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Happy New Year from the Carbon Tax Center!

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We established the Carbon Tax Center in January 2007. As we look back on our first year, we are thrilled by what we’ve accomplished.

CTC has established a reputation as the go-to web site for objective, non-partisan information on carbon taxes, with hundreds of hits almost every day. We have participated in conferences and debates in New York, Washington and Boston, we have appeared on national television, and we’ve been featured in newspapers, magazines and blogs. Congressional staff, academics, students and interested citizens of all stripes and from many countries have all turned to our site to get up to speed on a topic that is going to become increasingly vital as Congress and a new President grapple with reducing greenhouse gas emissions and limiting the damage from climate change.

peterbowers.jpgThe good news is two-fold. One, CTC has established a very solid foundation. Two, there is widespread support for revenue-neutral carbon taxes across the political spectrum from economists, business leaders, pundits and other opinion leaders. Just take a look at our Supporters page.

But we are not naïve. We know that powerful polluters who use the atmosphere as a free dumping ground are not going to give up that entitlement without a struggle. We know that cap-and-trade has well-connected advocates, many of them with a strong economic self-interest to favor their second-best alternative over carbon taxes. We know that carbon tax opponents have tremendous financial resources they will exploit to maintain their advantages.

And we are mindful that the “T” word is unpopular with politicians. Fortunately, awareness is growing that “putting a price on carbon” is an essential element of any successful strategy to significantly reduce greenhouse gas emissions. While debate continues over the two basic ways to put a price on carbon, a carbon tax or cap-and-trade, we remain convinced that the advantages of carbon taxes are becoming increasingly clear.

A legislated price on carbon is unlikely before a new Congress and President take office, providing time for careful examination of the relative merits of a carbon tax and cap-and-trade. We intend to use the time to frame the choice between an equitable revenue-neutral carbon tax and cap-and-trade schemes that provide huge windfalls to polluting industries and the financial community. This will help voters and elected officials grasp the huge benefits of the prompt reductions in greenhouse gas emissions that will result from an easily implemented revenue-neutral carbon tax, compared to the excruciatingly slow reductions that would result from the endlessly tendentious process of implementing a cap-and-trade scheme.

CTC intends to play a central role in the ongoing debate. To do so, we need your generous financial support. As you make your end-of-year contributions, please think of the Carbon Tax Center and click our Donate Now button or click here for instructions on making a contribution.

Thanks and Happy New Year!

Daniel Rosenblum
Charles Komanoff
Co-Directors

Photo: Peter Bowers / Flickr

Is Google Betting on a Carbon Tax?

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Google Inc. has a new project, Renewable Energy Cheaper Than Coal. Google is preparing to bet megabucks, mega-engineers and its cutting-edge reputation on its ability to propel solar thermal power, wind turbines and other renewable electricity up the innovation curve and under the cost of coal-fired power, Reuters reported Tuesday.

"Our goal is to produce one gigawatt [1,000 megawatts] of renewable energy capacity that is cheaper than coal. We are optimistic this can be done in years, not decades," said Larry Page, Google’s co-founder and president of products, according to Reuters.

To which we at the Carbon Tax Center say: Good luck, and don’t forget to hire the lobbyists. You’re going to need them to help win a carbon tax, ’cause without the tax, your goal of renewable energy cheaper than coal is likely to remain out of reach.

Don’t look to "market forces" to jack up the cost of coal-fired power. Unlike the 1970s, when the price of coal marched in lockstep with skyrocketing oil, coal prices are stuck in a proverbial peat bog. The national average coal price so far this year, $1.77 per million btu, is barely higher in nominal terms (and 40% less in real terms) than the 1982-1985 plateau of $1.65. The resource is abundant, mining technology is technically mature (if socially and ecologically devastating), and there’s barely a mine workers union to speak of. The power plants themselves are no harder to build, even with SOx and NOx scrubbers, than my kids’ Harry Potter lego’s, they just take a few years longer.

Coal-fired power isn’t about to get much more expensive by itself. Are renewables going to get much cheaper? Arguably not — at least not enough to win Google’s bet.

DOE_wind_power_cost_curve.jpgWhat about electricity from wind, my personal favorite energy-supply source and one for which I’ve done my share of advocacy? Wind power has gotten fabulously cheaper over the past two dozen years, as this DOE cost curve attests. But the rate of decline has slowed. Past advances — taller towers to capture higher wind speeds, larger blades to sweep larger areas, gearing to grab every available erg — appear pretty much tapped out. Further declines in wind costs will be incremental, not quantum. And to compete toe-to-toe with coal as baseload power, wind will need a support system of storage and transmission that will only add to its per-kWh cost.

Photovoltaics have more cost-cutting ahead but are starting from a much higher cost plane. I’m less up to speed on solar-thermal, but I suspect it sits somewhere between wind and PV — cheaper than PV now but with less scope for innovation. The bottom line, then, as I see it, is that coal will continue to undercut renewables in cost for the foreseeable future.

Unless a price is put on coal’s head.

An average kilowatt-hour from a coal-fired power plant sends 2 pounds of CO2 into the atmosphere. A megawatt-hour (1,000 kWh) puts up a ton. Charge $10 a ton of CO2 (or $37 a ton of carbon — precisely what we at the Carbon Tax Center recommend as the yearly increase in a phased-in tax) and you lift the price per coal-fired kilowatt-hour by one cent. If the gap between wind power (sans the federal Production Tax Credit) and coal power is conservatively put at 4 cents/kWh, then $40/ton of CO2 ought to give Google its Holy Grail.

There’s already a couple of carbon tax bills rattling around the House Ways & Means Committee. The Larson bill (that’s John B. Larson of Connecticut, a member of the Democratic leadership) calls for $15/ton of CO2 in starting in 2008, with the level increasing by 10% annually along with an additional inflation-offsetting adjustment. That could bring wind halfway to parity with coal in just a few years.

