\u201cClimate change poses a serious threat to the economic well-being, public health, natural resources, and the environment of Hawai`i.\u201d<\/p>\n
\tThat statement, included in the preamble to Act 234, passed by the Legislature last year and signed by the governor on June 30, serves as a stark backdrop to the coping strategies that the law anticipates. Weaning Hawai`i off fossil fuels and moving it in the direction of more sustainable energy sources will doubtless play an important role in reducing the state\u2019s emissions of carbon dioxide, the gas that is largely responsible for climate change and global warming. But just as important, under Act 234, will be the development of regulations and incentives that curb such emissions. Without regulatory measures, the state has little chance of meeting the goal of reducing by 2020 statewide greenhouse gas emissions to a level at or below that set in 1990.<\/p>\n
\tIn less than two years, by December 1, 2009, the Greenhouse Gas Emissions Reduction Task Force is to deliver to the Legislature a \u201cwork plan and regulatory scheme\u201d to achieve these reductions. Among other things, the work plan is supposed to identify ways to reduce emissions directly as well as techniques of achieving the goal through market mechanisms and \u201cpotential monetary and non-monetary incentives.\u201d<\/p>\n
\tBy December 31, 2011, the Department of Health is to have rules in place, to take effect January 1, 2012, that will put the state on course to achieve the targeted reductions. The rules are to ensure that the emissions reductions achieved \u201care real, permanent, quantifiable, verifiable, and enforceable.\u201d<\/p>\n
\tSo what could a regulatory scheme to reduce emissions look like?<\/p>\n
Capping versus Taxing<\/i><\/b>
\nElsewhere, governments grappling with this question have come up with two competing approaches: one involves development of a market in permitted emissions of greenhouse gases, the other involves development of financial disincentives (such as taxes) to curb such emissions.<\/p>\n
\tOther approaches do exist, though. There are standards-driven approaches, such as the fleet efficiency standards for automobile manufacturers, or energy-efficiency standards for appliances. Carbon sequestration schemes effectively offset carbon dioxide emissions through reforestation efforts or the actual removal of offending gases from smokestacks through sophisticated scrubber technology. Drawbacks exist to these approaches, however. Requiring new appliances or vehicles to be energy efficient depends on market turnover to achieve the desired goals \u2013 and that can be a long time coming. Corporate-average fuel economy (CAF\u00c9) standards are generally regarded as having been ineffective in putting fuel-efficient vehicles on the roads. Other standards require widespread adoption (at the federal level, generally) if they are to have any impact at all. In the case of reforestation, the actual amounts of carbon held by the new plantings can vary tremendously from one area to another, or from one year to another in the same area, making the actual value of the offset difficult to calculate. With respect to greenhouse gas scrubbers, no practical, economical technology yet exists that would give legs to this approach.<\/p>\n
\tWithout foreclosing the prospect of standards-based regulations, carbon offsets, or carbon sequestration, the most important policy decision facing the task force will be whether to go with a cap-and-trade system or a carbon tax.<\/p>\n
The Carbon Market<\/i><\/b>
\nA cap-and-trade system is generally the preference of economists. It is modeled on the stock market, and plugs easily into the system of trading that has developed in that sector. It works something like this:<\/p>\n
\tBusinesses or other major emitters are assigned a quota, or allowance, for carbon dioxide emissions. This is based usually on past history of emissions, although if the goal is to reduce emissions by a targeted amount, the quota may be set at a certain percentage of historic emission levels. This is the cap.<\/p>\n
\tIf the companies anticipate exceeding their emission allowances, they must purchase an allowance equal to the excess from another company that has not emitted their full allowance. This is the trade. Emitters thus have a real incentive to lower their emissions: not only do they save on fuel and achieve other economies resulting from more efficient operation, they can also use their excess emission allowances as a source of revenue. Affected businesses recover costs of the emissions they need to purchase by passing them onto the consumers of their products or services.<\/p>\n
\tCritics of this system note that it has inherent inequities. It places new enterprises at a disadvantage, since they must purchase an allowance before they can start up operation. Should demand for allowances be high, companies with allowances can cut production, sell emission credits, and still reap windfall profits \u2013 which, in the end, consumers will be forced to pay.<\/p>\n
