David Roberts asks: Who, in this scenario [carbon revenue rebated to consumers], has any new incentive to shift to low-carbon electricity or efficiency? Short answer: everyone. Let’s say I’m your utility, and I raise your energy prices so that, at present rate of consumption, your bill will rise to $50,000 per year. Pretend that energy here means everything: heating oil, electricity, natural gas, everything encompassed in a carbon cap. Then I hand you an annual rebate check for $50,000. You can do two things. Give the money right back to me to pay for energy. Money is shuffled. Nothing changes. …
The post on the mileage tax stirred up a lot of reaction, much of it negative. As it happens, the state of Oregon recently wrapped up a successful trial of a mileage tax system, so for the next few posts I’m going to be relying heavily on an excellent final report on the system (PDF) from the Oregon Department of Transportation (ODOT). The primary objection to a mileage tax is that we already have one: it’s called the gas tax, and it’s easy to administer, fair, and has the added bonus of rewarding fuel-efficient vehicles and driving behavior. ODOT says, …
Environmental Capital reports that Obama's approach to climate change legislation is foundering, because it's tied to an ambitious social agenda. Which is weird, because Obama's cap-and-trade proposal isn't tied to an ambitious social agenda. Many Democrats are upset that President Obama's budget earmarks most of the $646 billion in cap-and-trade revenue for generic tax cuts and to help fund other programs, rather than for specific help to cushion the blow of increased climate regulation. This is a bit tricky to parse, but it helps if you understand that the word "earmark" here is used to mean "the opposite of an earmark." Congresscritters want the money from cap-and-trade for projects in their own states (green infrastructure, vote-buying, what-have-you), and Obama wants to return most of it to taxpayers. So where is this "ambitious health and social welfare agenda" stuff coming from? For that, we are referred to Bush-era EPA official and liar G. Tracy Mehan, III. Mehan has penned a fairly boring article in which he runs down the usual pros and cons of various flavors of carbon taxation, and then concludes:
In December, ranchers fell into a panic over a nonexistent EPA proposal to tax methane emissions from cows. By February, panic was replaced by giggling: how could they every have worried over something so crazy as a "cow tax"? And now, to demonstrate how badly misplaced their fears were, a Democratic and Republican Senator have joined together to enshrine in law the sacred principle that American cows shall never be taxed. Smell the bipartisanship. Including cattle in a cap-and-trade system is, of course, a fine idea. From an environmental perspective, cattle are a major source of a wide range of ills: methane emissions, land use changes, nitrous oxide emissions, ammonia emissions, etc. If you tally up the negative impacts of beef on human health and productivity, the societal cost of cows climbs even higher. From an economic efficiency perspective, it generally doesn't make sense to exclude sectors from a carbon cap. We want emissions reductions to come from the fastest, lowest-cost sources available, and it's hard to imagine anything cheaper or lower-cost than reduced beef consumption. It takes decades to shut down a coal plant. It takes no time at all to not eat a strip steak. Moreover, energy is a primary input to just about every sector of the economy. The same can hardly be said for tender, delicious short ribs.
This sort of flew under the radar, but a few weeks ago a federal commission floated the idea of eventually replacing the gas tax with a tax based on the number of miles driven each year. What happened next was odd: progressives, conservatives, and wonks banded together to proclaim a mileage tax to be a stupid idea. A mileage tax is not a stupid idea. It may prove to be unworkable for technical, political, or even cultural reasons, but at root a mileage tax is both a very good idea and also possibly a necessary one as we undertake a shift away from the internal combustion engine. It's no surprise to see politicians (like Obama) run screaming from this proposal, but why are the pundits piling on? Before delving into the specific arguments for and against a mileage tax, it's worth noting that the entire country of Holland is doing exactly what commentators have deemed stupid or impossible: starting in 2011, the Netherlands will phase in a vehicle-tracking scheme that applies dynamic pricing to every mile driven. Pricing will vary by vehicle type, time of day, and location, in order to curb both congestion and carbon emissions. The program is designed to be revenue-neutral, and because the government is simultaneously phasing out a steep motor vehicle tax, the plan should end up reducing the burden on low-income drivers. I mention this not to suggest that the U.S. can or should do exactly as Holland does, but just to point out that the concept isn't quite as crazily unworkable as some seem to think.
Eager to find new ways to trivialize the warming of the planet, the New York Times has been reporting on the carbon footprint of individual politicians and legislatures. They are abetted in this effort by Terra Eco, a French environmental magazine that has calculated British Prime Minister Gordon Brown's footprint to be -- quelle horreur! -- 8,400 tons of CO2 per year. By my calcs, that's about 0.0001 percent of America's carbon footprint, so as soon as Brown buys a bicycle, we should have the climate problem pretty well licked. In the meantime, I applaud Terra Eco's work on this important issue, and look forward to their upcoming report on the size of Al Gore's swimming pool.
President Obama recently announced a plan to cut the federal deficit in half by the end of his first term, in part by raising revenue through the auctioning of carbon permits under a cap-and-trade system. In one sense, there's no new information here. Obama campaigned heavily on cap-and-trade and he's always favored auctioned permits, so the plan is just a restatement of some prior campaign pledges. Right? Sort of, but this is still a very big deal. The new budget has at least four big implications. The first is purely political. By including carbon revenue in his budget projections, Obama is not only presenting cap-and-trade as a fait accompli, he's also casting it as a matter of fiscal responsibility. Deficit reduction is the ultimate bipartisan fetish object, and with this announcement Obama has performed an effective flanking maneuver on opponents who are going to try to worry a climate bill to death over economic concerns. Don't get me wrong: the political battle over cap-and-trade will be bruising. But the rhetorical ground on which it will be fought just tilted more heavily in the favor of environmentalists.
Although rumors of its death may be exaggerated, the Kyoto Protocol hasn't so far been anyone's idea of a rip-roaring success. The question remains: is the international treaty fundamentally flawed, or is it a fixer-upper that bureaucrats are slowly tweaking into an effective carbon-fighting regulatory framework? Two pieces of recent evidence boost the fixer-upper view. The first is a report from a prominent research group suggesting that a large part of the European Union's drop in carbon emissions last year are attributable to the cap. EU emissions dropped by 3 percent in 2008. According to New Carbon Finance, 40 percent of this drop is due to Kyoto. Another 30 percent is due to the recession. Much of the drop came from a switchover from coal to natural gas. To be sure, this is a modest improvement. The drop itself is small, and natural gas is still a fossil fuel. Nevertheless, this is how a carbon price works: gradual, steady pressure yields incremental movement toward cleaner technologies. The mechanism appears to be sound, and legislators are presently engaged in the political task of making the cap more stringent.
Recently the green blogosphere has been engaged in an oddly vigorous defense of command and control style legislation. I'm not sure whether this trendlet grows out of environmentalists' unfortunate habit of ranking and re-ranking and arguing over the ranking of various solutions to climate change; or out of pique that odious people like Charles Krauthammer are pretending to be proponents of carbon pricing; or, as I suspect, out of something else entirely, but I have some good news for supporters of mandates: Both the public and public officials love command and control style legislation. To be sure, the term "command and control" is pejorative, but no congressperson ever introduced the 2008 Command and Control Environmental Protection Act. Nevertheless, virtually every single piece of environmental legislation ever enacted takes the form of a mandate. From renewable portfolio standards to CAFE to wilderness protection to the quality of our air and water to species protection to waste management to an endless stream of subsidies and tax credits (good, bad, and ugly) -- they don't call it environmental regulation for nothing.