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Comment 42 for Design Comments for the GHG Scoping Plan (sp-design-ws) - 1st Workshop.


First Name: Laurie
Last Name: Williams
Email Address: williams.zabel@gmail.com
Affiliation: www.carbonfees.org

Subject: Carbon Fees not cap-and-trade; also Request for Extension
Comment:
My husband, Allan Zabel and I have written 2 pieces regarding this
issue.  Please consider our explanations of why carbon fees are
the more efficient and effective market mechanism in the 2 pieces
below (1)our website at www.carbonfees.org, and (2) our July 11th
editorial, imported below.  In summary, we believe that
cap-and-trade is a flawed strategy for addressing climate change. 
The Acid Rain experience does not prove that cap-and-trade is
applicable to climate change.  The two situations are completely
distinguishable.  With climate change we face the need for massive
new infrastructure and innovation (as opposed to Acid Rain, where
an easy fuel switch was available); we also have a lack the
comprehensive accurate monitoring of greenhouse gases that was
available for the contaminants of concern in Acid Rain.  Finally
Acid Rain did not allow outside offsets.  All of this makes the
applicability of the Acid Rain experience to climate change a
myth.  

Also attached as a PDF please find a visual explanation of how
carbon fees work, and a request for additional public education
and an extension of the comment period on this issue.  

1.  Please see our May 4th, 2008 Open Letter to Congress at
www.carbonfees.org.  While this is not aimed at California and the
AB 32 process, the same arguments apply.  This website also
provides additional information on our credentials as public
sector environmental enforcement attorneys and references for the
arguments that we make.

2.  Please also consider the arguments in the following piece:
Cap & Trade - Misplaced Confidence (published in California Energy
Circuit on July 11, 2008) which addresses AB 32 and the upcoming
decision by the California Air Resources Board.  

By Laurie Williams & Allan Zabel 

As poles and glaciers melt, permafrost thaws and oceans acidify
from our ever-increasing greenhouse gas emissions, the question of
whether a carbon cap-and-trade program or carbon fees would provide
swifter, more equitable and certain emissions reductions is
increasingly urgent. Based on our experience as environmental
enforcers (including Allan’s experience with cap-and-trade
programs), we believe that the California Air Resource Board’s
confidence in cap-and-trade is misplaced and that carbon fees
provide the more effective and efficient path to the goals of AB
32, California’s landmark climate protection law. 

As long expected, California’s recently released AB 32 Draft
Scoping Plan relies heavily on “cap-and-trade” to reduce the
state’s significant contributions to global greenhouse gas
emissions. The draft minimizes the value of a system of “carbon
fees.” The Air Resources Board justifies its preference by calling
cap-and-trade a more certain route to meeting AB 32’s requirement
to reduce California’s emissions 30 percent below “business as
usual” by 2020. 

However, cap-and-trade has serious downsides. 

Unless all cap-and-trade elements, including offsets, are limited
to systems with accurate emissions measurement, the cap on total
emissions will likely be inflated and claimed reductions
exaggerated. While the emissions of large electrical generating
facilities with continuous emission monitoring systems can be
accurately tracked, many other sources of emissions and offsets
cannot be as closely monitored. 

If these less-accurately-measured sources participate, the
integrity of the cap-and-trade program will be undermined, as will
the certainty in reductions that CARB seeks. In addition, even if
the market is limited to facilities with continuous emission
monitors, this will create artificial scarcity that is likely to
result in disruptions and unfairness, as initial and future
allocations of the right to emit are distributed and traded. 

A preview of such disruptions was provided by the manipulations
that created the California energy crisis early in this decade.
This potential was also demonstrated in a recent simulation at the
University of California at Berkeley’s Haas School of Business, in
which students gamed a carbon-trading market for individual gain,
leading to scarcity and high prices. This potential for market
manipulation could contribute to undesirable price volatility. The
resulting lack of price predictability in a cap-and-trade system
(specifically, the lack of certainty that the price of energy from
fossil fuels will exceed the price of green energy) reduces the
incentive for the substantial investments in the new
infrastructure and innovation necessary to provide alternative
energy at affordable prices. 

The history of cap-and-trade demonstrates the limitations of the
state’s proposal. 

