Climate Change

Friedman on a Carbon Tax

New York City -- In today's Times, Thomas Friedman, who has been writing about environmental technology for some time and is well credentialed in this space, not only due to his platform at the Times, but also due to his relentless exploration of energy issue, expresses his support for a carbon tax in lieu of a cap and trade plan to put a price on carbon. 

In so doing, he joins others with true green environmental credentials such as Al Gore who supported a carbon or BTU tax before cap and trade was even invented and many economists, including NDN's Rob Shapiro who has written extensively on the subject. 

It is important to recall that Al Gore, arguably the father of the carbon tax, also supports cap and trade and indeed the two approaches need not be mutually exclusive. Several European countries including Denmark, widely praised for its switch to renewable fuels, have a carbon tax and participate in the EU cap and trade system. 

However, as with the Yankees and the Mets, cap and trade and a carbon tax both have passionate advocates.  An advantage of a carbon tax, supported by many economists, is that taxes -- something the government has long experience collecting and companies paying -- are probably easier to administer than a system for trading carbon credits.  With financial markets less esteemed than only a year ago, opponents of a carbon tax worry about gaming of the carbon market. Supporters of a tax also argue that it may result in less price volatility in energy at the expense of less precision in reducing emissions since it fixes price rather than quantity.

Most environmentalist scientists consider a cap and trade system to be critical to addressing climate change because in theory it imposes an absolute cap on emissions.  If one takes seriously the science on the issue, the argument runs, we have less time and leisure to avert major damage to the climate than commonly believed and only a fixed cap provides certainty about lowering emissions.  Companies could -- under a tax regime -- continue polluting and simply pay more tax which, in some cases, they might be able to pass onto consumers, giving them broad license to continue emitting.

Of the two approaches, cap and trade has gained far more traction. It is already in use in the European Union. Ten northeastern and mid-Atlantic states recently launched a mandatory cap and trade system called the Regional Greenhouse Gas Initiative (RGGI) and a similar initiative is underway in California and other western states. However, carbon taxes --generally smaller ones than those that would be needed to achieve deep carbon reduction --are employed in Denmark and, indeed, most European countries, in several US states and, indeed at the national level, by commodity, as in the retail tax on gasoline.

Rather than take a position on these cross cutting arguments, Friedman focuses on the immediate politics of the issue: the fact that coal companies and others are now trying to paint cap and trade as a tax to block its passage. If opponents are calling it a tax, he argues, why not just go ahead and pass a tax?

In fact, many of the staunchest supporters of cap and trade such as U.S. Rep. Ed Markey who oversees a key subcommittee and, with House Energy and Commerce Chairman Henry Waxman, has introduced cap and trade legislation has indicated he understands the arguments for a carbon tax as well as cap and trade but believes that one must be mindful of political realities which, for the time being, favor cap and trade.

Friedman argues that a tax could be sold to the American people by marketing it as vital to America's defense and economic priorities. In supporting Congressman John Larson's proposal to tax carbon but cut the payroll tax by an equal amount (an idea proposed by Rob Shapiro) he advocates employing the President's National Security Advisor, General James Jones, to make the case. (Jones worked on climate policy for the US Chamber of Commerce prior to entering the Administration, to the consternation of some environmentalists).

Is Friedman right?

Here is my view on the issue of how to proceed on putting a price on carbon. Ultimately, cap and trade and a carbon tax have more similarities than differences. Both put a price on carbon and neither one invalidates the potential value of the other.

Cap and trade will probably pass the House this year and needs about four to five more votes in the Senate than it has yet to achieve cloture and become the law of the land.  It will enjoy the deserved support of the vast majority of environmentalists as debate unfolds in coming weeks and months. It is important that the carbon tax not be used to undermine cap and trade support.

However, a carbon tax also deserves a hearing and the idea of reducing payroll taxes with the revenues is particularly appealing.  It should receive, at the appropriate juncture, the full attention of the Congress to determine how much support it has at what level of tax.  We probably need at least a ten cent increase in the gas tax later in the year to restore the Highway Trust fund to solvency and one legislative approach might be to include this as part of a wider carbon tax proposal. 

