MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Last week, California became the first state to legally restrict carbon emissions and the Congressional Research Service recently found a national carbon tax would reduce the federal deficit by 50 percent.

MS. DIANE REHMJoining me in the studio to talk about the potential risks and benefits of pricing carbon emissions, Coral Davenport with National Journal magazine and Jeff Keuter of The George C. Marshall Institute. Joining me by phone for the hour from Cincinnati, Ohio, is Elizabeth Kolbert of The New Yorker magazine.

MS. DIANE REHMI invite you to join us as well, 800-433-8850. Send us your email to drshow@wamu.org. Follow us on Facebook or send us a tweet. Good morning to all of you.

MS. CORAL DAVENPORTGood morning.

MR. JEFF KEUTERGood morning.

MS. ELIZABETH KOLBERTGood morning.

REHMCoral Davenport, I'll start with you. Back in December, you wrote a story about what you called our impending climate cliff. What is carbon pollution and why are we trying to stop it?

DAVENPORTCarbon pollution is produced by almost everything that our economy does. It's produced chiefly by burning fossil fuels and that is coal, oil and natural gas. So it's produced when you drive a car. It's produced when you turn on your light and a coal-fired power plant is running. It's produced by the electricity that runs a manufacturing plant.

DAVENPORTSo all of this carbon pollution is going into the air and all of these carbon emissions are caused by fossil fuels and scientists have known for a long time that these carbon emissions go up into the atmosphere and cause what is known as the greenhouse effect.

DAVENPORTA shorthand way of thinking about this is, you know, that carbon gas is up in the atmosphere and it's trapping heat within the earth, trapping heat within the planet's atmosphere. This has been going on at a higher rate for most of the 20th century when we've seen this increase in industrial activity and in industrial pollution.

DAVENPORTAnd so there's a steady series of scientific reports that show a now very, very strong consensus that this increasing fossil fuel pollution from this increasing economic growth is now leading to a level of warming that, over the long term, could have potentially catastrophic effects.

REHMAnd that level of warming could set in place some change reactions?

DAVENPORTReally significant chain reactions. Again, the science on carbon pollution, carbon emissions and global warming has been out there for a long time, but there's some new science that has really amped up that level of alarm. Most -- specifically scientists have been saying that we need to avoid a point at which the earth's atmosphere will warm by an average, a global average of 2 degrees Celsius or 3.6 degrees Fahrenheit.

DAVENPORTThat's the point at which scientists say it's kind of a point of no return. That's when we will probably see melting ice sheets. That temperature will lead to melting ice sheets in the Arctic and a very high, very rapid sea level rise which could come with a lot of catastrophic effects, one of which is higher storm surges which is the kind of thing that contributes to the damages that we saw in Hurricane Sandy.

DAVENPORTAnother thing that that 2 degrees temperature rise, 2 degrees Celsius temperate rise will cause is a lot of parts of the world will become too hot to grow food which could -- which sort of kicks off a lot of very worrying chain reactions.

REHMBut isn't there some evidence that the extent to which carbon emissions are being created in the atmosphere are somewhat decreasing?

DAVENPORTOh, absolutely, but I should say about that 2 degrees -- in November, we saw some new scientific reports saying that the amount of carbon emissions that are right now already baked into the atmosphere and sort of set to go into the atmosphere in the next couple of years probably make that 2 degrees inevitable.

DAVENPORTYou know, we're probably -- right now what we need to be doing is looking towards not making it any worse, not getting to 3 degrees, 4 degrees, 5 degrees, 6 degrees. We're probably -- that 2 degrees that I described, the melting ice sheets and the parts of the world where we won't be able to grow food, right now scientists are saying we're there.

DAVENPORTWe won't see it for several decades, but those levels of carbon emissions are already there. Certainly within the U.S., there have been a number of factors that have indeed lowered the rate of carbon emissions.

DAVENPORTThe first was the economic recession. We had lower economic activity and hence lower carbon emissions. That's not great news for the economy. It's good news for the environment, but overall, you know, it's hard to be happy about that. The other is that in the U.S., we have seen a big increase, a big boom in natural gas production. Natural gas is a source of fuel. It is a fossil fuel. It does produce carbon emissions...

REHMRight.

