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Search Results for: who-supports

Think-Tank Gives Thumbs-Up to "Dividending" Carbon Revenues

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Dividend? Yes.
Payroll tax-shift? No.
EITC tax-shift? Yes.
Energy-efficiency? Hmm, tell me more.

These are the bottom lines on carbon "revenue treatment," as we read them, of Resources for the Future’s impressive new report, The Incidence of U.S. Climate Policy. Released late last week, the report concludes that distributing carbon permit or tax revenues equally among U.S. residents would be income-progressive, whereas using the revenues to reduce payroll or income taxes would widen the already yawning income gap between rich and poor.

These findings appear just as serious attention is beginning to be paid in carbon-pricing circles to the disposition of the enormous revenues that would be raised under either a hefty carbon tax or a stringent carbon cap-and-trade system. Tomorrow, Sept. 16, the Energy and Environmental Study Institute and Clean Air – Cool Planet are co-hosting a Capitol Hill briefing on Climate Change Legislation and Revenue Recycling, while on Thursday Sept. 18 the House Ways & Means Committee is convening a Hearing on Policy Options to Prevent Climate Change focusing on revenue treatment.

RFF-DP-08-28_Figure8.cropped_1.jpgThe RFF report evaluated the effects of a CO2 cap-and-trade program on households in each of 11 regions of the country and sorted into annual income deciles, i.e., 10 income-percentage groupings. (The light blue bars in the chart at right denote net costs for each decile from poorest to richest after the revenue-dividend "remedy," with downward-pointing bars indicating net gains; these incidence findings for cap-and-dividend should apply about equally for a carbon tax-and-dividend.) Using the Modified Suits Index, or MSI (a variant of the better-known Gini coefficient for measuring income inequality), the report calculates an MSI of plus 0.15 for the cap-and-dividend approach championed by social entrepreneur Peter Barnes. Since an MSI of zero indicates income-neutrality, while minus one and plus one denote perfect regressivity (all taxes fall on the poorest decile) and progressivity (only the wealthiest are taxed), respectively, the plus 0.15 rating indicates that cap-and-dividend would be moderately progressive. And indeed, the RFF analysis finds that cap-and-dividend would produce a significant gain in "consumer surplus" (overall utility) for households in the lowest income decile, but a loss for most higher-income families.

Conversely, a cap-and-trade with much of the revenue applied to reducing payroll taxes, as long urged by Al Gore, has an expected Modified Suits Index of minus 0.33, indicating considerable income-regressivity. Indeed, that figure is more extreme than the minus 0.18 value estimated for cap-and-trade before considering revenue uses, strongly suggesting that applying carbon revenues to reduce payroll taxes is a non-starter so far as protecting poor families is concerned. Using carbon revenues to increase the Earned Income Tax Credit is progressive, however, with an expected MSI of plus 0.23.

Intriguingly, RFF holds out high hopes for investing carbon revenues in energy-efficiency programs. According to the report, investing in "EE" would yield around the same "progressive" outcome (an MSI of plus 0.16) as cap-and-dividend, but with larger emissions reductions. Though the authors note that "There are important institutional challenges to achieving gains from end-use efficiency investments," they add that "our modeling suggests that if these challenges can be overcome such a policy might have important distributional benefits."

The RFF geographical analysis is also encouraging, generally finding lesser interregional differences than are often supposed — largely because regions with high carbon consumption in one sector, such as driving, tend to have offsetting lower carbon usage in other sectors like home heating.

We encourage visitors to this Web site to comment with their own observations on the RFF report and the issues it addresses.

Image courtesy of Resources for the Future.

A Convenient Tax – May 2008

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Thanks to the gas tax “holiday” proposed by Senators McCain and Clinton, gasoline taxes (a component of carbon taxes) have become a major issue in the presidential campaign. Senators McCain and Clinton have been attacked across the political spectrum for pandering. Politicians from President Bush to House Speaker Pelosi have rejected the idea, as have newspaper editorial boards from the New York Times to the Wall Street Journal.

New York City Mayor Michael Bloomberg, a powerful carbon tax advocate, may have been the most succinct, calling a temporary suspension of the federal gasoline tax “about the dumbest thing I’ve heard in an awful long time from an economic point of view” and saying he did not see “any merit to it whatsoever” (NY Times, May 2). Economists have been nearly unanimous, with over 100 economists, including three Nobel Prize winners, signing a statement opposing the gas tax holiday.

In our last newsletter we acknowledged that “the ‘T’ word is unpopular with politicians,” but asserted that “awareness is growing that ‘putting a price on carbon’ is an essential element of any successful strategy to significantly reduce greenhouse gas emissions.” In fact, awareness is growing faster than we expected. We’re heartened by the widespread recognition that the gas tax holiday proposal is fundamentally flawed because it undercuts the need to properly price gasoline and would encourage gas use just when it is essential to discourage consumption. In breaking news, the Monday (May 5) New York Times will report that by 49% to 45%, more Americans think that lifting the gas tax is a bad idea than approve of the plan.

In addition, we are intrigued by a Wall Street Journal report that some members of Congress are advocating that proceeds of a windfall profits tax be used to provide rebates for consumers. It sounds a lot like the rebate we have proposed to return carbon tax revenues to the American people. While we take no position at this time on the merits of a windfall profits tax, it’s good to see thought being given to returning the windfall profit tax proceeds. It’s a step toward a revenue-neutral carbon tax.

Our next challenge is to convert the well-reasoned opposition to a gas tax holiday into support for a carbon tax. As a first step, we have begun preliminary planning for a Carbon Tax Conference to be held in Washington, D.C. in mid-November. The conference will be designed to focus public attention on a carbon tax as the best policy for reducing U.S. greenhouse gas emissions and is timed to occur just as a new administration and Congress begin establishing priorities and mapping out strategies. Interested in being involved in the early planning? If so, please let us know.

Please check our web page regularly for the latest developments on carbon tax issues and progress. We add important news stories to the “Headlines” column on our home page almost every day. Take a look at the excellent guest post by James Handley, an extraordinary volunteer at CTC, addressing the gas tax holiday issue. It was on our web page until today (in case you haven’t noticed, previous blog posts are listed just below the current post). Our next post will take up a related issue, the impact on demand of rising gasoline prices. There is more and more evidence that higher prices, such as would result from a carbon tax, lead to reduced consumption. That’s the premise of our proposed carbon tax and it’s being validated every day.

Finally, CTC does have to admit to one major failing. We’ve been so focused on policy issues and getting the message out that we haven’t spent the necessary time on fundraising. The result is predictable. We’re desperately short of money just when we need it the most. To continue playing our essential role, we need your financial help.

You can contribute to CTC in three ways, two of which 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
Dan Rosenblum

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.