Zichal says Obama to speak soon on climate, skips details on executive action

Source: Evan Lehmann, E&E reporter • Posted: Friday, March 1, 2013

White House climate adviser Heather Zichal repeated the president’s warning that Congress must act on climate change yesterday, but she declined to give lawmakers a deadline or say which carbon policy is preferred by the administration.

Describing climbing temperatures as “one of the clearest and most urgent challenges of our time,” Zichal also hinted at forthcoming action by President Obama as he faces pressure to spend more time rallying the public around solutions to climate change. He will pick up where his State of the Union address left off, Zichal said, noting that the Feb. 12 speech was “just the beginning of the conversation.”

“In the weeks and months ahead, you’ll hear more from the president as he makes the case for new action on these issues,” she said, adding later, “Climate change isn’t merely a future threat to the United States. It’s already facing the consequences of a changing climate, and the evidence is all around us.”

Her comments coincided with a separate discussion yesterday about the effects that a carbon tax might have on greenhouse gas emissions and the U.S. economy. A former adviser to Obama, Joe Aldy, predicted that future threats to the nation’s credit status could increase the likelihood of a pollution levy as lawmakers search for new sources of revenue to shrink U.S. debt.

“Maybe that’s when we get a real carbon tax bill,” said Aldy, an economist at Harvard University, at an event sponsored by Resources for the Future. “At that point in time, we’ll overcome this stigma [about taxes] because we have to. Then it’s why do you do a carbon tax? I think it’s because, well, we got to come up with a really big [revenue] number.”

A carbon tax might satisfy Obama’s demand that Congress pass a market-based climate solution. But when Zichal was asked which policy the administration favored — a cap-and-trade approach, a carbon tax or a clean energy standard — she declined to be specific, beyond repeating the administration’s position that it won’t recommend taxing emissions.

Don’t rush regulations on existing plants

“The president hasn’t proposed anything, and doesn’t plan to propose anything, on a carbon tax,” Zichal said after speaking at the Center for Strategic and International Studies. “We are willing to draw on the best ideas from Democrats and Republicans. Ultimately, one of the concepts we [recommended] a couple years ago was the clean energy standard because, you know, it does provide that predictability and certainty over the long term. At the same time, I don’t see a lot of appetite in Congress right now for such a broad, sweeping policy.”

At the time, a clean energy standard, which requires utilities to derive some power from low-carbon sources, was considered a less ambitious policy than capping carbon emissions and trading allowances.

Zichal, when asked if Obama planned to give Congress two years to act, declined to say when Obama would take the reins on climate.

“We hope that Congress will act soon with a bipartisan, market-based solution to climate change,” Zichal said during her presentation. “If Congress won’t act, he’s prepared to. He will direct his Cabinet to identify new types of actions that we can take to reduce carbon pollution, make our cities more resilient and accelerate the transition to more sustainable sources of energy.”

Many analysts and lawmakers believe Congress won’t have an incentive to act on climate until the administration proposes additional emission restrictions, like carbon dioxide standards on existing power plants. Zichal said regulatory action under the Clean Air Act is an important tool, but she urged climate advocates to be patient, noting that the rules for new power plants are not yet complete.

“We can’t put the cart before the horse,” she said. “Even the standard on new coal-fired power plants is something that’s never been done before and is going to shape the future of the power sector. So it’s not an insignificant undertaking.”

A few blocks away, most of the economists discussing a carbon tax described it as a relatively cheap way of preventing potentially large disruptions to the economy from climate change. But there were doubters.

Kevin Hassett, a scholar at the American Enterprise Institute who has in the past expressed support for taxing carbon in exchange for lower corporate taxes, believes there is “no free lunch” in reducing emissions.

Appeal of carbon tax will ‘increase over time’

If Congress undertakes wholesale tax reform, he suggested, Democrats might be able to entice Republicans to accept a carbon tax in exchange for big tax cuts elsewhere. But he believes that the increased economic production derived from, say, lower corporate taxes would be wiped out — and then some — by the economic damage from higher energy prices caused by the tax on emissions.

“A carbon tax is actually a pretty damaging economic tax,” Hassett said.

But where one economist sees big costs, another sees big savings. Rob Williams, a senior fellow with Resources for the Future, said cost estimates of carbon taxes “are ignoring all the benefits of preventing climate change.” He believes the cost of carbon taxes is cheap compared to the price of unmitigated global warming.

“If it’s very cheap to prevent climate change, well, should we be asking if it’s free or just very cheap?” Williams said. “Just being very cheap is enough. What really matters is the cost being less than the benefits.”

More practically, the revenue that the government is able to raise through a carbon tax could one day be seen as a way to preserve other valued tax benefits, whose advocates will, without question, fight tooth and nail to keep them.

Over 10 years, a carbon tax of $20 a ton could raise about $1.2 trillion — as much revenue as is lost to the mortgage interest tax deduction, or all the corporate tax breaks combined — and it nearly matches the cost of the biggest tax preference of all: the income tax exemption for employer medical insurance, said Ian Parry, an economist with the International Monetary Fund.

“It’s probably unlikely that a carbon tax is going to be introduced immediately in the United States,” he said yesterday. “But we think that the appeal of a carbon tax in the United States is only to increase over time as extreme events like Hurricane Sandy become more commonplace.”