OECD - US Economic Report

Nothing like curling up with a report from the Organisation for Economic Co-operation and Development (OECD) to ease any insomnia you might suffer from. To be fair the report is actually a great resource for US facts/figures, though I'm not sure about its claim that the US is accountable for only 15% of global emissions. This is far lower than the ~20% figure I've seen in the past (and ~22% for China). You can read the summary here.

A few highlights:

* The climate section of the report is framed in the context of reducing Americans' exposure to risk. It also identifies the corollary benefits of taking action - cleaner air, improved health conditions, enhanced energy/national security due to a reduction in foreign oil imports

* The report makes a very strong case for putting a price on carbon - least cost option, driver of RD&D, etc., and argues that the EPA is a less cost effective tool and unlikely to deliver the necessary emissions reductions

* It calls for passage of US climate legislation but: i) opposes the removal of provisions which do not take the indirect land use effect of bio-fuels into account (i.e., food shortages, increased prices, etc.); ii) opposes the inclusion of BTAs (border tax adjustments), also known as BAMs (Border Adjustment Mechanisms) in US parlance; and iii) suggests limiting offsets so revenues raised can be used as a deficit reduction tool.

I'm not sure what impact the report will have on the US debate, if any. But it's interesting to note that an organization set up to counterbalance OPEC is calling on the US to reduce its emissions and put a greater emphasis on investment in low carbon technology.

Carbon Tax vs. Cap and Trade

I came across this recent op-ed in the Houston Chronicle whose authors argue for a carbon tax which increases over time. I'm a strong supporter of a price on carbon but I'm not convinced about the efficacy of a tax for a few reasons. First, I think its a hard sell these days. Cap and trade has a difficult enough time getting traction in a down economy, I can't imagine a hard tax getting through. Secondly, I don't think it'll be as straight forward as proponents suggest. Anyone who has ever done their own taxes knows how complex they can be.

Most importantly, I don't think a carbon tax offers the same environmental certainty you get from a cap and trade program, in which the cap tightens over time. Not only does a "cap" ensure the emissions reductions necessary to avoid dangerous climate change, the "trade" allows for greater flexibility in the market place enabling business (that's right, business) to make the appropriate choice in meeting its targets. But it's also important to remember that cap and trade is one element of a wider suite of options needed to deal with the challenge.

Cap and Trade - A Bipartisan Success Story

I came across this excellent article recently on the history of cap and trade in the US. It's over a year old but that only effects a few aspects of the piece. It provides a great overview of how cap and trade became one of the most successful environmental programs in history under the George H.W. Bush Administration. Stunningly, it was a bipartisan effort. I know, consider your mind blown. So for those who doubt the efficacy of such a program this is a gentle reminder that it can be done, it can be successful, and it won't ruin the economy.