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Some ideas on climate change- The views are not necessarily those of the Green Economics Institute but are useful ideas and important to consider

These two articles about President elect Obama's climate challenge endorse cap and share/cap and dividend. You would expect Peter Barnes to do so (second article) - but the endorsement of Bill McKibben of the 350 campaign seems to me to be very important. It also begins to contextualise the case for cap and share in the global emergency perspective. In my opinion we now need this way of framing cap and share which will help us forge alliances at Poznan with all those other global players who have the 350-300 target. The time before Poznan is now short so what are we trying to achieve there? I suggest an alliance with all those who endorse the 350 goals would be a good starter. Just to know who they are and talk to them about cap and share and the GCT would be a great start.(This is sent in by Chris Keen)

President Obama's Big Climate Challenge

As he assumes the presidency, Barack Obama must make climate-change legislation and investment in green energy top priorities. And he must be ready to take bold and politically unpopular action to address global warming.

By Bill McKibben

And so our eight-year interlude from reality draws to a close, and the job of cleaning up begins. The trouble is, we're not just cleaning up after a failed presidency. We're cleaning up after a two-century binge.

Barack Obama won an historic victory yesterday, and with it the right to take office under the most difficult circumstances since Franklin D. Roosevelt. Maybe more difficult, because while both FDR and Obama had financial meltdowns to deal with, Obama also faces the meltdown meltdown the rapid disintegration of the planet's climate system that threatens to challenge the very foundations of our civilization.

Do you think that sounds melodramatic? Let me give it to you from the abstract of a scientific paper written earlier this year by one of the people who now work for Mr. Obama, NASA scientist James Hansen. "If humanity wishes to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted, paleo-climate evidence and ongoing climate change suggest that CO2 [in the atmosphere] will need to be reduced from its current 385 ppm [parts per million] to at most 350 ppm." In other words, if we keep increasing carbon any longer, the earth itself will make our efforts moot.

Hansen's calculation is a scientifically grounded way of saying: Everything must change at once. To meet his target, before enough feedback loops kick in to irrevocably warm the planet, Hansen says fossil-fuel combustion, particularly coal, must cease around the planet by about 2030, and that it must happen sooner in the industrialized nations. As the climate observer, and tireless blogger, Joe Romm observed when Hansen's paper was published, it means that "we need to go straight to the government-led WWII-style

effort for the whole planet that is sustained for decades." (Well, back to FDR, what do you know.).

Anyway, here are some of the pieces of what Obama must push for:

Massive government investment in green energy. For this to have any hope of being politically viable, it will need to be seen as the single huge stimulus effort that might lift us out of our financial swamp. (That's almost certainly true, by the way name another emergent technology capable of re-floating the economy for the long run). We have at least some of the technologies we'd need wind, the newly promising desert solar arrays, and the ever-useful insulation (the installation of which would at least create


A stiff cap on carbon, which will help drive the process. Again, to have any chance of passing politically, it will need to come with the feature proposed in recent years by Peter Barnes, and that Obama has semi-endorsed: a "cap and share" approach that would return the revenue raised directly to consumers. That is, Exxon would pay for the permit to pour carbon into the atmosphere, a cost that would rise steadily as the cap was lowered. But instead of the money going into government coffers, every American would get a check each year for their share of the proceeds. They'd be made whole against the rising cost of energy, while the shock that the price signal would send would be preserved. Current versions of cap-and-trade are too weak and too riddled with loopholes getting a clean, tough bill through Congress needs to be a preoccupation of President Obama.

Once the president has done all that tough stuff at home, he'll need to do it all over again, globally. The world is meeting in Copenhagen in December of 2009 to come up with a successor to the Kyoto treaty, the modest first international effort that George W. Bush walked away from weeks after taking office. If Hansen and others are even close to right, this will represent the last legitimate shot the world has at putting itself on a new carbon regime in time to make any difference.

It will be incredibly difficult, mostly because we begin from such unequal places. China has lots of coal and it would like to burn it, because it's the cheapest way to pull rural Chinese out of dire poverty (something the country's leaders would quite like to do because otherwise they won't be the country's leaders much longer). If we want them to use, say, windmills instead, we're going to need to ³share some wealth,² north to south, to make it happen. The Chinese opened the bidding last week, with a suggestion that one percent of the U.S. annual GDP would be a good amount to send their way. That's going to be quite a political ask it means that Americans would be working roughly one hour every two weeks just to help the global South build up their clean alternatives. What we're talking about is a carbon version of the Marshall Plan, and it would mean Obama needs to be not just FDR but Truman and Ike as well.