\tIn Europe, where the cap-and-trade system has been in effect since 2005, the emissions market has been blamed for a 7 percent rise in electricity bills. Overall carbon dioxide emissions across the European Union rose between 1 and 1.5 percent over the same period, and, in England alone, the windfall profits to electric utility companies was estimated at 1.7 billion pounds. According to the group Energywatch, based in England, \u201cconsumers increasingly accept the need for reductions in carbon. However, they are paying the price and not seeing the benefits. The big generators are banking huge amounts of money and consumers aren\u2019t benefiting.\u201d<\/p>\n
\tPoint Carbon, a company that closely follows the trading in carbon emission allocations, conducted a study of the European market last year, in which it determined that when the system was established, the allotments granted to industries actually exceeded emissions by some 170 million tons. As reported in The Guardian,<\/i> \u201cIn the early days, nobody realized quite how badly the European commission had miscalculated, and so the price of the EUAs [European Union allocations] was quite high\u2026 But individual companies, particularly energy companies, rapidly saw they had millions of tonnes of EUAs that they didn\u2019t need, and so they sold their surplus, making huge profits.\u201d<\/p>\n
\tThe Guardian<\/i> cited another report, this one by Open Europe, which found that oil companies in the United Kingdom \u201cwere also poised to make a lot of free money: ₤10.2 million for Esso; ₤17.9 million for BP; and ₤20.7 million for Shell. And behind this profiteering, the environmental reality was that these major producers of carbon emissions were under no pressure from the scheme to cut emissions.\u201d<\/p>\n
\t\u201cAt the other end of this EU market,\u201d The Guardian<\/i> report said, \u201csmaller organizations like UK hospitals and 18 universities, who had been given far fewer EUAs, were forced to go out and buy them \u2013 while the price was still high. So, for example, the University of Manchester spent ₤92,500 on UEAs. Now that the truth about the glut has been revealed, the university would be doing well if it managed to get ₤1,000 for the lot of them.\u201d<\/p>\n
\tDefenders of the cap-and-trade approach say the problems are just growing pains associated with the start-up of any new system. In an interview with Environment Hawai`i,<\/i> Paul Brewbaker, chief economist with the Bank of Hawai`i, says, \u201cthe way my mind works as an economist, I don\u2019t see a realistic way of getting there\u201d \u2013 to the goal of lowered greenhouse gas emissions \u2013 \u201cby just getting people informed and relying on their good will.\u201d<\/p>\n
\t\u201cWe need to have a market for this stuff,\u201d he continued. \u201cWhen we make that market, and have a limit on how much we\u2019re going to load, it\u2019ll work\u2026. If you have the right price for carbon loading, it\u2019s an even greater incentive for people who are coming up with alternatives \u2013 modes of transport, vehicle designs, even shopping mall locations. A whole range of choices will be made more efficiently.\u201d<\/p>\n
\tSeveral members of the state task force appear to share his views. Last October, at the panel\u2019s first meeting, Mark Fox of the Nature Conservancy of Hawai`i, one of two appointed members representing the environmental community, noted that his organization supported market-based approaches, such as carbon credits, cap-and-trade systems, and auctions of emission allowances. Frank Clouse of Tesoro, appointed as one of four members from affected business sectors, suggested looking into what other states are doing, especially with regard to carbon trading.<\/p>\n
Tax and Spend<\/i><\/b>
\nCitizens of Boulder, Colorado, have a different view. In November 2006, they approved a tax on electricity consumption that will be used to finance a Climate Action Plan, approved by the City Council five months earlier. The tax went into effect last April.<\/p>\n
According to a press release issued by the city, \u201cThis energy tax is also referred to as a carbon tax since most of Boulder\u2019s electricity comes from the burning of coal, which is directly related to carbon or greenhouse gas emissions.\u201d<\/p>\n
\tThe average household\u2019s electricity bill rose about $1.33 a month, while the average bill for businesses rose on average $3.80 a month (although the rate of tax is higher for households.) The city estimates that the tax will generate about $1 million a year through 2012, when it is set to expire. The long-term savings in energy that are expected to occur as a result of the Climate Action Plan will come to about $63 million,
\nthe city estimates.<\/p>\n
