 AEI event, Kevin Hassett decried Senator Cantwell’s direct “dividend” as “terrible policy” because it foregoes the efficiency advantage of using carbon tax revenue to reduce or possibly eliminate other taxes that dampen economic activity. In 2007 Hassett and his AEI colleague Ken Green published an essay aguing for a carbon tax shift as a “no regrets” policy for conservatives, because its tax reform benefits would make it worthwhile even without climate benefits. They pointed to the work of Stanford’s Lawrence Goulder who concludes that the benefit of reducing other distortionary taxes can be large enough to offset some or all of the dampening effect of adding a carbon tax, a phenomenon known as a “double dividend.”
Still, the potential political attractiveness of direct distribution of revenue can hardly be overstated. Dr. Hansen is no politician and doesn’t claim to be an economist, but he sticks to the “dividend” or “green check” while noting that because of its clear and briskly rising price, Rep. Larson’s approach is nevertheless the best climate option on the table. Rep. Van Hollen, outgoing chair of the Democratic Congressional Campaign Committee, certainly knows a thing or two about politics, and Senator Cantwell very effectively made the case for her “cap & dividend” approach last month at Brookings. But even she seems to be looking at other items on the revenue return menu. For the first time, she suggested appropriating some carbon revenue for deficit reduction, confirming that as high summer arrives in Washington, fiscal matters remain the topic for this Congress.
Photo: Flickr.
Memo to Sen. Kerry: Climate Science Includes Economics
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.
In 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
Happy New Year – A New Political Reality for Carbon Taxes
For too long the conventional wisdom has been that while carbon taxes may be superior to cap-and-trade schemes, there is no way that politicians would ever support a new tax, even one that was revenue-neutral. Environmentalists who might otherwise be supporting a carbon tax because it could produce real reductions in greenhouse gas emissions far more rapidly than cap-and-trade have dismissed carbon tax advocacy as naive and have rallied behind cap-and-trade.
Just as conventional wisdom was consistently proven wrong in the 2008 presidential election, it’s also proving wrong about the political infeasibility of a carbon tax. Just look at events over the past two days.
On Saturday, the lead editorial in the New York Times, The Gas Tax, made a compelling case that the president-elect and Congress should impose a “gas tax or similar levy to keep gas prices up after the economy recovers from recession.”
On Sunday, two prominent Republicans, Congressman Bob Inglis of South Carolina and supply-side economist Arthur Laffer, unequivocally endorsed a U.S. carbon tax in a New York Times op-ed, An Emissions Plan Conservatives Could Warm To, that concisely summarized the politics of climate change and the rationale for a carbon tax from a conservative perspective:
Conservatives don’t support tax increases that are veiled as “cap and trade” schemes for pollution permits. But offer us a tax swap, and we could become the new administration’s best allies on climate change.
The Inglis/Laffer summary of why the Liberman-Warner cap-and-trade bill failed is short and to the point:
A climate-change bill withered in Congress this summer because families don’t need an enormous, and hidden, tax increase. If the bill’s authors had instead proposed a simple carbon tax coupled with an equal, offsetting reduction in income taxes or payroll taxes, a dynamic new energy security policy could have taken root.
Inglis/Laffer cogently present the economic basis for a carbon tax:
We need to impose a tax on the thing we want less of (carbon dioxide) and reduce taxes on the things we want more of (income and jobs). A carbon tax would attach the national security and environmental costs to carbon-based fuels like oil, causing the market to recognize the price of these negative externalities.
They recognize that “the costs of reducing carbon emissions are not trivial” and the concomitant need for revenue-neutrality in carbon pricing:
It is essential, therefore, that any taxes on carbon emissions be accompanied by equal, pro-growth tax cuts. A carbon tax that isn’t accompanied by a reduction in other taxes is a nonstarter. Fiscal conservatives would gladly trade a carbon tax for a reduction in payroll or income taxes, but we can’t go along with an overall tax increase.
Inglis/Laffer directly address concerns that putting a price on carbon (whether through a carbon tax or cap-and-trade) would put Americans at a competitive disadvantage:
If China and India join the United States in attaching a price to carbon, their goods should come into this country without a carbon adjustment. But if they do not, every item they place on our shelves should be subject to the same carbon tax that we would place on our domestically produced goods, again offset by a revenue-neutral tax cut.
If World Trade Organization rules entitle members to an unwarranted exemption from such a carbon tax, then we should change them. Outliers should not be allowed to frustrate the decision-making of the countries that are trying to prevent the security and environmental train wrecks of this century.
Although other conservatives including George W. Bush speechwriter David Frum and the American Enterprise Institute’s Ken Green have made similar arguments, Inglis and Laffer are the two most prominent Republicans to publicly articulate such a clear pro-carbon tax position.
The same day as the Inglis/Laffer op-ed, conservative pundit Charles Krauthammer published his own strong endorsement of a gas tax. Though his Weekly Standard article, The Net-Zero Gas Tax – A Once-in-a-Generation Chance, begins by describing Americans’ “deep and understandable aversion to gasoline taxes,” Krauthammer quickly presents what he refers to as the “blindingly obvious” energy independence and other benefits of an increase in the federal gas tax, and proposes what he calls:
Something radically new. A net-zero gas tax. Not a freestanding gas tax but a swap that couples the tax with an equal payroll tax reduction. A two-part solution that yields the government no net increase in revenue and, more importantly — that is why this proposal is different from others — immediately renders the average gasoline consumer financially whole.
Krauthammer envisions the simultaneous enactment of a carbon tax and an offsetting reduction of payroll taxes, with the payroll tax reduction kicking in a week before the gas tax takes effect. He notes as a “nice detail” the fact that the payroll deduction would be “mildly progressive” and follows with a constructive analysis of some of the nitty-gritty details of implementing his net-zero gas tax.
Finally, Times columnist Thomas Friedman weighed in with yet another strong call for a gasoline and/or carbon tax in Win, Win, Win, Win, Win. Echoing the previous day’s Times editorial, Friedman states what should be obvious:
It makes no sense for Congress to pump $13.4 billion into bailing out Detroit — and demand that the auto companies use this cash to make more fuel-efficient cars — and then do nothing to shape consumer behavior with a gas tax so more Americans will want to buy those cars. As long as gas is cheap, people will go out and buy used S.U.V.’s and Hummers. (emphasis in original)
Friedman follows with a geopolitical argument very similar to that made by Inglis, Laffer and Krauthammer:
A gas tax reduces gasoline demand and keeps dollars in America, dries up funding for terrorists and reduces the clout of Iran and Russia at a time when Obama will be looking for greater leverage against petro-dictatorships. It reduces our current account deficit, which strengthens the dollar. It reduces U.S. carbon emissions driving climate change, which means more global respect for America. And it increases the incentives for U.S. innovation on clean cars and clean-tech.
The weekend explosion of support for carbon and/or gas taxing followed by just three weeks a similar confluence, also described here, in which Thomas Friedman called for a carbon tax, the Wall Street Journal stated its clear preference for a carbon tax over cap-and-trade and Ralph Nader and Toby Heaps made a compelling case for pricing carbon emissions via a tax rather than a trading scheme in a Wall Street Journal op-ed.
This convergence of opinion from Left and Right signals an extraordinary opportunity to obtain bipartisan support for a revenue-neutral carbon tax. As Congressman Inglis and Mr. Laffer conclude:
As president, Barack Obama, by working with conservatives as well as the members of his own party, can at once clean the air, create jobs and improve the national security of the United States — a triple play for the next American century.
