Ctc Slide Show 5 Sept 2007478
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Ctc Slide Show 5 Sept 2007478 Presentation Transcript

  • 1. Carbon Taxes First
    • By Charles Komanoff
    • & Dan Rosenblum
    • Carbon Tax Center
    • www.carbontax.org
    • 2007
  • 2. Global Warming Is …
    • Triggering a climate crisis that threatens massive and irreversible damage to our global environment, public health, world peace, national security and economic well-being.
    • No longer seriously contested by anybody other than vested interests, their hired “experts” and indebted politicians.
    • See An Inconvenient Truth and IPCC Fourth Assessment.
  • 3. Warmer Winters: 4.3 º F, 1971-2002 Winter (Dec-Jan-Feb) Mean Temp ( ºF) Source: Cameron Wake, UNH Boston is the new Philly; NYC is the new D.C. (winter temperatures.) 38 39 40 41 42 43 29 30 31 32 33 34 35 36 37 Latitude ( o N) o Boston New York Philadelphia Washington, DC
  • 4. More Extreme Weather Cameron Wake, UNH Extreme Precipitation Events, Northeast US-Canada, 1949-2002
  • 5. The Problem: Unsustainable CO 2 Emissions Worldwide
    • World must reduce emissions ~80% by 2050, with big cuts starting now .
    • Americans are emitting many times our share of CO 2 (next slide).
    • Americans must reduce by >80%.
  • 6. Americans Emit in a Day What Others Emit in a Workweek
  • 7. What about China?
    • “ In an alliance of
    • denial, China and
    • the United States
    • are using each
    • other’s inaction as
    • an excuse to do
    • nothing.” – New
    • York Times
    • editorial, 4-20-07
    U.S. China Lines X in 2009 U.S. China Lines X in 2009 U.S. China X
  • 8. Chemistry -> Responsibility
    • Because CO2 stays
    • “ resident” in the
    • atmosphere for at
    • least a century, the
    • U.S. is responsible
    • for more than 3x as
    • much greenhouse
    • gas as China. U.S.
    • still has a 40-year
    • lead.
    U.S. China Lines X in 2009 U.S. China Lines X in 2009 U.S. China X
  • 9. No More Free Dumping
    • “Since the dawn of the industrial revolution, the atmosphere has served as a free dumping ground for carbon gases. If people and industries are made to pay heavily for the privilege, they will inevitably be driven to develop cleaner fuels, cars and factories.”
      • — Avoiding Calamity on the Cheap , Nov. 3, 2006
        • New York Times editorial
  • 10. Putting a Price on CO 2 Emissions
    • High taxes on carbon emissions from coal, oil and natural gas will :
    • Reduce fossil fuel use and CO 2 emissions
        • Substitution of clean fuels and technology
        • More efficient use of energy
    • Provide a revenue stream to enable
        • Progressive tax-shifting, or
        • Rebate to all U.S. residents
  • 11. Additional Benefits of a Carbon Tax
    • Carbon tax receipts may also be used to finance
      • Energy efficiency, further reducing use of fossil fuels and related emissions.
      • Energy R&D.
    • Will also reduce dependence on foreign oil, with major national security benefits.
    • Economically, will keep dollars in USA instead of flowing overseas.
  • 12. Rely on “Market Forces”? Here Come Synfuels
    • Only a carbon
    • tax can subject
    • CO 2 -intensive
    • oil sands,
    • oil shale,
    • coal-into-oil, etc.
    • to a climate-
    • appropriate
    • market test.
  • 13. Clean-Energy Subsidies: A Limited Answer
    • Selecting the “next best energy technology” by fiat has largely benefited lobbyists + special interests
      • Oil shale, nuclear power, synfuels, ethanol, etc.