Monday Buzz: Climate Change, Civic Generations, Canadians, and More

NDN had major essays run in several publications this week. First off, NDN fellows Morley Winograd and Mike Hais had an ideas piece published in Politico, entitled "A New Generation Shapes a New Era." Here's an excerpt:

...Meanwhile, outside the Beltway, America’s demography is steadily and quietly changing in a way that will fundamentally reshape the country for decades to come. A new generation, the millennial generation (born between 1982 and 2003), is coming of age to make over or realign U.S. politics. The approximately 95 million millennials compose the largest American generation in history. There are now about 17 million more millennials alive than there are baby boomers (born between 1946 and 1964), previously the largest generation, and 27 million more millennials than members of generation X (born between 1965 and 1981), the relatively small generation between the boomers and the millennials.

While about 4.5 million millennials have reached voting age every year since 2000, the generation didn’t enter the electorate in large enough numbers to make a real difference until 2008. And make a difference it did. Millennials were decisive in securing the Democratic presidential nomination for Obama. In November, millennials supported Obama over John McCain by a greater-than-2-to-1 ratio, accounting for 80 percent of Obama’s popular vote margin and turning what would have been a squeaker into a decisive victory.

But the 2008 election was barely the tip of the millennial iceberg. Important as they were a year ago, not even half (41 percent) of millennials were eligible to vote, and they accounted for less than one-fifth (17 percent) of the voting-age population in 2008. A bare majority of millennials will be eligible in 2010. Close to two-thirds of them (61 percent), representing a quarter of the electorate, will be able to vote when Obama runs for reelection in 2012. By 2016, eight in 10 millennials will be eligible to vote, and they will account for 30 percent of the electorate. In 2020, when virtually all millennials will be old enough to vote, they will account for more than one-third of the electorate (36 percent). With numbers like these, the millennial generation will be in position to dominate U.S. elections and politics for decades to come...

Morley and Mike were also featured in the front-page story of Saturday's The Globe and Mail (Saturday is the Canadian equivalent of the Sunday paper here). From the Globe and Mail piece:

...The key to this debate may lie in a statistic. There are now more millennials than boomers. To be precise, there are 17 million more people born between 1982 and 2003 living in the United States than there are people who were born between 1946 and 1964. There are 27 million more millennials than there are Gen-Xers, the generation in between. The millennials constitute the largest generation in American history.

Millennials identify as Democrats over Republicans by 55 to 30 per cent; in one poll 80 per cent identified with Mr. Obama, and only 10 per cent identified generically with Republicans.

The boomers, who were raised to believe in ideals — hence the culture wars of the past 50 years — taught their children civic responsibility, says Morley Winograd, co-author of Millennial Makeover, a book that explores the phenomenon.

In the last election, millennials constituted 17 per cent of the electorate. In 2012 they will make up 25 per cent. By 2020, they will make up 36 per cent of the electorate, and will be the dominant demographic for decades to come.

"As long as they hold on to these more politically progressive ideas, which generations tend to hold onto throughout their lives — it's not true that they get more conservative as they get old — it obviously bodes well not just for Democratic politics but for activist government in economic matters, though not in social issues," he says, "which is the reverse of what we've seen."

Morley and Mike also appeared in The Hill talking about Obama's plans for the auto industry.

Next, Rob had a big piece published this week in Roll Call, "The Economy Will Force Quick Action on Climate Change." Here's an excerpt, though the whole essay is really worth reading:

...But with everyone’s attention now fixed on our economic crisis, this process can be accelerated. And as President Barack Obama has suggested many times, rebuilding the economy and dealing with climate change need not be mutually exclusive, if we enact the proper policies.

The proper approach here is a straightforward one.

First, enact a carbon-based tax to move people and firms to prefer and choose less-carbon-intensive fuels and technologies. Second, as we change the relative prices of different forms of energy based on their effects on the climate, protect people’s incomes and the overall economy by returning all or virtually all of the revenues through payroll tax cuts or lump-sum payments to households.

