Hillary releases rockin’ climate plan. Green gap grows.

hillary.jpg

Our irregular posting schedule has meant far fewer election updates than I originally planned, but it’s worth noting that with the release of Clinton’s energy plan we now have three extraordinarily solid proposals on offer from the leading Democratic candidates.

For the rundown on Clinton’s plan, see David Roberts. It is entirely unsurprising that Hillary’s plan is good. Her chief rivals have already released great plans, so anything less than great from Hillary would have been stumble. One interesting wrinkle is her proposal for a National Energy Council, modeled on the National Security Council, that coordinates energy policy across government agencies. Given the scope of the issue, this probably makes a lot of sense.

The plan is also bad in all the same places that her rivals’ plans are bad: excessive support for biofuels, clean coal silliness, etc. But these blemishes don’t detract much from the overall goodness. Hillary’s plan is heavy on efficiency, sets strong targets for reductions, and favors auctioning 100% of allowances under a cap-and-trade system. High fives all around.

Clinton, Obama, and Edwards have offered up fairly similar plans. Sifting through the minor differences isn’t all that interesting, particularly given the vast gulf that separates plan from future reality. But the bigger picture is fascinating indeed. Two major points:

  1. The aggressiveness of the plans on offer is really quite miraculous. Items that environmentalists used to fervently wish for but never dare to expect have become the consensus position. This is rapidly becoming a cliche, but it’s one I’m happy to repeat: we’re making galloping progress on this issue.
  2. The so-called Green Gap between Democrats and Republicans is becoming…awkward. Obviously, there has always been a gap between the way the major parties approach environmental issues, but climate change is different. It wraps together energy policy, economic considerations, and even national security concerns in a way that doesn’t fit comfortably into the old frames of conservation and regulation. After the primaries, when everyone has to tack back to center, it will be interesting to see how the Republican nominee tries to cover the Green Gap.

Photo available under Creative Commons license from flickr user sskennel.

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adam

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  1. Anonymous - November 7, 2007

    One of the primary assumptions of all of these plans is the continuation of development patterns which promote, or even require, the use of cars to accomplish even the most menial tasks.
    None of these plans adequately addresses the need to couple gains in efficiency with a reduction in miles driven, whether that is accomplished through increased use of mass transit, alternatives like bicycles, and by promoting more walkable communities.
    These may be typically municipal issues, but any truly ‘comprehensive’ plan for energy security should provide incentives for communities to make driving a car less necessary. I don’t see that from any of the candidates yet.

  2. Eric Nguyen - November 7, 2007

    I’m curious what Terrapass’ opinion is on a carbon tax. A tax seems like a much better way to internalize the costs of emitted carbon, since you can just apply the tax “at the source” (the coal mine, the oil well, etc.) The cost of the tax would ripple through the economy, perfectly tracking actual carbon usage: No difficulties with measuring additionality.
    Is it just that a carbon tax is politically infeasible? I realize I’m talking to guys who are invested in the development of carbon credit trading, here, but I’m sure you’ve thought of carbon taxes. Step back and tell us what you think the ideal solution would be. Have all the Democratic nominees really just given up on pursuing that ideal?

  3. Chad - November 7, 2007

    Eric, I agree – the carbon tax is the way to go. A recent analysis by the Congressional Budget Office, for example, found that a carbon tax would accomplish the same effect as increased CAFE standards at 70% of the cost. Only an idiot or a coward would support CAFE standards…and unfortunately, all politicians must be the latter, or else incur the wrath of the voter. Forcing polluters to pay is something almost everyone agrees with, until someone points out that we are all polluters.
    A carbon tax is simply the best policy. It allows people to create their OWN solutions in order to optimize their OWN welfare given the new constraints, rather than inflexible government mandates, incomprehensible laws, and a myriad of inconsistent, intermittent subsidies.

  4. Adam Stein - November 7, 2007

    Eric —
    We don’t particularly have an official position on these things, so regard this instead as sort of the water cooler opinion around the office. Basically, we think the most important is to put a price on carbon, whether by tax or by cap-and-trade. Each of these two approaches has well known advantages and disadvantages, which I won’t retread here.
    Our main concern is not which type of solution politicians end up pursuing, but rather how well they design the resultant policy. For example, a tax should be high enough to matter. A cap-and-trade scheme should not include a safety valve and should auction the allowances. Policy measures should encourage efficiency. Etc.
    We certainly have a lot of opinions about the design of voluntary carbon markets, but we can save those for another day.
    – Adam

  5. michael - November 7, 2007

    …where is the carbon tax re-invested? And, does there come a point or place in time where a carbon tax is abused? Will this tax maintain a relative relationship with the abuser? (sorry and I am one) And, will it follow the path CAFE has; we have 2.5 ton SUVs labeled as LEV along side small cars labeled with the same LEV rating, but achieving 2 to 2.5 times the mileage. I agree that a carbon tax has potential, but only if remians true to its mission. I’m a little synical about how these ideas beome so twisted, they become unrecognizable.

