Carbon Tax Center

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Hansen's Climate Stewardship Act: I don't entirely agree

With US politicians squabbling over current proposals for climate change and clean energy legislation and world leaders getting nowhere fast on a global agreement to limit CO2 emissions, well-informed people may be losing hope for progress on solving the problem. But we should find some hope in that policy choices that could actually substantively address greenhouse warming are at least being openly discussed and debated. A few years ago the only options on the table seemed to be more individual virtuous action ("change your lightbulbs", "buy hybrid cars") or modest government-level efforts; world CO2 emissions continued to rise quickly even after the entry into force of the Kyoto protocol. Now at least there are substantive proposals, still inadequate, but capable of addressing at least a significant fraction of the emissions problem. Any of these would be, if they pass into law, a major step forward.

Aside from the Kerry-Graham-Lieberman (KGL) senate bill that has been so much in the news lately, we have also the Waxman-Markey bill that passed the House last year - both of these are "cap and trade" proposals, though the KGL bill avoids that label - and in fact with its constricted "price collar" and credit reserve it's much closer to a straight tax (but still one that is allowed to vary by a factor of 2 or 3 in price). Both bills act at the point of emission of CO2, rather than the point of extraction. And both bills at first give away many of the emission permits to industry, so that it becomes a real tax with money going to the government only over a period of decades. Both bills allow some form of offsets, and both bills include proposals to spend the money raised, partly but not entirely for clean energy and efficiency investments. Flawed as they are, they will clearly have a significant impact on CO2 emissions, and cost estimates indicate little damage to economic growth, and perhaps a rather large positive effect, not even counting the benefits from starting to address climate change itself.

The other bill that seems to be seriously under consideration is from Senators Cantwell and Collins (CC). As I argued here, the real problem is our extraction and import of fossil fuels which are then added to the surface carbon cycle; it makes much more sense to tax or set a cap at that point of extraction. That is one major difference in the CC proposal - they set a cap and then auction shares in that cap to the extractive industries. The effect of that is essentially to eliminate the use of "offsets" and trading markets (though Jim Hansen attacks it for still allowing some offset-like projects). It has the simple direct effect of limiting fossil carbon use to an amount we set, and allocating the "rent" of those shares (or at least 75% of that revenue) back to the American people. It seems a much cleaner policy approach than the complex mechanisms of KGL and Waxman-Markey, and much less subject to attack for unfairness, but as with any political document there are compromises that many will be unhappy with.

What Hansen has been calling for is an even simpler "tax and dividend" plan, and he along with the Carbon Tax Center has just released a People's Climate Stewardship Act proposal with details. I fail to see how such a proposal could become law without some of the sort of compromises at least in the CC bill, but let's look at what the proposal actually entails as it stands now and see whether it really makes that much more sense.

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