DAVENPORT...but it has about half the carbon emissions of coal. Over of the 20th century, most of our electricity came from coal. Now, there's been a market shift towards natural gas, so towards a source of electricity that has about half the CO2 pollution. So because of that natural market shift, we are seeing a lowering, a leveling off in carbon pollution in the U.S.

DAVENPORTUnfortunately, that's not necessarily enough to stave off the worst of that CO2 increase and, of course, we have to remember CO2 is being produced around the world. In China, where there is China and India, where there is rapid economic growth and where there isn't that abundance of natural gas, we are seeing a big increase in coal pollution and so an increase in CO2 emissions.

REHMCoral Davenport, she's energy and environment correspondent for National Journal magazine. Turning to you, Elizabeth Kolbert, why is or is not a carbon tax a good solution to this rising temperature and the climate change problem?

KOLBERTWell, I guess the first thing I would say is that when people talk about climate change and the word solution, you know, as it was just said, we have baked in, if that's, forgive the pun, a lot of climate change into our system already. The system has a big time lag for the CO2 and the atmosphere.

KOLBERTOne thing I think is important to mention, in addition to that very good introduction to climate change is that CO2 emissions stay in the atmosphere for a long time, you know. For all intents and purposes, CO2 is forever. So this problem doesn't just -- it's nothing that dissipates, nothing that goes away. It's cumulative.

KOLBERTYou put the CO2 up there. You're going to be living with it. So we've basically increased the amount of CO2 in the atmosphere since pre-industrial days already by that 40 percent and we're going to be living with the consequences for the foreseeable future and even, to be frank, for the unforeseeable future.

KOLBERTNow, what we can do to try to minimize that, to, you know, not take things into the realm of the absolutely unmanageable, although you know, once again, to be honest, some of these effects are very difficult to know in advance and it's to try to bring emissions down as low as possible. And how do you do that?

KOLBERTYou have to transform the way you get energy because as was also mentioned, we're producing CO2 with, you know, at this point, virtually all activity that is associated with modern life. So people have looked at this problem very, very seriously and very carefully and many of them -- and economists generally have agreed that the most effective and cost-effective way to do this would be to put a tax on carbon emissions, on the carbon content of fuels and that that would spur -- on the one hand, it would encourage -- it would sort of level the playing field so that energy sources that don't produce carbon, say wind or solar power, would be more competitive.

KOLBERTRight now, they're much more costly than burning coal. And on the other hand, you would also spur a tremendous amount of energy conservation, right? Because all of the fossil fuels that you were burning would be more costly. So it's using the power of the marketplace to try to drive a very, very substantial reduction in carbon emissions.

REHMHow do you think a carbon tax would actually work, Elizabeth?

KOLBERTWell, I don't think the mechanisms are terribly complicated, to be honest. We know what the carbon content of different fuels is. It's twice as much for a unit of energy for coal as it is for natural gas, as was mentioned before. So you could put it, you know, downstream, upstream, wherever you want to in this process of burning the fuel.

KOLBERTIt would really -- presumably, you know, it adds some cost to the users of energy at the end stage, but you could assess really wherever you wanted to in that stream of using the fossil fuels.

REHMAnd that would mean I gather you'd be affecting really the price of virtually everything, including food as well as manufactured goods?

KOLBERTIt would have a, you know, significant -- I don't think anyone can deny that it's a tax that would affect most economic activity in this country. And so for that reason, people have suggested that you could start the tax at a relatively modest level and then you could ratchet it up over time.

KOLBERTNow, once again, we're talking, you know, theoretically, we're talking about what people say you would do in an ideal world. You would start it relatively low and then to build in predictability into the marketplace so that people could make planning decisions for the future because energy is a big, big cost for a lot of industries. You would phase in. You would make the tax higher and higher over time.

REHMElizabeth Kolbert, staff writer for The New Yorker. When we come back, you'll hear from Jeff Keuter of The George C. Marshall Institute. Stay with us.

REHMAnd welcome back. As we talk about a national carbon tax, here in the studio Coral Davenport. She's energy and environment correspondent for National Journal magazine. She, in the first part of the program, really laid out carbon pollution and why we're trying to stop it. Then you heard from Elizabeth Kolbert of the New Yorker magazine who talked about the ideas for a carbon tax, why she believes in the work that she's done that it would be a good idea, and how it could be phased in, acknowledging of course that it would affect the price of everything from food to manufactured goods.

