Carbon taxes have worked reasonably well in the Scandinavian countries.  Sweden, for example, repealed one-half of its general tax and replaced the lost revenue with a tax on carbon.  CO2 emissions have gone down there, and renewables are up.

Swedes, et. al. have enjoyed greatest success with "feebates" in which relatively high polluters pay into a fund that sends the money to relatively low polluters.  Was a tremendous success with sulfur in  vehicle fuels and industrial NOx emissions.  The key is that such a system must be completely revenue neutral, with the government keep none of the money.  Used in the context of global warming, dirty coal-fired powerplants would start paying money in, while cleaner ways of generating electricity--not just wind and solar, but higher efficiency coal technologies like IGCC and PFBC--would get money back.

In terms of non-CO2 causes of global warming, old fashioned command and control is the best, as the Californians are demonstrating with their increasingly stringent diesel soot and NOx standards.  There is no reason, for example, why SF-6 in excess of the minimum technologically required amount should not simply be banned.  Existing stocks should be removed and destroyed.

Similarly, Europeans are banning -134a as a refrigerant in motor vehicles starting with model year 2011.  The U.S., or acting individually, states could do the same.  The Montreal Protocol is non-preemptive, and since -134a is neither a fuel nor a defined pollutant, the Clean Air Act is non-preemptive as well.

Bravo and Amen!  A revenue-neutral carbon tax is superior in every way, except, of course, that it's called a tax...but "chicken soup" works for me.

Exxon made over 45 billion in profit the past year.  Does the oil industry really need 18 billion from taxpayers in corporate welfare?

Do the coal, oil, nuclear, and agrifuel industries need over 50 billion in corporate welfare per year?

Don't ask for a carbon tax until that giveaway is stopped and the money is put into renewable energy and conservation.  If it's not enough to get green jobs going fast enough to save the economy, take some of the cash that would be waste propping up wall street "banks", say another 50 billion per year, and put it to work building out green energy infrastructure.  

All the way from individual home solar cogeneration panels and ground source heating/cooling systems ... to local and regional smart grids...up to wind/solar powered high speed electric train corridors that double as a coast to coast High Voltage Direct Current (HVDC) smart power grid.

Let the free market buy and sell the power and invest in high speed trains that run on the tracks.  Government should own and control the backbone, just like the federal highway system.  Commerce should be free of monopoly control and fair for all.  Big and small.

When you can buy your electricity from a wind farm 1000 miles away at competitive prices, that'll be a real free market.  No more monopoly exxon-like mob hovering over the economy like a dark cloud.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

Good discussion of the merits of cap-and-trade vs. the carbon tax. I especially like that you called BS on the whole, "But we can't create a new TAX ZOMG" argument. In my opinion, people will eventually figure out that a cap-and-trade system has the same effects as a tax - and if they don't, there are plenty of right-wingers who would be glad to help them sort it out.

I do disagree, though, on whether green infrastructure is an adequate substitute for carbon pricing. Green infrastructure creates clean alternatives to traditional dirty sources of energy, transport, etc. But I think you need carbon pricing in order for people to actually make the effort to switch to those green alternatives. In my mind, green investment and carbon pricing are complementary - green investment creates the means to lead a cleaner lifestyle, and carbon pricing creates the will to do so.

While regulation also creates such will, it can only cover certain activities, and it's a relatively blunt instrument. Regulation can't create the sort of blanket incentive to reduce GHG emissions in all areas of modern living the way carbon pricing potentially can.

Your analysis of certainty is one-sided. Like the silliest of backward-looking economic models, it assumes economic growth, even we learn that U.S. GDP fell 3.8% and Chinese electricity output fell 6% year-over-year last quarter. At a time when positive growth cannot be taken for granted, why confine the issue of certainty to the ability to set firm caps. Firm caps may be meaningless in the event that the economy continues to contract. In that case, cap-and-trade would allow business-as-usual emissions. The price of carbon would fall to zero -- and indeed it is well on its way in Europe -- removing any incentive for emissions reductions beyond business-as-usual.

