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Friday, January 26, 2007

Hey, Democratic Majority. Please Get Real About CO2 Emissions Already.

posted by on January 26 at 0:11 AM

Senator Jeanne Kohl-Welles (D-36, Ballard, Queen Anne) and Rep. Maralyn Chase (D-32, Edmonds, Shoreline)—along with a small contingent of Democratic co-sponsors like Seattle Sens. Eric Poulsen and Adam Kline —are pushing a bill that would allow industry to get tax credits for limiting carbon dioxide emissions.

Specifically, participants would get a dollar tax credit for every ton of carbon mitigated in a year. (The total credits granted per year could not exceed $1 million.)

It’s an okay idea, but it seems a bit timid in that it’s voluntary. Moreover, while there may be an economic incentive for companies to reduce, there may be a stronger economic incentive to pump out more CO2. After all, the more coal, natural gas, or whatever fossil fuels a given utility burns—the more electricity it can take to market. Those profits could outweigh the savings from cutting back production. (Ha! Plus: The more CO2 a company produces, the more tax breaks the company could get. Afterall, the more CO2 a company kicks out, the more there is to mitigate.)

Furthermore, tax breaks sap state revenues.

Luckily, there’s a better approach that puts money into the public coffers. It’s called a cap and trade system.

More important: Cap and trade systems mandate mitigation rather than making it voluntary. Lastly, cap and trade systems offer a much more compelling financial incentive to reduce emissions.

Here’s how it works: The state puts a cap on how much CO2 a certain industry can produce. Then the state divvies up the total and sells permits allowing companies to produce a portion of the total.

Here’s a good explanation of cap and trade from the Union of Concerned Scientists that highlights why this system actually creates a stronger financial incentive than tax breaks do:

First, an environmental regulator establishes a “cap” that limits emissions from a designated group of polluters, such as power plants, to a level lower than their current emissions. The emissions allowed under the new cap are then divided up into individual permits—usually equal to one ton of pollution—that represent the right to emit that amount.

Because the emissions cap restricts the amount of pollution allowed, permits that give a company the right to pollute take on financial value. Companies are free to buy and sell permits in order to continue operating in the most profitable manner available to them. So, those that are able to reduce emissions at a low cost can sell their extra permits to companies facing high costs (which will generally prefer to buy permits rather than make costly reductions themselves).

Well, just yesterday, Oregon’s governor Ted Kulongoski expressed his intent to go the cap and trade route.

Gov. Gregoire?

RSS icon Comments

1

Cap and trade is the best. Even better when you auction off the rights for cash.

Tax credits suck. They're just off-budget subsidies.

Posted by chris | January 25, 2007 10:59 PM
2

Good points. Let the market rule! Only Reds like the Bushies would hate something so pro-capitalist as the cap-and-trade C02 emissions market.

Posted by Will in Seattle | January 26, 2007 1:02 AM
3

I'm not sure what he has to say about cap-and-trade systems, but it's worth noting that Al Gore has been advocating a carbon tax, offset by a cut in payroll taxes.

I have no doubt that a straightforward tax is far more effective than a complicated cap-and-trade system. I also have no illusion that the problem with a tax is always political. So the sole advantage of a cap-and-trade system seems to be political -- that it's not a tax. But the only way for it to be effective is for it to wind up being a hidden tax.

Anyway, here's a detailed discussion of the deficiencies of cap-and-trade systems vs. carbon taxes.

Posted by cressona | January 26, 2007 7:43 AM
4

Maralyn Chase also has a cap and trade bill House Bill 1210: http://apps.leg.wa.gov/billinfo/summary.aspx?bill=1210

HB 1210 is modeled after Assembly Bill 32, the California cap and trade bill that Schwarzenneger just signed into law with great fanfare. The House Agriculture and Natural Resources held a hearing on both the caps bill and the tax credit bill. While no longer denying the science, the business community pooped all over both bills. Enviros testified in favor of the caps bill while staying silent on the tax credit bill.

HB 1210 is a good bill that would put Washington at the vanguard on this issue, along with California. But, it's not going to go anywhere unless the people get activated on the issue and let their legislators, and the governor, know how important this is.

Posted by Bill L. | January 26, 2007 9:06 AM
5

How about requiring all companies to meet a specific emissions standard and fining them to death if they fail to comply? The environment's going to hell. Fuck half measures.

Posted by keshmeshi | January 26, 2007 10:25 AM
6

@3 - the thing is, carbon taxes may sound good, but won't survive the political process, whereas cap-and-trade actually works and some major multinationals are pushing since under Kyoto they already have to use them.

Results matter. Very un-Seattle, I know, but that's what WORKS. The planet doesn't care if we kill ourselves off, after all.

Posted by Will in Seattle | January 26, 2007 12:13 PM

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