Hiring genius engineers and pouring Google’s coffers into renewables are terrific moves. But nothing beats getting the prices right. Earth to Google: start pulling for a carbon tax.

A Convenient Tax — Issue #3

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Welcome to the latest issue of CTC’s newsletter, A Convenient Tax, summarizing the Carbon Tax Center’s progress in advancing carbon taxes in the United States. (For Issue #2, click here.)

These are heady times for CTC. Each week, and sometimes every day, brings a major development in carbon pricing. Sometimes it has our fingerprints, and sometimes it’s a product of our work to establish a carbon tax as "the gold standard" way to put a price on carbon (as The New York Times quoted us last week).

In Just the Past Two Weeks …

New York’s Mayor Bloomberg delivered a powerful plea for a revenue-neutral carbon tax in a speech to the U.S. Conference of Mayors last Friday. Here’s the lede of The Times’ on-line account:

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

Echoing the Tax vs. Cap page on our Web site: Bloomberg noted that cap-and-trade is at risk from gaming, profiteering and volatility, while a straightforward carbon tax offers the essential attribute of price certainty. What is more, Bloomberg spoke as the former businessman he is:

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

By 10 a.m. last Friday, CTC’s blog had a link to the Times’ story, framing Bloomberg’s speech in terms of swelling political support for carbon taxing. Since then, AP, Reuters and Newsweek (in a cover story this week) have reported on Bloomberg’s carbon-tax call.

We can’t say whether the mayor took his cue from us, or the center-right American Enterprise Institute (which issued its own report in June backing carbon taxes), or from his own internal compass. But back in July, in a piece on Gristmill, we linked Bloomberg’s NYC congestion pricing initiative with carbon taxing. We also drew Rep. John Dingell’s attention to the parallels, during a conversation with him last month (see below).

The big development the previous week was President Nikolai Sarkozy’s promise to consider a French revenue-neutral carbon tax and his urging that Europe examine the option of a European levy on imports from non-carbon-taxing countries. Sarkozy’s pledge puts pressure on the United States to do the same, a point made by New York Times columnist Roger Cohen as President Sarkozy arrived in the U.S. this week for meetings with President Bush.

Next Week

Special Invitation to NYC-area readers: CTC co-director Dan Rosenblum will be featured at a NYC Bar Association "Tax vs. Cap" debate in mid-Manhattan next Tuesday morning, Nov. 13. Go here for location, time and registration.

Congressional Support Grows for a Carbon Tax

In our last newsletter we reported on carbon tax bills introduced by Representatives Stark (D-CA) and Larson (D-CT). The two have now joined forces, with Rep. Stark and eight other members co-sponsoring the Larson bill. (Our Bills page has a list of the 10 sponsors and a summary of both bills.)

We stopped by Rep. Larson’s office recently in Washington and were deeply impressed with his staff’s and Mr. Larson’s commitment to a carbon tax. The news that Rep. Larson, the fifth highest member of the Democratic House leadership, will be participating in the United Nations Climate Change Conference in Bali next month is also heartening.

Eclipsing this, however, is the hybrid carbon tax proposal floated by the venerable John Dingell, a member of the House of Representatives since 1955 and long-time chair of its Commerce & Energy Committee. Rep. Dingell’s staff reached out to us in late June for help estimating the carbon, petroleum and revenue impacts of a carbon tax that also included a surcharge on gasoline and jet fuel. Over the ensuing three months we refined our tax impact model (see below) and ran at least a dozen scenarios, which we discussed with his staff in a stream of telephone discussions and e-mails.

When Mr. Dingell released his proposal on the evening of Sept. 26, we were ready with a blog post on both our Web site and Gristmill, branding the idea a "hybrid carbon tax," praising Dingell’s vision, and quantifying the impacts. We’ve also taken the fight to those of our fellow environmentalists who have let their battles with Dingell over car mileage standards blind them to what Dingell calls The Power in the Carbon Tax. (For the record, we strongly support tougher CAFÉ standards but we regard the hybrid carbon tax as an even bigger breakthrough.) Mr. Dingell expressed his gratitude in a phone call last month. (Click here to participate in a public poll on Dingell’s hybrid carbon tax on his Web site.)

Needless to say, a carbon tax bill won’t pass Congress until 2009 at the earliest — public education is needed non-stop until the White House and Congress resolve to make carbon pricing a central element in climate policy. CTC is laying the intellectual and political foundation now for action in 2009.

Carbon Tax Research — National and State

Seeking out and advancing knowledge about carbon taxes is a big part of our mission. To analyze Rep. Dingell’s draft proposals, we scaled up our state-level carbon tax spreadsheet into a national 4-Sector Model — so-called because it disaggregates the U.S. carbon economy into four discrete pieces (electricity, automobiles, airlines and "other"). The model now encompasses the entire U.S. and includes the capability to model a supplemental tax on petroleum products (gasoline and jet fuel, in this case). Advocates and legislative staff in Colorado, Washington State, Oregon, California and Minnesota are currently using it to estimate impacts of state-level carbon taxes.

Much is still to be done on the modeling front. Our next steps are to incorporate "upstream" carbon costs in fuel prices and to reconcile our more-conservative model results with the "bigger bang" predicted by carbon tax supporters at the American Enterprise Institute and several resource think-tanks. We’re also stepping up our cataloging of carbon pricing research. Work at universities and think tanks is proliferating, and we want to establish CTC as the foremost English-language clearinghouse.

Media Continue to Rely on the Carbon Tax Center

Maybe it’s our revamped Web site. Or maybe carbon taxing is moving into the mainstream. Or both. CTC has been in the news a lot lately. Some recent highlights: mentions in two separate on-line New York Times articles on the same day (Friday, Nov. 2), in the news story reporting on Mayor Bloomberg’s carbon-tax address in Seattle, and in an analytical piece, The Real Climate Debate: To Cap or to Tax? • publication of a feature story on carbon taxes in Tikkun magazine • mentions in Conde Nast’s Portfolio.com, Forbes.com, the Minneapolis Star-Tribune and literally hundreds of environmental and climate blogs. • We maintained our standing as the leading site on Google for those searching "carbon tax." • Our Web site continues to receive over 500 visits each week.

