Fee and Dividend

Madeline Ostrander interviewed James Hansen for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Madeline is YES! Magazine’s senior editor. Before the text of the interview, she introduces YES! readers to Dr. Hansen.

The following is a Zemanta enhanced version of the introduction with the usual added images, captions, and Easter eggs by yours truly, plus, as extra special holiday bonus, some snarky interjections.

Image in public domain from NASA. http://www.n...
Image via Wikipedia

NASA climate scientist James Hansen never expected the U.N. climate talks in Copenhagen to amount to much. He told the British Guardian newspaper that it would be better if Copenhagen failed. That’s because Hansen is a vocal critic of the economic policies discussed there, and he hopes Copenhagen’s failure gives the public a chance to talk about new options.

Hansen is arguably the world’s best known and most respected climate scientist. Sometimes called the “grandfather of climate change,” he began modeling the effects of warming three decades ago and first testified about climate change before Congress in 1988. He was one of the key figures to blow the whistle on the Bush Administration for censoring science and trying to muzzle warnings about the urgency of the climate crisis.

In the past few years, Hansen has expanded his activities outside the laboratory and into the political fray. In June, he was arrested after marching at a rally against mountaintop removal mining in West Virginia.

Jim Hansen Arrested at Marsh Elementary School
The Massey site is quite proximate to Marsh Elementary School, thus well-chosen as the spot for more arrests, to include the arrest of NASA’s chief climate scientist. By quite proximate we mean the elementary school playground, in which several hundred protesters gathered, is less than 300 feet away from Massey Energy’s Goals Coal preparation plant.

This blog also would like to interject that he developed a very simple method for evaluating climate change policy, which this blog refers to as the Hansen Test. One question, “Does the action (or inaction) allow coal to continue to be used and emit CO2 in the atmosphere?”

The fact that he is a renown spokesperson emphasizing the critical importance of reducing coal emissions is reason enough for his statements to be attacked. Back to the introduction of Dr. Hansen to YES! readers.

More recently, he has become a leading opponent of cap-and-trade, a market approach to greenhouse gas regulation that puts a limit on how much carbon can be emitted and then allows polluters to trade permits to emit. Hansen claims the approach ultimately will not produce the kinds of emissions cuts the world needs to avoid catastrophic climate change. It will simply allow “polluters and Wall Street traders to fleece the public out of billions of dollars,” he says. He is especially critical of the large number of offsets available under the current policy proposals, which allow polluters to pay for emissions reductions elsewhere in the world. He points to some offset schemes that have led to fraud, giving credit for pollution reductions that never actually happened.

Hansen is championing an alternative solution called fee-and-dividend, which would impose a fee on any pollution source (mines, ports of entry) and distribute the revenue back to the public. Both fee-and-dividend and cap-and-trade attempt to reduce carbon emissions by raising the price of fossil fuels, but Hansen insists the former is simpler and less vulnerable to speculation and gaming.

Advocates of cap-and-trade have been dismissive of Hansen’s arguments. David Doniger of the Natural Resources Defense Council says Hansen is simply wrong about cap-and-trade, insists the approach has been effective in the European Union, and maintains that the leading bills now before Congress have enough safeguards to avoid market manipulation. Economist Paul Krugman accuses Hansen of naïve thinking: “hard-science guys tend to assume that [economists are] witch doctors with nothing to tell them.”

image by hausfath
Coal,” says a foremost climatologist, NASA’s James Hansen, is the single greatest threat to civilization and all life on our planet.”

Hansen has faced off critics before. He is not alone in his critique. Naomi Klein, author of The Shock Doctrine, says that “carbon-trading represents an unprecedented privatization of the atmosphere, and … offsets … threaten to become a resource grab of colonial proportions.” The Indigenous Environmental Network calls cap-and-trade a false solution “that will allow the fossil fuel industry to continue to do what they do—drill, baby, drill.” In November, two longtime U.S. EPA attorneys published a video online calling cap-and-trade “a huge mistake.”

The point of re-posting the YES! introduction? Well, Dr. Hansen got his wish. At least, the part about COP15 failing to introduce carbon trading on a global scale. This blog is unsure whether his proposal could work; a knee jerk response is that it fails because it is an intervention designed to protect life on the planet as we know it, rather than finding away to afford the real limousines to the soiree after a 2-week conference fails miserably.

BTW: Calling James Hansen naive is like calling Amory Lovins stupid. You possibly could be right in some way, yet very much run the risk of being tarred with the same brush. Beside, if you asked Hansen if he is an expert on international economics or policy, no doubt he would disavow such expertise. Unfortunately, for 3 decades he has seen a failure of climate policy, and, so believes it necessary to speak out. And, quite frankly he is correct that a fee on the raw material mined or drilled would be a deterrent.

