The extreme weather experienced this summer across the United States, from the wildfires in Colorado to the searing heat waves and storms on the east coast, has given pause for many to think again about climate change. These events crystalize the risks posed to the environment and our livelihoods, and sensible people outside of Washington are growing increasingly concerned about the negative impacts of climate change in the future.

Across the world, there are governments who are responding to these risks through legislative efforts to curb emissions. For example, Mexico recently passed a landmark Climate Change Law to address their growing impact on global emissions. Australia continues to move ahead with implementing a carbon price across its economy to incentivize emissions reductions, against a heated political backdrop. Most critically, China, the world’s largest emitter, has made plans to introduce a national emissions trading scheme by 2015 in response to the risks they face if the problem continues without response.

How weird is that? China, Korea and Mexico are adopting cap and trade before the U.S.? What happened to our global leadership on environment – and our optimism about meeting the climate challenge in a way that plays to our strengths in capturing new market opportunities?

Washington has completely lost its way on this issue. Congressional efforts to enact an economy-wide cap-and-trade program blew up due to excessive use of auctions – leaving it vulnerable to a “cap and tax” charge. After the 2010 failure of the Kerry-Boxer effort in the Senate, the issue fell off the political radar screen completely. But the problem wasn’t solved. But “cap and trade” doesn’t have to be “cap and tax.” A simpler program would involve free allocation of allowances, which could be gradually lowered to meet climate objectives.

Hardly anyone in the political sphere is willing to admit that we’re bound for one of two ridiculous approaches: either EPA will advance its efforts to regulate greenhouse gases the old fashioned, command and control way – which could turn out to be the most expensive approach possible; or else, we’ll face the high costs of adapting to climate change – by re-engineering our coastal infrastructure, redesigning flood and drought management systems for more frequent occurrences, and upgrading our public health systems to address the spread of mosquito borne diseases. That ain’t cheap.

Business knows it does not have the luxury to wait for Washington to enact sensible policy to encourage emissions reductions. So companies have responded with corporate strategies to manage the real risks to their operations and assets posed by climate change. Yes, companies are preparing for the high costs of adaptation. However, these plans are costly and should not substitute for Congressional action to incentivize mitigating activities. And delay will only increase the costs further.

The U.S Congress could use this opportunity to begin talking about climate again, to face the challenge with a low cost, market-based response. Cap-and-trade can be done with a minimum of auctioning – so the “tax” aspect can be eliminated. The emissions trading policy tool has been demonstrated to be the most cost-effective policy for achieving an environmental target, allowing private businesses to determine the best way for them to reduce emissions. Maybe the time has come to give it another look.

Newton’s first law of motion states that unless it is acted upon by some external force, a resting object will remain at rest. It’s my opinion that this law also applies to human behavior. Our nation’s history of action around climate change is a perfect example.

There is energy and urgency building around the need to address climate change. We are optimistic about our ability to reduce man-made contributions to global warming. Some nations have set ambitious goals toward cutting emissions and the United States has participated in international conversations about addressing climate change, but never to a truly satisfactory end. And while the U.S. has made adjustments to energy consumption and greenhouse gas emissions here and there, we have a long way to go.

Lacking a compelling external force, we’ve continued to consume quantities of fossil fuels that produce tremendous amounts of greenhouse gases. We’ve remained largely at rest, even though coal-fired power plant closures are accelerating and the use of natural gas in the energy sector is rapidly expanding.

What’s the push that will get us moving? What will make us a leader? How can we turn these small changes into big impacts?

Ideally, we need federal policy that places a reasonable cap on carbon emissions. (State-level policy is admirable, and we should embrace this momentum, but it is far from ideal. Imagine the difficulty for American businesses operating in multiple states to achieve widely varying benchmarks for carbon emissions.) Despite past resistance to federal cap-and-trade proposals, this solution should stay on the table. We must be willing to have open and honest discussions about the need to reduce emissions, about what reasonable caps look like and about the effort it would take to achieve necessary changes.

We also need to be investing heavily in cleaner energy options to satisfy the growing need for electricity. I cannot overstate the need for a far more diversified energy portfolio that includes a robust commitment to energy efficiency. Fossil fuel combustion is the single largest contributor to greenhouse gases. We must significantly reduce our consumption of oil and coal and increase our use of low-carbon energy sources such as nuclear, wind and solar.

Nuclear energy is the only baseload source of carbon-free electricity. It is heartening to see the construction of new nuclear energy facilities in Georgia, South Carolina and Tennessee. But with an eye to the nexus of energy and environmental policy, we must do better.

The initial investment in nuclear infrastructure is significant, but pays off over 60 years of operation thanks to the stable, low cost of uranium fuel. If we are dedicated to lowering carbon emissions, we must be willing to make those investments and to embrace research and development in new energy technology. The payoff in low carbon electricity over the long-term is well worth it. We should also continue to support federal and state-level programs that incent and help secure investment in infrastructure development to promote the steady growth of these critical energy sources and the infrastructure to move power where it’s needed. We must take the risk that we know we need to take to make important changes in our nation’s energy consumption. New, more cost-efficient or more accessible clean-energy technologies –small-scale nuclear reactors, for example – can put energy diversification in closer reach and extend its uses. Nuclear energy technology already is used in some countries to desalinate water in regions where the availability of fresh water is scarce.

These commitments and conversations will ultimately lead to concrete steps at home, steps that will position us as a leader in the global effort to reduce greenhouse gas emissions. We have the opportunity now to leverage the interest and optimism to put us on a trajectory toward cleaner air, cleaner water and a more sustainable energy future.

