According to Sen. John Kerry, no.

There has been a lively discussion of this topic on James Handley's blog at carbontax.org. My last comment, responding to Dan's 11/19/2009 comment, was blocked, but is replicated below:

Dan,

Thank you for the calculations. This is excellent.

One point of clarification, re "As I understand, Ken would have the entire cost of wind power subsidized from the carbon fee revenue." If $100/MWh wind power is competing against $50/MWh fossil fuels, then wind would only need a $50/MWh subsidy (not $100/MWh) to be cost competitive. So the $10/MWh carbon fee could actually support 0.46 TWh of wind power (not 0.23), nearly 12 percent of total U.S. generation. The total increase in national generation cost would be about $23 billion (not $11.5 billion), corresponding to a retail rate increase of almost 6 percent (not 3 percent).

The $23 billion cost is unrelated to the choice of policy instrument -- it is simply the technology cost of replacing 12 percent of U.S. fossil fuel generation (at $50/MWh) with wind energy (at $100/MWh). That money has to come from somewhere. When wind energy is one or two percent of total generation, the money can come from government financing (grants or tax credits), but probably not when it gets up to 10 or 20 percent. The problem with government subsidies, like "cash for clunkers", is that the subsidy ends when the cash runs out. With financing derived from carbon pricing, the financing source is depleted only as carbon is phased out.

At current growth rates, it would take perhaps another decade for new wind energy to reach the 12 percent level, at which time the costs will probably be significantly below $100/MWh, and may have attained grid parity. (PV is also quickly catching up with wind.) Of course, we would like to accelerate that transition, not just in the U.S., but globally. New-source subsidies are primarily intended to facilitate low-carbon energy expansion in the early phase of this transition.

The key point that I hope you (and your readers) recognize is this: An initial carbon fee of $10/tCO2, with revenue recycling, will give renewables approximately a $10/MWh price advantage over coal; whereas new-source subsidies, financed by carbon fees starting out well below $10/tCO2, could provide new renewables a price advantage on the order of $100/MWh immediately -- not ten years from now.

If low-carbon energy prices do not come down, as expected, then high technology costs will lead to increasing electricity rates as low-carbon energy gains market share. In this case, a minor fraction of revenue might appropriately be used to sustain particularly disadvantaged consumers; but giving relief to poor people is not the same as distributing most or all carbon revenue to all consumers regardless of need.

Regarding energy conservation incentives, one of the most-cited examples of pricing impacts on conservation is high gas prices. But the conservation incentive from gas prices is already well in excess of $200/ton (and rising), far higher than any contemplated carbon price. Clean-vehicle technology is limited more by lack of efficient financing incentives than by lack of a carbon price. But pricing instruments such as appliance feebates could also create targeted incentives for energy efficiency.

Regarding NG substitution for electricity, new-source subsidies are based on emission performance, not technology type, so new NG generation would gain an immediate price advantage over coal, as would renewables.

Regarding "giving a boost to wind power developers that greatly exceeds their needs," again, the policy is technology-neutral, and the $50/MWh subsidy that wind power now gets from government subsidies and tax credits may be difficult to sustain as wind energy gains significant market share. Also (responding to your first observation), RPS standards, like cap-and-trade, are more "brittle" than pricing instruments in the sense that they impose a predetermined target no matter how high the cost, and do not provide incentives for exceeding the target no matter how low the cost. (On that point, I think you might agree.)

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If I began this column with "some advice for my friends in the nuclear industry," you'd probably brace for a big fat cream pie in the industry's face. I've been a vocal critic of the industry that presided over what Forbes Magazine called "the largest managerial failure in American history." So before offering my advice, I should explain. 

Four years ago, I was appointed to the Executive Board of Energy Northwest (formerly WPPSS), which operates Columbia Generating Station, the Northwest's one remaining nuclear plant.  I accepted the appointment in part because I believe the climate crisis is so severe and imminent that it will force a reexamination of nuclear as an energy option. (It has been over 30 years since a new nuclear plant was ordered in the U.S.). I actually do have friends in the nuclear industry now -- extraordinary people who have taught me a great deal about technology and human organization.

So I offer this advice in good faith: If you believe in nuclear power as a solution to global warming and fossil fuel dependence, you should be leading the charge for a strong national climate policy, with tight, science-based limits on carbon emissions. Nothing would do more to improve the prospects for nuclear power.

However, you should NOT condition your support for national climate policy on lavish subsidies from taxpayers. That sounds like a ticket to Nuclear Boondoggle 2.  We're still paying for the original movie, and there's no audience for a sequel.  If you want a legitimate shot at a nuclear renaissance, keep it simple:  Work to pass a hard cap on carbon and bear your own financial risk.

Our failure to adopt a national climate policy thus far represents a huge and unfair competitive handicap for nuclear power (and all nonfossil-fueled energy sources). The price of energy today does not reflect the exorbitant costs of climate disruption and geopolitical turmoil. 

These are real costs that we pay now in dollars and more precious currencies: the costs, for example, of the widening forest health crisis -- the dollars we pay to fight fires, the lungs we damage by living near them, the loss of habitat and regional identity when the fall colors fade in New England and the aspens die in the Rockies. Or the costs we pay to defend oil supplies, or to clean up after more intense storms and floods, or to build water storage projects to hold the rain that used to fall as snow -- all of them attributable in part to our use of fossil fuels, but not accounted for in the price we pay for those fuels.

Paying these costs amounts to an enormous public subsidy to coal and oil. As long as carbon dumping in the atmosphere is free, and the costs of that pollution are external to the price of fossil fuels, energy markets are artificially tilted against nuclear (and efficiency and renewables.) The best way to level the playing field for nuclear power is to end this subsidy by passing a national climate policy. Cap the carbon, and we'll see what nuclear can do.

This approach is consistent with fundamental values that are deeply ingrained in the nuclear industry: performance and accountability. Nuclear operations are -- by necessity -- rigorous, outcome-driven meritocracies. They are incessantly measuring, evaluating, and striving to identify problems and reduce risks. If they didn't, they would make terribly costly mistakes that would take down the whole industry. 

A national climate policy that fully accounted for the costs of fossil fuel dependence by capping climate pollution would create a fair competition for carbon-free energy. Winners and losers in that competition could emerge on their merits. Nuclear would have a fair chance to prove its value. That hard-nosed, performance-based approach is right up the alley of the people I know who operate Columbia Generating Station. 

So I find it odd when the people who represent the industry in Washington D.C., like the Nuclear Energy Institute, propose a very different approach, based not on merit and performance but on massive public subsidies. They run their plants like Admiral Rickover's nuclear navy, but they want the government to throw money at them like a drunken sailor. 

Look what's on the wish list they're shopping in Congress right now:

Sweet! You have to look at this in context to fully appreciate the audacity and irony.

Congress is tied up in knots over the prospect of offering a very limited public option for health care to a small number of Americans.  Ideological opponents in the Senate fear this is the camel's nose under the tent for socialized medicine. And yet the nuclear industry is proposing a full-tilt single-payer approach for nuclear financing to attract the votes of the very Senators whose free-market principles preclude support for a public option in health care legislation?

And how does this proposal square with the lessons of the Great Recession? What NEI is asking for here is socialization of risk on an epic scale -- shielding the industry from market evaluations of risk by foisting it off on taxpayers. Isn't shucking and jiving and playing shell games with risk exactly what touched off the financial crisis and the 10 percent + unemployment that ensued? And this time, it's not a matter of backing into a bailout because existing institutions are too big to fail. NEI is proposing to prospectively create huge government liabilities in order to foster the development of a new nuclear industry that would stand above market judgments of risk and competitiveness ... and all this to garner votes from Senators who espouse fiscal restraint?

Look, why don't we meet halfway here? I'm not a fan of nuclear power, but I'll concede that it merits another look in light of the climate emergency -- the urgent imperative to decarbonize our energy system on a massive scale. A cap on carbon emissions will do more to improve the competitive prospects for nuclear than all the public subsidies they are likely to win from a Congress that's turning from stimulus mode toward deficit reduction. 

And it's fair.  If nuclear advocates really believe in their technology, why don't they join the fight for a carbon cap and compete for the market space it creates without passing off all the risk to taxpayers? 

To be honest, I'd bet against the nuclear industry in a fair competition like that. It's not because I think they're incompetent; on the contrary, they're among the most capable people I know. It's because I think the technology is inherently too risky, complicated, and expensive. I believe there are cleaner, cheaper, more reliable options that can scale to the climate challenge -- energy solutions we WANT the rest of the world to have. 

But I'd expect the nuclear industry, if it really believes in its product, to take the other side of the bet. And I'd expect Senators who believe in competition, accountability, and fiscal discipline to give the nuclear industry a fair shot, not a free ride at taxpayers' expense.

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A stone marker in Rugby, N.D. identifies the town as the "Geographic Center of the North American Continent." No marker identifies the state as one of America's top two or three in wind-power potential. Yet North Dakota's vast expanses and steady winds endow it with the capacity to generate more than half as much electricity as all 50 states currently produce from all sources combined, according to a recent Harvard study of U.S. wind energy potential.

Indeed, that potential, equivalent to 2.6 trillion kilowatt-hours annually, is almost 100 times greater than the current output of the state's coal- and lignite-fired generators. And while tapping a goodly share of that capability would require a great many giant turbines -- as many as one per several square miles across the state -- each tower would only occupy a small footprint, leaving the land largely intact for agriculture and other complementary uses. Jobs erecting the towers and servicing the turbines would be another plus.

So how come wind power accounts for just 2 percent (XLS) of North Dakota's electricity generation -- barely matching wind's national share? One obvious reason is lack of transmission capability to reach load centers. But another is the extraordinary cheapness of coal.

In 2007 (the last year for which we have data), the coal and lignite burned in North Dakota power plants cost just under a dollar per million Btu, on average. Picture 12 cent a gallon gasoline, and you get a sense of just how inexpensive that coal is, in equivalent-energy terms.

That's why coal accounts for 93 percent of the state's power production, and why North Dakota is able to export almost two kilowatt-hours of electricity for every one it consumes -- mining, delivering, and burning the stuff is dirt cheap.

