Carbon Tax, Not More Financial Engineering, Best Way to Reduce Greenhouse Gas Emissions: Jeffrey Sachs
by Matthew McDermott, New York, NY on 10.10.08
Jeffrey Sachs speaking at University of North Carolina, photo: Kevin Tsui.
Both Barack Obama and John McCain think implementing a cap-and-trade system is the best way to decrease carbon emissions. On that one bit of policy, both candidates are in near perfect agreement, and many people tend to agree with the principle that a market-based solution is a better/more palatable method of reducing emissions than a direct carbon tax (particularly in the United States, a nation where the mere mention of the word ‘tax’ sends people into fits).
Jeffrey Sachs, special advisor to the UN Secretary General and director of Columbia University’s Earth Institute, doesn’t think so:
Having a lot of people engineer financial instruments for carbon when there are much more direct ways to do this strikes me as not really a great investment. (Reuters)
Getting the Prices Right With a Carbon Tax
Sachs is advocating a straight carbon tax on energy production as a simpler, cheaper and more direct method of incorporating the price of pollution into the cost of goods. Such a tax would be assessed directly at the well head or at the refinery, with the increased costs being passed onto products using carbon-emitting fuels: So pretty much everything. Such price increases (internalizing environmental externalities, or ‘getting the prices right’ in eco-economics speak) would quickly make green energy, and green products, that much more financially attractive.
Sachs says, in addition to being cheaper, such a direct tax system would be more efficient than a cap-and-trade system.
A Whole Generation of Young People Not Solving Social Problems
Elaborating on his comment on engineering financial instruments for carbon emissions, Sachs referenced the current Wall Street woes:
I’m also not so keen on sending out best and brightest off to do more financial engineering. I think the kind of [financial] meltdown we have right now is a little bit of an example of how we’ve taken a generation of young people and put them in tasks that don’t really solve social problems.
Carbon Tax v. Cap-and-Trade, Either/Or?
So what do TreeHugger readers think: San Francisco mayor Gavin Newsom recently expressed sentiment that carbon tax versus cap-and-trade isn’t an either/or decision; Sachs thinks carbon taxes are the best way to go; McCain and Obama are all cap-and-trade.
I tend to agree with Sachs—that no matter how politically unpalatable it may be, a carbon tax is both symbolically, theoretically and practically the best way to address the issue of decreasing carbon emissions—but, where do you stand?
via :: Reuters
Carbon Taxes
British Columbia Introduces Smart Carbon Tax
Al Gore Says Carbon Tax Best Choice
What Would a Carbon Tax Look Like?
Carbon Cap-and-Trade
Carbon Cap-and-Trade: A Looming Battle Among States
Ontario and Quebec Create Carbon Cap-and-Trade System
Schwarzenegger Invites Global Leaders to Talk Carbon Caps
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Regardless how we charge, be it carbon tax, or cap-and-trade. We, the end user, are going to feel the effects. If the big power companies are charged for their CO2 emmisions do you really think they are going to take the hit? No, they'll increase there prices to offset the tax. So we will be paying for there carelessness and America is in some rough times, the last thing we need is to be spending more money helping the big companies. And we will have to accept this until local, affordable renewable energy is avaliable.
These companies need to be forced to change their ways, not charged for polluting. Lets penalize them for polluting and invest that money in renewables....
I'm all for a carbon tax. Cap and trade hasn't worked in Europe and there's no reason to expect it to work anywhere else.
It doesn't have to increase total tax burden either; you could offset revenue from the carbon tax by lowering other taxes (this would also allow us to dampen the regressive nature of a carbon tax).
Of course the tax shouldn't just focus on CO2, but all GHGs. And emissions from airplanes should be taxed at a higher rate (CO2 emitted in the stratosphere is more potent than CO2 emitted on the ground).
Mathew, please don't play so loose with McCain and Obama on energy.
It will make the job of moving to a carbon free economy more difficult if we elect another Bush on energy, and McCains voting record is the opposite of his green talk.
This statement implies that McCain is favorable to Cap and trade:
"Both Barack Obama and John McCain think implementing a cap-and-trade system is the best way to decrease carbon emissions. On that one bit of policy, both candidates are in near perfect agreement"
Of the 5 Cap and trade bills presented to the Senate, McCain has supported ONLY his own McCain Lieberman in 2003, which failed because of the primarily nuclear power funding it provided.
If he was serious about renewable energy Cap and Trade, he would support the other Cap and Trade bills too, which are split to fund solar/wind/ocean/geothermal etc, not just nuclear power.
Obama has cosponsored all of the Cap and Trade bills, (+ including McCains failed bill), and consistently votes for renewable energy and carbon reduction techniques of all sorts, PTC, RPS, Cap and Trade, etc.
McCain has NOT SUPPORTED ANY OTHER RENEWABLE energy bill (till last Friday, when the energy bill was woven inextricably into the bailout, and he had to.)
These two pieces track their every energy vote: includes links to each roll-call vote, and shows how Inhofe and Boxer also voted each time for reference.
http://dotcommodity.blogspot.com/2008/09/mccains-50-votes-against-clean-energy.html
http://dotcommodity.blogspot.com/2008/09/how-obama-voted-on-clean-energy.html
"Such price increases (internalizing environmental externalities, or ‘getting the prices right’ in eco-economics speak) would quickly make green energy, and green products, that much more financially attractive."
True. But the big question we're all going to be asking is, what to do with the tax revenue this generates?
I say use it to help people cope with the price increases in ways that add further to reducing pollution. Subsidize and invest in insulation, improvements in energy efficiency, small and large scale clean power, infrastructure improvements, and clean tech R&D. The carbon tax we need should pay for the nation building we need.
The difference between a cap-and-trade system and a carbon tax is whether you want to guarantee costs or guarantee emissions.
With a carbon tax, you have a pretty clear notion of what the costs will be, so long term planning is easier, but there is no guarantee of reaching particular emissions targets. It might be necessary to fiddle the carbon tax rate to reach these goals.
With a cap-and-trade system, you guarantee the emissions reductions, because they are built into the cap. But the emissions trading market means the the costs are not fixed, and are potentially very volatile. This makes it significantly more difficult for businesses and investors to make long term plans.
Given this difference, I'm surprised that more business aren't lobbying for carbon taxes instead of cap-and-trade.
I can imagine that international enforcement of cap and trade would be nearly impossible, as large numbers of businesses would find it profitable to ignore regulations or to misreport the extent of emissions. With a carbon tax, enforcement would be far less difficult, as mines and wells don't move about and can't be easily hidden. With cap and trade, enforcement is as complex as the whole world of business. With the carbon tax, enforcement is only as complex as the carbon fuel extraction business.
The geographical scope of government must exceed the scope of business if any environmental regulation is to be effective.