Remarkably diverse groups across the US political spectrum are calling
for a high and rising price on carbon as part of their deficit-reduction
strategies. Extremely conservative to very liberal groups are finding
common cause. This is a potentially momentous development that could
spark the end of the political logjam in the US over energy and climate
Addressing carbon emissions that contribute to climate change has become an international challenge. At Pacific Northwest National
Laboratory, part of the focus of carbon storage research is on basalts, including this variety from Hawaii. (Photo: Pacific Northwest National Laboratory / Flickr)
Agreeing to Disagree
Scientific truth does not depend on what the majority chooses to
believe - not today and not in 1633 when Galileo was convicted of heresy
for saying that the earth revolves around the sun. He spent the rest of
his life under house arrest, but the earth continued in its orbit.
Let's face the facts: The earth is not flat. The sun does not revolve
around the earth. Climate change is not something that can be altered by
attacking those who report it. It's not something that should be swept
under the rug for any reason - the survival of human civilization is at
But it's also true that more focus on economic and national security
issues that transcend political divisions will speed the day when
countries around the world adopt smart carbon policies that will make
them more globally competitive, revitalize their flagging economies and
create jobs for the middle class.
An Unprecedented Opportunity for Clean Energy
The clean tech sector has an unprecedented market opportunity now that
Germany and Switzerland have decided to phase out nuclear power, Italy
has blocked its re-launch and Japan has announced plans to redo its
energy policy "from scratch."
Germany's decision to phase out nuclear power by 2022 means that the
world's third-largest economy plans to replace 23 percent of its power
in 11 years. Japan, the world's fourth-largest economy, which now gets
30 percent of its electricity from nuclear plants, plans to install
solar panels on ten million homes, while cutting the cost of solar power
by two-thirds by 2020. Its richest man, who broke open the country's
telecommunications market years ago, is moving into solar power,
tackling utility bottlenecks and eyeing the potential profits from more
efficient solar cells.
Nuclear power's likely downward slope is just one of three critical energy developments this year, as Michael Klare vividly describes.
The second is the turmoil in the Middle East and North Africa, which
could spread to Saudi Arabia and other major oil producers in the Gulf.
Even if the Saudis' big spending on public handouts manages to keep the
lid on popular protests, the government won't be able to ramp up oil
production enough to make up for falling production elsewhere unless it
spends hundreds of billions of dollars to build the infrastructure to
get out the heavier, "tough oil" left in its reserves. Its "easy oil" is
running out, although the precise degree of exhaustion of Saudi fields
is a state secret.
The third key energy development is the "intense drought over the past
year in Australia, China, Russia, parts of the Middle East, South
America, the United States and most recently northern Europe." In
addition to driving up food prices, the drought has led to sharp drops
in river levels and hydroelectric power plants' output. China's loss of
hydropower has created severe electricity shortages and increased its
demand for imported oil - which will drive oil prices higher.
All three of these developments portend unprecedented growth in the
global clean energy sector. Countries that want a piece of the action
need sound energy policies that send price signals to businesses,
investors and citizens that will shift their spending from fossil fuels
to clean energy.
The Market Is Not Telling the Truth
The market is not telling the truth about the cost of fossil fuels. You
can't believe the price at the gas pump. People pay twice for a tank of
gas - once at the pump and once when they pay their taxes.
In 2009, global subsidies for fossil fuels were 12 times as great as subsidies for renewables, according to Bloomberg New Energy Finance.
The $4 billion in annual US taxpayer subsidies for Big Oil, the
wealthiest industry on the planet, comes in many different forms. Many
indirect subsidies aren't included in that number, such as the billions
spent on the military's efforts to maintain the security of the Middle
East oil pipeline. One form of subsidy in particular is too often
overlooked - pollution.
All pollution is a subsidy. By tolerating pollution, we've made a
policy decision to let corporations foist some of their costs onto the
public. We need to undo this transfer and put the "off-balance sheet"
health and environmental costs of corporations' carbon pollution back
where they belong - with the companies that make a business decision to
profit from dirty energy.
If the environmental and health impacts of coal, oil and natural gas
were monetized and included in energy prices, more renewable energy
technologies would become economically attractive. Wind, geothermal and
solar are already fully competitive on that basis.
Fixing this problem will put people back to work.
Slapping a fee on carbon would be the simplest way to include the
environmental and health costs of fossil fuels in their retail prices.
We should impose a simple, transparent, gradually rising tax on
carbon-based energy sources at the points where they enter the economy -
such as at ports of entry or the mouths of mines - with most of the
revenue returned to the public to offset higher energy prices, as James
Hansen and others propose.
Every citizen would periodically receive the same size "dividend" by
check or electronic transfer, to make up for higher energy prices as a
result of energy companies passing along their higher costs.
Partly because of public aversion to the word "tax," the past few
years' debate over carbon policy has focused on creating a cap-and-trade
system. In the 1990s, such a system did enable the US to dramatically
lower its industrial sulfur dioxide (SO2) emissions, but the size of the
affected market was a fraction of the size new carbon trading markets
The World Business Academy's 2007 book, "Freedom From Mid-East Oil,"
stated that a carbon tax would be preferable to a cap and trade system,
but we thought only the latter was politically palatable. Experience has
since shown that a cap-and-trade system for carbon is neither
politically viable nor workable.