Going Forward

The next eighteen months are shaping up as the period in which competing policies to reduce carbon emissions will be examined for their effectiveness, cost and political viability.

CTC’s strategic goal continues to be to shape that debate and properly frame the issues by working with environmental organizations and other allies to solidify support for the concept of putting a price on carbon, while educating and inspiring opinion leaders, grassroots organizations and decision-makers to go for the "gold standard" of carbon taxes rather than settling for the less predictable, less transparent, less universal and less equitable cap-and-trade approach.

As The Times noted last week:

"Making the price predictable is the most significant move you can make to control global warming," says Charles Komanoff, a long-time environmental economist who [with Dan Rosenblum] has recently started the Carbon Tax Center as an advocacy group. "It would tilt literally billions of energy critical decisions toward using less carbon."

If you agree, please help us as we develop the intellectual ammunition, provide technical assistance, assist local, state and federal carbon tax initiatives, energize a broad coalition of interest groups, and mobilize public support for fair and effective carbon taxes.

CTC is proving its effectiveness daily. To continue playing our essential role, we need your financial help. We gratefully thank all of you who have already donated to CTC. We ask carbon tax supporters who are not yet CTC contributors to become so today.

You can contribute to CTC in three ways, of which two are tax-deductible:

  • Tax-deductible:

Write a check or money order to ELPC (Environmental Law & Policy Center), writing Carbon Tax Center in the memo line; mail it to ELPC at 35 East Wacker Drive, Suite 1300, Chicago, IL 60601. ELPC is CTC’s fiscal sponsor.

  • Tax-deductible:

Make an on-line contribution via Groundspring by clicking on the DONATE NOW box on our website, www.carbontax.org.

  • Not deductible:

Write a check or money order to Carbon Tax Center and send it to our New York City mailing address: CTC, 636 Broadway, Room 602, New York, NY 10012.

Please be as generous as you can, and please donate today. Thank you.

Sincerely,

Charles Komanoff
Daniel W. Rosenblum

Bloomberg to Urge U.S. Carbon Tax

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The congestion charge puts our money where our mouth is.

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

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

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

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

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

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

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

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

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

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

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

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

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

Photo: National 911 Memorial / Flickr.

Valuing the Commons: Congestion Pricing's Hidden Payoff

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

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

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

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

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

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

The congestion charge puts our money where our mouth is.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Photo: SkyShaper / Flickr

Who is Daniel Sperling and why is he saying bad things about carbon taxes?

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Yesterday’s Los Angeles Times ran an odd op-ed calling carbon taxes an ineffectual antidote to global warming. Unlike other critiques that brand carbon taxes as politically unpalatable, this one argued that they’re simply not up to the job of cutting carbon emissions:

“Carbon taxes — taxes on energy sources that emit carbon dioxide (CO2) — aren’t a bad idea. But they only work in some situations. Specifically, they do not work in the transportation sector, the source of a whopping 40% of California’s greenhouse gas emissions (and a third of U.S. emissions).”

I’ve known Daniel Sperling, the author of the op-ed, for decades. As the long-time director of the Institute of Transportation Studies at UC-Davis, Dan probably knows as much about automotive engineering as anyone in the world. What’s more, he’s conscientious, tireless and concerned.

gas_gauge.jpgSo why do I think he’s wrong about carbon taxes? Actually, Dan is part right, but his message is wrong. Let me explain.

It’s been clear for awhile that carbon taxes won’t make a huge dent in carbon emissions from gasoline — relative to their impact on the biggest source of U.S. carbon dioxide: coal-fired electricity generation. There are three reasons:

  • Gasoline has less carbon per btu than coal.
  • Engines make better use of their btu’s than do power plants.
  • Americans are less behaviorally sensitive to higher prices for gas than for electricity.

When we ran the numbers here at the Carbon Tax Center, we found out just how much gasoline would underperform while electricity overachieved under a level carbon tax. Using Colorado as a test case, we estimate that a statewide carbon tax would draw 60% of all of its carbon reductions from the electricity sector (which is responsible for 42-43% of that state’s CO2), but only 10% from gasoline (which accounts for 20% of emissions).

So we agree with Dan on some key facts. But we think he’s let his natural pessimism about price incentives (he’s an engineer, after all) run a bit amok.

For one thing, the low (10% or less) price-sensitivity for gasoline Dan cites (from his own UC-Davis study) is short-run only. The long-run price-elasticity of gasoline demand is invariably much higher since it can reflect long-term investment decisions — by households in buying more efficient vehicles, by automakers in designing and producing them, and by everyone in making location decisions that reduce driving.

Two widely respected transportation economists at UC Irvine, Ken Small and Kurt Van Dender, looked at pretty much the same gasoline data as Dan and observed the same low (under 10%) short-run price-elasticity. Unsurprisingly but importantly, Small and Van Dender found gasoline’s long-run price-elasticity to be much higher, approximately 40%.

Using that figure, and making assumptions similar to Sperling’s about the potential for substituting lower-carbon fuels, we find that a ramped-up carbon tax that increased the price of gas 10 cents a gallon every year for a decade would reduce CO2 emissions from motor vehicles further and faster than the Low-Carbon Fuels Standard Sperling touts in his op-ed.

Again using Colorado as a test case, the same carbon tax would eliminate more than five times as much CO2 in the electricity sector and almost three times as much in “other” sectors (trucking, space heating, aviation, etc.). Indeed, that tax, which in carbon terms tacks on a charge of $37 per ton (or $10 per ton of CO2) each year for 10 years, would lop off almost 40% from that state’s carbon emissions by 2020. And the revenue stream would be enormous — enough to permit the legislature to zero out the widely disliked state Sales Tax and Business Personal Property Tax by the fifth year, even while providing generous per-resident and per-employee rebates, supplementing the federal Earned Income Tax Credit to assist low-income families, and financing targeted investment in energy efficiency and renewable energy.

