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Leadership of House Committee on Energy Releases Climate Change Legislation Discussion Paper

Dingell
US greenhouse gas emissions by fuel and sector, 2005. Click to enlarge.

Congressmen John Dingell (D-MI), chairman of the House Committee on Energy and Commerce and Rick Boucher (D-VA), chairman of the committee’s Subcommittee on Energy and Air Quality, released the first of a series of climate change white papers that are intended to focus the Committee's discussion as it develops climate change legislation.

Based on a series of hearings held earlier this year, Dingell and Boucher say that they have concluded that the US should reduce its greenhouse gas emissions by between 60 and 80% by 2050 to contribute to global efforts to address climate change, and that the central component of an emissions reduction program should be a cap-and-trade program.

The first white paper discusses the overall benefits of a cap-and-trade system, and suggests the sectors of the economy that should be included. Subsequent white papers will address other topics including, but not limited to: cap levels and timetables; cost-containment mechanisms; carbon sequestration; offsets and credits; the role and obligations of developing countries; and the distribution of emissions allowances.

It is worth noting that while the use of white papers is not a policy-making tool frequently employed by the Committee, this topic in its scope and complexity is unlike any we have confronted and time is of the essence.

...There are many policy options available to address climate change. One is the use of carbon fees, or taxes, to establish a price on greenhouse gas emissions and thereby limit their proliferation. Other options include a rapid and substantial increase in climate research and technological development. While these are valuable tools, they do not fall under the province of the Committee and will there not the focus of these papers.

Memo to Members from Chairmen Dingell and Boucher

In September, Dingell published a legislative proposal that would create a carbon tax. Before introducing a formal bill, the Congressman is inviting constituents and other interested parties to review his current proposal and provide feedback. (Earlier post.)

With respect to the inclusion of transportation in a cap-and-trade program, the white paper notes that although the sector must be included in the cap (transportation accounted for 28% of the direct emissions of greenhouse gases in 2005), having a downstream point of regulations (i.e., the point where emissions occur) &ldquolis not workable.”

The paper suggests that one possible point of regulation of transportation emissions under a cap-and trade program could be vehicle manufacturers. However, it suggests:

A more promising point of regulation for this sector is upstream, i.e., refiners and importers. Adopting this point of regulation would require refiners and importers to turn in allowances to cover the carbon content of the transportation fuel they sell. Adopting this point of regulation...would also provide for highly accurate accounting for carbon dioxide emissions...

If refiners and importers are designated as the “point of regulation” for the transportation sector in the cap-and-trade program, a comprehensive climate change program will also regulate motor vehicle manufacturers through efficiency or other performance standards for vehicles. Such a program will also incorporate other complementary measures such as a low carbon fuel program, and tax of other incentives to increase the use of low-emitting vehicles and to decrease vehicle usage.

Whatever the resulting program for the transportation sector, the paper says, it must address all parties that contribute to emissions from the sector: vehicles, fuels and consumers.

Resources:

Comments

HealthyBreeze

"Such a program will also incorporate other complementary measures such as a low carbon fuel program..."

Are they still thinking hydrogen is a fuel?

JOSE DE JESUS

WE DON'T NEED TO WAIT UNTIL 2050
INEXPENSIVE TECHNOLOGY ALREADY EXISTS.
I AM WRITING TO LET YOU ALL KNOW ABOUT A GREAT PROJECT THAT WOULD GIVE ANY TYPE OF TRANSPORTATION A VERY HIGH PERFORMANCE IN GAS LOWERING THIS WAY THE EXPENSE IN GAS AND POLLUTING AGENTS. IT IS THE CONVERSION OF A HYBRID MADE AT HOME AND MY CONTRIBUTION TO IT IS MUCH MORE EFFICIENCY THAN THE ONE THAT IS NOW KNOWN, THAT IS OBTAINED ONLY FROM THE COMBINATION OF COMPONENTS. EVEN WITHOUT THE HELP OF ANY ORGANIZATION, BUT TIME HAS COME TO HAVE TO ASK FOR HELP SO AS TO MAKE IT AVAILABLE TO WHOEVER NEEDS IT. JUST TO GIVE YOU AN ADVANCE, A VERY LIGHT VEHICLE COULD TRAVEL BETWEEN 140 AND 160 MPG AND A HEAVY VEHICLE 60 AND 80 MPG.
IT COULD SEEM RIDICULOUS THAT ONE PERSON COULD ACHIEVE THIS WHEN AUTO MANUFACTURERS THAT HAVE HUNDREDS OF ENGINEERS TO DEVELOP NEW TECHNOLOGIES,
BUT IS TRUE.

RECEIVE A WARM GREETING FROM MEXICO

Mort

Based on a series of hearings held earlier this year, Dingell and Boucher say that they have concluded that the US should reduce its greenhouse gas emissions by between 60 and 80% by 2050 to contribute to global efforts to address climate change, and that the central component of an emissions reduction program should be a cap-and-trade program.

