Friday, January 16, 2009

Allocating for Climate Change is a Future Investment

For over thirty years I have worked on various environmental endeavors always in conflict with short run economic thinking. Environmental groups such as the Environmental Defense Fund and National Wildlife Fund must be "mindful" that they are walking in a economic "minefield."

In mid January the U.S. Climate Partnership announced their plan for a cap-and-trade system for a 42 percent cut emissions by 2030. However many economists and executives are skeptical with me included. Exxon CEO, Rex Tillerson called this a “stealth tax” cap-and-trade system endorsing a tax on carbon emissions that are more transparent and predictable. While there is widespread support for a cap-and-trade system, however, such measures create enormous volatility in the price of permits and ways for gaming the system according to financial experts.

This national carbon tax bill would be phased-in and revenue-neutral. Leading economists have recommended for enactment of a carbon tax as the simplest, easiest to administer and most transparent approach to carbon pricing, despite the conventional wisdom that a "cap and trade" regime is key to a political consensus. Indeed, there have been numerous cap and trade bills introduced in the Congress, including the Boxer-Lieberman-Warner bill that was brought to the Senate floor for a vote late last spring.

This raises the question for me, “is environmentalism failing”? The polluter has really never paid in our country for their pollution. So it is hard to profit from this prevention until we as nation wake up and smell the coffee. We the people are all guilty since we as a society have hidden some of these costs. An alarm clock of safe carbon emissions is crying out loud, “Tomorrow is today”. Simple, we can not afford to procrastinate any longer.

We are now at 385 ppm past the maximum 350 ppm. Of vital concern is how America is addressing a national climate change program. Many towns, cities, counties and states are dealing with how we develop a sustainable energy future however what Congress does is fundamental.

Ironically, how in American we have allowed massive financial market failure alter our way life and how our government is responding is case in point. Can we as a nation get practical and real in reducing greenhouse gas emissions? I challenge you to survey the existing science of today that documents how serious our world is in peril.

The key question is that if our government continues to be wasteful or boastful it will be disaster. Change can only happen by looking at the facts of this crisis and not deny that transformative action is required. We have to avert future collapse by forming new alliances, democratic processes and technologies. If this is a race not to the moon but “from a form of doom” we have to reinvent capitalism where market failure is not covered by the taxpayers but factored in as the cost of business.

We have spent trillions on a “war on terror” and now we must prevent even a great terror, future despair. Investment, innovation and entrepreneurship creating new economic prosperity for sustainable and sufficiency. Discovering how to regenerate natural capital is just another opportunity. For example resource productivity can happen once we redefined how we can profit from pollution prevention in our 60 trillion dollar ouput economy. Currently we are suffering from the trillions of dollars of toxic financial paper and derivative type instruments impacting us worldwide.

On the other extreme corporate pressure on policy makers has allowed for lax regulation, standards, and poor enforcement with little oversight. Economic growth would prevail at the expense of environmental pollution. In 2003, the Congressional Research Service estimated that U.S energy subsidies were between thirty-seven billion and sixty-four billion dollars and increased by two to three billion dollars annually by the provisions of the Energy Policy Act of 2003.

Look at lobbying in Washington DC. Thirty years ago there were less than a thousand lobbyists. Today there over 35,000. Political action (PAC) spending has in this time gone from $15 million to over $250 million today. The largest is the US Chamber of Commerce, followed by trade associations and 92 corporations. To get some idea of corporate might just look at ExxonMobil which is larger than 180 nations.

Further debate and examination of by all Americas is critical to address climate change. If we wish to make bold investments in a clean energy economy wise dialogue is a vital investment for future generations.