Transcript 1-8-14 Citizens Climate Lobby Power Point

Are you concerned about climate
change, but unsure which government
policy could best address it?
Do you worry that the measures our
government has taken to stop climate
change are too feeble?
The Right Policy:
Carbon Fee and Dividend
Motivation
What risks do we face from climate change?
Description
What is the Carbon Fee and Dividend plan?
Context
What are the other policy alternatives?
Pros and Cons
How does Fee and Dividend compare to other
policies?
Conclusion
In December of 2013, Jim Hansen and a long list of co-authors*
published
“Assessing ‘Dangerous Climate Change: Required Reduction of
Carbon Emissions to Protect Young People, Future Generations
and Nature”
This paper is an urgent warning that even the UN’s cumulative
carbon emissions limit designed to be consistent with 2°C of
warming is itself very dangerous.
*List of authors: James Hansen, Pushker Kharecha, Makiko Sato, Valerie Masson-Delmotte, Frank Ackerman,
David J. Beerling, Paul J. Hearty, Ove Hoegh-Guldberg, Shi-Ling Hsu, Camille Parmesan, Johan Rockstrom, Eelco
J. Rohling, Jeffrey Sachs, Pete Smith, Konrad Steffen, Lise Van Susteren, Karina von Schuckmann, James C.
Zachos
From the abstract of “Assessing Dangerous Climate Change”
“Cumulative emissions of 1000 GtC, sometimes associated with
2°C global warming, would spur ‘slow’ feedbacks and eventual
warming of 3–4°C with disastrous consequences. Rapid
emissions reduction is required to restore Earth’s energy
balance and avoid ocean heat uptake that would practically
guarantee irreversible effects. Continuation of high fossil fuel
emissions, given current knowledge of the consequences, would
be an act of extraordinary witting intergenerational injustice.”
Note: From this paper, cumulative atmospheric carbon emissions are currently 370
GtC and are increasing a at a rate 10GtC per year. Hansen recommends a “safe”
cumulative limit of 500 GtC.
If some of the top scientists in the field are warning that the
next decade is our last chance to avoid dangerous climate
change and all the world’s leading scientific organizations agree
that climate change is real and dangerous, why do seemingly
rational conservatives in the U.S. oppose legislation to address
it?
Fundamentally, U.S. conservatives fear the economic
consequences of government action to address climate change.
Progressive Perspective on Climate Change Risk
Political
Perspective
Left
Right
If we ignore Climate Change
If we continue to increase
carbon emissions
Environmental Risk
Environmental Collapse:
Devastating Droughts,
Floods, & Storms;
Famine; Sea Level Rise;
Ocean Acidification;
Mass Species Extinction
What? Me worry?
Deny Environmental Risk
Continue Business as Usual
Let Markets Decide
Drill, Baby Drill
Progressive Perspective on Climate Change Risk
Those greedy capitalists are willing to sacrifice their own children!
Conservative Perspective on Climate Change Risk
Political
Perspective
Right
Left
If we address Climate Change
If we drastically reduce
carbon emissions
Economic Risk
Economic Collapse:
Extremely Expensive,
Unreliable & Insufficient
Power Generation;
Uncompetitive Economy;
Blackouts; Growing Poverty;
Insolvent Government
Repressive Government
What? Me worry?
Deny Economic Risk
Continue Politics as Usual
Let Governments Decide
Emotion over Logic
Conservative Perspective on Climate Change Risk
Magical thinking by hopelessly ignorant political activists could kill
our free-market economy!
Opposing Perspectives on Climate Change Risks
Political
Perspective
Left
Right
Ignore Climate Change:
Continued Increase of
Carbon Emissions
Environmental Risk
Environmental Collapse:
Devastating Droughts,
Floods, & Storms;
Famine; Sea Level Rise;
Ocean Acidification;
Mass Species Extinction
What? Me worry?
Address Climate Change:
Drastic Reduction of
Carbon Emissions
Economic Risk
What? Me worry?
Economic Collapse:
Extremely Expensive,
Unreliable & Insufficient
Power Generation;
Uncompetitive Economy;
Blackouts; Growing Poverty;
Insolvent Government;
Repressive Government
My Perspective on Climate Change Risks
My
Perspective
Climate Change
is very real &
very dangerous.
