Top experts: Carbon Tax needed NOT Cap-and-Trade Emission Trading Scheme (ETS)

A number of eminent scientists, economists and writers variously argue strongly FOR a global Carbon Tax that will directly put a price on greenhouse gas (GHG) pollution and enable urgently required rapid transformation to a non-carbon economy.

They variously argue AGAINST carbon pricing based on a Kyoto Protocol-based Cap-and Trade Emissions Trading Scheme (ETS) of which the pro-coal Australian Government's carbon pollution-increasing and misleadingly named Carbon Pollution Reduction Scheme (CPRS) is a spectacularly flawed, irresponsible, anti-social, anti-humanity, anti-environment, anti-Planet and disastrous example.

Thus the pro-coal Australian ETS involves a rigged auction involving only major polluters and then extraordinarily hands most of the receipts back to the major polluters. The proposed Australian ETS is estimated to mean an increase in Australian domestic and exported greenhouse gas (GHG) pollution by 80% on 2000 levels by 2050 (see my letter in the leading Australian newspaper The Age, 14 June, 2009).

Well, we hear plenty from ignorant and dishonest politicians about their pet Cap-and-Trade Emission Trading Scheme (ETS). Indeed such a scheme is a key part of the Obama Administration Waxman-Markey energy, climate and cap-and-trade Bill that has just passed the US House of Representatives and now faces the US Senate.

But what do top climate scientists and climate economists say? Below are some key comments made by experts who press for a direct, global Carbon Tax rather than failed, worse than ineffective, dishonest, risky and market manipulatable Carbon Trading (for detailed, extensive and updated documentation of such views see the website of the Melbourne-based Yarra Valley Climate Action Group).

Professor James Hansen (top US climate scientist; Head, NASA’s Goddard Institute for Space Studies; adjunct professor, Columbia; University, New York, USA), February 2009:

“The most honest effective way to achieve a carbon price capable of driving our economy and our society to the clean world of the future is “Carbon Tax with 100% Dividend†… The worst thing about cap-and-trade [ETS], from a climate standpoint, is that it will surely be inadequate to achieve the sharp reduction of emissions that is needed. Thus cap-and-trade would practically guarantee disastrous climate change for our children and grandchildren.†[1].

Jonathan Leake (science and environment editor of the UK Sunday Times), March 2009:

“Britain’s faith in carbon trading as a way of reducing greenhouse gases could be dangerously misplaced, according to an independent academic working with the Department of Energy and Climate Change. Dr Chris Hope of the University of Cambridge’s Judge Business School … [has] a far wider conclusion: the current European Emissions Trading Scheme (ETS) is deeply flawed and should be replaced – or at least augmented – with a green tax … For the ETS to work, the price has to be set at a level that makes it worthwhile for consumers to cut their energy use. According to Hope’s research, the minimum price needed is about £85 per tonne [A$173] , rising at roughly 2 to 3 per cent a year … Prices now stand at roughly £9.50 [A$19] per tonne of CO2 – less than 12 per cent of what Hope’s calculations show is needed.… He believes a market-based trading system such as the ETS is very unlikely to generate consistent high prices, and this instability could undermine the whole point of the schemeâ€. [2].

Professor William Nordhaus (Sterling Professor of Economics, Yale University, USA), March 2009:

“The international community is making huge wager on the Kyoto model. The wager is that the cap-and-trade structure contained in the model will do the job of slowing global warming. The new United States Administration advocated that the U.S. adopt this system as its contribution top solving the global problem, and the primary legislation in the U.S. Congress is firmly a cap-and-trade proposal. But, as I have suggested above, the cap-and-trade approach is a poor choice of mechanism... You need only to look today at the wreckage of the current financial system to see the latest example of the effects of failed regulatory and risk-management design. So, if the Kyoto model turns out to be another failed model, it has lots of company. But it would be better to recognize and change it now, rather than in one or two more decades of ineffective and inefficient efforts to slow emissions. The international community should move quickly to replace the current cap-and-trade structure with one in which the central economic mechanism is a tax on greenhouse-gas emissions.†[3].

Professor Jacqueline McGlade (Director of the European Environment Agency, Copenhagen, marine biologist and Professor of Environmental Informatics in the Department of Mathematics at University College London, UK), March 2009:

"His [Nordhaus’] idea is very sensible. We need to move the burden of taxation away from labour to resources — and tax not just on carbon but other resources such as water to tackle the far wider environmental and resource problems we face." [4].

