SAVING THE PLANET, FOR TWENTY-SEVEN CENTS A GALLON

August 7th, 2007 <-- by Daniel Kammen -->

By Garrett Gruener and Daniel M. Kammen

It is now painfully obvious that the oil-addicted United States must take action to stop global warming — and equally obvious, after President Bush’s anemic State of the Union Address, that sensible energy action will have to come from Congress, the American people and the business community. Piecemeal approaches won’t work. What we need are market-based incentives that make it attractive to stop emitting the carbon that causes global warming – and quickly.

The longer we wait, the more global warming will cost us the long run. So it makes sense to adopt a tax on carbon emissions now. The trick is to design a “global cooling fee” that a majority of Americans will want to pay. We propose a tax that will hit energy hogs hardest. But under our scheme, whether you use a little or a lot, you will be able to invest your tax dollars directly in technologies that will clean up the environment now and lower your energy bills.

Americans consume 300 billion gallons of gasoline per year, and staggering quantities of coal and natural gas. What can we do to stop drastic climate change while we wait for viable alternative sources of energy? Plenty – if we are willing to pay and make our investments work for us. We can reduce carbon emissions by installing scrubbers on power plants, switching to hybrid and then plug-in hybrid cars and planting trees, building wind farms, and constructing the most energy efficient buildings on the planet. By several estimates, a fee of about 27 cents per gallon of fuel consumed and $30/ton of carbon dioxide emitted from electricity generation would tip the balance on our economy from one where pollution is essentially rewarded, to one based on ‘clean tech.’ This amounts to only $180 billion per year; less than 1% of the $17 trillion dollar U.S. economy.

Our carbon tax proposal is based on the principle that every consumer of fossil fuel energy should have to pay the price of getting rid of the carbon generated by burning it. At the $30 per ton of carbon dioxide level, the owner of a gasoline-powered Hummer who drives it 10,000 miles a year would pay $200 per year, while a Prius driver would pay only $50.

The carbon tax would also be imposed on gas or oil used to heat homes. Energy sources that don’t generate carbon, such as wind, solar and other renewable resources, would not be taxed; instead, producers could sell emissions credits to carbon polluters. A diverse group of industry leaders – termed the U.S. Climate Action Partnership – has already called for this sort of regulatory clarity.

Voters on the American political left might be content to stop there and let the federal government spend the tax proceeds to fight global warming as it sees fit. Voters on the right would likely object on the grounds that taxes are already too high, that market solutions to the energy problem are preferable, or that government programs to promote clean energy will only spawn more inefficient bureaucracies. Since taxes are well known to be the third rail of American politics – touch it and you die – politicians might never get around to making us pay for what most of us agree we need.

The alternative is to place the authority to spend the tax money directly in the hands of the American people. This approach would make a carbon tax more palatable, equitable, and efficient at reducing greenhouse gases. The average American would pay roughly $555 the first year for all of the carbon used in his gasoline, electricity and home heating. But instead of going straight to the federal Treasury, the tax money would be credited into individual web-accessible Energy Savings Accounts. Each taxpayer could decide how best to spend it to reduce carbon emissions, to his own – and the planet’s – benefit.

You could use your $555 to install solar panels on your roof, reducing your electricity bill to zero for the next two decades. Or, you could direct your tax money to a charity that plants fast-growing trees at the equator, or to a private company that would suck up carbon dioxide in the atmosphere and sequester it under the ocean floor. You could pool your “cooling tax” money with your neighbors and commission a windmill to supply your town with electricity, or a plant to supply you with a non-carbon alternative to gasoline. Any plan that produces energy without emitting carbon, or gets rid of carbon already in the atmosphere, would qualify. Companies would compete for your business, and more would surely spring up to serve the burgeoning clean-energy market.

