Do Cap-and-Trade and Carbon Tax Advocates Both Miss the Point of How to Best Beat Global Warming?

wind turbines photo

photo: Kyle Eertmoed

Though cap-and-trade is currently winning the day in the how to set a price on carbon battle, proponents of a carbon tax as being the better way to go certainly have valid arguments on their side. Too bad that both take the wrong approach if the end goal is reducing greenhouse gas emissions and doing so by substituting polluting and finite energy sources with clean and renewable ones. That's the word from Ted Nordhaus and Michael Shellenberger in a new piece in Yale Environment 360:Though the authors go into the arguments on both sides of the debate, I'm going to assume that TreeHugger readers are basically familiar with them (check out the links at the end to get up to speed if you have to) and cut to the chase. This is what neither advocates of cap-and-trade and carbon taxes get:

No Society Has Been Willing to Set a High Price on Carbon

Ironically, both sides share the same pollution paradigm, which views the massive transformation of the global energy economy as fundamentally the same as past pollution battles over acid rain and air pollution. In fact, the debate pits one central objective of that paradigm, the establishment of strict pollution caps, against another, making industries pay to pollute.

But the debate between carbon tax and cap-and-trade proponents is a false one. The problem is that no government in the world so far has been willing to establish and sustain a high price on carbon, whether through taxes or caps. This is due to at least four substantial and interlinked issues: the political power of incumbent energy interests, low consumer tolerance for high energy prices, the economic impacts that substantially raising energy prices will have on key energy-intensive sectors of the economy, and — most importantly — the substantial price gap that continues to exist between fossil fuels and clean-energy alternatives.

Yet so powerful has been the mental model imposed by the pollution paradigm that neither party to the tax vs. cap debate has much acknowledged either the ways in which the climate crisis differs from past environmental problems or the larger socio-political context in which any climate policy must function. Clean energy technologies cost much more than fossil fuels. Binding caps requiring deep and rapid reductions in carbon emissions must allow carbon prices to rise to whatever level they must (read: very high) in order to comply with the cap. As a result, no society has been willing to establish high carbon prices, regardless of the mechanism.

Instead We Should Use Public Funds to Push Low-Carbon R&D;
Ultimately Nordhaus and Shellenberger say we can get around this by stop focussing on high carbon prices as forcing a shift to low-carbon technologies and instead use public funding to push research and development:
Rather than focusing on emissions reduction targets and timetables, a new framework will establish price declines in the real, unsubsidized costs of clean energy technologies. Rather than attempting to establish high carbon prices globally in order to create sufficient incentives for private interests to invest in energy technology innovation, this new framework focuses on establishing very modest and politically sustainable carbon prices in developed economies to fund very large public investments in technology innovation and to help bring competitive technologies to market. Rather than viewing private interests and markets as the primary driver of technology innovation, this framework recognizes public investment as the most effective method of driving technology innovation. Rather than insisting that developed economies "go first" by achieving symbolic but largely irrelevant emissions reductions, the new framework sees developed economies as critical laboratories that will finance and invent the low-cost technologies that will make deep global emissions reductions possible.

Waxman-Markey Won't Reduce Emissions Nor Spur Cleantech Investment
The authors admit that this won't offer a guarantee of emissions reductions, but they argue that neither will cap-and-trade or a carbon tax. Furthermore they say that the Waxman-Markey legislation will have little impact on US emissions, nor will it will raise much in the way of clean energy funding. But it does allow the President to arrive in Copenhagen this December with the appearance of doing something—to return the US "to the community of good global citizens that have made such commitments without discernibly altering the actual trajectory of their growing emissions."

OK, so that's a pretty heavy claim, so check out the original piece for all the details: The Flawed Logic of the Cap-and-Trade Debate
Cap and Trade
Cap and Trade Explained in Under Four Minutes (Video)
A Cap and Trade System Could Save US Families $900 a Year

Obama's Cap and Trade Would Generate $645 Billion in 'Climate Revenue'

Carbon Tax
Carbon Tax, Not More Financial Engineering, Best Way to Reduce Greenhouse Gas Emissions: Jeffrey Sachs
Obama Should Implement Carbon Tax, Eminent Climatologist Says

Climate Expert James Hansen Supports Cap-and-Dividend System

Related Content on