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Putting a price on carbon

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Whether and how to put a price on carbon has been something of a hot topic this week, primarily due to the proposal of a landmark climate change bill to the US Senate that would “cap and trade” emissions of the greenhouse gas.

Perhaps somewhat unsurprisingly, the climate change bill offered by Senators Boxer, Lieberman, and Warner died today in the Senate after Democrat leaders fell a dozen votes short of the 60 needed to defeat Republican obstruction.

Republicans opposed the global warming bill over fears of the economic costs of pricing the greenhouse gas, though Democrats argued there would be no cost to consumers, who would be aided with tax relief. The debate over “cap and trade” legislation is now expected to be postponed until next year, when there is a new president in the White House.

Both presidential nominees back mandatory greenhouse gas reductions and indicated they supported moving forward on discussing the bill offered to the Senate this week, but whether “cap and trade” is the the best way to price carbon remains contentious.

The issue is taken up this week on Nature Reports Climate Change by Roger Pielke Jr who reviews Earth: The Sequel by Fred Krupp and Miriam Horn of the Environmental Defense Fund. The basic tenet of the book is that a US carbon market with tradable credits would provide the profit incentive needed to energize potential innovators of low or no-carbon technology – thus meeting the world’s escalating demand for green energy. But Pielke Jr argues:

By placing their attention on the need for innovative energy technologies, Krupp and Horn have focused on the one area where advocates for action on greenhouse gas reduction are in strong agreement. They have avoided engaging in the real debate over the policies necessary to decarbonize the growing global economy and, crucially, over whether and how to put a price on carbon dioxide.

You can read the full review here.

Meanwhile, over on Dot Earth, Andy Revkin has written about an alternative, though less popular, pricing approach known as “cap and dividend”. The scheme, being strongly endorsed by NASA climatologist James Hansen, is based on the principle of making the polluter pay without placing the burdening of rising costs on the consumer, the most commonly cited down-side of “cap and trade” (discussed by Pielke Jr in the above review).

Revkin explores two proposals for “cap and dividend”: one by Hansen that involves taxing fuels by their carbon content, and another by investment pioneer Peter Barnes that entails selling a steadily declining number of permits for emitting carbon dioxide. The latter would force polluters to eventually pay the full whack of their carbon consumption, and the revenue would be returned to citizens. You can read the full story here.

Olive Heffernan

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