If you don’t want to be bothered with this scheme, or if you believe the federal government is the best “decider” for how to solve global warming, you could just do nothing. The Treasury would collect unallocated funds from Energy Savings Accounts and put them to work tackle global warming as it deems best. Poor people could apply for tax rebates, so that the tax would not be regressive. And better market choices would presumably reduce the tax bill for most people each subsequent year.

Meanwhile, the results would be transformative. The United States would no longer be a net generator of greenhouse gases. Instead, it would become a global leader in environmental protection. American companies would lead the way with new markets and new technologies funded by the investment choices of individuals.

It is in our national interest to invest in our energy future, and in our power to innovate our way out of this crisis. It’s time to seize the opportunity.

Garrett Gruener is a venture capitalist and the founder of Ask Jeeves (now Ask.com).

Daniel Kammen the Class of 1935 Distinguished Professor of Energy at the Universty of California, Berkeley and is co-director of the Berkeley Institute of the Environment at UC Berkeley.

This post originally appeared in a different form in the January 31 Los Angeles Times as an Op Ed.

10 Responses to “SAVING THE PLANET, FOR TWENTY-SEVEN CENTS A GALLON”

  1. Paul Higgins Says:

    It’s true that emission fees (or taxes) don’t create market for pollution permits in the same way that cap-and-trade do. However, they are still considered a market mechanism.

    An emission fee sets the price of polluting and lets the market determine the economically efficient quantity of emissions that will result. Cap-and-trade, on the other hand, sets the quantity and lets the market determine the economically efficient price of emissions.

    Both approaches help correct the existing market failure that occurs when those who pollute are able to stick a sizeable fraction of the costs of their activities on others in society (as I discussed here).

  2. Phil Kithil Says:

    This topic is timely because my company, Atmocean, Inc., is developing a wave-driven ocean upwelling pump & system to bring up higher nutrient water from 200m deep, increasing phytoplankton which absorb CO2, which ultimately ends up in seafloor sediments, to counteract fossil fuel emissions. Large arrays of our pumps would be deployed in the open ocean beyond 200 mile limit, and under best case assumptions could sequester about 7.5 billion tons of CO2 per year – all using natural biological ocean processes.

    Rather than a carbon tax, we propose a small tariff on global imports and exports which would go to fund both SEQUESTRATION technologies (our definition is: this makes fossil fuels carbon neutral) and OFFSET technologies (definition: replace fossil fuels with non-fossil fuels). Since global exim’s are now $30 trillion per year, this is the largest single commercial activity and therefore a small tariff applied to it has the smallest impact on any single entity, group, or country. This could be administered by the WTO – they simply assess their members the fee and the members collect it on all imports and exports that cross their border.

    CO2 emissions are a huge global problem so the solution must also be global (and huge).

    I invite your comments. For more info on us please visit http://www.atmocean.com.

  3. David Kline Says:

    Let me take mild issue with this:

    >You could use your $555 to install solar panels on your roof, reducing your electricity bill to zero for the next two decades.

    If you get an unbelievably good deal on your PV, you might get 100W for your $555, which is not nearly enough to reduce your bill to zero. In fact you’d get just a few percent of your electricity from a system that size. You do your interesting idea a disservice by including this exaggerated performance claim.

  4. Tim Herzog Says:

    Taxes aren’t the 3rd rail of politics. Social security is.

    300b gallons gasoline isn’t even close. EIA says about 137b in 2003. Where did you get this number?

  5. David B. Benson Says:

    While interesting, I fear this would be an administrative nightmare.

  6. Dan G Says:

    David Kline — not that I wish to speak for the authors, but if we changed just one word “for” with “during” in that sentence you quote, “You could use your $555 . . . for (during) the next two decades.” it might make sense. I would double what David Benson says, and for sure, a lot of money would be wasted when it is really needed to help mitigation of the basic problem.