Carbon taxes have been in the news of late. On July 10, former GOP Congressman Bob Inglis of South Carolina launched the Energy and Enterprise Initiative to promote a ‘revenue-neutral’ carbon tax as a Republican idea. On July 11, the American Enterprise Institute (AEI) hosted a hush-hush meeting of carbon tax advocates titled Price Carbon Campaign/Lame Duck Initiative. On July 13, former Reagan administration Secretary of State and Hoover Institution distinguished scholar George Schultz announced his support for carbon taxes.

For those who regard affordable energy as a blessing, the recent uptick in Republican advocacy for carbon taxes is troubling, especially because two of Gov. Romney’s top economic advisors, Greg Mankiw and Douglas Holtz-Eagan, are long-time proponents.

For both political and policy reasons, GOP leaders should oppose carbon tax advocacy as dangerous folly.

The GOP has two main product differentiators going for it in electoral politics. The GOP supports spending cuts rather than tax increases to reduce the deficit. It also supports developing America’s abundant oil, gas, and coal resources to grow the economy, create jobs, and boost tax revenues. In contrast, many Democratic leaders want to raise taxes, restrict coal mining, ban construction of new coal-fired power plants, block the Keystone XL pipeline, and stifle the shale gas revolution.

For Republicans, both victory in November and a clear mandate for the next four years depend upon drawing a bright line between a GOP that is pro-energy and anti-tax and ‘progressive’ movement that is pro-tax and anti-energy. Advocating a massive new energy tax would blur the battle lines and demoralize the GOP’s Tea Party base.

Recall some recent history. Twenty-nine Democrats who voted for the Waxman-Markey cap-and-trade bill lost their seats in the 2010 elections. A key reason for this political “slaughter,” which helped the GOP regain control of the House, is that opponents exposed cap-and-trade as capntax – a stealth tax on energy. By what political calculus does the GOP now win elections by advocating an unvarnished energy tax?

Turning to policy considerations, proponents say we should tax ‘bads’ like pollution instead of ‘goods’ like capital or labor. Carbon dioxide (CO2) is a ‘bad,’ they contend, because its impact on global climate imposes a ‘social cost.’ But the social cost of carbon is very far from being a known quantity. Try, for example, to discern carbon’s social cost in the following information.

§ Global tropical cyclone frequency has declined slightly since 1970, while tropical accumulated cyclone energy (a measure of hurricane strength) has declined significantly since 2006.

§ As U.S. urban air temperatures increased over the past three decades, heat-related mortality and air pollution levels declined.

§ Since the 1920s, global deaths and death rates related to extreme weather declined by 93% and 98%, respectively.

Whatever your views on climate science, the claim that carbon taxes tax ‘bads’ rather than ‘goods’ is misleading. Enterprises don’t emit CO2 for the fun of it. They do so in the process of creating value and employing people. Carbon taxes are indirect taxes on labor and capital.

In a genuinely free society, taxes are used solely to raise revenue to pay for public services. That is, taxes are not used to regulate behavior, reward friends and punish enemies, or rig the marketplace. Carbon taxes deliberately aim to do those very things. Inevitably, the extent of the tax will be determined not only by fiscal considerations but also by social-engineering/wealth-transfer agendas and by sky’s-the-limit speculation about social cost.

Rep. Inglis says carbon taxes are a good idea even if one assumes global warming is “hooey,” because pricing carbon will reduce air pollution and improve energy security. But basing the social cost of carbon on air pollution risk also opens the door to excessive taxation, because air pollution alarmism is more pervasive and better entrenched than climate alarmism. For example, the EPA imputes scores of billions of dollars in annual health damages to fine particulate matter (PM2.5) at concentrations below the lowest levels associated with mortality risk in the epidemiological literature.

The energy security cost of oil consumption is another gauzy subject. Oil and government are joined at the hip in the Mideast, and some Mideast governments fund terrorist groups. But these generalities don’t enable us to calculate a ‘terror tax’ on oil. For starters, the vast majority of the oil we consume is not from the Mideast. Moreover, as Jerry Taylor and Peter Van Doren of the Cato Institute found, there is no discernible relationship between OPEC profits and incidents of Islamic terror.

Would the U.S. have as large a military presence in the Mideast if the region contained no oil? No. But protecting the Straits of Hormuz is a service our nation provides to the entire world. If anything, Gulf oil producers and oil-importing countries in Europe and Asia should pay to relieve the burden on U.S. taxpayers. Instead, carbon tax advocates would have U.S. citizens pay ‘twice’ – not only on April 15 but each time we purchase any good or service made with carbon-based fuels. That would place another drag on the economy. Economic stagnation is productive of malaise, not national security.

Inglis, Mankiw, and Holtz-Eakin favor a revenue-neutral carbon tax, with the proceeds used to reduce existing taxes on labor or capital. That has a certain appeal as a blackboard exercise, but the sausage factory is not kind to economic logic. One faction would clamor for a slice of the revenues to promote ‘clean energy.’ Another would demand a chunk to rebuild America’s aging roads and bridges. Still others would insist that a piece be used for deficit reduction. A panel at the AEI powwow featured presentations by “deficit hawks.” Of what value is a revenue-neutral tax to deficit hawks?

For the Obama administration, a big part of capntax’s appeal was its potential to raise $400 billion in additional annual federal revenues. This squeeze-the-taxpayer mentality would return with a vengeance in any serious debate about carbon taxes. Revenue neutrality is a pipe dream.

For economic liberty advocates, there are only two defensible reasons to consider carbon taxes. One is if we’re stuck with a choice between carbon taxes and cap-and-trade. Back in 2007-2010, some clever people argued that we had to support carbon taxes because “you can’t beat something with nothing.” They were wrong. We beat cap-and-trade by exposing it as a tax. Why on Earth should we support carbon taxes now, when cap-and-trade is dead?

