Analysis: To tax or cap carbon?

NEW YORK, July 21 (UPI) -- When Rep. John Dingell, D-Mich., said on C-SPAN that he would introduce a carbon tax measure in the U.S. House as a way to show the idea is politically moribund, he was trying to show that some good abstract ideas never make it out of Washington alive.

"I sincerely doubt that the American people are willing to pay what this is really going to cost them," said Dingell, chairman of the Committee on Energy and Commerce.

As fears of climate change have turned to mainstream concern in the United States, Congress has loosely talked about either capping allowable emissions or charging for it. (Dingell has not yet submitted a carbon tax bill.)

Either move is seen as an attempt to make the price of business more accurate: Polluting is a cost on the environment polluting businesses should pay.

But a tax on carbon emissions would raise the price of goods that release carbon dioxide and other greenhouse gases during their production or use.

This would affect things like gasoline, electricity generated by coal-burning plants and to a lesser extent, some agricultural products. The plan also hopes to thwart climate change by increasing costs, because consumers would conserve energy and reduce the amount of driving they do, while companies would invest in greener technology.

Economists tend to be supportive of the idea that people should pay for what they pollute.

"You can't be an economist without believing with every fiber of your being that the most direct and effective way of reducing the use of something is to raise the price of the good as high as possible," said Charles Komanoff, an economist and co-founder of the Carbon Tax Center. "You want it to reflect the externalities that are not included in the price."

The externalities are the environmental harm caused by the greenhouse gases.

There is certainly no consensus that a carbon tax would be the best solution to the global warming threat.

In Washington, as Dingell predicted, a carbon tax would meet stiff resistance.

"I've never seriously thought about it because a carbon tax is so far outside the realm of the doable," said Bill Wicker, communications director of the Senate Energy and Natural Resources Committee.

That is because imposing a tax that would drive up gas and utility prices is always a dangerous move for officials seeking reelection.

Nonetheless, Wicker conceded the tax could work if it became law.

"It is a good way to discourage consumption," he told United Press International.

The more viable alternative to a carbon tax is a cap-and-trade system, according to Wicker.

Senator Jeff Bingaman, D-N.M., who chairs his energy committee, has submitted a cap-and-trade bill. In his plan, the government would set a maximum emission level and then distribute pollution allowances to carbon producers. These could be sold in a "carbon market" by emitters that do not use all of their allowances to others who want to exceed their pollution limit. Over time, the government would gradually reduce the permitted level of carbon emissions.

Supporters say this system motivates companies to become more efficient and to develop green technology, because they would have the opportunity to make money by selling their carbon credits.

Many industry leaders and environmental groups have lined up behind the idea of a cap-and-trade system.

Annie Petsonk, from Environmental Defense, says her organization favors capping carbon emissions, because it shows "you're focused on setting a defined level of pollution control."

However, she is troubled by a "safety valve" provision in the Bingaman bill that prevents the price of carbon from getting too high. If the price hits $12 per ton of carbon, the government would sell more allowances to cause the price to drop.

Petsonk says this loophole is the equivalent of a tax and undercuts the fight against global warming.

"When you convert a cap to a tax, you punch a big hole in the cap," she said.

Wicker says the cap-and-trade bill would stall in Congress without the safety valve.

Companies "need some benchmark to know what the price of carbon is going to be," he said. "Without a safety vale, most objective observers will say the likelihood of any type of climate control legislation passing is next to zero."

Several other bills targeting climate change are in the Senate, and more might be on the way.

Dingell's statements leave room for him to support a cap-and-trade bill in the House.

"It is my intention to develop a comprehensive, mandatory, economy-wide program to reduce emissions of carbon dioxide and other greenhouse gases," he said in a written statement.

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