Will the environmental community unite to actually help pass climate change legislation? That remains to be seen as environmental groups continue to be split between carbon tax and cap-and-trade camps. I’ve worked closely with some of the groups supporting cap-and-trade, have tremendous respect for them and know they understand how important it is to put a price on carbon and to make very large reductions in greenhouse gas emissions as soon as possible. I know that some cap-and-trade supporters are genuinely convinced that a carbon tax is simply not possible politically. Will that change as bipartisan support grows for a revenue-neutral carbon tax?
It’s time to recognize that 2008’s conventional wisdom is wrong. If we join together in a bipartisan alliance, Congress can adopt and implement a carbon tax in 2009.
Photo: Valerio Schiavoni / Flickr.
NRDC Evolves from Cap-and-Trade to “Cap-and-Invest.” Keep going…
A special report for the Carbon Tax Center by James F. Handley
For almost four decades, the powerhouse Natural Resources Defense Council has stood as the green movement’s stronghold for regulation-based eco-solutions. It has fought for, and won, energy-efficiency standards for appliances, cars and buildings; renewable-energy quotas for electricity supply; and parts–per-million regulations on chemicals in water, air and food have been NRDC’s stock-in-trade. But not price-based mechanisms like gasoline taxes, congestion tolls and carbon emissions pricing.
It was striking, therefore, to read NRDC finance advisor Andy Stevenson come out swinging for carbon emissions pricing. In Why Putting a Price on Carbon is Fast Becoming an Economic Necessity, posted this week on NRDC’s Web site, Stevenson warns that tightening
credit markets threaten to strangle investment in alternative energy. His solution — “cap and invest”:
The cap forms a limit on the amount of CO2 that can be emitted in a given year. This declining limit is then broken up into permits… auctioned off to emitting entities, creating a… revenue stream of roughly $150 billion a year over several decades that can be used to help collateralize the loans needed to put America back to work and move us in the right direction…. [O]ver a trillion dollars in the early years of a "cap and invest" program… to help finance innovative energy solutions for our economy… giving the banks confidence to once again finance longer-term investments at reasonable interest rates. Investments that will pay dividends both in terms of their economics under a carbon cap, as well as for their ability to help reduce our greenhouse gas emissions profile.
Once sufficient capital has been deployed to jump-start emerging energy technologies, this program would then be transformed from a "cap and invest" program into a "cap and dividend" program that would rebate energy revenues back to the American people.
We like that last piece, “dividend… to the people.” Why not start there?
Stevenson’s article suggests that NRDC is moving up the ladder from Boxer-Lieberman-style cap-and-trade towards "the gold standard" of a revenue-neutral carbon tax. Could the Council be following the progression laid out in the Congressional Budget Office’s “Caps vs. Taxes”
report, of steps to make cap-and-trade more effective (and more like a carbon tax)?
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100% auction (drop all permit giveaways)
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safety valves and price floors to dampen volatility
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recycle revenue via dividend or tax-shift
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regulate (or eliminate) traders.
NRDC’s proposed cap-and-trade includes 100% auction and a loose safety valve. With Stevenson’s call for eventual revenue recycling, the group is at least contemplating the first three of these steps.
Yet the NRDC-Stevenson "evolutionary" approach of moving to cap-and-dividend only after a long incubation in cap-and-invest is riddled with problems. For one thing, once traders and polluters owned permits they’d be invested in the system. They’d have to be bought out to take the next step up the ladder toward the "gold standard" of a straight carbon
tax. Moreover, "green energy" subsidies are addictive, even if (or especially when) they don’t reduce emissions. Subsidies for corn-based ethanol — which Sen. McCain denounced in the Sept. 26 presidential debate
—– are a case in point.
Furthermore, a dividend or tax shift seem essential to counteract the income impacts of any carbon pricing scheme, whether tax or cap. Without revenue distribution, carbon emissions pricing is a regressive tax. Yet under either a cap or a tax, carbon prices will have to rise substantially to meet the emission reduction targets NASA’s Jim Hansen and most other climate scientists warn are essential to prevent catastrophic climate instability. The current financial meltdown cries out for a dividend or a tax shift over a regressive tax increase, since consumers are already being bled dry.
But the case against cap-and-invest would be strong even in flush times. Our government is lousy at choosing technology winners, particularly this early in the technology race. Remember synfuels? Lieberman-Warner was loaded with subsidies for similar money holes like nukes, ethanol, and “clean coal.” Carbon auction or tax revenue diverted to "green energy" programs, even well-crafted ones, is unlikely to drive conservation and innovation nearly as well as the steeper price increase on fossil fuels that could be politically and economically sustained if a broadly distributed dividend or tax shift were coupled with a tax (or cap) on carbon fuel producers. That’s because we know our homes and businesses better
than the government. With the right price signals, we’ll be in a far better position than government-mediated program officers to make decisions about how to reduce our use of fossil fuels.
NRDC’s thinking is evolving. But cap-and-invest is still a regressive policy that won’t do much good up-front. And down the line, as the cap tightens and fossil fuel prices soar, it will become wildly unpopular. Stevenson is right to suggest revenue recycling to offset that pain, but why wait? Why not skip “cap-and-invest” and go straight for “tax-and-dividend.” Economists
ranging from Ken Green on the right, Bill Nordhaus in the center and Robert Shapiro on the left are all saying “go for the gold” – a revenue-neutral carbon tax. Keep climbing, NRDC!
Photo: Flickr / Charlie Brewer.
Carbon Revenue Recycling is Focus of Capitol Hill Briefing
Reported for the Carbon Tax Center by James F. Handley
[Ed. note — two days after the Capitol Hill briefing, on Thurs. Sept. 18, the House Ways and Means Committee heard testimony on optimal pricing of carbon emissions, including a forceful presentation from carbon tax advocate New York City Mayor Michael Bloomberg; watch this space for CTC’s report.]
At least one Washington politician dares to say “tax” out loud — a carbon tax, no less.
Representative John Larson (D-Conn.) headlined a Capitol Hill panel discussion Tuesday and came out swinging for a revenue-neutral carbon tax. Larson, a member of the Democratic House leadership and the tax-writing Ways and Means Committee, called carbon taxing the most effective way to curb greenhouse gas emissions. Addressing a briefing organized by Clean Air – Cool Planet and the Energy and Environment Study Institute, the five-term Congressman invoked his constituents at Auggie & Ray’s Diner in East Hartford: “They know climate protection comes with a price tag — they want transparency up-front so they know what to expect and can plan ahead. And they want a fair, level playing field.”
Both a carbon tax or the auctioning of permits under a carbon cap-and-trade system would generate huge streams of revenue which would come under the jurisdiction of Ways and Means. The Committee has scheduled a hearing tomorrow, Sept. 18, on revenue recycling, and Larson will be on hand, presumably putting the spotlight on the American Energy Security Trust Fund Act he introduced in August 2007.
Speaking to an overflowing House banquet room, Larson, shown at right, called a carbon tax “simple, efficient, straightforward and effective” and said it will be a boon to the economy if the revenue is recycled to reduce or eliminate distortionary taxes. Following Larson, a politically diverse panel of economists — Robert Repetto, Robert Shapiro, Terry Dinan, and Ken Green — discussed ways to maximize the “double dividend” — benefits to climate and to the economy from recycling revenue from either a carbon tax or the auction proceeds of cap-and-trade.
