As usual, great issues raised here by Dr. Jim Hansen, whose outspoken leadership on climate change has been instrumental in raising public awareness and creating the opportunity we have now to craft effective solutions at the federal level.
We’re clearly not going to fix global warming without addressing the market failure at the very root of the problem — the lack of a price tag on dumping carbon pollution into the atmosphere. So a carbon tax on first blush may seem like a sensible way to go, according to basic economics: if you tax something, you get less of it, so we should tax carbon.
But the litmus test of an effective climate policy is not whether it achieves some carbon emissions reductions and drives investment in energy efficiency. The test has to be whether it reduces carbon emissions far enough and fast enough to ward off the serious consequences of runaway global warming. From that perspective, a carbon tax has a basic drawback: it may get you some emissions reductions, but it leaves the amount of reductions up in the air — literally.
No one knows where to set a carbon tax to drive sufficient pollution cuts, and the political pressure in the U.S. Congress (not to mention a general aversion to taxes) will always be to drive that price down. Given the urgency of the climate crisis, we simply can’t afford guesswork that will inevitably be muddied by politics.
What we do know is how far we need to reduce emissions to help avoid the worst climate outcomes. That’s why a mandatory cap on emissions, coupled with an emissions trading market, is a better approach: it sets a legal limit on pollution to ensure that greenhouse gas concentrations don’t reach dangerously high levels in the atmosphere. Emissions trading helps ensure that we meet that cap at the lowest cost – by putting companies and private-sector investment in the hunt for the broadest pool of pollution reduction options across the economy.
That promises to make the renewable energy electricity system advocated by Dr. Hansen about much more than just wind and solar (though we hope they play a huge role). It will also be about innovative new technologies like fuel brewed from yeast, advanced geothermal, and energy harvested from the waves of the sea. Cap and trade establishes a low-carbon playing field that lets them compete. You can get a sneak peek at some of those technologies in a series of short videos from my EDF colleague Miriam Horn.
Dr. Hansen is right that we do need to move as quickly as possible toward renewable energy, understanding that the transition will take decades even under the best circumstances. Government policy holds the key to speeding that transformation of the global economy. Carbon taxes are working in some countries and theoretically might be effective in the United States. The key to success, of course, is urgent action. We are most likely to see action in the United States through a cap-and-trade system, which already has considerable support from industry, environmentalists and many members of Congress. Cap-and-trade is not perfect (although it has some important advantages as Tony noted) but it’s the only approach that is seriously in play. The worse thing would be to lose another decade holding out for a better policy framework.
Hansen isn’t alone in calling for a carbon tax — Al Gore and other notables in the climate community have called for it. Heck, even John Dingell, chair of the House Energy and Commerce Committee, says that “a carbon tax would be the most efficient way of dealing with global warming.” It probably is the most efficient way of dealing with it, but as Tony points out, efficiency and effectiveness don’t necessarily win the day with the public in this debate over how to deal with climate change. We live in a country founded largely in protest of taxes, and the aversion remains strong. I don’t think anything that involves the word “tax” would fly at this point in time. During the debate of the Climate Security Act earlier this month, Republicans called the bill the “Boxer Carbon Tax” in an effort to malign it. I think that some sort of cap-and-trade scheme is the best option that stands a chance at this point.
But Hansen has a great point about how to gain public support, and how to do this most effectively, in advocating for a return of all the revenues to the public. Tax-and-dividend, or cap-and-dividend, is likely to fare much better with Republican politicians and the public in general. It also takes away the Republican argument that climate legislation is meant to be a new, giant money-suck for government-happy Democrats. Though I may personally favor using a portion of the revenues to invest in technology R&D and green jobs programs, this would probably make legislation more appealing to the general public.
And clearly Hansen’s idea that the next president should call for a completely renewable energy electrical system is great. Setting a price on carbon would correct the market in order to make that possible.