We’ll grant the point made by Dan (or the Times’ editors) at the top of his piece: Taxes on CO2 emissions alone won’t get us where we need to go. We’ll need judicious and creative incentives and regulations in addition to a carbon tax, and the Low-Carbon Fuel Standard that Dan is helping advance in California fits that bill. But let’s stop the nay-saying over carbon taxes. They’re the powerful tailwind America needs to get our carbon emissions down equitably, efficiently and immediately.

Photo: Tony.Gonzalez’s photostream (Flickr)

A Convenient Tax — Issue #2

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Welcome to the second issue of A Convenient Tax, the Carbon Tax Center’s newsletter, summarizing our progress in April and May. (For Issue #1, click here.)

The big carbon-tax developments this spring have been (i) the first overt expressions of Congressional support for a carbon tax, (ii) a torrent of criticism of the competing “cap-and-trade” approach by editorial writers and other opinion leaders, and (iii) a significant increase in CTC’s visibility on the national stage.

Congressional Support for a Carbon Tax

Two milestones were reached in the national political arena in April.

First, California Democrat Fortney “Pete” Stark, the second-most senior member of the House Ways & Means Committee, introduced the first carbon-tax bill in Congress in a generation. The Save Our Climate Act, filed on April 26 and co-sponsored by Rep. Jim McDermott (D-Wash.), would impose a $10 per ton (of carbon) charge on coal, petroleum and natural gas when the fuel is either extracted or imported. The charge would increase by $10 every year until U.S. carbon dioxide emissions have dropped 80 percent from 1990.

Prior to introducing the Save Our Climate Act, Rep. Stark’s staff reached out to CTC for guidance on carbon tax administrative and technical issues, as well as the optimal tax level, While the tax rate in the bill is several times less than what CTC is urging, we support it as an essential first step in the long legislative process, especially since the ramped-up tax in future years would tip millions of future carbon-critical decisions in land use, manufacturing and household purchasing toward carbon-conserving alternatives.

How quickly the Stark bill receives a hearing will depend on both the national political climate and the interest shown by other Ways & Means members. CTC has met with staff for other Committee members, as well as for Reps. McDermott and Stark, to review fine points and to convey the message that support for carbon taxing is growing in the grass roots.

In the other political milestone, Sen. Chris Dodd has built a strong carbon tax plank into his presidential election platform. Sen. Dodd, a Democrat who has represented Connecticut in the Senate since 1980, is making a Corporate Carbon Tax the centerpiece of his plan to eliminate 80% of U.S. greenhouse gas emissions by 2050.

“I don’t know how we can possibly talk about honestly getting to the [carbon] number we need to get to if you’re going to just dance around [the tax],” Dodd said as he campaigned in New Hampshire in April. “Price is the last real barrier.” Sen. Dodd has forthrightly put a carbon tax on the home page of his campaign Web site. In fact, on May 31 Sen. Dodd released a new television ad to run in Iowa and New Hampshire that promotes what he refers to as “a courageous corporate carbon tax to transform American industry.” CTC regards the senator’s corporate carbon tax as a lead-in to a universal carbon tax that can propagate incentives for carbon reductions throughout our economy.

Editorial Writers Back Tax, Take Whacks at Cap-and-Trade

When we two (Charles & Dan) resolved last fall to form the Carbon Tax Center, we looked forward to tangling with anti-tax ideologues on the Right and advocates of state intervention on the Left, not to mention Flat-Earthers who deny climate change altogether. We never anticipated that we would be debating with our friends and allies in the environmental community, but that became inevitable when, just before we launched announced the CTC, four large environmental organizations teamed up with major corporations to back carbon cap-and-trade regimes through the U.S. Climate Action Partnership.

CTC has no quarrel with the notion of tradeable emission allowances. In fact we credit the sulfur dioxide permit program enacted as part of the 1990 Clean Air Act Amendments with helping drive down acid rain emissions from power generation. But the scale and complexity of the carbon problem positively dwarf those of sulfur. (Block That Metaphor Department? We have likened the disparity to the difference between a French mud hut and the Palace of Versailles, in an article in Gristmill; and to the difference between a Mozart sonata and a Wagnerian opera, in an invited
post on the on-line Portfolio magazine.) Our fear is that with so many billions at stake, any carbon cap-and-trade program will necessarily be beset by crippling delays, inside-dealing and favoritism run wild. The result will be to disgust and disillusion the American public so that it turns against putting a price on carbon emissions altogether.

On this score, CTC finds itself in fine company. In just the past two months, outspoken criticisms of carbon cap-and-trade proposals have been published in Reason magazine, the Financial Times (U.K.), the Los Angeles Times, and the New York Times Science Section “TierneyLab” blog, to name just a handful. Of critical importance, each piece has been effusive in its support of a carbon tax. As we were posting this newsletter, the right-of-center American Enterprise Institute weighed in with an extraordinarily cogent report comparing a carbon tax with cap-and-trade that unambiguously backs carbon taxing as “the superior policy option.”

These testimonials are collected on our Supporters and Tax vs. Cap pages. The L.A. Times editorial is especially noteworthy. The sole editorial in the May 28 (Sunday) edition, the 1,600-word Time To Tax Carbon made as resounding a case for a carbon tax – both in preference to cap-and-trade and for its capacity to stimulate carbon-reducing investment and innovation – as we’ve seen. Here’s one passage:

A carbon tax simply imposes a tax for polluting based on the amount emitted, thus encouraging polluters to clean up and entrepreneurs to come up with alternatives. The tax is constant and predictable. It doesn’t require the creation of a new energy trading market, and it can be collected by existing state and federal agencies. It’s straightforward and much harder to manipulate by special interests than the politicized process of allocating carbon credits.

