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Climate Hustle

What Sir David King gets wrong about carbon pricing

Posted on 17 May 2016 by Guest Author

Judy Hindley is a writer and long-term activist, co-founder of Marlborough Climate Pledge and Citizens’ Climate Lobby UK. Brian Utton is the national coordinator of Citizens’ Climate Lobby UK.

Sir David King, UK Special Representative for Climate Change, recently took to The Guardian to throw cold water on the prospects of carbon pricing as an effective tool for reducing greenhouse gas emissions. He instead advocated for increased government research funding to develop ‘competitive’ clean alternatives to fossil fuels.

There can be little argument that swift, effective action on the climate is essential. In the UK alone, the Department for Environment, Food and Rural Affairs’ most recent Climate Change Risk Assessment projects a potential doubling of people at significant flood risk between 2012 and the 2020s, and industry experts warned that the economic costs of this last winter’s storms was over £5 billion.

Yes, it’s true that the current pricing regime can be described as – at best - ‘sluggish’. A landmark report by the Institute of Fiscal Studies in 2013 described the system of UK taxes of recent years as “complex and incoherent and less effective than it could be at reducing carbon emissions at the lowest overall cost”. A key component, the EU’s Emissions Trading Scheme has suffered from an excess of free allowances, fraudulent activity in the market, end-use monitoring that misses most emissions, and administrative complexity most countries cannot fully implement.

The IFS called instead for a single, consistent carbon price, leveled upstream.

Let’s go a step further and consider a revenue-neutral version of this steadier price signal. According to a study done in the US by Regional Economic Models, Inc., such an approach could cut American carbon pollution by as much as 52% in 20 years, while adding millions of jobs and spurring economic growth. Adopting such an approach in the UK and other countries would likely yield similarly positive results.

Technological breakthroughs are not in short supply. Despite the dearth of clear, consistent economic incentives, innovation in this sector continues to dazzle. But we’re hardly making the best of what we’ve got: it’s now five years since Mark Jacobson of Stanford University showed that in 20-40 years, the entire world could be powered with wind, water, and sun.

So why isn’t it? We’re not lacking technology; we’re lacking deployment.

Think what could happen if the market worked.

The quickest, fairest, and most effective way to make clean technology competitive with fossil fuels is simply for carbon to start paying its true costs. A fee starting at £10 per tonne of CO2 emitted, increasing by £7 each year could quickly make clean energy, whose prices are already dropping rapidly, the cheapest choice. A revenue stream rebated equally to all UK households would fuel the economy, incentivize green practices and the deployment of clean technologies, and cushion low-income households during the transition.

Consider the numbers. Sir David, as one of the architects of Mission Innovation, asks for a commitment by 20 governments to double research funding to £20 billion within five years. The UK contribution is targeted annually at £400 million by 2020/2021. Where is it going to come from? And how much could it accomplish on its own?

By comparison, Carbon Fee & Dividend, starting at £10 per tonne, would generate £4 billion in just its first year, to be rebated to households, rewarding them for adopting an increasingly lower carbon lifestyle. As both the fee and the household dividend rise steadily, each year, a clear, economy-wide price signal is sent to all investors, calling capital from the sidelines to finance new, low-carbon alternatives.

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Comments

Comments 1 to 11:

  1. I recently joined Citizen's Climate Lobby (CCL). This group is wonderful! They advocate for Fee & Dividend using a relationship-building, respectful, kind approach. They have great resources. There are CCL chapters all around the world and in about every congressional district in the US. If you are looking for an way to plug-into effective action, please take a serious look at CCL! Their cause (CFD) is the most effective way to really start reducing carbon emissions. Email the local chapter leader and they will quickly get you involved. You will be glad you did. PS: They don't hound you for money; but they will hound you for your time and talent.

    Also, read 'The Case for a Carbon Tax' Dr. Shi-Ling Hsu. Great book!

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  2. I'll 2nd what sauerj mentions at #1 - but then I'm obviously (also) biased, being a member of CCL in Germany where we recently came together in Berlin for our 2nd annual meeting. Thanks to weekly European calls, I'm also in regular contact with Judy and Brian from the UK who wrote the article. CCL is a great way to get something done climate-wise with like-minded people in an ever growing global network.

