They Just Quit?

I can’t believe they just quit. No fight, no public debate from the government of the country that represents 5 percent of the global population yet emits 20 percent of the carbon, more than twice the per capita average of even our European counterparts of the developed world? No prime-time TV address by the President? No more talk of a Manhattan Project?  Just “we quit?”  Cowards.  Bought and owned.

Surely many members of the Conservative party (ironically “conservare” comes from the Latin ‘to preserve’) and the coal state Democrats that are unwilling to support putting a price on carbon understand the scientific facts.  Surely someone has told them that recent scientific evidence suggests that climate change is proceeding faster than even the downside scenario of the latest IPCC report (2007).  Certainly some of them must have seen the NASA temperature chart published last week in the New York Times or better yet, read the study authored by Hansen, Ruedy, Sato, and Lo stating:

“We conclude that global temperature continued to rise rapidly in the past decade, despite large year-to-year fluctuations associated with the El Nino-La Nina cycle of tropical ocean temperature.  Record high global temperature during the period with instrumental data was reached in 2010.”

While there will be much partisan squabbling over our failed politics, our dysfunctional Congress–a Gallup poll that surveyed confidence in American institutions ranked it dead last–is merely reflecting the people’s addiction to an unsustainable fossil-fuel-based economic system.   The catastrophic consequences of this addiction are difficult to fully process:

  • Wars in the oil producing regions that cost lives and trillions of dollars, and that fuels terrorism and general hostility toward America
  • Subsidies to the oil and gas industry estimated by the Center for American Progress to exceed $4 billion per year
  • Fifty to 100,000 barrels of oil released every day into the Gulf of Mexico for three months, and the BP gusher is not yet secure
  • A fossil-fuel-based agriculture system that is eroding soil at an alarming rate, depleting aquifers, poisoning water, destroying biodiversity, creating dead zones at the mouths of our river systems, and leaving our food security highly vulnerable to peak oil and peak phosphorus
  • The transformation of the bio-chemistry of planet earth itself, the ultimate ethical violence we could inflict on our children and our ecosystem.

And the folks we elected to lead us simply quit?

Republican leadership has defined “cap and trade” as a tax that our weak economy cannot afford.  Louisiana Governor Bobby Jindal is so desperate for a fix (any jobs at any cost) he jumps to lead the “Drill Baby Drill” chorus even while the drill hole was gushing 100,000 barrels a day into his own back yard, devastating the environment and the culture of the gulf region for years and perhaps generations to come.   Addiction is hard, people.  We need to transform the economic system.  We cannot afford not to.  It is unsustainable.

While a cap is actually not a tax but rather a limit that then needs to be rationed, the impact on the cost of carbon of either a cap or a tax is directionally the same: up.  That’s the point.  The price mechanism is a tool that works.

We must begin.

A blog is not the place to describe comprehensive energy reform policy, but I do have a point to make.  We need a bold, imperfect first step.  While we cannot t underestimate the impact honest pricing of carbon will have on our economic system we cannot afford not to act now.   Our unsustainable American way of life is indeed, and must be, negotiable.

The first bold step we need to take is to impose a simple carbon tax.  Cap and trade is a market mechanism that could potentially reduce the carbon intensity of the economy.  But it is complex tool, fraught with design and implementation challenges.  Coming on the heels of financial system collapse and market failure, this may not be the optimal moment for yet another complex financial market solution.

A tax is simple and effective.  Europe and Japan tax gasoline at a much higher rate than we do in the United States.  As a result, Europeans and Japanese drive more fuel-efficient cars.  It’s time for the United States to institute a comprehensive carbon tax with a steep surcharge for luxury fuel hogs like recreational marine and private aviation fuel.  The tax should put a floor on the price of carbon-based fuel, the equivalent of $4 per gallon of gasoline, escalating by at least 5 percent per year over the coming decade.  The luxury surcharge should double the price of fuel for activities that a decade from now will look awfully dumb, if not immoral.

There is one positive teachable moment we can take away from Washington’s leadership failure on carbon this week:  the contrasting example of T. Boone Pickens’ leadership.   The Pickens Plan to utilize renewable energy, and natural gas as a “bridge fuel”, on balance, makes sense.  It also happens to suit Mr. Pickens’ financial interests, which is okay by me.  Given Congress’ failure our best hope now is for leadership from a few enlightened, entrepreneurial capitalists like Pickens who align their financial interests with the future we must embrace.   The Pickens Plan garnered grassroots support from over a million people who helped pressure Congress and succeeded.

Contrast Picken’s use of capital with the capital deployed in high-frequency trading, or in constructing “Abicus”-type sub-prime mortgage “investments” for speculators.  At 80, with plenty of billions, I don’t think Pickens is doing this for financial gain.  Concerned about his legacy, he chose to align his capital with his conscious, and then to fight.  He’s one of many investors increasingly seeking to align their investments with their values.  Theirs is a powerful movement, especially because it can mobilize capital at scale.

Boone Pickens is quite different than BP.  Capitalists are people.  Corporations are not, despite what the US Supreme Court thinks.  Capitalists have consciousness, just like the rest of us.  And it’s being raised.  Capital represents what Rudolph Steiner called “the ultra-economic life, which is essentially determined by the peculiar power inherent in the actual masses of Capital.”  Let us celebrate this responsible use of that “peculiar power” and shine a light on it. Through our policy efforts, we must lay the groundwork for many more values-driven capitalists to follow Mr. Pickens.

We face an urgent need for economic transformation of historic proportions at a time when political leadership is weak, Wall Street is morally bankrupt, and large public corporations are rightfully distrusted.  Leadership from enlightened capital has begun, manifesting itself in multiple forms and ideas, all feeding out of the same source: the rise of consciousness.

Capitalists must ask, what is the purpose of capital?  And as the crisis of modern capitalism’s conflict with the biosphere and our demands for social justice accelerate in the years to come, capitalists will increasingly be asked, what is the duty of capital?

Our mission at Capital Institute is to drive the systemic change of financial theory and practice necessary to harness the power of capital and markets to effect a more just, resilient, and sustainable economic system.