This (censored) commentary appeared today on Joe Romm’s blog:
Ken Johnson says:
January 31, 2010 at 9:39 pm
Regarding Fred Krupp’s comment about China’s “centralized industrial policy that we can’t match and don’t want in the United States …,” that sounds to me a lot like a top-down, economy-wide cap-and-trade system in which central planners set production targets and allocate quotas.
[JR: It may sound a lot like that to you — but not to anyone else. It is the opposite of central planning and it is Orwellian to say otherwise.]
[snip]
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Here is the original, uncensored post:
Regarding Fred Krupp’s comment about China’s “centralized industrial policy that we can’t match and don’t want in the United States …,” that sounds to me a lot like a top-down, economy-wide cap-and-trade system in which central planners set production targets and allocate quotas. That approach indeed seems to be unworkable in our political environment. Broad scope of coverage begets broad-based, consolidated political opposition, and the hard-caps-at-any-cost approach just leads to weak, politically emaciated targets. Sector-specific regulations could be more practical (in terms of political palatability and administrative simplicity) than trying to pursue Krupp’s dream of One Universal, Worldwide Carbon Price. Furthermore, a policy that is more favorable to price certainty could help overcome political obstacles to more ambitious environmental goals.
Regarding Krupp’s assertion that “A clear and declining cap on carbon emissions will send the essential market signal to industry …,” Senator Kerry recently said this: “Comprehensive climate change (legislation) means pricing carbon and setting a target for reduction. It’s open to how you price carbon. People need to relax and look at all the ways you might price carbon. We’re not pinned down to one approach.” Targets are fine when framed as minimal objectives — not as the “ultimate goal,” and not with regulations that seek to prevent and deter emission reductions beyond the cap even when the cap doesn’t come close to sustainability requirements and when further reductions could be achievable at low (e.g., negative) net cost.
Regarding “all the ways you might price carbon,” cap-and-trade is not “the only game in town,” and carbon taxes are not the only other game. Carbon pricing does not necessarily mean imposing a high price on emissions. A high subsidy on low-carbon energy (e.g. via feed-in tariffs) could be more effective at decarbonizing energy generation — particularly when low-carbon energy has small market share. The market competition for clean, low-carbon energy engendered by such subsidies could protect ratepayers from high energy prices more effectively than tax-and-dividend.
A Universal Carbon Price is an extremely blunt policy instrument. I am encouraged that Graham and Kerry seem to be open to regulatory alternatives outside the scope of the US-CAP recommendations, and I hope that the likes of Krupp will also “relax and look at all the ways you might price carbon”.
