Posted by: Steven M. Taber | November 18, 2009

Laurie Williams and Allan Zabel and the “Huge Mistake” Video: Can We Please Talk About the Issues They Raise?

Someone once said “there is no such thing as bad publicity.”   Maybe that is what Laurie Williams and Allan Zabel are hoping right now, wondering if their message is cutting through the smoke  of whether they are being “silenced” by the EPA and showing how the Obama Administration is no different from any other administration in muzzling differing opinions about policy issues.  Instead of launching into the firestorm around what happened after the video was posted, let us examine the issues that the video raises.

First, watch the video:

See also Williams’ and Zabel’s webpage at http://www.carbonfees.org.  Now you know more than many people who decrying the treatment that Williams and Zabel have received. The question they raise is a legitimate one:  is cap-and-trade the best way to reduce carbon emissions?  As they mention in the video, emissions trading has been around for quite some time, and has had some success with the reduction in acid rain.  Having been around when sulfur dioxide credits were first being discussed, I can say with some authority that cap-and-trade was developed as a compromise, not as a silver bullet to end all problems.  The “trade” part of the equation was developed so that the “cap” would be palatable to industry.  Industry was complaining that there were many facilities that would have difficulty reaching a hard cap and therefore, would be shut down because of their inability to achieve the standard.  Thus, the ability to trade or, more accurately, purchase credits was dreamed up to provide an incentive for polluters to control as much sulfur dioxide as possible, and provide a mechanism for those who could not attain the cap to meet their legal obligations.  The intent was to move away from the traditional “command and control” strategy and attempt to use market mechanisms and Adam Smith’s “invisible hand” to reduce sulfur dioxide emissions.

Somewhere between the success of the sulfur dioxide emission credit trading program and the advent of the Climate Change bill(s), the idea of cap-and-trade has devolved, in the eyes of many conservatives, into a nefarious plot of the government to seize control of industry.  Somehow, their opposition to cap-and-trade became a stand-in for their opposition to anything having to do with Climate Change. At the same time, on the other end of the spectrum, there are those who believe that cap-and-trade gives too much to industry right off the bat.  These people believe that something that is more akin to the EPA’s “Command and Control” should be used so that there are real results and no profiteering in the market for CO2 emissions credits.

Williams and Zabel believe that Carbon Fees and Rebates would provide the proper incentives and the proper transparency so that the dual objectives of Climate Change control can be met:  reduce emissions of greenhouse gases and increase reliance on “green” energy.  As the Carbon Tax Center argues:

  • A carbon tax is a tax on the carbon content of fossil fuels (coal, oil, gas).
  • A carbon tax is the most economically efficient means to convey crucial price signals and spur carbon-reducing investment and low-carbon behavior. Our spreadsheet shows how fast emissions will fall.
  • Carbon taxes should be phased in so businesses and households have time to adapt.
  • A carbon tax should be revenue-neutral: government can soften the impacts of added costs by paying back the tax revenues (”dividends”) or reducing other taxes (”tax-shifting”).

Because Sen. Harry Reid (D-Nev.) has indicated that Boxer-Kerry will not get to the full Senate until Spring 2010, there is a window of opportunity to seriously consider whether the cap-and-trade regimes found in both Boxer-Kerry and Waxman-Markey are the route forward in addressing Climate Change.

The idea of carbon fees/tax is catching on, particularly in Europe (French President Sarkozy has proposed a carbon tax and Sweden has had a carbon tax in place since 1991 and has reduced carbon emissions by 20%).  Although it seems that industry would not support a carbon fee/tax because they take away credits and any chance of accruing a profit, it is not readily apparent that industry is entirely opposed to the idea of a carbon fee/tax.  Bruce Bartlett, hardly a liberal, writing in Forbes Magazine, stated his belief that industry should welcome a carbon tax because it would “be much quicker and easier to implement, provide greater transparency and certainty of the cost to businesses and be less prone to political manipulation.”

A carbon fee/tax is not a new idea, nor is it simply an idea of couple “renegade” EPA attorneys.  Two University of Michigan Law Professors, in their article  “Combating Global Climate Change: Why a Carbon Tax is a Better Response to Global Warming than Cap and Trade” (by Reuven Avi-Yonah and David Uhlmann) argued that

A carbon tax could be implemented and enforced without the need for a complex new regulatory scheme and would provide an immediate carbon price signal. In addition, revenue from a carbon tax could support research and development of alternative energy and ease any regressive effects of the tax. Moreover, adoption of a carbon tax during 2009 would provide the United States much needed credibility on climate change issues and would allow the United States to focus its climate change efforts on negotiation of a new international agreement that provides meaningful carbon dioxide emission reductions by industrialized nations and less developed countries.

Cap-and-trade, on the other hand, would take years to implement properly, the desired price signal for carbon dioxide might be difficult to achieve until years later, and administration and enforcement of a comprehensive cap and trade system poses significant challenges.

Likewise, Yale economist Williams Nordhaus concludes in his article  “To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming” that “price-type approaches such as carbon taxes” have major advantages for slowing global warming over cap-and-trade.

Rest assured, however, that carbon fees/tax would raise energy costs, particularly over the short run before “clean” energy becomes cost-effective, but presumably those costs would be offset by rebates as proposed by Williams and Zabel, or be “revenue neutral,” as suggested by the Carbon Tax Center.

Here is the interesting issue for the folks who have been screaming about Williams and Zabel’s treatment at the hands of the Obama EPA, as stated by Bruce Bartlett:

If cap-and-trade goes down, the Obama administration may just use its regulatory power to deal with global warming, which yields no revenue to the government and raise taxes on the wealthy even more than it planned.

There is no doubt, greenhouse gas emissions will be regulated.  Either through the legislative process, in the form a bill that may or may not include cap-and-trade. Or through the regulatory process, in the form of regulations promulgated by the EPA under the Clean Air Act. Or, potentially, industry will have to account for its greenhouse gas emissions directly to the people in public nuisance actions, such as the lawsuit currently under way in State of Connecticut et al. v. American Electric Power et al. Would it not be best to have the revenue stream flowing back to the people instead of into the pockets of profiteers?

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Responses

  1. [...] is an issue that has been raised before on this blog, in my comments about Laurie Williams and Allan Zabel’s video. and on my Facebook page in a Note “Climategate and Environmental Policy Options.” It [...]


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