Some limited government advocates may be intrigued by the possibility of a grand bargain in which a national carbon tax replaces all federal and State anti-carbon regulatory programs. Those include not only the EPA’s greenhouse gas regulations but also the Renewable Fuel Standard, sub-rosa carbon regulations like the Utility MACT Rule (which effectively bans the construction of new coal power plants), California’s EPA-awarded power to meddle in fuel-economy regulation, California’s cap-and-trade program and low-carbon fuel standard, RGGI, and State renewable portfolio standards (RPS).

That the EPA, California, and major environmental organizations would agree to such a bargain is unthinkable. They have spent 40 years fighting for the regulatory mandates they currently administer or influence, not for carbon taxes. The only deal they might accept is one in which they get carbon taxes and carve-outs for regulatory sacred cows.

Republicans should eschew the politics of preemptive capitulation and keep their eye on the prize. The November elections could significantly change the correlation of forces in the nation’s capital, creating real opportunities to roll back the EPA’s greenhouse power grab without compromising the GOP’s bona fides on either taxes or energy.

Optimism about federal climate change leadership is in short supply. With uncertainty over extensions of key tax credits for wind production, and plans for cap and trade solidly on the back burner, clean energy developers are looking to state and local leaders for ways to avoid a tumble off the federal financing cliff.

My colleagues and I hope to find a new way forward. That’s why this week Clean Energy Group (CEG) and the Council of Development Finance Agencies (CDFA) are launching the Clean Energy + Bond Finance Initiative (CE+BFI), a new partnership to advance clean energy through the power of bond financing institutions. CE+BFI will work with institutional investors, public finance agencies and public clean energy fund managers across the country, finding ways to increase clean energy investment by an additional $5 billion to $20 billion in the next five years.

To assist the CE+BFI in its mission, CDFA and CEG have also launched a national Task Force on Clean Energy Bond Financeto support the partnership. The Task Force includes over 50 representatives from the top public and private clean energy and development finance organizations throughout the country, including states, cities, law firms, private banks, and other clean energy and bond finance industry professionals. A full list of confirmed participants is available online.

Why are we doing this? For starters, it’s because it’s crucially needed. With or without congressional action, the country needs new sources of clean energy financing to scale up the industry.

What’s more, the Great Recession of 2008 has exacerbated the decline in federal support, leading to reduced bank lending in the clean energy sector by both European and American banks. For example, many American banks do not offer loans that exceed 10 years, dealing a blow to infrastructure investment in clean energy projects and resulting in higher lending costs and reduced capital availability.

This perfect storm of federal inaction and private bank pull-back on lending has led many energy experts to turn to states and localities for the public investment strategies of the future. Indeed, in these tough times, we might have missed the most obvious funders that have been right under our noses for years: the public economic development finance agencies all over America that know how to raise capital at the scale needed in this sector.

In the U.S., over 50,000 municipal authorities access the capital markets to finance capital improvements, schools, hospitals and economic development projects. It is the scale available through access to these markets that is now needed for sustained clean energy development. Bond agencies can now begin to work with state clean energy funds to solve the clean energy problem of the next decade: how to use existing state clean energy and bond tools to massively scale up clean energy capital.

Development finance through the issuance of bonds has already begun to bring new capital into the clean energy space. Examples include the “Morris Model” for solar installations and bond-funded programs for clean energy economic development in New Jersey. But much more work must be done to use bond finance at the scale needed to expand the industry. Hundreds of billions of dollars are needed to scale up renewable energy, energy efficiency, and manufacturing support.

CE+BFI, with advisory assistance from the Task Force, will immediately begin the work of identifying opportunities and barriers facing stakeholders looking to issue bonds for clean energy development. The initiative will then look to launch pilot partnerships to finance clean energy projects in six to eight states and localities.

There is good reason to rely on bond finance for future clean energy investment. As to the capital they can raise, municipal bond issuers in March 2012 alone brought 1,196 deals to market, worth $34.50 billion total. That makes $78.3 billion in 2,927 deals in only the first three months of 2012, the kind of financing needed for a dramatic scale-up of the clean energy economy across America.

This strong showing is in contrast to a great deal of misconception about the use of bond financing by state and local governments. The truth is that municipal bonds remain safe investments, a fact evident in the market’s lack of reaction to high-profile negative news. CE+BFI will emphasize the issuance of revenue bonds, not general obligation bonds backed by a state or municipality, so communities will not be on the hook for project finances. These bonds will be backed by project revenues, and not risk the credit standing of states and local communities.

With this new CE+BFI partnership, we hope to work with many new partners in the coming months, including pension funds and other institutional investors who are looking for safe, secure ways to invest in the clean energy economy. We think municipal bonds, backed by sound clean energy project revenues, could be an important new asset class for institutional investment.

Since 2006, no other developed country has reduced national CO₂ emissions as much as the United States. A surprising outcome, given the last few doom-ridden years since the failure of cap-and-trade in the US Senate in 2010. But America’s climate accomplishments trace their lineage back far before Waxman-Markey and the American Power Act. It didn’t start in 1997 with the Kyoto Protocol, or even in 1992 with the creation of the United Nations Framework Convention on Climate Change (UNFCCC).

US action on climate change began in the early 1970s — we just didn’t know it was climate policy at the time. In response to the successive oil crises, the Ford and Carter Administrations funded major new energy R&D efforts to explore new fuels and new technologies that could hedge the United States’ reliance on OPEC oil and expand American energy diversity. There were many successes from these early investments, including the vaunted first commercial solar panels and wind turbines. But it was the Department of Energy’s investments in hydraulic fracturing and horizontal drilling for shale gas that ultimately led to the dramatic emissions reductions we’re seeing today.