Whatever. If CONgreffs wants to help they should all volunteer for the guillotine.

Bob

When are all these people going to learn the truth about CO2? Good grief!

Stan Peterson

CO2 is not important as the new Science increasingly shows and the UN's IPCC reluctantly agrees in TAR III and AR IV.

But even if it were so, we have already done everything necessary to meet these ridiculous targets without raising another finger or raising another nickel in taxes.

Committed new Nukes (now 32), cut CO2 from coal power by 50% and raise nuclear electricity generation to 40% from 19% today. More will follow. These committed, identified, sited and Technology-specified, pre-certified, Plants will come on line from 2012 through 2019.

PHEVs produced from 2010 onward, by many automakers, will cut ground transport generated CO2, by 60% by circa 2020.

That represents 65-70% of current CO2 emissions eliminated.

End of pseudo-Problem.


jack

Don't mind Stan. He doesn't even know the difference between NO2 and N2O.

Bill Young

Stan,

The new nuclear reactors will not reduce CO2 emissions. They will only slow down the rate of increase.

There will probably be no coal plants shutdown as the new plants come on line in several years (If they are built promptly, TVA's Bellafonte nuclear plants may actually permit the retirement of some of its coal generation.)

The publically announced new reactors will not even keep nuclear power at 20% of US generation.

Stan,

What part of NO2 don't you understand? :-)

K

??? two people refer to Stan not understanding NO2 but I can't locate where he said anything about NO2.

Can someone point to his error?

Rafael Seidl

@ Stan -

got that long-term waste repository up and running yet? Until you do, expanding nuclear power is simply not a politically feasible option.

DS

Dingell and Boucher are Corporate shills. This "Discussion Paper" is like the Michael Jackson Moonwalk: it looks likes it's moving in one direction while going the opposite.

John Munger

From what I understand, the cap and trade system has been a miserable failure in Europe. Why emulate failure? And why create another bureaucracy when there is such an obvious and more effective alternative?

Phase in a large carbon tax over ten years. If the carbon tax is large enough, there will be no need for regulation. Let capitalism go to work for us. With higher prices for carbon fuels, alternative energies become more cost effective. Research dollars and investment will follow the promise of competitive alternative energy sources.

As an enticement to more conservative elements, phase out the income tax as the carbon tax is phased in. Technology-based companies will have a strong incentive to locate in the United States as their income will not be taxed and they do not rely upon high carbon emissions to become profitable.

Glenn

I believe John is correct that cap & trade has failed in Europe since caps were set so high and assignments to various emitting sectors is very political.

A carbon tax assigned at the wellhead and some form of duty on imported goods from countries with no carbon tax (like China) would be easiest to administer and effectively reduce consumption even beyond our shores. There should also be a guaranty that the cost of oil will not go down, a floor price as proposed long ago by H Kissinger, to protect investments in alternatives.

"Tax shifting" is a good idea but it should be applied not to industry directly by reducing their income tax but by reducing payroll taxes which directly assists workers and indirectly reduces employers' tax burden. This approach would be nonregressive, encourage employment and reduce energy use. See Lester Brown's Plan B...

Rafael Seidl

@ John Munger -

cap-and-trade hasn't lived up to the Kyoto hype in Europe because the emissions certificates were given away rather than auctioned off and, because the period covered ends in 2012 - what comes after that, no-one knows yet. Companies that need to make investment decisions for their core energy infrastructure need politicians to nail down the market externalities for much longer periods, e.g. 20-30 years, before commiting to the additonal expense of greener technology.

In theory, cap-and-trade is not a bad idea. It just proved politically impossible to overcome the resistance of industry lobby groups.

A carbon tax would make sense - arguably, European consumers already pay them at the pump and in their utility bills - and so would off-setting the extra revenue by cutting other taxes and/or assisting low income families. However, setting it at a level that actually changes energy usage patterns is tricky, so the best approach may be a gradual transtion from the status quo.

The fly in the ointment is that finance ministries don't much like taxes that consumers and businesses can avoid by making smart choices. Before long, they end up with a hole in the budget you can drive a truck through, forcing them to introduce new taxes and/or cut spending programs - neither of which is popular.

Bill Young

Rafael et al,

I have long favored a carbon tax which is revenue neutral. That avoids the concerns with government loss of revenue.

I would suggest that a CO2 'sequester bounty' be paid. Maximum payments would be capped at 50% of the revenue from the carbon tax. The revenue remaining after payment of the sequester bounty would be 'equitably' distributed among the citizenry.

Bill

K

Bill Young:

How would you define 'equitably'. Can you clarify how to hand out the money?

I don't understand what the 'bounty' would be either. Who gets bounty payments, how much, and why?