Transitioning from coal to wind-powered electricity is probably the biggest single step we can take to dial back our CO2 emissions, and North Dakota and other High Plains states are well-positioned to lead the charge. The best way forward is not to further subsidize wind farms -- Washington already does this through the 2.1 cent/kWh production tax credit -- but to level the playing field with coal by adding an emissions charge to fossil fuel prices.

You have to marvel, then, at the passivity of the state's senators in the ongoing debate over climate legislation. As Bill Chameides of Duke's Nicholas Center on the Environment reported recently, Sen. Kent Conrad has been far more focused on preserving jobs in the state's oil, gas, and agricultural sectors than in helping wind energy compete with dirty coal. His fellow Democrat, Sen. Bryan Dorgan, has inveighed against the cap-and-trade architecture in the Kerry-Boxer bill, warning that "the Wall Street crowd can't wait to sink their teeth into a new trillion-dollar trading market in which hedge funds and investment banks would trade and speculate on carbon credits and securities." Yet Dorgan has offered no alternative means of putting a price on carbon emissions, without which development of wind farms and other clean energy will remain at a snail's pace.

There is a path to a carbon price without Wall Street speculation, of course, and that's a carbon tax that's raised steadily and predictably over time. Distributing the revenues raised by the carbon tax to households on an equal, per capita basis, as Alaska has done for decades with its North Slope oil revenues, would protect families against the rise in energy prices and also ensure that "big government" gets no bigger -- both major concerns in the Plains States as elsewhere.

A revenue-neutral carbon tax, or carbon fee-and-dividend as some prefer to call it, would seem to be just the ticket for Senators from wind-rich states who rightly fear climate change and market speculation. North and South Dakota both celebrated their 120th anniversary last week as members of the union. What better way to harken back to that independent pioneer spirit than to spit in the face of the special interests and help a revenue-neutral carbon tax win a place in the national climate policy debate?

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Copenhagen, U.S.A. December 7

Cross-posted from The Bellows.

One of the things about politics is that solutions always seem easier to implement and more promising before they stand a real chance of being implemented. People who have for one reason or another fallen in love with the idea of a carbon tax watch the difficulty Congress is having negotiating a passable climate bill and ask why we don't just pass a carbon tax. It would be so easy! It's just a tax! Pass it, price carbon, and bada bing, you're done.

But of course, a carbon tax looks like a clean, simple option at the moment because no one is invested in securing protections or advantages for themselves because a carbon tax isn't on the table. The moment it looked as though Congress might actually consider and pass a carbon tax, every single interest that has pushed for free carbon credits or other assistance would take on the carbon tax, demanding exemptions or offsetting subsidies of some kind, and generally producing the exact same kind of mess for a carbon tax bill that we have now with a cap-and-trade bill.

It's worth thinking about this when reading things by people supportive of geoengineering as a solution to the climate change problem. They tend to look at the difficulty the world has had putting in place a system that will succeed at reducing emissions, conclude that the world will fail at reducing emissions sufficiently, and argue that geoengineering is the only way forward.

Now, this is somewhat off base in that it ignores the progress that is actually being made on emission reductions, despite the scope of the problem. Europe is reducing emissions, America may well pass a climate bill within the next year, and even key emerging market nations are rapidly adjusting their positions to accept and move forward on emission reduction measures.

But the question that stands out most to me is just why these geoengineering advocates think that it will be easier to do grand scale, highly unpredictable projects that will affect the earth's climate in a significant fashion in just a short amount of time than it will be to continue on the path we're currently following, negotiating for emission cuts. Really, have they thought about this?

Begin with the fact that politicians are extremely risk averse. Who wants to be the guy in charge of the effort to build the who-knows-how-many-billions-of-dollars 18-mile long sulphur dioxide tube? The downside risks are enormous relative to the potential upside benefits.

And why have they not noticed that the public isn't exactly enamored with intellectuals at the moment, particularly where global warming is concerned. Think about the conspiracy theories being spun on the right at present and then extrapolate out to what might happen if the United Nations determined that massive amounts of gas ought to be pumped into the upper atmosphere.

But the real failing is the inability to consider the way that various interest groups are likely to act. In the best case scenario for geoengineering, costs are likely to be focused on certain groups and certain locations, and those groups may respond to the proposed solution by doing anything from demanding compensation to threatening war, depending on their severity. If risk models indicate that certain particularly bad outcomes might result from the project with certain probabilities, and they will, the potential for those outcomes will be negotation flashpoints, potentially leading to intractable divisions between countries.

Geoengineering seems like the easy approach now, because it's not on the table. There is no hysterical battle between proponents and opponents, no op-ed bickering between scientists and faux scientists, no global debate on who would and should bear which costs associated with whatever solution is agreed upon. But as soon as it became a real possibility, a fierce debate would rage. And, if one major geoengineering solution were tried and it failed, it is difficult to see how another attempt could win support, and at that point, of course, we'd have lost the ability to address climate change by reducing emissions when it would have helped.

I think it would be irresponsible not to continue studying the issue and looking for potential geoeingineering fixes, but I think that anyone suggesting that we should abandon the effort to cut emissions in favor of a geoengineering approach has not thought the matter through. It should be considered the last ditch effort, only pursued seriously when it is clear that emission cuts will not prevent catastrophic warming.

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BFFs: German Chancellor Angela Merkel and French President Nicolas SarkozyPhoto: Chesi - Fotos CCPARIS - The leaders of Germany and France called Friday for the United Nations to support a carbon tax on imports from countries who fail to back international efforts to fight global warming.

French President Nicolas Sarkozy and German Chancellor Angela Merkel wrote to U.N. Secretary General Ban Ki-moon arguing that states that fail to back a deal at a climate summit in Copenhagen in December should be held accountable.

"It would be unacceptable for the efforts of the most ambitious countries to be undermined by the carbon emissions released by lack of or insufficient action by other countries," reads the letter released by the French presidency.

"For that reason, it should be possible to put in place appropriate adjustment measures targeting the countries that do not implement or fail to support this accord," they wrote.

The two leaders also pleaded for the creation of a world environmental agency, with as a first step the emergence of new institutions that would "encourage the emergence of a body of international environmental law."

The Dec. 7-18 meeting under the U.N. Framework Convention on Climate Change (UNFCCC) aims to set down action for tackling heat-trapping carbon emissions beyond 2012, when the provisions of the Kyoto Protocol run out.

Representatives of the world's 17 biggest carbon polluters kicked off a week of high-stakes talks on climate change Thursday with a discussion aimed at bridging differences ahead of the Copenhagen talks.

Sarkozy, whose government is to introduce a carbon levy on domestic fuel emissions in 2010, has repeatedly argued for a European Union carbon tax on imports from regions with poor environmental standards.

Germany had yet to come out in favour of a carbon tax on imports, which a German minister has warned could be perceived by developing nations as a form of "eco-imperialism."

The European Union prides itself on being at the forefront of the climate fight.

But developing countries such as India and China argue rich countries ought to shoulder the main responsibility for mitigating global warming as they have historically emitted most of the greenhouse gases at the root of the problem.

The French and German leaders said the New York talks should secure "binding and ambitious commitments from developed countries" in line with a Group of Eight target to slash emissions by 80 percent by 2050 compared to 1990 levels.

Developing nations, meanwhile, should pledge to "reduce the growth in emissions compared to current levels" within an agreed timeframe, and to publish "carbon sober growth plans" by 2012.

They also called for world leaders to agree on ways to provide financial and technological support for developing countries in their struggle to rein in carbon dioxide emissions.

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Gregory MankiwThe New York Times turned over some of its valuable opinion space to Harvard economics professor Gregory Mankiw last weekend, so that he could discuss the merits of various carbon policies. His record on that score is not great, and he doesn't have any special training or experience on the subject, but as far as Big Media is concerned, being an economist makes you a wise commentator on literally any policy issue. All you need is theory!

Mankiw's main point is that a refunded carbon tax would be preferable to a cap-and-trade system, because ... economists prefer it. If they can't have that, they'll take a fully auctioned cap-and-trade system, which would be functionally equivalent to a tax. Obama campaigned on such a system, but now the ACES bill has been corrupted by "powerful special interests" and "most" of the allowances are given away, so Obama should veto the bill. Blah blah. It's familiar ground; Ryan Avent does some good work bashing it.

I want to hone in on one of Mankiw's background assumptions, a deep-rooted and ubiquitous assumption in economics that doesn't get discussed enough.

Mankiw makes the familiar economic point that it's good to "internalize an externality" (make polluters pay for the environmental damage they cause) by charging for carbon emissions. Also familiar is his follow-on point: whether we tax emissions or do auctioned cap-and-trade, it's crucial to return all the revenue the government gathers directly to taxpayers by reducing other taxes (either income or payroll). This so-called "tax shift" would be revenue neutral.

Now, I've argued at some length that under ACES most of the allowance value is not, in fact, "given away to powerful special interests." In fact, the bulk of the allowance value is returned to consumers. But for Mankiw, that's almost irrelevant. For mainstream Chicago School and neoliberal economists, it is a baseline assumption that money is more productively deployed by the private sector than by the government. Left to its devices, the market deploys capital efficiently (the "invisible hand" and all that). When government collects taxes and spends revenue, the capital is deployed less efficiently. Taxes result in "TK" -- "reduced economic activity" meaning "reduced growth of GDP." Government spending cannot compensate for that reduced growth, because governments aren't as smart as markets.

Insofar as government wants to secure a social benefit -- say, a clean environment or public health -- by a) constraining the private market through regulation, or b) spending tax revenue on public programs, it necessarily reduces economic productivity and GDP. There is no way around that trade-off. If you want a cleaner environment, you have to pay for it. You can't get something for nothing. No free lunch. Etc.

That's the root economic assumption. That's why economists (and elites who view the approval of economists as a mark of Seriousness) favor a tax shift: it is the absolute minimum government intervention required to secure the social benefit of reduced CO2 emissions. It does not "adversely affect the tax code" -- econospeak for raising taxes. It disturbs the precious, fragile, magical free market as little as possible.