There is a lesson here for supporters of solar, wind, advanced batteries, biofuels, next-generation nuclear, and other sources of low-carbon energy: investment in technology works. In fact, this isn’t even the first time we’ve learned that lesson. The two countries to achieve the highest rates of decarbonization since 1970 are France and Sweden, who accomplished such high rates of carbon reductions by deploying zero-carbon nuclear and hydroelectric generation.

The takeaway for climate hawks is clear. If countries want to cut their carbon emissions today, they can follow the example of Sweden, and France by deploying low-carbon power like conventional nuclear or natural gas generation. If renewables advocates seek a future with high penetrations of solar and wind, they can pursue cradle-to-market public policies similar to the federal government’s shale investments, which led with early R&D and followed with demonstration projects and tax policy support for deployment.

As we documented in our April 2012 report “Beyond Boom and Bust,” co-authored with Mark Muro of the Brookings Institution and Letha Tawney of the World Resources Institute, clean energy policy is best led by doubling down on America’s energy innovation system and re-designing federal deployment policies to prioritize cost declines and performance improvements. The best path to sustained decarbonization is to bet on domestic energy resources, resource diversity, and cleaner technologies — just like we did with shale gas.

Although global frameworks have not yet been agreed, many countries already have taken steps toward building environmental externalities into business decision-making. In addition to the European Union's emissions trading system and the soon-to-launch California system, several other initiatives have emerged. Australia recently introduced a carbon price, Quebec continues preparing for its cap and trade market, and China has published rules for a future carbon offset market. In a similar vein, the United Kingdom announced at the 2012 UN Conference on Sustainable Development ("Rio+20") that, beginning next year, it will require emissions reporting from large listed companies on the London Stock Exchange.

Reports of recent discussions at the American Enterprise Institute about a revenue-neutral carbon tax may signal an emerging alternative to cap and trade. If policymakers conclude that increased federal revenues are needed, a carbon tax could be viewed as a consumption-based tax, which economists generally believe would be more conducive to economic growth. Although decisions on pricing environmental externalities involve both scientific considerations and social, cultural and political context, some lessons may emerge from policies developed in other jurisdictions.

Where stable energy-policy frameworks exist, business innovation can follow. That was the clear message of the

Green Economies Dialogue, a series of in-depth, global discussions about how to cultivate and maintain greener growth and jobs conducted in the run-up to Rio+20. General Electric CEO Jeff Immelt made a similar point in a recent interview with the Financial Times, commenting about the EU's carbon targets that "standards sometimes really drive innovation." (Financial Times, 30 July 2012, page 1.)

Multinational businesses can – and do – manage variations in pricing and regulatory frameworks that they encounter across the globe. But an emerging trend on these issues, coupled with an emphasis on intellectual property rights and free trade, could nurture continued innovations in energy technologies.

Matt Haskins is a principal with PwC, where he leads PwC’s Sustainable Business Solutions tax practice, focusing on renewable energy, energy efficiency investments and tradable environmental rights.

Is momentum building to act on climate change? No. With the world economy still in shambles; with Germany building new coal-fired power plants and closing nuclear facilities; and with Cap and Trade a losing political position (aside from California and New England); the answer is no. Finally, the talk about a carbon tax appears to be a policy idea by a few that ignores the current debate on taxes.

The current spate of extreme weather events may or may not be related to global warming. But against a backdrop of a sluggish economy and a close presidential race, climate policy is not likely to rank high on the agenda of debatable issues. What’s more, greenhouse gas emissions in the U.S. have been falling, a trend that will continue as we become increasingly efficient in our energy use while at the same time shifting to natural gas as a boiler fuel for industry and electric power generation.

At the same time, a double-dip recession in the European Union has dampened their enthusiasm for embracing new carbon-reducing initiatives while prices under existing emission-trading schemes in the EU have plummeted. And no one in Europe or the U.S. is talking seriously about a carbon tax.

Despite all the hype, renewables will play a minor role in greenhouse gas reductions for the foreseeable future. Thus the best strategy for achieving lower carbon emissions globally is greater use natural gas and nuclear energy. The technology for shale gas recovery is now spreading from the U.S. to all corners of the world. For example, China, the world’s largest GHG emitter, is planning major investments in the Ordos Basin and other potentially productive shale gas fields. At the same time, China has 27 new nuclear plants under construction, compared to one in the U.S., and is planning to build dozens more.

How can America help address global warming? By adopting policies that encourage, rather than inhibit, development of our domestic natural gas and nuclear resources.

To quote Hemingway, the notion that momentum is building for a global agreement on climate change is a “triumph of hope over experience.”

History has demonstrated that the worst time to make long-term decisions is in the midst of a crisis, be it perceived or actual. There is nothing like the drum beat of an apocalypse to generate political action. This year’s heat wave and wildfires are being promoted at least as semi-crises, and there has been no lack of speculation that they are the result of human induced global warming and that we might be approaching a tipping point. But like the Red Queen who said sentence first, verdict later, the modern version seems to be action now, facts later.

First the facts. To validate the human-induced global warming theory, atmospheric water vapor must increase. Increased water vapor has the effect of enhancing the warming effect of increased CO2 and greenhouse gas concentrations. It’s referred to as positive feedback. Without positive feedback, the effect of doubling CO2 concentrations would be about one degree Fahrenheit. In addition, despite assertions to the contrary, the level of knowledge about the climate system and influences on it is meager. In the last Intergovernmental Panel on Climate Change (IPCC) report found of the climate variables only two are well understood. Under conditions of such uncertainty, it would be foolish to claim that the science is settled and that future impacts of emissions can be accurately forecast.

This summer is hot, very hot, and it has caused a great deal of damage. What we are experiencing is similar to the “dust bowl” of the 1930s, which had nothing to do with human activities that increase emissions – activities like producing goods and services, heating and cooling our homes, using information technology, and commercial and personal mobility. The jet stream has stayed north and we don’t know why, but that has had the effect of making our summer drier and hotter. Nonetheless, advocates will grasp any straws to push their agenda.

