A Carbon Tax — Or Just More Energy Science Research?

On Election Night last week, President Obama made a point of mentioning climate change: “We want our children to live in an America that isn’t burdened by debt, that isn’t weakened up by inequality, that isn’t threatened by the destructive power of a warming planet.”

That, along with superstorm Sandy, was enough — at least for the moment — to put the issue  back on the national radar. And as it so happens, Brookings is out with a plan for a carbon tax. It would start at $20 per ton of carbon dioxide, rising 4% per year in real terms. Over a decade, it would raise on average $150 billion a year while reducing carbon dioxide emissions 14% below 2006 levels by 2020 and 20% below 2006 levels by 2050. Brookings proposes would set aside “at least the first $30 billion of revenue annually for clean energy- and energy efficiency-related RD&D” while allocating the remaining $120 billion a year ”to tax cuts and deficit reduction as well as rebates to affected low-income households.”

AEI’s Ken Green thinks implementing a carbon tax would be a mistake for a variety of reasons:

There would be virtually no environmental benefits to unilateral greenhouse gas emission reductions by developed countries (whose GHG levels are already flat and slowly declining), while developing countries are pouring out virtually every kind of pollutant with joyous abandon.  …  Low carbon taxes won’t have a significant effect, and high carbon taxes won’t retain political support long enough to provide environmental benefits. … Energy taxes also make countries less competitive when it comes to exports, particularly when they’re competing against countries that don’t impose comparable taxes.

But his strongest point, to me, is that the way most carbon tax proponents want to implement  the levy makes for bad economics. How can you accurately price carbon while keeping myriad layers of government intervention from efficiency standards to regional trading systems to subsidies? Indeed,when a group of AEI scholars proposed a carbon tax, they addressed that very issue, substituting a tax on emissions for a) subsidies for ethanol and other alternative fuels, b) business and household energy tax credits, and c) regulations designed to lower greenhouse gas emissions. All those market interventions would be repealed or abolished. If you really want to address climate change in a pro-market fashion, that’s where you begin.

But I think the politics for a carbon tax remain daunting, especially given the Long Recession. Anyway, U.S. carbon emissions are already decreasing, down over 10% since 2007. That’s partly due to the Great Recession, but also the natural gas revolution. Fracking technology may allow natural gas to be a bridge fuel to this:

A technology is in the pipeline that has the potential to eliminate CO2 emissions entirely. Solar power, long believed to be unworkably expensive, has actually been falling in cost at a steady exponential rate of 7 percent per year for the last three decades straight. Because of this “Moore’s Law for solar”, electricity from solar panels now costs less than twice as much as electricity from coal, and only about three times as much as electricity from gas. Furthermore, technologies now in the pipeline seem to ensure that the cost drop will continue.

Within the decade, solar could be cheaper than coal. Within two decades, cheaper than gas. When that happens, assuming we also have electric cars, it is game over for carbon emissions.

So let innovation work its magic, with a bit of a nudge from increased government investment in energy science.

  1. Dan Hanson
    Valiuth: Dan Hanson: The problem as I understand it is not with CO2 but rather with how buffered the system (the environment) is against any slight increases in temperature that increasing CO2 leads to. The models that alarmists cite assume that the system is very sensitive and that positive feed back mechanisms will force temperatures higher hence the assumptions of rapid temperature gains. Those skeptical of this, feel that the system is a lot more buffered and temperature gains will be very mild.

    Yes, this is a perfect example of an area of global warming theory that is on much shakier ground.  To get to the alarming scenarios for global warming, you have to assume that there are a number of positive feedbacks that will amplify the effect of the CO2, because the atmospheric ‘forcing’ caused by CO2 alone will not cause an ecological catastrophe.   Debating these feedbacks and other ignored sources of negative feedbacks is important, but we cede the argument when our focus is elsewhere.

    So let’s stop arguing whether or not the Earth is warming at all, when it clearly is and which would be happening even if man wasn’t on this planet.