It's impossible to exaggerate how much this assumption shapes U.S. policy discussions. Anyone who proposes a regulation or public investment is inevitably faced with the kneejerk Blue Dog response: "we can't afford that." We have a deficit, you see, and since gov't action by definition reduces economic productivity and GDP, it increases the deficit. We can't have government do one thing unless it stops doing something else -- it's a zero-sum game.

You won't be surprised to hear that I think this assumption is wrong. Both regulation and public investment, when done properly, can increase economic productivity. Their effect on GDP is uncertain, but GDP is an absurd measure of public welfare anyway. On more sensible measures of public welfare, regulation and public investment can produce net gains.

Most importantly, carbon pricing (whether carbon tax or cap-and-trade) cannot do the job on its own. If complementary policies are ruled out, we're dooming ourselves to failure. (I'm going to make this point at much more length soon. Aren't you excited.)

Obviously this kind of fundamental dispute in economics won't get resolved in a blog post. But everyone fighting for vigorous, multifaceted government action to address climate change needs to be aware of it -- aware of the fact that they are ultimately fighting against the core faith of mainstream economics. As long as they accept that faith, the best they can argue is that tackling climate change will only moderately slow the economy and reduce GDP. And when you're fighting a battle this important, "moderate pain" is a pretty poor rallying cry.

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UPDATE:  Predictably, Swift Boat smearer Morano has made Hansen's post his top story at ClimateDepotted, again revealing that Hansen's recent attacks are helping the deniers and delayers.

Much as I am happy to devote many Climate Progress posts to publicizing Hansen's leading edge climate science analysis (see links below), I am unhappy to have to waste any time at all debunking his bleeding edge climate policy analysis (see "Memo to Hansen: Your opposition to Waxman-Markey is ill-conceived and unhelpful. There isn't going to be a carbon tax nor should there be. Get over it and move on" and "Memo to Hansen 2: Why is the country's top anti-science blog reprinting your stuff?").

Still, his arguments need debunking because he is mostly recycling myths that others are pushing - and with the country's top climate scientist putting his name on this collection of false and misleading statements, they will no doubt be parroted by yet more people.  Hansen has just written, "G-8 Failure Reflects U.S. Failure on Climate Change" for The Huffington Post.

Let me go straight to his needlessly (and pointlessly) provocative attacks on the "counterfeit climate bill known as Waxman-Markey," which is filled with right-wing and left-wing myths - and very little understanding of the basics of either this bill or cap-and-trade systems.

Hansen claims "For all its ‘green' aura, Waxman-Markey locks in fossil fuel business-as-usual and garlands it with a Ponzi-like ‘cap-and-trade' scheme."  Not so.  I have previously explained why W-M takes us sharply off of the BAU emissions path over the next decade, probably reducing coal use more than 25% by 2020 (see "Game changer, Part 2: Why unconventional natural gas makes the 2020 Waxman-Markey target so damn easy and cheap to meet").  And then it requires a 42% emissions reduction by 2030 and an 83% reduction by 2050, which will drive a massive energy transition over the next few decades.

The global economy is indeed a Ponzi scheme, but this is the first piece of legislation by any major country that makes a serious effort to end that Ponzi scheme.

Hansen then lists "a few of the bill's egregious flaws":

No.  The EPA doesn't have the "ability to regulate CO2 emissions from power plants."  EPA might well use its recent endangerment finding to get that ability [partially and eventually], but it hasn't asserted that regulatory capability yet.

More importantly, the CAA authority is most readily translated into regulating emissions from new power plants.  Regulating CO2 emissions from existing power plants would take a long time, engendering a great deal of litigation.  As John Podesta, former Clinton Administration Chief of Staff and now CEO of CAP, recently said, "it would be difficult for the EPA to enact a CO2 cap and trade without congressional cooperation."

Moreover, for a man who wants to "phase out coal emissions over the next two decades," as Hansen does, this is a pretty pointless complaint.  The Obama EPA was certainly never going to use the endangerment finding to do anything like that.

This "EPA can solve the problem on its own" myth is so commonplace that I will do separate post next week addressing it.  I certainly agree with NRDC that the bill should be changed to allow EPA to retain its CAA authority, but I wouldn't list this among the bill's top 4 flaws, let alone put it first.

Hansen's next "egregious" flaw in W-M:

Not quite - though the first part this statement is the bill's biggest flaw (and the only truly serious objection Hansen raises here).  The 2020 target is inarguably too weak from a scientific perspective (although using this deep-recession/near-depresssion year as the baseline and not the bill's 2005 base year is a critique that should be beneath Hansen).  That unfortunate outcome came about principally because the Bush administration did nothing for eight years, which meant that any U.S. climate bill passed now that starts in 2012 was never going to have a 2020 target like Hansen (and developing countries) wanted, which would have required the equivalent of a 40% cut in 8 years.  I guess Hansen and others can trash the Obama administration and leading environmental legislators like Waxman and Markey for that, but I see that as worse than pointless.

[Note to Hansen:  Congress was never going to pass a carbon tax that would "phase out coal emissions over the next two decades."  You can pretend it was -- and vent your misplaced wrath at cap-and-trade proponents -- but even if a carbon tax could pass Congress, it would ultimately be little different from W-M in its outcomes, and would lack the targets needed to move the international negotiations process forward.]

And it is really quite out of character for Hansen to make such a factually untrue assertion as

and sabotages even these by permitting fictitious "offsets," by which other nations are paid to preserve forests - while logging and food production will simply move elsewhere to meet market demand.

Of the more than 1000 Clean Development Mechanism projects funded and sold to date as international offsets (CERs) under the Kyoto process, 3 have been forestry.  Hansen has repeated an absurd and rather destructive myth, which will no doubt resonate around the blogosphere.

Why destructive?  Because one of the single best things in the entire W-M bill is that utterly separate from the offset provisions, it sets aside allowances to create a huge pool of money for the United States to contribute to a new international effort to stop deforestation using national-accounting based methods - a strategy explicitly designed to stop the very problem Hansen (falsely) claims the bill will accelerate.  Indeed, the funding in W-M is so great that the United States contribution alone is aimed at stopping deforestation equal to some 720 million metric tons of carbon dioxide - equal to 10% of U.S. emissions in 2005 - which is on top of the emissions reductions mandated by the bill.

Finally, the offsets complaint is a bit odd in a piece whose basic thesis is that the first-ever attempt by the United States to take climate action - which includes a requirement that this country cut greenhouse gas emissions 42% in two decades and 83% in four decades - is the entire reason for the failure of rich and poor countries to agree on an emissions pathway this week.  Hansen writes

With a workable climate bill in his pocket, President Obama might have been able to begin building that global consensus in Italy. Instead, it looks as if the delegates from other nations may have done what 219 U.S. House members who voted up Waxman-Markey last month did not: critically read the 1,400-page American Clean Energy and Security Act of 2009 and deduce that it's no more fit to rescue our climate than a V-2 rocket was to land a man on the moon.

That, of course, is poppycock.  The delegates haven't read the bill, and they certainly only care about the targets.  They could care less about the other 1300 pages of the bill that so bother Hansen (which he hasn't bothered to read, or even read a summary of, as we'll see).  Yes, the 2020 target is too weak, but that is true of Japan's new 2020 target - and frankly even Europe's proposed target wouldn't satisfy what many developing countries have asked for.

More to the point here, the Kyoto process created international offsets, and the Europeans are committed to keeping them (and improving quality and oversight). Whatever complaints the developing countries have about Waxman-Markey, the fact that it makes use of international offsets is not high on their list.  In fact, they want a mechanism by which rich polluters help them develop with clean energy.

I am not a big fan of offsets, but after much research and discussion with leading experts, I've come to the conclusion that they do not vitiate the targets (see "Do the 2 billion offsets allowed in Waxman-Markey gut the emissions targets?").  The bill is written in a manner that should allow the United States to strengthen oversight of international offsets, but in any case, it is difficult to blame the United States for the current state of the CDM.  And again, what the bill does on global forest preservation is not an "egregious flaw" but a central contribution to stopping global warming.

Hansen's third "egregious" flaw:

Its cap-and-trade system, reports former U.S. Undersecretary of Commerce for Economic Affairs Robert Shapiro, "has no provisions to prevent insider trading by utilities and energy companies or a financial meltdown from speculators trading frantically in the permits and their derivatives."

This is an utter falsehood.  Indeed, it is a repackaged version of a falsehood that anti-scientific anti-clean-energy Mississippi Gov. Haley Barbour put forward (see "Barbour utterly tries to scare public with wildly implausible Chinese scheme to manipulate the emissions market").  So let me repeat for the record:

There are many provisions (and realities) that would stop "insider trading" [whatever the heck that is in this case] and "a financial meltdown from speculators trading frantically in the permits and their derivatives."

First off, the permit market is huge.  Even purchasing 2% of the permits in, say, 2015, would probably cost $1 billion.  And speculators would have to purchase several times that to significantly run up the price.

[As an aside, Hansen should really like speculators because they increase the price of the permit]

Second, it will be so easy to meet the targets for at least the first decade (see here) that the "real" price of a permit will probably be slightly below the auction price (which has a floor).  So it will be highly unprofitable to buy lots of permits, which would run up the price, in an effort to make money selling those permits sometime in the future.  I can't imagine a plausible scenario in which this would make economic sense for any entity even if they could get away with it, which they cannot.

Third, the bill requires EPA to promulgate regulations to cover the auction.  As CQ's summary of the bill explains:

So it would be very difficult to do any major purchasing in secret, any major "insider trading," and virtually impossible to acquire a large fraction of the permits.  Indeed, in this context, "insider trading" looks to be just a collection of meaningless scare-words.  Hansen can do better.

Fourth, the bill has a whole section devoted to "Carbon Market Assurance."  As the WRI summary describes it:

The Federal Energy Regulatory Commission is given regulatory authority over allowance and offset markets and allowance derivative markets (Sec. 761, pg. 449). The President is also delegated authority to instruct agencies to take on pieces of market regulation based on existing authority as long as regulations are consistent with this section. The draft makes it a federal crime to commit fraud or manipulate any carbon market. In addition, the regulations facilitate and maintain market oversight and transparency and require market monitoring to prevent fraud, manipulation and excessive speculation.