That is how the fires in Colorado have been leveraged. Activists have eagerly used the situation to (point) amplify climate change arguments while at the same time ignoring many natural, measurable factors. For example, residential development has moved to the edges of forests in recent years, and land use and forest management rules have neglected build up. In Colorado, a “hands off” policy has resulted in millions of acres of densely packed old-growth forest that’s susceptible to wildfire. Historically there have been 20 to 80 tree stems per acre in national forests. The density now is more like 400 to 1200 stems per acre.

In the US, carbon emissions have declined and some project that they will be at 1990 levels in the not-too-distant future. This is the result of technology, a shift to natural gas to generate electrical power, and the changing composition of our economy. The Energy information Administration (IEA) forecasts that “total energy-related emissions of carbon dioxide in the United States remain below their 2005 level through 2035.” It is ironic that we have outperformed most EU nations in reducing carbon emission because we have relied, primarily, on market forces while they have used the heavy hand of government.

Although the apocalyptics will never abandon the belief that only government mandates and control of energy use will achieve their emission goals, Jesse Ausubel of Rockefeller University has demonstrated that the global economy has been decarbonizing for well over a century. Market forces have moved us toward the goal of more efficient energy use and reduced carbon intensity, and if allowed, will continue along the path that environmentalists favor, just not at their pace. They will also contribute to job creation and economic growth, which we desperately need.

The global economic problems that are causing so much pain and turmoil are not going to be solved quickly, maybe not even this decade. Under these circumstances there is virtually no chance of a global agreement on emission reductions. That is certainly true among developing countries, which need to raise their standards of living. That requires, among other things, the use of fossil energy to generate electricity and for transportation.

Renewed talk of a bi-partisan agreement on a carbon tax is just that – talk. The only way that a carbon tax could get serious consideration at a time of a weak and weakening economy is as part of comprehensive tax reform. The Simpson-Bowles Commission recommendations, which had tax reform as one of its planks, went nowhere. The Administration and Congress has shown themselves incapable of seriously addressing tough problems, so tax reform and other reforms have to wait for another day – a day when the nation’s interests trump personal interests and partisanship.

While the world is in economic decline, the USA's stagnant economy, and the renaissance in natural gas discovery which is significantly displacing coal generation -- all are driving down greenhouse gas emissions by default. But the reduction is far too late and by far too little.

The 2009 National Academy of Sciences, "“Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use” study concluded, "The damages the committee was able to quantify were an estimated $120 billion in the U.S. in 2005, a number that reflects primarily health damages from air pollution associated with electricity generation and motor vehicle transportation. The figure does not include damages from climate change, harm to ecosystems, effects of some air pollutants such as mercury, and risks to national security, which the report examines but does not monetize. "

In October 2011, The International Energy Agency (IEA) warned on the need to reduce global fossil subsidies. (www.reuters.com/article/2011/10/.../us-iea-idUSTRE7931CF201110... They concluded, "Global subsidies for fossil fuel consumption are set to reach $660 billion in 2020 unless reforms are passed. "

Tackling climate change emissions and reducing the harmful impacts requires true global cooperation, selection of options that are absolutely cost-effective and job creating, and accelerating removal of subsidies that promote carbon intensities while extending and enhancing incentives to drive the scale of clean energy and high-value efficiency applications. That is not happening.

Bill McKibben's article in Rolling Stone this past week sums it all up, "All told, 167 countries responsible for more than 87 percent of the world's carbon emissions have signed on to the Copenhagen Accord, endorsing the two-degree target..... Even the United Arab Emirates, which makes most of its money exporting oil and gas, signed on. The official position of planet Earth at the moment is that we can't raise the temperature more than two degrees Celsius – it's become the bottomest of bottom lines. Two degrees." I couldn't agree more.

I write in this week’s Energy Expert blog as one of the participants in recent left-right coalition meetings intended to test the political and policy barriers to pricing carbon in an effort to establish a comprehensive federal program on climate change. As the head of the energy and climate program for one of America’s largest consumer advocacy organizations, I see our work in terms of what is best for working families and the future of our planet: a coherent national energy policy recognizing that the science of climate change requires transformative changes to our electricity and transportation infrastructure to better serve the interests of both consumers and the climate. Our power and transportation systems were designed to accommodate inexpensive access to fossil fuels, and we were either unaware of the environmental problems associated with such dependence or unwilling to face those costs. Today we no longer can avoid the financial and environmental costs of our fossil fuel dependence.

Pricing carbon emissions alone will not successfully address climate change (whether that price is allocated through a carbon tax, or a “cap and dividend” approach or cap and trade). Price carbon too high absent consumer mitigation, and the high price―even ratcheted up gradually―will prove too destabilizing for the economy and ultimately be counterproductive. Price it too low, and consumer and investment behavior fails to change. A primary point of pricing carbon is actually generating the federal revenues needed for sustainable energy deployment and development: providing the upfront financing to put solar panels on the roofs of 20 million American buildings, money to efficiently retrofit a similar number of structures, and begin the electrification of the transportation sector through plug-in electric hybrids and expansion of mass transit―while leaving enough money to shield moderate- and working-class Americans from the regressive aspects of the carbon price.

We must admit that our centralized model of fossil fuel production and distribution will only become less affordable and less sustainable the longer we wait. The short term costs associated with transforming to a decentralized, low-carbon system are small compared to the advantages to our economic competitiveness in the long-term. Even those within the utility and oil industries privately (and sometimes publically) acknowledge that such a transformation to the era of low- and no-carbon energy is a matter of when, not if. And Public Citizen understands that the quicker we move today to arm our communities and small businesses with the tools they need to generate their own zero emission energy efficiently and affordably, the more competitive our economy will be tomorrow.

