SPEW MUST STOP & ACTION IS COMING, BE IT CAP-AND-TRADE OR TAX

It’s enough to make a person hopeful.

President-elect Barack Obama’s bold call for an 80% U.S. greenhouse gas emissions cut by 2050 is indeed a welcome change from the global climate change denial of his predecessor though, as State of the World 2009 from the Worldwatch Institute makes clear, it is only a beginning, if, yes, an audaciously hopeful beginning.

Such audacious hope seems more substantial when news emerges that Exxon Mobil’s CEO is calling for a carbon tax and, a few days later, a coalition of Republican Governors begins pushing Congressional recalcitrants for climate change legislation.

Erika Lovley, reporter, Politico: “Republican governors, battling climate change in their states and fed up with the GOP’s inability to organize in Washington, are urging their congressional colleagues to start the new Congress with unprecedented dedication to addressing global warming…”

According to Robert Engelman, co-author of the Worldwatch Institute report, 2009 is shaping up as the tipping point year in the fight against global climate change and these statements from Rex Tillerson, the Exxon CEO, and from the Republican Governors suggest Engelman is right.

Engelman pointed out that 2009 will culminate in the crucial Copenhagen summit, at which the world will define the agreement that will replace the Kyoto Protocol. Will the developed nations choose a global cap-and-trade system and find a way to bring the U.S., China and India in?

Engleman: "However this turns out, we still have some precious time and a clear shot at safely managing human-induced climate change…What's at stake is not just nature as we've always known it, but quite possibly the survival of our civilization. It's going to be a really interesting year."

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Exxon Mobil’s CEO has decided a carbon tax is superior to the European Union (EU) Emissions Trading Scheme (ETS) which is currently handling billions of dollars in trading daily, growing exponentially and systematically tightening down regulatory policy. Like so many conservatives who grumble about cap-and-trade, Tillerson sees confusion on the “trade” side that looks like a multibillion-dollar market with a serious transparency problem and he sees ineffectiveness on the “cap” side.

Tillerson: "…Unfortunately, the European scheme is struggling to achieve the overall reductions that its supporters had hoped for…One of the reasons for this is that cap-and-trade systems inevitably introduce unnecessary cost and complexity…a cap-and-trade system requires a new market infrastructure…This new "Wall Street" of emissions brokers will take the emphasis away from the goal of reducing carbon emissions and focus its attention on trading on price volatility…Also, cap-and-trade systems…require a vast expansion of administrative and regulatory officials…"

The EU ETS system is a work in progress. The idea is to put the power of the marketplace to work by establishing a price for emissions and letting entrepreneurial innovation find a way to control them. The EU emphasis so far has been more on establishing a stable system than immediately impacting emissions. (See CAP-AND-TRADE VERSUS TAX IN A RECESSION). As a result, prices have been far more stable than those of oil and the market is much more carefully and effectively regulated than oil futures markets.

The effectiveness and fairness of the EU ETS remain open to question. Objections voiced by people as diverse as climate change prophet James Hansen and Exxon's Tillerson raise serious doubts about cap-and-trade’s potential. That’s what makes the Copenhagen meeting so pivotal.

On the other hand, conventional wisdom holds that the tax Hansen and Tillerson advocate is politically beyond reach, making it “the more perfect” that is the enemy of “the less good.” Some fear idealists like Hansen play into the hands of cynics like Tillerson by joining in advocacy for the tax.

Tillerson: "As a businessman it is hard to speak favorably about any new tax. But a carbon tax strikes me as a more direct, a more transparent and a more effective approach. It avoids the costs and complexity of having to build a new market…or the necessity of adding a new layer of regulators and administrators…And a carbon tax can be more easily implemented…A carbon tax is also the most efficient means of reflecting the cost of carbon in all economic decisions…"

The EU ETS has already built the market and created regulation. Administering a tax fairly and equitably is no simple matter, necessitating expanded bureaucracy. And while a tax more directly impacts costs than a cap-and-trade system, it does not guarantee any emissions reductions because there is no cap.

The world's carbon markets. (click to enlarge)

In the same interview in which Tillerson called for the tax, he also said the federal government needs to allow more drilling of U.S. oil and gas reserves in protected areas. This suggests he has yet to fully grasp the urgency of the global climate change situation.

