Climate change is a threat to our environment and our economy, and we cannot afford the risk of inaction. With our free market economy, the best solution is a simple, transparent tax on carbon that unleashes the power of the market and enables America to lead the way toward a new, clean energy economy. Importantly, a carbon tax produces revenues that can be used to help American businesses and families. But there are many options for how to use these revenues. Critics of carbon taxes frequently cite slower economic growth, increasing taxes on the poor, and hurting coal workers as reasons for opposition. But finding a bipartisan solution for how to allocate the revenues from a carbon tax to address these concerns is the best way to address climate change, increase economic growth and ensure that everyday Americans don’t get left behind.
That’s why I introduced the Tax Pollution, Not Profits Act, which applies a tax on greenhouse gas emissions equal to $30 per ton of carbon dioxide or carbon dioxide equivalent. In my legislation, half of the revenues are used to lower the corporate tax rate from 35% to 28%. This will make our businesses more competitive in the global economy and lower consumer prices across the board. My legislation dedicates the other half of the revenues to help American families. Coal workers will be taken care of with funding for job training, health benefits, and early retirement. Low income households will receive monthly payments to make up for increased energy costs and the rest of the revenue will go towards tax credits to middle class households. The legislation is a win for the environment and a win for our economy.
By Henry M. Goldberg Consultant, Independent
Congressman Delaney’s bill to introduce a carbon tax for the United States is a welcome positive step to address the climate change problem. Carbon taxes should be one important component of an overall strategy to address climate change. Carbon taxes on oil and coal consumption would result in less use of these fuels through price-induced conservation, capture benefits for the U.S. from reduced world oil demand and resulting world oil prices, and encourage substitution to clean-energy alternatives if they were available.
The province of British Columbia in Canada enacted a similar carbon tax in 2008, which has progressively risen to $30 Canadian per metric ton of CO2 emissions, and transportation energy use has decreased by about 8%, which is greater than the expected price-elastic demand effect due to citizens realizing the importance of reducing CO2 emissions. The majority of the province’s residents support the tax partly because it is revenue neutral, with carbon tax revenues being returned in the form of business and personal income tax cuts and low-income tax credits, and provincial GDP has not been affected.
However, I disagree that carbon tax revenues should be allocated to the reduction of corporate taxes and personal income taxes. In my article “Creating an American Infrastructure Investment Strategy” https://www.ourenergypolicy.org/creating-an-american-infrastructure-investment-strategy, I propose the federal government establish an “American Infrastructure Investment Corporation”, funded substantially by carbon tax revenues, to partner with the private sector in investing in the clean-energy infrastructure necessary to allow substitution away from coal and oil. This includes investments in renewable solar/wind/hydro/geothermal power, a new national high-capacity smart electric power network, energy-efficient homes and buildings, new service station infrastructure to supply alternative fuel vehicles (natural gas, charging stations for electric vehicles, hydrogen), public transportation systems, and advanced broadband/digital infrastructure to enable telecommunications to substitute for transportation. The investment in this clean-energy infrastructure will drive economic growth and associated job opportunities in a way much more consistent with long-term sustainable economic development goals than across-the-board tax cuts. I do support Congressman Delaney’s proposal of providing income support for low-income households affected by higher energy costs as well as funds for retraining of coal workers.
A carbon tax by itself is not sufficient to address the global warming problem. Instituting a $30 tax per ton of CO2 emissions only adds about 27 cents per gallon to the price of gasoline. This will cause some conservation of gasoline, but will not drive most consumers to replace their gasoline-powered vehicles with electric and natural gas vehicles or substitute telecommunications for transportation on a large scale, which is what is necessary to properly address global warming in the transportation sector. Similarly, a $30 tax per ton of CO2 emissions results in about a 3 cent per kWh increase in coal-fired electricity prices, which will again incentivize some reduction in electricity consumption and switching from coal to natural gas. But this will not be sufficient to drive electric utilities to replace most of their existing coal-fired power plants with renewable power, which again is the required direction to halt global warming.