A mistake would be using carbon pricing revenues not for assisting with this needed transformation, but rather as a fallacious political plug to make up the financial losses associated with slashing corporate income taxes, estate taxes or other ill-advised tax policy misadventures. There are some who are eager to compromise before the debate even begins, arguing that the only political support for pricing carbon must arrive as the revenue-raising savior for the bankrupt strategies of slashing the powerful’s federal tax liability. Substituting income or estate tax reductions with a regressive tax on energy consumption is bad fiscal policy and bad climate policy.

Public Citizen understands that after the political dust settles on this Citizens United election, fossil fuel extractive and production industries will remember that the strict-constructionalist, conservative Supreme Court affirmed the federal government’s duty to regulate greenhouse gas emissions under its existing Clean Air Act authority. Votes may exist to successfully delay this inevitable regulation, but not to eviscerate these statutes. These same interests seek alternatives to such regulations serving as the sole basis of national climate change policy, and Public Citizen understands that once the silly season of politics concludes with the November election, leadership will be defined by those who will continue to promote political and rhetorical grandstanding to protect the unsustainable status quo, and those such as Public Citizen that seek solutions to help position the United States to compete and win in the next era of sustainability.

Extreme weather events — including droughts, wildfires, and heat waves — have indeed thrust the topic of climate change into the limelight. Some influential climate experts from the American Meteorological Society - explicitly link now some extreme weather events with climate change in their official publications. This is a scientific breakthrough. The New York Times’ David Leonhardt wrote an interesting article also saying that despite the odds, the nascent renewable - energy industries are thriving as costs continue to come down - although Leonardt curiously fails to link this change to the Kyoto Protocol carbon market that puts a price on carbon, making dirty energy undesirable and more expensive than clean energy, which becomes more profitable. This is why clean energy is gaining momentum now. The United Nations Kyoto Protocol carbon market is now trading $200 Bn/year as of the end of 2011 and has funded much of the world's innovation in clean energy. China is the recipient of $50Bn in UN Clean Development Mechanism Projects, and became the largest exporter in solar and wind energy equipment in the world since the Kyoto Protocol and its carbon market became international law in 2005.

We are in the eye of the storm. Major change always happens in a ragged and somewhat confusing way - it is not a smooth transition that is clear to the observer. And there is more change than meets the eye. The carbon market is now mandatory in four continents: EU, Asia, Australia and the Americas (Canada and now also in the USA, California). As the author of the carbon market of the Kyoto Protocol I applaud these regional carbon market developments which are starting to converge -- due to what economists call "no arbitrage" conditions. The carbon market provides healthy economic incentives for clean energy - and a market mechanism to put a fair price on carbon emissions - thus changing the use of energy and therefore the production of all goods and services in the world economy in the right direction.

And yes, an overarching agreement including the United States and other parts of the world is needed to address global warming to cut global greenhouse-gas emissions. The Kyoto Protocol's limits were to expire in 2012 - but were extended in Durban COP 17 to 2015 together with a mandatory agreement to continue globally after 2020. The Protocol itself remains as international law. A pionnering overarching global agreement was the Kyoto Protocol in December 1997and a global extension is on the way. In Durban South Africa December 2011, parties of the United Nations Climate Convention on Climate Change - which includes the US - adopted the Durban Platform for Enhanced Action, which launched a new round of negotiations aimed at developing further the Kyoto Protocol or otherwise a legal instrument for mandatory limits of global emissions by the nations of the world - which is the essence of the Kyoto Protocol. This Platform was voted by the nations at COP17. Once a mandatory limit on emissions is set for all nations the natural next step is to allow flexibility for overemiters to buy credits from underemiitting ones. In this process the global limits and preserved. This is, in essence, the carbon market I designed and wrote into the Protocol in 1997. It is now trading $200 Bn/year and growing branches all over the world.

What else is needed in order to spur more concrete action on this front? Is a carbon tax possible, both politically and economically? What other options should be on the table?

A carbon tax is possible and desirable at the national level - and it tallies well with the global carbon market. In fact any national solution to limit emissions works well with the Kyoto Protocol's limits. But at the international level - where global emission limits are needed - a carbon tax is nearly impossible. Think of it this way - who would be able to collect taxes from the nations of the world - would we need to create a global tax authority? This is not likely to happen in our life time. The carbon market is much more flexible than taxes and achieves something that taxes do not achieve: it limits strictly global carbon emissions. This is why the global carbon market will continue to flourish - having achieved in 2011 $200 Bn of annual trading the carbon market is expected to become the largest commodity market in the world. Not bad for a market solution that we created in 1997 - and which became international law only in 2005.