Reading manifestos like this, it’s hard to resist the feeling that a shift is underway from cap-and-trade to a carbon tax. Indeed, a few days after the L.A. Times ran its editorial, an editor at a popular environmental blog wrote to say:

It’s been a slow process of education for me. What brought me around to my pro-tax position is, ironically, my libertarian streak. The essential libertarian insight is that complexity and bureaucracy are invitations to corruption. Big business will try their best to game the system. We know that. Politicians will be subject to lobbying and financial support. We know that. So the best route is the one that minimizes complexity and bureaucracy.

Since the biggest rap against a carbon tax has been its lack of popular support, “conversions” to the carbon tax camp such as that above could have a snowball effect, as each new adherent makes success more plausible. Part of our job at the Carbon Tax Center is to help the world see how rapidly the snowball is growing. We hope to have more to report in future newsletters.

CTC’s Visibility Continues to Grow

  • CTC co-director Dan Rosenblum appeared on the Newshour with Jim Lehrer – a substantive interview enabling Dan to make the case for a carbon tax to an aware nationwide audience. Click here to see the interview.
  • Articles by CTC co-director Charles Komanoff in Gristmill,
    Common Dreams, and Conde Nast’s Portfolio.com,
    along with quotes in the New York Times and the Detroit Free Press.
  • We surpassed Wikipedia to become the leading site on Google for those searching “carbon tax.” CTC’s Web site, www.carbontax.org continues to
    receive almost 1,000 visits each week from across the USA as well as Canada, Europe, Asia and Australia.

Other CTC Highlights from April and May:

We are continuing to provide technical and logistical support to advocates organizing for state-level carbon taxes in Colorado, Washington State, New York State and California. We have greatly improved our state-level spreadsheet model for estimating the CO2 reductions and revenue generation from different levels of carbon taxes. The model now allows for time lags in demand response, and it reflects supply-side incentives (toward lower-carbon fuels and power generation) as well as demand-side conservation. We hope to “grow” the model to the national level and post it on our Web site soon.

Going Forward

The next two years
will be the crucial period during which competing policies to reduce carbon emissions will be examined for their effectiveness, cost and political viability. CTC’s strategic goals focus on shaping that debate and properly framing the issues by:

  • Working with environmental organizations and other allies to solidify support for the concept of “putting a price on carbon.”
  • Educating opinion leaders, grassroots organizations and decision-makers that while cap-and-trade is also a vehicle to put a price on carbon, carbon taxes are far superior because they provide a more predictable and less volatile price and are transparent, immediate, universal and equitable.

We anticipate engaging in these activities during 2007-2008:

  • Continuing to develop intellectual ammunition on key issues including revenue recycling, tax equity, “co-benefits” of a carbon tax (e.g., for national security), and the potential “bang” for each carbon tax “buck.”
  • Providing technical assistance to opinion leaders, grassroots organizations and decision-makers, including
    responding to requests for technical information from political campaigns.
  • Assisting local and state-level carbon tax initiatives.
  • Spearheading a sign-on statement by economists and other experts calling a tax on carbon emissions more effective, transparent and equitable than a carbon cap-and-trade regime.
  • Working with a broad coalition of interest groups (labor, environmental, economic justice, national security, etc.) to support carbon taxes through a national sign-on statement and other actions.

It’s clear that CTC is proving its effectiveness every day. But we can’t continue to play our essential role without your financial help. We heartily thank those of you who have already donated to CTC. We ask carbon tax supporters who are not yet
CTC contributors to become so today.

You can contribute to CTC in three ways, of which two are tax-deductible:

  • Tax-deductible:
    Write a check or money order to ELPC (Environmental Law & Policy Center), writing Carbon Tax Center in the memo line; mail it to ELPC at 35 East Wacker Drive, Suite 1300, Chicago, IL 60601. ELPC is CTC’s fiscal sponsor.
  • Tax-deductible :
    Make an on-line contribution via Groundspring by clicking on the DONATE NOW box on our website, www.carbontax.org.
  • Not deductible:
    Write a check or money order to Carbon Tax Center and send it to our New York City mailing address: CTC,
    636 Broadway, Room 602, New York, NY 10012.

Just as a carbon tax now will send climate-appropriate price signals to businesses and individuals and help lock in low-carbon investment for the long haul, your financial support today will enable CTC to build on our current successes and
chart a growth trajectory. Please be as generous as you can, and please donate today. Thank you.

Sincerely,

Charles Komanoff
Daniel W. Rosenblum

Is Cap-and-Trade Big Green’s Dead-End?

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When we resolved late last year to create the Carbon Tax Center, we thought our big battles would be fought with climate-crisis deniers, plus occasional skirmishes with doctrinaire leftists decrying attempts to graft carbon taxes onto an unjust social and economic structure. Little did we dream that our most contentious disputes would be with fellow environmentalists who had made up their minds that carbon taxing is a political no-sale and that cap-and-trade is the only feasible way to put a price on carbon emissions. (For background on carbon tax v. cap-and-trade see our issue paper on the subject.)

So it’s with some surprise and dismay that we find ourselves debating “tax vs. cap” with the most outspoken Big-Green member of the U.S. Climate Action Partnership, Environmental Defense. The latest round, in May, has played out in the electronic pages of Gristmill. Here in chronological order are

We welcome your comments.

— Charles Komanoff, Dan Rosenblum

Strange Bedfellows in Climate Politics

by Charles Komanoff

Did lefty pundit Alexander Cockburn and corporate behemoth General Motors secretly agree to swap climate positions?

