Thursday, August 6, 2009

Experts Say Conservative 'Cap and Trade' is a Dead Policy Walking

The video reveals the scam of the Conservatives first environmental program; emission-intensity; but their expensive and confusing 'Cap and Trade' (fancy term for a hidden carbon tax) will be devastating both to the Canadian economy and the environment.

Yet they are once again trying to use the carbon tax against the Liberals, claiming that Michael Ignatieff is trying to run away from it. They use several quotes on their Ignatieff Me site:

The Facts on Michael Ignatieff’s Carbon Tax

He was the first to call for energy taxes:

“Taxes have to rise; there is no other way” — Ignatieff on using higher taxes as “solutions” for the environment (Kingston Whig-Standard, June 10, 1991)

He campaigned for leader on imposing a carbon tax:

“We’ve also got to have popular, practical, believable policies that may involve some form of carbon tax, for example, to increase the penalties on emissions. The time for action really is now” — Ignatieff during a Liberal leadership debate (Globe and Mail, June 15, 2006)

He took credit for pushing St├ęphane Dion to embrace a carbon tax:

Craig Oliver: Now you were the first leader, as a candidate [for] leader, to talk about a carbon tax and you took a little bit [of] heat for that. Do you still believe in a carbon tax? Of course you do.

Michael Ignatieff:I do Craig. I learned that there’s no punishment more severe in politics than being the first guy with a good idea but I’m glad, I’m glad our party seems to be moving that way.” (CTV Question Period – May 25, 2008)

Well it seems that Mr. Ignatieff knew as long as 18 years ago, what experts are only now realizing.... "those who care deeply about climate change will find that a carbon tax system has become the last, reasonable policy standing."

Those are the words of Robert Shapiro, chair and co founder of the U.S. Climate Task Force and former Undersecretary of Commerce for Economic Affairs, who has lent his voice to countless environmental experts who say that the 'cap and trade' tax will not work. Energy prices will soar and corruption will abound.

That Michael Ignatieff is a pretty smart guy.

Tax vs. Cap-Trade

April 2009 updates: Robert Shapiro, chair and co founder of the U.S. Climate Task Force and former Undersecretary of Commerce for Economic Affairs, makes a compelling political case that “the costs and lessons of the financial crisis may effectively swamp the prospects for cap-and-trade. If cap-and-trade has become a dead policy walking, those who care deeply about climate change will find that a carbon tax system has become the last, reasonable policy standing.”

CTC regards carbon taxes as superior to carbon cap-and-trade systems for six fundamental reasons:

Carbon taxes will lend predictability to energy prices, whereas cap-and-trade systems will aggravate the price volatility that historically has discouraged investments in less carbon-intensive electricity generation, carbon-reducing energy efficiency and carbon-replacing renewable energy.

Carbon taxes can be implemented much sooner than complex cap-and-trade systems. Because of the urgency of the climate crisis, we do not have the luxury of waiting while the myriad details of a cap-and-trade system are resolved through lengthy negotiations.

Carbon taxes are transparent and easily understandable, making them more likely to elicit the necessary public support than an opaque and difficult to understand cap-and-trade system.

Carbon taxes can be implemented with far less opportunity for manipulation by special interests, while a cap-and-trade system’s complexity opens it to exploitation by special interests and perverse incentives that can undermine public confidence and undercut its effectiveness.

Carbon taxes address emissions of carbon from every sector, whereas some cap-and-trade systems discussed to date have only targeted the electricity industry, which accounts for less than 40% of emissions.

Carbon tax revenues would most likely be returned to the public through dividends or progressive tax-shifting (this was Mr. Dion's Green Shift if the Conservatives hadn't made it the grim reaper), while the costs of cap-and-trade systems are likely to become a hidden tax as dollars flow to market participants, lawyers and consultants.

Carbon Taxes Will Lend Predictability to Energy Prices. With carbon taxes ramped up through a multi-year phase-in, future energy and power prices can be predicted with a reasonable degree of confidence well ahead of time. This will make it possible for literally millions of energy-critical decisions — from the design of new electricity generating plants to the purchase of the family car to the materials used in commercial airframes — to be made with full cognizance of carbon-appropriate price signals.

