Tuesday, November 11, 2008

Obama’s “number 1 priority”


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By spawning “a new energy economy,” Obama can create millions of new jobs, decrease our dependence on foreign oil and avert catastrophic climate change. But the politics of launching that new energy economy — even with enlarged majorities in Congress — remains challenging.


Peter Barnes is an entrepreneur and writer whose books include Who Owns The Sky? and Climate Solutions: A Citizen’s Guide. The views expressed are his own. –

By Peter Barnes

A few days before the election, Barack Obama told Time’s Joe Klein:

Finding the new driver of our economy is going to be critical. There’s no better driver that pervades all aspects of our economy than a new energy economy … That’s going to be my No. 1 priority when I get into office.

That’s exactly the right choice for numerous economic, geopolitical, and ecological reasons. By spawning “a new energy economy,” Obama can create millions of new jobs, decrease our dependence on foreign oil and avert catastrophic climate change. But the politics of launching that new energy economy — even with enlarged majorities in Congress — remains challenging.

In facing this challenge, Obama will be constrained both by a gargantuan budget deficit and his campaign vow not to raise taxes on anyone making under $250,000 a year. And because of the recession, he can’t suck buying power out of the economy. On the contrary, he needs to stimulate spending by consumers.

He also faces a tight international timetable: in December 2009, the nations of the world will assemble in Copenhagen to negotiate a successor to the Kyoto Protocol. If Obama is to have any credibility in those negotiations, he must pass significant legislation before then.

How, then, can he fulfill his No. 1 priority?

There are many opinions about what should be part of a comprehensive energy policy, but the centerpiece nearly everyone agrees on — the great lever that will tip the whole economy toward clean energy — is a strong, descending cap on carbon emissions. If done correctly, such a cap will raise the price of polluting, spur innovation and conservation, and shift billions of dollars of private investment into new technologies for the next 40 years. But designing the cap correctly is critical; a half-baked, loophole-ridden and overly complex system will do more harm than good. The devil is in the details — and, of course, in the politics.

The most critical details involve where to place the cap and what to do with the permits the cap will create. The simplest and most effective place to put the cap is upstream — that is, on the small number of companies that bring carbon into the economy. An upstream cap could be administered without monitoring smokestacks, without a large bureaucracy, and without favoring some companies over others. It would work for the obvious reason that, if carbon doesn’t come into the economy, it can’t go out.

The declining number of permits that would be issued under the cap should then be auctioned rather than given away free — all polluters would pay, and there would be no politically chosen winners or windfall profits. Fortunately, Obama pledged during the campaign to do just this. But that leads to another crucial detail: what to do with the auction revenue, which over time will total trillions of dollars?

There are two possibilities: spend the money on a variety of energy-related programs, or give the money back to the people. While there’s broad agreement that some public spending is necessary to solve the climate crisis, it’s by no means clear that permit revenues should be used for that purpose. The reason is that permit revenues, though initially paid by energy companies, are ultimately paid by consumers in the form of higher energy prices. They are, in effect, a sales tax on carbon — a tax that will fall on millions of Americans earning under $250,000 a year, and that will rise as the cap tightens.

Obama’s best choice is to fund energy-related programs from other sources (including long-term debt) and return all the carbon revenue to the people. This can be done through yearly tax credits, or better yet through monthly cash dividends wired like Social Security payments to people’s bank accounts or debit cards. The advantage of cash dividends is that they’d tangibly and frequently remind people that higher carbon prices are coming back to them — and help them pay mortgages and other bills that fall due on a monthly basis. The whole system might then be called “cap-and-dividend” or “cap and cash back.”

Like Social Security benefits, carbon dividends would be taxed as ordinary income; the government would then recoup about 25 percent of the revenue and could use that money as it sees fit. More importantly, ordinary families would get the lion’s share of the auction revenue, and get it in a way that rewards conservation. Since everyone would get the same amount back, those who use the most carbon would lose and those who use the least would gain — their dividends would exceed what they pay in higher prices. Low-income families in particular would gain because they use less energy than others and would pay little or no taxes on their dividends. In addition, the overall economy would benefit from this periodic replenishment of consumer demand.

The most persuasive argument for cap-and-dividend, though, isn’t economic but political. As the presidential campaign revealed, energy prices are an explosive issue. A carbon cap will raise fuel prices not just once, but for years to come. The potential for backlash — for frenzied cries of “Drill, baby, drill!” — is never-ending. If America is to reduce carbon emissions to the level scientists say is necessary, it’s crucial that families’ pocketbooks be protected for the duration. Cap-and-dividend does this by permanently linking dividends to carbon prices. As carbon prices rise, so — automatically — do dividends. If voters scream about rising fuel prices, as they surely will, politicians can truthfully say, “How you fare is up to you. If you guzzle, you lose; if you conserve, you gain.”

Moreover, for a carbon cap to endure, it must have broad bipartisan support. A revenue-neutral cap is far more likely to garner Republican support than one that’s linked to a large increase in government spending. Consider, for example, Senator Bob Corker of Tennessee, who supports a declining cap on carbon but not a spending bill that earmarks trillions of dollars over 40 years. Though it’s not glaringly evident, there are more Republicans like him. This doesn’t mean Obama shouldn’t spend public money on energy; it means he should separate such spending from the cap.