REHMNow let's hear from Jeff Keuter who's president of the George C. Marshall Institute as to what you do not think a carbon tax is a good idea.

KEUTERWell, a few points on Coral's assessment of the state of the science. I'd say first of all there is no such thing as carbon pollution. It's not a pollutant. Carbon dioxide is a naturally occurring substance. We're all...

DAVENPORTBut except it has...

KEUTER...we're all admitting it right now, despite what the Supreme Court and the EPA's interpretation of what the Clean Air Act says. We've seen higher rates of CO2 in the atmosphere before in earth's history at much higher levels than we're experiencing today or even projected to experience today.

KEUTERTemperature rates, as we've observed them and measured them by satellites and even on ground temperature stations, are much less than expected or projected by the alarmist climate models.

KOLBERTWell, I have to jump in there. This has...

KEUTERNo, no, actually, let me finish...

REHMHold on, Elizabeth. Let's let him finish first.

KEUTERAnd those rates that we've seen correlate very well with natural cycles in the oceans, that being in particular the Pacific decadal oscillation. I'd say also it's hard to distinguish fume effects from these natural drivers. That's an area where a lot of science is being done and one where we really need the answers to those questions to advance any of this policy framework.

REHMSo let me understand. Are you saying, just for clarity sake, Jeff, that there is no global warming taking place?

KEUTERWell, temperature is always changing so to some...

REHMNo, no. I'm asking you specifically, is warming taking place now?

KEUTEROver the last decade, no.

REHMYou believe not.

KEUTEROver the last 50 years, yes. Over the last 150 years, probably. We're recovering from a little ice age is what many long term climatological models show.

REHMSo from your perspective, the entire discussion regarding climate change and global warming is, what, being inflated, not truthful? I'd like your clear assessment on that.

KEUTERThere are considerable doubts about the extent to which humans are affecting the changes in the climate that we're seeing.

REHMAh, that's a very different question. The issue has been debated by many, many scientists. I'm very aware of that. A majority of whom have determined that there is global warming taking place and that human beings have affected that change. You totally disagree with that scientific conclusion.

KEUTERNo. I don't disagree that humans are affecting climate or that humans have an effect on the climate. Of course, we have an effect on the climate. What I'm suggesting to you is that the statements that CO2 is the principal driver in the changes that we're observing today or that we think that we're observing today is overstated.

REHMAll right. Let's get a reading on that from Coral Davenport.

DAVENPORTI would disagree with that. A recent survey by the Proceedings of the National Academy of Sciences of scientists who work -- of climate scientists found that 97 percent of scientists who work within the field of climate studies agree with the assessment that CO2 -- human caused CO2 pollution is contributing to global warming. The inner -- the international -- intergovernmental panel on climate change also has come to the same conclusion.

DAVENPORTThe majority -- there's not really disagreement among climate scientists who work on this issue that CO2 emissions caused by industrial and human activity are contributing to the warming of the atmosphere.

REHMAll right. Elizabeth Kolbert, I want to give you a second to respond.

KOLBERTYeah, I just think this argument is way, you know, out of date, to be honest. We're not having this argument anymore. You -- it's a complete side issue. We can argue about what we should do about carbon emissions but we can no longer argue that humans are not driving climate change at this point. It's just beyond (word?).

REHMAll right. Let's talk about a carbon tax, Jeff Keuter, and why you believe that carbon taxes would kill jobs.

KEUTERWell, carbon taxes are costly, they're aggressive, they're inefficient, they're environmentally meaningless. And as the previous segment showed they're a slippery slope to be ratcheted up as the political whims of the day show. The economic assessments of the impacts of the carbon tax reveal that the cost would range anywhere from 50 to $70 billion to up to 1.2 trillion, in terms of the amount raised. That all depends, of course, on the level of the tax.

KEUTERThe CVO and the CRS both show that that would disproportionately impact the poorest households. The numbers range anywhere from 3.4 percent of after-tax income for the lowest income decile up to .8.0--or I'm sorry, 0.8 percent for the highest incomes.

REHMAll right. Let me stop you right there. Elizabeth Kolbert, what about that argument that a carbon tax would be regressive? Would there be a remedy for that?

