Dirty details of reducing pollution

Two leading proposals, a carbon tax and a 'cap-and-trade' system, both raise hard questions over the particulars.

ALBUQUERQUE -- As fuel costs rise and our global environment continues to heat up, we're increasingly falling over ourselves to go green and save not only the planet, but ourselves as well. The main culprit responsible for global warming is carbon dioxide, CO2 for short, which analysts say humans have increased in the atmosphere by 35 percent since modern industrialization began.

For this reason, bringing down the amount of CO2 we release into the atmosphere has become a collective imperative. The charge in the United States so far has been led by the states in the absence of action at the federal level, but our congressional delegation is beginning to get with the program.

Sen. Jeff Bingaman, a Silver City Democrat, acknowledged as much in a speech on climate change yesterday to NDN, a progressive advocacy think tank formerly known as the New Democrat Network. He said there was disappointment among many about the failure last month of the Lieberman-Warner Climate Security Act, but that the debate shows an important transition.

"Congress has moved beyond a debate on the science of global climate change," he said. "We are now starting a much more difficult debate – one on how best to construct a mandatory regulatory regime to mitigate global climate change."

Tax or trade?

Bingaman favors a market-based "cap-and-trade" system to reduce greenhouse gas emissions. In the speech he gave, he listed other possible approaches, one of which is a carbon tax. But he dismissed that idea, saying there's uncertainty about how high or low the tax would need to be in order to be effective, and he said, in any event, it was politically unfeasible to impose a tax.

But in fact there's a debate about which is the better approach, with former Vice President Al Gore backing a carbon tax. Those who favor a carbon tax say that a tax is simple and predictable, and can be applied very quickly. And it's predictability would allow long-range planning for both companies and government. The effect in the end would be to raise the costs enough that consumers would use less carbon-producing energy, and create the demand for more alternative energy sources. Such a tax would raise a lot of revenue that could be returned to the public through rebates, proponents say, thereby offsetting the hardships that would be bound to happen with rising energy costs.

A cap-and-trade system, theoretically, would have the same end result, but get there through a trading system rather than a tax applied evenly across the board. In a cap-and-trade system, the government sets a cap on emissions and gives companies a certain amount of "allowances." If a company needs to exceed its individual cap, it can buy allowances in a market. On the other hand, clean energy-producing facilities can sell their excess allowances, and in this way be rewarded. The national cap theoretically then would be reached by all these emitting facilities operating under this elaborate cap-and-trade system. And a big distinction from a carbon tax, boosters say, is that a cap-and-trade system mandates explicit greenhouse gas reductions.

Jonathan Black, a staffer for the Senate Energy Committee, said cap-and-trade legislation should include safeguards against excessive market prices for allowances that might cause instability in the economy:

...we've tried to marry the efficiency of a carbon tax with the certainty of the cap-and-trade method by including a "safety valve" or price cap on the value of emissions. Once the cap and trade program is implemented, companies will either reduce their emissions or go to the government to buy permits if the market is too expensive. This gives the efficiency of the tax and doesn't cause overwhelming harm to the economy. Each year, the cap gets tighter and the cost of purchasing from the government goes higher. Eventually, the idea is that we find the right spot over time that will reduce greenhouse gas emissions while protecting the economy.

While the carbon tax proposal has compelling arguments and a substantial number of promoters, the cap-and-trade method seems to be winning out among policymakers. In fact, New Mexicans may be surprised to hear it isn't already a given among policy makers elsewhere. Created by New Mexico along with other western states and now including nine partners working hard to develop a regional cap-and-trade system, the Western Climate Initiative has been championed by Gov. Bill Richardson and others.

Bingaman said in his speech that given the lack of action at the federal level he couldn't "blame" the states for taking action on their own, but that eventually a national system needs to be implemented to take the place of any other cap-and-trade efforts at the regional level.

Will saving the planet hurt the poor?

While the debate among economists, advocates, environmentalists and politicians continues, one problem with both proposals doesn't seem to get much attention: Raising the cost of energy, which will happen with either approach, will have a disproportionate impact on poor communities. We're already seeing such harm now with rising fuel prices.

And a cap-and-trade program may have undesirable external impacts exceeding those of a carbon tax. For instance, it's conceivable that communities in which polluting industries are disproportionately located, which are generally composed of low-income and/or people of color, would continue being the repository of pollution while the rest of society reaps the environmental benefits of a global cap and trade system.

The Independent spoke with Sandra Ely, Energy and Environment Policy Coordinator at the New Mexico Environment Department, about these concerns. Ely said its very clear that cost increases occurring during a systemic transition away from fossil fuels will impact poor communities disproportionately, but so will the effects of global warming in the long run.

"We know global warming is coming," she said. "It already is. And there will be big environmental justice issues."

She said it's true that polluting industries can keep on polluting under a cap-and-trade program. At the same time, she explained, there are other pollutants beyond greenhouse gasses being emitted into the air from a lot of these facilities. With a cap-and-trade system, she said, it's possible we'll see co-benefits of reductions in those other pollutants.

Ely explained that even in plants that purchase the right to continue their output of CO2 and other greenhouse gasses, other chemicals and particulate matter aren’t part of the cap and trade system and will still be covered by any air quality regulations in place. In New Mexico we have local pollutants that we worry about, Ely said, such as mercury in the Four Corners area. On the other hand, CO2 isn't a local pollutant, she continued, it’s a global problem.

Nonetheless, there are concerns about impacts on low-income communities predominantly made up of people of color. Ely said that ultimately the solution is to take a systemic approach. Programs to bring down CO2 levels aren't enough. Ultimately, she added, we need to also invest in renewable energy and shift our economy away from polluting fossil fuels.

And hand-in-hand with both regulation and renewables, she said, it's essential that we move toward energy efficiency. This may be where the cost effects on low-income communities can be mitigated the most in the short run.

"We need public transit that works and smart growth. We've really gotten caught with our pants down with the way fuel prices are going through the roof. We've been spending tons of money on our highway infrastructure when we need to be using less fuel. If we use it less, we can spend more on it," Ely said.

She also pointed out that moving in such a direction is challenging for New Mexico, because of the size and rural nature of the state. In the short run, though, revenue from a cap-and-trade program, or a carbon tax, could offset the impact on low-income communities. For instance, it can be invested in public transit, for weatherization of homes, or for energy rebates to low-income families.

Black echoed these thoughts: "We need to reinvest the revenue generated by the cap and trade program in two things: in new technology to reduce greenhouse gas emissions and for programs to mitigate negative effects on low and middle income consumers, such as rebates. In order to be successful, we need to recognize that we have a balancing act to help lower income communities adjust. Revenue should be used for those purposes."

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