\tEconomist Charles Komanoff, who has monitored energy trends for decades, comes down squarely on the side of a carbon tax. To promote this, he has a website, [url=http:\/\/www.carbontax.org,]www.carbontax.org,[\/url] that presents the pros and cons of a tax versus a trading system. He cites five \u201cfive fundamental reasons\u201d to prefer a tax:<\/p>\n
Komanoff notes that the carbon content of every different type of fuel is precisely known, as is the amount of carbon dioxide released when the fuel is burned. \u201cA carbon tax thus presents few if any problems of documentation or measurement,\u201d he writes. Administration of such a tax should be simple, he says: \u201cutilizing existing tax collection mechanisms, the tax would be paid far \u2018upstream\u2019 (e.g., at the point where fuels are extracted from the earth and put into the stream of commerce, or imported into the U.S.). Fuel suppliers and processors would pass along the cost of the tax to the extent that market conditions allow.\u201d<\/p>\n
\tWhile some politicians despair over the prospect of a new tax, even one that might be revenue neutral, New York City Mayor Michael Bloomberg has come out swinging for the idea. At a two-day conference on climate change attended by mayors from across the country, Bloomberg advanced the proposal. \u201cAs long as greenhouse gas pollution is free,\u201d he said, \u201cit will be abundant. If we want to reduce it, there has to be a cost for producing it.\u201d<\/p>\n
\tBloomberg acknowledged that \u201ccap-and-trade is an easier political sell because the costs are hidden \u2013 but they\u2019re still there. And the payoff is more uncertain.\u201d<\/p>\n
\tAlthough the system is intended to give manufacturers and others incentives to invest in pollution-reducing technologies, \u201cthe price volatility for carbon credits can discourage investment, since an investment that might make sense if carbon credits are trading at $50 a ton may not make sense at $30 a ton. This price volatility can also lead to real economic pain. For instance, if 100 companies release higher emissions than they had planned for, they all have to buy more credits, which can create a very expensive bidding war.\u201d<\/p>\n
\tIn addition, he said, \u201ca cap-and-trade system will only work if all the credits are distributed from the start \u2013 and all industries are covered. But this begs the question: if all industries are going to be affected, and the worst polluters are going to pay more, why not simplify matters for companies by charging a direct pollution fee? It\u2019s like making one right turn instead of three left turns. You end up going in the same direction, but without going around in a circle first.\u201d<\/p>\n
\tIn Hawai`i, Henry Curtis of the group Life of the Land, which closely monitors energy issues, favors a carbon tax: \u201cBy having a high carbon tax, and by encouraging conversion of gas stations to electric stations, where you can recharge vehicles, we can shift away from liquid fuel to renewable-based electricity,\u201d he told Environment Hawai`i.<\/i><\/p>\n
\tRep. Mina Morita, chair of the House Committee on Energy and Environmental Protection, also favors underwriting energy initiatives through a tax on oil. \u201cWe need to look at our taxation policies carefully\u2026 Our tax policies aren\u2019t right. We went along with the governor\u2019s plan to eliminate the excise tax on alcohol fuels, but nobody saw prices go down. That\u2019s $35 million out of the general fund — $35 million you could be investing in clean technologies or schools, while people just burn up more gas in their gas-guzzling SUVs.\u201d<\/p>\n
\tPutting the state on a new, clean energy course \u201cis kind of like education,\u201d she continued. \u201cReforms aren\u2019t going to happen overnight. You have to sustain the political will to get to your vision.<\/p>\n
\t\u201cWe should be looking at a barrel tax on oil. Now, the barrel tax is primarily for environmental cleanup, but I think we should have the tax increased to specifically target energy initiatives. Even 5 cents a barrel \u2013 some ridiculous amount \u2013 would go far.\u201d<\/p>\n
— Patricia Tummons<\/p>\n
Volume 18, Number 7 — January 2008<\/p>\n","protected":false},"excerpt":{"rendered":"
“Climate change poses a serious threat to the economic well-being, public health, natural resources, and the environment of Hawai`i.” That statement, included in the preamble to Act 234, passed by the Legislature last year and signed by the governor on … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[163],"tags":[],"class_list":["post-1260","post","type-post","status-publish","format-standard","hentry","category-january-2008"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/1260","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1260"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/1260\/revisions"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1260"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1260"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1260"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}