KOLBERTRight. Yes. I think that you have to acknowledge that a carbon tax is regressive in the sense that, you know, everyone pays it for energy. And it obviously takes a bigger hit out of your income if you're a low income person presumably. You know, you still need heat. You still drive a car. So it is a bigger hit.

KOLBERTNow many people -- there are a couple of points about -- I'd like to make about that one, is it's been proposed that a carbon tax could back out other even more aggressive taxes for example. You know, payroll tax, you could basically have a carbon tax replace other taxes. So you wouldn't be increasing federal revenues or the federal tax or aggressive tax (word?) . It would simply be replacing one for the other.

REHMWhat about that, Jeff Keuter?

KEUTERWell, you could certainly do that in concept but in reality I don't know that those quid pro quos survive the political machinations of the negotiations much less any sort of future public policy environment. No Congress binds a future Congress. As long as those taxes are in place they can be manipulated, deals can be undone.

REHMCoral.

DAVENPORTJeff is absolutely right. The debate about a carbon tax is just explosive because it would effectively tax almost all economic activity. There are ways -- it would be regressive. There are ways that you can offset that, but if you are a member of Congress today and you come out in support of that, if you vote for that and you're running for reelection in two years or four years and your opponent comes up and says, you know, this member voted to raise your energy costs, that is a really, really...

REHMBut what about the idea of adding a rebate for low income consumers to try to address that regressivity?

DAVENPORTWell, there are a number of different ways it could be addressed. One, as Elizabeth said, is a swap, you know, cutting the payroll tax, potentially cutting the income tax, a rebate, some way to not make it regressive, some way so that it wouldn't hurt lower income people. But I will say, you know, as politically controversial as this is -- and this is why until this year we really haven't seen the carbon tax -- you know, even though the issue of climate change has been debated for many years, it's sort of always been considered that the carbon tax is just -- it's a third rail. It's too explosive to really have any political traction.

DAVENPORTThis year it's kind of -- it's a special case. We're hearing it -- it's being talked about, you hear it talked about, certainly by economists but you're -- it's starting to enter the debate about the budget and the deficit.

REHMAnd it's interesting, Jeff, that apparently even Grover Norquist has said he'd be in favor of a carbon tax?

KEUTERI think he's reversed his position on that, but you'd have to ask Grover that question.

DAVENPORTI actually have talked to Grover about this. I asked him a few weeks ago specifically about this. I said, what if there was this carbon tax that was -- that cut, you know, you had a carbon tax, but you cut a payroll or income tax. And he said to me that would not violate his pledge. You know, he has a...

REHMNo new taxes.

DAVENPORT...no new taxes. And he got hit so hard immediately by the fossil fuel industry. He had allies -- you know, his friends all over the right came out and just hammered him. This one fossil fuel lobby gave him their Dim Bulb of the Day award. And a couple hours after that happened, he effectively seemed to reverse his position.

REHMSo, Jeff Keuter, you would see very little, if any, chance of a carbon tax finding its way through Congress?

KEUTERI certainly don't see this political environment supporting a tax on energy, particularly given the experience that we saw ten years ago, twenty years ago with the BTU tax where we tried to do something very similar -- or certain people tried to do something very similar to this.

DAVENPORTAl Gore.

KEUTERAnd the Democrats and the Congress, and if there were any Republicans, paid a heavy, heavy price for it. The political environment at the time was very much the same. We were focused on economy. We were focused on deficit reduction. This was advanced as a way to raise an enormous amount of revenue. And eventually it dies because the costs are too much and it creates very unique political coalitions that undoubtedly will form again to fight against a carbon tax proposed in this environment.

REHMAnd yet, Elizabeth, I gather there are a number of conservative economists who really like the idea.

KOLBERTYes. It's one of those, you know, tragic situations where there's -- there's actually a lot of consensus among economists that if you want to affect the future of the planet you don't want to head down a path of sort of guaranteed disaster. You really need to impose a carbon tax and you need to do it right away. And economists on both sides of the aisle you can fine many, many Nobel Prize-winning economists on both sides of the political spectrum agreeing that a carbon tax would be a good idea.

