JUICE: Carbon Fever

By Published On: March 12, 2010

I welcomed the cold outside air after sitting in overheated, stuffy meeting rooms in the nation’s capital last week. The crisp air was refreshing and the lingering snow on the ground beautiful. Those subjected to the heavy snow and ongoing frigid temperatures in Washington D.C., however, didn’t share my sentiments. They suffered cabin fever. A number of Washingtonians, particularly on Capitol Hill, also are plagued by another malady this season--carbon fever. This strain is linked to the continued lack of a price on carbon. A federal carbon cap-and-trade market, expected to be the vehicle for sticking a price tag on carbon pollution emissions, is suffering frostbite. A market involving buying and selling certificates representing greenhouse gases is supposed to ameliorate climate change, at least in theory. It’s touted as a cost-effective way to reduce carbon pollution, providing profits to those who trade carbon, including promoters of carbon offset projects. Prospects for a carbon trading market in California or in the West are not a whole lot brighter than for a federal one. -A West-wide regional carbon market proposed by the Western Climate Initiative has fizzled because of opposition by a number of participating states. Only California and a couple of hydro-rich provinces in British Columbia remain standing. -The state’s climate change law, AB 32, which includes establishing a carbon market, is under attack. The biggest threat comes from the initiative backed by Big Oil money for November. That ballot measure seeks to halt AB 32’s implementation. -The Air Board’s Low Carbon Fuel Standard, which aims at promoting fuels that emit at least one-tenth less carbon emissions than gasoline burned in engines, has been dragged into court. The Air Resources Board, which is implementing AB 32, plans to use carbon trading as a means to reach about 40 percent of the mandated emission reductions set for 2020--a 25 percent cut from 1990 levels. The majority of emission reductions are expected to come from mandated state programs: a 33 percent renewable portfolio standard, energy efficiency requirements, the state’s low carbon fuel standard, and auto emissions standards. Legislation creating a one-third alternative energy standard that failed last year is in play again this session. The silver lining is that this chaos creates opportunity. That includes opening the way for a properly structured carbon tax. Or, taking a cue from the tab for my round trip flight to and from Washington, let’s call it instead a carbon “security fee,” “surcharge,” or “facility fee” to make it more palatable. Whatever strategies are used to move us away from a fossil fuel-heavy economy it will cost us all. The crux is how much and where the revenue generated from carbon lite measures--real and perceived--is directed--into public or private pockets and for what purpose. I don’t want my hard-earned dollars going to fatten the wallets of those trading in a complex market where carbon emission reductions would be tricky to measure, verify, and police. I suspect many share my distrust. An interesting twist is a carbon tax is thawing in straight and narrow Washington D.C. Much of if appears spurred by concerns over China’s dominance in the so-called clean energy race, so much so that “Red China” is now dubbed “Green China.” During a three-day Department of Energy conference, the repeated attention-grabbing statistic was that while Washington politicians and lobbyists fight over energy legislation and green energy technology investments, China is investing $12 million an hour in renewable and efficiency technology, seriously threatening our nation’s ability to compete in this multi-billion dollar sector. Bi-partisan federal energy legislation being worked is rejecting the use of the term “climate change,” which has become more politically charged than the word “tax.” Developing a well-thought out and transparent carbon fee could, in essence, price carbon. The fee or surcharge--be it at the pump or meter--would be known as would the revenue generated. The state and U.S. Environmental Protection Agency estimate annual greenhouse emissions from the different industries--electricity to chemical--for states and the nation (see Climate Roundup below). Thus, the amount of revenue collected from a carbon fee could be estimated. If properly structured, a carbon surcharge on electricity, natural gas, and transportation fuels would help the economy and environment. That includes requiring that the revenue be spent on clean energy investments and given back to citizens for investing in energy efficiency and renewables, as suggested by an Air Board advisory committee. Government bureaucracy is far from problem free--and more so with corporate campaign spending limits eliminated by the High Court. But, a carbon fee avoids the challenging and politically charged task of setting a carbon cap on industries, the selling or giving away of carbon allowances, and establishing standard measurement and enforcement protocols. Furthermore, citizens can express their pleasure or unhappiness with elected officials at the ballot box. As D.C. awaits its cherry blossoms, the thaw may unfreeze a carbon tax too and allow the U.S. to give China a run for its money in the emerging green economy.

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