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7 Comments

  1. jcwinnie
    Posted 2010-1-2 at 9:58 am | Permalink

    Professor Gumption, a.k.a., Jim Hansen writes for the Guardian that Copenhagen, a.k.a., COP15, has given us the chance to face climate change with honesty. The piece for the Guardian is a repeat of the YES! interview, i.e., we need to put a carbon-use dividend into effect for everybody. Hansen is adamant that such a strategy must replace the ‘cap-and-trade’ scheme, which had been proposed leading up to and at Copenhagen, but which the UNFCC Conference of Parties failed to adopt. “Now there is a chance for the world to get on to an honest, effective path to an agreement,” writes Hansen at the start of the Guardian article.

    Chart showing emission trends

    The centrepiece of the old approach was a “cap-and-trade” scheme, festooned with offsets and bribes – bribes that purportedly, but hardly, reduced carbon emissions. It was analogous to the indulgences scheme of the Middle Ages, whereby sinners paid the Church for forgiveness.

    In today’s indulgences the sinners, developed countries, buy off developing countries by paying for “offsets” to their own emissions and providing reparation money for adaptation to climate change. But such hush money won’t work. Yes, some developing country leaders salivated over the proffered $100 billion per year. But by buying in, they would cheat their children and ours. Besides, even the $100 billion hush money is fugacious. The US, based on its proportion of the fossil fuel carbon in the air today, would owe $27 billion per year. Chance of Congress providing that: dead zero. Maybe the UK will cough up its $6 billion per year and Germany its $7 billion per year. But who will collect Russia’s $7 billion per year?

    Most purchased “offsets” to fossil fuel carbon dioxide emissions are hokey. But there is no need to flagellate the details of this modern indulgences scheme. Science provides an unambiguous fact that our leaders continue to ignore: carbon dioxide from fossil fuel burning remains in the climate system for millennia. The only solution is to move promptly to a clean energy future.

    The difficulty is that fossil fuels are the cheapest energy, if the price does not include the damage they do to human health, the planet, and the future of our children. “Goals” for future emission reductions, whether “legally binding” or not, are utter nonsense as long as fossil fuels are the cheapest energy. The Kyoto Protocol illustrates the deceit of our governments, which have not screwed up their courage to face down the fossil fuel industry. As the graph here shows, global fossil fuel emissions were increasing 1.5% per year prior to the 1997 Kyoto accord. After “Kyoto” emission growth accelerated to 3% per year. A few developed countries reduced their fossil fuel use. The only important effect of that was to slightly reduce demand for fuel, helping to keep its price down. The fuel was burned in other places, and products made were shipped back to developed countries.

    As far as the planet is concerned, agreements to “cap” emissions, such as the Kyoto Protocol and the imagined Copenhagen Protocol, are worthless scraps of paper. As long as fossil fuels are the cheapest energy, they will be burned somewhere. This fact helps define a solution to the climate problem. Yes, people must make changes in the way they live. Countries must cooperate. Matters as intractable as population must be included. Technology improvements are required. Changes must be economically efficient. The climate solution necessarily will increase the price of fossil fuel energy. We must admit that. But in the end, energy efficiency and carbon-free energy can be made less expensive than fossil fuels, if fossil fuels’ cost to society is included. The solution must have honesty, backbone and a fair international framework. We need a rising price on carbon applied at the source (the mine, wellhead, or port of entry). The fee will affect all activities that use fossil fuels, directly or indirectly. The entire fee collected from fossil fuel companies should be distributed to the public. In this fee-and-dividend approach people maintaining a carbon footprint smaller than average will receive more in the dividend than they pay via increased energy costs. The monthly dividend, deposited electronically in their bank account or on their debit card, will stimulate the economy and provide people with the means to increase their carbon efficiency. All that governments need do is divide the collected revenue by the number of shares, with half-shares for children, up to two children per family.

    Some economists prefer a payroll tax deduction over a dividend, because taxes depress the economy. The problem is that about half of the public are not on payrolls, because of retirement or involuntary unemployment. I suggest that at most 50% of the collected carbon fee should be used for payroll tax deduction.

    Cap-and-trade is the antithesis of this simple system. Cap-and-trade is a hidden tax, increasing energy costs, but with no public dividend. Its infrastructure costs the public, who also fund the profits of the resulting big banks and speculators. Cap-and-trade is advantageous only to energy companies with strong lobbyists and government officials who dole out proceeds from pollution certificates to favoured industries.