KOLBERTAnd, you know, some people have sort of slightly different ideas but basically that it's a good idea. And yet you have a political system where, you know, I have to agree we're very unlikely to see any sort of a carbon tax in the foreseeable future. So we're just going to basically continue down the path that we're headed down, which is not a good one.

REHMI thought it was interesting to read that both Royal Dutch Shell and Unilever have called on lawmakers to "impose a clear transparent and unambiguous price on carbon emissions."

KOLBERTWell, there's a sense I think that, you know, this is an unsustainable path that we're on. It's a -- you know, I really can't emphasize enough how serious it is when you start to affect the climate of this planet. And I would like to go back to something that was said earlier, that carbon dioxide levels have been higher in the past, and that is true. But they have not been higher in a time that our species homosapien has been around. We're actually -- they haven't been higher quite probably for a very, very long time. And...

REHMAnd you're listening to "The Diane Rehm Show." Jeff Keuter, if you've got these conservative economists you've got these major corporations all saying let's move toward a carbon tax. Are they all wrong?

KEUTERWell, in many respects the calls for a carbon tax are calls for a carbon tax in relation to other alternatives. They're being advanced in the public policy environment, commanding control regulations, a cap and trade system, other proposals that have been advanced. The argument is that a carbon tax is the most effective or economically efficient of the alternatives that have been proposed. That's not necessarily something that we have to do in terms of a policy choice if you want to bring out emission from the economy, emission already going down on their own, as Coral mentioned.

KEUTERThere's a natural trend in decarbonization. If you look at the long run history of energy use in the United States and in the Western world, as we pursue fuels that have greater and greater energy potential they, by definition, have less carbon. We are on that transition. We do not need this policy framework to encourage it.

REHMSo explain what California is doing, Coral.

DAVENPORTSo California in 2006 passed a really pioneering law. It's known as AB32 and it just kicked into enforcement on January 1. It's a cap and grade law. It essentially is the kind of law -- the structure of the law is what President Obama tried to get enacted through Congress in his first term and failed to do. It's sort of like a carbon tax in that it puts a price on carbon emissions. It makes it more expensive for consumers and industrial polluters to emit that carbon dioxide. It's a more complicated system but it's still -- it kind of combines both the market and the regulation.

REHMSo, Elizabeth, which is better, California's approach or a national carbon tax?

KOLBERTWell, I should say that from an economics point of view -- and I'm not an economist but I've spoken to many economists about this issue -- a cap and trade and a carbon tax are equivalent. They should function equivalently. Now in point of fact, you know, both are subject to political manipulation. I think a -- people would say a carbon tax is simply easier to administer. But the effect of a cap and trade, the whole cap and trade program, you know, was developed so that you could avoid using the word tax.

KOLBERTBut they are -- the effects should be the same. You should be raising -- as Coral mentioned, you're just raising the price of emitting CO2. You're imposing a price on emitting CO2. I should say right now that is cost free. So what we're doing is, you know, we're just releasing large quantities of what is -- in fact, it is a naturally occurring substance. Certainly we are all breathing it out, but it is also a pollutant. And so we're just releasing it without any cost. And if you incorporate the cost that this is imposing on society into the price of doing that, you will change the way people do things.

REHMAnd, Jeff Keuter, what do you think of California's new law?

KEUTERWell, if we're supposed to be imposing a cost that changes people's behavior than $10 a ton, which is what the cost of California's allowances are, is ridiculously low. And even under the projections that they want to reduce their emissions of these 350 firms to 340 megatons -- million megatons by 2020, they could shoe in a temperature reduction of one-and-one-half-ten-thousandths of a degree Celsius, a drop in the bucket, to avoid the goals that the alarmists claim that are going to happen because of our climate change.

KEUTERA cap and trade system has many of the same characteristics of a carbon tax but it has additional administrative costs associated with it. And it's open to political manipulation.

REHMJeff Keuter. He's president of the George C. Marshall Institute. When we come back, we'll open the phones. I'd like to talk with you about your thoughts on a carbon tax versus cap and trade.

REHMAnd welcome back. It's time to open the phones, 800-433-8850. Send us your email to drshow@wamu.org. And first to Glen Rock, Pa. Good morning, Michael.

MICHAELYes, Diane. Thank you for taking my call.

REHMSurely.