Beyond a carbon tax, the U.S. government needs to develop an overall clean-energy infrastructure strategic plan to replace coal in the electric power sector and oil in the transportation sector. The federal government, state governments, and local governments have an important role to play in this transition to clean-energy infrastructure that goes well beyond the operation of the free market. There are a range of government actions that need to be taken including: mandating coal and oil facilities retirement, partnering with the private sector in funding clean-energy infrastructure development, enabling rights-of-way for new infrastructure, streamlining permitting processes for new infrastructure construction, feed-in tariff policies for distributed renewable power, regulations to enable smart grids for distributed renewable energy and demand management, and a whole range of policies to enable digital infrastructure development (see “Arizona’s Strategic Plan for Digital Capacity” https://digitalarizona.az.gov/sites/default/files/editors_choice/attachments/StrategicPlanExpanded.pdf).
The carbon tax should be raised over time, for example to $60 per ton of CO2 emissions in 3 years and $90 per ton of CO2 in 6 years to raise greater revenues for federal government infrastructure investment. Consumers would not be that hard hit with gasoline prices that increased by about 50 cents per gallon in 3 years and 75 cents per gallon in 6 years, particularly if world oil prices remain relatively low, and considering that gasoline taxes are much higher in Europe. A $30 per ton carbon tax would raise about $150 billion in annual revenues, and the federal government infrastructure investment funds should increase over time.
Carbon taxes are a necessary first step. To properly address the global warming problem, the United States must develop a full strategic plan on how to best use the resulting revenues and how to effectively enable the transition to the future clean-energy infrastructure that will replace the current oil and coal- powered energy system.
By Joseph Aldy Associate Professor of Public Policy, Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School
Every aspect of economic activity affects greenhouse gas emissions and, hence, the global climate. Since individuals and businesses bear virtually no cost for emitting greenhouse gases in the absence of public policy, and thus have no incentive to reduce these emissions, the government has a strong case for climate change policy.
Designing a Carbon Tax
A well-designed carbon tax should be cost effective, efficient, and administratively simple. A cost-effective carbon dioxide tax would cover all emission sources. The government could set a tax in terms of dollars per ton of CO2 on the carbon content of the three fossil fuels (coal, petroleum, and natural gas) as they enter the economy. An efficient carbon tax would be set equal to the marginal benefits of reducing CO2 emissions, i.e., the social cost of carbon, and would increase over time to reflect the greater incremental damage from an additional ton of CO2 as atmospheric concentrations rise. Analysts – in academia and the government – have produced a wide array of estimates of the social cost of carbon.
Applying the carbon tax to the carbon content of fossil fuels targets the bottleneck in the product cycle of fossil fuels. Under such an upstream approach, refineries and importers of petroleum products would pay a tax based on the carbon content of their gasoline, diesel fuel, or heating oil. Coal-mine operators would pay a tax reflecting the carbon content of the tons extracted at the mine mouth. Natural-gas companies would pay a tax reflecting the carbon content of the gas they transport or import via pipelines or liquefied natural gas (LNG) terminals. This carbon content of fuels scheme would enable the policy to capture about 98 percent of US CO2 emissions by covering only a few thousand sources as opposed to the hundreds of millions of smokestacks, tailpipes, and so on that emit CO2 under a system targeting actual emissions.
A US carbon tax would be administratively simple and straightforward to implement, since it could incorporate existing methods for fuel-supply monitoring and reporting to the government. The US Energy Information Administration already tracks the production, import, export, storage, and consumption of fossil fuel products. United States refineries and importers of petroleum products already pay a Federal per barrel tax and coal mine operators already pay a Federal per ton tax , so a national carbon tax could easily piggyback on these existing tax reporting systems.
A crediting system for downstream carbon capture and storage technologies could complement the carbon tax system. A firm that captures and stores CO2 through geological sequestration, thereby preventing the gas from entering the atmosphere, could generate tradable CO2 tax credits, and sell these to firms that would otherwise have to pay the emission tax. Such a system of tax credits could provide a transparent means to finance such carbon capture and storage technologies.
While stimulating the investment in low-carbon, zero-carbon, and energy efficient technologies, the implementation of a carbon tax could adversely affect the competitiveness of energy-intensive industries. This competitiveness effect resulting from higher energy prices can lead to firms relocating facilities to countries without meaningful climate change policies, thereby increasing emissions in these new locations and offsetting some of the environmental benefits of the policy.