    Fee-and-dividend, in contrast, is a non-tax – on average it is revenue-neutral. The public will probably accept a rise in the carbon fee rate, because their monthly dividend will increase correspondingly. As fee-and-dividend causes fossil fuel energy prices to rise, a series of points will be reached at which various carbon-free energies and carbon-saving technologies are cheaper than fossil fuels plus the fee. The market place will choose the best technology. As time goes on, fossil fuel use will collapse, coal will be left in the ground, and we will have arrived at a clean energy future. A rising carbon fee is essential for a climate solution. But how to achieve a fair international framework?

    The critical requirement is that the United States and China agree to apply across-the-board carbon fees, at a relative rate to be negotiated. Why would China agree to a carbon fee? China does not want to be saddled with the problems that attend fossil fuel addiction such as those that plague the United States. Besides, China would be hit extraordinarily hard by climate change. A uniform rising carbon fee is the most economically efficient way for China to limit its fossil fuel dependence.

    Copenhagen discussions showed that China and the United States can work together. Europe, Japan, and most developed countries would very probably agree to a similar status to that of the United States. Countries refusing to levy an across-the-board carbon fee can be dealt with via an import duty collected on products from that nation in accord with the amount of fossil fuel that goes into producing the product. The World Trade Organisation already has rules permitting such duties.

    The international framework must define how proceeds from import duties are used to assure fairness. Duties on products from developing countries will probably dwarf present foreign aid to those countries. These funds should be returned to developing countries, but distributed so as to encourage best practices, for example, improved women’s rights and education that helps control population growth. Fairness also requires that distribution of the funds takes account of the ongoing impacts of climate change. Successful efforts in limiting deforestation and other best practices could also be rewarded.

  2. jcwinnie
    Posted 2010-1-3 at 1:39 pm | Permalink

    While the chart separates developing from developed nations and suggests a correlation between growth in global emissions with growth in emissions by developing countries, supposedly at COP15 Obama and the U.S. delegation called attention to a different separation, that between the largest polluters and the rest of the world.

    As yet, the advantage for the world is unclear. It does change the perception that developing countries are to be penalized for being the latecomers (Hey, Asia, clean up that mess we made with our economic growth in the 1990′s). The response from China was to tie emission goals to economic growth.

    Separating the largest polluters and the rest of the world allows for climate policy based upon a different model. Instead of reparations to countries harmed by past pollution, the focus is upon a reduction from the major sources, e.g., investment in “clean coal”, nuclear power, or anything else that can take a coat of green wash.

    No Tongue

    It definitely is a power play since the major economies / polluters are continuing with Business As Usual. The Conference of the Parties failed to adopt a global carbon market strategy, much to the dismay of the carbon marketers, so instead of a little “bakeesh”, what Jim Hansen calls hush money, the major polluters now seem to have turned to extortion, e.g., You got a pretty planet here, yeah, would be a shame to see it go to 770ppm.

    Wikipedia suggest you see also:

    • Nuclear blackmail is a form of nuclear strategy in which an aggressor uses the threat of use of nuclear weapons to force an adversary to perform some action or make some concessions. It is a type of extortion, related to brinkmanship.
    • Terrorism is, most simply, policy intended to intimidate or cause terror. It is more commonly understood as an act which (1) is intended to create fear (terror), (2) is perpetrated for an ideological goal (as opposed to a materialistic goal or a lone attack), and (3) deliberately targets (or disregards the safety of) non-combatants.
  3. jcwinnie
    Posted 2010-1-4 at 11:17 am | Permalink

    Giving attribution, where attribution is due, this blog got the idea that it no longer is a matter of Developed vs. Developing countries, rather it is a matter of the major emitters vs. everyone else, from the Indispensable Blog and Andrew Light, Senior Fellow at the Center for American Progress, although this blog agreed more with the less optimistic take by HuffPo contributor Johann Hari.

  4. jcwinnie
    Posted 2010-1-4 at 11:33 am | Permalink

    And, while shifting commentary — we don’t say repetition at After Gutenberg, we say recursion — it bears repeating that the “voluntary climate pact” by BASIC (Brazil – Africa, South – India – China) with US going along for the ride, failed to produce commitments on emissions reductions.

    “Yet the agreement — and the approach to reaching it – could have far-reaching and positive implications for future negotiations on difficult issues, particularly for the US and China. That is the spin according to Harvard University’s Robert Stavins, director of the university’s Project on International Climate Agreements, as reported by Peter N. Spotts for the Christian Science Monitor via T r u t h o u t.

