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Analysis: Money woes ignite CO2 debate

Public support for a tax could only be won if the money collected from the tax was given back to Americans through incentives for low-emitting behaviors, like driving hybrid cars or installing energy-efficient appliances.
by Rosalie Westenskow
New York NY (UPI) Oct 13, 2008
Energy reform must be implemented if the United States is to escape the burgeoning financial crisis, experts say, but how to do it, and whether the public will stand for it, remains uncertain.

Before Wall Street's tumble, figuring out how to get public support for significant carbon dioxide reductions was difficult; now, it may be impossible, experts said Thursday at an event hosted by Columbia University.

The old argument that some short-term pain will lead to long-term gain may no longer work, said Yvo de Boer, executive secretary for the United Nations Framework Convention on Climate Change.

"That was a convincing argument until a few weeks ago, and then things changed and changed radically," de Boer said. "You can't pick an empty pocket."

Faced with the imminent expiration of the Kyoto Protocol -- the current international agreement on emissions reductions -- and growing concern that inaction will lead to an insolvable problem later on, some experts are re-examining which road presents the shortest route to a healthier atmosphere.

Three main methods to reduce carbon emissions exist: regulations that mandate energy efficiency and renewable energy production; a carbon-based market wherein emissions are capped at a certain level and entities can buy and share allowances to pollute; or a tax on carbon emissions or the fossil fuels that cause them.

In recent years, the carbon market concept has gained increasing popularity among policymakers. The Kyoto Protocol relies on a market system to achieve reductions. Under the agreement, participating industrialized countries are allotted a certain amount of emissions, but they can trade carbon dioxide allowances they don't use to other countries. Inversely, countries can buy additional shares from low-emitters if they can't decrease pollution beneath their allotted level.

Whether the system is working remains to be seen, said John Drexhage, director for climate change and energy at the Canada-based International Institute for Sustainable Development.

"The real question is: Is this something where we just need to get the wrinkles out, or do we really need a radical ... rethink?" Drexhage asked.

De Boer agrees with the former analysis, urging the continuation of a market-based system under Kyoto's replacement, which will be negotiated in Copenhagen, Denmark, next year. This will encourage innovation and decrease costs by letting market forces work, he said.

"Markets do what markets do," he said. "They cherry-pick the cheapest options."

But both the market and tax options impose a heavy price tag upfront. As a result, it's better to go with the simplest option, and that's taxes, said economist Jeffrey Sachs, director of Columbia University's Earth Institute.

"These are basically the same thing, but one is predictable and one is not," he said. "One is easy to administer, the other is very difficult."

Complicated carbon trading schemes that involve major refiguring for the economy and government look all too familiar right now, Sachs said.

"I'm not so keen on the Wall Street approach to carbon," he said.

However, Sachs agrees that current economic turmoil will make any plan a tough sell to the public.

"Businesses in Europe and the United States are going to say, 'On top of this (financial crisis) you're putting on higher burdens? We're trying to stay alive,'" he said.

While a carbon tax may be simpler, a market approach is much more likely to occur simply because tax hikes are a political lightning rod, said Henry Derwent, president of the International Emissions Trading Association, a non-profit organization.

That became clear to Derwent during his time as a policy adviser to the British government. While briefing a former prime minister on the subject, Derwent advocated a carbon tax.

"He heard me out ... and then said, 'And how would you advise me if I wanted to get re-elected?'" Derwent said.

Recent legislative action in the U.S. Congress certainly reflects this sentiment. In June, a carbon market bill stirred up controversy on the Senate floor. Although it failed, Reps. John Dingell, D-Mich., and Rick Boucher, D-Va., introduced another cap-and-trade bill this week. And it's likely future legislation will follow suit, said Eben Burnham-Snyder, spokesman for the House Select Committee on Global Warming.

"The likelihood of a tax going through Congress is virtually nil," Burnham-Snyder told United Press International.

Public support for a tax could only be won if the money collected from the tax was given back to Americans through incentives for low-emitting behaviors, like driving hybrid cars or installing energy-efficient appliances, said Bob Perkowitz, president of ecoAmerica, an environmental non-profit.

"So it's not really increasing your taxes, it's just taxing a different thing," Perkowitz told UPI.

For Dingell and Boucher, at least, the current economic trouble is not a reason to stop pushing for emissions reductions. Quite the opposite -- it causes even greater urgency to push forward with energy reform.

From their statements during Tuesday night's presidential debate, both Sens. Barack Obama, D-Ill., and John McCain, R-Ariz., agree. But they focused more on energy independence than emissions reductions, with no mention of a carbon market or tax from either one.

"Now, I have a plan to fix this (financial) problem, and it has got to do with energy independence," McCain said. "We've got to stop sending $700 billion a year to countries that don't ... like us very much."

No argument from Obama there.

"We are going to have to deal with energy, because we can't keep on borrowing from the Chinese and sending money to Saudi Arabia," he said. "We are mortgaging our children's future. We've got to have a different energy plan."

What that plan will be, though, has yet to be seen.

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