Search Results for: revenue

The growing movement for transparent carbon pricing to combat global warming reached a major milestone this week: Progressive Democrats of America, the nationwide grassroots voice for progressive values founded in 2004, has strongly endorsed direct carbon pricing to create incentives for a transition to renewable, low-carbon energy. PDA also advocates “recycling” substantial carbon revenues to households to counteract the potentially regressive effects of carbon pricing and to build long-term public support for carbon pricing

PDA played a key role in the Democratic Party’s surge in the 2006 mid-term elections, as well as in the Democrats’ 2008 victories. Its board includes prominent members of the Progressive Caucus as well as peace, labor and civil rights advocates. PDA says that it seeks to reclaim the Democratic Party as a voice for the people by educating, organizing, and lobbying within as well as outside the Party. Its statement follows:

Global Warming Policy Statement, adopted Oct. 19, 2009. (Footnotes omitted.)

No issue is more of a threat to civilization than the accelerating menace of catastrophic climate destabilization.  To avert this disaster, we must make a collective, long-term investment in a new energy infrastructure in order to protect the welfare of future generations.

Focus group research shows that the “…public has come to view clean energy as an immediate and long lasting economic driver,…something that is vitally important to the health of our economy.”  Scientists call for urgent action: “Continued growth of greenhouse gas emissions, for just another decade, practically eliminates the possibility of near-term return of atmospheric composition beneath the tipping level for catastrophic effects.”

PDA calls on the President and Congress to lead boldly in reducing our country’s oil dependence and use of fossil fuels by investing in walkable, bikeable communities, efficient public transportation, energy conservation technologies and alternative energy development, which all create good-paying and dependable jobs.

PDA supported 2008’s “climate principles letter” circulated in the House of Representatives.  To repeat and expand upon its goals, we agree that climate/energy legislation should meet these criteria:

1. Reduce greenhouse gas emissions on a long-term trajectory that will avoid the worst effects of global warming;

2. Transition the United States to an efficient, clean energy economy by putting a price on carbon that will guide investment and personal decisions on every level and lead the world with both incentives and example;

3. Recognize and minimize any adverse economic impacts from global warming legislation and build political support for a price on carbon pollution by “recycling” carbon pricing revenues directly to households; and

4. Aid communities and ecosystems vulnerable to harm from global warming.

To help achieve these goals, PDA supports revenue-neutral direct carbon pricing over carbon trading.

Direct carbon pricing:

1. Can push America toward an efficient, clean energy economy, and reduce greenhouse gas emissions on a long-term trajectory, by providing a gradually-increasing price on carbon pollution;
2. Can minimize adverse economic impacts of legislation by “recycling” a substantial portion of carbon revenue to households through a direct “carbon dividend” or a payroll tax reduction;
3. Can provide revenue to aid communities and ecosystems vulnerable to harm from global warming;
4. Reduces the need for complex and difficult-to-verify regulations and cannot be gamed in a multi-trillion dollar unregulated secondary energy trading market;
5. Eliminates offsets, which are difficult to measure and substantiate;
6. With WTO-sanctioned border tax adjustments would create immediate incentives for international implementation, as all countries have a taxing mechanism in place but few (if any) can manage a complex carbon trading system;
7. Can be set at levels to form the basis for international cooperation and treaties to reduce greenhouse gases to levels consistent with the findings of the IPCC; and
8. Would maintain the EPA’s authority to regulate carbon emissions.

The Carbon Tax Center welcomes PDA to the movement for a clear, simple, effective and fair carbon-pricing system as a key component of climate policy.

“If we can design a policy that is transparent and easy for people to understand, puts an effective price on carbon, and reimburses average Americans for all or nearly all of their increased energy costs, we have a chance to reverse climate change in a timely manner.” So concludes political scientist Elaine Kamarck, PhD, lecturer in public policy at the Kennedy School of Government, and former head of the national performance review “reinventing government” (1993-97) in the Clinton Administration.

Kamarck’s new paper, “Addressing Climate Change: The Politics of the Policy Options,” begins by reviewing three decades of evolving public consciousness about global warming. She reminds us that cap-and-trade didn’t start as the front runner. In his 1992 book “Earth in the Balance,” Al Gore proposed a carbon tax with revenue used to reduce other taxes, an approach backed by most economists and policy analysts. But two events changed this; the apparent success of the acid rain (SO2) cap-and-trade program written into the 1990 Clean Air Act, and the political failure of Clinton’s BTU tax.