The ultimate reason for paying equal dividends from carbon revenue may be this: it fits Obama’s vision of how government ought to work. In this vision, the government’s job is to serve ordinary people, not special interests. It is to be fair and transparent. And it is to unite rather than divide us, to move us from a “you’re on your own” society to one in which “we’re all in this together.”

Cap-and-dividend fits this vision perfectly. It curbs carbon emissions in a way that’s simple to understand and administer, favors no special interests, and provides a degree of security to all. It treats all Americans as co-owners of the air and allocates trillions of dollars in a completely transparent way. It would be a signature Obama policy, one that sets the tone for his whole administration and remains as memorably linked to him as Social Security is to Roosevelt.

Urgent regulation needed for nanomaterials: experts


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"...having analyzed the potential health and environmental impacts which flow from the properties of nanomaterials, we concluded that there is a plausible case for concern about some (but not all) classes of nanomaterials," the Royal Commission experts from the scientific, legal, business and medical communities wrote in a British government-funded report.


Urgent regulation needed for nanomaterials: experts

LONDON (Reuters) - More testing and regulation of nanomaterials used in an increasingly number of everyday products is urgently needed, experts said on Wednesday.

"...having analyzed the potential health and environmental impacts which flow from the properties of nanomaterials, we concluded that there is a plausible case for concern about some (but not all) classes of nanomaterials," the Royal Commission experts from the scientific, legal, business and medical communities wrote in a British government-funded report.

In particular the report cited tiny soccer-ball shaped carbon molecules called buckyballs that may have potential uses ranging from novel drug-delivery system to fuel cells, as well as carbon nanotubes and nanosilver.

Recent studies have found buckyballs -- short for buckministerfullerenes -- may threaten health by building up fat and have linked carbon nanotubes to potential lung cancer risk.

"We are very conscious of the extent to which knowledge about the potential health and environmental impacts of nanomaterials lags significantly behind the pace of innovation, although this could change as new scientific information arises," the study said.

Nanotechnology, the design and manipulation of materials thousands of times smaller than the width of a human hair, has been hailed as a way to make strong, lightweight materials, better cosmetics and even tastier food.

Major corporations and start-ups across almost every industry invest in nanotechnology, which found its way into $147 billion worth of products in 2007, according to Lux Research.

But scientists are only just starting to look at the impact such tiny objects might have, and the British report warned existing regulations may not be able to keep up with technology.

"We are also concerned that more sophisticated later generation nanoproducts will raise issues which cannot be dealt with by treating them as chemicals or mixtures of chemicals," John Lawton, an ecologist, who chaired the report, said in a statement.

The report, to which the government must reply, also determined that there were not grounds for a blanket ban or moratorium on nanomaterials.

Specifically, it also called on the government to recognize a "degree of ignorance and uncertainty in this area" and lay out the time it will take to address these.

(Reporting by Michael Kahn; Editing by Louise Ireland and Maggie Fox)

Global investors urge action on climate change


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"As institutional investors, we are concerned with the risks presented by climate change to the global economy and to our diversified portfolios," said Mike Taylor, chief executive of London Pensions Fund Authority. "We are ... urging world leaders to implement strong and effective policies to support us in allocating capital toward low carbon investments."


Global investors urge action on climate change

Global institutional investors holding more than $6 trillion in assets pushed policymakers Tuesday to quickly hash out a binding agreement to cut greenhouse gas emissions and promote clean technology.

More than 130 big investors, including London Pensions Fund Authority, want countries to agree to reduce the climate- warming emissions by 50 percent to 80 percent by 2050.

Those numbers are in line with global warming policy favored by U.S. President-elect Barack Obama, who supports an 80 percent reduction in carbon emissions by mid-century.

The investors also want policymakers to set long and medium term emission reduction targets for developed countries and to provide for an expanded and more liquid global carbon market.

Already big U.S. investors, such as the California Public Employees' Retirement System, with $185.6 billion of assets under management, have been calling for legislation to promote new and existing clean technologies.

They have also called on the U.S. Securities and Exchange Commission to force publicly traded companies to disclose climate-related risks along with other factors that affect their business.

"As institutional investors, we are concerned with the risks presented by climate change to the global economy and to our diversified portfolios," said Mike Taylor, chief executive of London Pensions Fund Authority. "We are ... urging world leaders to implement strong and effective policies to support us in allocating capital toward low carbon investments."

The group of global investors want countries to sign on to a new binding agreement to succeed the Kyoto Protocol climate pact, which set binding targets for industrialized countries to cut greenhouse gas emissions.

The European Union is aiming to cut greenhouse gas emissions 20 percent by 2020 and increase the share of wind, solar, hydro, wave power and biofuels in their energy mix by the same date.

The United States is alone among major industrialized countries in rejecting the Kyoto Protocol, but is participating in discussions to craft a follow-up global agreement.

"It is time to put an agreement in place where the United States is involved," said Mindy Lubber, the president of Ceres, a coalition of investors and environmental groups working on climate change issues.

The global group of investors is hoping its voice is heard ahead of a December climate change convention in Poland.

(Reporting by Rachelle Younglai; Editing by Andre Grenon)