Below is an email message to a representative of EDF [Environmental Defense Fund]. It was the third in an exchange that began on July 12 with a message from me [posted below on July 12]. EDF has long promoted a system of carbon cap-and-trade and this was the basis for the legislation being considered in Congress. I have always thought this system was too complicated and ripe for abuse, and I support a system of carbon fee-and-dividend. In my message I outlined some pros and cons for the two systems and asked EDF to comment.
The message from EDF to which I respond below is posted on July 27.
Bill Allen, July 31, 2010 <> OFFby2050
Hi Mandy:
Thank you for the comments in your msg below. My response follows.
GOAL: This issue may be addressed at several levels. First, I believe, we need to define our long term goal.
I’m old enough to remember when John Kennedy challenged the nation in 1961 to land a man on the moon and bring him back safely to earth “before this decade is out.” Neither he or nor anyone else had more than general ideas on how to do this in 1961. But we learned and we met the challenge.
I believe we should set a goal to stop burning fossil fuels by 2050. I’ve read a lot on the subject and believe this is reasonable. In fact, if we start now, and if the scientists continue to report deteriorating conditions, then the national motivation will increase and we will probably beat that goal.
The goal can be expressed as “Off Fossil Fuels by 2050” or simply “OFF by 2050.” This is a much better rallying cry than something like “Reduce carbon dioxide emissions to 20% of 2005 levels by 2050.”
We don’t know now how to get OFF by 2050, so initially we can assume a straight line and set a goal of 25% reduction from current levels by 2020. Then work the problem and fill in the details.
Note that a goal is not a guarantee. It should be set high enough to stretch our capabilities, but not so high that we give up before we start. I think OFF by 2050 meets these conditions.
Note also that this is a goal for the U.S. We should lead other countries for two reasons, not wait for them: set a good example, and develop helpful technologies that we can share with others.
PUBLIC SUPPORT AND INVOLVEMENT: No program to reduce CO2 emissions over the long term will be successful without broad public support and participation. If the public will be involved in the long term, it should be involved in the beginning. People must know that many things are going to change and that they will have to adjust. If these adjustments are made slowly and intelligently, most people will be able to make them easily and will be better off afterwards. But change is coming.
No political leader has explained this to the public. In fact, most comments from the Senate this year are to the effect that the proposed legislation would not affect people very much. That is a stupid way to begin the program and will guarantee a backlash later.
Borrowing from Lyndon Johnson: If the people will be in on the landing, then they should be in on the takeoff.
I attach a letter to President Obama in which I urge him to call now for a national program to phase out fossil fuels by 2050 and build a sustainable economy powered by clean energy. [Letter posted on this website on June 28] Declare the rest of this year to be a period for national dialog on the program and how to implement it. Call for enabling legislation next year.
If done, this will let Congress off the hook for legislation this year. It will also allow the cap-and-trade proposal to be taken quietly off the table.
CAP-AND-TRADE VS FEE-AND-DIVIDEND: Your main argument for cap-and-trade appears to be that a “limit on pollution” guarantees “reductions in global warming.” This may be true for some small reductions in the early stages of the program, where some easily identified sources [such as coal fired power plants] are assigned caps. I believe it is highly unlikely that it will get us to OFF by 2050. There will be too many concessions to special interests and too many ways for people to game the system.
In a command-and-control economy, government can reduce the use of fossil fuels by capping. In a market economy, it can do this by imposing a fee on fossil fuels and raising their prices. I’m a life-long Democrat and I’m not afraid of government. But I firmly believe that we should make maximum use of the market first. And I’m certain that most in the public would agree with me if they understood the issue.
When I enter an expressway in my car I don’t know initially know how far to depress the accelerator pedal. I adjust it gradually to the speed I want. Same with a CO2 fee.
James Hansen estimates that a fee of $11.50 per metric ton of CO2 would raise the price of gas at the pump by 10 cents. Charles Komanoff of the Carbon Tax Center has an interactive spreadsheet that shows that this fee in Year 1 and incremented by this amount each year would reduce emissions by about 25% by Year 10. Suppose we start with this fee schedule and find in Year 6 that emissions are not on track. We can adjust the fee.
You say that a carbon fee “can’t guarantee that emissions will go down…” In above scenario I can say with very high confidence now that they will go down by Year 10 and in Year 6 will probably be able to estimate fairly accurately how far down.
I have heard business leaders like Jeff Immelt argue the importance of clear price signals for business decision makers. A system of gradually rising CO2 fees will provide much clearer signals than a cap-and-trade system, particularly if financial operators are allowed to trade futures and complicated derivatives. I believe the European experience with cap-and-trade shows price volatility. If we don’t have caps, then we don’t need trades and the abuses these will bring.
You cite the history of tax legislation and suggest that imposition of a CO2 fee may not be simpler. It can be. Just say at the outset that there will be no concessions to special interests. None. Everyone will start at the same place. Because the fees will start low and rise gradually, this should be acceptable. Remember that fee revenue will all go back to the people [except for a small administrative cost], so all users of fossil fuels will be able to raise their prices some.
Imports and exports will be a little more complicated, and I won’t explore them here.
POLITICS: When I suggested to a friend that fee-and-dividend legislation should be simple and not make any concessions to special interests, he said it would never happen. In my view, a cap-and-trade system that actually works and receives public support is even less likely in the present political environment.
Many in the public [like you and me] know that we must implement a bold energy program. Others are uneasy and think we should do something, but don’t know what. I suspect that these two groups together are a majority, but they must be motivated and led.
The main leadership must come from President Obama. [I have read the letter signed by Fred Krupp and other NGO leaders that asked him to lead.] Then, with support from organizations like EDF and the public, I believe that Congress could pass a simple energy bill that is based on carbon fee-and-dividend in the next term. But Democrats must retain control of both houses.
The likely failure of cap-and-trade this year was apparent many months ago. I’m glad it’s now off the table and we don’t have to fear irresponsible actions [eg the December deal with Ben Nelson] just before election.
WRAPUP: I was alerted to the issue of climate change when I read a book by Stephen Schneider in 1993, and I have continued to study the issue. After reading Pooley’s “The Climate War” I understand that Fred Krupp and others have been working on this issue a lot longer. I have great respect for that effort. But I still believe that a system based on cap-and-trade will be too complicated and ripe for abuse, and that it will receive too little public support to get us OFF by 2050.
Success will be much more likely if we start with a simple and fair system of carbon fee-and-dividend. Targeted command-and-control steps [eg higher CAFÉ standards] can be implemented later, if fees and market forces are not working fast enough.
This is long. If you have read this far, thank you. I welcome any additional comments you may have.
Bill Allen (908-766-2876) 07-29-10 0742P