Tuesday, November 06, 2007

Bloomberg Tells Mayors Carbon Tax Provides More Certainty

Nov 2: On the final day of the 2007 Mayors Climate Protection Summit [See WIMS 11/2/07], hosted by the U.S. Conference of Mayors and the City of Seattle, over one hundred mayors convened to stress the importance of forming a federal partnership to boost energy independence. Due to recent geopolitical events and the dramatic rise in global energy prices, the mayors called on Congress to complete its work on major energy efficiency legislation by the end of the year and send it to the president for his signature. Mayors have been working closely with Congressional leaders to authorize an Energy Efficiency Block Grant to expand and accelerate community-based energy saving projects.

Among other items the Conference announced a new partnership with the Clinton Foundation’s Climate Initiative (CCI) which will allow 1,100 U.S. cities to gain access to volume discounts on energy-efficient and clean-energy products and technologies through CCI's purchasing consortium. Congressional leaders traveled to Seattle on November 2, specifically to get ideas from mayors about local energy strategies that could be used as national models. Conference leaders, President and Trenton Mayor Douglas Palmer, Miami Mayor Manuel Diaz and Seattle Mayor Greg Nickels, as well as New York Mayor Michael Bloomberg, provided that input.

In his keynote address Mayor Bloomberg had some interesting comments on climate change and the hot debate over a "cap and trade" approach versus a "carbon tax." He said, "On climate change, the duck-and-cover usually involves pointing the finger at others. It's China-this and India-that. But wait a second. This is the United States of America. When there's a major challenge, we don't wait for others to act. We lead. And we lead by example. That's what all of us here are doing... "Leadership is not waiting for others to act, or bowing to special interests, or making policy by polling or political calculus, and it's not hoping that technology will rescue us down the road or forcing our children to foot the bill. Leadership is about facing facts, making hard decisions, and having the independence and courage to do the right thing, even when it's not easy or popular. We've all heard people say, 'It's a great idea, but for the politics.' I hear it a lot..."

Bloomberg, who indicated he will be going to the U.N. Climate Change Summit in Bali next month, as part of an international delegation of mayors, said, “Climate change presents a national security imperative for us, because our dependence on foreign oil has entangled our interests with tyrants and increased our exposure to terrorism. It’s also an economic imperative, because clean energy is going to be the oil gusher of the 21st century.” Mayor Bloomberg called for increased research and development for climate protection, a pollution fee to discourage practices that generate greenhouse gas pollution and raising fuel efficiency standards.

On carbon dioxide emissions, Bloomberg said, "we have to stop ignoring the laws of economics. As long as greenhouse gas pollution is free, it will be abundant. If we want to reduce it, there has to be a cost for producing it. The voluntary targets suggested by President Bush would be like voluntary speed limits - doomed to fail. If we're serious about climate change, the question is not whether we should put a value on greenhouse gas pollution, but how we should do it."

Regarding a cap and trade system as opposed to a carbon tax, Bloomberg said, "Cap-and-trade is an easier political sell because the costs are hidden - but they're still there. And the payoff is more uncertain." However, he noted, "the price volatility for carbon credits can discourage investment since an investment that might make sense if carbon credits are trading at $50 a ton, may not make sense at $30 a ton." He said further, "A cap-and-trade system will only work if all the credits are distributed from the start - and all industries are covered. But this begs the question: If all industries are going to be affected, and the worst polluters are going to pay more, why not simplify matters for companies by charging a direct pollution fee? It's like making one right turn instead of three left turns. You end up going in the same direction, but without going around in a circle first.

"A direct charge would eliminate the uncertainty that companies would face in a cap-and-trade system. It would be easier to implement and enforce, it would prevent special interests from opening up loopholes, and, it would create an opportunity to cut taxes... Creating a direct charge for greenhouse gas pollution would also incentivize the kinds of innovation that a cap-and-trade system is designed to encourage - without creating market uncertainty. To do this, a portion of the revenue from the pollution charge would be used to create an innovation fund, which would finance tax credits for companies that reduce their greenhouse gas pollution. As a result, companies would have two big incentives to reduce their pollution: Minimizing the charges they would have to pay and maximizing their tax savings. And unlike a cap-and-trade system, the certainty of tax credits would be more likely to lead companies to make the long-term investments in clean technology that will allow us to substantially reduce greenhouse gas pollution."

In concluding, Bloomberg said, "Both cap-and-trade and pollution pricing present their own challenges -- but there is an important difference between the two. The primary flaw of cap-and-trade is economic - price uncertainty; while the primary flaw of a pollution fee is political - the difficulty of getting it through Congress. But I've never been one to let short-term politics get in the way of long-term success..."

Access a release from the Conference (
click here). Access the Mayors Climate Protection Center website for extensive information (click here). Access the complete text of Mayor Bloomberg's presentation (click here). Access links to all video presentations including Bloomberg, Clinton, Gore, etc. (click here). [*Climate, *Energy]