David Roberts at GristMill has been writing a series of thoughtful posts on the potential actions the 110th Congress may take to address climate change. As he recognizes in this post, we’re now moving beyond simply demanding that Congress do something about global warming and have start thinking about what we want that something to look like. If we can’t articulate some simple principles, we risk having growing momentum and calls for action co-opted to pass a weak, ineffective climate bill that fails to get the job done at the same time that Congress declares victory and tells us to pack up and go home.
As David writes, “We need the grassroots to be engaged, pushing back against the many half-ass measures on offer, lobbying on behalf of good measures.” And to do that, to engage with the incredibly ‘wonky’ and complex yet enormously relevant topic of cap-and-trade proposals, people need some simple guidelines to help them see if a climate proposal is a good one or not. We need a few simple points we can latch on to, encourage our legislators to keep in mind and build pressure behind.
To that end, David recently outlined the general elements of what makes a good cap and trade system. Obviously there could be different priorities – Step it UP! 2 has a different, broader-focused list – but these are what both David and I agree are the key elements to a strong cap-and-trade proposal worth supporting:
(More below the fold…)
1) Auction rather than give away emissions permits for free.
Free allowances are a windfall for polluters, forgo an excellent revenue source (that can help offset the costs to low-income energy users and spur clean energy investment … see point 2 below) and undermine the price signal for polluters that’s the whole point of putting a price on carbon.
2) Spend revenue wisely to spur development and deployment of clean energy and reduce impacts on low-income and vulnerable citizens.
Putting a price on carbon will raise energy prices and will do so in a regressive manner: those with lower incomes pay a much more substantial portion of their income to energy costs and will be hit hardest by higher energy bills. The regressive nature of a cap and auction policy can be remedied by pumping auction revenues back into reducing payroll or income taxes for low-income citizens – I would suggest an expansion of the earned income tax credit, for example. The remaining revenue should either be used to fund incentives and R&D in clean energy technologies, or to fund a flat, per-capita tax rebate/reduction for everyone. The former will help further reduce energy bills by decreasing the costs of the clean technologies that will help transition to a low-carbon energy future and the latter will be a politically popular way to help sell the whole concept, building support by producing tangible benefits to voters. Both also help further offset the regressive nature of a carbon price.
3) No ‘safety valves’ that undermine the integrity of the cap.
A ‘safety valve’ or cap on emissions allowance prices undermines the integrity of the cap and destroys the price signals necessary to incent investment in low-carbon technologies, sacrificing the goals of the legislation to protect polluters.
These are simple guidelines and principles for what an effective cap and trade program would look like. To David’s list, I’ll add one more crucial point:
4) Targets that get the job done.
This probably means a target of 10-20% below 1990 levels by 2020 and 80% below 1990 levels by 2050. We’ve got to cut emissions hard and fast in the United States to a) do our fair share to curb rising global emissions and b) gain credibility with the rest of the world, particularly China and India, as we try to lead an international effort to cut global emissions at least in half by mid-century. That will mean getting developing nations to agree to develop in a less carbon-intensive way and to adopt mandatory caps on their emissions, a tough sell unless we’re leading the way with credible, strong actions at home.
To summarize, as David does, “auction permits, spend the resulting revenue wisely, and don’t short-circuit the system with safety valves.
We can all remember that, right?” Oh, and don’t forget (as David unfortunately does) that we need targets that will actually get the job done – 80% by 2050 – or the whole thing’s pointless anyway.
A cap-and-trade system that auctions credits can be justified, though an economy-wide tax with tax-shifting would be a whole lot more equitable and effective. I wanted to comment on the target. I currently support the movement’s rallying call for 80% cuts by 2050 in the hope that it will change soon to 95% by 2030 for the U.S. But it is important to think about the serious risks we’ll be taking with the targets we’re calling for. We have to remember that scientists give these recommendations, but they never mention to us the probabilities associated with them. Timothy posted about this earlier. I completely disagree with an 80% by 2050 target because it will not prevent us from passing tipping points — those of no return. The chances are more than 2/3 that we will go over the climate threshold. If we’re going to spend a lot of money fighting global warming (of course, it’ll be cheaper to fight than not to), we ought to make sure the chances of avoiding catastrophic climate change are really high — at least 2/3. The science says that only global reductions of 60% by 2030 will achieve greater than a 2/3 chance — so the U.S. should go for at least 95% cuts below 2005 levels by 2030.