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  3. Hi Baerbel! Could you send me any good stuff you might have on how to start implementing a carbon tax with full or partial dividend? I'm on our local government's advisory panel to their Energy Policy Executive and they've asked me to submit some carbon tax stuff. I have my own information but I'd like to see a different perspective to keep me as up to date as possible. I'm still on the usual email

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  4. Nick @ 3. I'm a member of a Citizen's Climate Lobby chapter in New Hampshire. Our chapter is just a year old, but already it's lobbying effectively at the Federal legislative level (Senate and House). Citizen's Climate Lobby has posted a great deal of information about its proposed "carbon fee & dividend" policy here: http://citizensclimatelobby.org/carbon-fee-and-dividend/

    In addition, the Carbon Tax Center posts lots of information about carbon taxes in general, with and without dividends, on its website.

    Finally, I fully agree with sauerj@1 that Dr. Shi-Ling Hsu's book, "The Case for a Carbon Tax," is an excellent source of information. In addition, it's brief, well written, and occasionally humorous. Look it up on Amazon.

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  5. I am 100% in favour of a carbon tax to take into account, as far as possible, external costs but when David King says "“It needs to go hand in hand with other regulatory systems.” I cannot find fault with that opinion either. We neeed surely to use every tool at our disposal, carbon tax, government planning and regulation. If on the other hand he argues that regulation should be used instead of carbon tax I would say he was in error for excluding an important strategy. 

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  6. I agree with Carbon Fee & Dividend, with the carbon fee being significant enough that the dividends are noticably improve the life circumstances of the least fortunate who actually live in ways that result in very little CO2 impact.

    In addition to that action, I agree with Sir David King's push for more tax money to be collected and spent on reserch and development of truly suistainable energy technologies. But that tax should be a special surcharge on individual gross income (before reducing the inome by tax allowed deductions like loss of value of stocks), for anyone whose gross income is significant (a tax only on the top 10%).

    The bottom line is that many of the currently developed perceptions of prosperity and wealth are clearly unsustainable and undeserved. Pushing for those perceptions to be excused and be maintained until (or unless) a cheaper more popular or more profitable way of  living is developed is simply shameful. History clearly shows that less acceptable actions that can actually be temporarily gotten away with will be cheaper, popular and most profitable (for a few for a little while). That Invisible Slapping Hand of the marketplace needs to be acknowedged in order for humanity to more rapidly advance to a lasting better future for all.

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  7. One Planet Only Forever@6: I agree w/ your comment, but the reality of today's US Republicans (who have pledged not to enact any new taxes; Grover Norquist pledge) causes an impasse. CCL's approach: 'OK, that won't stop us, we can get around this'. And, they are! They are getting some GOP members' attention & real support (which opens the door to building relationships for really getting things moving).

    SkS members would all agree that CFD at $100 US/ton CO2 (CCL proposal) would be a very effective start to motivating toward a FF-free economy. Dr. Shi-Ling Hsu (Case for Carbon Tax) argues that CFD is the most effective way (compared to Command&CaptureControl (Regs), Cap&Trade, and Subsidies). CCL's approach is to figure out a way to effectively and respectfully work within the political constraints that we have. And, the 100% revenue neutral CFD proposal (no new net tax burden) removes any political foothold from the GOP to thwart this policy (on the grounds of tax burden). And, this is working; GOP members are signing-on in support (see citizensclimatelobby.org/climate-solutions-caucus/). In fact, CCL places such a high priority on bipartison cooperation that they purposely do NOT invite any new Democrats until a new GOP member joins (currently there are 6 democrats and 6 republicans). I find that kind of "vision" very refreshly (another example of the positive spirit behind CCL).

    But, in the end, though CFD by itself will be very effective. A combination of 1) 100% revenue neutral CFD, and 2) subsidies to R&D, and 3) Command&Capture (regs) would be extremely powerful. My personal analogy is that CFD is a "pulling" economic force (it pulls the economy & markets toward the best solutions); while Command&Capture (regs) are a "pushing" economic force (they push the economy & markets away from an undesire state). I compare the effectiveness of these to that of front-wheel drive cars (pulling) vs rear-wheel drive cars (pushing). If you had to pick between the two, you would pick the former. But, the ultimate would be BOTH (an all-wheel drive car), especially to move somewhere as expedieting as possible. R&D subsidies would be like hiring a mechanic that works 24/7 on your car to continuously optimize its technology.

