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.
People’s Climate Stewardship / Carbon Fee and Dividend Act of 2010:
1. Causation: The overwhelming consensus of peer-reviewed literature by climate scientists worldwide indicates that burning of fossil fuels is increasing atmospheric CO2 levels which, along with emissions of other greenhouse gases, is causing an accelerating rise in global temperatures and ocean acidification,
No argument there!
2. Mitigation (return to 350 ppm or below): Current atmospheric CO2 levels of 387 parts per million (“ppm”) are the highest in human history. A rapid return to levels of 350 ppm CO2 or less is necessary to slow or stop the rise in global temperatures and ocean acidification,
True enough - but this doesn't quite answer the question of whether it is "necessary to slow or stop the rise in global temperatures" in a "rapid" manner...
3. Endangerment: We face a global climate emergency. Further increases in global temperatures and ocean acidification pose imminent and substantial dangers to human health, the natural environment, the economy and national security and an unacceptable risk of unmanageable catastrophic impacts to human civilization,
This seems over-sold - or at least, Hansen is here positioning himself (as he has done before) and this proposal towards what one could definitely call the "alarmist" end of the spectrum of concern. What does "imminent" mean here? The Iraq war was sold to the American people on the basis of an "imminent" threat that was unfortunately manufactured; people are quite reasonable doubtful about such assertions now. He is right that continued warming presents at least a small "risk of unmanageable catastrophic impacts" - and the uncertainty we have about impacts makes those risks more significant, not less - but to what degree are those risks now imminent and "unacceptable"? To get public acceptance of a sense of emergency you have to get much broader support for such claims - and in contrast to the "overwhelming consensus" on point 1, that just is not there on this point, at least to the degree of urgency Hansen seems to require.
4. The False Economy of Cheap Fossil Fuels: Fossil fuel prices currently do not reflect their true, long term-costs to society, the environment and future generations. This false economy of cheap fossil fuels is obstructing an economy-wide transition to low carbon energy sources.
No doubt about this one.
5. Benefits of Carbon Fees: Steadily-increasing carbon fees on fossil fuels are the most efficient, transparent and enforceable mechanism to drive an effective and fair transition to a low-carbon economy. They will stimulate investment in low-carbon technologies, create powerful, predictable incentives for businesses and households to increase their energy-efficiency and reduce their carbon footprints and harmonizing carbon tariffs will create incentives for other nations to enact carbon fees,
A price on fossil carbon to cover its externalities is definitely needed; the argument here is that a "steadily increasing fee" would be "most efficient" (is there peer-reviewed economic support for that?), "transparent" (probably, depending on implementation) "enforceable" (probably), and provide
"powerful, predictable incentives". The component that I have the worst issue with here is the "predictable" claim. Just look at the history of the renewable energy production tax credit - probably the most unpredictable incentive US companies have ever had to face. Why would practical legislation for a "steadily increasing carbon fee" be significantly more predictable than the PTC?
6. Co-Benefits: Adding carbon fees to the prices of fossil fuels will have many additional benefits, including: 1) reducing dependence on foreign oil, 2) stimulating advances in low-carbon energy technology, 3) job growth in low-carbon energy and energy conservation, efficiency and retrofitting, 4) reducing conventional (non-greenhouse-gas) pollutants emitted by fossil fuel burning which cause health and environmental harm,
This seems partially redundant with (5), but yes, this is the impact of any added cost for fossil carbon, whether implemented through caps or taxes.
7. Return Revenue: All revenue from carbon fees should be returned to households equitably, in order to build broad public support and ensure that families can afford the energy they need during the transition from fossil fuels to cleaner energy,
Isn't there then a danger of creating a dependence on that fossil revenue, and public demand to "optimize" the tax so that revenues are maximized, rather than to raise the tax high enough to eliminate fossil carbon use altogether? Because in the end we want this "return revenue" to essentially go away completely. This is a real hazard even if the government keeps all the revenue raised, of course, as well. My preferred scheme would be to simply use the money to pay down US debt. Maybe we can arrange things so the debt is erased at the same time we stop using any fossil fuels; that would be a neat trick... In any case, while this is obviously designed to build some popular support for the idea, I am definitely not convinced it's the best path forward for climate legislation.
Therefore, we propose the People’s Climate Stewardship Act:
1. Collection of Carbon Fees/Carbon Fee Trust Fund: Beginning on July 1, 2011, a carbon fee of $15 per ton of CO2 equivalent emissions will be imposed on all fossil fuels at the point of first sale in the U.S. economy. CO2 equivalent fees shall also be imposed for other greenhouse gases including methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons (HFCs) emitted as byproducts, perfluorocarbons, and nitrogen trifluoride. All fees are to be returned to American households as outlined below.