It looks that way. GM, swallowing hard, recently joined the U.S. Climate Action Partnership, the elite enviro-business coalition pushing cap-and-trade — a so-called “market-based system” for controlling carbon dioxide emissions. Meanwhile, the famously acidic Cockburn lacerated global warming orthodoxy in his column in the Nation magazine, deriding it as a “fearmongers’ catechism [of] crackpot theories” ginned up by “grant-guzzling climate careerists” and opportunistic politicians looking to ride the greenhouse “threatosphere” all the way to the White House. (Whew!)

But there’s less here than meets the eye. For as the inconvenient details of cap-and-trade schemes start to surface, USCAP is looking less and less like a CO2 control lobby and more like a corporate club seeking to cash in on the rising clamor against free carbon spewing. And Cockburn, it turns out, has been raining on the climate crisis parade for years.

Let’s dispense with Cockburn first. His Nation column is infested with nakedly inverted syllogisms, such as: Al Gore is alarmed by global warming, but Al Gore backed nuclear power as a congressman, ergo alarm over global warming is a ruse to push nukes. Or, The New York Times is alarmed by global warming, but The New York Times whitewashed the Bush Administration’s Iraq WMD lies, ergo alarm over global warming is a lie.

But Gore and the Times are easy targets. The heavyweight in the room is the international climate-science community. To take them down, Cockburn disingenuously recycled a charge by Science magazine’s global warming reporter, Richard Kerr, that “climate modelers have been ‘cheating’ for so long it’s almost become respectable.” It’s yet more illogic: Climate modelers cheat, which makes climate models part and parcel of the “reflexive squawk of the greenhouse fearmongers,” which makes global warming a hoax.

Worse, in the time scale of climate modeling, that “cheating” remark Cockburn lifted is positively ancient. It’s the lead from a May 16, 1997 Science article by Kerr heralding the first climate model to replicate actual climate records without fudge factors, developed at the National Center for Atmospheric Research. And much as the first four-minute mile back in the 1950s unleashed a torrent of sub-four-minute miles, NCAR’s breakthrough triggered a tidal wave of modeling progress that has largely done away with the fudge factors, along with the yawning error bars that surrounded the old forecasts. Twenty-three different models, all unfudged, support the terrifying new finding from the Intergovernmental Panel on Climate Change that the current trajectory toward doubled CO2 levels will raise the mean global temperature above the pre-industrial level by six-and-a-half degrees Fahrenheit, give or take a mere degree.

No doubt Cockburn would deride this forecast as “hysteria” propounded by IPCC “functionaries and grant farmers.” But perhaps it’s time for Alex to take playwright Harold Pinter’s advice to Bush to “look in the mirror chum.” After all, this is the same Cockburn who, in a nutty 2005 paean to his “aging fleet of 50s and 60s era Chryslers” provocatively titled “The Virtues of Gas Guzzling,” proclaimed: “I don’t believe in any effective role of man-made CO2 in global warming, a natural cyclical trend.” Cockburn then dug his hole deeper, writing that oil itself “doesn’t come from dead dinosaurs and kindred organic matter [but] is a renewable, primordial soup continually manufactured by the Earth under ultrahot conditions and tremendous pressures.” Earth to Alex: where does contrarianism end and madness begin?

But if Cockburn pretty much begs to be dismissed, the boys at the U.S. Climate Action Partnership are sober as pinstripes. From Shell to DuPont, from GE and now GM to the Natural Resources Defense Council and Environmental Defense, the 27-member USCAP is mustering a high-octane campaign (some would call it a stampede) to re-fashion the holy grail of climate protection — attaching a stiff price to carbon pollution — as an emissions-trading poker table with a billion-dollar minimum. Thanks in large part to USCAP, a half-dozen carbon cap-and-trade bills are circulating in Congress, and the A-list of Washington carbon-trading acolytes includes House Speaker Pelosi and Senators (and presidential contenders) McCain, Obama, and Clinton.

Yet cap-and-trade seems a curiously unpromising way to put a price on carbon. Making fossil fuels cost more portends a radical overhaul of the American way of life: people will drive and fly less, industries will rise and fall, cities will redevelop and suburbs will stop sprawling. To make that transition requires a pricing mechanism that’s simple, transparent, and equitable. A straightforward, ecumenical carbon tax meets that standard; devilishly complex cap-and-trade does not. The old Hollywood maxim that a story line can’t exceed 25 words should disqualify cap-and-trade systems from the get-go. And as Americans get wind of the legions of legal and financial functionaries swarming around carbon trading, they’ll likely feel disillusioned if not hoodwinked — and ripe for a reversion to unfettered carbon-burning.

There’s no mystery to General Electric’s and General Motors’ embrace of cap-and-trade. Daily, the climate handwriting on the wall grows clearer, and corporate America knows it’s only a matter of time before it is made to pay for using — and making products that require consumers to use — climate-altering fossil fuels. And unlike a carbon tax, which would resist gaming and could be started quickly, a cap-and-trade system would take years to formulate as powerful interests carved up the revenue pie.

Moreover, that revenue pie — a concomitant of “putting a price on carbon” — will eventually total hundreds of billions of dollars a year. Yes, the carbon price has to be high to internalize the costs of climate damage and for renewable solar and wind power and energy efficiency to be in position to displace and ultimately eliminate fossil fuels. Under a carbon tax, those revenues would be known in advance and could be dedicated to public purposes such as progressive tax-shifting and transition support for affected communities. In contrast, the costs of cap-and-trade systems are likely to become a hidden (and regressive) tax as dollars flow to market participants.

The more interesting question is why some big environmental groups are pushing carbon cap-and-trade. One reason is precedent: Environmental Defense conceived emissions trading in the 1980s and spent years convincing utilities and Congress to make it the vehicle for cutting acid rain pollutants (though in truth that “market” bears as much resemblance to a carbon market as did a French mud hut to the Palace of Versailles). In addition, at the time the green groups were laying the groundwork for USCAP — before Gore’s movie and before the Republicans lost their hold on Congress — the more politically dicey carbon tax alternative may have appeared out of reach. Settling for cap-and-trade may have seemed more sensible than vying for a carbon tax and coming away empty-handed.