Third, use the certainty of a substantial tax on carbon, along with additional subsidies, to promote the development of new climate-friendly fuels and technologies that can capture a new and fast-growing global market.

Rob was quoted in the Houston Chronicle on climate change as well.

Obama's Weekly Address Focuses on Global Cooperation

President Barack Obama, aboard Air Force One, speaks this week on the need for global cooperation and explains his overseas trip to the American people. He begins with the now-familiar, but still excellent refrain on global interconnectivity.

In this new century, we live in a world that has grown smaller and more interconnected than at any time in history. Threats to our nation’s security and economy can no longer be kept at bay by oceans or by borders drawn on maps. The terrorists who struck our country on 9/11 plotted in Hamburg, trained in Kandahar and Karachi, and threaten countries across the globe. Cars in Boston and Beijing are melting ice caps in the Arctic that disrupt weather patterns everywhere. The theft of nuclear material from the former Soviet Union could lead to the extermination of any city on earth. And reckless speculation by bankers in New York and London has fueled a global recession that is inflicting pain on workers and families around the world and across America.

The challenges of our time threaten the peace and prosperity of every single nation, and no one nation can meet them alone. That is why it is sometimes necessary for a President to travel abroad in order to protect and strengthen our nation here at home. That is what I have done this week.

Take a look at the whole address:

Also, Obama's town hall in Strasbourg yesterday, following a surprisingly successful G-20 summit, was pretty amazing, both in itself and its symbolism of a new era of American leadership. His tone and policy prescriptions are right on the mark. Read Simon's blog about it and the politics of bottom-up going global.


In the current New Yorker, David Owen has a provocative, cautionary article on the difficulty of addressing climate change that points out that the only thing ever shown to truly lower CO2 emissions is a well timed industrial implosion.  Greenhouse gas emissions are the result, generally, of prosperity. 

While the article has many interesting observations, Owen draws a fine point on a subject that is often neglected and has relevance both to proposals to put a price on carbon and the future of Detroit, namely the mathematical equivalence between cheaper gas--anathema to many environmentalists--and, paradoxically, higher fuel economy 

The centerpiece of emissions policy for decades has been higher fuel economy standards.  However, as Owen notes, if higher gas prices such as those last summer lowered miles traveled and stimulated use of mass transit, then their mathematical equivalent, improved fuel economy or fiddling with the other side of the equation, can only reverse those trends. Higher fuel economy and, indeed, to a degree energy efficiency writ large suffer from the same problem.  Both encourage greater consumption of energy as cost declines.

Although Owen does not explore the next question, consider the impact of higher fuel economy and energy efficiency on energy independence--another major driver of efforts to get off fossil fuels.

Higher fuel economy which is to say cheaper driving if it leads to more driving as it appears to do may not reduce consumption of gas or oil and therefore either their price or money transferred to oil producing states.

This does suggest an interesting difference between hybrid and pure electric cars.  Whereas hybrids by improving gas mileage may promote more driving, limiting their effect on emissions, pure electric cars such as the planned Chevy Volt should unequivocally lower carbon emissions and oil consumption (since electricity generally produces less CO2 than gasoline thanks to its use of hydro, nuclear and natural gas-fired power not to mention renewables.)

But you say didn't cutting back on gas use last year after prices spiked, cause the price of oil to collapse, reducing payments to foreign oil producers?

First, the falloff in driving followed a price spike.  It only showed, therefore, that people consume driving like other normal goods, using more when costs drop and less when they rise.  The subsequent collapse of oil prices is much more tied to the collapse of the global economy than to any conservation efforts.

All of which brings us to the other main proposal for reducing emissions, the one now gaining traction in Congress: putting a price on carbon through a cap and trade system or tax.  In contrast, to better fuel economy or energy efficiency writ large, a cap that absoutely limits emissions or a cap and trade system that allows emissions at a price, by raising the price of fossil fuels should lower their consumption and thus greenhouse emissions.