That section explicitly includes derivatives, with further oversight by the Commodity Futures Trading Commission.

Fifth, the bill has a Strategic Reserve (with tons originally skimmed off from each year's total target) that an entity can purchase permits from if the price sees a short-term run up of about 60%.  So again the bill will is designed to prevent someone from cornering the market.

So this charge by Shapiro and Hansen is utterly false.  Now Hansen apparently hasn't bothered to look at the bill or any of the many summaries.  I would note that essentially all of these oversight provisions were in the original March draft - so they should not be a surprise to anybody.

Since Hansen really doesn't follow this sort of policy issue closely - even though he opines on it - I can understand why he might just parrot Shapiro.  But Shapiro is, as Hansen notes, former U.S. Undersecretary of Commerce for Economic Affairs and co-chair of the U.S. Climate Task Force.  So he should know better.  Then again, one of the two (!) advisors listed for the U.S. Climate Task Force is "Kevin Hassett, Director of Economic Studies for the American Enterprise Institute."

Now AEI remains a leading anti-climate-action, anti-clean energy right wing think tank.  For instance, AEI continues to assert (without any supporting evidence), "No matter what you've been told, the technology to significantly reduce emissions is decades away and extremely costly," and it continues to parrot utterly false denier talking points like "For the last decade, warming peaked, and has recently declined: we're back to the average temperatures that prevailed in 1978″ (see "AEI: Still crazy with denial and delay after all these years").  I simply can't imagine any group that wants to be taken seriously on climate policy having a senior AEI staffer as an advisor.  So for now, the analysis of "The U.S. Climate Task Force" and its leadership should be ignored by anyone who wants to be taken seriously on climate policy.

But Hansen isn't content to quote Shapiro's falsehoods once.  No, his fourth and last egregious flaw is:

It fails to set predictable prices for carbon, without which, Shapiro notes, "businesses and households won't be able to calculate whether developing and using less carbon-intensive energy and technologies makes economic sense," thus ensuring that millions of carbon-critical decisions fall short.

Uhh, no.  In fact, the bill does set a very predictable (and rising) floor on the auction price.  And again, since the 2020 target is so easy to meet with abundant, low-cost domestic clean energy - like efficiency, conservation, renewables, and fuel switching from coal to gas - I think the carbon price is likely to hug the floor price through 2020.  But that's what I think - not what the industry believes.

Hansen has this argument exactly backwards.  One of the biggest plusses of a cap-and-trade over a tax is that participants tend to think that the cost of meeting the targets - and hence the cost of the permits - will be much higher than they actually turn out to be.  So they do more than is necessary, especially once they find out how easy it is to cut emissions. That is why in previous cap-and-trade programs, like sulfur dioxide, the targets were achieve faster and cheaper than anybody expected.

Remember the industry-funded economic models show very high permit prices.  That's why the industry ends up acting as if the permit price is going to be high.  I already know medium-sized energy-intensive companies that have done bupkes on energy for decades who are now scrambling to figure out what this bill means for them.  They will inevitably put in place basic energy efficiency and carbon mitigation strategies of the kind that I detail in my book Cool Companies (see "Cool Companies, Part 1: How the best businesses boost profits and productivity by reducing greenhouse gas emissions" and "The United States of Waste").  That will be repeated by hundreds of different companies, ultimately leading to far more emissions reductions at a far lower cost than all the economic models project.

So it is sheer nonsense - and the exact opposite of the truth - for Hansen and Shapiro to claim this bill will ensure "that millions of carbon-critical decisions fall short."

Yes, those who like carbon taxes think that predictable prices are preferable.  But I'm with Nobelist Krugman, who writes, "The claim that carbon taxes are better than cap and trade is, in my view, just wrong."  In particular:

One objection - the claim that carbon taxes are better than cap and trade - is, in my view, just wrong. In principle, emission taxes and tradable emission permits are equally effective at limiting pollution. In practice, cap and trade has some major advantages, especially for achieving effective international cooperation.

Not to put too fine a point on it, think about how hard it would be to verify whether China was really implementing a promise to tax carbon emissions, as opposed to letting factory owners with the right connections off the hook. By contrast, it would be fairly easy to determine whether China was holding its total emissions below agreed-upon levels.

Now Hansen can keep pointlessly pushing his carbon tax if he wants to.  Heck, he can argue the merits of Betamax and John McCain and Adam Lambert, if he wants.  But trashing Waxman-Markey and its supporters based on recycled myths touted by others remains ill-conceived and unhelpful.

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It's an article of faith that cap-and-trade will raise our energy costs, but it's not necessarily true.

The ubiquity of this faith makes clear that the Smart People who write, talk, and vote about CO2 policy don't really understand the issues. A quick discussion, and then some math to clarify.

There are two core problems with the theory that carbon pricing schemes will raise energy costs:

Discussion on both points follows.

Taxes vs. wealth transfers

First, a statement of the obvious: no one likes to lose money, and we're all hypocrites, me included. Speeding tickets I have to pay are a drag on the economy and a diversion of police resources from more socially urgent activities; speeding tickets you pay are but a small drag on your income, offset by massive intangible social gains.

This love of money and hypocrisy is no less true for businesses. My reasoned argument against speeding tickets for Sean (or as I call them, "fun taxes") is different only in degree from the coal company that argues CO2 regulation will be a tragedy for low-income rate payers.

So let's agree to be more honest. If taxpayer X suddenly has a new $1,000 cost, it's only a drag on the economy to the extent that the money disappears into non-productive activities. If the Fun Police give me a $200 ticket and then set my money on fire, it's a clear economic drag. On the other hand, if those proceeds go to fund public safety measures that we all benefit from, then my personal economic pain is partially/wholly offset at a macro level. This is no less true with carbon regulation. If a coal company suddenly has a billion dollars worth of annual penalties it has to pay, but that billion dollars is used to bring an equivalent volume of clean energy forward, the wealth transfer isn't necessarily a drag on the economy.

(I'm obviously over-simplifying a complicated story, but directionally, if the effect of a carbon regulatory regime is to replace high capital cost / low variable cost coal with an equivalent MWh production of high capital cost / zero variable cost renewables, then you could well end up with bankrupt coal companies but cheaper power and a stronger economy in the long run.)

This suggests that as we assess carbon policy, we shouldn’t be asking whether the price is high enough to impose meaningful penalties, but whether the result of the payment is a socially-benefical wealth transfer - as opposed to a socially-detrimental Money Fire.  The basic problem with the vast majority of carbon regulatory models is that they fail to ask this question, even as they fall in love with the proceeds that CO2 auctions will send back to political bodies for redistribution. Political bodies historically have a certain preference for Money Fires.

Statics vs. dynamics

While it's analytically easy to show possible scenarios wherein a CO2 regulatory model yields an economically-neutral wealth transfer, it's impossible to guarantee that outcome, for the simple reason that none of us have a crystal ball. I can articulate plenty of scenarios wherein dirty MWh are displaced by clean ones, with the economic pain necessary to shut down the former is sufficient to incentivize construction of the latter. But I can't guarantee that those possibilities will materialize. (As a friend at NREL once told me, "the great thing about writing laws is that you see behavior change immediately. The lousy thing about writing laws is that you don't have any good way to predict how behaviors will change.") Humans are too clever, and our behavior too dynamic, to allow accurate predictions.

That's fine, except that when it comes to carbon regulation, we end up falling into one of two traps -- either assuming omniscience (e.g., "This bill will change behavior as follows") or stasis (e.g., "Assuming no change in behavior in response to this bill, economic impacts are as follows"). A classic example of this is in the "scoring" process that the Congressional Budget Office uses, wherein tax breaks are calculated based on their cost to the treasury. CBO analysis assumes that the only impact of the bill will be to reduce tax receipts -- with no offset for increased demand for product and corresponding growth in personal and corporate income tax receipts. (Or, for that matter, any monetization of the social benefit sought by the tax break.)

The result is that all our predictions are wrong. Moreover, at least in my experience, the assumption of a static world is much more common, meaning our predictions are generally skewed in an unfavorable direction. Speeding tickets do make me drive slower. Likewise, putting a price on CO2 emissions will cause power plants and industrials to look for lower-carbon ways to stay in business. And yet we frame our analyses as if the only impact of a $20/ton CO2 price is a $20/ton increase in the price of power. It's one thing to acknowledge our inability to predict the future, but something else entirely to presume that the human instinct not to lose money will suddenly go away once a carbon bill is passed.

Stay tuned!

Here's the point: When you factor in both of these issues and run some pretty simple math, it becomes apparent that good carbon policy has the potential to be a massive wealth transfer that is damned near economically-invisible. Which in turn means that the hand-wringing and political horsetrading going on in DC right now as we debate CO2 policy is, while perhaps politically necessary, ultimately irrelevant. That's a cause for some optimism.

Math coming in part II of this post.

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In a laudable attempt to draw more elite media attention to the Waxman-Markey bill -- which, like all things "environmental," has not exactly been a preoccupation of the political cable/blog/op-ed axis -- Washington Post business writer Steven Pearlstein makes a hash of a few important facts.

Pearlstein says the Waxman-Markey bill will create "create dozens of new government agencies with broad powers to set standards, dole out rebates and tax subsidies, and pick winning and losing technologies." By my math, "dozens" means 24 or more, but I can't even come up with a handful. EPA will monitor CO2 and issue permits. FERC will regulate the carbon trading market. The Department of Energy will establish efficiency standards, do new research, and expand smart grid and electrical vehicle support programs. These aren't new agencies.

There is a new Carbon Storage Research Corporation [S114(b)] run by EPRI. There's an Offsets Integrity Advisory Board [S731] to consult on quality and standards for offsets. There might at some point be a clean energy and/or infrastructure investment bank to help finance new green projects. But most of the regulating is being done by existing departments and agencies.