Hmmm. For a large oil company, point of first sale could be at the gas pump. It's not clear to me that makes this as simple as it could be - why not go with the Cantwell-Collins approach of taxing the extraction and import of fossil fuels directly?
2. Steady step-up of CO2 Fees, Ensuring Replacement of Fossil Fuels with Low-Carbon Energy: The yearly increase in carbon fees including other greenhouse gasses shall be at least $10 per ton of CO2 equivalent each year, to steadily reduce U.S. CO2-equivalent emissions by 2050 to 10% of the 1990 U.S. CO2-equivalent emissions. EPA and DOE shall annually review greenhouse gas emissions data and determine whether an increase larger than $10 per ton per year is needed to achieve emissions reductions commensurate with that reduction trajectory. If EPA and DOE find that U.S. emissions are not being reduced sufficiently, the CO2 fee shall increase by $15/T CO2 in the following year. [Modeled after Rep. Larson’s H.R. 1337 “America’s Energy Security Trust Fund Act.”]
How do you avoid Congress meddling with those increases? And this is rather non-specific on how the 2050 point is to be reached. If EPA and DOE allow US emissions to be still at 50% of 1990 levels in 2049, what is the penalty for not making the 2050 target? Oops? I think a better approach would be to allow for a specific total fossil carbon allowance from now through 2050 - some number of hundreds of billions of tons. But of course, that would be a cap, which Hansen for some reason finds distasteful (because it allows for trading and markets?)
Also note that, to the extent the tax rate increases are not at a steady rate (remember PTC!) you lose that predictability that allows for more sure business planning, and end up in roughly the same position as a fluctuating cap-and-trade price scheme would.
3. Mechanisms for 100% Revenue Return: All revenue from CO2 and CO2 equivalent fees shall be returned to households. Mechanisms include: (1) Equal monthly per-person “dividend” payments made to all U.S. households (1/2 per child under 18 years old, with a limit of 2 children per family) each month beginning on August 28, 2011, (2) Use all carbon fee revenue to reduce payroll taxes for employers and employees. Unemployed persons and Social Security recipients shall receive equivalent distributions.
Limit of 2 children per family! Well, that'll go over well in some sectors!!! Again, I'd prefer all revenues to simply go to reduce the national debt. Efficiency and other renewable energy promotion programs are good - and should be funded separately, in my view, though of course the money is fungible in the end. Sending it all back to the people is a transparent populist ploy that is, in the end, pretty much meaningless, or worse, possibly detrimental to the kinds of carbon cutbacks we want this program to achieve.
4. Border Adjustments: To ensure that U.S.-made goods remain competitive abroad and to provide an additional incentive for U.S. trading partners to adopt their own carbon fees, Carbon-Fee-Equivalent Tariffs shall be charged for goods entering the U.S. from countries without comparable Carbon Fees. Carbon-Fee-Equivalent rebates shall reduce the price of exports to such countries and ensure that U.S. goods remain competitive in those countries.
Yes, something like this is absolutely necessary, agreed. We don't want to just move carbon-intensive manufacture overseas and have the same or worse CO2 impact from our economic activities.
5. Phase Out of Fossil Fuel Subsidies : All existing subsidies of fossil fuels including tax credits, shall be phased out within 5 years.
This is good.
6. Moratorium on New or Expanded Coal-Fired Power Plants without CCS: No new coal-fired power plants shall be permitted, constructed, or operated. No expansions in capacity of any existing coal power plants shall be permitted, constructed, or operated. [Exception: Permits may be issued for facilities that successfully demonstrate safe and effective long-term Carbon Capture and Sequestration of at least 90% of CO2 emissions.]
I have my doubts about CCS, but yes, this is a necessary rule. I fail to see what this has to do with the tax proposal though - this is a regulatory measure in the electricity sector, and really out of place here. If taxes are sufficient to cut fossil fuel use, then why do we need additional regulations like this anyway?
7. Seeking Treaties: The President shall seek treaties with other countries that encourage adoption of similar programs to reduce CO2 and other greenhouse gas emissions worldwide.
Proposed by Dr James Hansen: Earth Day, April 25, 2010.
On the whole it's really not a bad proposal - but it has real faults, just like everything else out there. I really wish I understood why Hansen was so dogmatic about this particular approach being so much better than all the others. What we need is a price on fossil carbon to capture the externalities associated with burning it - climate change being likely the worst of those. How we get that price and who benefits in detail is of far far less concern.