In the NY Times, Tom Friedman wonders aloud why politicans are so afraid of the "T-word" when it comes to what he considers very good rationales for imposing a gas tax sooner rather than later — with sooner being sometime, say, prior to 9/11/01.
An Agricultural Crime Against Humanity, George Monbiot, from the Guardian Nov 6: Biofuels could kill more people than the Iraq war. … In principle, burning biofuels merely releases the carbon they accumulated when they were growing. Even when you take into account the energy costs of harvesting, refining and transporting the fuel, they produce less net carbon than petroleum products. The law the British government passed a fortnight ago - by 2010, 5% of our road transport fuel must come from crops - will, it claims, save between 700,000 and 800,000 tonnes of carbon a year. It derives this figure by framing the question carefully. If you count only the immediate carbon costs of planting and processing biofuels, they appear to reduce greenhouse gases. When you look at the total impacts, you find that they cause more warming than petroleum.
A recent study by the Nobel laureate Paul Crutzen shows that the official estimates have ignored the contribution of nitrogen fertilisers. They generate a greenhouse gas - nitrous oxide - which is 296 times as powerful as CO2. These emissions alone ensure that ethanol from maize causes between 0.9 and 1.5 times as much warming as petrol, while rapeseed oil (the source of over 80% of the world's biodiesel) generates 1-1.7 times the impact of diesel. This is before you account for the changes in land use.
A paper published in Science three months ago suggests that protecting uncultivated land saves, over 30 years, between two and nine times the carbon emissions you might avoid by ploughing it and planting biofuels. Last year the research group LMC International estimated that if the British and European target of a 5% contribution from biofuels were to be adopted by the rest of the world, the global acreage of cultivated land would expand by 15%. That means the end of most tropical forests. It might also cause runaway climate change. … (footnotes omitted here)
For more than a year, Greg Mankiw has formally/strongly advocated for Carbon Taxes. Mankiw also keeps tabs on who else supports such. Lately he adds, by reference, several billion new members to his Pigou Club:
Pro Football's Philadelphia Eagles are not only green in color but "green" in commitment and action, voluntarily reducing their environmental footprint and providing a much-needed precedent in the sports arena. This is the right way to go: no big government inducements, no notions that somehow government and industry are "partners" in regulation. Instead we have an enterprise doing things because people involved think it right and necessary.
Big banks and big timber companies, on the other hand, seem to be fishing for big payoffs from cap-and-trade carbon legislation, to allow them to profit from both their extant ventures and from the very "market-based" regulatory schemes they are petitioning for — the type that are currently being debated as cap-and-trade on Capital Hill in Washington DC. This seems to me to be the wrong way to go.
Environmentally aware cap-and-trade advocates continually stress moving, through time, away from corporate giveaways, else starting without corporate giveaways from the beginning. Still, most legislative proposals allow for some carbon credits to be given to polluter firms as does this week's spotlight bill, the Liberman/Warner sponsored America's Climate Security Act. (S.2191)
Cap-and-trade v. carbon tax was debated in two important forums this week. On Oct 30, The Brookings Institution's Hamilton Projecthosted a very lively and informative debate of carbon tax v. cap-and-trade. Policy papers included:
It isn't clear where any of this is headed in the US: even if a legislative proposal emerges in either form, there is a big question of whether it gets past a G.W. Bush Presidential Veto. Still it is worth the effort to read the policy papers, and even the transcript (pp 1-62 or 103 [PDF]).
Since I advocate for carbon taxes over cap-and-trade, I'll post up this one comment from the transcript, from panel moderator Sebastian Mallaby (Council of Foreign Relations):
… [I]f people focus in on [the debate over "carbon tax" and "cap and trade"] more and they perceive the cap and trade mechanism as being partly a way to distribute free vouchers to industry, as consumers wake up to that, they may prefer the tax system with a rebate that Gib [Metcalf] is talking about. So the political dynamic could flip when consciousness goes up.
Dissenters, like Wysham (and me) believe that cap-and-trade while well-intentioned will never get to desired results due to the overly-complex nature of the proposals and the inability to ratchet up the "caps" through time, and ratchet down the "corporate giveaways" through time. Here are Snips from the "debate":
… ANNIE PETSONK: We've had great experience with cap-and-trade for controlling air pollution in this country since 1990, when Congress passed the Clean Air Act amendments. We put a cap on acid rain pollution and adopted this kind of system to cut acid rain pollution from coal-fired power plants. So, in that program, we essentially put the training wheels on the bicycle and learned how to ride the bicycle. That program has cut acid rain pollution far faster than industry and many environmentalists predicted could be done. And it's done so at a fraction of the cost that people projected.