    Despite the disappointment expressed by many, Stavins believes it was important to the future of US-Chinese relations. Those relations are “of the utmost importance” for the future of the two countries and for global security in general, as the world’s most important economy today works out its relationship with the world’s most important economy tomorrow… “If the US and China had left this meeting without an agreement, it would have boded poorly for dealing with a range of other issues, from trade, to the environment, to human rights.” …From a climate standpoint, he continues, the agreement lays the foundation for bringing emerging economies into a global climate agreement.

    Elsewhere there was commentary that it bodes well for India and China relations, and standing up to the white skin minority, and saying we won’t clean up your mess anymore, we want to make our own.

    And the Dragon just smiles and bides its time.

  5. jcwinnie
    Posted 2010-1-4 at 9:10 pm | Permalink

    It looks as if Hansen’s idea of a fee at point of entry is being quickly challenged. SciAm relates some of the unfolding story, it would seem that such legislation “unfairly discourages coal-powered electricity sales in favor of renewably powered electricity.”

    carbon tax to reduce the greenhouse gases from imports comes not between two nations, but between two states. Minnesota has passed a measure to stop carbon at its border with North Dakota.

    To encourage the switch to clean renewable energy Minnesota plans to add a carbon fee of between $4 and $34 per ton of carbon dioxide emissions to the cost of coal-fired electricity, to begin in 2012, to discourage the use of coal power; the greatest source of greenhouse gas emissions.

    State officials in North Dakota are mounting a legal battle against Minnesota.

    Anyone care to bet that those North Dakota officials are benefiting from the best legal advice that Emperor Fossil can buy?

  6. jcwinnie
    Posted 2010-1-4 at 9:12 pm | Permalink

    The SciAm article further relates:

    Coal has immediate health effects in addition to the well documented long term effects on climate. Coal has been implicated in asthma, diabetes, heart disease and even neurological damage, reducing intelligence levels. North Dakota ranks 8th in toxic metals contaminating its coal waste, with 3,419 tons of toxic metals.

    Most of North Dakota’s electricity exports is generated by coal-fired power plants. North Dakota officials argue that the move would place an unfair tax on electricity exports from the state and discourage its use by Minnesota utilities.

    The state had set aside $500,000 for legal fees to fight the law back in 2007, and having now exhausted their arguments with Minnesota are preparing to use the funds to take legal action.

    Both states, ironically, have abundant wind power resources. North Dakota in particular has been called “the Saudi Arabia of Wind”. Yet, till now it has barely tapped into that clean energy resource, with the first few wind farms only just starting to come online. Basin Electric Coop just completed one project on New Years Eve and Spain’s Iberdrola just completed another a few days ago.

    By contrast, North Dakota coal has low energy value.

  7. jcwinnie
    Posted 2010-1-5 at 9:43 am | Permalink

    Returning to the chart, it is worth noting that how much aviation and marine transportation GHG emissions were made part of humanity’s carbon footprint.

    As this blog has noted repeatedly, increasing emissions from the transportation sector is nearly as catastrophic as coal-fired electric power. The emphasis in the U.S., and more successfully in Japan and Europe has been the reduction of emissions from passenger vehicles. After all, it is easier for City Hall to go against John Q. Citizen than against Mister Major Campaign Contributor.

    Mike Millikin relays the results of a study entitled “Aviation and Marine Transportation: GHG Mitigation Potential and Challenges (PDF)”. Published by the Pew Center on Global Climate Change and written by David McCollum and Gregory Gould, both from UC Davis and the Institute of Transportation Studies there; and David Greene, Oak Ridge National Laboratory, the report:

    1. Presents an introduction to aviation and marine transportation and a discussion of the determinants of GHG emissions from transportation;
    2. Gives overview of current emissions and trends and growth projections; explains the technological mitigation options and potential GHG emission reductions;
    3. And discusses policy options at both the domestic and international level to achieve deep and durable reductions in emissions.

3 Trackbacks

  1. By The No Planet B Fee – After Gutenberg on 2010-1-6 at 7:00 pm

    [...] recent post and commentary contained reference to 2 articles, wherein Jim Hansen sets forth the premise that we need to [...]

  2. By Makes One Wonder – After Gutenberg on 2010-1-16 at 1:06 pm

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  3. By Own Your Stuff – After Gutenberg on 2010-2-16 at 11:41 pm

    [...] Dr. Jim Hansen advocates a carbon tax on raw fuel mined or drilled. Dot Earth commentator Ben opines, “The whole point of a fossil fuel is to release the energy contained in it. So it is at the point of combustion that all the economics of before and after coincide.” [...]

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