As the effects of climate change become increasing dire, we will start to see more of a debate that has been raging within the climate cognoscenti for at least two decades — when it comes to really reducing carbon pollution, which way should we go: a Carbon Tax or a Cap & Trade policy?. Both approaches are based on the same simple principal: ultimately we must make fossil fuels more expensive in order to reduce their use.
Cap & Trade
In a Cap & Trade approach, a government sets the Cap, their country’s maximum amount of CO2 to be released into the atmosphere. Usually this cap will be part of some promise that the country has made at one of the UN Climate Conferences. Each polluter in the country is given an allotment, their share of that amount, that they can legally emit. Entities that emit less than their allotment are allowed to sell (Trade) their surplus to entities that can’t or won’t stay within their quota. Periodically, the Cap is reduced, making the credits more valuable. The trading of credits is managed through a marketplace, like that used for stocks and commodities, and subject to the scrutiny of regulators.
A Carbon Tax
In this approach, a government puts a tax on the mining of any sequestered carbon source (mostly fossil fuels, but the firing of limestone for cement would also qualify). The more carbon released into the atmosphere, the more tax must be paid, so coal would pay a lot, natural gas much less. If the tax is applied at the source (mine or wellhead) the cost then ripples through the economy, making everything that fuel is used for — gasoline, cement, steel — more expensive and encouraging the switch to cleaner alternatives. The tax is gradually increased over time, so the earlier you adopt green sources, the more you save on taxes.
Which is the better way to reduce carbon emission?
The business community seems to prefer Cap & Trade. They say it gives them more flexibility to address the problem, and they tend to like market based solutions.
The environmental community generally prefers a Carbon Tax. They say it is vastly simpler to set up and administer and less susceptible to the kinds of shenanigans that corporations are good at — lobbying and market manipulations.
Properly administered, either approach can work.
Critics of these policies — not surprisingly the same folks who have been stonewalling climate action for a generation — will point to problems with each approach.
The intense debate in the halls of government, largely considered un-newsworthy up to now, has produced some experimentation. The European Union established a Cap & Trade marketplace that has come to be considered too full of loopholes to be very effective. More recently, California has put into effect a law that gets credit for correcting many of these problems. Since the early 1980s, the US has had a Cap & Trade market for sulphur dioxide and nitrous oxides, which has been effective in reducing acid rain.
But with the US being the elephant in the carbon emissions tent, we have to consider what will likely be more effective here in the US. The combination of our ideological divide together with unbridled corporate funding for “think tanks”, lobbying and campaign contributions, will make for a battle to get any kind of carbon pricing put into law. The masters of word-spin will be working overtime to try to make hay with the “tax and spend” paintbrush.
Watch this eyeopening PBS documentary: Frontline: The Power of Big Oil
And so,
Considering that a generation of Americans have been raised on the notion that paying taxes is somehow unpatriotic, a Carbon Tax will be hard to enact. But I agree with the Citizens Climate Lobby that it is a better way to go:
A Carbon Tax can be quickly put in place — no smoke & mirror wrangling in Washington over what the Cap should be and who gets what allotment. It could take years to settle these numbers and establish the rules for a carbon marketplace.
A Carbon Tax is more transparent, and since it filters down to everyone, it encourages ordinary citizens to take responsibility for their own carbon footprint.
Most Carbon Tax plans include redistributing the tax proceeds to those who will be most negatively affected by the tax and by climate change itself — low income households, and cities and towns.
Properly designed, a Carbon Tax could lower emissions more quickly. Cap & Trade policies will not likely reduce greenhouse gasses beyond the current Cap, whereas a tax, combined with falling prices for alternative energy sources can encourage greater reductions.
It is now well documented just how effectively the fossil fuel industry delayed any effective policy to slow climate change. And they had plenty of corporate accomplices in their efforts. Why shouldn’t we conclude that their preference for Cap & Trade isn’t more of the same?
Heads in the sand.
By a large margin, the US is the world’s greatest per capita emitter of CO2, and has the most resources at hand to mitigate its effects. It’s understandable, but still shameful, that most Americans seem to have the philosophy that “Maybe I’ll change my ways when it’s easier and cheaper than the old ways”, that it’s more important to pay a little less for gas than to be stewards of our children’s future. This seems to be the approach of the Federal Government, even when it is in the control of “the more environmentally enlightened.” We’ve already frittered away critical time — two decades in which addressing the problem could have been much easier, cheaper and more effective.
Things you can do:
Contact your state and federal representatives and urge them to work as quickly as possible on putting a price on carbon emissions. A brief call to a local office will put you in touch with a staffer who will log your position and tally them for your representative.
Join Citizens Climate Lobby and help wrestle this most important decision out of corporate hands.
Thanks for reading,
Doug Hylan, Brooklin, Maine
Atmospheric CO2 levels:
6/28/22 — 420 ppm
2006 when AN INCONVENIENT TRUTH came out — 385 ppm.
1981, when Exxon scientists concluded that human caused climate warming was a serious problem— 342 ppm.
"Wrestling" climate decisions "out of corporate hands" is the key. Thanks for the link to that effort!
I've been stuck in a negative feedback loop in my recent rants about the climate crisis, not without tons of damning evidence, of course, but I must say that your newsletter serves as a refreshing roadmap for positive action.