| Statement of Dr. James Hansen, Adjunct Professor, The Earth Institute at Columbia University, New York, New York Testimony Before the House Committee on Ways and Means February 25, 2009
Our planet is in peril[1].
Climate disruption threatens everyone, but especially the young and the unborn,
who will bear the full brunt through no fault of their own. Recent science
makes it clear that if we continue to burn most of the fossil fuels we will
leave our children a deteriorating situation out of their control.
One scientific conclusion is crystal clear1: we
cannot burn all of the fossil fuels without setting in motion a process of
climate disruption that threatens the very existence of many species on our
planet. This potential injustice is not limited to the innocent species we
exterminate. The greatest injustice is to our own species[2]
– our children, grandchildren and the unborn, and people who live with nature,
who we may call ‘undeveloped’, indigenous people who want only to live their
lives without bearing burdens that we create.
The President deserves credit for recognizing that our
planet is in peril, and his administration deserves credit for initial steps
that may lead to increased vehicle fuel efficiencies and constraints on coal
emissions. These steps are important. Greater fuel efficiency, e.g., is
essential. But it must be recognized that these steps address the symptoms of
the problem, not the root cause. Moreover, these steps will fail if the root
cause is not addressed.
The root cause is our failure to make polluting fossil-fuel
energy more expensive than clean energy. Instead we subsidize fossil fuels!
We must put a price on carbon emissions, a rising price. If
we do this promptly we can stabilize the atmosphere and climate, with healthier
air, improved agricultural productivity, clean water, an ocean providing fish
that are safe to eat, with a reversal of the trend toward increased birth
defects and other consequences of fossil fuel pollution in our air and water.
Fossil fuels are finite. We must find clean energies to
replace them. Why not do that sooner, rather than digging for every scrap of
carbon, and in the process destroying the future of our children and
grandchildren?
The reason “why not” is this: the fossil fuel industry has
enormous power over our governments, through their lobbying and “campaign”
contributions. Yet you and other leaders are elected to represent the public.
The public expects you to look out after their children, to preserve creation, our
children’s heritage. Instead we are robbing money from our children’s pockets
and piggybanks, borrowing money from our children to fund subsidies for the
fossil fuel industry.
This selfishness is not limited to America. I wrote to
government leaders of several countries that are believed to be among the
“greenest”, one of them led by a physicist. I thought they would understand the
clear scientific rationale that we must phase out coal use and move beyond
fossil fuels, if we are to preserve a planet resembling the one we inherited
from our elders. But I learned that the fossil fuel industries in those
countries have enormous power, as they do here. Those governments are not
green – they are black, coal black.
Carbon Tax and 100% Dividend
If we continue to subsidize fossil fuels and do not impose a
carbon price, our automobile manufacturers will likely fail – they are being
instructed to build fuel-efficient vehicles, which will be in limited demand as
long as fossil fuels do not have to pay their true costs. Similarly,
“renewable energy portfolios” for utilities will rip off the public
(rate-payers), with marginal benefit for the environment. Energy-inefficient
buildings will continue to be built. And so on.
The most honest effective way to
achieve a carbon price capable of driving our economy and our society to the
clean world of the future is “Carbon Tax with 100% Dividend”[3].