    • Many new sources also emit CO 2
    • Renewable Energy Standards: helpful – but not enough
  • 14. Efficiency Standards: Vital, but Not Enough
    • Too slow
      • Corporate resistance
      • Inherently reactive
    • Corporate gaming
      • (e.g., “CAFE ” loophole that enabled SUV’s)
    • Scattershot – impossible to regulate the hundreds of important energy-usage sectors
    • 1-dimensional
      • (e.g., CAFE doesn’t affect miles driven)
  • 15. More than Half of U.S. Oil Use Is Not Gasoline for Cars Cars Freight Heat, Power Other Air Paving RV’s
  • 16. Example - Gas Use Decisions
    • Gas Tax-Shift impacts:
    • How high CAFE is set
    • Mfg’er mpg decisions
    • What car to buy
    • Which car to drive
    • How to drive
    • VMT (miles traveled)
      • Share (carpool)
      • Chain trips
      • Transit
      • Walk/Bike
      • Proximity
    • CAFE impacts:
    • Mfg’er mpg decisions
    • What car to buy
  • 17. Dynamic Capitalism & CO2: I
    • “ … specially equipped,
    • privately owned jumbo
    • jets – the kind that
    • normally carry 300-400
    • passengers … recon-
    • figured … for the
    • enjoyment of, at most,
    • a couple of dozen.”
    New York Times, 17-Oct-2006: For the Super-Rich, It’s Time to Upgrade the Old Jumbo Jet
  • 18. Dynamic Capitalism & CO2: II
    • Backyard Blizzards :
    • “ Snowmaking, since the
    • mid-1960s the provenance
    • of ski resorts and, more
    • recently, some party
    • planners, has gone
    • domestic,” with 2-kW
    • plug-in snowmakers that
    • run ’round-the-clock.
    New York Times (Home Section) 15-Feb-2007: Not Enough Snow For You? Talk to Your Father
  • 19. Example - Electricity
    • Utilities and other generators will
      • Respond to price signal by substituting lower-carbon fuels
        • Renewables
        • Natural Gas
      • Invest in efficiency on demand- and supply-side
    • Consumers will
      • Respond by using less
      • Substituting low- or non-carbon energy
  • 20. Carbon Tax Proportions
    • Fuels are taxed by their carbon content per btu
  • 21. A “Starter” Carbon Tax-Shift
    • $37 / ton of carbon =
    • 10 ¢ / gallon of gasoline, jet fuel, etc. =
    • 0.72 ¢ / kWh (U.S. retail average)
    • Reduces U.S. CO 2 emissions ~ 4%
    • Repeat 10 X (while standards and incentives also cut emissions)
  • 22. Energy Use: Not Inelastic
    • Gasoline usage grew only 3.5% from 2003 to 2006, while the economy grew 11%.
    • Pump prices have risen < 50% since 2003 (adjusted for inflation) – not the doubling commonly believed.
    • The modest growth in demand points to a “short-term price elasticity” of around 0.1, and 0.4 in the long term, for gasoline.
    • Finding: Demand for gasoline (and other fuels) is at least somewhat price-sensitive.
  • 23. Elasticity (long-run) Assumptions
    • Gasoline: ­ 0.4
    • Electricity
      • Residential (37%) - 0.5
      • Commercial / Industrial (63%) - 1.0
      • Fuel-switching Leverage: 1.2 x
    • “ Other” – midway betw Gasoline/Elect.
    U.S. CO2 Reductions
  • 24. Starter Tax – Why Ramp Up?
    • Win broad consensus
    • Implement ASAP
    • Help people and businesses adapt
    • Empirical validation of efficacy
    • Mid-course corrections
    • Establish long-term price trajectory
    • Complement w/ investment in EE and renewables
  • 25. USA After “Starter Tax x 10”
    • CO 2 emissions down by a third
    • Oil use down by ~5 million barrels/day
    • Energy
      • Coal-fired generation reduced
      • Wind and other renewable generation increased
      • Incandescents / halogens out , CFL’s + LED’s in
    • Transportation and Land-Use
      • SUVs out , sedans in
      • Costlier air and highway travel creates market pull for 300-mph intercity rail
      • Urban trips by bicycle up 10x, to 10%
      • Urban revitalization
  • 26. The Wealthy Will Pay More
  • 27. “Progressive” Use of Carbon Tax Revenues
    • EITHER
    • Distribute pro rata to 320 million Americans (~ $1,500 each, per year)
    • OR
    • Tax Shift out of regressive taxes (green bar at right assumes 2.5%/yr drops in emissions (net of +1.5%/y income, - 4%/y price)
  • 28. Two Fossil Fuel Subsidies By Taxpayers: Relatively Small By Climate: Enormous
  • 29. Existing Carbon Taxes (1 st -year Starter Tax shown for comparison) Per ton of car-bon
  • 30. Politics?