The Impacts of a Carbon Tax on Energy Markets and the Economy
Energy suppliers will increase the price of the fuels they sell in response to the carbon tax. This will effectively pass the tax down through the energy system, creating incentives for fuel-switching and investments in more energy-efficient technologies that reduce CO2 emissions. The real-world experience of firms and individuals responding to changing energy prices demonstrates the potential power of a carbon tax to drive changes in the investment and use of emission-intensive technologies. The higher gasoline prices in 2008 resulted in larger market share of more fuel-efficient vehicles, while reducing vehicle miles traveled by drivers of existing cars and trucks. In recent years, electric utilities responded to the dramatic decline in natural gas prices (and the associated increase in the relative coal-gas price ratio) by switching dispatch from coal-fired power plants to gas-fired power plants.
Historically, higher energy prices have induced more innovation and increased the commercial availability of more energy-efficient products, especially among energy-intensive goods. Imposing a carbon tax would provide certainty about the marginal cost of compliance, which reduces uncertainty about returns to investment decisions and eliminates the regulatory uncertainty that inhibits energy sector investment. Of course, certainty over costs results in uncertainty over emission reductions.
Carbon Tax and Tax Reform
The effects of a carbon tax on emission mitigation and the economy will depend in part on the amount and use of the tax revenue. Using carbon tax revenues to finance tax reforms that improve the efficiency of the tax code could stimulate economic activity and offset some or all of the costs of cutting emissions. In addition, a relatively small percentage of the annual carbon tax revenues could also support the research and development of climate friendly technologies, which suffer underinvestment by the private sector.
Raising energy prices could disproportionately impact low-income households, since a larger fraction of their budgets is dedicated to energy expenditures. The regressive nature of a carbon tax can be mitigated through the recycling of revenues back to the economy. For example, British Columbia’s economy-wide carbon tax program returns all revenues to the economy by cutting corporate and individual income tax rates and through a means-tested Low Income Climate Action Tax Credit. If a carbon tax is part of a broader fiscal and tax reform, the overall progressivity of the package will depend in part on the use of carbon tax revenues, but more substantially on decisions regarding entitlement spending and changes to the tax code for businesses and individuals.
Businesses that face the possibility of a carbon tax would likely oppose it, especially if they also must comply with regulations under the US Clean Air Act. Lowering the tax rate on corporate income may address some business reservations. Moreover, a meaningful, economy-wide, long-term carbon tax would obviate the need for many if not all greenhouse gas regulatory options. A carbon tax would deliver more cost-effective and efficient emission reductions and promote innovation more effectively than the Clean Air Act regulatory authority, as well as avoid some of the potential legal and political pitfalls and administrative costs of regulations. Exchanging regulatory authority for a carbon tax could also improve the political viability of taxing carbon dioxide emissions.
This post is excerpted from an article I wrote for the Oxford Energy Forum, which can be found in its entirety here.
By Bruce Stram Permanent Monitoring Panel - Energy, World Federation of Scientists
As an economist I wholeheartedly support carbon taxes as a primary approach to carbon emissions policy. Given the inter nation character of the problem, a tax is much easier to coordinate amongst them. The same tax translates to all. Cap and trade,a similar competing policy, has a very serious flaw in that carbon allowances for participating countries need be settled up front.
There is, however, a painful conflict at the heart of current climate change policy efforts which is seldom commented upon. Virtually all proposals, cap and trade, carbon tax, command and control, promise to make fossil fuel energy much more expensive than it is now, therefore creating a strong incentive to avoid carbon based energy.. Yet the world’s poor can’t afford energy even at today’s “cheap” prices for these fuels. Their lack of such access is widely agreed to be a primary source of their extreme poverty. Imagine their plight were they to suffer the current German climate change energy regime with power prices reaching thirty cents per kwh.
Fortunately for those poor, we are not moving very quickly at all down a path to make this happen. For those who adhere to the most dire, and even moderate claims of climate change modellers, this circumstance is clearly dismaying. Even if one’s hair isn’t on fire with regard to this matter, the fact of so much apparent agreement on the issue with so little action is disconcerting. What if the pessimists are right?
I have proposed a strategy ( http://authors.elsevier.com/sd/article/S0301421514003048) to address both energy poverty and carbon emissions. It is simple and cheap, at least at first. It starts with substantially increased funding of energy technology research and development worldwide with the expressed goal of finding non carbon energy sources and services which are lower in cost than those available today with fossil fuels. This goal directly addresses the energy poverty problem and climate change issues.
