Here is the text of the Williams/Zabel letter.  (They're married and used their home address, because their opinion is not meant to reflect official EPA policy). 

Their analysis comes at an interesting time: when the EPA "has vetoed state action to directly regulate greenhouse gases from auto emissions and is delaying development of any federal approach to the problem, apart from limited voluntary incentives," according to an advocacy group called Public Employees for Environmental Responsibility (PEER), which distributed the letter.

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Laurie Williams & Allan Zabel
Oakland, CA 94618
Williams.Zabel@gmail.com

May 4, 2008

Re: Climate Change Legislation – Urgent Plea for Enactment of Carbon Fees and Ban on New Coal-Fired Power Plants without Carbon Sequestration

Dear Senators and Representatives:

We are writing to you about the urgent problem of climate change. Each of us has approximately two decades of public-sector experience in environmental enforcement.1 In addition, Allan has substantial experience with cap-and-trade programs. The purpose of this letter is to communicate the bases for our opinion that attempting to address climate change through a cap-and-trade approach alone (as is currently contemplated in most of the major bills before Congress) is an inefficient and ineffective strategy to address the most pressing problem of our time. We believe that failure by the United States to enact meaningful and escalating carbon fess in the near future will result in an unacceptable risk of devastating and irreversible global climate change. Even if you have doubts concerning the time-frame remaining for effective action, please join us in insisting on a strategy that will effectively address this unacceptable threat to our children’s future.

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[1] We are writing this letter as citizens and as parents. Our educational background includes undergraduate degrees from Yale College (Laurie) and the University of California, Santa Cruz (Allan) and J.D.’s from Boalt Hall School of Law at the University of California, Berkeley. We are employees of the United States Environmental Protection Agency (“EPA”), Region 9, in San Francisco, however, we want to make it clear that we are writing to you only in our personal capacities, and nothing in this letter is an attempt to present the views of EPA or the Administration.

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Here are our main points: (a) A cap-and-trade approach is inherently inferior to carbon fees; (b) the most efficient approach would be escalating carbon fees on all fossil fuels at the point of importation or extraction, along with appropriate carbon tariffs and international outreach as soon as the United States has taken appropriate action domestically; and (c) there is also a need for other interventions, including a ban on new coal-fired power plants without effective carbon sequestration.

A. Defects in “Cap-and-Trade”: While recognizing that there are many variations on the cap-and-trade approach, here are the problems that cut across the board and would delay achieving the large emissions reductions needed to adequately address climate change:

Problems Verifying Emissions in Many Sectors: There are many barriers to a comprehensive system that would accurately report greenhouse gas emissions. A cap-and-trade system without accurate verification of emissions is an invitation to fraud and would significantly delay reductions. While it is possible to require accurate greenhouse gas reporting from large industrial facilities and electrical generators, there are many other sectors of the economy from which it will be difficult or impossible to insure accurate reporting. In Europe, the methods used to estimate greenhouse gases are believed to have resulted in wide-spread under-reporting, which has helped to undermine the effectiveness of the Kyoto treaty. In our experience, the detective work needed to determine whether such under-reporting has occurred can be extremely complex. As a result, we do not think a reliably accurate system can be put in place for enough sources of emissions and offsets within the necessary timeframe.
Problems in Setting a Starting “Cap” on Emissions: In virtually all prior cap-and-trade systems, setting of the initial cap on emissions has been extremely contentious and has resulted in a cap that was significantly inflated above actual emissions. Setting the cap too high delays meaningful reductions and creates serious market distortions.
Policing of Trading will be Complex: Assuring that mitigation offsets and allowances that are bought and sold represent true reductions, not just paper credits, will be extremely difficult and resource intensive. Industry and its consultants will have tremendous financial incentives to understate actual emissions and overstate the amount of emission reductions or carbon sequestration offsets.
Misplaced Market Theory, Uncertainty, and Economic Harm: Market theory is based upon the exchange of real goods and services. In contrast, cap-and-trade proposals to address climate change are based upon the unproven hope that a market in a totally contrived commodity (allowances and mitigation offsets) will produce the technological innovation needed to adequately reduce greenhouse gas emissions. This reckless leap of faith is unjustified. The few and relatively minor experiments in emissions trading in our country have produced virtually no technological innovation, much less the kind of innovation necessary to power our economy on renewable resources rather than fossil fuels. In addition, the process of allocating allowances, either by auction or based upon historic emission levels, and creating mitigation credits is cumbersome and excruciatingly complex. This is further complicated by the “safety valve” provisions in many of the proposed laws, which allow greenhouse gas sources to pay to pollute if allowances reach unacceptably high prices. The volatility and uncertainty of such a system is inherently inefficient from an economic perspective. For businesses, this will make the cost of energy much harder to anticipate and economic planning far more difficult. This will cause a variety of problems that disrupt business and delay the incentives to invest in lower emitting technologies.
Shifting of Assets to the Polluters: Unlike carbon fees, whose proceeds can be used to cushion the impact of higher energy costs on individuals, cap-and-trade programs, like the European carbon market, have tended to enrich polluting industries and their consultants, while producing minimal decreases in emissions. While this could be addressed in part by having the polluters pay for all greenhouse gas allowances, this is not what is proposed in the cap-and-trade bills currently being considered by Congress.
B. Why Carbon Fees are the Winning Solution: As recognized by the February 2008 U.S. Congressional Budget Office report, carbon fees are the most efficient means to achieve meaningful emissions reductions in the necessary time-frame. They are also a means to regain the international credibility necessary to influence other countries.