Professor Daniel M. Kammen, (Energy and Resources Group and Goldman School of Public Policy, University of California, Berkeley), March 2009:

“Evolving the filed of climate solutions science: the economics of clean and sustainable energy must be supported for individuals and companies to achieve a shared vision; a price on greenhouse gas emissions is essential (but alone it is not sufficient); innovative financing is needed to advantage clean energy; innovation and implementation is needed in the North and South; scientific, and policy innovations open the door for quantified cases of clean development that, in turn, can reset the political landscape in favour of a low carbon future.†[5].

Professor Barry Brook (Sir Hubert Wilkins Chair of Climate Change, University of Adelaide, Adelaide, South Australia, Australia), 2009:

“1. A cap and trade mechanism is by its nature, an all consuming policy instrument that extinguishes the effectiveness of voluntary actions, harming rather than enhancing the evolution of a low carbon economy. 2. With a cap and trade approach, the target is everything as both the emissions cap and emissions floor are locked in. No one can do better than the cap, and so the cap must be a science based all consuming sustainable target pathway that won’t lock in failure. As we don’t yet have the widespread political and economic preparedness to commit to an all consuming sustainable target pathway (either nationally or internationally), the cap and trade mechanism is the wrong approach and we should instead focus on a carbon tax with complementary mechanisms that would transform the economy more effectively than the [Australian] proposed Carbon Pollution Reduction Scheme (CPRS).†[6].

Larry Lohmann (climate economist, The Corner House, London, UK); summary of book “Carbon Tradingâ€, by Larry Lohmann, editor, 2006 [implicit in the GHG pollution cessation argument is taxing GHG pollution out of existence]:

“The main cause of global warming is rapidly increasing carbon dioxide emissions -- primarily the result of burning fossil fuels. Some responses to the crisis, however, are causing new and severe problems -- and may even increase global warming. This seems to be the case with carbon trading -- the main current international response to climate change and the centrepiece of the Kyoto Protocol. Carbon trading has two parts. First, governments hand out free tradable rights to emit carbon dioxide to big industrial polluters, allowing them to make money from business as usual. Second, companies buy additional pollution credits from projects in the South that claim to emit less greenhouse gas than they would have without the investment. Most of the carbon credits being sold to industrialized countries come from polluting projects, such as schemes that burn methane from coal mines or waste dumps, which do little to wean the world off fossil fuels.†[7].

Dr Robert J. Shapiro (Chair, U.S. Climate Task Force and finance consultancy firm Sonecon; undersecretary of commerce for economic affairs in the Clinton Administration), January 2009:

“A cap-and-trade system is very unlikely to reduce global greenhouse gas emissions — and more likely to introduce new, trillion-dollar risks for the financial system. The clearest illustration of the problems with cap-and-trade is the European Trading Scheme, based on the Kyoto protocols covering most of Europe. According to a new report by the Government Accountability Office, there’s little if any evidence that the ETS has had any effect at all on emissions in Europe. One reason is that major emitters such as Germany simply exempt many of their facilities generating greenhouse gases. Another factor is the “offset†permits that European “transition†economies, themselves exempt from caps, can sell to other ETS members…the volatile prices for the permits themselves, traded on financial markets, would attract speculation and new financial derivatives, putting us at risk for another crisis. Even more regulations cannot eliminate most of cap-and-trade’s inherent price volatility or the incentives for its participants, including governments, to evade or manipulate the system. These are the main reasons why the father of climate-change politics, Al Gore now prefers carbon-based taxes over cap-and-trade. A carbon tax system would apply a stable price to carbon, creating direct incentives to develop and use less carbon-intensive fuels and more energy-efficient technologies. President-elect Barack Obama is committed equally to fighting climate change and restoring economic growth. The best way to do both is to give up cap-and-trade and learn to love carbon-based taxes." [8].

More from Dr Robert J. Shapiro, March 2009:

"The proper approach here is a straightforward one. First, enact a carbon-based tax to move people and firms to prefer and choose less-carbon-intensive fuels and technologies. Second, as we change the relative prices of different forms of energy based on their effects on the climate, protect people’s incomes and the overall economy by returning all or virtually all of the revenues through payroll tax cuts or lump-sum payments to households. Third, use the certainty of a substantial tax on carbon, along with additional subsidies, to promote the development of new climate-friendly fuels and technologies that can capture a new and fast-growing global market. I recently co-authored a study that used the same modeling system as the Department of Energy to estimate the environmental and economic consequences of applying this specific approach. We found that we can effectively address climate change without harming our economy ... And after the carnage of Wall Street’s recent rounds of malfeasance, it is painfully clear that the Securities and Exchange Commission and the Justice Department simply lack the ability (and the resources) to effectively police complex, fast-moving markets involving many, many thousands or millions of trades per day. Despite its advocates’ good intentions, cap-and-trade could put America at risk of another meltdown — one originally created and financed by the government itself. None of these painful and difficult issues arise with a carbon tax-shift. Rather, it could enable us to effectively do our part in addressing climate change, while protecting or even enhancing our economic prospects. That’s a deal Congress cannot afford to pass up." [9].