Several noted the most egregious flaws of the defeated Lieberman cap-and-trade bill: it would have given away emission permits and auction revenues, mainly to fossil fuel industries, rather than recycling auction revenues downstream to consumers. Panelists noted that energy firms pass their costs downstream to consumers — who will need assistance. Only Repetto, of the UN Foundation, preferred cap-and-trade over a carbon tax, but with either, he wants a tax-shift — auctioning all permits and dedicating revenues to reduce other taxes.
Shapiro, a former Undersecretary of Commerce, warned of the costs and instability from price volatility under cap-and-trade, citing the U.S. acid rain program whose permit prices slosh around as much as 80% and the similarly volatile EU climate program which has achieved zero net greenhouse gas reductions. The morning after a disastrously volatile day on Wall Street, Shapiro called volatility the enemy of rational planning and efficient economic decision-making. Shapiro advocates recycling 90% of carbon tax revenue with the remaining 10% dedicated to R&D on low-carbon alternatives.
Dinan, author of a series of weighty CBO studies on climate policy documenting the advantages of a carbon tax, suggested ways to move cap-and-trade closer in efficiency to a carbon tax, for example by adding safety valves to limit price volatility. She underscored the efficiency advantages of applying revenues to reduce distortionary taxes such as payroll taxes, vs. distributing revenues equally with pro rata dividends. But Dinan and the new RFF study caution that unlike a straight dividend approach, tax-shifting out of payroll taxes would be acutely regressive, mainly because many low-income people, including elderly and the unemployed, don’t pay payroll taxes and thus wouldn’t benefit from payroll tax reductions. In contrast, dividends would go to everyone, equally, thus benefiting a clear majority of less-well-off individuals and households.
Ken Green, AEI resident economist and scientist who has written extensively about the “double dividend” from reducing distortionary taxes with carbon revenues, is rare among conservatives for supporting strong medicine to combat climate change. Because our entire society and every activity in it is built around energy consumption, changing energy prices will have profound effects, he noted, some of which must be offset. Green warned that politicizing climate change legislation or otherwise attempting to favor some constituents over others will “torpedo” the serious effort that is needed. Cap-and-trade hides the truth that we must use prices to change consumption patterns, said Green, and it will breed cynicism and undermine public support for climate protection. The public needs to understand that although fossil fuel prices will rise, they will be “made whole” as a group.
During Q&A an audience member noted the consensus for a carbon tax but asked panelists how a tax would provide the certainty that is often touted as the chief advantage of cap-and-trade. Shapiro suggested that carbon tax levels may need to be adjusted periodically to assure that emissions targets are being met. Green contended that powerful incentives for cheating and market manipulation will render cap-and-trade’s emissions certainty largely illusory. He called cap-and-trade a government-mandated constraint on supply, likening it to OPEC’s mission to limit oil supply to support prices. Just as in OPEC, cap-and-trade will bring irresistible temptation to cheat by selling outside the system and will eventually destroy public confidence, Green said.
Photo courtesy of Clean Air – Cool Planet
The 2 Big Things Missing from Coverage of Nuke Plant Shutdowns
Next month will mark four years since the Indian Point nuclear power plant north of New York City began to be shut down.
Indian Point 2 was closed on April 30, 2020. Indian Point 3’s closure followed a year later. The two units, rated at roughly 1,000 megawatts each, started operating in the mid-1970s. A half-century later, their reactor cores lie dismembered. Both units are irretrievably gone, for better or worse.
I believe the closures are for the worse — and not by a little. The loss of Indian Point’s 2,000 MW of virtually carbon-free power has set back New York’s decarbonization efforts by at least a decade. And that’s almost certainly an understatement.
I hinted at this in Drones With Hacksaws: Climate Consequences of Shutting Indian Point Can’t Be Brushed Aside, a May 2020 post in the NY-area outlet Gotham Gazette. Over time I grew more outspoken. In two posts for The Nation in April 2022 (here and here) I invoked Indian Point to urge Californians to revoke a parallel plan to close Pacific Gas & Electric’s two-unit Diablo Canyon nuclear plant, which I followed up with a plea to Gov. Gavin Newsom to scuttle the shutdown deal, co-signed by clean-air advocate Armond Cohen and whole-earth avatar Stewart Brand. Which the governor did, last year.
Once I had regarded nuclear plant closures as no big deal. Now I was telling all who would listen that junking high-performing thousand-megawatt reactors on either coast was a monstrous climate crime, the carbon equivalent to decapitating many hundreds of giant wind turbines — a metaphor I employed in my Gotham Gazette post. My turnaround rested on two clear but overlooked points.
One was that nearly all extant U.S. nukes had long ago morphed from chronic inconsistency into rock-solid generators of massive volumes of carbon-free kilowatt-hours, with “capacity factors” reliably hitting 90% or even higher. This positive change should have put to rest the antinuclear movement’s shopworn “aging and unsafe” narrative about our 90-odd operating reactors. It also elevated the plants’ economic and climate value, making politically forced closures far more costly than most of us had imagined.
The other new point is connected to carbon and climate: The effort to have “renewables” (wind, solar and occasionally hydro) fill the hole left from closing Indian Point or other nuclear plants isn’t just tendentious and difficult. Rather, the very construct that one set of zero-carbon generators (renewables) can “replace” another (nuclear) with no climate cost is simplistic if not downright false, as I explain further below.
These new ideas came to mind as I read a major story this week on the consequences of Indian Point’s closure in The Guardian by Oliver Milman, the paper’s longtime chief environment correspondent. To his credit, Milman delved pretty deeply into the impacts of reactor closures — more so than any prominent journalist has done to date. Nonetheless, it’s time for coverage of nuclear closures to go further. To assist, I’ve posted Milman’s story verbatim, with my responses alongside.