Predictability and Effectiveness: Escalating carbon fees will have a more predictable impact on energy prices and will immediately create incentives for conservation and investments in alternative non-polluting energy technologies.
Getting Started Quickly: Carbon fees can be enacted and phased in much more quickly than a complex cap-and-trade system.
Simplicity: Carbon fees are more transparent and understandable. In cap-and-trade, failures and manipulations can more easily be hidden and are labor intensive to uncover. Failure to pay carbon fees on fossil fuels at the point of extraction or importation would be much easier to uncover.
Incentives Spread Quickly to All Sectors of the Economy: Carbon fees imposed on all fossil fuels will spread the incentive for conservation and non-polluting innovation quickly throughout the economy
Funding Rebates, R&D and International Assistance: Carbon fee revenues can help protect individuals from the impact of higher energy costs by providing rebates in the form of reduced payroll tax or periodic payments to every person. In contrast, the costs of cap-and-trade systems are likely to become a hidden tax, as dollars go to market participants, their lawyers and consultants. A portion of carbon fees could also be used to fund the research and development needed to improve non-polluting energy technologies, and to create technology-transfer programs to assist developing countries, including China and India.
Phase-in of Carbon Fees and Carbon Tariffs: We encourage you to enact carbon fees that would be phased in gradually, starting with relatively low per ton fees on fossil fuels and increasing each year, until we have achieved effective controls, along the lines suggested by the Carbon Tax Center and Representatives Pete Stark and John Dingell. Please consider including appropriate phased-in carbon tariffs, reflecting the level of emissions control in exporting countries, in order to protect American business from suffering a competitive disadvantage.
C. Ban on New Polluting Coal-Fired Power Plants: As a major source of greenhouse gases, please enact a ban on all new coal-fired power plants without carbon sequestration. This issue is discussed in the articles by Dr. James Hansen cited in the reference section below and is the subject of recently proposed legislation by Congressmen Waxman and Markey.

D. U.S. Historical Contribution to Global Climate Change: It is important to note that the United States through its unique and exponential economic growth has produced approximately 27% of all of the human-created greenhouse gas that is currently affecting our climate. The fact that our society has a very high standard of living that has been powered by fossil fuels gives us a unique responsibility to address climate change effectively and to assist developing countries in improving their standard of living while minimizing greenhouse gas emissions. Carbon fees and tariffs would help us fund this assistance. Carbon tariffs would protect U.S. manufacturers from unfair competition from carbon-intensive manufacturers outside the U.S.

E. Urgency: The Intergovernmental Panel on Climate Change (“IPCC”) released its Fourth Assessment Report (“AR4”) in 2007. The warnings and projections in AR4 are a call to action. However, some scientists, including by Dr. James Hansen, Director of the Goddard Institute of Space Studies, have expressed concerns that AR4 did not adequately address additional threats that might accelerate global warming. These threats include greater heat retention as formerly ice-covered ocean surfaces melt and become darker open water, thawing of huge areas of permafrost and resulting greenhouse gas emissions as those areas decay and ferment, and the reduced ability of the oceans to absorb and sequester atmospheric carbon, as some areas are nearing CO2 saturation. Recent events and data, including the rapid decline of the Artic sea ice, the diminishing capacity of the oceans near Antarctica to absorb CO2, and the observed thawing of permafrost in Alaska and Russia, provide disturbing evidence that AR4 may be significantly underestimating the threat we are facing.

We recognize that new fees are not wildly popular at this point in history. We can only succeed if you are able to educate people to the point where they understand that these are fees on a material that threatens the future of our children and grandchildren, and that such fees will help “fuel” innovation, a sustainable business boom and a livable planet, by kick-starting the kind of World-War-II-type effort we need to make the necessary changes in time. Here you need to make the case and lead the way. Everything that we care about depends on your success.

Thank you for your consideration. Please let us know how we can be of further assistance.

Sincerely,

Laurie Williams and Allan Zabel
Citizens and Parents