Despite all these advances, the reality today continues to be grim. We have procrastrinated so long that now - rather than slowing down emissions we need to actually reduce the carbon that is already in the atmosphere. I call this a "negative carbon solution(TM)". It requires technology - no carbon market can actually take carbon from air. In Copenhagen I proposed the Green Power Fund to implement a solution involving carbon negative technologies. This is a $200 Bn a year private/public fund to build 'carbon negative power plants' -- particularly in developing nations of Africa, Latin America and the Small Island States. These nations can use the Clean Development Mechanism to channel the $200 BN/year already traded by the carbon market to build carbon negative power plants that produce economic progress while cleaning the atmopshere. I proposedand published this in Copenhagen COP15 December 2009 - while I was working for the Papua New Guinea delegation,gave the proposal to Mr. Pershing of the State Department, and to Will Pizer of the US Treasury -- and my proposal was taken up by Secretary of State Hillary Clinton in the next two days, who announced it in Copenhagen COP15 as US proposed policy. It had a warm reception. The idea became a seed with irresistible growth. It was adopted in December 2011 at the Durban South Africa COP 17, now called the Green Climate Fund. The difference is that my concept of the Green Power Fund is funded by the carbon market - the $200 Bn that is already traded - and will build carbon negative power plants. The Green Climate Fund is more diffuse as a concept: it aims to mitigate effects of climate change in general, and has no identified source for funding. In my view the two concepts will converge - the Green Power Fund I suggested and the Green Climate Fund that was voted in Durban, South Africa. How effective can the Green Power Fund be in taking the edge from climate change concerns?. It can be transformational. It is targetted to making the problem the source of the solution. The $55 trillion global power plant infrastructure is responsible for about half of the world's carbon emissions. If these same power plants are fitted with new carbon negative capture technologies - for example that of the Global Thermostat LLC www.globalthermostat.com -- the worse offenders - the power plants - can reverse course and actually clean the atmosphere. A coal power plant can become a sink of carbon emissions if fitted with carbon negative Global Thermostat technology. And the CO2 thus captured can be used profitably to produce synthetic fuels, plastics, to carbonate beverages and food, for greenhouses, to feed algae that produce clean fuels, to make synthetic gasoline from air and water anywhere in the wworld - and generally to make money. The whole thing is profitable and it creates new jobs.

My response to the question in unequivocal. There is an underground swelling that is difficult to pin point but emerges in many parts of the world - new cleaner and profitable technologies, new international mandates to limit emissions, and new mandatory carbon markets across four continents that put a price on emitting carbon. As President Bill Clinton said last week at a speech in Oxford University UK - the issue now is timing. Can we move fast enough to prevent the risk of potentially catastrophic climate change? "Nobody knows" - he said. "But when you are playing to win, you don't give up - you just keep on playing." I agree.

A price on carbon emission is necessary to make real headway in addressing global warming. Without it the public picks up the bill for the costs of carbon that include destructive changes in climate patterns. And though carbon pricing remains politically contentious, it can be a viable solution if revenue is paid out as a rebate to energy ratepayers.

Right now, power companies are free to pollute at will and pass on the costs of doing so to the public. In economic terms, the incurred costs of pollution are “externalities”—it’s essentially a cost that people like us, who don’t profit directly from emitting harmful gases, are stuck with. Meanwhile, the companies responsible for dirtying our air and altering our climate are able to pad their bottom lines by avoiding these external costs.

The price we pay for allowing emissions to go untaxed is significant: higher rates of asthma, more sick days and hospital visits, damage to the environment, and lost lives. Other downsides are less conspicuous but just as real: hampered innovation, disincentives to invest in renewable energies, and the shelving of promising energy efficiency projects.

The government recognizes the danger to society posed by carbon emissions. The EPA factors this into a figure known as the “social cost of carbon,” which is used to assess the benefits of regulations. While, unsurprisingly, there’s disagreement among experts over how this value is tallied, the use of such a figure still represents a landmark admission by the government: The damage to our nation’s long-term wellbeing from the emission of greenhouse gases cannot be ignored.

There is an approach that could shift these costs back to those responsible for them while easing the pain of rate hikes for consumers. The government would charge polluters for their emissions use the money raised to essentially reimburse electricity users for the uptick in the price of their bills.

Whether through a tax or a capping structure, utility companies would be likely to pass their costs along to consumers—often a major sticking point for those arguing against the idea. But if consumers were compensated they’d win twice over: they wouldn’t have the costs of dirty air foisted upon them and they would not have to feel the economic pain of transitioning to cleaner energy. It could even be a money-maker for households that conserve energy but would still get the refund check.

In 2009 a similar plan had been proposed as legislation—the CLEAR Act. Like other carbon pricing plans, the act didn’t pass political muster with so many in Congress adhering to the belief that climate change is not a man-made problem. But a revival of such a plan could stand a chance now and should be given serious consideration.

It’s an approach that could ease the transition to a carbon pricing policy that has had strong detractors and powerful political enemies. Power companies would be unable to make the argument that their customers would be saddled with skyrocketing rates for their electricity.

And in the long-term, the public might actually see savings not only in better health and cleaner air but also on their electricity bills through green energy innovations. With the full price of carbon-burning fuels exposed, other, cleaner technologies will be better investments. Companies would see opportunities in generating carbon-free energy and compete to deliver it.

With the scientists continuing to express concern over the trajectory of our planet’s temperatures, and the erratic weather that may be a result, public opinion seems to be turning towards action. With a plan that would transmit the right incentives without hurting pocketbooks, Americans might just be prepared to take the leap and control our emissions.

Drought, fires, noxious politics: Is there any real reason for hope in the realm of climate change mitigation? You might not think so.

But as it happens, there really are solid grounds for encouragement, and David Leonhardt captured a lot of them in his surprisingly optimistic essay on climate developments in The New York Times last week.

Leonhardt’s welcome contribution was to remind us that an investment-oriented, technology-driven push toward climate sanity has begun to deliver real progress.

Governments of the U.S., Europe, and China have all spent hundreds of billions of dollars on clean-energy research and deployment. The price of solar and wind power have fallen precipitously. And as Leonhardt noted even the natural gas boom proves the point. Not only has the “shale gale” been facilitated in very specific ways by government investments but it is now generating as much electricity as coal in the U.S.—something that would have been unthinkable not long ago.

Beyond that, while Washington may be convulsed in politics and denial, most Americans believe that the climate is changing and support efforts to clean up the energy system. For that reason, dozens of states and scores of regions remain committed to climate mitigation, clean energy innovation, and zero carbon solutions of all kinds. Especially intriguing is that fact that more than a dozen states are now developing their own clean energy finance and “banking” to draw private money into the scale-up of clean new technologies.