Pearlstein's hyperbole is par for the course these days. Lots of people have taken to exaggerating the complexity and opacity of the bill based primarily on its page length (one wonders how many have read it, or even a summary). Waxman-Markey does a great many things (thus the many pages), but most of them are described fairly clearly and constitute reasonable evolution of existing regulatory authority. This isn't to say there aren't complexities -- important questions remain to be answered about coal plant performance standards and EPA authority, for example -- but the bill is not the impenetrable Rube Goldberg mechanism so many in the press caricature.

Pearlstein is mixed up about the choices in climate policy as well. Apparently Paul Portney, former president of Resources for the Future, told him there are three options in reducing emissions: a carbon tax, a cap-and-trade system, and other regulations, standards, and investments (so-called "complementary policies"). Not sure if Portney said exactly that, but if he did, he's mixed up too. That's like saying your sandwich choices are chunky peanut butter, creamy peanut butter, or jelly.

Then Portney/Pearlstein adds to the confusion by saying Waxman-Markey uses a mix of all three policies, but that's not right either. The carbon title of the bill is a cap-and-trade system, full stop. It's a declining cap and tradable permits. Features that might have made it slightly more tax-like, e.g. 100 percent auction of permits, were rejected. There's no tax in the mix.

The cap-and-trade system is, in fact, packaged in a large bill with a whole range of complementary policies. But why should expect (or want) otherwise? Climate policy cannot live by carbon pricing alone. [See, from the Carnegie Mellon Electricity Industry Center: “Cap and Trade is Not Enough: Improving US Climate Policy” (PDF), or Holmes Hummel, “The Essential Role of Complementary Policies in Climate Policy Design” (PPT).]

The climate policy stool has three legs: a price on carbon, complementary regulations and standards, and public investment. It would be unwise to pick one at the expense of the others just to make a bill tidier or fewer pages in length. If anything, the third leg -- investment -- needs to be bulked up in the bill.

All that said, Pearlstein is absolutely to be commended for recognizing that:

Something very important has been happening this week -- more important, if you can believe it, than what Nancy Pelosi knew about waterboarding or why Kris Allen scored his upset victory on "American Idol."

So damn true. Let's hope Pearlstein can get a few more of his colleagues interested. One of the things that would have made the bill better is a lot more sunlight, and that only comes with relentless (and accurate) press exposure. After all, he's dead on about this:

Given the bill's scope and complexity, just getting it out of committee is a monumental achievement on the part of its principal authors, Democrats Henry Waxman of California and Ed Markey of Massachusetts. To do so, they had to make numerous compromises and concessions to powerful special interests and regional voting blocs that would be most affected by the transition to a system in which companies and consumers are forced to pay, indirectly, for the environmental damage they cause. Waxman and Markey are wily and experienced politicians, so it is a fair assumption that the bill their committee passed last night in a 33-25 vote is pretty close to what the U.S. political system is now willing to accept.

Producing a better bill than Waxman-Markey would require a few changes in the political landscape, one of which is a political media that takes the bill and the issues it addresses seriously.

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Well look at this! Just as a compromise was announced on the Waxman-Markey bill and it looks set to move out of committee, along come a couple of Republicans with a carbon tax bill (Bob Inglis [SC] and Jeff Flake [Ariz], co-sponsored by Dem Dan Lipinski of Illinois -- none of whom are on the House Energy Committee).

I've had people ask me whether this is a good-faith effort, whether Dems might be wise to "call their bluff" and support the bill.

Um. No. And No.

This bit right here should tell you all you need to know about a) the bill's chances of passing, and b) the sponsor's effort to garner support for it:

Of course, there are ways to help the people and industries likely to be hardest hit. Waxman-Markey contains some. And of course it's perfectly possible to offset some of the impact while preserving "incentive to change."

But why bother engaging with this substantively? It's not a substantive proposal. It's got no chance in hell of going anywhere. It's meant to confuse, divide, and derail.

If Republicans were serious about pricing carbon -- the core of any long-term climate strategy -- they'd say, "we'd prefer to do it this way, but we'll work with you to tweak your bill. We can find a compromise." But they don't. They say, we want this exact thing with these exact features, and if you don't support us we'll walk. Watch: whatever bill makes it to the floor will get not a single Republican vote. Mark my words.

It's not serious, and it's not worth wasting time on.

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British Columbia held its provincial election yesterday, with the province's carbon tax playing a big role--and coming out a big winner. Aside from the economy, probably no issue was more important than the ruling Liberal Party's climate plan, passed last summer and subsequently the opposition New Democratic Party's (NDP) centerpiece campaign issue.

A carbon tax backlash failed to unseat British Columbia Premier Gordon Campbell in the province's May 12 elections.Image courtesy Liberal Party of British ColumbiaThe Liberals won, leading in some 48 district races and giving Premier Gordon Campbell a third consecutive majority government. That should ensure the survival of the carbon tax, called one of the best in the world by our partner in wonkery Alan Durning over at Sightline.

I don't know all the ins and outs of Canadian politics, where the traditionally progressive and environment-minded NDP came out against the tax, which was created by the typically right-of-center Liberals. But the Canadian press reads the election as an affirmation of the climate plan.

Says the Vancouver Sun: "Election victory gives Campbell economic, environmental mandate"

From the Toronto Globe and Mail:

It wasn't an entirely green night, as the Globe and Mail noted the B.C. Green Party won only 8 percent of the vote province-wide, less than it got in the 2005 election.

The carbon tax debate began last summer when oil prices were at a peak, which didn't help its popularity. The NDP tried to harness that frustration, saying the tax was too hard on the economically strapped poor. That strategy earned criticism from prominent green groups like the David Suzuki Foundation.

Vancouver alt-mag the Tyee spoke to David Cubberly, a regional NDP pol who disagreed with his party's strategy:

Says the Carbon Tax Center, an advocacy group:

I can't think of an American statewide (governor or otherwise) election in which a climate plan became the first or second-most important issue. That's not too say it couldn't happen soon.

--

Related: Read Grist contributor Charles Komanoff's take.

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Carbon emissions pricing met its first big electoral test this week, as British Columbia voters rewarded BC premier Gordon Campbell, who last July instituted North America's first major carbon tax, with a third four-year term.

News service AFP reported that with more than 60 percent of the votes counted, Campbell's Liberal Party held a 46-42 lead over the opposition New Democratic Party, whose leader, Carole James, denounced the carbon tax throughout the two-month campaign and promised to replace it with a cap-and-trade scheme.

Elections aren't referenda, as I hastened to note when the Liberals were routed in Canada's national election last fall. But that outcome was tied to the Liberal candidate's hapless campaign style, compounded by his backing away from the carbon tax plank in his party platform. In the BC campaign Campbell stood squarely behind his carbon tax. Indeed, voters appear to have rewarded the Liberals for sticking to principle as much as for the substance of the carbon tax itself.

Here's how AFP put it (emphases added):

The contrast with the U.S. is stark. Not a single governor here publicly backs a carbon tax. Few of the major environmental organizations have anything positive to say about a national carbon tax, and most are still cheerleading for the carbon cap-and-trade alternative no matter how loose the cap or polluter-friendly the trading.

The BC carbon tax that took effect on July 1, 2008 is modest, equating to just $7.50-$8.00 (U.S.) per ton of CO2. However, it is to rise each year through 2012, reaching the U.S. equivalent of around $11.75/ton on July 1 and, in July 2012, around $23.50.

A U.S. carbon tax at that level would raise petrol prices by approximately 23 cents a gallon and national-average electricity prices by around 1.7 cents a kilowatt-hour. (Virtually all power generation in British Columbia is hydro-electric, so their carbon tax effectively exempts electricity.) The BC tax is revenue-neutral, with revenues returned to taxpayers through personal income and business income tax cuts.

In a recent e-mail to the Carbon Tax Center, American climatologist and climate campaigner James Hansen said, "The important thing is to get on the right policy track at the beginning - the policy must attack the fundamental problem, that dirty fossil fuels are the cheapest energy because they are not made to pay their costs to society."

Yes, carbon taxes must reach high levels and go global quickly. But for now let's celebrate that the first major jurisdiction - and party - to choose the right policy track has seen its vision recognized and its courage rewarded.

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Tax! Cap! Tax! Cap! Pant ... I find it really hard to believe, but the perennial "carbon tax vs. cap-and-trade" debate is still going on. It goes on and on and on and it never changes. It's like everyone's following a script now.

I've been over this territory so many times that I hardly know what to say any more. So here's what some other people are saying:

Joe Romm started this off by asking James Hansen to drop his quixotic and politically toxic campaign against the Waxman-Markey climate/energy bill. Kevin Drum chimed in, supporting Romm.

Michael O'Hare responded with a heated defense of carbon taxes (or as he calls them, carbon charges), premised mainly on a basic misunderstanding of Romm's post. (Joe wasn't defending cap-and-trade as such against the carbon tax alternative -- he was defending Waxman-Markey, including all its complementary policies, against the tax alternative.)

Ryan Avent says taxes and caps are not that different in effect and only one has a chance of passing, so carbon taxers should STFU. Andrew Sullivan responds that he thinks the tax will work better, and so no, he won't STFU. Kevin and Ryan both respond to Sullivan, pointing out that he seems to be suffering from some serious misunderstandings about cap-and-trade systems. (In this he has, to put it mildly, plenty of company).

Meanwhile, Yale 360 has rounded up a group of "experts" to weigh in on the issue, though several of the purported experts seem to understand very little about the policies and/or the politics at hand. The submissions from Jeffrey Sachs and Roger Pielke Jr., in particular, are so poorly argued as to defy explanation. Michael Tobis says that Jeffrey Sachs' argument for a tax "makes sense" to him, but Kevin points out that Sachs' argument is somewhat hampered by the fact that virtually every single sentence is head-slappingly false.

Is that it? I think that's it. For now, anyway. I'm sure the entire roundelay will repeat itself soon enough.