MICHAELJust a quick clarification and then a comment. The previous input on the greenhouse gas emissions of natural gas ignores the upstream lifecycle costs. The DOE issued a report last year saying that on an upstream energy basis, natural gas actually has higher emissions than coal, based on the production and the distribution. My comment is that those who claim that reduced carbon emissions will hurt the economy ignore the fact that climate change will eventually do much more to damage the economy than reducing carbon.

MICHAELAnd if a proposed fee and dividend approach were to be instituted, like that proposed by Dr. James Hanson of NASA, each individual would receive a cash rebate of the fees imposed on carbon at the source and thereby offset any additional taxpayer costs.

REHMCoral?

DAVENPORTIt's true. The fee and dividend proposal, essentially that's just one of many ways of getting at pricing carbon without hurting low income people, it's putting a price on carbon and, again, just sort of doing that straight back rebate.

REHMAnd, Jeff Keuter, you're worried about how in the world do you put a price on something that we're not sure about not only how much is out there, but then how you price it.

KEUTERPrecisely. Right now California is estimating a price, $10 a ton. Australia put in their carbon tax, that took effect in July of 2012, as $23 per ton, Australian dollars. The carbon taxes estimates that have been advanced by CBO and CRS range anywhere from $15 to $20 billion. But the IPCC is saying you need a $50 carbon tax. Richard Toll, in an analysis that was done just a couple of months ago says it has to be at least $150 a ton in order to avoid the consequences that they're talking about and to stabilize atmospheric CO2 admissions at 450 parts per million.

KEUTERSo what we're talking about here in terms of the policy environment is a carbon tax that doesn't get you any of the environmental returns that you want. You, by definition, will have to ratchet it up tenfold over what we're talking about. That's a pig in a poke.

REHMElizabeth?

KOLBERTWell, you know, once again, we keep having these arguments where we just go around and around about the same topic. And your caller pointed out, you know, we can say that we'd like to just keep things the same, keep things as they are, but the economic, not to mention, you know, the social and global environmental consequences of continuing to do what we are are extremely high. And when people have looked at this systematically, you know, the costs of trying to transition to a low carbon economy and the cost of continuing the way we are, where eventually you get, you know, five, ten, fifteen percent of your economy eaten up, basically, by climate change.

KOLBERTAnd when Coral mentioned at the top of the show, you know, if you ask people a choice between would you like your energy cost to go up or wouldn't you, well, obviously the choice they're going to choose is I'd prefer not to. But if you ask people would you like to eat or would you not like to, would you like the corn belt of this country to gradually no longer be able to support growing corn, they'd say well, I'd like to do something about that.

KOLBERTAnd we are faced with a situation where we don't have a choice of just sitting here and saying nothing is going to change. Something is going to change.

REHMCoral?

DAVENPORTDiane, I would like to agree heartedly with Jeff on one point, which is that once you come to agreement around the idea that there should be a price on carbon, then it's a really, really difficult policy discussion to figure out what should that price be. It's important to get it right. If the price is too low, then you've put a price on carbon, but you haven't really sent--

REHMMade an impact.

DAVENPORTMade an impact, sent enough of a market signal to actually stop that pollution. If the price is too high you can bring your economy to a screeching halt and cause, you know, a lot of economic harm really quickly. And so it's very important to figure out how you do that. And the policy debate about how you structure it and how you phase it in and what is the time frame and what are the levels, you know, make a really big difference. And this is one of the difficulties about this debate. You can come up to agreement and say well, this is the problem and broadly this is the concept of the solution.

DAVENPORTBut then figuring out, you know, the devil in those details is very, very difficult.

REHMJeff?

KEUTERSo the other variable that comes into this, of course, is what's the rest of the world going to do because U.S. emissions are on the decline? Even under a $15 to $20 carbon tax it will take our emissions down to just below five million metric tons, but world emissions until 2035 are estimated to grow by 43 percent. That's approximately eight billion metric tons. So we're talking about a drop in the bucket with unilateral U.S. action. So where is the rest of the world on this system? Because otherwise, we're imposing costs on ourselves, gaining very little return in terms of environmental benefits with enormous competitive disadvantages that we're placing on ourselves.

REHMAll right. To Louisville, Ky. Kris, you're on the air.