It is my hope that we will not settle for 80% by 2050. If we get the targets wrong, it doesn’t matter how nice leadership from Congress looks and how excited we get about having won some “strong” action; the reality is that it will be a waste of money and resources that could have instead been spent in helping developing nations deal with climate catastrophe. I still haven’t heard the youth climate movement, as a whole, addressing this issue, even though some of us have brought it up repeatedly. If we don’t call for the necessary actions (those based on probabilities), no Senator or Representative will introduce legislation to cut emissions 95% by 2030. It’s up to us to take a stance on this and demand what the rest of the climate movement is not shooting for: 60% global cuts by 2030 or earlier.
As long as there are firm targets, I’m not sure we should reject safety valves. As David points out, most economists agree that a carbon tax would be better policy than cap-and-trade — it’s just politically impossible. But a safety valve is basically a way to turn c-and-t into a carbon tax w/o calling it one.
It all comes down to defining the right targets and having the will to meet them. The policy tool will determine whether we do so in a cost-effective way or not. A carbon tax is likely to be more cost-effective.
Phil, you are correct that a safety valve price essentially amounts to implementing a carbon tax set at whatever the safety valve price is. But you write, “It all comes down to defining the right targets and having the will to meet them.” Well, the whole point of a safety valve is that it puts the price ahead of the target – it undermines the cap and therefore our will to achieve the target by saying it’s more important that we don’t pay more than a certain amount than it is that we actually achieve the reductions we need.
That’s my main problem with a carbon tax in general: it doesn’t guarantee any certain level of reductions in emissions. A carbon tax sets a carbon price and lets the market decide what level of reductions to achieve at that price. A cap and trade, in contrast, sets a required level of reductions and lets the market decide the price of carbon necessary to hit that target. Since guaranteeing that we achieve meaningful reductions in greenhouse gas emissions should be our priority, in my mind, a cap and trade is a preferable policy tool to do that – without safety valves which undermine the certainty and integrity of the cap.
Carlos, as for what’s the right target, I think you are probably right that we’ll need to cut emissions harder and faster than 80% by 2050. It’s a matter of trying to shift the debate about what’s possible, and at this point, I’ve been reluctant to move beyond a call for an 80% reduction by 2050. But perhaps it’s time to think hard about the best strategy to shift the Overton window and think about uniting behind a stronger call for emissions reductions. We need to walk the fine line between pushing the window forward and having our calls for action seem impossibly aggressive (and therefore have them fall on deaf ears).
A safety valve undermines the cap and trade (and auction) system. The whole point is that we cannot pass certain limits, and a safety valve says we can if it gets too hard. It would provide an incentive for dirty energy to stall their greening process and then claim that they need the safety valve. Car makers used this tactic in California when they undermined their own electric car programs to ‘prove’ that they weren’t feasible.
The Sky Trust would be similar to the proposal above, for increasing the earned income credits, but it would be more politically feasible and easier to implement. When carbon offsets are auctioned, half of the proceeds would be divided up equally among every American with a social security number, and a check mailed to each one of them. The bottom two income brackets should make money on the deal, while the upper income brackets will foot the bill for more valuable energy. I think Americans, especially those currently ambivalent about climate action, will vote for candidates proposing this.
Even more important than a sky trust, the Green Jobs Act must be expanded. Retrofitting American homes and industry is going to take a lot of labor, and we need to include the Americans who need the jobs most in our solution, because we need them to be on board ideologically with the sustainability movement. By promoting green jobs as pathways out of poverty, we score political victories, do social good and fight climate change. Read up more at the Ella Baker Center for Human Rights.
Thanks for the comment Morgan. The Sky Trust proposal is intruiging (and one I’ve run across before). As I mentioned in the post, a flat, per-capita tax rebate akin to the Sky Trust proposal could be a great use of the auction funds, especially considering the fact that they are the results of selling off a public good – the right to pollute our commonly-owned atmosphere. There’s no reason why polluting industry should get the vast bulk of the financial value of this common good – as proposals that give away allowances for free to polluters and industry, such as the recent Lieberman-Warner proposal, would do – and every reason why citizens should receive the benefits, either through direct payments, or through investments in public goods, like lowering the cost of the transition to sustainable energy, or some combination of the two. Making it clear that the revenues from the auction won’t line the pockets of polluters and instead will end up in the pockets of every day Americans is going to go along way towards ‘selling’ a cap and auction proposal to the American people (2008 Democratic Presidential Candidates, take note!)
The Green Jobs Act is also well worth pursuing.