A nuclear plant’s closure was hailed as a green win. Then emissions went up.By Oliver Milman, The Guardian, March 20, 2024 When New York’s deteriorating and unloved Indian Point nuclear plant finally shuttered in 2021, its demise was met with delight from environmentalists who had long demanded it be scrapped. But there has been a sting in the tail – since the closure, New York’s greenhouse gas emissions have gone up. Castigated for its impact upon the surrounding environment and feared for its potential to unleash disaster close to the heart of New York City, Indian Point nevertheless supplied a large chunk of the state’s carbon-free electricity. Since the plant’s closure, it has been gas, rather then clean energy such as solar and wind, that has filled the void, leaving New York City in the embarrassing situation of seeing its planet-heating emissions jump in recent years to the point its power grid is now dirtier than Texas’s, as well as the US average. “From a climate change point of view it’s been a real step backwards and made it harder for New York City to decarbonize its electricity supply than it could’ve been,” said Ben Furnas, a climate and energy policy expert at Cornell University. “This has been a cautionary tale that has left New York in a really challenging spot.” The closure of Indian Point raises sticky questions for the green movement and states such as New York that are looking to slash carbon pollution. Should long-held concerns about nuclear be shelved due to the overriding challenge of the climate crisis? If so, what should be done about the US’s fleet of ageing nuclear plants? For those who spent decades fighting Indian Point, the power plant had few redeeming qualities even in an era of escalating global heating. Perched on the banks of the Hudson River about 25 miles north of Manhattan, the hulking facility started operation in the 1960s and its three reactors at one point contributed about a quarter of New York City’s power. (Guardian/Milman continued) It faced a constant barrage of criticism over safety concerns, however, particularly around the leaking of radioactive material into groundwater and for harm caused to fish when the river’s water was used for cooling. Pressure from Andrew Cuomo, New York’s then governor, and Bernie Sanders – the senator called Indian Point a “catastrophe waiting to happen” – led to a phased closure announced in 2017, with the two remaining reactors shutting in 2020 and 2021. The closure was cause for jubilation in green circles, with Mark Ruffalo, the actor and environmentalist, calling the plant’s end “a BIG deal”. He added in a video: “Let’s get beyond Indian Point.” New York has two other nuclear stations, which have also faced opposition, that have licenses set to expire this decade. But rather than immediately usher in a new dawn of clean energy, Indian Point’s departure spurred a jump in planet-heating emissions. New York upped its consumption of readily available gas to make up its shortfall in 2020 and again in 2021, as nuclear dropped to just a fifth of the state’s electricity generation, down from about a third before Indian Point’s closure. This reversal will not itself wreck New York’s goal of making its grid emissions-free by 2040. Two major projects bringing Canadian hydropower and upstate solar and wind electricity will come online by 2027, while the state is pushing ahead with new offshore wind projects – New York’s first offshore turbines started whirring last week. Kathy Hochul, New York’s governor, has vowed the state will “build a cleaner, greener future for all New Yorkers.” Even as renewable energy blossoms at a gathering pace in the US, though, it is gas that remains the most common fallback for utilities once they take nuclear offline, according to Furnas. This mirrors a situation faced by Germany after it looked to move away from nuclear in the wake of the Fukushima disaster in 2011, only to fall back on coal, the dirtiest of all fossil fuels, as a temporary replacement. “As renewables are being built we still need energy for when the wind isn’t blowing and the sun isn’t shining and most often it’s gas that is doing that,” said Furnas. “It’s a harrowing dynamic. Taking away a big slice of clean energy coming from nuclear can be a self-inflicted wound from a climate change point of view.” With the world barreling towards disastrous climate change impacts due to the dawdling pace of emissions cuts, some environmentalists have set aside reservations and accepted nuclear as an expedient power source. The US currently derives about a fifth of its electricity from nuclear power. Bill McKibben, author, activist and founder of 350.org, said that the position “of the people I know and trust” is that “if you have an existing nuke, keep it open if you can. I think most people are agnostic on new nuclear, hoping that the next generation of reactors might pan out but fearing that they’ll be too expensive. “The hard part for nuclear, aside from all the traditional and still applicable safety caveats, is that sun and wind and batteries just keep getting cheaper and cheaper, which means the nuclear industry increasingly depends on political gamesmanship to get public funding,” McKibben added. (Guardian/Milman continued) Wariness over nuclear has long been a central tenet of the environmental movement, though, and opponents point to concerns over nuclear waste, localized pollution and the chance, albeit unlikely, of a major disaster. In California, a coalition of green groups recently filed a lawsuit to try to force the closure of the Diablo Canyon facility, which provides about 8% of the state’s electricity. “Diablo Canyon has not received the safety upgrades and maintenance it needs and we are dubious that nuclear is safe in any regard, let alone without these upgrades – it’s a huge problem,” said Hallie Templeton, legal director of Friends of the Earth, which was founded in 1969 to, among other things, oppose Diablo Canyon. Templeton said the groups were alarmed over Diablo Canyon’s discharge of waste water into the environment and the possibility an earthquake could trigger a disastrous leak of nuclear waste. A previous Friends of the Earth deal with the plant’s operator, PG&E, to shutter Diablo Canyon was clouded by state legislation allowing the facility to remain open for another five years, and potentially longer, which Templeton said was a “twist of the knife” to opponents. “We are not stuck in the past – we are embracing renewable energy technology like solar and wind,” she said. “There was ample notice for everyone to get their houses in order and switch over to solar and wind and they didn’t do anything. The main beneficiary of all this is the corporation making money out of this plant remaining active for longer.” Meanwhile, supporters of nuclear – some online fans have been called “nuclear bros” – claim the energy source has moved past the specter of Chernobyl and into a new era of small modular nuclear reactors. Amazon recently purchased a nuclear-powered data center, while Bill Gates has also plowed investment into the technology. Rising electricity bills, as well as the climate crisis, are causing people to reassess nuclear, advocates say. “Things have changed drastically – five years ago I would get a very hostile response when talking about nuclear, now people are just so much more open about it,” said Grace Stanke, a nuclear fuels engineer and former Miss America who regularly gives talks on the benefits of nuclear. “I find that young people really want to have a discussion about nuclear because of climate change, but people of all ages want reliable, accessible energy,” she said. “Nuclear can provide that.” |
The forces that won Indian Point’s closure were blind to the climate cost.By Charles Komanoff, Carbon Tax Center, March 23, 2024 New Reality #1: Indian Point wasn’t “deteriorating” when it was closed.“Deteriorating and unloved” is how Milman characterized Indian Point in his lede. “Unloved?” Sure, though probably no U.S. generating station has been fondly embraced since Woody Guthrie rhapsodized about the Grand Coulee Dam in the 1940s. But “deteriorating”? How could a power plant on the verge of collapse run for two decades at greater than 90% of its maximum capacity? Had Indian Point been less productive, the jump in the metropolitan area’s carbon emission rate would have been far less than the apparent 60 percent increase in the Guardian graph at left. Though the “electrify everything” community is loath to discuss it, the emissions surge from closing Indian Point significantly diminishes the purported climate benefit from shifting vehicles, heating, cooking and industry from combustion to electricity . The impetus for shutting Indian Point largely came through, not from then-Gov. Cuomo.Milman pins the decision to close Indian Point on NY Gov. Andrew Cuomo and Vermont’s U.S. Senator Bernie Sanders. While Cuomo backed and brokered the deal (which Sanders had nothing to do with), the real push came from a coalition of NY-area environmental activists led by Riverkeeper, who, as he notes, “spent decades fighting Indian Point.” And it was relentless. The wellsprings of their fight were many, from Cold War fears of anything nuclear to a fierce devotion to the Hudson River ecosystem, which Indian Point threatened not through occasional minor radioactive leaks but via larval striped bass entrainment on the plant’s intake screens. Their fight was of course supercharged by the 1979 Three Mile Island reactor meltdown in Pennsylvania and, later, by the 9/11 hijackers’ Hudson River flight path. But as I pointed out in Gotham Gazette, few shutdown proponents had carbon reduction in their organizational DNA. None had