A source close to Obama once told me, when I asked how serious the White House is about getting a climate bill this year, to watch the budget. If permit auction revenue is included, that should send a clear signal that this was no empty campaign promise.
Obama’s budget outline won’t be released until Thursday, but the New York Times has an early preview that includes this:
On energy policy, Mr. Obama’s budget will show new revenues by 2012 from his proposal to require companies to buy permits from the government for greenhouse gas emissions above a certain cap. The Congressional Budget Office estimates that the permits would raise up to $300 billion a year by 2020.
This is fairly sketchy. It doesn’t say anything about the amount of new revenues projected by 2012, which would be a tip-off about the strength of the targets and the percentage of auctioned permits the administration expects. Perhaps on Thursday we’ll get a clearer picture. But at the very least, this is an unmistakable sign that they’re serious about a cap-and-trade program with (some) auctioned permits, and soon.
Now, here’s a part I’m not as thrilled about:
Since companies would pass their costs on to customers, Mr. Obama would have the government use most of the revenues for relief to families to offset higher utility bills and related expenses. The remaining revenues would cover his proposals for $15 billion a year in spending and tax incentives to develop alternative energy.
There are lots of fans full rebating (sending back 100 percent of tax or auction revenue to taxpayers) in the Grist community. I am not one of them. I am not even particularly a fan of rebating "most" of auction revenue. The fact is, we need enormous public investments in green energy and infrastructure—far beyond $15 billion a year. Rebates should be the minimal necessary to compensate those hardest hit by higher energy prices, and the rest of the revenue should go to investments in a green economy. After all, the best way to provide long-term relief to American consumers is to accelerate the clean energy transition.
How much revenue is necessary for sufficient rebates? The Center on Budget and Policy Priorities did a study in late 2007 and determined that 14 percent of auction revenue could "hold low-income consumers harmless." The CBPP recently updated that report to show what it would take to extend the rebates to middle-income consumers. ("Policymakers have expressed interest" in handing out some money to "consumers with somewhat higher incomes." Ahem.) The whole report is worth reading, but for our purposes here’s the relevant conclusion:
Because a rebate program aimed at middle-income as well as low-
income households would go to more people and provide larger rebates, it would require more
funding. The Center’s low-income rebate program can be funded with about 14 percent of the total
market value of the emissions allowances under a cap-and-trade program (or 14 percent of the
revenues from a carbon tax). A rebate that would offset the average purchasing power loss of
consumers in the next higher quintile would require about 35 percent of the total value of the
allowances and one to offset the average loss of the middle 20 percent of the population would
require about 55 percent of the total allowance value.
Now, people can disagree about the relative policy value of rebating money back to the middle 20 percent of the population vs. having 20 percent more auction revenue to plow into, as the CBPP puts it, "research and development on alternative energy, conservation efforts and energy efficiency investments, transition assistance for workers and communities harmed by the shift to a less carbon- intensive economy, adaptation to the impacts of climate change here and abroad, green job training, and offsetting impacts on federal, state, and local budgets." I happen to think the latter represent far better investments than the former.
But I can’t see any policy rationale for spending more than 55 percent of the revenue on rebates. Given, 55 percent is "most," so maybe that’s what Obama’s people have in mind. Still, the paucity of their proposed investments indicates that they might have a bigger percentage in mind. That would be, in my humble opinion, a considerable wasted opportunity.
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Comments
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hapa Posted 12:34 am
23 Feb 2009
taking pay-go as gospel is not a neutral or objective political position.
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David Roberts Posted 2:15 am
23 Feb 2009
grist.org
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Ted Nace Posted 3:03 am
23 Feb 2009
Help build CoalSwarm -- a shared informational resource on coal and alternatives to coal.
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David Roberts Posted 3:12 am
23 Feb 2009
Are you asking rhetorically? I thought this stuff was fairly straightforward.
grist.org
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ce1907 Posted 4:05 am
23 Feb 2009
we will be serious if we put something in budget
"something" in budget -- with no detail whatsoever
pre-planned applause
game for suckers
sadly, the devious S*mmers/Orsz*g crowd does not have the same vision of a clean energy economy that you do
think CCS, nuke subsidies, big transmission lines tailored to utility wants
$15 billion per year sounds about right
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SallyVCrockett Posted 4:15 am
23 Feb 2009
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biodiversivist Posted 4:17 am
23 Feb 2009
"...Since companies would pass their costs on to customers,..."
This is likely to turn into another version of the corn ethanol clusterf*ck--one step forward, two back.
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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David Roberts Posted 4:34 am
23 Feb 2009
grist.org
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hapa Posted 4:37 am
23 Feb 2009
i'm completely flummoxed. i don't know how to read this except as zero sum:
Now, people can disagree about the relative policy value of rebating money back to the middle 20 percent of the population vs. having 20 percent more auction revenue to plow into [other good stuff]. I happen to think the latter represent far better investments than the former.
But I can't see any policy rationale for spending more than 55 percent of the revenue on rebates.... That would be, in my humble opinion, a considerable wasted opportunity.
how is it not zero sum. you're saying that the money is "wasted opportunity" as in "opportunity cost" -- as in the other project is dead because "the money" was not available.
there's no requirement anywhere that says 55% of whatever instead of 25% of whatever means less for other projects. it's politics that would cut the other project budgets.
see what i'm saying.