This is not to say it will be easy to implement a cap and trade system or tax. However, it does suggest that we ought to try as the focus on fuel economy and energy efficiency alone will not get us to a lower carbon economy.

The Virtual March on Washington for Energy Independence, April 1-3.

Today is the first day of the three day Virtual March on Washington, organized by T. Boone Pickens, to promote the Pickens plan to get America off of foreign oil and onto new cleaner forms of energy.  The Pickens plan, in a nutshell involves increasing electric transmission capacity to bring wind power onto the grid and replace gasoline burning cars with those running on natural gas or, for lighter uses, electricity.

While opinions vary on whether there is enough natural gas in the US at an affordable price to ultimately replace foreign-imported oil, there is no doubting Pickens' energy and passion to promote his cause--or his ingenuity in using diverse media from television to Facebook to Twitter and partnerships with the NAACP, Rock the Vote, Ted Turner, AWEA and others--on its behalf.

If you haven't seen the commercials, you can learn more about the Pickens plan and the virtual march at

The Waxman-Markey Energy Legislation

Yesterday, Representatives Waxman and Markey, Chairmen of the House Energy and Commerce Committe and Energy and Environment Subcommittee, respectively, introduced draft energy legislation.  The ambitious bill lays out a sweeping agenda for energy reform that shows the intensity of commitment in this Congress to energy reform and dramatically increases the chance for passage of important energy legislation this year.  Today, the White House endorsed the legislation, further increasing the chances of action.

Key proposals include a cap and trade system to reduce emissions 83% by 2050, modernization of the grid, a renewable portfolio standard and support for new energy technologies including the politically important one of clean coal.  Coming on the heels of the major investments in clean energy included in the $787 billion ARRA legislation passed earlier this year, America is on the verge of the largest transition in energy priorities in our history--away from carbon based energy--toward new cleaner forms of energy.

Speaker Pelosi has already signaled her intent to move the legislation forward in the House where it will likely pass.  As usual, the key battleground will be the Senate where cap and trade legislation appears to be about four to five votes short of the 60 needed for cloture.  If cap and trade falls short, the Senate could move forward on the energy portions of a bill.  However, this would weaken the US negotiating position in Copenhagen next year.  Bringing a few more Senators on board is thus the key to comprehensive action.

The four titles of the bill map the major countours of the energy discussion, support for clean energy and clean technology including electric cars and a modernized grid, energy efficiency, a cap and trade system to limit heat-trapping pollutants and a transition title to minimize the disruptive impact of change this large on industry and consumers.

In addition to the Waxman-Markey bill, a variety of bills on the smart grid, grid modernization, renewable fuels, energy writ large and the reduction of carbon emissions through cap and trade or a carbon tax are also in play.  Some, such as Senator Harry Reid's transmission bill and Senator Bingaman's energy legislation have the imprimateur of highly influential legislators. 

While the Waxman Markey draft legislation is not designed to be the final say and leaves some details unspecified, we at NDN look forward to working with these leaders, the Administration and others to advance the legislation's critical energy goals.

The time has never been more ripe for moving America and the world decisively away from the carbon-laden fuels of the 19th and 20th Centuries toward a new, low carbon, renewable energy future.  That, in turn, should help drive the next great wave of economic growth one would expect from a major leap forward in the single most import imput--after people--in the economy, energy.


Is Cap and Trade a Dead Policy Walking?

In his February 24 speech to Congress, President Barack Obama asked Members “to send me legislation that places a market-based cap on carbon pollution.” So yesterday, House Energy and Commerce Committee Chair Henry Waxman took the first step by introducing his cap-and-trade plan. Yet sometimes, the political sands shift underneath a policy approach that was once viable, even embraced broadly, and its chances of becoming law ebb away. Until the media and the public make the connection between the policy and the new environment, the approach becomes a dead policy walking. It happened to Social Security privatization and the flat tax -- good riddance to both -- and now it appears to be overtaking cap-and-trade.