Kamarck points out the key factors behind the success of the acid rain cap-and-trade program: only a few hundred sources had to be “capped,” SO2 scrubber technology was readily available, and deregulation of rail freight prices slashed the cost of western low-sulfur coal. She notes that these factors don’t apply to carbon emissions. Curbing CO2 will require a vast array of new technologies at both the energy production and user levels, along with widespread behavioral changes. Beyond the technology differences, the number of entities regulated in a carbon control system would be many times larger than for acid rain.

Kamarck concludes that policymakers have taken the wrong lesson from the failure of the BTU tax proposal. The measure was complex, for example, taxing gasoline at a higher rate than other fossil fuels without a clear rationale. Policymakers could not answer basic questions about its effect, specifically about its cost to consumers. Kamarck says politicians incorrectly concluded they couldn’t touch tax policy; in fact, we generally accept the idea of “sin” taxes, for example on cigarettes, as both good health policy and an appropriate way to generate revenue.

Complexity, exceptions and inability to demonstrate effectiveness are very serious political disadvantages of cap-and-trade that began to surface as the Lieberman-Warner bill failed in the Senate. Kamarck observes that these drawbacks are becoming even more glaring as the Waxman-Markey bill works its way through the legislative process. Whereas politicians must be able to answer constituents’ question What will this cost me?, the complexity of cap-and-trade invites opponents to make outrageous claims about the cost that are almost impossible to persuasively refute. Moreover, in the wake of the collapse of the financial system, the public is extremely wary of trading systems that appear capable of wreaking financial havoc.

The public is also properly skeptical about a policy whose effectiveness requires the rest of the world to follow suit. Since cap-and-trade systems depend on well-developed regulatory and enforcement systems that are far beyond the capacity of many governments, the prospects for an international system based on cap-and-trade are tenuous, Kamarck concludes. In contrast, most nations have a reasonably effective tax collection system that could be used to administer a carbon tax.

Under any carbon pricing system, revenue recycling is essential, Kamarck concludes, not just for the poorest quintile as Waxman-Markey provides, but for virtually everyone, in order to put the policy on a broad political footing. She refutes cap-and-trade architect Robert Stavins’ assertion that giveaways of allowances don’t affect the integrity or effectiveness of an emissions cap. She cites the European Union’s experience where emitters overestimated past emissions to garner more free allowances which led to a very loose cap. That, in turn, brought about virtually negligible carbon prices with virtually no effect on emissions. Indeed, investment in new coal-fired power plants has increased in the EU, a sign that investors expect carbon permit prices to remain low.

Don’t assume that Waxman-Markey can be made effective, fair and transparent enough to be enacted, Kamarck warns. She suggests we start now to work out an effective system under which we can answer the question How much will it cost? with enough certainty to win enactment. Her, and our “Plan B” is, of course, a revenue-neutral carbon tax which as she points out was the original “Plan A.”

A planetary crisis “threatening the young and unborn” compels a “substantial, gradually-increasing carbon tax with all revenue distributed directly as monthly ‘dividends’ to each household,” Dr. James Hansen told Congress today.

Hansen, director of NASA’s Goddard Institute for Space Studies and the unofficial dean of climate scientists, testified that measurements of Earth’s historical climate sensitivity to atmospheric CO2 make clear that rising levels are now driving our climate into ranges that will have lethal consequences. Current concentrations of 385 ppm amplify dangerous feedback mechanisms such as loss of reflective ice surfaces and release of methane gas from permafrost, he said. Atmospheric concentrations must be brought below 350 ppm as quickly as possible, Hansen stressed, specifically rejecting the target of 80% reductions by 2050 advocated by leading environmental groups.

Hansen testified at a House Ways & Means Committee hearing this morning, kicking off debate in Congress over legislation to help the U.S. achieve deep cuts in carbon emissions through a cap-and-trade system, a carbon tax, or perhaps a hybrid approach. Hansen and Union of Concerned Scientists geochemist Dr. Brenda Ekwurzel both testified in favor of vigorous action, although they differed on the cap vs. tax question. A third witness, University of Alabama professor John Christy, argued for a go-slow approach.

Hansen told the committee that a transparent carbon tax with direct dividend would “spur rapid replacement of our inefficient infrastructure” and lead to an “efficient phase-out of coal.” He strongly criticized cap-and-trade proposals, calling caps “hidden taxes,” contending that they would undermine essential price signals through price volatility while enriching traders and lobbyists at the expense of the public. He predicted that cap-and-trade could lead to "blackmail" by electricity suppliers, who would force the public to choose between meeting emissions targets and blackouts, and pointed out that the European Union’s cap-and-trade system has failed to reduce carbon emissions.