In contrast, a cap-and-trade program will exacerbate the volatility of energy prices since the price of carbon allowances will fluctuate as weather and economic factors affect the demand for energy. The vaunted advantage of cap-and-trade — that future levels of carbon emissions can be known ahead of time — is mostly notional, particularly if the cap-and-trade system includes a “safety-valve” for auctioning off additional carbon allowances if the price of allowances exceeds a predetermined level. And even certainty in future emission levels is of questionable value, since there is no agreed-upon trajectory of emissions for achieving climate stability and preventing disaster. The real target for which the U.S. must aim is to reduce carbon emissions as much as possible, and then more.

Carbon Taxes Will Provide Quicker Results. The taxes themselves can be designed and adopted quickly and fairly. Cap-and-trade systems, by contrast, are devilishly complex and will take years to develop and implement. Thorny issues must be addressed intellectually and resolved politically; the proper level of the cap, timing, allowance allocations, certification procedures, standards for use of offsets, penalties, regional conflicts, the inevitable requests for exceptions by affected parties and a myriad of other complex issues must all be resolved before cap-and-trade systems can be implemented. During this time, polluters will continue to emit carbon with no cost consequences.

Carbon Taxes Are Transparent and Are Easier to Understand than Cap-and-Trade. A carbon tax is transparent and easy to understand; the government simply imposes a tax per ton of carbon emitted, which is easily translated into a tax per kWh of electricity, gallon of gasoline or therm of natural gas. By contrast, the prices for carbon set under a cap-and-trade system will vary with market fluctuations and be impossible even for big business (let alone small businesses or consumers) to predict. A cap-and-trade system will require a complex and difficult to understand market structure in order to balance the many competing interests and ensure that the trading system minimizes abuse and maximizes real carbon reductions.

A Carbon Tax’s Simplicity Inoculates it Against the Perverse Incentives and Potential for Profiteering that Will Accompany Cap-and-Trade. In contrast to the simple and straightforward process of implementing a carbon tax, the protracted negotiations necessary to implement a cap-and-trade system will provide constant opportunities for the fossil fuel industry and other invested parties to shape a system that maximizes their financial self-interests as opposed to an economically efficient system that maximizes societal well-being. If allowances are allocated based on some type of baseline reflecting past pollution (which has been the practice with NOx and SO2trading programs), rather than being auctioned, polluters will have perverse incentives to maximize emissions before the cap-and-trade system goes into effect in order to “earn” those pollution rights. (The voluntary carbon cap-and-trade system currently operating has already been criticized for questionable offsets that have produced huge profits but little environmental benefit. )

Carbon Taxes Address All Sectors and Activities Producing Carbon Emissions. Carbon taxes target carbon emissions in all sectors — energy, industry and transportation — whereas at least some cap-and-trade proposals are limited to the electric industry. It would be unwise to ignore the non-electricity sectors that account for 60% of U.S. CO2 emissions.

Carbon Taxes Can Produce a Far More Equitable Result than Cap-and-Trade. As discussed in our Issue Paper, Managing the Impacts, carbon tax revenues can be returned through dividends or can be used to fund progressive tax-shifting to reduce regressive payroll or sales taxes. (Again the Liberal Green Shift) The costs of cap-and-trade systems, both implementation and the costs incurred as more expensive technologies replace older and less expensive coal-fired combustion, are far more likely to be imposed upon consumers with less possibility of rebating or tax-shifting. Moreover, because cap-and-trade relies on market participants to determine a fair price for carbon allowances on an ongoing basis, it could easily devolve into a self-perpetuating province of lawyers, economists, lobbyists and other market participants bent on maximizing their profits on each cap-and-trade transaction.

General Electric, DuPont, Alcoa, Caterpillar and other industrial pigpens this week endorsed cap-and-trade limits on carbon dioxide, which would turn their established habit of using the atmosphere as a free waste disposal into a property right, worth billions. Talk about a low-hanging fruit. They are accustomed to treating carbon dumping as a gimme. Now they’d at least be in a position to get paid for dumping less.

The dollars that will be funneled into making the market work could be better spent reducing regressive taxes, protecting poorer households and/or helping consumers use less energy.

The Conservatives 'cap and trade' is a hidden tax which will only benefit industry; while consumers will pay the bulk of the costs. Gee. Where do I sign?

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