Cap-and-trade combines a regulatory cap on greenhouse gas emissions with a market-based scheme to trade as financial instruments the “permits” to produce those emissions. For all of cap-and-trade’s initial promise as an answer to climate change, the current financial crisis has made its vulnerabilities painfully clear. The strategy would have the government create trillions of dollars in new, asset-based financial instruments. These emissions-right-backed securities, like their cousins, mortgage-backed securities, also would throw off a host of new derivatives to be profitably traded by the “professionals.” Unsurprisingly, cap-and-trade’s fiercest promoters include Wall Street institutions that see emissions-permit trading as a lucrative new market that could earn them billions in new fees, commissions and, while it lasts, speculative gains. But after Wall Street’s meltdown, the proposition for another round of the financial merry-go-round that produced the worst economic crisis in our lifetimes seems either very naïve or very cynical.

That’s not the only tricky problem facing cap-and-trade. The other part of the policy’s design, the hard cap on emissions, ensures that the prices of the permits will be very volatile. Here’s why. The cap in cap-and-trade is set as a percentage reduction in annual emissions, figured from some baseline. The problem is that no one can forecast with precision how much energy American businesses and households will need from one year to the next, because no one knows how cold the winter will be, or how hot the summer, or how fast the economy will grow a year from now. When energy companies see that demand is going to outpace the forecast, so they will need more permits to keep on selling energy, the price of those permits will rise sharply. It’s not just theory: We use a small-scale cap-and-trade program to reduce the emissions that produce acid rain, and the price of those permits moves up and down an average of more than 40 percent per year. In the same vein, Europeans adopted their own cap-and-trade system for energy emissions a few years ago, and the price of their permits has moved up or down by an average of 17 percent per month.

For years, economists have worried that this basic feature of cap-and-trade would produce new volatility in energy prices. They’ve also cautioned that the result would likely be less investment in climate-friendly fuels, since no one would know what the price of their carbon content would be. Now there’s another, equally serious problem: The unavoidable volatility of the prices of emission permits also would attract furious financial speculation, since speculators live off of volatile prices. And we now know the risks that we all run when rampant speculation occurs in financial instruments tied to our economic foundations, such as housing -- or energy.

Like the excesses that helped create our current crisis, the financial markets for emissions permits also could well produce serious insider trading and manipulation. That’s because the final purchasers of the permits, large energy companies and utilities, would see shifts in demand for the underlying energy coming before anyone else. This information would create golden opportunities for insider profits and market manipulation, and erecting a “Chinese wall” inside the companies to segregate the production division from the trading division would work no better than it has on Wall Street. That may explain why until its own collapse, Enron was a prominent advocate of cap-and-trade.

The only reason to play another round of Russian roulette with the economy would be if cap-and-trade were the only way to address climate change. Happily, it isn’t: Many economists and some politicians support the major alternative, carbon-based taxes with rebates. This approach would create no new financial instruments to trade and abuse, and produce no additional price volatility, because the price of carbon would be set. It also would be relatively simple to administer and enforce. And it can be designed to recycle its revenues in payroll tax reductions or rebates. In this way, the carbon tax would change the relative price of different forms of energy, based on how much damage they do to the climate, while protecting people from the additional, direct costs of the tax itself. The revenues could also be recycled as a flat payment to each American household, providing relatively more help to low and middle-income families. The policy’s only real weakness is that it has no cap. But the tax rate could be adjusted periodically if actual emissions exceed its goal. And modeling shows that a carbon tax of about $50 per-ton of CO2 would produce slightly larger reductions in emissions than last year’s leading cap-and-trade proposal, the Warner-Lieberman bill.

For years, many politicians and environmental leaders have believed that any kind of tax to deal with climate change would be dead on arrival. That may be changing, especially if the tax is paired up with rebates to take away much of its political sting. More importantly, the costs and lessons of the financial crisis may effectively swamp the prospects for cap-and-trade. If cap-and-trade has become a dead policy walking, those who care deeply about climate change will find that a carbon tax system has become the last, reasonable policy standing.

Obama Advisor Previews G-20 Summit

With the G-20 Summit approaching tomorrow, Obama Deputy National Security Advisor Mike Froman spoke about the high stakes at the upcoming meeting.