  2. Free Radical

    That’s awesome news about technology providing a profitable method to carbon release into the atmosphere. I would love to buy inexpensive solar panels and make the meter run backwards in the summer.

  3. Dan Hanson

    Fossil fuels are a fungible resource.   As a result, the global price changes when demand changes anywhere, within limits. 

    If the U.S. taxes its carbon and other countries don’t, the result will be a decline in the world price of oil and natural gas, which will simply stimulate more use elsewhere.  In effect, a local carbon tax acts as a wealth transfer from the taxed country to countries that do not tax carbon. 

    The unintended consequences could be counter-productive.  For example, if a U.S. factory has a comparative advantage in energy efficiency over foreign competitors, then a carbon tax in the U.S. could erase that advantage, which would result in the factory losing market share to countries that are less energy efficient.  This could easily have the perverse consequence of raising the size of the carbon footprint for that product.

    I don’t see how a carbon tax can possibly help to lower global CO2 emissions if it is not applied equally across the globe, and that will never happen.

  4. Brian Clendinen
    James Pethokoukis: So let innovation work its magic, with a bit of a nudge from increased government investment in energy science. · · 39 minutes ago

    Are you serious or is that a joke I did not get?  I thought this was a conservative web site were we think any time someone says investment and spending tax payer money in the same sentence we run screaming for the doors.

     If you honestly believe that statement please show your work on the estimated return we have so far recieved on green energy public  investments and tax breaks since the 70′s, which I think are in the hundreds of billions of dollars.  I don’t know how you could spin this 30 year and counting money pit unless you use Global Warming math.

  5. Valiuth

    So the point is the problem doesn’t require any special Government intervention, new taxes, etc… Innovation and market forces will do for us what we want to if we are just patient enough. But, that is the problem with the Environmental movement they don’t have patients to let things workout in the time it takes them to workout. 

  6. Dan Hanson

    There is also the difficult question of determining the right size of a carbon tax.  I happen to believe that the earth is warming and that man is contributing to it, but reading the literature I can’t find any consensus on what the real price of carbon should be to eliminate the externality costs. 

    Pricing carbon is an extremely difficult task – probably impossible.  The real damage done by a pound of carbon emitted into the atmosphere depends on so many variables, many of which are poorly understood or unknowable, that determining the price becomes little more than an exercise in figuring out how much tax the market will bear without causing extreme economic damage, and how much in taxes politicians can get away with before the voters revolt.   It’s not a matter of science.

    A real ‘Pigouvian’ tax meant to correct for externalities would see the revenue being given to the people harmed by the tax.  In this case, you can guarantee that the tax revenue would be used as a slush fund by politicians to pay off corporate cronies or be shunted into general revenue, bloating the size of government.   Nothing good will come of it.  

  7. John Hanson

     There is no reason for a carbon tax, because CO2 is not a polutant, and “Global Warming” to the extent it exists (about 0.8 degrees C over last 100 years, most before 1975) is the result of normal climate variation, and no one has shown anything else except with flawed models.   More CO2 would make it easier to feed the world’s population.   Further, actual statistics show a decrease in the number of huricanes, and in the world wide power of such storms, world wide this year was one of the lowest on record.

    Lastly, even if we granted everything the alarminsts keep distorting facts about, the cheapest approach is not to use carbon taxex, but to adapt to the changes. It leads to the higher living standards.

  8. John Walker
    James Pethokoukis:

    (Excerpt from quote from The Atlantic:)

    Because of this “Moore’s Law for solar”, electricity from solar panels now costs less than twice as much as electricity from coal, and only about three times as much as electricity from gas.

    This is fine, as far as it goes, but it’s misleading as regards the total cost of solar power. There’s this phenomenon we irritating engineers call “night”, not to mention “clouds”.  So while it may be true that the price of electricity delivered from solar panels in direct sunlight may be falling, the cost of replacing base load generation (coal, natural gas, hydro, or nuclear) must include the energy storage which allows solar to ride out those periods when the Sun isn’t shining on the panels.

