NYC Mayor Touts Carbon Tax in Climate Plan

At a conference of mayors in Seattle, Michael Bloomberg outlines a four point plan for addressing climate change. The mayor recommends more investment in energy research, an end to the ethanol tariff, raising CAFE standards, and a carbon tax.

Here are excerpts from his speech, per the New York Times.

Climate change presents a national security imperative for us, because our dependence on foreign oil has entangled our interests with tyrants and increased our exposure to terrorism. It’s also an economic imperative, because clean energy is going to fuel the future. Jobs are on the line here – good jobs of every kind: Farm jobs. Factory jobs. Engineering jobs. Sales jobs. Management jobs. If we don’t capture these jobs, they’ll just move overseas. Green energy is going to be the oil gusher of the 21st century, and if we’re going to remain the world’s economic superpower, we’ve got to be the pioneers – just as America always has been.

First, we need to increase investment in energy R & D. Right now, we’re spending just one-third of what we were in the 1970s. If we really want to be able to manufacture competitively priced bio-fuel and solar power, if we really want to sequester the carbon dioxide released from coal, we have to be willing to make the commitments that will drive private capital to these projects – and right now, we’re just not doing that.

Second, we have to stop setting tariffs and subsidies based on pork barrel politics. For instance, Congress is currently subsidizing corn-based ethanol at 50 cents a gallon – and you can argue that’s good agricultural policy, but you can’t argue that it’s good for consumers or the environment. Because it isn’t. Consumers pay more for food, and producing corn-based ethanol results in much more carbon dioxide than producing sugar-based ethanol. But are we subsidizing sugar-based ethanol? No! We’re putting a 50-cent tariff on it. Ending that tariff makes all the sense in the world, but for the politics. Everyone knows that politically-driven policies are costing taxpayers billions while providing only marginal carbon reductions – but we need leaders who will do something about it!

Third, we have to get serious about energy efficiency – and the best place to start is with our cars and trucks. efficient vehicles. Raising fuel efficiency standards is the best thing we could do for U.S. automakers – and it would’ve beren done years ago, but for the politics.

Fourth and finally, we have to stop ignoring the laws of economics. As long as greenhouse gas pollution is free, it will be abundant. If we want to reduce it, there has to be a cost for producing it. The voluntary targets suggested by President Bush would be like voluntary speed limits – doomed to fail.

[If the price of coal goes up due to a carbon tax] many power plants would likely switch to natural gas, which is much cleaner, and the 100 coal plants that are now on the drawing boards would likely convert to natural gas as well. Raising the cost of carbon would also make alternative energy sources more cost-competitive, which would lead more consumers and property owners to make the switch.

Cap-and-trade is an easier political sell because the costs are hidden – but they’re still there. And the payoff is more uncertain. Because even though cap-and-trade is intended to incentivize investments that reduce pollution, the 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. That’s exactly what’s happening in parts of Europe right now, and it’s going to cost companies there billions of dollars.