    • Concerns about carbon tax-shifting
      • Contrary to Americans’ sense of entitlement to “cheap energy”
      • Anti-tax ideology of past 25 years
      • Elected officials wary of another defeat
        • Clinton’s 1993 Btu tax
        • Rep. John Anderson’s “50-50” program (1980 presidential campaign)
  • 31. But: Growing Support for Taxing Carbon Emissions
    • Opinion leaders
      • Al Gore
      • Scientists such as James Hansen (NASA)
      • NY Times op-ed columnists Brooks, Friedman, Kristof, Krugman & Tierney
      • Conservatives including Gregory Mankiw, Bush chief Economic Advisor, 2003-2005
      • CEO’s of Dynegy & FPL Group
  • 32. Some Support in Opinion Polls
      • Feb. 2006 New York Times poll
        • 55% would support increased tax on gasoline if it reduced dependence on foreign oil.
        • 59% would support if the increased tax would curb energy consumption and global warming.
      • Oct. 2006 M.I.T. survey
        • Over three years, 50% increase in respondents’ willingness to pay more for electricity to reduce global warming.
  • 33. Carbon Tax v. Cap-and-Trade
    • Cap-and-trade is alternative vehicle for “putting a price” on carbon
    • Proposed by US CAP – coalition of large environmental groups and large corporations
    • Emissions are capped at a level determined through the political process
    • Allowances/permits to emit CO 2 up to the cap are distributed or auctioned
    • Market participants can buy or sell as necessary
  • 34. Cap v. Tax: Predictable Prices
    • Carbon taxes provide predictable prices necessary to encourage investment in
      • less carbon-intensive technology
      • carbon-reducing energy efficiency
      • carbon-replacing renewable energy
    • Cap-and-trade aggravates price volatility that discourages beneficial investments
  • 35. Are We Over-Valuing Cap-and-Trade’s “Emissions Certainty”?
    • “Safety-valve” would authorize auctioning additional allowances if allowance prices exceed predetermined level
    • Emissions cap could be politically fragile without public support
    • No magic emissions level (except as low as possible)
  • 36. Tax v. Cap: Timing
    • C&T design and implementation: complicated, contentious, prolonged
        • Level of cap
        • Timing
        • Allowance allocations
        • Certification procedures
        • Offsets
        • Penalties
        • Permit banking
        • Inevitable requests for exemptions
    • Tax can be in place promptly with quick results
  • 37. Tax v. Cap: Equity
    • Cap-and-trade
      • Practice has been to allocate based on past use
        • Rewards polluters with windfall
        • Perverse incentive to pollute more now to increase base for allocations
      • Allowances can be auctioned off to highest bidders
        • Proposed in RGGI program
        • Proceeds used to provide public benefits
      • Lawyers and consultants are other big winners
    • Carbon tax would be revenue-neutral
  • 38. Tax v. Cap: Understandability
    • Carbon taxes provide direct, transparent and understandable price signals to consumers
      • Perceived political liability, but essential to transform societal climate-awareness
    • Cap-and-trade is complicated and opaque
      • Perceived political asset, but limits public participation and could backfire
  • 39. Tax v. Cap: Comprehensiveness
    • Carbon taxes address emissions from every sector
      • All users must respond to price of carbon
    • Most current cap-and-trade programs, as proposed, only target the electricity industry
      • Only 40% of emissions
      • If allowances are allocated, polluters with sufficient allowances have less incentive to reduce emissions
  • 40. Keys to Political Success
    • Progressive Tax-Shifting
      • Not a tax increase
      • Carbon tax revenues used to reduce regressive payroll and sales taxes
    • Provisions to Protect Low-Income Families
      • Reductions in payroll/sales taxes will offset all or a portion of the carbon tax
      • Other measures to reduce low-income energy use
    • Message: Taxing pollution instead of productive work
  • 41. Summary
    • Principles
      • Tax-shifting – not a tax increase
      • Full-cost pricing
      • Polluter pays
    • Responds to concerns about
      • Climate crisis
      • Inequitable taxes
      • Security / Oil dependence
      • Basing economy on vulnerable energy
    www.carbontax.org