     

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    Moderator Response:

    [JH] Edited per request.

  8. sauerj,

    My observations of the behaviours of the die-hard adherents to Grover Norquit's pledge indicates that anything that would shift wealth and benefit away from the portion of the population that does not deserve the benefits and rewards it has been getting away with personally gathering will be unacceptable to them. And they will use the Pledge to Grover as an excuse for the irresponsible inexcusable choice they want to make.

    So I would expect that the GOP members who are receptive to CFD did not sign Grover's pledge (not all GOP signed onto that piece of Playschool Theatrics) and that Democrat members who support it do not represent regions where the smiting might of disinformation political campaign attacks would significantly affect them (some Democrats have supported continued coal burning). However, I would wholeheartedly welcome learning that GOP members who signed the pledge have decided to ignore the expectations of those who sign it and are willing to act rationally and responsibly to advance global humanity to a lasting better future for all.

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  9. One Planet, I can't find pledge signers list for current 114th congress, but HERE is list for previous 113th congress. 3 of 6 GOP Climate Solutions Caucus members are on the 113th pledge list. The other 3 GOP reps didn't start office until the 114th congress. Of these Bob Dold has signed the pledge; I can't find if either Carlos Curbelo (FL) or Ryan Costello (PA) have signed. ... Unfortunately, the Grover Norquist pledge (Americans for Tax Reform) is a formidable political reality as 94% of House GOP have signed it (link). ... But, the 100% revenue neutral Fee & Dividend approach effectively gives us a way to get around this political stumbling block, and that's OK, because this by itself would still be very effective in moving us toward a FF-free (or greatly FF-reduced) economy. Take note that Dr. James Hansen is a strong supporter of this 100% revenue neutral CFD approach. ... This is what makes CCL vision so attractive; they realize the political reality and embrace it head on. If we can help keep building this political will and getting other GOP pledgers to get on board, we might actually get some real national discussion going and get something with some real force passed.

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  10. Carbon taxes have to be paid by the ultimate user. A simple way to collect these taxes (in the US) would be to add $1 a gallon carbon user tax to gasoline, nationwide.

    Natural gas's carbon tax should be assessed at 900BTU/cu ft, which is equivalent to 115,000BTU in a US gallon of gas...or 1 cent per cu ft. 

    Electricity is rated at 3400BTU/kw - so the % of energy generated by burning carbon would be taxed at 3 cents/KW. 

    I also think that there should be a 100% tax penalty for using electricity generated by burning dirty dangerous coal - so that proportion of a homeowner/electricity users bill would be assessed at 6 cents/KW.

    The public power companies provide charts telling us where the energy come's from (coal, natural gas, renewables). The public utilities should be paying an ADDITIONAL carbon tax (not passed on to the users) for every KW they generate from coal.

    Carbon taxes for a better world...

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  11. sauerj,

    I am thrilled to learn that some of the GOP supporters of CFD did sign the pledge. I am hopeful that there are a significant number of "signers in appearance only", meaning they only signed it because of the threat of disinformation campaign marketing attacking them for not signing it.

    I am actually hoping that some of the GOP "signers of convenience of the Pledge" will start to argue for more rational considerate taxation of the richest to reduce taxation on the less fortunate and for the delivery of support to the less fortunate who need assistance to live a decent basic life while changing to using more responsible and unavoidably more expensive energy.

    More responsible and considerate ways of doing things are guaranteed to be more expensive and difficult than getting away with less responsible behaviour (and defineitely be less rewarding for the ones currently getting the most benefit from those understood to be unsustainable damaging activities). Getting the GOP (and Democrats) to openly admit that challenging fatal flaw of the marketplace of popularity and profitability is a key step to getting leadership that effectively advances global humanity to a lasting better future for all (rather than people in positions of power and influence trying to abuse disinformation marketing to create appearances while striving to get a better present for only a portion of humanity, or boldly promoting selfish greed and intolerance, to the detriment of the future of humanity).

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