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ce1907 Posted 4:53 am
23 Feb 2009
my point is simply this: O has no plan
probably does not want a real plan. ever
what O has is a PR machine
and a staff from B*ngaman/B*ucus world devoted to the B*ngaman/Ba*cus world view
to recap: no meaningful CO2 limit before 2035
"research" and "investment" to pump up the existing energy establishment (utilities/mining)
the rest is just keeping the lefties at bay with cheap talk
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David Roberts Posted 4:53 am
23 Feb 2009
grist.org
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hapa Posted 5:06 am
23 Feb 2009
it's a NATIONAL GOVERNMENT.
it is responsible for the money supply. of virtually the whole world! and it has dominating influence on lending rates.
it's not a small business that has to raise prices or find loans directly for everything it wants to do!
where do you get this thornton wilder small town finance model from!!!!!!
certainly not the republicans. they "cut taxes" when they feel like it.
don't get me started on the craziness -- or overwhelming partisanship -- of government austerity measures during a depression.
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ce1907 Posted 5:11 am
23 Feb 2009
best way to get a commitment to spend on green infrastructure is to put a fence around related revenue
it is a question of what is practical; philosophy has nothing to do with it
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hapa Posted 5:56 am
23 Feb 2009
"democrats aren't allowed to deficit spend or allocate general revenue to new projects" is not a philosophy.
"let the bankers run us into the sea while they watch safely from subsidized gold yachts" is not a philosophy.
"economic growth will cure global warming" is not a philosophy.
"energy efficiency and affordable healthcare are both economic losses" is not a philosophy.
"tax cuts for no economic gain should be permanent" is not a philosophy.
"government spending crowds out private investment even when private investment is negative" is not a philosophy.
you don't want to own the debate, own the terms of debate, don't want to say, "energy efficiency, government RD&D, and adaptation funding pay for themselves many times over in future revenue or prevented losses," fine.
that's YOUR philosophy.
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ce1907 Posted 6:16 am
23 Feb 2009
Hope tomorrow is a better day
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Ted Nace Posted 7:45 am
23 Feb 2009
My question of how exactly the government is going to invest the hundreds of money in utility bill carbon fees so as to replace existing coal plants wasn't rhetorical. Among the items on your list -- "tax credits, feed-in tariffs, high-speed rail, public transit, federal procurement" -- only tax credits could possibly by regarded as such an offsetting investment. Feed-in tariffs are not a public investment. As for federal procurement, that has nothing to do with investments in electrical capacity (unless you're talking about having the feds build a bunch of solar/wind for federal agencies like TVA). High-speed rail and public transit investments also do nothing to get rid of existing coal. I'm sure that when Midwestern and Southern utility customers find out that a big part of the reason their utility bills are skyrocketing is that monies from them are being spent on public transit and rail, they'll certainly rebel. They'll justifiably ask transit and rail projects to be financed in some other ways. Thinking that heavy levies on utility customers in coal-heavy states can be a great bonanza for "good stuff" all over the country is just a ticket for a big fat rate-payer revolt.
Help build CoalSwarm -- a shared informational resource on coal and alternatives to coal.
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David Roberts Posted 8:00 am
23 Feb 2009
As for utility customers finding their bills skyrocketing, you seem to have missed the point of the post. Low-income, low-middle-income, and middle-income customers could all be made completely whole with 55 percent of auction revenues. That leaves 45 percent for investment. Unless you insist on rebating 100 percent, thus eschewing investment revenue for no policy rationale I can discern.
grist.org
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hapa Posted 8:28 am
23 Feb 2009
i mean there's really no question that private spending on clean tech will expand immensely now that the finance sector has been liberated of its old dependency on money-for-money's sake. why they'll be hurling money at people trying to disrupt current sunk costs and force outstanding fossil facilities into default. for years to come!
look at me philosophy-ing.
but how terrible, the future has to wait, there are two seats in the senate that must. be. appeased. and there's no way to communicate with the public how the energy transition and related remediation are the path out of the current desert.
i'd like to be able to say we could bring taxes on the rich back to the older balance but -- we can't -- so i guess we'll just have to settle for reconfiguring the whole economy and all the infrastructure without them kicking in -- and without borrowing money -- because that will be so much easier.
how long before GDP gets somewhere tolerable? 5 years?
when does employment get somewhere tolerable? longer?
when do we need to have our game plan in place and going? before then.
so yes i'll be better tomorrow. much less grumpy. but only if fiscal prudence bento boxing is a sweet-talk program.
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Jesse Jenkins Posted 8:44 am
24 Feb 2009
Jesse Jenkins
_____________________
WattHead - Energy News and Commentary
http://watthead.blogspot.com
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Jesse Jenkins Posted 8:53 am
24 Feb 2009
You might be interested in checking out the Breakthrough Institute if this is your thing. We haven't been afraid to push for smart investments, even if they come from deficit spending. And my colleagues Teryn Norris and Adam Zemel recently wrote a featured column at HuffingtonPost calling on Obama to overhaul the federal budget system to allow for capital budget accounting to differentiate between short-term spending (which would follow pay-go in general) and long-term investments (which would not). You can see it here, "Obama Needs an Economic Philosophy."
Jesse Jenkins
_____________________
WattHead - Energy News and Commentary
http://watthead.blogspot.com
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Jesse Jenkins Posted 8:57 am
24 Feb 2009
"Will Obama Put Real Money on the Table for Clean Energy?"
Jesse Jenkins
_____________________
WattHead - Energy News and Commentary
http://watthead.blogspot.com
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ce1907 Posted 9:09 am
24 Feb 2009
(saying it is "smart" grid, but nothing smart required, and no talk of feed-in tariff)
(saying needed for big solar and wind
but not identifying specific transmission lines)
essentially funding for the blank check (now being prepared; see hubbub over pushing aside states to site lines; NEPA next) to make whatever is "right"
which we will learn by September just happened to turn out to be what will help big utilities maintain high consumption and utility income
and help the coal companies that supply the utilities
big money for CCS "research"
ditto the mining and utilities
nuke subsidies
to make it bipartisan
what will not be in the budget
insulating homes and office buildings
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