What it all boils down to is: The bills are coming due. And not just, or even mainly, the bills from a failed Bush presidency. The bills are from 200 years of burning fossil fuel. Twenty years ago when we started worrying about global warming, we thought we'd have a generation to pay those bills off. But we were wrong < the planet was more finely balanced than we'd realized. The melting Arctic is the call from the repo man.

Any hope of succeeding will require Obama to grasp, deep in his guts, the fact that climate, energy, food, and the economy are now hopelessly intertwined, and that trying to solve any one of these problems without taking on the others simply makes all of them worse. More, he needs to understand, again viscerally, the single stark fact of our time: No matter how many votes, no matter how much lobbying, no matter how much pressure you apply, you can't amend the laws of physics and chemistry. They aren't like the laws that politicians are used to dealing with. They will be obeyed, like it or not. 350 is now the most important number on the planet, the red line that defines reality reality.

It doesn't define political reality, however. The political reality goes like this: George W. Bush was so terrible on this issue that the bar has been set incredibly low < Obama will get all the political points he needs with fairly minimal effort. Doing what actually needs to be done will be politically unpopular isn't even the word. It might well wreck his political future, because it would involve - directly or indirectly - raising the cost of continuing to live as we do right now.

My guess, from the outside, is that all Obama's instincts are centrist. Certainly in energy policy he's offered nothing all that bold or interesting, though his sophistication and engagement have grown during the campaign, which is a good sign. If Obama sits down to understand the scale of the problem, he might decide to take the gambles the situation requires. A better sign is simply that, by every testimony, he's one of the smartest men ever to assume high political office in this country. Not just smarter than Bush. Really smart. Smart enough, if he sits down to really understand the scale of the problem he faces, that he might decide to take the gambles that the situation requires. He said, not long ago, "under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket" - which is a sign of someone who is aware there may be a reality to come to grips with.

First signs to watch for: Does he go to Poland next month for the United Nations Climate Change Conference, and in so doing electrify the international talks over carbon? Are people like green-jobs advocate Van Jones on the short list of those he's listening to on energy policy? Can hesee clear to making this - after dealing with the short-term financial emergency < his first legislative priority, even before health care?

Obama, and the rest of us, have a lot more to fear than fear itself. We've got carbon, and right now that's the most frightening stuff on earth. (2)


By Peter Barnes

A few days before the election, Barack Obama told Time magazine's Joe Klein: "Finding the new driver of our economy is going to be critical. There's no better driver that pervades all aspects of our economy than a new energy economy ... That's going to be my No. 1 priority when I get into office."

That's exactly the right choice for numerous economic, geopolitical and ecological reasons. By spawning "a new energy economy," Obama can create millions of new jobs, decrease our dependence on foreign oil and avert catastrophic climate change. But the politics of launching that new energy economy - even with enlarged majorities in Congress - remains challenging.

In facing this challenge, Obama will be constrained both by a gargantuan budget deficit and his campaign vow not to raise taxes on anyone earning under $250,000 a year. And because of the recession, he can't suck buying power out of the economy. On the contrary, he needs to stimulate spending by consumers. He also faces a tight international timetable: in December 2009, the nations of the world will assemble in Copenhagen to negotiate a successor to the Kyoto Protocol. If Obama is to have any credibility in those negotiations, he must pass significant legislation before then. How, then, can he fulfill his No. 1 priority?

There are many opinions about what should be part of a comprehensive energy policy, but the centerpiece nearly everyone agrees on - the great lever that will tip the whole economy toward clean energy - is a steadily descending cap on carbon emissions. If done correctly, such a cap will raise the price of polluting, spur innovation and conservation, and shift billions of dollars of private investment into new technologies for the next 40 years. But designing the cap correctly is critical; a half-baked, loophole-ridden and overly complex system will do more harm than good. The devil is in the details - and, of course, the politics.

The most critical details involve where to place the cap and what to do with the permits the cap will create. The simplest and most effective place to put the cap is upstream - that is, on the small number of companies that bring carbon into the economy. An upstream cap could be administered without monitoring smokestacks, without a large bureaucracy, and without favoring some companies over others. It would work for the obvious reason that, if carbon doesn't come into the economy, it can't go out.

