Cap, Trade and Lobby

Much remains to catch up on, but here is one hot off the press.

It is James Hansen's reflections following his testimony to the Committee on Ways and Means of the US House of Representatives on 25 February.

His testimony lays out starkly the reasons why cap and trade - which he argues should properly be called 'tax and trade' - is intrinsically incapable of addressing climate change effectively.

Because it is inherently inefficient, far too slow, and wide open to exploitation, as well as just plain unjust.

More than just disquieting, then, that cap and trade is the principal and more or less unique mechanism world leaders are prepared to envisage as a response to the perils of climate change.

Here are some key quotes from Hansen's testimony:

'A ‘cap’ increases the price of energy, as a tax does. It is wrong and disingenuous to try to hide the fact that Cap is a tax. Other characteristics of the “cap” approach: (1) unpredictable price volatility, (2) it makes millionaires on Wall Street and other trading floors at public expense, (3) it is an invitation to blackmail by utilities that threaten “blackout coming” to gain increased emission permits, (4) it has overhead costs and complexities, inviting lobbyists and delaying implementation.

'The biggest problem with Cap Tax is that it will not solve the problem. The public will soon learn that it is a tax. And because there is no dividend, the public will revolt before the Cap Tax is large enough to transform society. There is no way that the Cap Tax can get us back to 350 ppm CO2.

'We need a tax with 100% dividend to transform our energy systems and rapidly move us beyond fossil fuels. For the sake of our children and grandchildren, we cannot let the special interests win this fight.

'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 clear (1): 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.'

[please see the paper for footnotes 1 and 2 - link below]

Instead he argues passionately for a 'Carbon Tax & 100% Dividend' where the entire yield of the tax is returned to the community so as to reward low carbon users whilst penalising profligate ones. This is a simple measure that can be quickly introduced which will immediately change consumer behaviour directly. One reason is that it will shift the balance decisively in favour of renewable energy over carbon.

In his testimony he suggests:

'a tax large enough to enough to affect purchasing decisions: a carbon tax that adds $1 to the price of a gallon of gas. That’s a carbon price of about $115 per ton of CO2. That tax rate yields $670B per year. We return 100% of that money to the public. Each adult legal resident gets one share, which is $3000 per year, $250 per month deposited in their bank account. Half shares for each child up to a maximum of two children per family. So a tax rate of $115 per ton yields a dividend of $9000 per year for a family with two children, $750 per month. The family with carbon footprint less than average makes money – their dividend exceeds their tax. This tax gives a strong incentive to replace inefficient infrastructure. It spurs the economy. It spurs innovation.

'This path can take us to the era beyond fossil fuels, leave most remaining coal in the ground, and avoid the need to go to extreme environments to find every drop of oil. We must move beyond fossil fuels anyhow. Why not do it sooner, for the benefit of our children? Not to do so, knowing the consequences, is immoral. The tax rate likely must increase in time, but when gas hits $4 per gallon again most of that $4 will stay in the United States, as dividends. Our vehicles will not need as many gallons. We will be well on the way to energy independence.'

On the way we get some insights into the world of climate change politics and lobbyists in particular:

'the number of lobbyists in DC working to influence federal policy on climate change increased in the past few years by 300% to 2,340 lobbyists -- four climate lobbyists for every member of Congress.'

'The question is: who will Congress listen to? Protesters (bringing no gifts - it's hard enough to pay their own way) or lobbyists (with lobbying expenditures last year of about $90M).

'Young folks, if you need an indication of what you are up against, let me give you one example. Peabody Coal (a.k.a. Peabody Energy) hires Dick Gephardt, paying him $120,000.00 per quarter in 2008. The amount of money going into lobbying is increasing rapidly. As Shakespeare would say, gird up your loins.

'If democracy does not win this one, if the lobbyists win, perhaps the best we can do for our grandchildren is buy them a ticket to another planet. Of course, Congress would have to borrow the money from our grandchildren. But at least we would show that we are giving them some consideration.'

And I guess that goes equally for every one of us too.

Gird up your loins, folks. The Last Battle approaches. Truly.

For those with the time, his testimony is well worth a look to see how the world's top climate scientist summarises our position and policy responses to it. Find them all at

http://climatechangepsychology.blogspot.com/2009/02/james-hansen-ways-and-means-and.html