For example, a carbon price equivalent to $1/gallon of gasoline (about $115 per
ton of CO2), for 2007 rates of fossil fuel use in the United States,
generates $670B. If we give one share to each legal resident age 22 and over,
one half-share to college age youth (18-21), one half-share to the parents of
each child up to two children per family, that yields about 224 million shares
in 2007 (this could be off by ~10%; I could not find optimum census data). So
the 100% Dividend for a $1/gallon tax rate ($115 per ton of CO2) is:
Single share: $3000/year ($250
per month, deposited monthly in bank account)
Family with 2 children:
$9000/year ($750 per month, deposited monthly in bank account)
The tax rate and dividend should increase with time.[4]
This approach would reduce demand for fossil fuels, driving down the price of
fossil fuels on the open market. The next time the price of gasoline reaches
$4/gallon most of that $4 should be tax, with 100% of that tax returned to the
public as dividend. Instead of our money going to the Middle East and other
foreign places, most of it would stay at home.[5]
This tax, and the knowledge that
it would continue to increase in the future, would spur innovations in energy
efficiency and carbon-free energy sources. The dividend would put money in the
hands of the public, allowing them to purchase vehicles and other products that
reduce their carbon footprint and thus their taxes. The person doing better
than average would obtain more from the dividend than paid in the tax. The tax
would affect building designs and serve as an effective enforcer of energy
efficient building codes that are now widely ignored. The need to replace
inefficient infrastructure would spur the economy. Tax and 100% dividend can
drive innovation and economic growth with a snowballing effect. Carbon
emissions will plummet far faster than alternative top-down regulations. Our
infrastructure will be modernized for the clean energy future. There will be
no need to go to the most extreme environments on Earth for the last drop of
fossil fuel, to squeeze oil from tar shale, or develop other unconventional
fossil fuels.
A tax on coal, oil and gas is
simple. It can be collected easily and reliably at the first point of sale, at
the mine or oil well, or at the port of entry. This approach also implies the
fastest most effective way to international agreements. A proportionate duty
should be applied to any imported products whose manufacture produced carbon
emissions. The system could impose presumptive border taxes, allowing
individual firms to prove that a lower rate should apply.[6]
A carbon tax will raise energy
prices, but lower and middle income people, especially, will find ways to
reduce carbon emissions so as to come out ahead. Effects will permeate
society. Food requiring lots of carbon emissions to produce and transport will
become more expensive and vice versa. There will be a growing incentive for
life style changes needed for sustainable living.
One may ask: is there sufficient
technology today, and just around the corner if the economic incentive exists,
to allow phase out of coal emissions in the near term and other fossil fuels on
a longer time scale? The answer is a clear “yes”, as discussed in a workshop
report[7]
(this report is a draft – criticisms would be welcomed). Indeed, Stoft[8]
shows that ‘Tax & Dividend’ supports and makes more effective appliance
efficiency standards and renewable portfolio standards. However, in order for
energy efficiency and non-fossil energies to rapidly supplant fossil fuels, the
carbon price should be substantial and rising.
Tax & Trade (a.k.a., ‘Cap
& Trade’, pseudonymously and sometimes disingenuously)
‘Cap & Trade’ increases
costs to the public as does ‘Tax & Dividend’, but without the dividend.
Thus it should be termed ‘Tax & Trade’.[9]
Part of the reason for the pseudonym is to avoid the stigma of a tax, under the
presumption that the public is too gullible to figure it out. Other parties
support ‘Cap & Trade’ because they hope to profit – it is a give-away to
special interests, who feel, based on extensive empirical evidence, that they
will be able to manipulate the program through their lobbyists. Except for its
stealth approach to taxing the public, and its attraction to special interests,
‘Cap & Trade’ seems to have little merit.
Of course the proponents of ‘Cap
& Trade’ are not all special interests and their lobbyists, or people who
hope to make millions on Wall Street from price volatility and manipulations.
That is surely right. Many, without looking closely at the details, assume
that the successful ‘Cap & Trade’ used to help solve the acid rain problem,
might be a good model for the climate problem. Acid rain was much simpler,
partly because it was a program that required existing facilities to employ a relatively
simple low-cost solution. Unlike climate change, the acid rain problem did not
require massive investments in new infrastructure and
innovation. Instead it required a group of existing facilities, with accurate
emissions measurement, to make minor burner modifications and use readily
available low-cost low sulfur coal. A few new rail lines were built and some
facilities purchased more efficient scrubbers.[10]
Caps have not generally been
applied at the mine or well-head, rather further downstream. Proponents of
‘caps’ say they will try to push them upstream. That would open up
consequences that now should be unacceptable to Americans: volatility,
manipulation, and trading floor millionaires. Where would the millions come
from – the common person, of course, the rate payer, the public.
The abject failure of Cap &
Trade was illuminated for all to see by the Kyoto Protocol, the granddaddy of
all Cap & Trade schemes. Even countries that accepted the toughest
emission reduction targets, such as Japan, saw their emissions actually
increase. The problem is the inevitable loopholes in such complex approaches,
which take years to negotiate and implement.