Of course, there’s nothing to stop the “green” members of USCAP from pointing to the new facts on the ground and throwing in with the smaller but fast-growing carbon tax forces. No one should hold their breath, however. NRDC, ED, and their partners have invested too much institutional capital in building bridges to big business.

Dig deeper, moreover, and a harder truth emerges. NRDC and ED have gotten very skilled — and grown very prosperous — at cutting deals. What began benignly 20 years ago, with the groups persuading utility regulators to fund innovative energy-efficiency programs, appears to have mushroomed into a perceived entitlement to speak for environmentally concerned citizens, meaning most of us, while being accountable only to their own trustees.

This top-down style, in which “the ways that work,” to borrow ED’s slogan, are formulated in private and presented to the community as a fait accompli, won’t do with something as momentous as putting a price on U.S. carbon emissions. The stakes are too high in both dollars and lives for the environmental position to be decided by a handful of green groups, no matter how accomplished or well-meaning. The path to carbon pricing must be debated and ratified in the open, not negotiated in certified-green offices.

Cockburn knows this. Hell, it was Counterpunch’s reporting on those backroom utility deregulation deals in the 1990s that helped alert advocates like me to Big Enviro’s aversion to the democratic process. C’mon Alex, dump the ‘59 Imperial and the climate crisis conspiracy theorizing. You needn’t enlist with the Carbon Tax Center, but the members-only push for cap-and-trade is a worthy target. Load up and let ‘er rip.

Charles Komanoff, an economist and environmental activist, co-founded the Carbon Tax Center earlier this year.

Response from Environmental Defense: Top-down or bottom-up, the goal is cutting carbon

The following is a guest essay from Tony Kreindler of Environmental Defense, in response to Charles Komanoff’s post from earlier today, “Strange bedfellows in climate politics.”

—–

Charles Komanoff’s post is entertaining, but a lot of what he says is wrong. His main proposition is that unlike “devilishly complex” cap-and-trade, a carbon tax is straightforward approach that will resist gaming by special interests. That raises a few questions: is there anything straightforward about the U.S. tax code? Has anyone ever gamed that system? Are there “no legal and financial functionaries” swarming around taxpayers?

Those questions aside, the fact is that a cap is the only way to guarantee the emissions cuts scientists say we need to avert the worst impacts of climate change. No one knows what level of carbon tax will produce what level of emissions cuts — and the science is pretty clear that we need to cut emissions by 80% from current levels by mid-century or we’re in trouble. Guess wrong on a tax and we’re all co-starring in a big-budget disaster movie.

Finally, a carbon cap can pass Congress and a tax can’t, so if we agree climate change is extremely urgent, we don’t have time to waste. Which brings us to the big corporations in USCAP. I’m sure they’ve all got a mix of reasons for pushing strong action on climate, but their motivations aren’t important — getting something passed into law is. There’s little doubt that the USCAP companies can help us get something passed.

Komanoff is worried about the process; we’re worried about cutting carbon emissions enough to avert a real environmental, economic, and human disaster. Top-down, side-to-side, stand-on-our-heads-till-we’re-blue — however it happens, the important thing is getting it done.

Rejoinder to Environmental Defense: Cap-and-Trade Is Looking Like Duck-and-Cover

Can any of ED’s three main points
stand up to scrutiny?

ED: A carbon tax can be gamed as easily as a carbon trading scheme.

CTC: A carbon tax may be subject to gaming, but cap-and-trade positively invites it. USCAP concedes that some allowances will be given out (not auctioned) at the outset, which means protracted, high-stakes negotiations (“a giant food fight,” a leading utility executive called it) over the free allowances that will be worth billions. How will these be allocated? What baseline year? Watch Earth burn as the polluters jockey for the baseline giving them the most allowances! With a carbon tax, by contrast, any tax preferences or exemptions will at least be visible and locked in, and thus potentially removable. This difference is part of why former Commerce Undersecretary Robert Shapiro wrote recently that carbon taxes, compared to cap-and-trade “are much less vulnerable to evasion and market manipulation, providing a more stable and transparent system for consumers and industry alike.”

ED: “A cap is the only way to guarantee the emissions cuts scientists say we need to avert the worst impacts of climate change. No one knows what level of carbon tax will produce what level of emissions cuts … Guess wrong on a tax and we’re all co-starring in a big-budget disaster movie.”

CTC: Thanks guys, but the movie has already started. Here’s what The Financial Times said about it last month: “Getting the amount of emissions a little bit wrong in any year would hardly upset the global climate. But excessive volatility or unduly high prices of quotas on carbon emissions might disrupt the economy severely. [Carbon] taxes create needed certainty about prices, while markets in emission quotas [i.e., cap-and-trade systems] create unnecessary certainty about the short-term quantity of emissions.” And how confident is ED that cap-and-trade won’t come without the dreaded “safety valve” (lift cap if price too high) that will blow its vaunted emissions certainty to smithereens?

ED: “A carbon cap can pass Congress and a tax can’t.”

CTC: A carbon tax may be the turtle, but as sure as the hare lost its lead, a cap will be sidelined for years as the financiers, lawyers and consultants work out the details — which they’ve been doing for four years and counting for the much-touted RGGI compact for capping Northeast U.S. utility emissions. That aside, the climate issue is moving very fast. We have a rare confluence of events that may actually make it possible to go the right route. It would be tragic to lock in an ineffectual approach that would block more effective action. A revenue-neutral carbon tax is no longer anathema, and it’s past time for ED and its brethren to give it the consideration it deserves.

A Convenient Tax – Issue #1

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(Note: We’ve changed the newsletter’s name. While the “truth” about global climate change may have been inconvenient, the carbon tax for combating it is straightforward, transparent and simple to administer — in a word, convenient! — CK & DR)

Welcome to the first issue of A Convenient Tax, the Carbon Tax Center’s newsletter. It’s been a very successful initial two months. Here are highlights.