Ignore Climate Change:
Continued Increase of
Carbon Emissions
Environmental Risk
Address Climate Change:
Drastic Reduction of
Carbon Emissions
Economic Risk
Environmental Collapse:
Devastating Droughts,
Floods, & Storms;
Famine; Sea Level Rise;
Ocean Acidification;
Mass Species Extinction
Our global industrial
economy rests on a
fossil fuel foundation.
Energy transitions are
enormously complex
& take decades.
Economic Collapse:
Extremely Expensive,
Unreliable & Insufficient
Power Generation;
Uncompetitive Economy;
Blackouts; Growing Poverty;
Insolvent Government
Repressive Government
The changes to our economy that are needed to replace fossil
fuels and address climate change are immense.
Concerns about the cost of government involvement on this
scale are reasonable.
“There is one thing all energy transitions have in common: they
are prolonged affairs that take decades to accomplish … And the
greater the scale of the prevailing uses and conversions, the
longer the substitutions will take.”
“a world without fossil fuel combustion is highly desirable …
getting there will demand not only high cost but considerable
patience: coming energy transitions will unfold across decades
not years.”
-Vaclav Smil, prolific author on energy issues, Distinguished
Professor at the Univ of Manitoba
From the book Power Hungry by Robert Bryce
Refer to World Energy Outlook p. 4 graph “Growth in primary
energy demand”
Earth’s
Changing
Climate
as GHGs
accumulate in
its atmosphere
The Fossil
Fuel
Foundation
of the global
economy
We are in a precarious position trapped between the irresistible force of climate change and
the immovable object of our global economy.
We can afford neither business as usual nor politics as usual.
Business as usual could destroy our environment.
Politics as usual could destroy our economy.
To successfully navigate between these two risks,
it is critically important that we adopt the most economically
efficient method to address rising carbon emissions.
The Carbon Fee and Dividend plan advocated by Citizen’s
Climate Lobby (CCL)*
• directly and powerfully addresses rising carbon emissions
and
• is as economically efficient as any other policy proposal.
* The Carbon Fee and Dividend plan has many supporters. The Hansen, et. al. paper
from Dec 2013 states that “A rising carbon fee is the sine qua non for fossil fuel phase
out”
What is “Fee and Dividend”?
The Carbon Fee and Dividend plan is a form of revenue neutral
carbon tax.
Carbon taxes are widely acknowledged among economists (on
the left and the right) as being the most economically efficient
method to address rising carbon emissions.
A Carbon Tax America Could Live With, NYT, Aug 31,
Harvard’s Greg Mankiw, economic advisor to President
George W. Bush and Mitt Romney
Among economists, the issue is largely a nobrainer…of 41 prominent economists about this
statement: “A tax on the carbon content of fuels
would be a less expensive way to reduce carbondioxide emissions than would a collection of
policies such as ‘corporate average fuel economy’
requirements for automobiles.” Ninety percent of
the panelists agreed.
A Republican Case for Climate Action
By WILLIAM D. RUCKELSHAUS, LEE M. THOMAS, WILLIAM K. REILLY and CHRISTINE TODD
WHITMAN, New York Times, August 1, 2013
• “the United States must move now on substantive steps to
curb climate change, at home and internationally.”
• “The costs of inaction are undeniable. The lines of scientific
evidence grow only stronger and more numerous. And the
window of time remaining to act is growing smaller: delay
could mean that warming becomes locked in.”
• “A market-based approach, like a carbon tax, would be the
best path to reducing greenhouse-gas emissions…”
The writers are former administrators of the EPA during Republican
administrations: Ruckelshaus, 1970 - 1973, and 1983 to 1985; Thomas, 1985 1989; Reilly, 1989 - 1993; and Whitman, 2001 - 2003.
In 2012, former Rep. Bob Inglis (R-SC4 1993-1999; 2005-2011) established E&EI,
the Energy and Enterprise Institute. From their website …
“Under Inglis’ leadership, E&EI advocates conservative alternatives to big-government
mandates and fickle tax incentives. E&EI maintains that the accountability of a “true cost”
comparison between competing fuels will drive innovation and economic growth. As an
optimistic conservative, Inglis launched E&EI to apply a “can-do” American spirit to the
challenges at hand."
