Fee and dividend vs cap and trade

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Permalink Reply by Kendall Weyers on January 13, 2010 at 3:09pm

Sorry...rookie mistake. Here's the site:
http://www.commondreams.org/headline/2010/01/13-5

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Permalink Reply by Andrea Davis on January 14, 2010 at 12:24pm

Kendall, what is your impression of Cap & Trade? My understanding is that it is basically carbon offsetting?

I know that internationally, carbon offsetting in other countries may actually give forest poachers an incentive to actually protect forests they would otherwise be burning?

But applied here in the U.S., it seems like it is meeting businesses where THEIR incentives lie.

I took a train to Denver recently. And when I clicked to pay, I was asked if I would like to offset my carbon footprint of the trip by donating to carbonoffset.org. Now, I realize that I have not properly vetted carbonfund yet. But because I have not found a better solution to my train travels yet, I was happy to donate. I mean, if I can't get home without burning fossil fuels yet, I have to start somewhere. I would prefer those dollars went into effective research and development of alternative transportation fuel, but at least the concept is in place.

I can see why businesses feel the same way, initially. My question would be, "How would it evolve from here?" If it's put into law, how difficult/expensive is the new evolution of the solution? Is the proposed Nebraska "Cap & Trade" fitted with an expiration date that can be extended, for example?

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Permalink Reply by Dennis Keim on January 14, 2010 at 3:55pm

Andrea, buying carbon credits as you have done is related to cap and trade in that there's trading going on of the "right" to pollute. The difference is that there is no capping going on. Just a neutralization of the impact (if you can trust that the carbon credits are being appropriately implemented in the field).

The idea with cap and trade is that you put an absolute cap on emissions (like SOx in the past and perhaps CO2 in the future) and start ratcheting down that cap over time. Annie Leonard is right about the "Cap and Giveaway" problem which is what made the European first time effort work so badly. Also there's a big question about validating offsets as she also notes. That's why I would recommend carbon credits for renewable energy offsets as they may be less prone to crookedness. Easy to count kWHs produced by a wind turbine.

The Story of Cap and Trade - Annie Leonard

Of course, one big complaint with offsets, especially by the economic climate skeptics, is that rich folks (say Al Gore or Bono) has plenty of money to spend on as many carbon offsets as he wants to pay for to cover all their extensive international air travel. Kind of like buying indulgences to counteract one's ecological sins.

The good news is that it's a first, and voluntary, step in trying to internalize the costs of what is otherwise externalized and that would be air pollution. Right now, we get to pollute everyone else's air for free in most instances. I didn't pay an extra penny for my 10 mile or so drive today. Had there been a Hansen style carbon tax on my fuel, I would have and I probably would have benefited from this in the end as my carbon consumption levels are certainly below the national average.

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Permalink Reply by Dennis Keim on January 14, 2010 at 3:35pm

Seems to me that Krugman's "Unhelpful Hansen" column hits the critical point of the politics of the situation. It's not unlike folks who claim that single payer is the better way of doing universal health care. It's a non-starter in this Congress either way. They had a hard time getting almost anything through and that with health care being way higher on the list of domestic concerns than a years out climate change problem than many of them think is a fabricated issue.

It seems like cap and trade will be even more difficult especially since some of the conservatives who in the past have talked up the policy have changed directions because of the effort to stop Obama from passing any legislation.

This is a link that works for that Krugman blog entry:

Unhelpful Hansen - NYT

"...we have a real chance of getting a serious cap and trade program in place within a year or two. We have no chance of getting a carbon tax for the foreseeable future. It’s just destructive to denounce the program we can actually get — a program that won’t be perfect, won’t be enough, but can be made increasingly effective over time — in favor of something that can’t possibly happen in time to avoid disaster."

I'd add all the discussions about nuclear power fall into the same "can't possibly happen in time to avoid disaster" category. Hansen is promoting that option too but seems to disregard his concern for tipping points in doing so as it will take at least 10 years for the first new nuke to go on-line and that at a likely $7,000 kW installed according to the rating agencies. In the meanwhile, the lost warming cost from diverting billions of dollars away from the lower hanging and more quickly implementable fruit of conservation and renewables will be non-trivial.

Hansen does make a good point that the initial round of cap and trade was a joke. That was largely because they didn't put a high enough price on the credits which is not unlike what the current cap and trade bill in the USA will be doing if I'm understanding it correctly. But just like in Europe, it's at least a start whereas there will be no start on a tax and rebate option (which is certainly what it will be called). Anything with "tax" stuck to it will have slow sledding on both sides of the aisle.

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Permalink Reply by Kendall Weyers on January 14, 2010 at 9:36pm

I like it when Hansen says: "Yet the core issue can be defined independent of climate. It concerns how society can phase out its addictive use of fossil fuels and move on, in the most economically efficient and equitable way, to a clean energy future. Conservatives, independents and liberals should be united in this fight." Get everyone pointed to a common goal they can agree on and suddenly it seems much more achievable.

Another good point Hansen makes is that the public needs to get accurate information to make an educated decision and play a strong part in the legislation. I too have skepticism about the government being able to accomplish anything, but the only way for that to change is for the public to have a more significant input and impact. I don't think our elected "leaders" will suddenly, on their own, change their ways and start making logical choices in the long term interest of the common good. To me it is becoming more and more clear that we, the public, must take more of a leadership role to make things happen. This may be naive hope, but it is something, something I can work on and at least say I tried. I prefer that over the other choice of saying it won't or can't happen, giving up without a fight.

"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man." ~ George Bernard Shaw

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Permalink Reply by Andrea Davis on January 17, 2010 at 7:59pm

Kendall,

I totally agree with what you mean about the government not just suddenly change their ways. I have never heard of this "Fee‐and‐dividend" model. I'm glad you brought it to my attention.

I don't think I understand, though. The fee to the oil company becomes a dividend on purchase of gas?

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Permalink Reply by Kendall Weyers on January 17, 2010 at 8:53pm

I'm no authority on the fee and dividend, but from what I understand of Hansen's suggested model, all fossil fuels would be charged a fee upon extraction, and the funds aquired from the fees distributed equally to all residents, with an additional 1/2 credit per child up to two. The increased fuel costs will be passed on to the consumers, but if you use energy efficiently and spend less on fossil fuel costs, you will be less affected, yet still receive the same dividend amount as the less efficient consumer.

The bottom line that Hansen makes is: "What we need is an approach that addresses the fundamental fact that keeps us addicted to fossil fuels: they are the cheapest form of energy, provided their prices do not have to include the damage they do to human health, the environment, and the future of our children." Without a clear financial incentive (or major and obvious crisis) the masses simply will not change. The trick now is to find the quickest, most equitable, and most effective system to provide that incentive.

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