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Expert: Time To Tax What We Don’t Want

by Sally E. Bahner | Feb 20, 2012 11:31 am

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Posted to: Environment

Few subjects generate more debate and are more politically charged than energy consumption and its effect on global warming.

In the course of 40 years, we’ve gone from cheap, plentiful oil produced right in the U.S. to a dependence on foreign oil and living with the political tinderbox resulting from that dependence.

Michael Graetz, Justus S. Hotchkiss Professor Emeritus of Law at Yale, is an expert in tax law. He laid out the whole scenario at a recent talk at Blackstone Library titled “The End of Energy,” based on his most recent book. 

Facebook/Yale Law School Graetz’s talk was sponsored by Occupy Shoreline CT. Members collected donations in support of Operation Fuel, a fuel assistance program for the needy, which has seen its funding slashed. Graetz said he commends the Occupy movement for bringing disparities to the public consciousness. Many in the Occupy Shoreline movement attended the crowded lecture.

Perhaps his most compelling question is: Why shouldn’t we impose a tax on things we want less of – carbon emissions and wasteful use of energy?

By taxing things we want to consume less of, Graetz says, we can give it back to the people for things we want more of – jobs, wages, and a reduction in payroll taxes.

Graetz, who also holds an appointment at Columbia University where he is the Isidor and Seville Sulzbacher Professor of Law and Columbia Alumni Professor of Tax Law, took the audience through a timeline whose common denominator is the promise of nine administrations to reduce our dependence on oil and curb the production of carbon dioxide generated by the coal industry, which is being held accountable for a high portion of global warming. Today, with just 4 percent of the world’s population, the U.S. uses a quarter of the world’s oil. 

Some key historical points:

• An oil tariff during the Eisenhower administration kept foreign oil out of the country and kept U.S. suppliers happy.
• In 1969, the Shah of Iran offered the U.S. oil at a price of $1 a barrel for a million barrels a day, but was turned down. Twice. 
• Peak oil production in Texas was reached in March 1971. In 1973, the U.S. used 6.3 million more gallons of oil than it produced, and Japan and Europe were in similar situations.
• No new nuclear plants have been built in the U.S. since the Three Mile Island meltdown and fear of nuclear power has only been exacerbated by Chernobyl tragedy in 1986 and the Fukushima disaster last year. Approval was just given for construction of a nuclear plant in Georgia, but that is meeting resistance.

Once we used up our oil supplies, we turned to Venezuela and the Middle East. We’re still paying for that mistake, Graetz said. President Barack Obama and eight presidents before him all promised to reduce oil consumption, each in their own way, all looking for the technological silver bullet. Among them:

• Nixon spent $4 billion each on two breeder reactors (a nuclear capable of producing more energy that it consumes); both failed.
• Ford called coal an “Ace in the Hole” but Graetz says it’s now the Joker in the deck
• Carter touted synthetic fuels in response to the 1973 oil embargo.
• George W. Bush pushed for “clean coal,” which involved burying coal’s carbon dioxide way deep into the earth.

In the meantime the production and control of oil moved from oil companies to the nations that produced the oil. And all along gas taxes were met with defeat. In particular, an anti-tax movement in the late ‘70s in California made taxes a dirty word.

Like many people today, Graetz believes the political process is broken, that politicians have let us down by putting short-term political advantages and regional benefits ahead of national needs. Billions have been spent on energy subsidies, he said. “We’re providing costly mandates requiring utilities to buy a certain amount of clean energy or window power and requiring auto manufacturers to reach new heights in gas mileage.”

He goes on to say that the environmental movement in the U.S. looked in such ideas as using solar panels on each light post, there’s been resistance to wind power. He’s optimistic about the use of natural gas because there’s less carbon dioxide, fewer health risks and less affect on climate change. However, in terms of the fracking process used to obtain the natural gas, he says it needs to be done without shortcuts.

He added that ethanol subsidies came and stayed, now expired, but costs outweighed the benefits. “They raised a lot of corn and food, but there was a loss of land for production of other products,” he said. “There’s now a 7 percent subsidy for oil.”

He added, “We should have gotten rid of oil and gas subsidies.”

He says the debacle occurring in this administration is failure to enact cap and trade – regulations made cap and trade a dirty word.

Defined by the US Environmental Protection Agency,

“Cap and trade is an environmental policy tool that delivers results with a mandatory cap on emissions while providing sources flexibility in how they comply. Successful cap and trade programs reward innovation, efficiency, and early action and provide strict environmental accountability without inhibiting economic growth.”

Cap and trade is also described as a credit swapping anti-pollution policy. Graetz cited Chrysler, producer of big gas-guzzling pick-up trucks, exceeding its “caps” on carbon dioxide emissions, trades its cap with Toyota, which produces more gas-efficient vehicles. The end result is a balance that meets a total, predetermined amount.

One member of the audience asked Graetz for his solution.  He said he would tax fossil fuels, including a carbon tax on coal, and use the revenue to protect working people. He would also repeal all subsidies on gas and fossil fuels.

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