The Congressional Budget Office[11]
provides a comparison of carbon taxes to cap-and-trade. That report concludes
that a given emission reduction could be achieved at a fraction of the cost via
a carbon tax, as opposed to cap-and-trade. Another useful comparison is also
available.[12]
The worst thing about
cap-and-trade, from a climate standpoint, is that it will surely be inadequate
to achieve the sharp reduction of emissions that is needed. Thus cap-and-trade
would practically guarantee disastrous climate change for our children and
grandchildren.[13]
The only solution to the climate
problem is to leave much of the fossil fuels in the ground. That requires a
high enough carbon price that we move on to our energy future beyond fossil
fuels.
Summary
The honest approach, the
effective approach, for solving the global warming problem would be a tax with
100% dividend. The public is not stupid. They will understand that the hooks
and eyes of a less comprehensive more dissembling approach will be put there
for some reason other than saving the future for their children.
One of the biggest advantages of
the Tax and Dividend approach is its simplicity, which would allow it to be
introduced quickly. The Kyoto-like Cap & Trade is notoriously slow to
negotiate and implement, as well as being ineffective in the end. A related
point is that an effective international accord could be implemented with only
a few of the major economies. Import duties on countries not imposing a
comparable tax would surely bring broad rapid compliance.
[1]
Clarification of the climate threat could usefully be obtained by requesting a report
from the National Academy of Sciences. The Academy, established by Abraham
Lincoln for the purpose of advising the President and Congress on important
technical matters, is widely recognized as the most authoritative scientific
body in the world.
[2]
The Sword of Damocles: http://www.columbia.edu/~jeh1/mailings/2009/20090215_Damocles.pdf
[3]
http://www.columbia.edu/~jeh1/mailings/2008/20080604_TaxAndDividend.pdf
[4]
The tax rate should increase until fossil fuel energy is not competitive with
clean energy. The tax gathered, and thus the dividend, will initially increase
as more clean energy enters the mix. But the dividend will enventually go
down, as clean energy becomes ascendant. That is okay, because, as a result of
competition, economies of scale and innovation, clean energy prices will fall.
In addition, increased energy efficiency and conservation will reduce energy
use per person.
[5] Two years ago I sat next to the Saudi Arabian
Ambassador to the United States at a dinner. He became upset, politely, when I
mentioned this concept of a carbon tax. Clearly, he understood the
implications. He did not seem too concerned that it would be adopted – he
probably took it for granted that fossil fuel special interests could overcome
any wisdom of our law-makers.
[6]
Metcalf-Weisback-Design of a Carbon Tax
[7]
P. Kharecha et al. http://www.columbia.edu/~jeh1/2009/ECWorkshop_report.pdf
[8] S.E. Stoft http://stoft.com/ebooks/cap-secrets.pdf
[9]
Much of the support for Cap & Trade stems from the desire to avoid the term
“tax” and create a real “cap” or declining limit on emissions. However, as
shown in the European Emissions Trading Scheme and the Los Angeles RECLAIM
program, among others, weaknesses in the cap-and-trade concept make it
inapplicable to the climate crisis. Specifically, over-allocation of credits,
lack of accurate measurement, fraudulent outside offsets, and the failure to
create true incentives for early investments in clean energy technology and
infrastructure will doom the prospects for real emissions reductions.
[10] http://www.carbontax.org/blogarchives/2009/02/21/what-worked-for-acid-rain-won%e2%80%99t-work-for-climate-change/
[11]
Congressional Budget Office, “Policy Options for Reducing CO2 Emissions,” February
2008, http://www.cbo.gov/ftpdocs/89xx/doc8934/02-12-Carbon.pdf
[12] L. Williams and A. Zabel, http://www.carbonfees.org/home/Cap-and-TradeVsCarbonFees.pdf
[13]
Brattle Group Report, CO2 Price Volatility: Consequences and Cures, http://www.brattle.com/_documents/UploadLibrary/Upload736.pdf
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