The so-called “cap-and-trade” of the federal acid rain program in
no way resembles the complex challenge we face in reducing
greenhouse gases. Under the program, all facilities had monitors,
so the system had the integrity of accurate measurement. There was
relatively little trading, particularly outside of any given
corporation and its subsidiaries. Trading in the acid rain program
primarily meant that some corporations complied with the gradual
reductions in total sulfur emissions by averaging among several of
their facilities. In addition, there was no significant need for
investments in new technologies or innovation in order to reduce
sulfur. All that was needed--and what happened--was a “fuel
switch” from high-sulfur coal, to the low-sulfur coal found in
Wyoming’s Powder River Basin. 

In contrast, another cap-and-trade program failed spectacularly in
Los Angeles. Known as RECLAIM (the Regional Clean Air Incentives
Market), it was aimed at reducing ground level ozone. In RECLAIM,
despite the presence of monitors, an inflated cap delayed most
emission reductions for over seven years. At the end of that time,
the market collapsed and the necessary control technology was
required by regulation. 

Similarly, attempts to design an effective carbon cap-and-trade
system have failed under the Kyoto Protocol--a 1997 international
accord to cut greenhouse gas emissions which the U.S. never
ratified. Utilities and other sources have underreported their
emissions, purchased flawed offsets, driven up prices, reaped
billions in undeserved profits and generally failed to produce
promised emission reductions. 

Despite cap-and-trade’s enormous disadvantages, it is ardently
supported by two disparate groups. This first consists of those
who stand to profit, whether from trading, certifying offsets
and/or delaying the phase-out of fossil fuels. The second includes
those who truly want rapid reductions, but believe that the greater
efficiency and transparency of carbon fees is politically
unattainable and/or fail to understand that the vulnerabilities of
cap-and-trade to manipulation and fraud will make the “cap”
illusory. 

The advantages of carbon fees, in contrast, include simplicity and
transparency. For instance, the U.S. Congressional Budget Office
stated in its February 2008 report: “A tax on emissions would be
the most efficient incentive-based option for reducing emissions
and could be relatively easy to implement.” These advantages
include that it is much easier to effectively trace and impose a
fee on all fossil fuels at the point of importation or extraction
than it is to accurately measure all greenhouse gas emissions. 

By phasing in gradually increasing carbon fees that would go up
each year until the price of energy made from fossil fuels exceeds
the price of clean technologies, carbon fees would create the
certainty needed to spur investment in post-fossil fuel energy
sources. A per-capita rebate of these carbon fees to all
California taxpayers would cushion the impact of higher energy
prices, particularly for low and middle income taxpayers, during
the transition to the post-fossil fuel economy. The relative
certainty provided by escalating carbon fees and the investments
they would foster are likely to catapult California and the nation
into a leadership position in green technology and set a roadmap
for the rest of the world on how to move beyond the ineffective
policy of cap-and-trade. 

As CBO acknowledges, the main barrier to the carbon fees approach
is a lack of political acceptability. It in turn is based on a
lack of public education about why carbon fees (and a ban on new
coal-fired power plants without sequestration) are our best hope
to save our way of life and leave a habitable biosphere to the
next generation. 

By selecting carbon fees to meet AB 32’s goal, California could
lead the nation in effectively and efficiently addressing climate
change. While CARB’s draft scoping plan attempts to support its
preference for cap-and-trade by indicating that it would fit well
with expected cap-and-trade programs by the Western Climate
Initiative and the federal government, this justification is
unworthy of California’s proud tradition of environmental
leadership. 

Only if we discuss the urgency of the problem and the most
effective solution with friends, families, neighbors and
colleagues, and ask them to join us in calling and writing our
representatives, can we jump-start the huge outpouring of public
participation necessary to make carbon fees the acceptable as well
as the wise choice. 

--Laurie Williams and Allan Zabel of www.carbonfees.org wrote this
editorial as citizens and parents. In May, the two lawyers issued
an open letter to Congress urging lawmakers to put their efforts
into setting carbon fees in place of a carbon cap-and-trade
program. For details about their professional experience and
carbon fees approach, see their website. 

3.  Attached please find a visual providing a chart to
demonstrates how the certainty that green energy will become less
expensive than fossil fuel energy would affect investment and
affordability.  Cap-and-trade cannot deliver this same price
certainty and hence will not be as effective in moving us to a
post-fossil fuel economy.

4.  REQUEST FOR EXTENSION:
We believe that an additional period of public education should
occur on the issue of carbon fees vs. cap-and-trade, and that
there should be an additional comment period on this issue prior
to a final decision.  

Attachment: www.arb.ca.gov/lists/sp-design-ws/45-why_carbon_fees_work_7-28-08.pdf

Original File Name: Why Carbon Fees Work 7-28-08.pdf

Date and Time Comment Was Submitted: 2008-07-30 22:56:07



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