We interrupt our coverage of the political campaign for a few words about the cost of preventing climate change.
Don’t worry, there are plenty of other articles to read elsewhere on The New York Times Web site about the presidential race. But before you turn your attention back to the war of words between Senator Hillary Rodham Clinton and the men attacking her or the argument among the Republicans over who is most like Ronald Reagan, perhaps you can spare a few minutes to consider what at first glance might seem an esoteric economic debate about a problem of the distant future.
It isn’t. One of the central challenges the next president and Congress will face is what steps the United States should take soon if there is to be any hope of dealing with the threat of global warming in time to make a difference.
In recent months, as even the most skeptical critics have begun to accept the scientific consensus that the burning of fossil fuels cannot continue uninterrupted without risking a dangerous elevation of the Earth’s atmospheric temperature, a simmering debate among experts has erupted into the open. It pits those who favor what is known as a “cap-and-trade” program against those who support a direct tax on the man-made production of carbon dioxide, which mostly comes from coal, oil and natural gas used to generate energy.
Under the cap-and-trade model, which is embodied in most of the legislation that has been offered so far to deal with global warming, the government would set an overall limit — squeezed lower and lower over time — on the amount of carbon dioxide that can be pumped into the atmosphere.Continue reading the main story
Through a formula that would have to be determined by Washington and eventually extended to the rest of the world, permits would be issued to energy producers up to the set limit. A market would be established so that those who use such allocations would have to pay for the right, while allowing those who find ways to reduce their carbon output to earn money from selling their excess emission rights to those who need them. The trading market would set a price for a ton of carbon emissions based on the supply and demand of such allocations.
A carbon tax reverses the process. The government would impose a tax on carbon output, gradually raising the price of energy produced from fossil fuels to higher and higher levels. The cost of coal would go up the most, because it emits more carbon dioxide for each unit of energy, with the price rising less for products derived from oil like gasoline and jet fuel, and even less for natural gas. The money raised by the tax, ideally, would be used to offset other taxes in ways that could compensate lower-income households and minimize damage to the economy.
“Making the price predictable is the most significant move you can make to control global warming,” says Charles Komanoff, a long-time environmental economist who has recently started the Carbon Tax Center as an advocacy group. “It would tilt literally billions of energy critical decisions toward using less carbon.”
In theory, both approaches aim to achieve the same result: by making it more costly to emit carbon into the atmosphere, the government would discourage the burning of fossil fuels, encourage producers to find alternative energy from renewable sources and prod consumers into using energy more efficiently. Each side can make a compelling case.So what’s the argument?
Many economists line up behind a carbon tax. They argue that it is the most cost-effective way to limit global warming emissions, that it provides a more predictable long-term price for energy producers of all kinds and that emissions trading schemes would be subject to manipulation by special interests.
“Most economists believe a carbon tax (a tax on the quantity of CO2 emitted when using energy) would be a superior policy alternative to an emissions-trading regime,” write Kenneth P. Green, Steven F. Hayward and Kevin A. Hassett, three economists at the conservative American Enterprise Institute in Washington. “The irony is that there is a broad consensus in favor of a carbon tax everywhere but on Capitol Hill, where the “T” word is anathema.”
Indeed, most politicians favor cap-and-trade, in part because it obscures the full cost of curbing carbon emissions. By the calculation of the A.E.I. economists, for example, a tax of $15 per ton of carbon would achieve an estimated 11 percent reduction in emissions and raise about $80 billion in revenues. By doing so, however, it would raise the price of coal-fired electricity by 1.63 cents per kilowatt-hour, or about 20 percent of the average electricity price. And it would increase gasoline prices by about 14 cents a gallon.
Supporters of a cap-and-trade program argue that explictly raising carbon taxes high enough to make a serious dent in the output of global warming gases would be politically impossible.
But environmental advocates make a further argument. While they agree that cap-and-trade programs will lead to higher prices, too, they say that the only way to achieve support for an ambitious global warming agenda from both the general public and those within the energy industry is to guarantee that emissions will fall.
“You have to set the reductions in stone,” said Nathaniel Keohane, director of economic policy and analysis for Environmental Defense, the advocacy group long identified with seeking market-based solutions to environmental problems. “Bottom line, cap-and-trade is the most environmentally sound approach and it’s the only politically viable approach.”
In just the last few weeks, the debate has heated up, so to speak, as both sides recognize that with both Republicans and Democrats agreeing that something needs to be done, their shared goal may be within grasp. That makes winning support for the right approach, as each side sees it, even more important.
“This may be an argument among friends,” Mr. Keohane said, “but it’s an argument where we have the more compelling case.”
Mr. Komanoff is equally convinced that the carbon tax is superior. “Why settle for silver, and tarnished silver at that,” he asks rhetorically, “when you can achieve the gold standard?”
The debate is certainly becoming more refined. Robert N. Stavins, an influential professor at Harvard’s John F. Kennedy School of Government, has recently published a paper setting out a detailed plan for a cap-and-trade system intended to overcome some of the objections of carbon tax supporters.
Just this Friday, meanwhile, New York Mayor Michael R. Bloomberg declared his support for a national carbon tax.
Which brings us back to politics. While Mr. Bloomberg has flirted with running for president as an independent, he seems unlikely to mount a serious campaign, giving him more freedom to speak out.
“The job of an elected official is to lead — not to stick a finger in the wind,” Mr. Bloomberg said, according to the text of his speech at a Seattle conference sponsored by the United States Conference of Mayors. “I think it’s time we stopped listening to the skeptics who say, ‘But for the politics,’ and start being honest about costs and benefits.”
We should expect no less of the candidates actually campaigning for the White House. But if they did, would anyone follow?Continue reading the main story