    There hasn’t been any substantial progress in gigawatt scale load-levelling since pumped storage in the 1960s (you pump water uphill when the sun’s shining, then run turbines with it at night).

    Solar power satellites solve all of these problems, but they’re considered “Buck Rogers stuff”.  We could have had them by now for a fraction of the cost of the wars in the oil patch.

  9. John Hanson

    Another point,   as one commenter has said, the cost of the panels, and connecting them is the minor stuff.   To replace base load one needs massive energy storage capabilities that exceed the capability of the solar panels, (Sun only shine about 35%s of the time, and most of that is at less than 40% of their full capacity at noon on summer day).  When I looked at these costs a couple of years ago, the actual solar equipment was only about 20% of the cost.     It is also difuse so takes huge area of land, and huge infrastructure investents to get power from where it is efficiently generated, to where it is needed.    Now if we want to talk about

    powering an individual home, that might have some benefit, for persons in sunny isolated places.

  10. mikesixes

    If anybody here is aware of any evidence that anthropogenic emissions of CO2 constitute a danger to humans or any other living thing, please post it. You will be the first person ever to do so.  Hint: computer climate models are not and cannot be evidence of anything other than the existence of functional computers.

  11. Eeyore

    “Within the decade, solar could be cheaper than coal. Within two decades, cheaper than gas. When that happens, assuming we also have electric cars, it is game over for carbon emissions.”

    Do these time frames include the delays currently being caused by internecine conflicts among the “stakeholders” (I hate that word) involved. Solar people vs. water depletion people (solar takes a lot of water to convert and/or clean facilities) vs. the “save the turtles and sedges” people vs. the “stop despoiling our ancestral homelands” people?

  12. George Savage

    Anthropogenic global warming–now “climate change”–is a scam promoted to justify never-ending state empowerment at the expense of individual liberty.

    There has been no net global warming since the late 1990s, as quietly reported by the United Kingdom’s Met Office last month.  Note that the much-heralded computer models driving environmental policy–and not incidentally making crony capitalists like Al Gore fabulously wealthy–predict accelerating warming as global CO2 concentrations increase.  According to the doomsayers, the world should now be well into rapid, cataclysmic warming.  Wrong.

    Yes, global average temperature has risen over the longer term–rising at a fairly constant rate for the past century–but there is no evidence of a positive temperature feedback loop modulated by human CO2 emissions.

    Nevertheless, as usual, the Left has seized control of the linguistic high ground.  For example, each day the news reports California’s Cap and Trade energy tax as directed against “polluters.”   As though carbon dioxide, a non-toxic gas essential for life on Earth, is harmful because of some demonstrably inaccurate computerized climate simulations.

  13. John Murdoch

    Solar panel installations are increasing–but they funded by federally-mandated power purchase agreements that require the states to, in turn, require their utilities to buy a substantial percentage (as much as 30%) of their power from alternative sources. By which the politicians and the greens mean solar and wind.

    Take away those subsidies, and solar panel installation dries up. The total cost of ownership yields a practically infinite payback period.

  14. George Savage
    Dan Hanson  So let’s stop arguing whether or not the Earth is warming at all, when it clearly is and which would be happening even if man wasn’t on this planet. · 8 hours ago

    Edited 8 hours ago

    Agreed.  But the real positive feedback loop nowadays is between the simulation set and statist policymakers.  Individual liberty is all very nice in concept, but cannot stand against global catastrophe–equivalent to a slow-motion asteroid strike–brought on by your freedom to use energy as you please and enjoy private property more generally.

    This is the scam, and it needs to be confronted in big bold letters, in the first sentence.  Every time.  Otherwise, we begin with “Well, we all agree that the world is getting warmer, but…” and by this point the average citizen tunes out, siding with the “consensus” that the catastrophe is unfolding but, as usual, the evil right-wingers are looking out for the interests of the plutocrats even at the cost of hastening Armageddon.