It's no surprise to anybody that we're gathering the G20 at a time of the most severe economic and financial crisis in generations.  These 20-plus countries represent about 85 percent of the global economy and they come together at a time when incomes are falling, unemployment is on the rise, trade has collapsed and financial markets are strained in all of their countries.

To put this a bit in historical context, international cooperation at times of crises is very important.  Most people agree that the Depression was made great by the lack of cooperation, that the Latin American debt crisis of the '80s lasted a decade in part because there was difficulty in formulating a common approach.  But historically, it's proven difficult to cooperate around international crises because nations controlled their own fiscal policies, their monetary policies were dependent on independent central banks, and their regulatory policies were shaped by their own culture and national traditions.  And if you look back at the history of summits, there have been very few examples of summits that have achieved significant gains in terms of international cooperation during times of crisis.

This has become all the most important now because of the interconnectedness of the economy now, of markets now, and of this crisis -- in particular, financial problems in one country spread quickly to others, and exports to all countries are dependent on the ability of demand in each country to rebound. 

There was a global economic summit here in London in 1933.  The U.S. President did not attend and the summit failed to provide what at the time was seen as good direction to try and get out of the Depression at the time. 

The stakes for this summit are very high.  They are magnified by the fact that much has happened since the last G20 summit in November.  The last summit focused largely -- and importantly -- on a number of regulatory issues.  But the economy has declined in November and December, the crisis has spread, and the countries of the G20 have been focused on restoring demand and restoring growth.

And that really is the agenda here.  It's really two tracks: restoring growth, on one hand, and engaging in broad and deep regulatory and institutional reform on the other.

More on the talk here.

And if you're interested in the G-20 Summit, come to NDN's event tomorrow at noon, "The G-20 and Beyond: Challenges Facing the Global Economy." U.S. Rep. Adam Smith, Foreign Policy Editor Moises Naim, and NDN Globalization Initiative Chair Dr. Robert Shapiro will preview the summit and discuss the difficult challenges facing the global economy. Click here to RSVP.

Cars, Banks and the Future of the Clean Economy

Yesterday, the Obama Administration's task force on the auto industry concluded that America's auto industry must downsize.  Drastically.  Cutting 50,000 jobs at GM--the company's proposal--is inadequate, the Administration concluded in its review of the GM plan.  Nor can GM continue to sponsor so many brands which the task force dubbed distracting to management.  Instead, the Administration believes GM should pare back to perhaps Chevy and Cadillac.  As for Chrysler, the Administration ordered it to sell, ie. hand itself over to Fiat or file for bankruptcy.

At issue is the $6 billion or so the industry needs to keep going. 

Does anyone else notice the irony that this pronouncement came on the heels of a plan to provide 1 to 2 trillion dollars to banks to take bad loans off their books with no concessions, no plan for a turnaround, no paring of brands, no industry review or task force, in fact, nothing at all required?

I support bailing out the banks.  And I support doing it without micromanaging the business beyond changing management at the top--and securing warrants to reduce the cost to taxpayers--as I don't think government is well suited to managing businesses.

But I don't think anyone in the government including the task force after reading the industry's plans and conducting one or two trips to Detroit know more about cars than the car industry itself.  Nor does anyone in the government know more about cars than about the banking industry which the government regulates and has been bailing out--and therefore learning about--for over a year at the cost of trillions. 

One other thing about the government's dual standard for financial services and autos bothers me, namely wrapping condemnation of the auto business in environmental rhetoric. While the car industry took a hit from high gas prices last summer--an external shock it could not control--and has shown a consistent tin ear to fuel economy, its problems today have little connection to the environmental profile of cars.  From a strict profit and loss perspective, investing in hybrids and electric cars--though critical to a future that may no longer exist in the United States--is not good for present cash flow.

The primary problem facing all the automakers today, not just GM and Chrysler but Toyota, Honda and the rest is that sales have fallen off a cliff becasue of lack of financing.  Few people can pay all cash for a car.  And currently only those with sterling credit can get a car loan.  The auto industry, from Honda whose sales are down over a third to Chrysler, is a casualty of the financial crisis created by our banks.  But it and the hundreds of thousands of Americans who work in the auto supply chain will now have to pay a far higher price.