Rather than tread all this ground yet again, here are what I take to be the three key points:

• The policies are, or can be made, roughly equivalent. With a tax you get certainty about prices but uncertainty about emission reductions; with a cap you get the inverse. You can tweak a tax to shift the balance; you can do the same to cap-and-trade. Both can be weakened with loopholes and favors for special interests. Political reality being what it is, either is likely to impose a fairly low price on carbon for the first decade or so. Which means ...

• In the short-term, complementary policies will spur the most action. The never-ending, chin-stroking carbon pricing debate perpetually overlooks this basic fact. (See: “Cap and Trade is Not Enough: Improving US Climate Policy” [PDF] from Carnegie Mellon.) What's going to knock us off the status quo path in the next decade is, above all, new targets and standards for energy efficiency. Also: a renewable energy standard, a low-carbon fuel standard, smart-grid standards and funding, government procurement policies, direct government investment, etc. etc. These are the policies that could get things rolling immediately. And guess what?

• The Waxman-Markey bill contains those complementary policies. Also, it exists. Both these characteristics set it apart from the Alternative Universe Carbon Tax Pony Bill. Carbon taxers seem blinded by a misguided obsession with the specific mechanics of carbon pricing. By bashing Waxman-Markey, they are aligning themselves with people who want to block the best opportunity for climate/energy action in a generation. They're aligning themselves with people who want to block it not in favor of a pony alternative, but in favor of doing nothing, to protect corporate donors. In many cases, they are adopting the exact same rhetoric as conservative obstructionists.

If taxers want to engage productively, they should advocate for tax-like features in the cap-and-trade provision of the Waxman-Markey bill -- price floors and/or ceilings, fully auctioned permits, expanded banking and borrowing, etc. Bashing the whole bill in order to argue endlessly and fruitlessly in favor of a hopeless alternative, the advantages of which exist entirely in the whiteboard fantasies of economists, is politically daft.

The focus should be twofold: a) get complementary policies up and running quickly, and b) get some kind of carbon pricing scheme in place, which in future years -- as the depredations of climate change become clearer to the public -- can be tweaked and improved. Passing the Waxman-Markey bill would achieve both.

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Climate Wire (subs. req’d) reports today:

NASA’s leading climate scientist says he hopes that climate legislation proposed by Democratic Reps. Henry Waxman (CA) and Edward Markey (MA) to introduce carbon emissions trading to the United States fails. He says lawmakers should abandon cap-and-trade initiatives altogether and implement a simple carbon tax instead….

“Trading of rights to pollute … introduces speculation and makes millionaires on Wall Street,” Hansen said in his keynote lecture at Columbia University’s 350 Climate Conference held here Saturday. “I hope cap and trade doesn’t pass, because we need a much more effective approach.”

Hansen also stands opposed to so-called “cap and dividend” proposals that would introduce pollution trading and a near full auctioning of emissions, with proceeds from the auctions going back to the public. Instead, Hansen proposed a “tax and dividend” approach to tax fossil fuels at the point where they are extracted from the ground, to set a firm price on carbon. Proceeds from the tax, rather than from the auctioning of allowances, would then be distributed to consumers.

“It could be implemented in one year, as opposed to decades with cap and trade,” he said. “The bureaucracy is very simple.”

Why oh why do even smart people like NASA’s James Hansen think that there is such a thing as a “simple carbon tax”? Have you folks ever looked at the friggin’ tax code?

Seriously, nothing bugs me more than this notion that Congress would ever pass a “simple” carbon tax, even if it were politically feasible, which it most certainly is not. Well, one thing bugs me more — people who attack the first serious chance we have to get major energy and climate legislation because they are operating under the severe misimpression that the political system of this country might embrace a tax.

Nobelist Al Gore, who also embraces a 350 ppm target like Hansen, combines political realism with his climate science realism, which is why he takes the exact opposite view that Hansen does — see Gore on Waxman-Markey: “One of the most important pieces of legislation ever introduced in the Congress … has the moral significance” of 1960s civil rights legislation and Marshall Plan.

Let’s be very clear here, since there are obviously a great many smart people who keep pushing a carbon tax instead of cap-and-trade, who are wasting a lot of time tilting at windmills, so to speak, when they should be building them instead (with the help of Waxman-Markey):

Let me elaborate on these points.

1. A carbon tax, particularly one capable of deep emissions reductions quickly, is a political dead end. There simply aren’t any major politicians — in office – who support one. So I’m not certain who is going to introduce this imaginary “simple carbon tax” as a bill, and I’m quite certain very few are going to vote for it. The Obama administration campaigned on a cap-and-trade, and they are the only ones who can change the direction of US climate policy, the only ones who could move us to a tax. Since they aren’t going to do that, it is a monumental waste of everyone’s time for people like Hansen to rail against cap-and-trade. You might as well howl at the moon or look for gold at the end of the rainbow.

The weird thing to me is not that Hansen refuses to combine policy/political realism with climate science realism. He is, after all, a climate scientist — the one I admire most greatly (see “American Meteorological Society gives James Hansen its top honor“) — and not a politician. The weird thing to me is that Hansen refuses to be internally consistent and advocate policies that match his scientific statements. I have blogged on this at great length here: “An open letter to James Hansen on the real truth about stabilizing at 350 ppm.”

Let me repeat the key point: It is utterly inconceivable that you could stabilize atmospheric concentrations anywhere near 350 ppm by using a carbon price as your primary mechanism.

A price isn’t what is needed to stop building any new coal plants and shut down every existing one in 10 years in rich countries and 20 years everywhere else — and replace all that power (plus growth) with carbon-free generation and efficiency. Plus you have to build all the necessary transmission.

Indeed, I can’t imagine how high a price would be needed but it is probably of the order of $1000 a ton of carbon or more starting in 2010. Talk about shock and awe. Remember, we are talking about a carbon price so high that it actually renders coal plants that have been completely paid for uneconomic to run. And once you stop new demand and start shutting down existing plants, the price of coal will collapse to almost nothing.

Once you start building all of the alternatives at this unimaginable pace, bottlenecks in production and material supply will run up their costs. The collapse in coal prices, making existing plants very cheap to run, together with the run up in the price of all alternatives will force carbon prices even higher.

But, in any case, if you want to replace all those existing coal plants with carbon free power that fast, again the carbon price is almost beside the point. How are you going to site and build all the alternative plants that fast? How are you going to site and build all the power lines that quickly? How are you going to allocate the steel, cement, turbines, etc? How are you going to train all the people needed to do all this?

There is only one way. That is a WWII-style and WWII-scale government-led mobilization. As Hansen and his coathors conclude in their landmark paper (see “Stabilize at 350 ppm or risk ice-free planet, warn NASA, Yale, Sheffield, Versailles, Boston et al“):

The most difficult task, phase-out over the next 20-25 years of coal use that does not capture CO2, is Herculean, yet feasible when compared with the efforts that went into World War II.

Well, we didn’t accomplish the WWII mobilization through a pricing mechanism. So if you support 350 ppm — and as readers know, I have various issues with that target — then you need to be honest with the public about what the right policy approach is and not go about A) offering policy proposals that won’t get you 350 and B) criticizing others who may not embrace your target for advancing a different approach that also won’t achieve 350 ppm.

2. A carbon tax that could pass Congress would not be simple. I would have thought this was obvious were it not for the large number of very smart people who believe otherwise. Again, look at the U.S. tax code. Let’s also look at what happened with the BTU tax. There were granted:

… a steady string of energy-tax exemptions to key lawmakers, special pleaders and important industries. Farmers won exemptions on diesel fuel for tractors. Majority Leader George Mitchell won an exemption for home heating oil, an important commodity in New England. Clinton himself agreed in an April telephone call (from a Congressman at a pay phone in Oklahoma) to change the way the tax would be collected on natural gas, electricity and oil.

And as for rip-offsets, strong political forces are insisting upon a cap-and-trade system that includes large amounts of offsets to substitute for a fraction of the emissions permits/allowances that carbon-emitters need to buy. I am not a fan of rip-offsets (see “The one simple change that could vastly improve Waxman-Markey: Sunset the rip-offsets“) — although they are not as bad as many people think, as I will discuss in later posts.

But why wouldn’t those same strong political forces insist that carbon-emitters be able to pay some of their carbon tax through the purchase of offsets? It would be very “simple” to introduce that into this imaginary carbon tax bill. But it would create a bureaucracy comparable to the one needed for Waxman-Markey.

It’s the golden rule, folks. If you have the gold — in this case, the lucre from selling unsustainable, polluting energy — you get to write some of the rules.

And if Hansen thinks that it would be politically possible to raise carbon prices that high without diverting some of the money to affected industries, again, I’m not certain what country he is living in.

And again a carbon price isn’t going to solve the problem by itself. You need a bunch of complementary measures that complicate the legislation. I have been meaning to write about a recent Carnegie Mellon University report that came to that exact conclusion, but until I get around to that, you can look at the Green Car Congress piece on it, “CMU Paper: Market-Based Mechanisms for CO2 Reduction Will Be Insufficient to Attain Mid-Century Goals.”

Hansen sort of acknowledges this:

But ultimately, an effective response to climate change will require a variety of actions, he argued. That includes a new, much stronger international agreement, action by U.S. lawmakers to finally put a price on carbon through a tax, and new policies designed to ultimately phase out fossil fuel consumption.

“We’re going to have to make the decision to leave coal in the ground” or burn it only at power plants utilizing carbon capture and sequestration technology, Hansen said. “Perhaps the best chance is in the courts,” he added.

Courts? Yeah, that’ll get it done in the time frame needed.

Fine, “we need new policies designed to ultimately phase out fossil fuel consumption.” Waxman-Markey isn’t perfect, but it has some of those policies and it’s a start.

3. A carbon tax is woefully inadequate and incomplete as a climate strategy. Let me just focus on one issue here — the need for targets and timetables. A climate bill must have binding targets and timetables if it is to achieve any desired emissions or concentration goal. That is especially true because we need to have a credible piece of legislation to convince the rest of the world that we are serious about emissions reduction.