The declining number of permits that would be issued under the cap would then be auctioned rather than given away free - all polluters would pay, there'd be no politically chosen winners, and no windfall profits. Fortunately, Obama pledged during the campaign to do just this. But that leads to another crucial detail: what to do with the auction revenue, which over time will total trillions of dollars?

There are two possibilities: spend the money on a variety of energy-related programs, or give the money back to the people. While there's broad agreement that some public spending is necessary to solve the climate crisis, it's by no means clear that permit revenues should be used for that purpose. The reason is that permit revenues, though initially paid by energy companies, are ultimately paid by consumers in the form of higher energy prices. They are, in effect, a sales tax on carbon - a tax that will fall on millions of Americans earning under $250,000 a year, and that will rise as the cap tightens.

Obama's best choice is to fund energy-related programs from other sources (including long-term debt) and return all the carbon revenue to the people. This can be done through yearly tax credits, or better yet, through monthly cash dividends wired like Social Security payments to people's bank accounts or debit cards. The advantage of cash dividends is that they'd tangibly and frequently remind people that higher carbon prices are coming back to them - and help them pay mortgages and other bills that fall due on a monthly basis. The whole system might then be called 'cap and dividend' or 'cap and cash back.'

Like Social Security benefits, carbon dividends would be taxed as ordinary income; the government would then recoup about 25% of the revenue and could use that money as it sees fit. More importantly, ordinary families would get the lion's share of the auction revenue, and get it in a way that rewards conservation. Since everyone would get the same amount back, those who use the most carbon would lose and those who use the least would gain - their dividends would exceed what they pay in higher prices. Low-income families in particular would gain because they use less energy than others and would pay little or no taxes on their dividends. In addition, the overall economy would benefit from this periodic replenishment of consumer demand.

The most persuasive argument for cap and dividend, though, isn't economic but political. As the presidential campaign revealed, energy prices are an explosive issue. A carbon cap will raise fuel prices not just once, but for decades - indeed, that is its purpose. The potential for backlash - for frenzied cries of "Drill, baby, drill!" - is thus ever-present. If America is to reduce carbon emissions to the level scientists say is necessary, it's crucial that families' pocketbooks be protected for the duration. Cap and dividend does this by permanently linking dividends to carbon prices. As carbon prices rise, so - automatically - do dividends. If voters scream about rising fuel prices - as they surely will - politicians can truthfully say, "How you fare is up to you. If you guzzle, you lose; if you conserve, you gain."

Moreover, for a carbon cap to endure, it must have broad bipartisan support. A revenue-neutral cap is far more likely to garner Republican support than is one that's linked to a large increase in government spending. Consider, for example, Senator Bob Corker of Tennessee, who supports a declining cap on carbon but not a spending bill that earmarks trillions of dollars over 40 years. Though it's not glaringly evident, there are more Republicans like him. This doesn't mean Obama shouldn't spend public money on energy; it means he should separate such spending from the cap. The ultimate reason for paying equal dividends from carbon revenue may be this: it fits Obama's vision of how government ought to work. In this vision, the government's job is to serve ordinary people, not special interests. It is to be fair and transparent. And it is to unite rather than divide us, to move us from a "you're on your own" society to one in which "we're all in this together."

Cap and dividend fits this vision perfectly. It curbs carbon emissions in a way that's simple to understand and administer, favors no special interests, and provides a degree of security to all. It treats all Americans as co-owners of the air and allocates trillions of dollars in a completely transparent way. It would be a signature Obama policy, one that sets the tone for his whole administration and remains as memorably linked to him as Social Security is to Roosevelt. How might Obama introduce cap and dividend to the nation?

"This plan is simple, fair and market-based. It's not a tax, and it requires no large bureaucracy. It says to all businesses that rely on carbon emissions: start reinventing yourselves now. And it says to all families: we will solve the climate crisis together.

"I appeal to the entrepreneurs and workers of America: we can do this - yes we can. I appeal to the families of America: we can do this - yes we can. And I appeal to all nations around the world: let us race to the top to avert planetary catastrophe, not race to the bottom to avoid meaningful action." If, in 2009, President Obama secures a durable domestic carbon cap and a ratifiable treaty in Copenhagen, he'll be well on his way to reviving our economy and healing our planet. We should do all in our power to help. --------------------------------------------

Posted Miriam Kennet November 2008


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