The Big Three have one problem the Japanese carmakers don't, their legacy healthcare and retirement costs from when times were good and unions were strong.  These have been exacerbated, however, by the stock market collapse--again a financial problem not of their making. 

If America is serious about reaping the economic benefits of a clean technology revolution that encompasses transportation--as I believe we must be and the President has indicated he believes we must be as well, we can't do it with a gutted auto sector.  By gutting the auto sector, we are only making ourselves more dependent on financial services as the chief engine of our economy--a strategy that has proven ill advised.

To rebuild our economy we need more engineering and less financial engineering.  And to do that we will need a healthy auto sector.  In a previous post I outlined some of the reasons that finance is advantaged in the policy process relative to manufacturing.  Until we address the anti-blue collar, anti manufacturing barriers in our policy process, we will not succeed in placing our economy back on a sustainable path to long term growth.

Sustainable Funding for Sustainable Infrastructure

New York City -- This past Friday, Princeton University's PRIOR Center and the NYU's Rudin Center convened a conference on what's next in transportation. The speakers, who included Mort Downey, former Deputy Secretary of Transportation and leader of the Obama transition team for transportation, Tony Shorris, former head of the New York and New Jersey Port Authority,  current PA chairman Anthony Coscia, and others agreed that we are at a crossroads in transportation policy. 

On the one hand, there has never been more enthusiasm for new modes of transportation such as high-speed rail and new approaches such as vehicle mileage tolling and congestion pricing. Billions in the stimulus bill and the Obama budget for rail have set off a frenzy of excitement about building high-speed rail in the United States. At the same time, however, the old system of funding infrastructure, the Highway Trust Fund, fed by gas taxes, has never been under greater stress. With a new transportation authorization bill likely to move this year, we stand at a key juncture in U.S. transportation policy.

Transportation reform is vital to building a clean economy. Not surprisingly, therefore, much of the discussion at Princeton focused on the irony of trying to fund the reinvention of transportation out of a five-cents-per gallon gas tax -- at a time when reducing gas consumption has emerged as a national security, economic and environmental priority.

Currently, the Highway Trust Fund, built on nickel-a-gallon gas tax accounts for the lion's share of infrastructure funding in the United States -- not only for roads, but for mass transit as well. But the fund essentially depleted (having required a bailout last fall to stay solvent).  Additionally, with construction prices higher but gas usage falling, the gas tax now provides only about half the purchasing power needed to sustain our current system, let alone make improvements.

As a result, many people have been talking about switching to a Vehicle Mileage Tax or VMT as an alternative to the gas tax. A VMT would toll mileage, not gas, enabling the country to reduce gas consumption without starving its infrastructure. However, the "t word," as Mort Downey has described it, whether that refers to taxes or tolls, is highly controversial and recently White House Press Secretary Robert Gibbs struck down a suggestion by new Transportation Secretary Ray LaHood that switching to a VMT is on the table.

One alternative that would sustain historic levels of funding but would not provide funds for much new investment would be a dime-a-gallon tax. That would be the easiest -- if least imaginative -- fix.

A bolder idea is to create a national infrastructure bank as proposed by U.S. Sens. Chris Dodd and Chuck Hagel to tap private money for infrastructure investment, an idea endorsed by NDN. Indeed, the Obama budget would fund such a bank. However, in the current environment, private money is not as available as it was.

Last week, U.S. Rep. Earl Blumenauer, who spoke at NDN's clean infrastructure event in January, introduced Clean Tea legislation to tap 10 percent of revenues from a cap-and-trade system of the type contemplated by the Administration's budget for transportation. Given the key role of transportation in emissions and cleaner transportation in reducing emissions, this makes a great deal of sense. 

Everyone recognizes that the old system of a nickel-a-gallon tax combined with earmarks isn't working. There is a great appetite to reform the basis for funding infrastructure and this year, a real opportunity.

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