UCS’s Ekwurzel testified that acidification has already diminished the oceans’ ability to absorb more carbon dioxide — a development that will accelerate global warming. She advocated a “cap and invest” program in which emission permits are auctioned and the proceeds used to finance energy efficiency and renewable energy.

Christy’s appearance was sponsored by Republican members of Ways & Means. He testified that cloud effects outweigh human effects on climate, and contended further that any U.S. actions to reduce emissions would be overwhelmed by emissions from China and India, both of which have rejected carbon caps. He suggested that the best way to reduce CO2 emissions is a massive nuclear power construction program.

Committee Chairman Charles Rangel, who represents Manhattan’s Harlem neighborhood and parts of the Bronx, asked Hansen about the effects of a carbon tax on low-income households. Hansen explained that under his proposal to distribute 100% of carbon tax revenues to U.S. residents, a steadily increasing tax reaching $115 per ton of CO2 would result in estimated dividends of $9,000 per two-child household, assuming that adults got one “share” and each of the first two children got one-half. [Ed. note — Using CTC’s carbon tax impact model, we estimate that a $115/ton carbon tax would provide the average family of four with a $7,500 annual dividend.] Hansen noted that because households that use below-average amounts of fossil fuel would receive more in dividends than they paid in higher energy costs, his program would help the vast majority of middle- and lower-income Americans. Hansen also cited Congressional Budget Office findings that carbon taxes are five times as efficient as caps at reducing emissions.

UCS’s Ekwurzel argued that retrofitting homes and  transportation would be a better use of carbon cap revenue than direct dividends. However, she did not address whether “breaching” strict revenue-neutrality on behalf of energy efficiency and renewables might unleash a torrent of less benign uses of the cap or tax proceeds. For his part, Christy seconded Hansen’s view that a carbon tax would be  more transparent than a carbon cap-and-trade system.

Rep. Dave Camp (R-Mich.) and several other Republican members branded carbon caps as hidden taxes. They insisted that the Ways & Means Committee assert jurisdiction over any cap or carbon tax legislation.

Rep. Sander Levin (D-Mich.) responded to Christy’s testimony, saying “nobody is talking about the U.S. acting alone.” Hansen explained that the U.S. could use “average carbon content data” to set tariffs on goods from countries that didn’t enact their own carbon taxes. A U.S. tax with harmonizing tariffs would encourage trading partners to enact their own carbon taxes to negate tariffs and capture tax revenue themselves, he said.

Connecticut Democrat John Larson cited Friends of the Earth’s recent report describing carbon trading as potentially the world’s largest “dark, unregulated” derivatives market and asked why anyone should think that auctioning tradeable permits wouldn’t lead to “a speculative mess.”

During a recess in the hearing, Peter Barnes of Cap and Dividend and Mike Tidwell of Chesapeake Climate Action Network asked Hansen if he would support legislation to cap emissions and recycle revenue via a direct “dividend” to households. Hansen replied, "I don’t see what a cap gets you. We need maximum reductions as soon as possible and a tax gets that."

Committee members asked one cogent question after another. Rep. Jim McDermott (D-Wash.) focused on volatile prices under a cap, which he said would discourage clean energy entrepreneurs. Rep. Chris Van Hollen (D-Md.), a strong supporter of cap-and-dividend, asked about revenue-recycling, noting Hansen’s testimony that a carbon price will need to be high enough to affect behavior and purchasing decisions. Rep. Doggett noted that Exxon now supports a carbon tax after years of climate-change denial.

Hansen stressed the importance of a dividend to ensure continued political support as carbon prices rise. He urged Congress to direct the National Academy of Sciences to report on climate science as a way to end the debate over anthropogenic global warming once and for all. 

After the hearing, I had the good fortune to join Dr. Hansen for lunch. I asked him about clean coal. He said “there is no such thing as clean coal, and there never will be.”

Links to testimony
Hansen: http://waysandmeans.house.gov/hearings.asp?formmode=view&id=7577
Erwurzel: http://waysandmeans.house.gov/media/pdf/111/ekw.pdf
Christy: http://waysandmeans.house.gov/media/pdf/111/ctest.pdf

Photo: Flickr / World Development Movement.