Saturday, February 16, 2013
Climate Push 2013: A Cold-Eyed Look at Sanders-Boxer
Although it has a zero chance of getting past a Republican veto in congress, it’s good to see a new climate bill sponsored by Bernie Sanders and Barbara Boxer. You need a concrete proposal to transform amorphous climate anxiety into political activism. The fate of this bill will have little to do with its actual strengths and weaknesses, but we should still size it up carefully, since politics often has a way of digging channels that it eventually has to follow.
In some ways this is an evolutionary improvement on Waxman-Markey, which made it through the House in 2009 but died in the Senate. Like W-M, its centerpiece is a framework for putting a price on carbon, a sine qua non for organizing a comprehensive response to the buildup of greenhouse gases. Unlike W-M, it would position itself upstream, slapping a tax on fossil fuels as they leave the ground or enter the economy from abroad. This is a huge improvement: it would cover a wider swath of carbon emissions and would avoid all the loopholes and backroom dealing that sector-by-sector coverage practically invites.
Also, it devotes three-fifths of all carbon revenues to per capita rebates back to the public. This is essential for several reasons: it is good macroeconomics (more predictable muting of the dampening effect of higher energy costs), good social policy (turning regressive fuel price increases into progressive redistribution), and good politics (countering the understandable fear of households that rising energy bills will slash their living standards). This is the right direction for policy.
The brief summary posted on Sanders’ website doesn’t make clear how long or complex the bill is, but from the looks of it, it should be simpler and more transparent than W-M. That’s important too.
However, there’s another possible comparison to make: Maria Cantwell’s CLEAR Act. This was introduced at the same time as W-M but didn’t get the endorsement of either the Democratic Party establishment or the major green groups. It was a much, much better approach.
Rather than collecting money through a tax, CLEAR required permits to introduce fossil fuels into the economy, and these permits would be auctioned. Permits have two large advantages over taxes. First, the relationship between carbon prices and emissions is uncertain and likely to change over time. By setting one, you allow the other to fluctuate. If you are a climate hawk—and you should be—you want the price to vary and to control directly how much carbon we send up into the atmosphere. Permits do this. Second, as a practical matter, it will be difficult to pass a bill that does more than impose a token restriction on carbon emissions, at least initially. S-B, for instance, starts low at $20 per ton of CO2 equivalent and programs a very modest rate of increase over the next decade. In fact, it anticipates only a 20% reduction in emissions by 2025, not nearly what we need. By itself, that’s OK; just getting a framework is a big deal. But basing the framework on taxes means that, if we somehow manage to make S-B the law of the land, we are going to have to spend the next decade arguing for higher taxes on fossil fuels. That’s tough not only because of the politics of taxes, but also because taxes are connected to climate outcomes only through a chain of effects that is complex and imprecise. It would be much more powerful, politically, to be arguing about how much carbon to send up to the atmosphere directly, which is what you get from a permit system. There’s a reason Bill McKibben’s outfit is named 350.org and not, say, $120-per-ton.org.
Also, CLEAR rebated nearly all of its revenues back to the public. Rebating some of the money is a good idea, and the more you rebate the better it is. That way you cover more of the public’s fears about energy costs, recycle more of the cost increases into other forms of demand, etc. Ah, you say, but what about all the investments in clean energy we need to make? Yes, we need to make them, but we don’t need any extra revenue: we could finance them almost entirely out of repurposing anti-environmental spending on fossil fuel subsidies, ag subsidies, a large portion of military spending, and so on. You can even see that, camouflaged, in S-B. It proposes to increase green investments of all sorts by $480B over ten years, along with ending fossil fuel subsidies—but then it would devote $300B of these savings (from ending subsidies) to reducing fiscal deficits. In other words, the majority of the money that could have gone into rebates is going into financing the government—and this is based on just one of many possible changes in federal spending. It is important to bear in mind that price increases for energy are highly regressive in themselves; so programming a more austere fiscal policy at the expense of lower income households is a double no-no.
So there you are: we have a new starting point that’s better than the “official” proposal last time around but worse than its better competitor. The good and bad news is that we will have lots of time—at least two years and probably longer—to discuss what the best framework would look like.