By contrast, a carbon tax would maintain incentives to reduce emissions whether the economy is growing or contracting.

This to me is the most potent advantage of a carbon tax, yet out of fear of the ramifications of suggesting the prospect negative growth, or to hew to the conventions of USCAP-driven political debate, no policy analysts care to address it. That's a shame, because as green advocates we are missing an opportunity to expand key economic issues relevant to the question cap-and-trade versus carbon tax, rather than try to demonstrate to industry representatives that we understand their models and account for their concerns. Meanwhile, nobody knows better than they do where business-as-usual emissions will be in the next few years.

"I think you need carbon pricing in order for people to actually make the effort to switch to those green alternatives."

In Texas where consumers can choose their power sources, wind is in short supply, it's actually cheaper.  There's a waiting list.

Because of the nature of fuel irself, carbon based energy sources will continue to rise in price.  This dip in oil and other fuel commodities is temporary, manily due to the global recession.

Consider ground source heating/cooling, this form of energy conservation can vastly reduce utility bills, with some mass production cost reduction this and other systems like solar cogeneration panels will come down in price.

Subsidizing renewable energy and conservation with 5 cents per kwh would put the payback period to free power and heating at only a few years.  that's a powerful incentive, add in free kwhs to charge your plugin hybrid and it's like having another part time income for the family.

Gasoline and utility bills can be expensive, mortgage busting costs.  Wouldn't it be nice to retire without them someday?

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

Instead, they merely did a massive roll-out of "Green Infrastructure Loan Guarantees"

Since what we're really after is Green Infrastructure Investment.

-David Ahlport

A green tax & rebate program would provide a reliable revenue stream for development of green tech.

My biggest concern with "dividend", is that you'd need to raise the "pricing" pretty high in order to achieve a significant downward pressure on carbon intensive industries.

That said, dividending may be the only politically paletable way to do that.

But I guess the real question is what do we want the policy primarily to do?

Upward pressure on Green Tech
Or Downward pressure on Carbon Tech

-David Ahlport

ttcm

>our analysis of certainty is one-sided. Like the silliest of backward-looking economic models, it assumes economic growth, even we learn that U.S. GDP fell 3.8% and Chinese electricity output fell 6% year-over-year last quarter.

Did you read my post? I thought I refuted the certainty argument pretty well. It seems like you and I are having a robust -- agreement? I was comparing the "theoretical certainty" with real uncertainty. My point is that "Cap &  Trade" certainty can fail well short of declining economic growth.

I do disagree, though, on whether green infrastructure is an adequate substitute for carbon pricing. Green infrastructure creates clean alternatives to traditional dirty sources of energy, transport, etc. But I think you need carbon pricing in order for people to actually make the effort to switch to those green alternatives. In my mind, green investment and carbon pricing are complementary - green investment creates the means to lead a cleaner lifestyle, and carbon pricing creates the will to do so.



Clearly a case where I got the balance wrong between avoiding repetition and remembering most people don't follow the links. Key phrases "~75 percent of U.S emissions come from sources where "command and control" measures are superior to prices for reducing emissions." and "in most sectors, emissions pricing will work better as reinforcement than as the primary instrument of greenhouse-gas policy." (counting carbon trading, carbon taxes, and "feebates" all as pricing mechanisms".

The argument seems to be that what we need to do first is get through a pricing mechanism. Infrastructure spending and regulations are reinforcement. Whereas the reverse is true. What is most urgent is green infrastructure, and regulations. Carbon pricing is reinforcement.If we can do everything at once, great. But if in the real world of politics some things have to take priority over othes, then Infrastructure and regulation should be the priority.

What is most urgent is green infrastructure, and regulations. Carbon pricing is reinforcement.If we can do everything at once, great. But if in the real world of politics some things have to take priority over othes, then Infrastructure and regulation should be the priority.

Wouldn't it be more prudent to focus on promoting federal support for Green Infrastructure Banking?

And Regulations that make things harder for new development of Coal, Shale, Tar Sands, and Deforrestation.

Hell, federal support for Utility Decoupling could go a long way.