Setting up a carbon trading system for the world and for the United States is more complicated. There are more polluters. I agree with Daphne that companies should not be allowed to get credit in a developing country which has no caps on emissions for doing what they were supposed to do anyway. … [O]ne of the reasons why we're looking forward to the markup [of the Liberman/Warner "America's Climate Security Act"] in the Senate Environment and Public Works Committee today is that the bill now being considered there doesn't create that system. It's better than that. …
DAPHNE WYSHAM: I tend to disagree with that perception, as do quite a few number of groups. Friends of the Earth has recently produced an analysis on the windfall profits in the Lieberman-Warner global warming bill [FOE Press Release], and according to their calculations, 38% of the giveaways, the free giveaways in this bill, would benefit the fossil fuel industry over the lifetime of the program. That's — and roughly $268 billion of that would go directly to the coal industry alone. …
[O]ne of the failures of the EU emissions trading system is that they essentially — the governments essentially gave the right to pollute to certain industries. They set the tap high, and as a result industry was able to emit as much as they had been emitting in the past and make a profit buying and selling these emissions rights. Similarly, in this — and there was no auctioning.
Now, in the current Lieberman-Warner bill, there is some auctioning, but about 50% of all of the permits are just being given away for free. Now, these permits are valuable. They are basically being turned into a commodity. So now what we have is essentially the most carbon-intensive of the fossil fuels, the coal industry, is one of the largest beneficiaries of the Lieberman-Warner bill. And an additional $522 billion will potentially go to what they call zero and low carbon energy technologies. Now, if we are optimistic, we would say, "Wonderful! That's going to go to renewables." However, the legislation is vague. It could go to either the fossil fuel industry for carbon capture and storage, which is a very expensive and unproven technology, or it could go to the nuclear energy. And that is not specifically ruled out in this legislation.
So we have problems with this also because it essentially is a tax on the working poor. It's not a tax on the very corporations that are causing the problem.
AMY GOODMAN: How is it a tax on the working poor?
DAPHNE WYSHAM: Well, because we will see the windfall gains. Instead of having those go to, say, subsidize an increase in the price of power or to public transportation or to other incredibly important solutions to the climate problem, we will see billions and billions of dollars worth of profits going back to the very industries that are causing the problem.
AMY GOODMAN: Annie Petsonk?
ANNIE PETSONK: We believe that the Americas Climate Security Act that's going to be voted on this morning in the Environment and Public Works Committee is a very good first step. Is it perfect? No. Are senators moving to improve it? Yes. Senator Lautenberg announced yesterday he wants to broaden the coverage of the bill so that more parts of the economy come under that cap on fossil fuel emissions. …
DAPHNE WYSHAM: … I think it's important to take some specific examples. I think itâs instructive to look at, for example, the World Bank, which I have been monitoring for over ten years now. Now, they have invested over fifteen times as much in fossil fuels as renewable since 1992. Originally, it was a hundred to one. Now, they are getting into the carbon trading market. The US Treasury back in 1997 said this is a clear conflict of interest for a financial institution to both profit from financing fossil fuels and profit from carbon trading. They're actually charging somewhere on the order of 13% commission on all carbon trading transactions. Now, what the World Bank could have done and should have done instead of getting into the carbon trading market is they should have set a higher energy efficiency standard, they should have stopped subsidizing fossil fuels, they should at the very least be calculating their climate footprint, which they are not doing. So they're calculating the carbon credits, but they're not calculating the carbon debits.
Now, if you globalize that particular model and look at how that would play out with bank after bank, whether it's Citibank or the European Bank for Reconstruction and Development or other public or private banks, you see how these banks are going to be gaming the system. They will be profiting from selling — from giving loans to the likes of Chevron, and then they'll be profiting again from charging a commission on the CO2 that is captured from those operations in developing countries or potentially in the US.