ever built anything, leaving many with a fantasyland conception of the work required to substitute green capacity for Indian Point. (CTC/Komanoff continued) And while the shutdown forces proclaimed their love for wind and solar, their understanding of electric grids and nukes was stuck in the past. To them, Indian Point was Three Mile Island (or Chernobyl) on the Hudson — never mind that by the mid-2010s U.S. nuclear power plants had multiplied their pre-TMI operating experience twenty-fold with nary a mishap. No, in most anti-nukers’ minds, Indian Point would forever be a bumbling menace incapable of rising above its previous-century average 50% capacity factor (see graph above). Most either ignored the plant’s born-again 90% online mark or viewed it as proof of lax oversight by a co-opted Nuclear Regulatory Commission. Note too that the “hulking facility,” as Milman termed Indian Point, lay a very considerable 35 air miles from Columbus Circle, rather than “25 miles north of Manhattan,” a figure that references the borough’s uninhabited northern tip. NYC residents had more immediate concerns, leaving fear and loathing over the nukes to be concentrated among the plant’s Westchester neighbors (Cuomo’s backyard). Which raises the question of why in-city environmental justice groups failed to question the shutdown, which is now impeding closure of polluting “peaker” plants in their own Brooklyn, Queens and Bronx backyards. Still, the shutdown campaigners’ most grievous lapse was their failure to grasp that the new climate imperative requires a radically different conceptual framework for gauging nuclear power. New Reality #2: Wind and solar that are replacing Indian Point can’t also reduce fossil fuels.It’s dispiriting to contemplate the effort required to create enough new carbon-free electricity to generate Indian Point’s lost carbon-free output. Think 500 giant offshore wind turbines, each rated at 8 megawatts. (Wind farms need twice the capacity of Indian Point, i.e., 4,000 MW vs. 2,000, to offset their lesser capacity factor.) What about solar PV? Its capacity disadvantage vis-a-vis Indian Point’s 90% is five- or even six-fold, meaning 10,000 or more megawatts of new solar to replace Indian Point. I won’t even try to calculate how many solar buildings that would require. But this is where Indian Point’s 90% capacity factor is so daunting; had the plant stayed mired at 60%, the capacity ratios to replace it would be a third less steep. But wait . . . it’s even worse. These massive infusions of wind or solar are supposed to be reducing fossil fuel use by helping the grid phase out gas (methane) fired electricity. Which they cannot do, if they first need to stand in for the carbon-free generation that Indian Point was providing before it was shut. So when Riverkeeper pledged in 2015-2017, or Friends of the Earth’s legal director told the Guardian‘s Milman that “we are embracing renewable energy technology like solar and wind,” they’re misrepresenting renewables’ capacity to help nuclear-depleted grids cut down on carbon. Shutting a functioning nuclear power plant puts the grid into a deep carbon-reduction hole — one that new solar and wind must first fill, at great expense, before further barrages of turbines and panels can actually be said to be keeping fossil fuels in the ground. (CTC/Komanoff continued) I suspect that not one in a hundred shut-nukes-now campaigners grasps this frame of reference. I certainly didn’t, until one day in April 2020, mere weeks before Indian Point 2 would be turned off, when an activist with Nuclear NY phoned me out of the blue and hurled this new paradigm at me. Before then, I was stuck in the “grid sufficiency” framework that was limited to having enough megawatts to keep everyone’s A/C’s running on peak summer days. The idea that the next giant batch or two of renewables will only keep CO2 emissions running in place rather than reduce them was new and startling. And irrefutably true. To be clear, I don’t criticize Milman for missing this new paradigm. He’s a journalist, not an analyst or activist. It’s on us climate advocates to propagate it till it reaches reportorial critical mass. I credit Milman for giving FoE’s legal director free rein about Diablo. “There was ample notice for everyone to get their houses in order and switch over to solar and wind and they didn’t do anything,” she told him. Goodness. Everyone [who? California government? PG&E? green entrepreneurs?] didn’t do anything to switch over to solar and wind. Welcome to reality, Friends of the Earth! I knew FoE’s legendary founder David Brower personally. I and legions of others were inspired in the 1960s and 1970s by his implacable refusal to accede to the world as it was and his monumental determination to build a better one. But reality has its own implacability. The difficulty of bringing actual wind and solar projects (and more energy-efficiency) to fruition has the sad corollary that shutting viable nuclear plants consigns long-sought big blocks of renewables to being mere restorers of the untenable climate status quo. In closing: Contrary to Milman (and NY Gov. Kathy Hochul), Indian Point’s closure will wreck NY’s goal of an emissions-free grid by 2040.“Two major projects bringing Canadian hydropower and upstate solar and wind electricity will come online by 2027,” Milman wrote, referencing the Champlain-Hudson Power Express transmission line and Clean Path NY. But their combined annual output will only match Indian Point’s lost carbon-free production. Considering that loss, the two ventures can’t be credited with actually pushing fossil fuels out of the grid. That will require massive new clean power ventures, few of which are on the horizon. I’ve written about the travails of getting big, difference-making offshore wind farms up and running in New York. I’ve argued that robust carbon pricing could help neutralize the inflationary pressures, supply bottlenecks, higher interest rates and pervasive NIMBY-ism that have led some wind developers to deep-six big projects. Though I’ve yet to fully “do the math,” my decades adjacent to the electricity industry (1970-1995) and indeed my long career in policy analysis tell me that New York’s grid won’t even reach 80% carbon-free by 2040 unless the state or, better, Washington legislates a palpable carbon price that incentivizes large-scale demand reductions along with faster uptake of new wind, solar and, perhaps, nuclear. |
Congestion pricing, coming soon to New York City, could bode well for carbon-taxing.
Externality pricing is coming to New York City in a big, barrier-busting form known as congestion pricing. Judging from how it’s unfolding, it might just be bold enough to give a much-needed boost to the cause of U.S. carbon pricing.
In a long-awaited step, New York’s Metropolitan Transportation Authority this week unveiled its prospective tolls to drive a car or truck into Manhattan’s central business district. Barring a last-minute reversal, the Western hemisphere’s first congestion pricing program, and the world’s biggest by far in terms of revenue, will begin next June, just six months from now.
The plan took half-a-century to legislate and another four-and-a-half years to flesh out, culminating, for now, in its formal approval by the MTA board on Wednesday. Autos will be charged $15 to drive into Manhattan south of 60th Street between 5am-9pm weekdays and 9am-9pm weekends and holidays. Night-time tolls will be 75 percent lower, at $3.75. Trucks will pay more than cars, and for-hire vehicle trips that touch any part of the 8-square-mile congestion zone will be surcharged $1.25 (for yellow cabs) and $2.50 (for “ride-hail” vehicles, largely Ubers). Peak-period car trips to the zone via tunnels under the Hudson and East Rivers, which already pay double-digit round-trip tolls, will get $5 off, but other exemptions or discounts will be few except for low-income residents of the zone and commuters to it. (Many details here, by the author; and here, by the MTA’s toll-setting panel.)
The 2019 state legislation authorizing the tolls requires that they generate $1 billion a year net of administrative costs — a revenue stream sufficient to bond $15 billion in transit investments. Eighty percent of that, $12 billion, is earmarked for subway improvements such as station elevators to increase accessibility and fully digital signals to allow more frequent train service; the other $3 billion will be invested in expanding commuter rail service between the suburbs and Manhattan.
[Click here to watch/hear Gov. Hochul’s remarks depicted above. Click here for Komanoff’s.]
Revenue Most Visible
The billion-dollar a year take from New York congestion pricing puts it in the same league as the Northeast states’ Regional Greenhouse Gas Initiative, which currently reaps $1.2 billion a year from sales of carbon emission permits for burning fossil fuels to make electricity. Yet “RGGI” is largely invisible to the public. So too are California’s economy-wide carbon cap-and-trade program, which started in 2013, and British Columbia’s 2008 carbon tax as well as subsequent cap-and-trade schemes elsewhere in Canada, .
Those other mechanisms rest on what former CTC staffer James Handley habitually derided as “hide the price” subterfuges. Congestion pricing, in contrast, hides nothing. Motorists know full well what they’ll soon have to pay to drive into the nation’s most gridlocked (and transit-rich) district. True, the surcharges on for-vehicle trips can be tricky to track — they add to rather than replace incumbent FHV surcharges of $2.50 and $2.75 for “taxi zone” trips in yellows and ride-hails, respectively. But congestion pricing’s main event is the fees for private car trips.