The Republican Governors, on the other hand, are pretty unequivocal. They want action on climate change from Congress and they want the Republican minority that has blocked Congressional action during the last few years to get out of the way. The Governors have no more patience for climate change deniers like Senator Jim Inhofe (R-Okla.).

Gov. Jon Huntsman (R-Utah): “It’s been enormously frustrating…We would not need the Western Climate Initiative if it were not for the foot-dragging nature of Congress…If Republicans had identified this problem earlier and tackled it aggressively, we would all be working together.”

There is political as well as climatological wisdom to the Governors’ call. The classic political move on a successful opponent (Bill Clinton was a master of it) is to take back the strong issues.

Karl Rove, political guru to outgoing Republican President George W. Bush: “Voters ages 18 to 29 voted Democratic by a 2-to-1 margin…A market-oriented ‘green’ agenda that’s true to our principles would help win them back.”

It is a strategy that has been successful for the conservative party in England in the post-Tony Blair years.

Whit Ayres, Republican pollster: “Obama is attractive to young people, but that doesn’t mean Republicans can’t still get in the game…you need to have a more compelling message. Most Americans believe that mankind is contributing to the problem, so denying the existence of climate change is a losing position.”

More info at www.carbontax.org (click to enlarge)

Whatever the motivation, the news is good. Action against climate change is imminent. Senate Minority Conference Chair Lamar Alexander (R- Tennessee) and Congressman Bob Inglis (R-S. Carolina) are among many who opposed climate change legislation in the past but are now inclined to follow the lead of the “green governors.”

Senator Olympia Snowe (R-Maine): “The governors are true leaders. They have seen a problem … and taken actions to try to reach workable solutions…”

Senator Snowe is also pushing legislation for energy independence and has joined Senator Diane Feinstein (D-California) in a call to include stimulus money for Energy Efficiency programs.

The Republicans have identified the climate change fight as a middle ground they can take back by labeling those who propose restrictive, costly solutions “far left.”

Former Speaker of the House of Representatives Newt Gingrich (R-Ga.):“In the real world, bankrupting America is a bad strategy…Conservatives can be the middle ground in this story.”

This why the Worldwatch Institute report is so important. It is a digest of the science that has brought the fight against global climate change to center stage. Having committed themselves to the fight, can Republicans turn away from the message in State of the World 2009?

The answer will come in legislative battles over a cap-and-trade system, in which details like the severity of the cap and the amount of auctioned versus free credits will be debated – UNLESS the Republicans decide to aggressively fight cap-and-trade with a revenue-neutral carbon tax proposal.

Congressman Inglis (R-S. Carolina): “The attitude needs to be how can we conservatives contribute to this process and make it better than what the Democrats alone can come up with…We need to be driven by the consensus position. That position may turn out to be wrong someday. But we can always change the policy.”

The “please don’t throw me into the briar patch” debate: Because most economists say the tax would be preferable if it were politically possible, Mr. Obama and the Democrats might adamantly argue for cap-and-trade and, by doing so, lure Republicans and conservatives like Mr. Inglis and Mr. Tillerson into advocating (perish the thought!) for a tax. At the 11th hour, Democrats could then “settle” for the tax.

Where this would leave the EU ETS and the rest of the world is a serious question. Would U.S. leadership draw the entire world toward a universal carbon tax?

The role of Senator John McCain (R-Ariz.), who advocated for cap-and-trade before and during his unsuccessful presidential bid, remains to be seen but could be pivotal.

Adam Kolton, federal affairs director, National Wildlife Federation: “We still don’t know what GOP is going to show up next year…We want to encourage them to be in a leadership role. Hopefully, there will be some real soul-searching.”

Hopefully. It is a concept that turns up more and more these days.