  6. Adam Stein - November 7, 2007

    Michael —
    Many support a revenue-neutral carbon tax balanced out by reductions to the payroll tax. The thinking here is that payroll is something we want to encourage (not tax), and carbon is something we want to discourage. A nice feature of such a system is that while a carbon tax is regressive, the payroll tax is also regressive, so the cuts would balance pretty well with the new fees.
    Regarding the prospect for abuse — really the main nice thing about a carbon tax is that it’s relatively difficult to abuse. You’re taxing fuel use directly, so it’s hard to wriggle out of the spirit of the law.
    – Adam

  7. Chad - November 7, 2007

    Adam, I agree with except for one thing – there is no relationship between carbon taxes and Social Security, and they should not be coupled. The money from carbon taxes should and would go into the general funding pool, and likewise, taxes that fund that pool (primarily income taxes) should be cut. The cuts can come in a manner of a tax credit, increased EITC and increased Social Security adjustments, which makes income taxes more progressive overall and negates the regressive nature of the carbon tax. Structured properly, the carbon-tax/income-tax trade could not only be revenue neutral but also neutral by major income brackets and demographic groups. There is no need to cut FICA taxes and put SS/Medicare into even further financial difficulty.
    Carbon taxes and 100% auctioned cap-and-trade are equivalent in economic theory, but in practice, there tends to be quite a bit of corrupt gamesmanship with the latter. Carbon taxes also are more business-friendly. Most big companies don’t mind a carbon tax as long as their competitors face the same tax. They do, however, dislike uncertainty. Cap-and-trade is much harder to predict.

  8. michael - November 8, 2007

    …I need to add, my concern is about transparency and truth. Sometimes marketing and policy making hide the truth.

  9. Deb - November 8, 2007

    Hi,
    Could you please explain cap and trade and what is 100% auctioning. I live in an area with three coal generation plants and I want them to have to cut their emissions, not be able to trade them off to someone else. I’m tired of breathing poison just so someone can run their Game Cube. (Sorry, dont mean to be bitter)

  10. Michael - November 8, 2007

    I’m writing this question without really thinking the answer thru…are we robbing Peter to pay Paul?
    If I understand, income tax will be offset by a carbon tax and the value of the carbon tax, and therefore income tax, is directly related to how many miles I drive. It seems there is no penalty in this system if the there ia a 1:1 ratio???

  11. Adam Stein - November 8, 2007

    Hi Deb —
    You’re in a bad situation. Once coal plants are built, they don’t get unbuilt, and the specific effects that you have to deal with as a neighbor of the plants, such as particulate emissions and mercury, aren’t going to be significantly affected by climate change legislation. This won’t change under cap-and-trade vs. carbon tax vs. whatever. In answer to your question, though, auctioning of allowances refers to the way carbon credits are allocated under a cap-and-trade system. When they are auctioned, companies have to buy them rather than get them for free.
    Michael —
    You’re a bit overly fixated on driving. A carbon tax would also penalize upstream activities such as electricity generation and manufacturing. This would have the beneficial effect of discouraging energy use, but the negative effect of disproportionately raising the cost of living for poor people. An offsetting reduction in payroll taxes would help to alleviate the impact on the poor while still penalizing energy use.

  12. michael - November 9, 2007

    Understood Adam…I was fixating on cars since we have a few million of these driving around. I agree the burden should be shared by all. I become concerned when I think about how complicated – in my brain – the auto/truck/airplane industry is do in some part to shear numbers. Electric plants using coal as a source of energy for example seem like an easy target because there are far fewer plants than cars/trucks/airplanes. A politician might be swayed to try to achieve quick results by concentrating on powerplants.

  13. Paul - November 11, 2007

    I’m still a little confused as to the net effect of having a carbon tax that was offset by a reduction in payroll taxes. If a carbon tax results in my gas, electricity, and so forth to become more expensive, but this is offset by my paycheck being bigger as a result of lower payroll taxes, then where is my incentive to reduce the amount of carbon I consume?

    Also, if carbon taxes replace payroll taxes as a source of revenue for government, and carbon usage goes down, doesn’t that source of revenue also go down, and doesn’t this then become a revenue problem for government?

    I feel as though I’m missing something…
    Thanks

  14. Adam Stein - November 11, 2007

    Hi Paul,
    I’ll refer you to carbontax.org for a detailed but accessible discussion of this topic. See in particular this discussion of revenue-neutral taxes:
    Note that each individual’s receipt of dividends or tax-shifts would be independent of the taxes he or she pays. That is, no person’s benefits would be tied to his or her energy consumption and carbon tax “bill.” This separation of benefits from payments preserves the incentives created by a carbon tax to reduce use of fossil fuels and emit less CO2 into the atmosphere.
    You are correct that as fossil fuel usage drops, revenue from the tax would shrink. I haven’t studied the specific proposals that are out there, but I imagine that the tax rate ratchets up over time to provide greater and greater disincentives to fossil fuel use. This is analogous to the way the emissions cap is continually lowered in a cap-and-trade system. Eventually, yes, the carbon tax would stop providing revenue, and the government would have to raise funds elsewhere.

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