-David Ahlport

Env economics tells us that in ideal systems both price and quantity instruments will produce the exact same results when constructed efficiently. And everyone reading here knows how difficult that can be...note windfall profits and carbon price crash during Phase I of the EU ETS.

While I would otherwise be in favor of a global, harmonised carbon tax, I don't see that happening within an international framework. Given historical emissions and the right of developing countries to develop, there is hardly a chance we can ask the E5 and G77 to apply the same carbon price to their production that we in the G8 enjoy. Lacking this however, results in leakage and arguable greater emission intensity.

In this light, I am all for cap and trade in the states. Particularly given the EC's recent call to integrate any new federal C&T system with the ETS; this would be a significant step towards a global market. The only feature of a cap and trade system that truly matters with regards to environmental efficacy is the cap. Windfalls aside, grandfathering vs. auctioning produces no effect on environmental performance of the market. I am certain that given the resources in America and its culture of litigation, more than adequate historical records are available to construct a declining cap with a price floor (as mentioned, however I don't believe it needs to be "Low").

With regards to carbon pricing, I disagree that infrastructure is needed before setting a price. Industry and the private sector need a price to incentivize R&D as well as forecast the risk of continuing along a fossil fuel intensive path. Without a firm carbon price, progressive spending on infrastructure cannot and will not happen.

In paragraph 8 there is a typo regarding a cap being set too low (should be high) and thus producing a low carbon price.

Industry and the private sector need a price to incentivize R&D as well as forecast the risk of continuing along a fossil fuel intensive path.

And this is where I'd disagree.

The private sector is already doing plenty of R&D, and what's more, for foundational R&D that's often best served by Federal programs and Universities anyways.
What we need is demand.  Not supply.

Also the carbon price will never be set high enough to be prohibitive, so that's silly.

-David Ahlport

The current discussion of Standards-Setting, Cap-and-Trade, and Carbon tax is valuable and long overdue.

I want to make a case for carbon pricing over the kind of standards you are promoting.  The biggest problem with command-and-control is that it fails to allow for flexible responses to the problem.  For example, raising the CAFE standards would make cars more efficient, but doesn't encourage moving closer to your job, carpooling, or bicycling.

bill

but doesn't encourage moving closer to your job, carpooling, or bicycling.
Yes it wouldn't encourage that, but then again, neither would a weak auction, or tax system either.
So it's a rather moot point.

Besides which, the thing that does that most isn't behavior, or price signals.  It's urban planning.  i.e. Command and Control "Central Planning".
So doubly a moot point.

-David Ahlport

Correct me if I'm wrong, but it seems that in the post you linked to, the 75% figure comes from the fact that there has been no serious investment in green alternatives.  The point I get from your post is that because green alternatives aren't readily available to people, it takes a very large price signal in order to change behavior, and even then the response is suboptimal. But while I'm convinced by your argument that green infrastructure is necessary to any smart climate change program, I'm not convinced that price signals aren't also necessary in addition to green investment.

For example. Suppose we invest a lot of money into renewable electricity. This would cause people to buy more renewable electricity, which would be a good thing. But because such investment would increase the supply of renewable energy without decreasing the supply of dirty energy, overall energy supply would rise, and overall energy prices would fall. This would cause people to consume more energy, of both the clean and dirty varieties. However, if you increased the price of dirty electricity by putting a price on carbon, then energy consumption would actually shift from dirty to clean without rising overall. So in this scenario, green investment is necessary to get people to start using renewable energy, but a price signal is necessary to get people to stop using dirty energy.

(I suppose that in this scenario, you could prohibit new coal plants from being built or set a shut-down date for existing coal plants - but neither of those seem as effective as a gradual phase-out of coal-fired electricity through a ramp-up of prices.)

I do, however, agree that green investment should come first, as it seems that would help everyone adjust effectively to a higher carbon price.

I actually don't disagree that price is also neccesary - just that green infrastructure is the more critical piece. WE need both. I'd even support doing both at the same time if possible. But if we have set priorities, then yes, green infrastructure first.