First Name | Jim |
---|---|
Last Name | Stewart |
Email Address | Jim@EarthDayLA.org |
Affiliation | Sierra Club CA Climate-Energy Comm. |
Subject | Carbon fees are preferable to cap-and-trade |
Comment | Sierra Club California Comment on Scoping Plan Appendix J CEQA Analysis The brief summaries in Appendix J, pages J-85-87, of why ARB staff believes a cap-and-trade approach is superior to carbon fees, disregard real world experience so far with cap-and-trade. ARB staff simply asserts (p. J-87), “While a carbon fee and a cap-and-trade program provide very similar economic incentives to those covered, a carbon fee does not provide certainty in terms of the amount of emission reductions that will be achieved. The cap-and-trade program, on the other hand, which provides a firm cap on 85 percent of the state’s greenhouse gas emissions, increases California’s certainty in meeting the 2020 target, and provides a robust mechanism to achieve the additional reductions needed by 2050.” Whether it be the problems with RECLAIM in the South Coast AQMD, or Europe’s bungled attempt at trading, cap-and-trade is no panacea. It is much less likely to lead to achieving a firm cap, compared to a combination of regulations, with financing of reductions with carbon fee income. In fact a carbon fee is markedly superior to cap-and-trade for the following reasons: 1. Such a fee would benefit businesses since a carbon fee would reduce risks and aid business planning, because the price is more predictable than the outcome of a cap and trade/auction. 2. In addition, such a fee would provide a predictable source of income for the state to put into Scoping Plan implementation. 3. Under the precedent of the Sinclair Paint case, expenditures of revenue from carbon fees must be related to the issue of carbon emissions. On the other hand, auction revenues could be appropriated by the legislature for any purpose they want, including deficit reduction, which would have zero impact on GHG emissions. 4. Fees can be imposed on all carbon sources, rather than only on the sector of large producers. This accomplishes the following goals: a) it allows a much lower carbon rate per ton to raise the same amount of money, b) it distributes the cost burden between all sectors, c) it insures that the cost rate is low enough that it will not be disruptive to industries or consumers, d) it provides equity between sectors. In California a modest fee of $4 per ton on all the state's emissions (currently about 500 million tons) could collect about $2 billion in revenue. ARB's planned “cap and trade” market system accounts for 20% of 174 million tons reduction target (34.4 million tons). To raise the same revenue from this 34.4 million ton basis would require a carbon auction price over $58 per ton, a price that is very doubtful given recent experience with auctions in the US trading at under $5 per ton. As for consumer impact, a $4 per ton rate would add about 4 cents per gallon for gasoline, and 0.1 to 0.3 cent per kilowatt-hour for most California electric utility customers. (Likely, there would not be a strong consumer reaction, compared to a $58 per ton price.) 5. Fees also eliminate the “loopholes” of offsets that create many regulatory and compliance problems, as well as huge potential environmental justice issues. 6. Fees avoid much of the high transaction costs associated with auctions. They can be designed to avoid the fate of the auction in the northeastern US where the bid price for RGGI permits of $3 per ton barely covered the cost of the auction. 7. Auctions could raise some initial money to benefit the state, but then market traders who bought the credits have the chance to resell the credits, thus reaping profits for themselves but not benefiting the climate. (For example, traders who bought the RGGI permits for $3 per ton are now reselling them for over $4 per ton, but none of those millions of dollars of trading profits are benefiting the climate.) 8. Offsets would be allowed under cap-and-trade, which require expensive verification procedures, as well as controversy over location (in-state, regional, international?). 9. Cap-and-trade creates huge environmental justice equity problems, which can be more fairly dealt with using a targeted combination of regulations and financing mechanisms from a carbon fee. 10. The bottom line is that the combination of regulations and financing reduction measures with fee income can be more easily adjusted to achieve the firm cap. We conclude that the language in Alternative 5 wrongly condemns carbon fees. Carbon fees are much preferable to cap-and-trade to achieve the goals of AB 32. Sierra Club California said to ARB in our Nov. 19 Comments on Proposed AB 32 Scoping plan that “Sierra Club urges CARB consider the merits of replacing cap and trade with a carbon fee. CARB has not given this fee option the attention or study it merits.” Jim Stewart, PhD, Co-chair Sierra Club California Climate-Energy Committee |
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Date and Time Comment Was Submitted | 2008-11-30 22:31:14 |
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