“Economists have long understood that the key to smart environmental policy is aligning
private incentives with true social costs and benefits. That means putting a price on carbon
emissions, so households and firms will have good reason to reduce their use of fossil fuels
and to develop alternative energy sources.”
http://energyandenterprise.com/
Carbon Fee and Dividend Plan
Revenue Neutral Carbon Fee - Charge For Polluting, Give All the
Money Back
– Steadily rising fee on carbon pollution at source
• For example $10/ton each year for 10 years (adds $100/ton or $1 extra for
gas at the pump)
• Border Tax Adjustments (Import fee/export subsidy, based on carbon
content and presence/absence of carbon pricing policies of respective
trading partner)
• Make it expensive to pollute so everyone-everyday will work to reduce
emissions
– Return All Funds to Families
• 65% made better off
The Fee and Dividend Plan
Simple
Carbon Fee and Dividend proposal is simple, far simpler than
the 1,400-plus pages of the Waxman-Markey cap and trade bill
that passed the House in 2009 but will died in the Senate.
Market-based
It makes use of market principles, by prodding the market to
tell the truth about the costs of carbon-based energy through
prices.
Minimizes Bureaucracy
It would not impose mandates on consumers or businesses,
create new government agencies, or add a penny to Uncle
Sam’s coffers.
The Fee and Dividend Plan
Protects U.S. Trade
Gives incentives to other nations to impose their own carbon price
A gradually rising fee would be imposed on carbon-based
energy sources at the points where they enter the economy –
at mine mouths or ports of entry, for example.
Trade with countries that have not yet put an equivalent price
on carbon would be covered by Fee and Dividend.
Fees would be levied on the carbon content of all imports from
these nations. Also, some revenue from fees would be used to
subsidize carbon-intensive exports (like agriculture) to these
non-carbon price countries.
The Fee and Dividend Plan
It’s fair – not regressive on incomes
Carbon-based energy imposes costs – on the environment, public
health, and national security - and those costs would be made
more obvious in the marketplace through the fees.
Energy prices would go up BUT
revenues collected from carbon fees would be returned 100% to
the public through dividends.
A $100-per-ton carbon fee would add a dollar to the per-gallon
price of gasoline but would raise enough revenues to pay every
adult American as much as $3,000 per year.
The Fee and Dividend Plan
How would it affect individuals?
The impact on individuals would depend on how they exercise
their right to make free choices.
Those who wish to use carbon-based energy with abandon
would be free to do so – knowing up front that they would pay
the environmental and other costs of using lots of carbonbased energy rather than shift those costs onto their fellow
citizens.
Those who acknowledge the market signal and change their
purchasing decisions could avoid some or most of the higher
prices. Depending on the choices they make and the size of
their dividends, many would come out ahead financially.
The Fee and Dividend Plan
Carbon Pricing: Money Talks to the Entire Economy
Businesses would seek out more opportunities to improve their
energy efficiency.
Other businesses would sell products and services that enable
them to do so.
Low-carbon energy sources would be more competitive with highcarbon sources.
The Fee and Dividend Plan
Easy to Explain to Everyone
The idea behind the bill could be described in a 1-minute
elevator speech.
As legislation, Fee and Dividend could fit onto a few pages.
The bill could be read and understood by anyone – voters
and lawmakers alike willing to put in a few minutes of time.
The Fee and Dividend Plan
A Realistic Goal: Bipartisan Support
• Transparent.
• Market-based.
• Does not enlarge government.
• Leaves energy decisions to individual choices.
• Takes a better-safe-than-sorry approach to throttling back
oil dependence and keeping heat-trapping gases out of
the atmosphere.
Fee and dividend is a conservative climate plan.
Climate Change Policy Alternatives
From “The Case for a Carbon Tax” by Shi-Ling Hsu
• Command and Control Regulation
• Government Subsidies
• Cap and Trade
• Carbon Tax
Climate Change Policy Alternatives
The Case for Government Subsidies
Carbon dioxide emissions are market externalities.
Subsidies for renewable energy technologies are one way to
internalize the externality, a way of lowering the price to
consumers of renewable energy.
Carbon taxes internalize the externality by adding to the price of
fossil fuels.
Subsidies are politically popular.
Carbon taxes are not.
Climate Change Policy Alternatives
What’s wrong with “The Case for Government Subsidies”?
• Higher energy prices are needed to spur energy conservation.
• Subsidies are expensive. Cost puts a limit on how low
renewable prices can be driven.
• The rebound effect. Lowering the price of renewables lowers
the demand and hence the price of fossil fuels.
• Governments are bad at picking winners and losers are good at
picking governments.