Thus the “simple carbon tax” bill would have to have binding, specified targets and timetables similar to (if not stronger than) Waxman-Markey. It would have to have some sort of mechanism for constantly adjusting the tax to make sure emissions goals were being met. The obvious mechanism is to simply auction the permits and let the market decide what the price is. Otherwise, you have to develop an equally complicated bureaucracy that keeps changing the carbon price based on past performance and that keeps trying to guess what future price is needed to achieve the binding targets and timetables.

So again, whatever this carbon tax bill would be — at the end of the day it would probably look a lot like a cap-and-trade system with exceptions and allocations for certain industries, international and domestic offsets, various complementary measures like energy efficiency standards, and some complicated oversight board but constantly adjusted the price.

I can appreciate Hansen’s frustration with the politics and bureaucracy surrounding a cap-and-trade. But I think that is far more an inevitable outcome of the nature of this legislation and the nature of our political process than it is inherent in the policy measure. And the notion that the political system would somehow accept a much higher price of carbon through a tax bill but not a cap-and-trade bill is, again, naive.

The Climate Wire story notes:

Public remains apathetic about climate Hansen also said climate activists need to be more vocal and strategic in getting the public to lobby harder for action to reduce emissions of CO2 and other greenhouse gases. He pointed to recent public opinion polls showing that among Americans’ concerns, climate change ranks nearly last in the order of priority, well behind the economy and the United States’ dependence on foreign oil.

“It’s hard for people to realize that we have a crisis, because you don’t see much happening,” he said. “If people understood the implications for their children and grandchildren, they would care.”

Well, again, a surefire way to make sure that you don’t see much happening is to keep campaigning against Waxman-Markey, because that is the only serious comprehensive energy and climate legislation around.

Hansen also urged conference participants to press the United States to negotiate a robust international agreement by the final negotiating round of U.N. climate change talks this year at Copenhagen. He said the new agreement has to be much more far reaching than the Kyoto Protocol, which he deems to have been entirely ineffective, and the Copenhagen talks should emphasize action by the United States and China.

I can’t argue with that, except to say that the world would be much happier — much more willing to join us in climate action — if we passed something like Waxman-Markey than if we passed the imaginary simple carbon tax.

No, Waxman-Markey won’t get us to 350-450 ppm, but it takes us off of the business as usual path, which is the most important thing, and it accelerates the transition to a clean energy economy, which is the second most important thing, and it establishes a framework that can be tightened as reality and science render inevitable. That is, after all, the same way we saved the ozone layer. The original Montréal protocol provisions would not have done so. But they got tightened overtime.

Hansen is right that it can take a few years (not decades) to establish a cap-and-trade system. That’s why we need to start now.

Related Links:

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Are carbon taxes a viable option?

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Although it’s not his regular beat, Kevin Drum blogs sensibly about carbon policy from time to time. Recently, though, in an otherwise agreeable post about the fecklessness of opponents of climate change legislation, Drum offers up a narrative that is both fairly commonplace and also riddled with misconceptions:

It also goes to show how fleeting conservative support for “market-oriented solutions” like cap-and trade is. A lot of the liberal enthusiasm for cap-and-trade over the past decade has been based on the idea that it might be more acceptable to conservatives than a straight tax, but obviously that hasn’t turned out to be the case. Basically, they just don’t want to do anything, full stop.

I get the point of this story. It’s supposed to demonstrate the bad faith of opponents of climate change legislation. “We gave you what you asked for, and this is the thanks we get?” While I’d hardly argue the general point, there are a couple of problems with the narrative.

First, a nitpick: a carbon tax and a cap-and-trade system are both “market-oriented solutions” to climate change. Occasionally carbon taxers like to pretend otherwise, in the hope that “market” has become an even dirtier word than “tax.” But, technically speaking, this bit of revisionism doesn’t wash. A carbon tax puts a price on carbon directly and lets market participants decide whether they’d rather pay the tax or reduce emissions. A cap and trade system puts a limit on the total amount of carbon and lets market participants decide whether they’d rather bid for carbon permits or reduce emissions. If these systems sound similar in principle, it’s because, broadly speaking, they are. They’re both market-oriented (or, alternatively, price-oriented) ways of reducing pollution.

More problematically, this narrative implies that liberals came around to a fundamentally conservative policy approach primarily as a sop to their political opponents. But carbon pricing isn’t a defensive crouch on the part of environmentalists — it’s the substantively correct position. The interest group known as “people who don’t want to roast the planet” came around to market-oriented environmental policies because they’re the best shot we have at curbing carbon emissions. Obviously I’m eliding a considerable diversity of opinion here, but the fact is both liberals and conservatives who support carbon pricing do so on the merits.

Next up, there’s the subtext that environmentalists secretly prefer a carbon tax, but they made a pact sometime in the ’90s to back the horse they thought could win. In reality, a large majority of people from whichever end of the political spectrum couldn’t begin to explain how either a carbon tax or cap-and-trade system works, much less parse the differences between the two. Of the significantly smaller group that is fluent in the details, you can find good-faith partisans of all sorts of different policies.

Finally, it bears mentioning that the central conceit of the narrative — cap and trade is more politically acceptable than a straight carbon tax — happens to be true. I’m pretty sure no one ever said cap and trade would unite all interest groups for a rousing chorus of kumbaya. After all, most of the organized opposition to climate change legislation isn’t ideological in nature. The issue, as ever, boils down to money. Any meaningful restrictions on emissions — carbon tax, cap and trade, command and control, whatever — are going to push costs onto polluters, and are therefore going to encounter considerable resistance. But a carbon tax never had a snowball’s chance of passage, and here we are in 2009, with climate legislation looking more likely by the minute.

None of this is to suggest that opponents of action aren’t feckless or opportunistic or whatever. But it’s hardly the case that environmentalists got played on this issue.

Related Links:

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The Environmental Defense Fund's Fred Krupp threw down the gauntlet to carbon taxers in the Wall Street Journal last month:

Environmental taxes have worked well to raise revenue, but without a cap they inevitably become a license to pollute in unlimited amounts. No air pollution problem has ever been solved except by imposing a legal limit on emissions. (emphasis added)

This is a little like the Pope complaining that sex isn't enough fun: how would he know? Pollution taxes have seldom been tried. But in the few cases where they've been tried, they've worked rather well.

One example is from the dawn of my own career, in early 1973, when I was a junior economist with the New York City EPA, and the City was almost entirely dependent on fuel oil to generate electricity and heat offices and apartments. A local law requiring a switch to low-sulfur oil had just gone into effect. Swearing that supplies of the cleaner fuel were drying up, the oil companies began jawboning city officials for variances to keep selling the dirtier (and cheaper) fuel.

The city was about to cave, until an EPA lawyer channeled Adam Smith and suggested granting the variances with a condition: that each barrel of dirty oil be "surcharged" at a rate slightly greater than the price premium for the clean fuel. After researching market conditions, the City settled on a surcharge of 75 cents to $2.00 a barrel of higher-sulfur oil, depending on the sulfur content.

Guess what? The Invisible Hand carried the day. With the surcharge canceling the profit from polluting, the oil companies discovered ways to get more clean fuel from their refineries and otherwise re-allocate supplies. For the rest of that year's heating season, the dirty stuff amounted to a tiny fraction of the total granted in the variances. A simple, market-correcting tax probably saved hundreds from succumbing to emphysema and other pulmonary diseases while keeping the lights on.

Another pollution-tax success story is the global phase-out of chlorofluorocarbons and other ozone-destroying chemicals. While this landmark achievement is often ascribed to the cap-and-trade system built into the 1987 Montreal Protocol, the fact is that emissions barely dropped until a U.S. tax on CFC's took effect on Jan. 1, 1990.

The rate of reduction in emissions in 1990, the first year with the tax, was at least five times greater than in the preceding period with the cap alone. While a more aggressive cap might have worked by itself, the fact is that, contrary to Krupp, a pollution tax did the job quite well.

Krupp's hostility to pollution taxes represents a retreat from good sense on the part of EDF, which used to be a conspicuous - and prescient - advocate of price incentives. For example, it was EDF that hired economist William Vickrey to testify for social-cost-based pricing in regulatory proceedings on electricity and rail transit in the mid-1970s - 20 years before Bill's work on peak-load pricing won him the Nobel Prize.

Back then, EDF understood the simple idea that when something becomes more expensive to do, people do less of it. Even granting the group's allegiance to cap-and-trade, is it really necessary for them to turn up the rhetorical heat against pollution taxes?

True, price internalization isn't the sole answer to everything, including slashing carbon emissions. Institutional barriers like split incentives and unequal access to capital need to be addressed by complementary policies. Regulatory standards, technology-forcing measures and pollution limits all have a part to play. But without fuel prices that clearly convey the real price of pollution to the purchaser, the transition from fossil fuels won't happen until most of the carbon still underground has moved into the atmosphere.

On the other hand, if human nature is anything like what it was in Adam Smith's day, then a phased-in, upward-adjustable and largely revenue-neutral carbon tax, such as proposed last month by Rep. John Larson (D-Conn.), is the best tool for the job.

The market insiders lined up at the cap-and-trade trough will gnash their teeth. But in some celestial think-tank, Mr. Smith will be smiling.

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He's still skeptical. So are we. Courtesy of Lomborg.comBjorn Lomborg -- Danish statistician, self-styled "Skeptical Environmentalist," and long-time Grist nemesis -- found his way onto the New York Times op-ed page over the weekend, arguing that reducing greenhouse gas emissions is a hopeless cause and that public money is better spent on research and development of renewable energy.

He claims Americans don’t much care about global warming (according to a recent Pew survey) and notes that international negotiations have so far failed at producing emissions cuts -- neither of which, we say, is a reason not to devise a better climate treaty. He concludes that the "smarter, more realistic strategy" is to fund technological breakthroughs in solar and wind energy.

"Kyoto-style emissions cuts can only ever be an expensive distraction from the real business of weaning ourselves off fossil fuels," writes Lomborg, the director of the Copenhagen Consensus Center.

It’s a classic Lomborg argument -- deliberatively provocative and presenting several worthy goals as an either/or choice. Choose either emissions caps or R&D, he proposes. You can’t have both.