The last thing the US needs is a vast new market for trading emissions
allowances, offset credits and the new financial derivatives they will
The financial crash that brought us the Great Recession proved that
regulators can't keep up with Wall Street's ability to turn the
financial sector into a casino by slicing, dicing and repackaging
tradable instruments into new complex derivatives for even bigger bets.
The Greek debt crisis vividly shows how little reform there has been
since the last financial crisis and how urgently we need to implement
reforms that would regulate derivatives and reduce speculation.
Traders and Polluters Have Gamed the EU and UN Carbon Markets
Global carbon markets surged from about $15 billion in 2005 to a high
of about $144 billion in 2009, before falling to about $142 billion in
2010. About 97 percent of all trades now take place in the EU carbon
market, appropriately named the "Emissions Trading Scheme" (ETS).
Like the 2008 market crash, the UN and EU
carbon trading programs have shown that we should beware of a system
based on financial trading. The problems go far beyond computer hackers'
theft of two million emission allowances worth 32 million euros.
Academy Fellow Hazel Henderson has described
how large polluting industries in the ETS gamed the Kyoto Protocol and
how Wall Street and London financial traders got what they wanted: "a single commodity: carbon, to construct tradable financial instruments."
The result? A costly new bureaucracy and precious little carbon removed
from the atmosphere. Carbon emissions increased by a record amount in
2010, to 5 percent above levels in 2008, the last record year. (The
slight dip in 2009 was as a result of the recession.)
The use of emissions "offsets" has been a
dismal failure. Investors can earn tradable credits known as "Certified
Emission Reductions" or offsets by participating in so-called greenhouse
gas mitigation projects in developing countries. The projects have been
rife with fraud.
As of 2013, the EU will ban offsets tied to
certain industrial greenhouse gases; HFC-23 can trap up to 11,700 more
heat per molecule than carbon dioxide. Factories have upped production
of the dangerous gases to get credits for reducing them. The EU has
admitted that these offsets have generated "exorbitant" returns for
investors and undermined the market's integrity.
Such projects account for 78 percent of the
total Certified Emissions Reductions used to comply with 2010 emissions
limits, according to an analysis by Bloomberg New Energy Finance. It
added, "Of all credits issued so far, 66 percent are of this type."
Those numbers pretty much say it all.
States Consider a Carbon Tax and Cap and Trade
Recent events in New Jersey and California also put a spotlight on
carbon taxes and cap and trade. In May, Gov. Chris Christie pulled New
Jersey out of a regional carbon trading system created by a group of
Northeastern states that tired of waiting for the federal government to
put a price on carbon. Christie couldn't give a clear explanation of his actions.
A recent California court decision sided with environmental lawyers who
challenged proposed rules to implement the state's climate change law
on the grounds that regulators hadn't taken a hard look at a carbon tax
as an alternative to cap and trade, as the law required.
The lawyers argued that the cap-and-trade system wouldn't cut carbon
emissions because it would let corporations buy cheap "offsets" and
continue to pollute. The regulators have just issued a new, more
thorough report that looks at other jurisdictions that have a carbon
tax, including British Columbia, where there is reportedly wide support
for a carbon tax that was accompanied by cuts in other taxes.
It goes without saying that sounder energy policies would help the
planet. But with millions of Americans still suffering from
unemployment, it's time to focus on the economic benefits of ending
fossil fuel subsidies and putting a price on carbon that makes the
market tell the truth about the exorbitant cost of fossil fuels.
As a direct result of its carbon policy, the US is falling behind in
the global competition to capture a piece of the booming clean energy
market. It now ranks 17th in the world in the percentage of its GDP that
comes from its clean energy sector.
The global clean energy economy represents a $2.3 trillion opportunity
over the next ten years if G-20 countries significantly strengthen their
clean energy policies, such as by putting a price on carbon, according
to a report by the Pew Center.
The US has fallen behind on clean tech and is one of three countries
(along with India and the UK) with "the most to gain from adoption of
aggressive clean energy policies," the report concludes. "Time and
again, it has been shown that nations with the strongest policy
frameworks have attracted the most capital and enjoyed the associated
economic benefits, including job creation."
It will require human ingenuity to find solutions to our energy
challenges. As Goethe said, "First and last, what is demanded of genius
is love of truth." The opportunity for humanity to rediscover its genius
lies in its ability to begin telling the truth: we must switch from
fossil fuels to a new planetary fuel system. There is no other choice.
This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.
Rinaldo Brutoco is a well-known futurist and the founding president of
the World Business Academy, a nonprofit think tank launched in 1987 with
the mission to educate and inspire the business community to take
responsibility for the whole of planetary society. He is a frequent
public speaker and a prolific author on renewable energy, climate change
and sustainable business strategies. He is the co-author of "Freedom
from Mid-East Oil" (2007), a leading book on energy and climate change
and "Profiles in Power" (1997), a college textbook on nuclear power and
the dawn of the solar age.
Madeleine Austin is vice president of the World Business Academy. She
is the co-author with Rinaldo Brutoco of various articles, including
"The Nuclear Nemesis Redux" (Forum CSR International, Dec. 2008) and
"Japan's Nuclear Kamikazes," March 2011.