More info at www.carbontax.org (click to enlarge)

Halt all carbon emissions by 2050: Worldwatch
Deborah Zabarenko (w/Eric Walsh), January 13, 2009 (Reuters via Yahoo News)
and
Exxon CEO calls for carbon tax over cap-and-trade system, citing transparency, effectiveness
January 8, 2009 (AP via Yahoo News)
and
Exxon Chief Embraces Carbon Tax
Steve Mufson, January 9, 2009 (Washington Post)
and
GOP governors urge action on global warming
Erika Lovley, January 14, 2009 (Politico)

WHO
William Hare, co-author, Worldwatch Institute report; Robert Engelman, co-author, Worldwatch Institute report; Rex Tillerson, CEO, Exxon Mobil; Gov. Jon Huntsman (R-Utah); Karl Rove, political guru to outgoing Republican President George W. Bush; Senate Minority Conference Chairman Lamar Alexander (R- Tennessee); Congressman Bob Inglis (R-S.Carolina); Senator Olympia Snowe (R-Maine); Senator Jim Inhofe (R-Okla.); Senator John McCain (R-Ariz.)

More info at www.350.org (click to enlarge)

WHAT
State of the World 2009 reports that greenhouse gas emissions must stop growing by the middle of this century and become less after that for the world to avoid the worst impacts of global climate change. Recognizing the urgency, Exxon CEO Tillerson called for a carbon tax.

WHEN
- Global mean temperature is up 1.4 degrees F (0.8 C) since 1850.
- Greenhouse gas emissions must stop increasing by 2050 to keep global mean temperature rise less than 3.6 degrees F (2 degrees C) over what it was before the Industrial Revolution.
- Energy demand is expected to be 35% higher in 2030 than it was in 2005.
- The November 2008 defeat of Republicans has prompted Republican Governors to speak out.

WHERE
- Cutting greenhouse gas emissions must begin with rich countries, not poor ones. Industrialized nations must cut emissions 90% by 2050 and allow developing nations to grow their economies and develop new, emissions-free technologies.
- Worldwatch Institute is based in Washington.
- Tillerson called for a carbon tax in remarks at the Woodrow Wilson International Center for Scholars in Washington, D.C.
- The Western Climate Initiative, formed in part by Republican Governors of Western states, has committed to reducing greenhouse gas emissions 15% below 2005 levels by 2020.

WHY
- Worldwatch Institute says greenhouse gas emissions must peak by 2020, drop 85% below 1990 levels by 2050 and keep dropping to allow global mean temperature to remain no more than 3.6 degrees F (2 degrees C) above its level before the Industrial Revolution.
- More greenhouse gas emissions must be absorbed than emitted after 2050.
- Even with the formula prescribed, global mean temperature is still likely to rise ~1.8 degrees F (1 degree C) because of the impact of past greenhouse emissions.
- Tillerson said a carbon tax should probably start "somewhere north of" $20 a ton, which translates to a 6 cents/gallon tax on vehicle fuel. Yale economist William Nordhaus estimated that to change emissions patterns a carbon tax needs start at ~$30 a ton and go up to $85 a ton by 2050. British economist Nicholas Stern estimated the price should be ~$300 a ton.
- Tillerson reportedly makes the point that a cap-and-trade system “disguises” a carbon tax. In this he is exactly right.
- Congress is expected to take up climate change legislation in the present session but first must handle the stimulus package legislation.

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QUOTES
- William Hare, co-author, State of the World 2009: "Global warming needs to be reduced from peak levels to 1 degree (Celsius, or 1.8 degrees Fahrenheit) as fast as possible…At this level you can see some of the risks fade into the background."
- Stephen Lincoln, environmental chemist, University of Adelaide, Australia: "The strongest message from State of the World 2009 is this: if the world does not take action early and in adequate measure, the impacts of climate change could prove extremely harmful and overwhelm our capacity to adapt."
- Rex Tillerson, CEO, Exxon Mobil: "(A carbon tax) strikes us as the most efficient means of reflecting the cost of carbon in all economic decisions -- from investments made by companies to fuel and product choices made by consumers…"
- Senator Olympia Snowe (R-Maine): “Without cooperation, [Republicans] have been rudderless and the situation has only deteriorated…”
- Jim DiPeso, policy expert, Republicans for Environmental Protection: “When Tony Blair was elected, the conservative party was out of ideas and out of energy…But over the last 10 years, they’ve started talking about green issues and retooled their message. Now they’re in a good position to win.”