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Failure at Copenhagen: Now what do we do?

John Harte, professor of energy and resources | November 19, 2009

At Copenhagen, world leaders will probably just agree to vague promises, without any firm commitment to greenhouse gas emissions reduction.  But there is much that the US can still do to reshape energy policy here at home and thereby curb our own emissions.  And we should do it.

For a domestic energy policy to succeed it should be politically acceptable, equitable to all members of society, and designed to actually encourage research and development of new clean energy technologies.  Neither a carbon tax nor cap and trade schemes appear to meet these criteria.  Politicians unfortunately hate taxes, and low-income people dread the threat of rising energy costs.  Moreover, the influence of a carbon tax on technological innovation may be at best indirect, with the strong possibility that we will continue to use fossil fuels but just pay more to do so.

Consider, instead a tax break on future profits from the sale of more energy-efficient automobiles, appliances, and homes, as well as on the sale of home solar panels and more cleanly produced commercial electricity.  The money to do this could come from two sources: rescinding and redirecting the Bush Administration tax break for the richest individuals, and eliminating subsidies for the fossil fuel industries.   The plan would be revenue neutral and thus acceptable to politicians.  By making clean energy and energy efficiency cheaper, rather than dirty energy more expensive, this tax policy would be progressive, benefiting the poor more than the rich.  Under such a policy, investment capital would flow to firms, large or small, that invest in appropriate research and development of energy sources, such as solar and wind, that do not produce climate-altering carbon dioxide. And the government will not choose winners  in advance, for only the eventual winners with marketable clean energy systems will be rewarded with the break on profits taxes.

Some might argue that this plan will simply encourage people to use more energy, but that is highly unlikely to be a serious issue.  People generally do not start using more electricity after installing roof-top solar panels, and they don’t use energy efficient appliances more frequently than they would use energy guzzling ones.

Both major political parties profess a commitment to the principles of tax relief, economic fairness, and reliance on market forces to create a decent future for all of us. Here is an opportunity to put these principles into practice, and at the same time greatly reduce the threat of what is the greatest environmental problem of our time: global warming.