So, you know, what I think people need to understand is, yes, the time is urgent. We need to take action very soon on this issue. However, we need to learn the lessons from the failures of the EU emissions trading system. And the bill that's on the Senate floor this morning is not the best way to move forward. It's a corporate giveaway, and we need to do better. Boxer needs to hear from people on this
AMY GOODMAN: Last word, Annie Petsonk, on this. Is this just a corporate gift, a subsidy, a giveaway?
ANNIE PETSONK: If America doesn't take the lead, beginning to tackle our global warming pollution — excuse me — other nations won't either. I strongly support getting rid of fossil fuel subsidies for big coal-fired power plants in China and India and in the US. We've got to start. We cannot afford to delay. This bill is not a corporate subsidy or giveaway. It's a first step in getting America on a track to a cleaner energy future and a safer climate.
AMY GOODMAN: Fifteen seconds, Daphne Wysham, then what's your alternative, since you are so critical of this?
DAPHNE WYSHAM: Well, I think, you know, what we have is a political opportunity here. We know that the President is going to veto any kind of legislation that comes from the Senate. He has made clear his opposition to any kind of legislation —
AMY GOODMAN: Even Lieberman and Warner?
DAPHNE WYSHAM: Even Lieberman and Warner. So why aren't the Democrats — why are they just — why are they kowtowing to Bush? Why aren't they pushing forward the most aggressive piece of legislation that they can get as a benchmark and say this is what we're going to be pushing for in the next administration? And, you know, we can do better. We should be debating these issues. We should be setting much more stringent targets, at least 80% below 1990 levels by 2050. This bill gets us nowhere near that. And so, that's my concerns with it.
I'm still on the carbon tax bandwagon. But what do I know, relative to these economists who, as members of the Union of Concerned Scientists are on record in favor of cap-and-trade systems. Questions linger: Do economists like Joseph Stiglitz favor cap-and–trade over carbon taxes, or do they endorse cap-and-trade as a second-best resolution to the carbon problem relative to extant institutional arrangements? Of course we all know—or should—that it is difficult to know, at least in the Theory of the Second Best what really constitute a "second best". Then again, said "theory" doesn't apply here. What does? To the NY Times:
-Looking at the countries outside of the Former Soviet Union and OPEC, it can be noticed that their total production increased until about the year 2000, but since then total production has been declining.
-Only a very limited numberof countries will still be able to expand production, particularly Brazil and Angola.
-King Abdullah of Saudi Arabia: "The oil boom is over and will not return. All of us must get used to a different lifestyle."
-World's biggest fields in decline.
-Based on the analysis of the world's giant oilfields peak oil will happen somewhere between 2008 and 2018 [Robelius 2007 [RGE $] ].
-Growth of production has come to a standstill and production now is more or less on a plateau despite historically high oil prices.
-The historical maximum of oil discoveries after some time has to be followed by a maximum of oil production (the "peak"), which was in May 2005
-33 of the 48 largest oil producing countries have already passed peak [Chevron 2007].
-IEA projections are not a very reliable basis for planning the future.
Another update from The Oil Drum shows a peak oil plateau starting in 2006 and ending in the middle of 2009, falling-off thereafter.
The Carbon Tax Centerendorses Congressman John Dingell's Carbon Tax Legislation, set to be introduced later this year. Dingell is chairman of the US House of Representatives Committee on Energy and Commerce. The Carbon Tax Center says of the proposal, "we think the bill is terrific." Here's more from CTC:
… The current version would phase in, each year for five years, a charge of $10 per ton of carbon content of coal, oil and natural gas; plus an additional 10 cents/gallon for gasoline and jet fuel (kerosene). By the end of the five-year period the charges would reach $50/ton of carbon plus 50 cents/gallon of gasoline and jet fuel. These equate to 63 cents a gallon of gas and 90 cents for one hundred kilowatt-hours assuming the nationwide average fuel mix. …
We examined a 20-year ramp-up — starting Dingell's "10/10" tax in 2008 and continuing through 2027 to a level of $200 per ton of carbon plus $2/gallon on gasoline and jet fuel. Here's where the U.S. would be in the representative year 2025:
Carbon dioxide emissions would be down by 1.55 billion metric tons from projected levels, a 20% drop — a decrease equivalent to current emissions from England, France and Italy combined.
Petroleum consumption would be 4.5 million barrels a day less than otherwise, an 18% decrease from projected usage, and more than 10% greater than Iran's current production.