Bottom line: subsidies are expensive and often ineffective.
Climate Change Policy Alternatives
Command and Control Regulation
Early environmental regulation was mostly Command and
Control.
For example, the first attempts in the 1970’s by the EPA to use
the Clean Air Act to address acid rain was to require the
installation of sulfur dioxide scrubbing technology in all new
coal-burning power plants.
The industry response was to use old power plants more and
avoid building new power plants.
Climate Change Policy Alternatives
Command and Control Regulation
In general Command and Control regulation is
inefficient (expensive for benefit derived) because it
•
•
•
•
•
requires much administrative oversight
is prone to regulatory capture
does not balance costs and benefits as compliance costs are
difficult for agencies to estimate
fails to offer emitters incentives to find innovative ways to
reduce emissions
invites gaming and litigation.
Climate Change Policy Alternatives
Cap and Trade
A carbon tax puts a price on carbon emissions and does not
directly limit the amount of emissions.
Cap and Trade puts a price on carbon emissions as well but it
limits the quantity instead of the price.
The Cap
Cap and trade limits the amount of emissions. Permits to
emit carbon are distributed.
The Trading
Cap and trade specifies activities (such as fossil fuel based
power generation) that require permits. These permits can
be traded, allowing the cap to be achieved more efficiently.
Climate Change Policy Alternatives
Cap and Trade
Cap and Trade for U.S. SO2 emissions was implemented under the
first George Bush and has been successful in reducing acid rain.
Three notable GHG cap and trade schemes are
1. the EU Emission Trading System (EUETS)
2. the northeastern US states Regional Greenhouse Gas Initiative
(RGGI) and
3. Waxman-Markey bill passed in U.S. House in 2009, died in the
Senate (notable failure)
Climate Change Policy Alternatives
Cap and Trade
Cap and trade does establish a price on carbon emission. It incents
power producers to innovate and lower emissions.
Theoretically, it could be almost as efficient as a carbon tax.
Politically, it has been easier to implement.
In practice, there have been substantial drawbacks.
Climate Change Policy Alternatives
Drawbacks of Cap and Trade
Drawbacks of current Cap and Trade systems.
•
The volatility of the permit prices undermines incentives, especially for
investment. [EU permit prices fell from €30/ton in 2008 below €3 in 2013.]
Price volatility encourages financial solutions like options rather than
innovations in lower carbon energy production.
•
The scope is too narrow. The RGGI includes only power producers. EUETS
has been broadening its scope but still covers less than 50% of carbon
emissions. Still price signals do not transmit throughout the economy.
•
Permits are often given away as political favors rather than auctioned.
From The Case for Carbon Tax, “The free allocation of allowances under
Waxman-Markey reads like a Christmas list.”
Climate Change Policy Alternatives
RPS: Similar to Cap and Trade
Similar Policy: Renewable Portfolio Standards (RPS) have been
implemented across the U.S. and vary across states.
They are market-based, requiring electric companies to produce
a specific percentage of renewable energy. Renewable Energy
Credits (RECs) are issued for production of renewable energy.
An active market exists for trading RECs.
RPS suffers from some the same issues as Cap and Trade and has
an even narrower scope.
Climate Change Policy Alternatives
Carbon Taxes
"As a businessman it is hard to speak favorably about any new
tax, … But a carbon tax strikes me as a more direct, a more
transparent and a more effective approach. ... A carbon tax is
also the most efficient means of reflecting the cost of carbon
in all economic decisions - from investments made by
companies to fuel their requirements to the product choices
made by consumers,"
-Rex Tillerson, CEO of Exxon.
Summary
Carbon Tax efficiency + Fairness = Fee and Dividend
Fee and Dividend is a revenue-neutral carbon tax
because all the proceeds are returned to the general
public to offset their increasing energy costs.
A carbon tax is almost certainly the cheapest way to
reduce carbon dioxide emissions.
As the war against climate change will be long, hard
and expensive, we must spend our resources as
carefully as possible.
Fee and Dividend: The Best Solution
Fee and Dividend is the right policy to fight
climate change.
The political challenge is substantial.
Let’s fight the good fight!
Good Books
The Infinite Resource: The Power of Ideas on a Finite Planet by
Ramez Naam
Storms of my Grandchildren by Jim Hansen
The Case for a Carbon Tax by Shi-Ling Hsu
Power Hungry by Robert Bryce