22 february 2010

In a fascinating interview with Monica Trauzzi of E&ETV, Robert Shapiro, former adviser to President Clinton and Chairman of the U.S. Climate Task Force, explains the resignation of BP, Conoco Phillips and Caterpillar from the U.S. Climate Action Partnership, the main business-based cap-and-trade advocacy organization. Shapiro also makes a strong argument for abandoning cap-and-trade and legislating a carbon tax. Excerpted from E&ENews, February 22, 2010.


Monica Trauzzi: And the common thread here between all these three companies is that they're part of energy intensive industries. Do you think there's any question there in terms of the science behind climate change and the push for legislation or is this just about politics and doing ...

Robert Shapiro: I think this is politics.

Monica Trauzzi: OK.

Robert Shapiro: I think this is companies trying to be involved in the crafting of the program that is most likely to actually occur and that cap and trade's prospects have declined significantly. There is political rhetoric about the science of climate change. There are little scandals about the data used in particular claims. No one has questioned the basic science. That is no scientist has questioned the basic science. There is no debate in science about the basic dynamics of climate change. There are debates about the particular timing, our ability to forecast where the effects will occur, the particular nature of those effects. But the fact that CO2 and other greenhouse gas emissions are produced by fossil fuels and accumulate in the atmosphere and have the effect of, over time, raising temperatures of land and water on Earth and that those increased temperatures in turn affect weather patterns, that is no more subject to real scientific debate than evolution is. Those who say climate change is not occurring really are taking the same kind of position as creationists.

Monica Trauzzi: So, you're a strong supporter of the Plan B carbon tax.

Robert Shapiro: I am.

Monica Trauzzi: Explain what that is, what is that you're pushing for.

Robert Shapiro: Well, a carbon tax, instead of giving out permits to emit greenhouse gases and then letting those permits be traded in financial markets in order to allocate them more efficiently, which is the essential model of cap and trade, a carbon-based tax would impose a tax on energy based on its carbon content, that is based on how much damage it does to the climate, in order to change the relative price of energy, again, based on its effect on the climate, so that we can induce businesses and people and utilities to move away from carbon intensive fuels and towards less carbon intensive and more climate friendly fuels and technologies. Our approach and the approach of many others who favor carbon-based that taxes, including former Vice President Gore, who endorsed it in his Nobel lecture as well as in Earth in the Balance 20 years ago, plus most economists, we would take the revenues raised from this carbon-based tax and our carbon-based fee and use it to reduce other taxes because the point is not to make people poor or to withdraw resources from the economy, but rather to change people's preferences and choices about the kind of energy they use moving them to climate friendly fuels.

Monica Trauzzi: There are some clear challenges though to passing a carbon tax, including the fact that the word tax ...

Robert Shapiro: Yes, that's right.

Monica Trauzzi: Is in the title of the name and also how to get the support of Wall Street? I mean Wall Street is behind a cap and trade, so how do you overcome those challenges?

Robert Shapiro: Well, let me say, with respect to Wall Street, Wall Street is absolutely the single largest supporter of cap and trade because Wall Street sees it as a bonanza. This would be the U.S. government and the American people and the American taxpayers creating a new trillion dollar market for Wall Street to trade, a market that would be very ripe for speculation because cap and trade has the effect of making energy prices more volatile and one which also could be subject to a lot of insider trading because large utilities and large energy companies would inevitably see shifts in demand, which would affect the price of the permits, before anybody else. They're closest to it. So this is, of course, something Wall Street would want. I don't care about Wall Street's endorsement frankly. I think Wall Street has been utterly discredited with the American people. They created the worst financial crisis in 80 years, they then got the taxpayers to bail them out and now they're blocking any reforms of the practices which produce speculative profits and huge bonuses at the potential cost to the American economy. So, I don't want their endorsement. Yes, they are powerful, they are very powerful, but they're not more powerful than the American people and they're not more powerful than lots of other sectors who are deeply involved in this, beginning with the energy sector. So, that's why. Now, the question of the tax is a very serious question. It's a serious question not just for a carbon tax. It's a serious question for any proposal to address climate change because all proposals, including cap and trade and regulation, effectively work by raising the price of energy based on their carbon content, whether they do it directly or indirectly. The fact is that any program that we put in place will entail very significant costs for everybody and the advantage of a carbon-based tax is that we can make people whole again. We can take those revenues and the scientists say and all the models say that in order to put us on a path which is sustainable with respect to the climate, that can stabilize concentrations of greenhouse gases in the atmosphere at somewhere between 450 and 550 parts per million will cost, over a period of 20 years, an average of about $1,500 per household.

Monica Trauzzi: Right.

Robert Shapiro: Now ...

Monica Trauzzi: Wait, we're going to have to pause right there.

Robert Shapiro: OK.

Monica Trauzzi: But I thank you for coming on the show. Clearly, this will continue to be debated.

Robert Shapiro: I do need to finish one sentence. It is critical that that $1500 be returned to the people and that we can do with a carbon tax tied to tax cuts.

Monica Trauzzi: OK, we'll end it there. Thank you.

Robert Shapiro: My pleasure.

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