Moreover, these reductions could be supplemented by savings from other targeted policies and programs to reduce use of petroleum, natural gas and coal-fired electricity. (Indeed, a companion section of Dingell's bill will call for phasing out the federal tax deduction on mortgage interest on very large homes, thus ending a subsidy through which middle and working class families subsidize gargantuan sprawl homes for the wealthy.) No other single policy measure — not broader CAFÉ standards, not a national Renewable Energy Standard, not a massive biofuels push, and certainly not a new generation of subsidized nuclear power plants — can produce nearly the carbon and petroleum savings promised by the Dingell hybrid carbon tax, provided it extends beyond the initial five-year period.
The brilliant touch in the Dingell bill is the supplemental tax on gasoline and aviation fuel. …
Maybe this will take some heat off Dingell, who some environmentalists have criticized as not "on board" on environmental issues. Or maybe not.
I'll echo The Carbon Tax Center's concluding comment: Let Dingell and others know how you feel on this issue.
… We urge you to read Dingell's Web statement and post a comment on his site and at other sites that cover climate, energy, oil, national security, and politics. Having a legislator of Dingell's stature even float a carbon-tax trial balloon is a very important and positive development — possibly a breakthrough. There's a lot riding on it. Be heard.
Econospeak, Economists v. Politicians, Michael Perelman, Sept. 26: … [T]he Wall Street Journalhas chimed in reporting that economists as a whole agree that carbon taxes are the way to limit global warming, yet politicians are just as adamant in supporting the cap and trade. Nobody wants to get blamed for raising taxes. Rep. John Dingell (Dem, GM; i.e. General Motors) is still supposed to introduce a carbon just to prove how unpopular such a tax might be. …
Over at the promising new blog Econospeak, Peter Dorman argues that auctioning off permits for rationing carbon is a better strategy than either a carbon tax or the much-maligned 'cap and trade' system. I'm not yet convinced, still leaning toward a tax. But at least Dorman has it out there for discussion. Here is Dorman:
Tax Carbon?: The New York Times has a story today about John Dingell's change of heart on climate policy. … [A] carbon tax "is the climate solution that economists and environmentalists have long dreamed of" [says NY Times David Leonhardt] and that the only alternative is cap-and-trade, giving away emission permits to longstanding polluters. The third approach, and by far the best, is setting up a permit system and auctioning off each one of them.
There are two reasons why permits rule. (1) There is great uncertainty about the future relationship between carbon prices and pollution levels (long run elasticity of demand for fossil fuels). Taxes place the burden of this uncertainty on the environment (the amount of pollution); saleable permits place it on costs faced by energy users (fossil fuel prices). (2) Politically, if we go the tax route, we end up in a discussion about taxes. … If we center the policy on permits the debate is over how much greenhouse gas emissions we are willing to tolerate. That's the discourse we need.
Folks, this is a very important issue at a very important time. In the next year the contours of the national debate over climate change policy will be set. Huge ecological consequences — and gobs of cash — are on the line. It is essential to start off in the right direction. I'd like to see enough clarity and truculence in the activist community that journalists are forced to take notice
… Devised correctly, a cap-and-trade system could certainly work. But there are enormous complexities. As Gregory Mankiw, the Republican economist, has pointed out, companies that use the most energy today are likely to be given the largest number of permits, essentially rewarding them for their prior pollution. Some companies may even deliberately use more energy in the next few years, to assure themselves additional permits. Given all the issues, a cap-and-trade system could end up being "ineffective or even counterproductive," Lawrence Summers, who was a Treasury secretary under Bill Clinton, has warned.
A solution that relies at least partly on a carbon tax would be simpler, and the revenue it generates would go to the government, rather than to companies. The government could then turn around and cut, say, payroll taxes to cushion the blow of more expensive gasoline and home heating. …
"Liquid coal will NOT move America toward a clean energy future." So says Julie Waterman of SaveOurEnvironment.org in an email today:
According to the Department of Energy (www.fueleconomy.gov), a Honda Civic produces 5.5 tons of CO2 per year and a Hummer H3 produces 10.6 tons of CO2 per year. According to Williams et. al., Princeton University, coal-to-liquids produces 50 lbs CO2/gal gasoline equivalent and conventional gasoline produced 25 lbs. CO2/gal.
Where is the countervailing evidence? I can find none. But that doesn't mean there is none. Help!
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