Our Successful Launch

In just two short months the Carbon Tax Center (“CTC”) has established a strong presence in Washington DC, New York City, within the environmental community and throughout the Blogosphere. Here’s a quick snapshot of what CTC has accomplished since our Jan. 22 start.

  • Created the first Web site (www.carbontax.org ) devoted to taxing carbon emissions.
  • Formed a working partnership with veteran Washington (DC) environmental advocates who are committed to advancing a carbon tax in the current (110th) Congress and enacting one as soon as possible.
  • Provided technical assistance to legislative staff of a senior House Ways & Means Committee member (and gained a higher tax level in his anticipated carbon tax bill).
  • Raised probing questions about the “cap-and-trade” approach advocated by some large environmental groups and corporations, while maintaining a united front on the necessity of putting a price on carbon emissions,
  • Presented the case for “Carbon Taxes First” to an overflow Capitol Hill briefing organized by the Environmental and Energy Study Institute (EESI), and at other meetings in New York, Washington and Westchester County (NY).
  • Developed a preliminary analysis suggesting that CTC’s proposed 10-year phased-in $370/ton carbon tax (ramped up by $37/ton, the equivalent of a 10c/gallon addition to petroleum prices, each year) could reduce U.S. emissions of carbon dioxide by at least one-third.
  • Shared information and strategy with carbon tax advocates in several dozen states, including developers of carbon tax proposals for Colorado, New York and Washington, DC.

CTC Media Highlights

  • CTC’s comprehensive, accessible web site attracts 100-150 visits a day from across the USA as well as Canada, Europe, Asia and Australia, making www.carbontax.org the #2-ranked site on Google for those searching “carbon tax,” surpassed only by Wikipedia. Note: On April 12 we leapfrogged Wikipedia, making us #1 on Google.
  • Prominent and complimentary coverage of CTC’s launch in the online version of the New York Times in late January, in Times columnist John Tierney’s Science Blog.
  • Time Magazine‘s use of CTC’s estimate of the carbon-reduction impact of a carbon tax in its Global Warming Survival Guide (under solution #5: Pay The Carbon Tax ).
  • Strong presence in online discussions of carbon taxes and cap-and-trade, including repeated mentions of CTC in Gristmill and Slate.
  • Attack on carbon taxing and CTC by climate deniers at Accuracy In Media.

Going Forward

The climate debate “has shifted incredibly quickly,” wrote New York Times economics columnist David Leonhardt this week, and “the political debate now revolves around what … action should be [taken].” The next two years are the crucial period during which competing policies to reduce carbon emissions will be examined for their effectiveness, cost and political viability. CTC’s strategic goals focus on shaping that debate and properly framing the issues by:

  • Working with environmental organizations and other allies to solidify support for the concept of “putting a price on carbon.”
  • Gradually educating opinion leaders, grassroots organizations and decision-makers that while cap-and-trade is also a vehicle to put a price on carbon, carbon taxes are far superior because they provide a more predictable and less volatile price and are transparent, immediate, universal and equitable.

While CTC’s action plan will necessarily remain flexible, we anticipate engaging in the following activities during the next one to two years:

  • Continuing to develop intellectual ammunition on key issues including revenue recycling, tax equity, “co-benefits” of a carbon tax (e.g., for national security), and the potential “bang” for each carbon tax “buck.”
  • Providing technical assistance to opinion leaders, grassroots organizations and decision-makers, including responding to requests for technical information from political campaigns.
  • Assisting local and state-level carbon tax initiatives seeking to build on Boulder’s partial carbon tax adopted last November.
  • Spearheading a sign-on statement by economists and other experts calling a tax on carbon emissions more effective, transparent and equitable than a carbon cap-and-trade regime.
  • Working with a broad coalition of interest groups (labor, environmental, economic justice, national security, etc.) to support carbon taxes through a national sign-on statement and other actions.

That’s how things look at this juncture (April 1, 2007). It’s clear to us that CTC is proving its effectiveness every day. But we can’t continue to play our essential role without your financial help. We heartily thank all of you who have already donated to CTC. We ask carbon tax supporters who are not yet CTC contributors to become so today.

You can contribute to CTC in three ways, of which two are tax-deductible:

  • Tax-deductible: Write a check or money order to ELPC (Environmental Law & Policy Center), writing Carbon Tax Center in the memo line; mail it to ELPC at 35 East Wacker Drive, Suite 1300, Chicago, IL 60601. ELPC is CTC’s fiscal sponsor.
  • Tax-deductible : Make an on-line contribution via Groundspring by clicking on the DONATE NOW box on our website, www.carbontax.org.
  • Not deductible: Write a check or money order to Carbon Tax Center and send it to our New York City mailing address: CTC, 636 Broadway, Room 602, New York, NY 10012.

Just as a carbon tax now will send climate-appropriate price signals to businesses and individuals and help lock in low-carbon investment for the long haul, your financial support today will enable CTC to build on our current successes and chart a growth trajectory. Please be as generous as you can, and please donate today. Thank you.

Sincerely,

Charles Komanoff
Daniel W. Rosenblum

Full house for Carbon Tax pitch on Capitol Hill

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Close to 150 Congressional staffers, policy types and lobbyists jammed a Senate hearing room yesterday for a briefing on carbon taxes and cap-and-trade systems featuring CTC’s Charles Komanoff, along with Terry Dinan of the Congressional Budget Office and James Barrett of Redefining Progress.

EESI_Crowd.jpgThe briefing was sponsored by the Environmental and Energy Study Institute. Attendance at EESI briefings generally runs between 75 to 100, and the packed house for the March 14 panel was taken as a sign of surging interest in carbon pricing.

Charles’s presentation may be accessed here. It’s an updated and more concise version of the PowerPoint on our Home Page.