If a carbon tax is a good national policy which will cut energy use then levy the tax because it is good national policy.

It need not be earmarked for housing the poor, or giving hearing aids for the elderly, or an expansion of the Smithsonian. Doing so is a mistake, it creates an entitlement which will never end.

Joe Martin

I also do not understand the references made to stan about NO2. Nevertheless I think using nuclear power is a much better solution that what we are currently using, petroleum products. If we were to phase in one new nuclear plant in exchage for closure of an old oil fired plant, we could make significant advances in reducing carbon released.

Also, we could do this by reducing nuclear weapons. I like that idea as well! Just use the material from a retired weapon to produce electric.

I know there are a lot of people who worry about nuclear waste disposal. To those people I ask the most simple question, which is worse: global warming or nuclear waste disposal. To me its an easy choice, we can easily store the waste in barrels until we find a proper site for disposal.

jack

I also do not understand the references made to stan about NO2.

"jack,

The IPCC knows that NO2 is a GHG. They discuss is at length in all their interim IPCC Reports. Try reading the TAR III or the current AR4.

But then you wouldn't know that. The Elmer Gantry flunkout, showed you a movie and you converted."

http://www.greencarcongress.com/2007/08/vienna-talks-re.html

Bill Young

K,

Carbon sequestration is a nacent technology at this time. There are several different approaches that are being investigated. Other than governmental research money, there is little economic incentive to put any of the various technologies into large scale trials.

A 'sequestration bounty' is a payment for sequestered CO2. I would limit the payments to that CO2 which is permanently removed from the atmosphere or prevented from reaching the atmosphere in a normally CO2 emitting industrial process (power generation and cement manufacturing are the two that come immediately to mind). In the context of a carbon tax, I would suggest a payment of $25/ton of contained carbon or the amount of the carbon tax whichever is greater.

A bounty of this size will stimulate innovation and corporate risk taking (in the good sense). Bounty payments should be capped at a fraction of the revenue of the carbon tax (50% or 60% is my preference but this would be debated and determined politically).

The residual of the carbon tax receipts would be 'equitably' distributed. What is equitable would be determined politically.

My personal view, which is very equalitarian, is that equal payments should be made to all citizens and legal residents. It could be in the form of an income tax credit with a separate filing for those who are not required to file on April 15.

A carbon tax is a very regressive tax. It will hit the poor much harder than the wealthy. For a carbon tax to effect the reduction in CO2 which I believe is necessary it will be fairly aggresssive. Because of this, I favor keeping the tax revenue neutral and the refund mechanism progressive.

Bill


Jim G.

Bill,

Your vision here reminds me of two ideas Milton Friedman came up with back in the 1970's: reverse taxes (which he advocated on income taxes rather than food stamps and WIC) and what he called "effluent taxes", of which the carbon tax is a variety.

Although I dislike most of what Friedman said as I think he was an extremist, if properly administered a policy like you describe sounds pleasantly elegant, simple and disinterested compared to what we are likely to see when Washington finally does something.

K

Bill and Jim: I don't no simplicity in a rebate to be distributed to all citizens and legal residents. One reason - we don't have the faintest idea who they are. Is anyone going to verify claims?

If this is about the poor then the illegals are among the poorest.

The income tax works fairly well because employers report wages to the government and withhold much of the taxes. And various transactions trigger similar reports.

The sequestration bounty? Yes, there is no possiblility of mischief in getting public money for CO2 you say you didn't produce. Or CO2 you insist you put permanently away forever.

But I am replying to 'equalitarian' people who wail about the poor and immediately resort to words such as 'regressive' and 'progressive'. So no need to discuss it further.

Bill Young

K,

One of the main features of the carbon tax that I suggested is that it should be revenue neutral.

A major portion of the revenue should go to sequestration bounty. There would be a substantial residual after payment of this bounty.

My suggestion with that remainder is an equitable distribution of that residual. I then defined my take on equitable. My take is more generous to the poor, less generous to the wealthy.

Others may think it should be distributed primarily to corporate CEOs and CFOs since they know best how to invest the extra money. This is probably more like what would happen since we have the best government money can buy and the poor don't have any money.

Bill

K

Bill: You correctly pointed to exactly where we diagree totally. I don't want revenue neutral and regard it as a first class bad idea.

We aren't going to agree but this is how I see this.

1) What are the goals? Mine would be to reduce the volume of fossil fuel imports and reduce CO2 emissions. CO2 reduction comes second for me only because there is uncertainty about what effects that would or can have. Go to next step.

2) Is a carbon tax likely to help meet the goals?

It seems so to me. Go to next step.

3) How can we easily and effectively collect the tax?

My way would be to tax every barrel at the well or tanker port. And every cubic foot of NG at the wells or where a pipeline enters the country. Every ton of coal at the mine. The companies involved already keep good records, administration is simple, evasion is hard.

