Carbon Financing

| Wed Feb. 25, 2009 11:00 PM PST
The Washington Post reports on Barack Obama's plan for the revenue from his climate change plan:

As for cap-and-trade, the official said the administration believes it will generate enough money to fund a variety of priorities, including investments in renewable energy and rebates for vulnerable consumers who may struggle to pay higher energy bills if utilities pass along the cost to consumers. Obama also wants to use the money to cover the cost of extending his signature Making Work Pay tax credit, worth up to $800 a year for working families. That credit, which will cost $66 billion next year, was enacted in the stimulus package, but is set to expire at the end of 2010.

Hmmm.  That sounds like roughly $100 billion per year.  Is that reasonable?  The United States produces about 7 billion tons of CO2 equivalent a year right now, which means that Obama expects his cap-and-trade plan to generate a price of about $14 per ton in its first year — assuming it covers every single molecule of carbon emitted in the U.S.  If only half of all emissions are covered at first, it means a price closer to $28 per ton.

For comparison, the European ETS cap-and-trade plan currently prices CO2 at about 10 euros per ton.  That's roughly $13.  And that price has dropped considerably over the past few months thanks to the recession.  By 2012 it's likely to be back up in the range of $20 or more.

So at a glance, it looks like Obama's estimates are defensible.  My guess is that they're on the high side, since the initial cap will probably be fairly generous and will therefore generate a relatively low carbon price.  But as the cap goes down, the permit price should go up fairly quickly.  These numbers are at least in the right ballpark.

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Kevin Drum is a political blogger for Mother Jones. For more of his stories, click here.

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Comments

If?

if when utilities pass along the cost to consumers. FTFWP

Carbon Tax

Please tell me again why we don't want to make things simple and impose a carbon tax of $20 a ton? Don't let facts get in the way of your opinion.

Here are several reasons: 1)

Here are several reasons: 1) This "simple" idea is mostly simple in the context of a blog comment. Any actual legislation would be about as complex as a cap and trade system. 2) How did you arrive at $20? The correct carbon tax is one set to the marginal cost to society of carbon emissions. You've just picked a number out of the air, and you haven't proposed a mechanism for adjusting it over time if the number happens to be wrong. A cap and trade system in theory will find the correct price, based on the desired amount of emissions reductions. 3) Congress won't pass a carbon tax. Don't get me wrong: I think a carbon tax would be a fine thing, much as a cap-and-trade system will be a fine thing. But there's nothing simple about it.

Climate policy lobbyists

Now that Bush and Cheney are no longer around to run the executive branch as a wholly-owned subsidiary of ExxonMobil, and now that the Obama administration and the Congressional Democrats are moving to take action -- however inadequate -- to reduce carbon pollution, the giant fossil fuel corporations will kick their campaign of deceit and denial into overdrive. For one thing, this blog and others like it are already being flooded with scripted pseudo-scientific drivel from brainwashed dittoheads, regurgitating "Climate Science According To Rush Limbaugh" talking points. The corporate-programmed zombie army is on the march. Meanwhile, at the Congressional climate policy hearings this week, the Republicans invited a pseudo-scientist from the ExxonMobil-funded propaganda mill, the Marshall Institute, to opine that any action to limit carbon pollution would be as misguided as Prohibition of alcohol. In other words, forget the overwhelming scientific evidence that unmitigated global warming will cause deadly catastrophic harms to billions of human beings and devastate if not destroy human civilization -- it's all just a bunch of hyper-moralistic "liberals" who want to make us stop burning fossil fuels because it offends their delicate moral sensibilities. This is a common talking point of the denialists. Meanwhile, I commend to your attention a new report from the Center For Public Integrity, which finds that "the number of lobbyists seeking to influence federal policy on climate change has grown more than 300 percent in five years". Other findings: "More than 770 companies and organizations hired some 2,340 lobbyists to work on climate change and spent at least $90 million lobbying in 2008. The American Coalition for Clean Coal Electricity – a group of 48 companies - topped the list of those solely focused on the issue, spending $9.95 million." "Despite the huge growth in the number of environmental, health and alternative energy lobbyists, they are outnumbered by industry and other interests 8-to-1." The report includes "a fully searchable database of climate lobbyists ... as well as brief profiles of some of the most prominent lobbyists."

rebates?

If the government provide rebates to people whose utility bills go up, doesn't that undercut the point of cap and trade?

rebates?

Brock, in a word - no. The cap puts a hard limit on the amount of carbon (if enforced - a big if). All the rest is the price of that cap and how that price is distributed. Rebates just move the price (cost) around a bit.

rebates?

But if the government subsidizes (e.g. via rebates) a good whose production can't be ramped up (by design, in this case), it will create a shortage, right? That is to say (since the term "shortage" is misleading here), we'll go from rationing by price to rationing by some other means. Or perhaps, since the rebates will only apply to certain parties, will this create de facto price discrimination, where one class of customers gets discounted power, and another class ends up making up the shortfall by having their power become even more expensive?

Looks like Karog is drinking

Looks like Karog is drinking the militant zombie brainwashed environazi bullcrap globalwormering fear monger kool aid. Ask Australians and the rest of the world how they feel now about buying into this powergrab bullcrap hoax. Nice try Mr. Marx.

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