And “main event” is putting it mildly. Though the $15 peak car toll is many times less than the socially optimal toll (per Paul Krugman, whose July encomium to congestion program relied indirectly on my traffic-cost modeling) or the congestion costs imposed by a single car trip, which is nearly the same thing, it’s still a gut-punch for diehard drivers. Not only that, imposing a hefty price on car travel to capture externality costs rather than merely to pay for infrastructure provision is, let us say, deliciously transgressive in the USA. Kind of like taxing carbon emissions.
The point being: successfully implementing congestion pricing in New York — not simply putting it in place but having it deliver tangible benefits like more-reliable travel, more-livable streets and re-invigorated public transportation — conceivably could burnish carbon pricing not just in New York but nationwide.
Enacting Carbon Taxes Remains Devilishly Difficult
Let’s be clear, though. As if getting New York congestion pricing within inches of the goal line hasn’t been hard enough, enacting a national, i.e., federal carbon tax worthy of the name — one that hits triple digits within a half-dozen years or less — will be devilishly more difficult. Consider these differences between New York congestion pricing and national carbon taxing:
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- The economic incidence of NY congestion pricing is far more income-progressive than national carbon pricing. A bulwark of CP advocacy here has been unstinting support from the Community Service Society — the city’s and nation’s oldest antipoverty NGO. It’s hard to picture comparable support for nationwide carbon pricing. Not even “dividending” carbon revenues, which CTC strongly supports, can guarantee that millions of U.S. households won’t pay more in higher fuel costs than they’ll get back in monthly carbon dividends. Inevitably and unfortunately, some will slip through the dividend’s safety net, allowing opponents to cast even the most judicious revenue treatment for carbon taxing as insufficient to protect the poor.
- NY congestion pricing comes with a natural route for managing the congestion revenues: investing them in long-term mass transit improvements. It was this facet, more than the promise of lessened auto traffic, that brought the city’s rich tapestry of transit advocates into the fore of the congestion pricing campaign. Even motorists — some of them, anyway — grasp improved transit’s value to them as a means of dissuading others to invade “their” road space. National carbon pricing has no such obvious path for distributing or investing its revenues. Sure, spending carbon revenues on renewables and efficiency, particularly in historically disadvantaged communities, has a nice ring, but in practice there’s no clear carbon revenue spending path that won’t disaffect vast numbers of stakeholders. Now factor in the orders-of-magnitude difference in annual dollars — a billion or so in the case of NY congestion pricing vs. half-a-trillion for a comprehensive triple-digit U.S. carbon tax. Talk about a donnybrook gap!
- America’s geographic vastness and cultural separateness make it nearly impossible for citizens to consistently find common ground, as evidenced by our red-vs.-blue and urban-vs.-rural polarization. Even as New York City’s sense of conjoined fate has frayed somewhat, many residents still manage to cultivate a sense of connectedness to each other. Nationally, that ship has sailed. Woody Guthrie’s “This Land Is Your Land” anthem is 80 years old. Fond hopes from the 1990s or early 2000s that combating climate change might re-invigorate Americans’ shared humanity seem almost as distant.
Antidotes
To these three difficulties we have three antidotes.
The first is the power of carbon dividends. Even if they can’t keep whole every single low-income U.S. household — there are, after all, 65 million below-median-income families, each with its own consumption profile — the vast majority of those households will reap more in dividends than they’ll pay with the carbon tax. Not just that, the dividend approach bypasses political fights over where and how to invest the revenues.
A second possible antidote is the exigency of the climate crisis itself. Unlike NYC traffic congestion or failing transit, which public policies like congestion pricing can vanquish going forward, climate collapse can’t be reversed. This ineluctable fact could, or should, motivate climate advocates to re-evaluate their largely ideological objections to robust carbon pricing (which we discuss elsewhere in terms of climate justice campaigners and self-identified progressives). Given that people of color, whether in the U.S. or the Global South, are disproportionately vulnerable to climate chaos, hope remains that carbon-pricing opponents may reconsider their antipathy to the most efficacious policy for slashing emissions and actually protecting the populations they profess to care about.
The third, as always is organizing. Carbon-taxing proponents need to keep up the pressure. We also need to expand our tent, as we wrote about last month in Gainsharing: Carbon Taxes Can Put Clean Energy Back in the Black. We’ll have more to say soon on that score.
Gainsharing: Carbon Taxes Can Put Clean Energy Back in the Black
Note: This post distills and extends ideas from our Nov. 1 post, The Carbon-Tax Nimby Cure.
From the East Coast to Idaho’s high desert, big green-energy investments are foundering.
Just in the past week, Danish wind giant Orsted scuttled the 2,248-megawatt Ocean Wind farm it was developing off New Jersey’s Atlantic coast, while NuScale scrapped its planned 462-MW complex of six 77-MW small modular reactors (SMRs) near Idaho Falls.
Both ventures were viewed as door-openers to new forms of large-scale U.S. carbon-free green power. They would have contributed mightily to decarbonizing their respective grids, taking the place of fossil fuel electricity now spewing nearly 4 million metric tons of carbon dioxide each year.
Their demise, along with dimming prospects for Equinor’s 2,076-MW Empire Wind farm off Long Island, NY, suggest that the vaunted crossover point at which big green-energy investments will come seamlessly to fruition fast and hard enough to rapidly decarbonize our grids is receding.
The causes are no mystery: supply bottlenecks, spiraling materials costs, 40-year-high interest rates, Nimby obstruction. Not all of these will necessarily persist, but suddenly the combination looks daunting. Big energy projects, once derided as “brittle” by energy guru Amory Lovins, are rife with negative synergies. Nimbys stretch project schedules and impose punishing interest costs, particularly on big wind farms, a phenomenon we wrote about a week ago in The Carbon-Tax Nimby Cure.
Alas, Joe Biden’s Inflation Reduction Act is not a panacea. IRA incentives primarily lift EV’s, rooftop solar, heat pumps, batteries and factories. By themselves they’re not going to refloat stalled clean power projects. The big push will have to come from somewhere else.
What a Robust Carbon Price Could Do for Green Energy
A robust carbon price could do the trick. Not a token price like RGGI’s $15, which is the per-metric-ton (“tonne”) of CO2 value of the 4Q 2023 permit price in the northeast US Regional Greenhouse Gas Initiative electricity generation cap-and-trade program; but $50 or more per tonne of carbon dioxide, preferably $100.
I’ve been calculating how much profit a robust carbon price could inject into clean-energy bottom lines. The numbers are so astounding that I checked and rechecked them. Here’s one: A $100/tonne carbon price in NY would allow Empire Wind to charge an additional $200 million or more each year for its output. How? Because the tax would raise the “bid price” for natural gas-generated electricity, the dominant power source and thus the price-setter on the downstate grid by so much — $30 to $35 per MWh, I estimate — that Empire Wind’s 7.25 million MWh’s a year could extract an additional $240 million in its power purchase agreement with the NY grid operator.
Same goes for NuScale. I estimate that its Idaho SMRs could command an additional $100 million a year (less than for Empire Wind because the project is smaller and not all of its output will replace fossil fuels). This additional value equates to $29 per MWh — nearly the same, coincidentally, as the $31/MWh climb in costs since 2021 that triggered NuScale’s cancellation, according to a report by the anti-nuclear Institute for Energy Economics and Financial Analysis.