I largely agree with Tony on the cap-and-trade vs. carbon tax question. That debate has taken on a very strange character — everyone from economists to social justice advocates talks about a carbon tax in reverent tones, as though it’s a Blu Ray DVD player while a cap-and-trade system is a Betamax VCR (you younger readers can ask your parents about that one). But it’s not exactly fair to compare a real-world cap-and-trade system (like the one in the EU, which admittedly had a very rough start) with the Platonic ideal of a carbon tax as sketched on Greg Mankiw’s whiteboard. In the real world, as Tony says, it’s just as easy for a tax to be complex and unwieldy, once the lobbyists fill it with loopholes and exemptions. Most of all though, a well-crafted cap-and-trade system gets you certainty on emission reductions, which is the overriding priority here.
That said, if you want to drive a large-scale, short-term shift to efficiency and renewables — as Hansen does, and I do — it’s important to realize that federal carbon-pricing is only one piece of the policy puzzle, and not even necessarily the most important piece. You also need a large, sustained program of public investment, along with complimentary regulations and regulatory reform.
On the investment front, we need to plow a lot of money into infrastructure, particularly public transit, a smarter electrical grid, and improved water systems. We need to raise our R&D spending tenfold. We need to use the government’s full purchasing power to expand markets for new green products and technologies. And we need investment to help seed and nurture nascent industries.
On the regulatory front — which is boring to talk about, I realize, but vitally important — we need to fix the perverse regulatory scheme that governs our electricity sector and biases utilities in favor of large central generation plants (which is why they all love nuclear and “clean coal”). We need to radically raise our efficiency standards for buildings, which is where most of the easiest, cheapest reductions can be found. We also need higher efficiency standards on everything from industrial boilers to vehicles to appliances.
And — tipping my hat to the illustrious Dr. Hansen — we need an immediate moratorium on new coal-fired power plants. That’s the biggest prize in the short term, and if anyone’s reading this wondering where they should direct their energy, direct it here. No new coal!
First, I would like to extend my thanks to Grist, On Day One, UN Dispatch, and all of those who have weighed in on this important project all week. We must understand this whole experiment not just as a thought exercise, but rather as a potential conduit to our elected officials. One of the critical tenets of agenda setting is problem definition and associating the proper frame with that problem – this project is already well on the road to doing that. Another critical component in setting the agenda will be to ensure that the properly framed problem and its concomitant solutions reach our policymakers with the kind of broad-based support needed to affect substantive policy change – and that’s next.
Broadly speaking I think Dr. Hansen’s suggestions are excellent ones, and I will address them separately. First, the suggestion that we need to move to a “national low-loss electric grid” powered solely by renewable energy sources is a useful one. But considering the incrementalism that is built into our government structure, not to mention the fact that a national grid infrastructure and our multi-layered federalism go together like oil and water, we may not be able to do so within the ten years that Dr. Hansen suggests – but that certainly doesn’t mean he shouldn’t suggest it. We need urgent action now to simply maintain the kind of investments in renewable energy that will ensure its continued growth. Whether that action comes in the form of investment tax credits, production tax credits, feed-in tariffs, carbon credits, a carbon-tax, or some combination thereof, “the key to success…is urgent action,” as Nigel rightly suggests.
Like Dr. Hansen, I am a big proponent of a carbon tax. The cap and trade mechanism (especially ones with soft limits and ten-year phase-ins), would not provide the type of certainty that Tony suggests when he writes, “No one knows where to set a carbon tax to drive sufficient pollution cuts…”. One only needs to look at Europe to see the ‘effectiveness’ of their carbon cap and trade program. I am not opposed to a cap and trade outright, as one was successfully built and implemented to address acid rain. We may even be able to learn from the mistakes made in the European model. But there is just as much “guesswork” involved in formulating a cap and trade as any other carbon policy.
Yes, Americans have an aversion to taxes. But, might that aversion be lessened if a carbon tax replaced personal income tax? A carbon tax would not stifle our economy, it would actually stimulate it. We need to take ownership of this issue and stop letting nay-sayers win the framing battle by continually allowing them to play the economic trump card. Environmental protection and economic vitality are not mutually exclusive.
Yes, transitioning to a revenue stream fed by carbon taxes as opposed to income taxes would require a complete restructuring of our tax code as we know it, something few want to do. But we might be beyond the point of choosing the easy path.