by Ben Block on December 15, 2008
Photo courtesy Kaveh SardariHansen recommends levying a rising tax on fuels and redistributing 100 percent of the proceeds to taxpayers, known as “tax and dividend.”" class="caption" align="" width="250" height="166">Photo courtesy Kaveh Sardari
Hansen recommends levying a rising tax on fuels and redistributing 100 percent of the proceeds to taxpayers, known as “tax and dividend.”Hansen, director of the NASA Goddard Institute of Space Studies, is one of the leading voices for a carbon tax to address climate change, rather than backing the more widely used cap-and-trade approach. In his plan, Hansen recommends levying a rising tax on fossil fuels and redistributing 100 percent of the proceeds to taxpayers - a "tax and dividend" approach [PDF].
Obama has preferred a cap-and-trade policy - an economy-wide limit on greenhouse gas emissions that will be lowered over time and that allows polluters to trade emission permits on a carbon market. His most recent climate change speech, delivered last month at a summit hosted by California Governor Arnold Schwarzenegger, further emphasized his support for cap-and-trade.
"We will establish strong annual targets that set us on a course to reduce emissions to their 1990 levels by 2020 and reduce them an additional 80 percent by 2050," Obama said.
Yet Hansen and other carbon tax supporters insist that the debate between the two policies is far from complete.
"Politically, [cap-and-trade] will be convenient, but it will not solve the problem," Hansen said at a Capitol Hill briefing last Tuesday. "We do need a communicator. Obama has the ability and opportunity to do it."
Hansen was the first climate scientist to state publicly that greenhouse gas emissions were causing climate change, at a hearing before the U.S. Senate 20 years ago. He has since become a leading voice on the severity of climate change, urging world leaders to discontinue support for coal and to accelerate the transition to carbon-neutral energy sources.
Carbon Tax vs. Cap-and-TradeCarbon taxes raise the price of carbon-intensive fuels and thereby encourage low-carbon lifestyles. Tax advocates say the approach could be implemented instantly and that it would avoid the interference of interest groups.
Emissions among the industrialized countries that ratified the Kyoto Protocol - a treaty that embraces the cap-and-trade approach - have risen since 2000 [PDF]. Analysts cite several reasons for the rise, including the fact that Western European energy utilities effectively lobbied for free pollution permits as part of the European Emission Trading Scheme (ETS).
Also, one of the tools developed under Kyoto to manage the pollution offsetting process - the Clean Development Mechanism (CDM) - has lacked effective oversight. The United Nations acknowledged last month that the firm that validated nearly half the world's CDM projects lacked proper qualifications.
Another concern is that cap-and-trade mechanisms have led to volatile prices. Whereas carbon taxes contribute some certainty to energy prices - a $100 tax on a ton of carbon emissions would raise coal prices an estimated 14.6 percent, for instance - the ETS carbon price fluctuates on average 17 percent each month, according to Robert Shapiro, a former U.S. under secretary of commerce for economic affairs.
"We're looking at very, very volatile energy prices," said Shapiro, who is currently the chairman of Sonecon, an economic advisory firm. "Business leaders need to know energy prices when they decide whether to invest in more energy efficient products."
World leaders have promised to address the cap-and-trade flaws during the current climate negotiations. The policy is still preferred by some environmental groups such as the Environmental Defense Fund and the Pew Center on Global Climate Change.
Cap-and-trade advantages include that its emissions cap provides a more certain level of greenhouse gas reductions, if the policy is written without major flaws and the program runs smoothly. Environmentalists are lobbying for an emissions cap lower than what was allowed as part of the ETS.
In addition, a carbon tax is not free of potential scandal. Depending on the policy, billions of dollars would be dispensed to energy efficiency and renewable energy firms, or taxpayers pockets, creating potential opportunities for fraud. Also, Friends of the Earth, an environmental group that advocates carbon taxes, notes that polluters have become skilled at finding tax loopholes over the years.
"Gaining Momentum Every Single Day"
Carbon taxes are currently in place, with frequent exemptions, in Scandinavia, the United Kingdom, British Columbia, and select U.S. cities. The taxes are generally politically unpopular - national plans in New Zealand and Canada failed to win residents' support. According to a global BBC poll in 2007, about half of the 22,000 people surveyed were in favor of increased fossil fuel taxes, and 44 percent opposed the proposal.
James Hoggan, chair of the David Suzuki Foundation, said carbon tax proponents have to overcome the disinformation campaigns that regularly attack new tax proposals. "Any legislator considering a carbon tax has to prepare the ground more effectively than we have in Canada," he said at Tuesday's Capitol Hill panel. "Stop calling it a carbon tax. Call it a carbon dumping fee or something that makes it seem more like a climate change solution."
Connecticut Representative John Larson has sponsored U.S. legislation that would impose an excise tax on any taxable carbon substance sold by a manufacturer, producer, or importer. The bill currently has support of 12 fellow Democrats. "It's gaining momentum every single day," Larson said on Tuesday. "Twelve members may not seem like a lot, but [three of] these are influential members of the Ways and Means Committee."
Political Success May Need Additional Research
At a time of economic recession, further research may be necessary to galvanize support for the higher energy costs that may accompany a climate change solution, the panel's economists said.
Hansen's letter to Obama will request that the president-elect order a National Academies of Science study of the latest climate science. Such a study should determine the present and future impacts of global greenhouse gas emissions, Hansen said.
"We have the strongest scientific body in the world. He should ask them because the situation is more severe than people realize," Hansen said. "It's even worse than what is inferred from the latest [Intergovernmental Panel on Climate Change (IPCC)] report. A lot of information has become available in the past two years."
A report would also help silence climate change disbelievers, Hansen said. "It would give [Obama] cover. Otherwise critics say it's just a few scientists saying this, or the IPCC is politicized," he said.
The Academies are already developing several climate change-related research projects, however. In October, the Division on Earth and Life Studies began its America's Climate Choices project, which seeks to address how the United States can limit the magnitude of future climate change.
"Overall, I believe the study will meet [Hansen's] concerns," said Thomas Dietz, director of the environmental science and policy program at Michigan State University and vice chair of the project's science panel. "We will address the current state of the science around issues that matter in making decisions about climate change."
Hansen has made available a more detailed draft [PDF] of the letter he plans to send to Obama. His policy recommendations are comments of personal opinion and are not related to his government position, he said.
Ben Block is a staff writer with the Worldwatch Institute. He can be reached at bblock@worldwatch.org.
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