Pro-coal US and pro-coal Australia are world leading greenhouse has (GHG) polluters. Pro-coal, climate criminal Australia is the world’s biggest coal exporter and a world leading greenhouse gas (GHG) polluter. Thus Australia’s domestic and exported “annual per capita GHG pollution†is 54 tonnes CO2-equivalent per person per year – 2 times that of the US, 10 times that of China, 25 times that of India and 60 times that of Bangladesh.

If the December 2009 Copenhagen Climate Change Conference opts, like the climate criminal nations of the US and Australia, for a Cap-and-Trade Emissions Trading Scheme (ETS), then the World is facing disastrous inaction over man-made global warming and the real prospect of worsening, First World-imposed climate genocide. Top UK climate scientist Dr James Lovelock FRS has estimated that fewer than 1 billion people will survive global warming this century, this constituting a prospective climate genocide that will kill 10 billion non-Europeans including 6 billion infants, 3 billion Muslims, 2 billion Indians and 0.3 billion Bangladeshis (for detailed documentation see here).

Key References

[1]. Dr James Hansen, “Carbon Tax and 100% Dividend vs. Tax and Tradeâ€, Committee on Ways & Means, US House of Representatives, February 2009: http://cleanenergy-project.de/.../carbon-tax-100-dividend-vs-tax-trade/ ; http://www.columbia.edu/.../WaysAndMeans.pdf.

[2]. Tricia Holly Davis & Jonathan Leake, New Statesman, 26 March 2009: http://newstatesman.com/.../carbon-price-climate-hope-co2.

[3]. Professor William Nordhaus, “Economic issues in designing a global agreement on global warmingâ€, Keynote plenary address for the 10-12 March 2009 Copenhagen Climate Change Conference on Climate Change: Global Risks, Challenges and Decisionsâ€: http://climatecongress.ku.dk/.../speaker-11march2009.pdf/ ; for this and other plenary lectures see: http://climatecongress.ku.dk/.../congresspresentations/.

[4]. Oliver Tickel, “Replace Kyoto Protocol with global carbon tax, says Yale economistâ€, Guardian, 12 March 2009.

[5]. Professor Daniel M. Kammen, “From climate science to solutions: shared agendas in the North and Southâ€, Keynote plenary address for the 10-12 March 2009 Copenhagen Climate Change Conference on Climate Change: Global Risks, Challenges and Decisionsâ€: http://climatecongress.ku.dk/.../speaker-11march2009.pdf/ ; for this and other plenary lectures see: http://climatecongress.ku.dk/.../congresspresentations/.

[6]. Professor Barry Brook, “CPRS versus carbon tax: Senate Inquiryâ€, 30 March 2009.

[7]. Larry Lohmann, summary of book “Carbon Trading. A critical conversation on climate change, privatisation and power†by Larry Lohmann, editor, 2006, published by Dag Hammarskold Foundation, Durban Group for Climate Justice and The Corner House, 2006.

[8]. Dr Robert J. Shapiro, “The real choice between Cap-and Trade and Carbon-based taxesâ€, Roll Call, 15 January 2009.

[9]. Dr Robert J. Shapiro, "Shapiro: economy will force quick action on climate change", Roll Call, 30 March 2009.


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Dr Gideon Polya
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Why is there such a strong outcry against carbon emissions when methane may be more lethal to our atmosphere? Can we not get some legislation that tackles all of the harm cows are doing? I feel like this may be much more cost effective and more reasonable to be accepted by all parties. See this Green Over Everything blog article for some of the damage done by cows:

http://greenovereverything.blogspot.com/2009/04...

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I certainly hope that the Senate turns its attention toward a carbon tax shift approach before it's too late! Not only would a carbon tax benefit the environment measurably more than the watered-down cap and trade included in Waxman-Markey, it would also incentivize green R&D and return the revenue to the people.

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Guest Sara

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Sweden have had a tax on carbon for years now without any problems.

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