These added payments to clean-energy developers are not “subsidies.” They arise by slashing ongoing subsidies now enjoyed by fossil fuel providers and processors — in this case the methane-gas extractors and the electricity generators that burn the fuel — by subjecting these fuels to carbon pricing. The added payments will come about as the carbon price forces the gas generators to raise their sale price to the grid (to recoup their higher price to purchase the gas), which then creates room for Empire (or NuScale) to raise its prices.
Every cent of the carbon tax revenues will remain fully available for public purposes, whether to support low-income ratepayers, or invest in more clean energy or community remediation, or, our preference at CTC, as “dividend” checks to households. None of it needs to be earmarked to Empire or NuScale for them or other clean-power generators to rebuild their profit margins. The gainsharing comes about through pricing carbon emissions, not disbursing the carbon revenues.
Adios, Nimbys?
The Not In My Back Yard crowd wasn’t an apparent factor in NuScale’s downfall. (“Regulatory creep” was, but that’s a story for another time, not to mention one I dissected 40 years ago for the peer-reviewed journal Nuclear Safety.) But they certainly were for Ocean Wind in NJ and will be in NY if Empire Wind goes down the drain.
But here’s the thing: Not only would the added revenue allowed by the carbon price help return Empire Wind to the black. It would give Equinor, the developer, the wherewithal to spread so much largesse among the residents of Long Beach, LI (my hometown!) that they could subdue the Nimbys who have been able to hold up permitting by spreading scare stories about the routing of the project’s power cables underground. Nimby-ism solved, not by suasion (a fool’s errand) but by motivating the masses in the middle who evidently require more tangible inducements than saving the climate (or their beaches or homes).
Let’s Think Big
Ocean Wind, Empire Wind and NuScale are just a few examples of carbon-free projects that could again pencil out with robust carbon pricing. The question remains, how do we get there?
The point of this new analysis isn’t so much to tie clean energy to carbon pricing, but to enlist the political power and prestige of clean-energy entrepreneurs and developers on the side of carbon-tax advocacy.
As we noted in our previous (Nov. 1) post, during headier carbon-pricing times (2007 to 2011) the Carbon Tax Center attempted, alongside allies like Friends of the Earth, the Friends Committee on National Legislation, and Citizens Climate Lobby, to induce the American Wind Energy Association, the Solar Energy Industry Association and other green-tech trade groups to join us in advocating carbon taxing. We put out similar feelers to the Nuclear Energy Institute and the American Nuclear Energy Council. Getting the U.S. nuke lobby behind carbon taxing should have been a no-brainer, given that carbon taxes that monetized the climate value of nuclear power plants’ combustion-free electricity could have supplied mega-dollars to keep extant reactors solvent.
No dice. We weren’t granted even one conversation with the nuclear folks. The wind and solar people, for their part, insisted that unending cost reductions through increased scale and efficiency, along with green power’s inherent magical appeal, would propel them past any obstacle. Why besmirch our Randian aura with energy taxes, they seemed to say, when our tech is going to usher in energy abundance and spare earth’s climate?
Things look different now. Big, carbon-free power ventures — the ones that everyone from governors and ambassadors to scientists and schoolkids are counting on to get us off fossil fuels — are beset by troubles: financial, logistical, cultural.
Without genuine carbon pricing that accords clean energy the economic rewards to which it’s entitled, too many large-scale green energy projects are going to come up short. As we asked in that earlier post: Will clean-power developers look at this week’s NJ and Idaho losses, among others, and decide that they need a carbon tax every bit as much as the climate does?
The Carbon-Tax NIMBY Cure
NY Gov. Kathy Hochul last month vetoed a bill that could have expedited a huge wind farm in the Atlantic Ocean off Long Island. Her veto imperils not just the project, called Empire Wind, but New York State’s hopes to decarbonize its electric grid and validate its claim to national climate leadership.
I’ll argue here that a state or federal carbon price — one more substantial than the relative pittance of $15 per ton now being charged for electricity sector emissions under the RGGI compact — could have helped the developers beat back the NIMBYs whose rabble-rousing helped force Hochul’s hand. Let’s review the project and then explain how its difficulties are connected to the absence of robust carbon pricing.
Empire Wind Will Be Large
There will be 138 turbines, identical and gigantic. At 387 feet, each turbine blade will be the length of a football field including the end zones. The distance from water surface to blade tip at full height will be 886 feet, roughly the extent of two celebrated Manhattan towers that a century ago were the world’s tallest buildings: the 792-foot Woolworth Building (#1 from 1913 to 1930) and the 1,046-foot Chrysler Building (1930-1931). An even funner fact, from the developer’s spec sheet, is this: just one complete rotation by one turbine’s three blades will “power a New York home for about 1.5 days.”
The anticipated annual electrical generation from Empire Wind 1 and 2 combined is 7.25 TWh (or, if it’s easier, 7,250,000,000 kilowatt-hours),assuming a 40% yearly capacity factor. Here are four alternative ways of visualizing the significance of that output:
- Empire Wind’s 7.25 TWh is half again as great (i.e., 1.5x as large) as the entire production by New York State wind turbines in 2022 (that figure was 4.8 TWh);
- 7.25 TWh is 5 to 6 percent as great as all electricity generated from all state sources in 2022 (130.5 TWh);
- 7.25 TWh is one-sixtieth (1/60) as much as all U.S. wind-generated electricity last year (435 TWh), a figure that itself constituted a tenth of U.S. electricity production from all sources;
- 7.25 TWh is close to (12 percent less than) the average annual 2010-2019 output of either of the twin Indian Point reactors in suburban Westchester County that until their recent forced retirement were downstate New York’s lone large-scale source of carbon-free electricity. (The entire Indian Point station’s average annual output over its final decade, 2010-2019, was 16.5 TWh.)
Putting aside that last benchmark — which is intended as a reminder of the carbon disaster of shutting Indian Point (and a cautionary tale against shutting its West Coast doppelganger, Diablo Canyon) — Empire Wind looms large in New York state’s goal of attaining a 70 percent carbon-free grid in 2030.
The state’s 2022 carbon-free electricity share was just 48 to 49 percent, down from 60 percent in 2019, before Indian Point’s closure commenced. If Empire Wind’s output were available today, the statewide share would stand at 54 percent, indicating that this single (albeit two-part) project can close a quarter of the gap from the current clean percentage to the 2030 target.
Hochul and the NIMBYs
Along with infusing the grid with billions of clean kilowatt-hours, building and servicing Empire Wind 1 and 2 is expected to create 1,300 permanent onshore jobs — 300 to manufacture turbine components at the Port of Albany, and 1,000 in operation and maintenance at the South Brooklyn Marine Terminal, according to Equinor, the developer. These numbers, along with the clean electricity, ought to be catnip for any Democratic politician.
Why, then, did Hochul on Oct. 20 veto a bill that could have cleared the path for the Empire Wind 2 power cable to run under Long Beach and connect to the electric grid in Oceanside?
There’s no shortage of possible rationales. Long Island flipped from shaky blue to all red a year ago, as Democrats lost all four Congressional races and a number of state legislative seats while Hochul herself was outvoted there in her unnervingly close re-election. She may be seeking to preserve political capital for a possible renewed push to undo exclusionary zoning that that keeps housing in Nassau and Suffolk counties unaffordable for newcomers or those without generational wealth. Moreover, Empire Wind itself has faced financial headwinds due to supposed supply chain bottlenecks and spiraling financing costs, with the latter due in no small part to the regulatory delays.
