Hansen Warns Against ‘Cap-and-Tax’ (Steyer and California, are you listening?)

“What, in short, if there is government failure in the quest to address what is seen as market failure? James Hansen should consider supporting his scheme inside the ivory tower, not outside in the real world policy. The two are not the same.”

As California labors under its cap-and-trade law for stationary sources, and as Tom Steyer pushes the state to include the transportation market for allowances as well, words of warning come from climate scientist/activist James Hansen. Such updates his biting analysis against California’s initial program back in December 2012.

Hansen’s latest concerns Australia, which smartly ditched their carbon tax. In a July 29th post, Facing Facebook: Australia’s Cap-and-Tax, Hansen states:

The two main points that I made in discussions in Australia re their cap-and-trade were (1) it would be ineffectual in reducing emissions, and (2) it would be recognized as a tax, and thus it would not survive and grow at the rate needed to phase out emissions.

Did you know that cap-and-trade is by and for big banks? In the U.S. there is a revolving door between Wall Street and Washington. The skilled trading units at JP Morgan Chase and Goldman-Sachs can make enormous amounts from cap-and-trade, every dime coming out of the public’s pockets.

The fluctuating prices are bad for our purpose. If the public, businesses, and entrepreneurs know that carbon prices will continue to rise, as in fee-and-dividend, they will begin to make the choices that move us rapidly to a clean energy future.

The half-baked 3000+ pages of the Waxman/Markey cap-and-trade scheme in the U.S. (and scheme is the right word) were not written by our Senators or Representatives slaving into the night. They were written by lobbyists for special interests and stapled into the bill by our elected representatives, who are beholden to the special interests.

Our representatives, in both parties, seem to feel entitled to the Washington life style, once elected. Did you know that Dick Gephardt, after retiring as House Democratic Leader, received $120,000 per quarter from a single source (Peabody Coal)? I doubt that Peabody wastes its money — they probably get their money’s worth in lobbying. I don’t mean to pick on the Democrats; one party is not noticeably better than the other in this regard.

We seem to have a situation where members of both parties like their status and don’t really want to stanch the money flow. And the electoral system has been pretty well rigged such that it is very hard for a third party to rise.

Cap-and-Dividend: Real-World Naiveté

In fairness, what Hansen wants in place of cap-and-trade is a version of a revenue-neutral carbon tax, which introduces its own set of problems (see the posts of Robert Murphy).

But what is rather amazing is the political naiveté of Hansen in his quest for “a simple honest approach, fee-and-dividend, designed for the public and most of all designed to effectively address the carbon/climate matter” and without “one dime to the government.”

Once in place, this system would be armor-plated; most people would get more money in the dividend than they pay in increased costs; they would want the carbon price to rise.

Yes, rich people would pay more, but nothing they can’t afford, and it addresses growing wealth disparity.

Not one dime for government? Armor plated?

Who pays for administration? What happens if not dimes but millions of dollars go to the general fund? What happens if the calculations behind the tax (yes, it is a tax) do not “effectively address the carbon/climate matter”? And what is “armor plated in the political world of broken promises and activist jurists?

What, in short, if there is government failure in the quest to address what is seen as market failure?

Conclusion

James Hansen should consider supporting his scheme inside the ivory tower, not outside in the real world policy. The two are not the same.

Short of that, Hansen’s on-the-mark criticisms about cap-and-trade (and renewable energy subsidies) should be heeded. As the Washington Post editorialized some five years ago, “Cap-and-trade regimes,” the editorial board wrote, “are complex and vulnerable to lobbying and special pleading, and they do not guarantee success.”

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Appendix: Related Hansen Posts at MasterResource

Hansen to Obama/EPA: State Renewable Credits, Cap-and-Trade Are Special-Interest, Ineffectual GHG Mitigation Policies (June 2, 2014)

James Hansen: Still More Good Energy Realism (just ignore his climate alarmism, world fee-and-dividend fix) (March 18, 2014)

Game, Set, Match Fossil Fuels? James Hansen Sleepless in Ningbo” (March 13, 2014)

Energy Realism Amid Climate Alarmism: James Hansen Rides Again (February 25, 2014)

Is the Environmental Movement Net CO2 Positive? (James Hansen wants to know) (February 24, 2014)

California Cap-and-Trade Cronyism: James Hansen Weighs In (December 21, 2012)