Avoid the trap of debating whether some coal is dirtier or some oil is a bit cleaner. Unless you want to have ten thousand rates instead of perhaps five.

4) Where will the tax money go?

We might try paying some of the national debt. Or at least not borrowing billions more every month.

5) But what about the poor?

Yes, what about the poor? If we want to route additional money to them why not just raise income taxes on the rich and give that money to the poor? What makes carbon tax money uniquely suited to helping the poor?

6) But it isn't revenue neutral!

Who cares? Oh, I forgot, you do. Also see #4.

I might add that revenue neutral is a political goal whereas a Carbon Tax is to address an economic and/or scientific difficulty as stated in #1.

7) We should pay a bounty to those producing less CO2 or sequestering it.

Why? Sequestering is still highly problematic although I think it has promise. Why lock in payments to one method that may not pan out anyway?

CO2 emission reductions? I regard reducing total fossil fuel use as a superior way to strangle CO2 emissions.

8) If you don't want CEOs and CFOs getting the carbon tax money then why send them bounty checks for not claiming the have not produced an invisible gas or for claiming they have stored immense amounts of it somewhere forever?

Bill Young

K,

I'm glad there are some points upon which we can agree. There are some points to make on your plan, however:

A straight carbon tax has a more dramatic impact on coal than on oil or gas. A $60/ton of carbon would double the cost of coal, whereas it would add about 15% to the price of natural gas. Coal is almost 100% a domestic product.

A transportation or fluid fuel tax would be more effective if the goal was to reduce imports rather than reduce CO2.

If the taxes (carbon and/or transportation fuel) are revenue for the government then they will be adjusted to meet the revenue needs of the gummint. If they are revenue neutral they can be adjusted to meet the emission goals regardless of the prevailing budgetary issues of the government.

You stated a bounty should be paid for avoiding CO2 emissions. Question: An electric utility builds a bunch of windmills or a nuclear power plant and shuts down a coal plant. Should the utility receive a payment beyond its reduced or eliminated fuel costs?

My intent to load the neutrality payments in favor of the poor is a political/philisophical/religious preference. It is not central to the concept of a carbon tax, just to my sense of humanity.

Bill

K

Young: you wrote

You (K) stated a bounty should be paid for avoiding CO2 emissions.

If I said that it was by mistake. But I should have proofread my #8. That is where you may have gotten the impression.

My #8 should have read:

8) If you (Bill Y) don't want CEOs and CFOs getting the carbon tax money then why send them bounty checks for claiming they have not produced an invisible gas. Or for claiming they have stored immense amounts of the gas somewhere, forever?

More simply: if you don't want big cats getting tax money then don't send it to them.
++++
Moving along. You asked:
An electric utility builds a bunch of windmills or a nuclear power plant and shuts down a coal plant. Should the utility receive a payment beyond its reduced or eliminated fuel costs?

No. They should build, operate, and decomission plant based upon cost and the other constraints. I have no quarrel with environmental laws forcing change. The relative costs of various plants types would be impacted by a carbon tax. (which is exactly the reason for the tax.)

Also. Utilities cannot just raise rates or build plant. They are regulated. So they can't just stubbornly choose fossil fuels for new plants and pass the carbon tax through to the consumer.

That combination of tax, environmental law, and regulation will be ample incentive to choose solar, wind, or nuclear and slowly phase out NG, coal, and oil. (Oil isn't heavily used by utilities but they do use some.)

Yes, coal gets hit hardest with a straight carbon tax. That suits me fine. It is the least desirable fuel when burned and the most destructive to mine. No matter what is done it will be used in huge amounts for at least two decades.

Your last argument for revenue neutral assumes it would free the carbon tax from other fiscal decisions.

Hah! What it will do is create a lobby of those getting the revenue from the treasury. They will want more tax and want it perpetually. And a few well placed campaign contributions will get it for them.

++++++++ Finally. A sense of humanity is fine. But good government also serves humanity. Crafting effective legislation on this matter would be a real help to humanity. Separately look at social problems.

In Congress there is committee turf. Combine a tax with a rebate to everyone, bounties, arguments about CO2, and energy policy and about twenty committees will jump in and stall until everyone gets a CYA provision in the bill.

With a simple tax you might only have three or four committees involved. They will still produce an abomination. We can hope it is less odious.

Lawmakers love to pile one complexity upon another. They want favors for their friends down in the details. They also live with the delusion that perfection is one more clause away. It isn't.

We will end up with legislation that soaks the rich, - who will survive - provides lip service to the poor, produces immense fortunes through obscure earmarks, and is administered expensively and poorly.

Somewhere in the bill you will find text condemming the Serbs about Kosovo, funding a Peanut Museum in Georgia, a grant to study fleas on poodles, lifetime limo service for widows of members of Congress, and a partridge in a pear tree.

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