Cap & Trade's Failure Means It's Time for a Carbon Tax

"I was a huge supporter of cap-and-trade," said Wayne Leonard, the CEO of Entergy, a $11 billion utility company.

"We developed enormously elegant solutions, but they couldn't get done."

Taxing carbon emissions is the next best way to deal with the threat of global climate disruptions, he said, in part because it would give the energy industry a degree of certainty about how to deploy its capital.

"A simple tax on every one is a starting point," Leonard said. Proceeds could be used to reduce the federal deficit or rebated to consumers.

Leonard spoke today (Nov. 9) at a launch event for the Center for Climate and Energy Solutions, a new organization that is succeeding the Pew Center on Global Climate Change.

Eileen Claussen, who has directed the Pew Center for 13 years, will lead the new group, which has raised money from three so-called strategic partners -- Entergy, HP and Shell -- as well as Alcoa Foundation, Bank of America, GE, The Energy Foundation, Duke Energy, and the Rockefeller Brothers Fund. Pew is no longer a backer.

The arrival of yet another Washington group to deal with climate and energy issue doesn't mean much, especially when it's a makeover of an existing group. C2ES says: "We believe that ensuring safe, reliable, affordable energy for all -- while protecting the global climate -- is a paramount challenge of the 21st century."

Well, sure, but that's what Washington environmental groups have said for years, with few signs of political progress to show for it. Global GHG emissions, meanwhile, reached record levels in 2010.

So what's to be done? If a new idea was voiced at C2ES's launch event, I missed it. Most interesting, to me at least, was the conversation about an old idea -- a carbon tax or fee -- which was set off by Leonard's comments.

Claussen said that C2ES will take a close look at global carbon pricing. "The most effective and efficient way to deal with this issue is through some form of carbon pricing, whether it's a tax or something else," she said. Europe's approach has been based on cap-and-trade, which sets a cap on emissions, allocates or auctions permits to emit, which can then be traded among emitters. (By the time you explain cap-and-trade, most people tune out.) Australia, by contrast, has just enacted a carbon tax.