Joe Romm misunderstands cap-and-dividend and my overall approach as well. First, cap-and-dividend is not a `price only' solution. Its most important feature is a descending economy-wide (upstream) cap on carbon as it enters the economy in the form of fossil fuels. This is a physical (and simple-to-administer) limit on the total amount of burnable carbon that can eventually enter the atmosphere. A rising carbon price follows from the descending carbon cap, but it is the cap that transforms the economy and makes sure we reach 80% reductions by mid-century. The market then sorts out who burns the declining supply of carbon, and which technologies (including efficiency improvements) replace carbon.

Cap-and-dividend will transform our economy and ensure that we meet our emission reduction goals on time. It should be the keystone of US climate policy, but it does not eliminate the need for other measures that Romm cites and that are included in Obama's and Clinton's programs. Those are important too, and as Romm suggests, they will keep carbon prices from rising as high as they otherwise would. But without that declining upstream carbon cap, there's no assurance that they will get us to our goals on time, and markets won't transform our energy infrastructure as quickly as they will with an inexorably declining cap.

Romm also misses my point about `taking politicians off the hook.' They're not off the hook because they can blame markets for higher prices (though that shrinks the hook compared to voting for taxes). Mainly, they're off the hook because of the dividends. As prices rise, so will the dividends. A majority of Americans will come out ahead because of the dividends, and everyone will have the chance to come out ahead by conserving. Absent dividends that automatically rise with prices, the middle class will eventually rebel against carbon reductions.

The policies Romm (and Obama and Clinton) recommend are good, and I support them. They will stimulate emission reductions and keep the price of carbon from rising too high too fast. But they are not sufficient. They require both an upstream cap and dividends to (a) make sure we meet our goals on time, and (b) protect the middle class.

Inflation.  Without lower cost energy, food and other prices will rise inexorably.  The lower the cap, the faster energy prices rise.  The dividends cannot keep up with inflation.  Why?

Because a rise in energy price is magnified all through the economy.  Sure you can voluntarily conserve, but that won't be enough to offset this exponential inflation.

As with all "free" market solutions, this will be gamed by corporations.  A real free market in energy innovation is what works.  But how to do that with a market controlled and manipulated by the monopolies?

The control mechanism that results in monoplized markets is government subsidies for the GHG spewing status quo.  Hillary wants to divert these subsidies to lower cost, renewable energy and conservation.

Dr. Huckabee proposed a billion dollar government funded prize for the developer of the first 100 mpg car.  What he doesn't realize is that  the 100 mpg plus car already exists, it's called a plugin hybrid.

Use that billion, and 10s of billions more, diverted from big oil, coal, nuclear, and fuel farming to create a mass market for these plugins with large orders for government vehicle fleets.  That will get the GHG reduction we need.  By stimulating mass production efficiency and price reduction for consumers for new, better technologies like plugin hybrids.

Follow along to geo heat exchange heating/cooling for government buildings and solar PV on government buildings and facilities, like military bases, powered by large wind machines.  And so forth.

So-called "free" market solutions don't work in an unfree market.  Free up the market with government policy and regulation and the best, cheapest, cleanest solutions will prevail.

Allow hegde fund gaming to erode the value of the currency, as with this fed lowering (during a time of enormous inflation hidden by politically skewed government statistics) to bail out the global banking system, and you end up with more wealth and power concentrated in the hands of fewer and fewer wealthy individuals.

And the general stadard of living dropping precipitously.  That is what caused the mortgage crisis, people being payed in a currency that buys less and less of the necessities of life.

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  No offense intended, but in this and other blogs, I sense a major emphasis on what is wrong with other contributions, not what is right.

  It is tempting to be entirely negative (for both Obama and Clinton, and probably Edwards) about a program that focuses on targets in 2050. But lets look at the glass as "half-full" and recognize that they are talking of auctioning caps.  So far so good.  Relevant questions are:

*    How many caps do they intend to auction in 2009? And, what do they expect the resulting price to be?
*    Will they allow carbon credits not based on under-cap emissions, so that total emissions may exceed total caps?
*    Why do they think it is better to fix total emissions, rather than the price of emissions?

  It is not good enough for candidates (or any of us) to argue general principles (or targets) far in the future. What specifically are we proposing be done next year, if not sooner?

  Credit where credit is due. Peter Barnes has been talking about "putting a price on carbon" since 2001, moreover even then he finessed the dread "carbon tax" with a "carbon fee", as a charge for polluting the atmosphere.  He got it right, before many current commentators had notice the problem.

  I also notice a tendency to construct "straw-men".  Some bloggers suggest that you can "put a price on carbon" or "set efficiency standards", but why not "both" as Pooh famously remarked when offered "honey or condensed milk" by Rabbit. By all means place a moratorium on new coal fired generation plants at the same time that a tax is being introduced that would make them unprofitable.

  I was delighted to learn that EIA thought that a carbon tax of $348 per ton in 1998 would be required to double the price of electricity.  I had calculated $250 per ton in 2006, to have the same effect ("Global Warming: The Answer.  (The Energy Dividend)", Chapter 7).  The nice thing about relying on a carbon tax is that it does not matter if EIA or my calculations are right: Introduce the tax at either level and we will either shrink demand a bit less or a bit more than estimated.  Either tax is in the right direction, and in any case will need to be raised before we have totally eliminated the use of fossil carbon.

  If we are to make progress we need to focus on what we can agree upon: It is better to charge for caps than to give them away free. O.K.?  Then we can ask: What are the arguments for auctioning caps, rather than instituting a carbon tax?  Surely it is better for investors to have the price of carbon fixed, than the quantity to be used?  Just asking. I can be convinced, but I would rather invest in a wind farm knowing the price I had to beat.

  A recent (12/28/2007) article in the Washington Post quotes Dr. James Hansen, Director, NASA Goddard Institute for Space Studies as saying that we've gone too far. "The evidence indicates we've aimed too high - that the safe upper limit for atmospheric CO2 is no more than 350 ppm".  As all readers of this blog will know current ppm is about 386, so that increasing evidence of positive feed-back loops in global warming is to be expected.

   So can we agree a program for 2009?

Will Candler

It would be good to have an actual program to push Will, right away in 2009.  But the time to really get it into the system is now.  Congressmen and Senators are meeting up with constituents right about now.

Hillary's plan to divert subsidies from fossil and nuclear industries to renewables and conservation is the program to inform elected officials about.  I would add diversion of subsidies for agribizz fuel farming to renewable and conservation too.

Carbon taxes, cap and trade, or other inexplicably complicated programs are political ambien.  They will put voters to sleep while the no new taxers demagogue green politicians into oblivion.  If cap and trade (dividend?) actually got passed it would have goals set decades from now, easily overturned by the next GOP congress, set to arrive in 2010.  

And it will be gamed by the hedge funds, raising energy prices, creating a financial disaster similar to the mortgage crisis.  In the home heating, home electricity cost, and family gasoline expense sphere.

Hillary mentioned FDR in relation to this program.  Create a mass market for plugin hybrids, geo heat exchange heating/cooling devices, solar panels, wind systems, smart grid technology, and so forth with government orders for these devices.  The funds coming out of subsidies now going to big oil, coal, and nuclear.

FDR instituted programs to create jobs and end the great depression, these green energy revolution jobs could end this global financial crisis and keep it from becoming another great depression.  

These issues ought to be set in the minds of our representatives now, the very short 2009-2010 window to get this legislation passed will be filled up with more Iraq nonsense and health care reform.  Not much room for energy policy!

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