KRISThank you for taking my call. Earlier in the show they mentioned that China and India are using coal for their industry and so therefore polluting more and more. One of the things the U.S. could do is the corporations in the USA could bring the jobs back here where we don't pollute as much and that would solve two problems. It would help cut down the carbon emissions in China or that are produced by China and India. And it would help our unemployment. And another thing, our government would not being paying corporations to send jobs overseas, which they do now.

REHMCoral?

DAVENPORTWell, it's interesting. One of the unexpected benefits of this boom in cheap natural gas is that a lot of industry actually is starting to return to the United States because we've got this cheaper energy, which happens to be a little bit cleaner than coal. And so we are starting to see that. Another thing that the U.S. is also doing is the State Department has instituted a program to help the Chinese start doing fracking for their own natural gas. You know, that's a big basket of issues there, but the State Department, under Hillary Clinton and I think especially under expected Secretary of State John Kerry is looking very hard at ways to incorporate energy systems around the world to be more low carbon.

REHMLet's go to Chapel Hill, N.C. Dr. Holin, you're on the air.

DR. HOLINThank you for your excellent show. My point is about methane. First, I should say there was a misstatement about too much carbon dioxide. That's an antiquated notion. Paracelsus 500 years ago said that the dose determines the poison so too much CO2 is a pollutant. Also, earlier there was a misstatement that natural gas was less polluting than coal. Methane's been an all worry, melting tundra in the news for years, but in 2008 there was a nature article that showed four percent leakage rates in natural gas wells in the operations.

DR. HOLINIn 2012 that data was republished at 12 percent leakage rates for operating natural gas operations. A gas and oil report in 2005 said something even worse, that after 30 years of capping a well they had about a 50 percent leakage rate across the country.

REHMInteresting.

HOLINSo to sum up, coal is not clean. Gas is not less polluting than coal or nuclear. We need to stop burning things like cavemen. We need to start developing high tech tidal, wind and solar.

REHMAll right, sir. Thanks for calling. Coral?

DAVENPORTThe caller raises a really important point about natural gas production. The issue is that during the process of fracturing or extracting natural gas this pollutant called methane tends to be emitted. Methane is a very powerful greenhouse gas pollutant. In fact, more powerful even than carbon dioxide. And there is concern that in drilling for natural gas methane is released from these wells and getting out into the atmosphere and potentially causing even more damage than the CO2 from burning gas or burning coal or burning oil.

DAVENPORTSo the natural gas industry is very aware of this. They're trying to make sure that wells are capped. They're trying to make sure they're capturing that methane. So there's a lot of studies going on right now. There's a lot of work going on right now to make sure that the natural gas production doesn't release all of that methane. If it turns out that we cannot successfully frack or drill natural gas without big releases of methane from those wells, we've got an even bigger problem to think about.

REHMJeff?

KEUTERWell, just in terms of the alternatives to our fossil fuel economy that you have incredible problems of scale that one needs to work through for solar, for wind, for tidal power. Being able to bring that up to a standard that can even begin to replace the amount of energy that's provided by the fossil resources that we use--there are intermittency problems with certain renewables. Not so much the oceans. They're always there, there always moving, but solar and wind, those problems have been well documented.

KEUTERAnd neither provide really an answer for the transportation sector, which will remain a liquid fuel dominated infrastructure for the foreseeable future. You're not going to be able to plug an electric infrastructure into that and turn it over very quickly or very cheaply.

REHMAll right. To Charlottesville, Va. Good morning, Bill.

BILLHey, good morning. This is a very interesting discussion. There's a background assumption that seems to be here that there's nothing going on in the policy arena to reduce carbon emissions today. That's simply not true. The Clean Air Act has been putting a price on polluting fuels since the 1970s, including the latest rules that are driving coal out of the power market. And so I see a big risk in trying to rely on one solution, the carbon tax, which would bring a huge political price in which opponents would then use as a weapon to say, well, we don't need EPA air rules. We don't need fuel economy standards.

BILLWe don't need renewable energy programs because we have a carbon tax. With this, what's going to happen in Congress since Congress has just finally agreed to raise income taxes. That will be used as a weapon against every other Democratic priority for the next ten years. I think if you somehow got a carbon tax the same political risk would occur.

REHMAll right. Elizabeth Kolbert?