Lomborg makes no mention of the tremendous potential that carbon regulation has to raise money for clean energy R&D. Nor does he acknowledge how regulation raises demand for clean energy, in turn driving tech breakthroughs. (This ground is well-trodden by Dave Roberts and Joe Romm -- take it from them.)

Lomborg made his name in 2001 by publishing The Skeptical Environmentalist: Measuring the Real State of the World, a 540-page attack on conventional green wisdom. It suggested that supposed environmental crises -- including global warming -- were "phantom problems" drummed up by the environmental old guard to serve its own ends. That prompted Grist to respond with A skeptical look at The Skeptical Environmentalist, a special series in which experts scrutinized Lomborg’s claims in their fields.

Did much debunkery ensue? Oh yes it did. Nobel-winning Climatologist Stephen Schneider exposed Lomborg’s selective use of statistics in his climate analysis. Energy expert David Nemtzow called out Lomborg for knocking down a straw man of fossil fuel scarcity. Biologist E.O. Wilson blasted holes Lomborg’s "stop worrying" analysis of species extinction. And more.

As Schneider complained eight years ago, the most vexing question might be how Lomborg keeps getting such high-profile attention. And that prompts a question about the New York Times' rationale for going to Lomborg for this essay. He is, basically, a climate change denier. Granting him space on the NYT op-ed page is yet another example of the media treating a scientific matter as just another political topic fit for debate. One wonders, would they grant the same privilege to the wackos who think HIV doesn't cause AIDS?

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Among the weird memes that has grown up around the cap-and-trade debate, one of the most puzzling to me is that C&T is fatally flawed because it is complex. Americans don't "get it." They'll only support a climate policy that is so "simple and transparent" that you can explain it on a napkin. (Like a carbon tax, which Americans "get," and thus support. Supposedly. All evidence to the contrary.)

The twin energy and climate crises are incredibly complex and far-reaching. Should federal policy designed to address complex, far-reaching problems be simple enough to explain to your grandmother?

As far as I can tell, that requirement was invented out of whole cloth, specifically for this problem, more specifically for this particular way of dealing with this problem. Yet despite being completely made up, it's something people repeat to each other all the time, with serene confidence, as though it's self-evident. It's crazy.

If you stop an average person on the street and ask them to explain how Social Security works, do you think you'll get an accurate answer? How about Medicare or Medicaid? How about, oh, governance of public lands? Defense appropriations? Pick a federal policy out of a hat. The mechanics are probably complex. Why? Because the problems are complex, the government is huge, and there are lots of competing interests involved. Such is life in a wealthy, developed democracy.

Now, people can probably explain the basic goal of Social Security. "It protects old people from poverty." Medicare? "It's health care for old people." Medicaid? "Health care for poor people." Defense? "It protects the country." Income taxes? "Pay for gov't services."

But of course they can explain the goal of cap-and-trade, too: "Prevent climate change and shift to clean energy."

Perhaps the difference is that climate policy is asking people to sacrifice, and if we want them to sacrifice, we have to have their buy-in. They have to know what they're sacrificing for, and how it works.

Far as I can tell, though, this notion is just a weird outgrowth of the moralizing that attends climate policy discussions. Climate policy will redirect money from certain parts of the economy to other parts of the economy. It uses the public's money to secure public goods. In that, it is exactly like all public policy. Any reallocation of money asks (some) people to sacrifice, insofar as by "sacrifice" we mean "pay for it." Taxpayers "sacrifice" to fund Social Security, to build highways, to clean up Superfund sites, to run fire departments, etc. They also benefit, as they will benefit from increased energy efficiency, new jobs, new industries, and of course, avoided global warming.

Regardless, the fact that someone pays doesn't obviously entail that climate policy, any more than all the other policies for which someone pays, should be simple enough to fit on a napkin.

Perhaps the problem is that complexity means the policy will be ridden with cheating and gaming of the system. Once you have more than one or two moving parts, it becomes anarchy! Who can keep track? But of course, as Eric pointed out the other day, we have C&T systems running now, and they're administered quite well.

Of course the collapse of the financial system has raised a general hostility toward anything that smacks of finance. But this is just commodity trading, of a substance that is fairly easily measured (is already measured in most cases). The gimmicky financial instruments that could or could not be used to package and distort commodity prices and risks also could or could not be used on other commodities, and will be prevented, or won't, by decent financial regulation. We're a rich country full of smart people. I bet we could figure out how to run a working market. Despite the financial hysteria going on, there are actually lots and lots of working markets going on all around us.

Taxpayers express their goals to their elected representatives. Those representatives then determine how to accomplish the goals and how to pay for it. The notion that the process has somehow gone wrong once it reaches a point where average taxpayers no longer understand its detailed mechanics it is just wacky, invented out of the blue. Applying that constraint to all federal policy would be crippling.

Government of a huge, diverse country is complicated. Markets are complicated. Life is complicated. Climate policy will inevitably be complicated, no matter what form it takes. Again: such is life in a wealthy, developed democracy.

(Having said all that, I should add as an addendum: I don't even really see how cap-and-trade is particularly complex, as public policies go. You put a declining cap on emissions, you issue permits, people trade the permits. There's my napkin summary!)

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Editor's note: See David's follow-up post to this piece.

...

Tom Friedman has done stellar work on green issues lately. He's certainly given them a higher profile than any dirty blogger could. So I guess he's owed some latitude. But his recent column is a disaster: wrong on the merits, politically tone deaf, and timed so poorly as to be malicious.

Timing

Next week, the House begins an intense round of hearings on a comprehensive Democratic energy/climate bill. This is not a pundit's daydream or backbencher making a point. It's a serious piece of legislation: the bill Democrats on the relevant committees will sign off on; the bill Obama will support; the bill that will go to the Senate; the bill that could, if everything goes well and progressives rally behind it, become law.

On the cusp of an enormous fight against well-funded proponents of doing nothing at all, Friedman has decided it's time for "an alternative strategy, message and messenger"? Seriously?

There will be no grand retooling in the next week. If it has any real effect, Friedman's endorsement of an alternative bill will simply divide supporters of the best chance for a serious energy/climate bill in 30 years. His timing could not possibly be worse.

Of course, Friedman is not a Democratic operative. He's under no obligation to stump for a bill that doesn't make his mustache tingle. When it comes to climate legislation, though, everybody has their own pony plan, their own messaging, their own strategy -- the one those silly legislators should be using. The opposition is united, and keeps winning, but hey, at least those on the side of action are clever.

Message

The bill that's heading into hearings next week is a comprehensive effort to address energy/climate issues. It's got provisions boosting clean energy, accelerating energy efficiency, and upgrading the national electricity grid. It sets standards for fuels, for electrical generators, for appliances. It's 600 pages long, and about a fifth is devoted to the carbon cap-and-trade program. That's deliberate. Dems are well aware that clean energy, energy security, green jobs, and economic renewal are their strongest messages. They know the carbon stuff is wonky and unpopular. They put everything together into One Big Plan so that the stronger parts could be foregrounded and the carbon cap recede.

Yet Friedman says the Dems' message is all wrong because ... they're too focused on the carbon cap. "[O]ur energy policy should be focused around 'American renewal,' not mitigating climate change," he says.

Who's focusing on the carbon cap here? Who's calling it the "center" of the Democrats' plan? Why, Friedman! Did he read the bill?

Politics

I have read the following sentence 50 times and I cannot make a lick of sense out of it:

Opponents of the carbon cap think they can kill the bill by calling it a tax. So the obvious political move is to... make it a tax. Because why again?

Maybe it's because of the new requirement that seems to have sprung up recently for federal legislation that tackles the most complicated set of interlocking problems in the nation's history: it has to be easy to explain to your grandmother. The tax code? Military budgeting? Medicaid? That stuff can be complicated. Dealing with energy and climate apparently has to be done via legislation that can be summarized in a Tweet. Because "people won't support what they can't explain," says Friedman.

Friedman supports a bill with a "simple" tax that would rise automatically unless an independent board determined that emissions were no longer on track for the target, in which case the tax would be adjusted; also there would be a border tax assessed on imports based on their carbon content. According to Friedman, "people get that."

It's Friedman who doesn't seem to "get" cap-and-trade, which he characterizes as "a firm in London trading offsets from an electric bill in Boston with a derivatives firm in New York in order to help fund an aluminum smelter in Beijing." Indeed, he says, that's what cap-and-trade is "all about." Except it's nonsense.

Best of all: "Americans will be willing to pay a tax for their children to be less threatened." This is asserted with no supporting evidence, indeed in the face of virtually all available polling and the experience of the last three decades of American politics. Perhaps Friedman heard it in a taxi?

Manly man

Of course, no Friedman column is complete without the claim that people will fall in line if they are told what to think by a manly man. That's what people understand: "Suck. On. This." Friedman wants Gen. James Jones to ride to the rescue on his heaving steed, saving poor environmentalist damsels in distress. Jones, a Marine general in charge of coordinating defense policy, could sell a historic piece of domestic policy because, well, he's military. And "imposing," which makes some columnists tumescent.

The ball

Friedman says the Dem bill "hides the ball" because it's not explicit about the price put on carbon. But this obsession with price misses the point. The price is not the ball. The cap is the ball. And that ball is right up front.

The price is unknowable in advance, since no one knows what it will end up costing to achieve the cap targets. So there is by definition no way to be transparent about the price before the fact. That's why all "simple, transparent" carbon tax plans sneak in a provision whereby tax rates are continually adjusted based on progress toward ... a cap. Except the price is adjusted by Smart Bureaucrats instead of markets. This is preferable, because a marine can explain it to your grandmother.

Somebody needs to hide Tom Friedman's ball. When he plays with it in public like this, he does real damage to the most important legislative effort of this generation at exactly the time it most needs support.

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Tom Friedman says cap-and-trade is in truth a form of taxation. But taxes don't suck. Why don't Dems and the adminstration just tell it like it is and push for something more straightforward: a carbon tax. Such a tax, he goes on to say, should be pitched as a way of renewing the American economy -- seeding an industry of clean energy -- and as a necessary means of protecting America's place as a top dog in the world.

Will this piece make Dave puke?

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