  15. Dan Hanson
    George Savage: Anthropogenic global warming–now “climate change”–is a scam promoted to justify never-ending state empowerment at the expense of individual liberty.

    There has been no net global warming since the late 1990s, as quietly reported by the United Kingdom’s Met Office last month. 

    Man, I hate to take the side of the global warming gang, but that statistic is misleading.   The  annual variance in temperature swamps the ‘signal’ from global warming, and it’s not impossible or even unlikely for variance to result in a long period where temperatures don’t increase much.

    Have a look at this chart, showing global temperatures since 1880.  There is a very clear upwards trend in temperature, yet there was a period  of 40 years during which temperature actually declined.  And earlier, there was another period from 1898 until about 1910 where global temperatures declined rapidly, and didn’t recover to their previous levels until almost 1930. 

    What the data does tend to indicate, however, that the extreme claims of the ‘alarmists’ are very questionable.  A long period of stable  temperature is consistent with a very small global warming signal, but not with a rapid, accelerating rate of change.

  16. Lavaux

    Silly Greek, the AGW industry is a special interest entirely reliant on government largess, sort of like the entire Greek People. CO2 could recede back to 17th Century levels and government would still work with the AGW industry to incite imaginary but exploitable crises. Forget science, it has nothing to do with AGW and everything to do with politics, money, greed, deceit, etc.

    Maybe the best way to sum up the foregoing is that if you still believe that government has anything to do with truth or the good, you’ve got lots of catching up to do.

  17. Fake John Galt

    Lets be honest, a Carbon Tax has very little to do with Global Warming and unacceptable fuel choices. It has everything to do with generating revenue, creating secondary markets, cronyism and influence peddling. It is just one more way for the political class to steal.

  18. Lavaux
    Fake John Galt: Lets be honest, a Carbon Tax has very little to do with Global Warming and unacceptable fuel choices. It has everything to do with generating revenue, creating secondary markets, cronyism and influence peddling. It is just one more way for the political class to steal. · 2 minutes ago

    Right on!

  19. Dan Hanson
    mikesixes: If anybody here is aware of any evidence that anthropogenic emissions of CO2 constitute a danger to humans or any other living thing, please post it.

    There is plenty of evidence.  Read the IPCC 4th assessment report – not the over-hyped ‘summary for policy makers’, but the actual scientific information.  

    Yes, there are problems with the models.  Their ability to predict the future is questionable, and we should be very skeptical of them.  But we don’t just have models – we have actual measurements of CO2 levels and temperatures over the past 100 years, and there’s a pretty strong correlation.  In addition, the basic atmospheric physics that CO2 is a greenhouse gas and more CO2 = more temperature is incontrovertible and not in dispute.

    We need to start talking about global warming intelligently.   We keep denying or arguing the basic science, which is where the AGW alarmists have the best argument.   Instead, we should concede the basic science and attack them where they are weakest – in their extreme claims for future warming based on flawed models and their idiotic left-wing policy prescriptions.  That’s where they are vulnerable, and where there is no science on their side.

  20. Valiuth

    Dan Hanson: The problem as I understand it is not with CO2 but rather with how buffered the system (the environment) is against any slight increases in temperature that increasing CO2 leads to. The models that alarmists cite assume that the system is very sensitive and that positive feed back mechanisms will force temperatures higher hence the assumptions of rapid temperature gains. Those skeptical of this, feel that the system is a lot more buffered and temperature gains will be very mild. 

    Others have also argued that CO2 is simply an indicator of global temperatures. Since rising ocean temperatures will cause the release of dissolved CO2. These scientist site evidence suggesting that CO2 levels actually lag historical indicators of temperature. So first you get warming and then CO2 is released…

    I agree with you though that many opponents of the AGW policies don’t give enough credit to the actual science and scientist involved most of whom do not really have an axe to grind politically. Science always is at its worst when politicized and I don’t think our side should contribute to the problem, when the main question to be addressed is in fact political and not scientific.