KOLBERTWell, you know, there's definitely two levels to have this discussion on and one is realpolitik in which, you know, lots of things are used as a weapon against people and you may, you know, be careful what you wish for. So I certainly sympathize with the caller on that regard. I think in terms of carbon regulations moving forward, there are some significant carbon regulations that I hope will move forward that will change the energy dynamics in this country, will make it much more difficult, virtually impossible people would say I think to, for example, build new power plants.

KOLBERTBut we don't have regs on existing power plants at this point. And it's unclear whether we're ever going to get them. And so I think that the point that people would make, first of all, regulations that have an impact--we've been talking all through this program about what are you going to do that's actually going to have an impact, that's not just going to be trivial. If you want to have an impact you have to have a very severe regulatory regime. And economists will tell you that's not the most efficient way to go. So we have, you know, been going that way because that's what the President and the administration have the authority to do without going to Congress.

KOLBERTBut the fact that we're just sort of, you know, giving up on Congress, giving up on the best way to do this is, once again, just an unfortunate fact of our politics at this point.

REHMAnd you're listening to "The Diane Rehm Show." Let's go to Detroit, Mich. Hi there, Rhonda.

RHONDAHi. Thank you very much for having me. I love your show.

REHMThank you.

RHONDAI actually am a professor and I teach a lot of classes in energy and environmental issues. And my comment was just that cap and trade has been a very effective program in the United States for acid rain, but it really only works for the larger sources. Things like utilities and refineries because they have the extensive monitoring systems that they can track the emissions that are coming from these sources. So those emissions can not only be tracked, but then they're trading can be enforced. And we have a system that's actually viable and, I guess, a well monitored system.

RHONDAI actually like the idea of--I don't like to call it a carbon tax, but some form of system such as that because it'll address other types of sources, smaller sources, automobiles, other things that don't have that tight of a monitoring program on them. And I do think that there's a way to do it so it doesn't hurt low income folks. You can have a circuit breaker so that they get tax refunds for what they pay. The other thing is what we're starting to see in industry is that carbon dioxide emissions are actually being seen as a surrogate for efficiency. And companies that are emitting more and more CO2 are starting to be viewed as less efficient, less competitive types of companies.

REHMAll right. Jeff?

KEUTERWell, industry certainly has an enormous incentive to reduce its own energy consumption. It's a critical input to the production process and it's an expensive one. So it's not surprising that they see great incentive to finding way to invest in new production processes that are more efficient, more effective and by definition then probably less polluting a whole realm of sources. Undoubtedly, also if you're constructing this regime you'd tax it at the highest level. And the caller's exactly right, that that's the easiest way to track and to monitor, but I would remind the caller and remind the listeners that the quid pro quo is to protect the lowest incomes or to protect energy intensive industries, which is another issue that we really haven't gotten into. Those things don't stand future political battles.

REHMSo where is this discussion going?

DAVENPORTWell, I think it's going to heat up a lot in the next couple of months. And here's why, the fiscal cliff debate ended with a deal that is going to increase our deficit by a staggering $4 trillion. And it kicked the can, as Congresses want to do, down the road. Congress has given itself a deadline where it has to come back and confront these huge looming spending cuts. Huge potential cuts in defense and huge potential cuts in entitlements, Medicaid, Medicare, Social Security. These potential spending cuts were put in place in order to force Congress to find other ways to come up with revenue.

DAVENPORTYou know, no one wants to actually cut these programs. The idea is members of Congress now have to go back to the table and figure out where else are they going to get this money. What else can they cut? Where else can they raise money? And so I love this conversation that I had with Grover Norquist where he said, you know, as members of Congress come back to the table on this and keep trying to find, you know, where are they going to get this money, how are they going to fix the deficit, he said it's going to be like a teenage boy on prom night. He's going to keep asking the same question and the same question and the same question.

DAVENPORTAnd what he meant by that is they're going to keep coming back to a carbon tax because it's a way to raise revenue without cutting defense and without reforming entitlements.

REHMAnd that has to be the last word from Coral Davenport of National Journal Magazine, Elizabeth Kolbert, writer for The New Yorker and Jeff Keuter, president of the George C. Marshall Institute. Thank you all. And thanks for listening. I'm Diane Rehm.