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January 3, 2009

The Carbon Debate Debate
There's a vigorous debate going on among a group of bloggers over a gasoline/carbon tax and what role it will play in addressing climate change which was kicked off by a Tom Friedman column on the subject in the NYT. For the basic outlines, see this from Mother Jones' Kevin Drum and this from Dave Roberts at Grist.

Suffice it to say that while everyone agrees that a gas or carbon tax would need to be really high to have an effect, even then it would be muted by the fact that a lot of people will still drive (or heat their homes). For his part, Roberts maintains that you'll never be able to tax or cap carbon out of existence - while both policies are useful and necessary, the ultimate solution will be regulation (e.g. super-high mileage standards) and public investment in alternative fuel and mass transit.

But in an article that lifts the curtain on the Obama administration's climate change plans, the NYT tells us that Obama has already decided: there will be no carbon tax. So much for all that vigor.

However, if you believe the article, we will be getting cap-and-trade - assuming of course that Larry Summers lets us have it. For, if nothing else, the NYT confirms that this country really has been in an almost decade-long snooze. We're waking up to the same internal administration debates the Clinton folks were having back in the nineties. And, while the political (not to mention the scientific) landscape has changed significantly, the arguments on each side, along with the people making them, haven't.
In the fall of 1997, when the Clinton administration was forming its position for the Kyoto climate treaty talks, Lawrence H. Summers argued that the United States would risk damaging the domestic economy if it set overly ambitious goals for reducing carbon emissions...

His view prevailed over those of officials arguing for tougher standards, among them Carol M. Browner, then the administrator of the Environmental Protection Agency, and her mentor, Al Gore, then the vice president...

While Mr. Summers's thinking on climate change has evolved over the last decade, his views on the potential risks to the economy of an aggressive effort to limit carbon emissions have not.
Indeed, of all things, Summers, along with incoming OMB head Peter Orszag, favors a carbon tax. Browner, not surprisingly, doesn't like that idea, having been burned back in '93 when President Clinton's proposed version of a carbon tax cratered. And apparently, Obama agrees with her. So no carbon tax for now. You have to leave something for the second term, after all.

But having lost the cap-and-trade debate to Browner, Summers threatens to wield his +5 Green Eyeshade of Market Power and force "a maximum price or 'safety valve' cost [for carbon] in case permits become prohibitively expensive." Such a safety valve would render any cap-and-trade system toothless since it would only be triggered when we were all finally feeling the bite of a market price for carbon. In addition, Summers wants:

a phase-in of several years for any carbon restraint regime, particularly if the economy continues to be sluggish, a slower timetable than many lawmakers and environmentalists are pressing.

So now we know what to look for. Yes, Summers has already lost a big argument on environmental policy despite his much ballyhooed powers of persuasion. But he still has the ability to undercut serious cap-and-trade. When and if the administration talks about the need for a safety valve or long phase-ins, we'll know Summers won this one.

What makes this debate important, though, isn't really the particulars of administration infighting, especially because it doesn't answer how a market price for carbon fits into a plan to move us to a low-carbon economy. What really concerns me is the question of how we are going to do all the things that need to be done if we can't even implement a cap-and-trade system with teeth. Anyone?

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