In short, the emerging view that climate disaster can be forestalled through investments in technology development is welcome and stands in pointed contrast to the "almost-but-not-quite-finally hopeless" picture of the world depicted by Bill McKibben in this month's Rolling Stone. To be sure, the scale of the problem is massive. And yet the possible gains from demonstrating and scaling both existing and disruptive new clean technologies are massive as well. Me? I’m going to stick with the party of hope.

And yet, with that said, saying a word for optimism is not to license complacency. Far from it: Climate science tells us that the rate and scale of the needed decarbonization of the world economy is truly daunting. Global carbon emissions continue to grow. Meanwhile, Bill McKibben is absolutely right that the needed cleanup is going to require rapid and massive achievements far beyond the genuine but modest progress that has been made in recent years. It is precisely the scale of that needed step change that argues, in fact, for the sort of innovation-centered agenda that captivates Leonhardt.

All of which raises the grubby and very specific question that tests my optimism: Where is the money going to come from? How are we going to finance the kind of rapid and massive investments needed to develop, deploy, and diffuse waves of cost-effective low- or zero-carbon solutions? This is where the narrative of hope gets dicey and needs to grapple with the realities of politics.

On this front, the slow and grudging funding of the Department of Energy’s Energy Innovation Hubs program has not inspired confidence. RD&D budgets remain far shy of the $15–25-billion-a year-or-more federal R&D investment target my group and others have been advocating for years now. And meanwhile the end of the Recovery Act’s massive pulse of research and deployment investments (discussed in our “Beyond Boom and Bust” report) raises the simple question tweeted by author Michael Grunwald: “What now?” With overall federal cleantech support falling from a high of $44 billion in 2009 to $16 billion this year to $11 billion in 2014 it’s clear that the nation is already falling off the cleantech funding “cliff.” Clearly new arrangements need to be made for financing the improvement and adoption of existing low-carbon technologies and the development and deployment of new, super-cheap solutions.

And yet, even here I am relatively optimistic. Some of us favor a low carbon tax, a portion of the revenues of which would be dedicated to direct investments in cleantech R&D and scale-up programs. Some of us also favor a version of the “all of the above” Republican energy plan of 2009 that would apply a sliver of the revenue from fossil fuel development fees and taxes to investments in cleantech. And for that matter others of us who worked on the “Beyond Boom and Bust” analysis favor a new brand of time-delimited, performance-oriented declining subsidies.

For that matter while my group here at Brookings has become increasingly interested in sub-national problem-solving such as states taking the lead in the development of clean energy solutions. Early this year, for example, we collaborated with Lew Milford of Clean Energy Group on a paper reviewing the accomplishment of state clean energy funds and noting the funds’ further potential for accelerating the development of robust clean energy industries in states. And soon we will publish a paper suggesting that state clean energy finance banks (aka state “green” banks) hold out great promise for helping to leverage scarce public outlays with infusions of private-sector to finance larger-scale technology adoption. Both these papers point to the great potential of states to drive continued progress even despite Washington gridlock.

And so while optimism is warranted about climate-change mitigation much work remains to be done. To be sure, no shortage of ideas exists for backing up the claims of deliver on climate optimism. But we really do need to get to work.

From the perspective of a community of more than 61,000 Earth and space scientists, it is heartening to see renewed interest in climate change as a result of recent extreme weather events. For decades now, climate scientists have warned that as the planet warms, we will experience more of these extremes. It is definitely time for action, but if our nation is to move forward, we will first need to experience another kind of climate change.

We need a climate in which fear of some of the public policy alternatives associated with addressing climate change no longer prevents acceptance of the facts. Scientific research clearly shows that the Earth is warming and that this time around human activities – particularly the burning of fossil fuels – are the major driving force behind it. Earth’s climate is changing at rates and in patterns that are beyond the bounds of natural cycles. A new booklet by the National Research Council of the National Academies, Climate Change: Evidence, Impacts, and Choices, covers these topics in a way accessible to general audiences. But people’s engagement with the subject of climate change is influenced by deeply held personal values. As a result some people easily embrace the need to address climate change while others do not. It is the responsibility of the scientific community to understand and respect this in communicating about climate change.

We need a climate in which the costs of doing nothing are more widely understood and taken seriously. A report by David Gardiner and Associates prepared for Oxfam, Calvert Investments, and Ceres, Physical Risks from Climate Change, outlines impacts across seven major sectors of the economy and possible risk management strategies. The Pentagon’s Quadrennial Defense Review released in 2010 includes an assessment of the security challenges created by a changing climate. As a nation we need to recognize that the impacts are real and that some very serious players are already planning for them.

We need a climate in which constructive, fact-based dialogue can take place with policymakers and other key stakeholders across the full political spectrum. Climate science has been politicized to the point that acceptance of the facts has become a political liability for some. We are encouraged by the recent formation of the Energy and Enterprise Initiative led by former South Carolina Congressman Robert Inglis. The purpose of this initiative is to explore and promote conservative solutions to America’s energy and climate challenges. The collective voice of this group is one that needs to be heard along with others across the political spectrum. As a nation we need to be exploring all the various options for solutions.

Lastly, we need a climate in which scientists are not discouraged from conducting research related to Earth’s climate and communicating their findings. Personal attacks and other forms of harassment by a small minority of individuals and organizations with vested interests in the status quo are destructive. By trying to discourage the process of scientific discovery – a process that produced human flight, life-saving medicines, advanced telecommunications, abundant food, and other benefits – they harm the public good. If this kind of political pressure squelches scientific research, climate change will not go away, but the objective knowledge needed to inform good decisions will.

Creating a climate for addressing the reality of climate change is a big task. But it’s one I think we’re capable of achieving.