    There is a wishy-washiness about how this money is to be spent that really needs firming-up. I wish that there were some way that all beneficial considerations of any carbon-saving project could be boiled down to a simple phrase of “carbon saved” or “carbon sequestered” or some similar basic measurement or metric. We really have to stay serious and speak of what is really being achieved, not only because the basic problem demands that sort of dedication, but why should anyone (particularly business people) ever consider plunking down a measurable portion of their income or investment into a gamble or some frivolous venture that will never pay more (in terms of carbon) than it costs, or some such nonsense?

    We really do need a market pretty badly; some place where carbon sequestration can be traded, and regulations to create the demand for the carbon trading.

    I am in a province whose premier seems ready to pay for sequestration, but only if that sequestration is done in his province. We need regulations without that “but”, because right now, we do not have facility by which we can sequester anything significant. That’s all moving pretty slowly . . . although there may be progress being made in the “abandoned mine or well” areas of which I know little. I think that our premier is trying to have his cake and eat it, too. I wish that regulations wouldn’t wait for such self-serving developments. Everything will take too long. There is a genuine selfishness going on here, because our emissions don’t just hurt us. He says that he’s just doing what’s best for his people and they accept this.

  7. mike Says:

    The world is searching for a solution to quickly reduce emissions…..especially those from the combustion of hydrocarbon based fuels. We might get simple and focus on the process itself, i.e., how can we cost effectively improve efficiency whereby ALL harmful emission components are significantly reduced….including NOX and PM?
    Over -20- years ago a technology was developed that ultimately showed that efficiency was altered with substantial reductions in engine and exhaust temperatures, all emissions and with a big reduction in fuel consumption. The physical process is well documented (Viscoelasticity) and the theory is well supported with years of gov’t testing. At $0.03 to treat a gallon and 5% + fuel reduction the cost to the consumer is a wash. For those skeptics the proof is in the fact that this technology is already being manufactured, sold and treating millions of gallons of diesel fuel right now. Polyisobutylene is now found in this product called Viscon. As a scientist I have spent many years studying this technology and to date I have still not found any negative attributes. It is environmentally benign and classified by the FDA as a Food Grade Additive and today used in many gasoline detergent packages. If it was included tomorrow in ALL diesel fuel consumed in the U.S. there would be an immediate reduction in ALL harmful emissions including the elimination of some toxic compounds. It is the real deal!

  8. John Abshire Says:

    It is vital that the US take the lead, regardless of what theme is adopted. We are the leading CO2 producer, (and we lead in most areas of technology) so it is imperative that we lead in CO2 emission reduction and sequestration. Developing countries then will have a lead to follow. There is no reason that developing countries have to follow our dirty energy past to become “developed”. Quite the contrary. There are lots of clean energy solutions right now on the market, that we (the US) could be pushing, and developing nations could be using. Solar power is the ultimate source. It supplies electricity (and thermal energy) now to many parts of developing countries. We have shown also in the US that solar power and energy conservation are big winners in cities and residences. California (and like minded states) are leading the way. It is only at nation wide conferences where I hear the resistance from our top leaders.

  9. Barbara Passero Says:

    Like the former blogger, I agree that the U.S. must take the lead. But Congress is selfishly short-sighted, and the president is conveniently blind to the need for change.

    The problem with raising the cost of oil is that it gives Big Oil the opportunity to devastate more of our sacred environment instead of finding solutions. There was an article called

    In 2005, I researched information a book called Opposing Viewpoints: Energy Alternatives (for high school students, a good introduction to the various solutions proposed). I found a speech that President Jimmy Carter planned to give on July 5, 1979. This speech (www.americanrhetoric.com/jimmycarterundeliveredenergyspeech.htm) would have been similar to John F. Kennedy’s “it’s not what your country can do for you, it’s what you can do for your country” speech.

    It is crucial that the American people use their democratic rights to write, call, email, etc. their legislators in a concerted effort to finesse the influence of the lobbyists. Otherwise we leave our fate in the hands of the private interest groups, who have no thought for anyone’s future.

  10. Barbara Passero Says:

    http://www.grist.org/comments/food/2007/12/20/?source=food

    oops forgot to put in the name of the article

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