Whatever the reasons, Hochul went all NIMBY-friendly. Her veto message faulted Equinor for running roughshod over Long Beach residents (see pull quote at left) rather than calling out the obstructionists for teeing up a replay of 2012’s Superstorm Sandy that devastated the very communities that now are clamoring for the wind project to go away.
In her message, the governor ignored the tinfoil-hat essence of most anti-wind opposition, which one observer, a former New York City chief climate policy advisor, characterized as combining “propaganda from the fossil fuel industry, rumor mongering in local communities, and basic nimbyism.” As NY Focus helpfully reported in Long Island Politicians Claim Victory for Hochul Wind Power Veto, objections to the Empire Wind farm and cables run the gamut from shopworn (ocean views sullied by turbines 15 miles offshore) to debunked (health-harming electromagnetic radiation from the power cables) to chronologically impaired (“We’ve had a huge number of [dead] whales that are showing up on our beaches,” a state senator fretted, yet not even a single offshore wind turbine has begun operating on the Atlantic Coast).
Hochul and her staff seem unaware that there is no placating NIMBYs, whether their sights are trained on giant offshore wind projects or small-bore items like transit-friendly higher-rise housing or bike lanes. To the naysayers, any palpable change in their way of life is either Armageddon in itself or a pathway to purgatory. The only way to deal with them is to give pro-development, pro-change forces the strength to vanquish the NIMBYs outright — which is where carbon pricing comes in.
Would You Like $240 Million in (Annual) Carbon Benefits With Your Order?
Offshore wind’s chief virtue — in some respects, its true raison d’être — is its ability to take the place of dirty, fossil-fuel electricity generation in the grid. This asset is particularly salient in the case of Empire Wind, insofar as the downstate New York grid, with only modest interconnections to greener grids upstate or elsewhere, obtains more than 90 percent of its annual electricity by burning methane (“natural”) gas.
As a result, nearly every kilowatt-hour from Empire Wind will directly displace a kWh from burning fracked gas. And though the 90% share will decline when the new Champlain-Hudson Power Express transmission line enters service, perhaps in 2026, nearly all of the “incremental,” hour-by-hour power production actually avoided by generation from Empire Wind will still be gas-fired when the project’s two parts come on line in 2028 and 2029.
Now picture a federal or state carbon tax — or “price” if you prefer. Set it at $100 per metric ton (“tonne”) of CO2, which is both a round number and the level the Carbon Tax Center has been advocating since our inception, to be reached after a ramp-up taking half-a-dozen years. Now apply the carbon tax to the CO2 emitted from one kWh generated by burning gas. You’ll find that the carbon tax associated with each such kilowatt-hour is 3.9 cents.
Calculations: 659 x 10^6 tonnes (CO2 emissions from 2022 U.S. gas-fired electricity) divided by 1.689 x 10^12 kWh (U.S. electricity generated with gas in 2022) multiplied by 10^4 ¢ charged per tonne yields 3.90¢/kWh.
Let’s bring that figure down to earth: With a $100/ton (okay, tonne) carbon tax, each gas-fired kWh in competition with Empire’s offshore wind would cost 3.9 cents more to generate than at present. (To keep the discussion simple, I’ve refrained from counting an additional tax on methane.) We trim that to 3.3¢/kWh because the Regional Greenhouse Gas Initiative (RGGI) already charges a carbon price on fuels used to generate electricity in New York and neighboring states; in the most recent (September) quarterly auction, that price reached $13.85 per short ton, equivalent to $15.25 per metric ton, which we deduct from our aspirational $100/tonne carbon price to avoid double-counting, reducing it by just over 15 percent.
The hypothetical 3.3¢/kWh additional carbon charge for gas-generated electricity (stemming from the $100 carbon price) multiplied by Empire Wind’s 7.25 TWh annual output yields $240 million per year. Those dollars represent a first estimate of the additional annual revenue Equinor could have sought in its 2018 and 2020 bids responding to NYSERDA’s solicitations to prospective developers of offshore wind projects. (See text box further below.) With a robust NY carbon price, in other words, Equinor’s Empire Wind venture would enjoy a far higher profit margin.
Offshore Wind’s Missing Carbon Price
Imagine what Equinor might have done with $240 million a year in additional Empire Wind revenue. It could have banked, say, half that amount to offset the price escalation and higher interest costs that this year lowered its prospective profit margins and compelled it to appeal to NY State to grant a higher price for its production. (Incidentally, the NY Public Service Commission’s Oct. 12 order denying Equinor’s petition seeking renegotiation of its power contract with NYSERDA provides a good capsule summary of NY state offshore wind activity; it can be found via this link; search for Cases 15-E-0302 and 18-E-0071.)
The other $120 million, or a good chunk of it, could have been used — and might still be — to provide economic benefits to Long Beach and other communities that consider themselves “affected” by Empire Wind’s turbines or cables.
As a thought-experiment, consider that $120 million distributed equally to Long Beach’s 11,700 households (assuming the city’s 35k population resides 3 per household) could provide recurring yearly dividends of around $10,000 per household, once the electricity began to flow. Perhaps more practical would be to set aside $75 million as a one-time payment to retire the so-called Haberman Judgment holding Long Beach financially responsible for blocking a proposed real-estate venture near the boardwalk and ocean beach several decades ago (see City of Long Beach 2023-2024 adopted budget, pages ii-iii).
Of course there are any number of other “improvements” that Long Beach, Island Park and Oceanside might elect to be funded by Equinor “payments in lieu of taxes.” I was surprised that Empire Wind’s online materials do not mention any such payments.
The idea is not to “win over” the NIMBYs — I consider that a fool’s errand — but to neutralize and politically overpower them by appealing to the larger community’s enlightened self-interest. Not so much the members of the Long Beach city council — who apparently (and astoundingly) went from 5-0 in favor of permitting the cable route to 0-5 between spring and fall of 2023 — but the citizenry that holds sway over them.
This isn’t my first time linking carbon pricing to big, hence potentially intrusive, green-energy projects. I struck that note in 2006, in Whither Wind, a long-form piece on wind and other green power for Orion magazine:
[I]if carbon fuels were taxed for their damage to the climate, wind power’s profit margins would widen, and surrounding communities could extract bigger tax revenues from wind farms. Then some of that bread upon the waters would indeed come back — in the form of a new high school, or land acquired for a nature preserve.
The urgency now is far greater. Today, as I was wrapping this post, the New York Times reported that the Danish offshore wind company Orsted canceled an equally large (2248 megawatts) wind farm, Ocean Wind 1 and 2, it was developing off New Jersey’s Atlantic coast. Orsted cited the same combination of faltering economics and local opposition (which of course weakens the economics further through delays) now besetting Equinor and Empire Wind. Note too that even though Empire Wind 1’s interconnection to the grid, also under the seabed but through Brooklyn, is not (now) threatened, the economics will almost certainly kill Part 1 if Empire Wind 2 through Long Beach goes down.
Long-time CTC followers will recall my standing frustration over wind and solar entrepreneurs’ lack of interest in pushing carbon pricing. Efficiency gains, cost reductions and the magical appeal of green power would carry them over any and every threshold, they imagined. Will today’s NJ offshore wind defeat and the one looming in NY be enough to convince clean-power developers that they need a carbon tax every bit as much as the climate does?
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