Breakthrough: ATTN James Hansen: Cap-and-Dividend NOT Worth Fighting For

An open letter by Alisha Fowler, Breakthrough Generation Fellow

For more than twenty years, your scientific expertise and public statements have helped many (including myself) understand the relationship between human activity and global warming. I felt a sense of urgency as I read your latest testimony to Congress (PDF) regarding the need to curb greenhouse gases and put us on the path to building a clean energy economy. I can only imagine how frustrated you must be by the inability of Congress to pass meaningful and comprehensive energy and climate legislation. As I read your testimony it was clear that you fully grasp the scale of the energy and climate challenge and desire to implement effective solutions that will tackle it head on.

That's why I felt totally lost when you articulated what you feel is the best way to transform our current energy system. You said, "One hundred percent dividend or fight!"

I do not understand how we will dramatically alter our energy system and spur the rapid deployment of clean, climate-safe energy sources if we rely solely on capping carbon emissions and pricing carbon while returning 100% of the dividends to Americans. Why are you issuing a divisive rallying cry around a market-based approach that has consistently failed to achieve results? A market-based approach such as Cap-and-Dividend will never solve our energy woes alone. I hope you can clarify your policy position, and are open to other solutions that will re-energize America and curb greenhouse gases.

The New York Times actually cited you as a proponent of large-scale government investment. According to The New York Times, you said that we will need the kind of government investment and support that was given when the federal highway system was created and the Apollo project was carried out:

"The transformation would require new technology as well as new policies, particularly legislation promoting investments and practices that steadily reduce emissions.
Such an enterprise would be on the scale of past ambitious national initiatives, Dr. Hansen said, like the construction of the federal highway system and the Apollo space program."

You're right! We most certainly will. Transforming our energy economy will require a sustained national commitment even larger than these historic examples and will require massive public investments. The question is, did you actually say this or is this a mis-representation of your views? If you did say this, how does it fit with your market-based policy solution?

The Cap-and-Dividend regulatory approach will not spur large-scale investment in new technology fast enough to rise to the challenge. Where will we get the billions of dollars needed to research, develop and deploy the vital clean energy technology you were just talking about if we return all of the funds to the American public? If you do recognize the need for major federal investments in clean energy infrastructure and technology, please tell me where we'll get the money if auction revenues are off the table. I don't get it. I want to understand your position, and I respect your scientific expertise, but I do not understand how Cap-and-Dividend could ever be an effective policy capable of building the clean energy future we both see as necessary.

So, Dr. Hansen, I for one am NOT interested in fighting for a Cap-and-Dividend scheme. On the other hand, an investment-based policy solution with the potential to spark lasting economic prosperity -- and not just dividend checks in the mail -- IS something I'm ready to fight for.

Further, the political climate in America indicates that a clean energy future is something Americans as a whole are ready to fight for - and invest in. Americans are clearly frustrated with our current state of affairs, and more open to change. But we must listen when Americans tell us what they want change on; the rising cost of fuel is the number two concern of the American public (after the economy and jobs) not global warming. It's pretty clear that focusing on energy is a recipe for political success, and that the next president will have the opportunity to transform our energy economy and curb America's greenhouse gas emissions.

One thing you are absolutely right about: the 2008 election is critical for the planet and time is short. Let's make our policies clear, and get them right.

Sincerely,

Alisha Fowler

Breakthrough Generation Fellow

The EU carbon emissions markets have indeed failed, for entirely predictable reasons that were articulated by economists when it was set up: the credits were given away for free to the most polluting industries, instead of being auctioned off. I do not see how this one instance constitutes a "consistent" failure of market-based approaches. A price has to be assigned to carbon dioxide emissions somehow, and the additional costs which are associated with that price will be borne ultimately by consumers. Cap-and-dividend creates the right incentives for polluting industries and avoids making the carbon tax regressive. What part of that exactly do you have issues with? Market-based regulation can work very well, but only if you listen to the economists when you're setting it up - California's regulation of the electrical utilities in the 1970s is a great example. Their profits were de-coupled from the amount of electricity they sold, and they were instead given incentives to increase energy efficiency. The result: today per-capita electricity usage in CA is exactly the same as it was in 1970, while in the rest of the US it is up by 60%. Californians pay more per kWh than the rest of America, but we use so much less electricity that our bills are actually smaller, despite the higher unit price. Posted by: Zane Selvans at June 25, 2008 7:27 AM

Thanks for your comment Zane. You say:

"Cap-and-dividend creates the right incentives for polluting industries and avoids making the carbon tax regressive. What part of that exactly do you have issues with?"

While I agree setting a price for carbon is absolutely necessary, I do not think that Cap-and-Dividend is the right way to go. As a market-based approach. Problems arise as soon as you implement it or even take a hard look at what implementation would look like. There are significant equity issues associated with a Cap-and-Dividend that, unless addressed, will be exploited by folks against the bill. The people impacted will be even more upset. For example, folks in coal-heavy, fossil-fuel heavy states will pay a lot more than folks in less carbon intense states like California or Oregon. To send equal dividend checks to folks in the mail would make polluting states pay for the bulk of our transition while other states would profit. I would also argue it does not create the right incentives for big industries. We should be putting our efforts (our "fight" as Hansen says) into driving down the cost of clean energy for big industries rather than making dirty energy expensive. Sounds like the same thing, but to me it is not. Making our energy policy viable on an international context must involve driving down the costs of clean energy to first compete with coal here in the US (which can be reached faster by implementing as high a carbon price as is politically possible in the US) and ultimately the "China Price." (which is unlikely to be affected by any carbon pricing scheme in China any time soon). Posted by: Alisha Fowler at June 26, 2008 6:04 PM

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