The source of this increased funding should come from a small carbon tax agreed to by at least several countries as a beginning. The proceeds of that tax are dedicated to goal oriented energy technology research and development. Even a small tax would raise enough funding to substantially increase energy R and D. Further, the existence of a dedicated fund would provide for financial continuity of such expenditures. It is widely agreed that such research funding should be increased, and that stable funding is critical. (For example, a $2 per ton tax would raise $12 billion in the US alone, compared to Federal energy R and D of $9.1 billion in 2011.)
The countries joining the coalition would agree to enact the tax, and pool the funds to be overseen by a common administration. As the R and D produces valuable technologies, members of the coalition would have preferred rights to it, thus providing an incentive for membership.
Such a program would provide a backstop to already existing (and struggling) policy efforts and could if successful, render them moot. Less costly non carbon energy would be adopted voluntarily. And if these research efforts are not fully successful (this is an extremely ambitious goal), an existing carbon tax regime would facilitate harmonization of climate change policy among nations and reduce the ultimate cost of climate policy. With the tax mechanism widely in place and greater public support of carbon policy, responding more effectively, if and as adverse outcomes become apparent, would be a “simple” matter of raising the tax level (Simpler at least than starting from scratch.). Part of the proceeds from a substantially increased tax could be used to help countries with substantial numbers of citizens in extreme poverty to adapt to more expensive non carbon energy sources if the research effort comes up short.
By Lewis J. Perelman Principal, Perelman Group
Bruce, your proposal is certainly on the right track. As you suggest, the necessary goal is to make clean energy cheap enough for the poor to afford — without subsidies.
A small carbon tax to fund innovation investments is certainly the only practical one — given, as Jesse Jenkins has explained at length, and consistent with Roger Pielke Jr.’s “Iron Law” of climate policy, that the great majority of the public is unwilling to pay any significant economic penalty to curtail carbon emissions.
But there are other, more sweeping and urgent needs for tax reform that the Congress has been unable to effectively address for several years. Former Rep. Dave Camp’s conscientious, bipartisan effort to craft a tax reform bill ultimately went nowhere. The Congress has struggled just to fund a highway bill to repair crumbling roads and bridges, and so far has been unable to pass any measure that is more than a short-term stopgap.
So it seems unlikely that any kind of carbon tax will be enacted any time in the foreseeable future. My book, Energy Innovation, assumes any large increase in appropriations will be hard to achieve, so instead it offers a “Plan B” to create more innovation in energy technology, faster, by reforming the way existing resources are engaged.
By Dr. Bruce Stram Permanent Monitoring Panel - Energy, World Federation of Scientists
Lewis,
Thanks for you comments which are well taken. My antidote to Congress doing nothing is to set my carbon tax small enough to be almost nothing ( :)), but large enough to fund significant and reliable increases in goal oriented energy R & D. Once that step is taken, nations beyond the initial few will be incented to join in order to have access to valuable innovations. Unlike a setting of carbon allowances, wherein joining up becomes less meaningful as the group gets larger, joining this group becomes more attractive as it gets larger and the successful possibilities become greater. At least that’s what I tell myself.
By George Frampton President, Partnership for Responsible Growth
By dedicating revenues generated through a carbon tax or some kind of “pollution fee” to lowering the corporate tax rate and to compensating families for higher energy costs, modeling has shown that there would be an increase in GDP, job creation, and of course a substantial benefit to U.S. companies by enhancing their competitiveness in global markets if the U.S. pairs its policy with a Border Adjustment Tariff. In-so-doing, the United States can incentivize the international community to embrace a similar approach and significantly reduce carbon emissions on the global scale.
A carbon fee imposed as a compliance mechanism in lieu of a purely regulatory approach, such as the Environmental Protection Agency’s (EPA) Clean Power Plan (CPP) (as proposed under section 111(d) to the Clean Air Act), is a more effective way to curb carbon emissions, provides certainty to industry’s infrastructure investments, and simplifies compliance. A simple tax passed by Congress would provide predictability in energy prices and minimize litigation costs. The certainty a carbon fee would provide could encourage businesses to invest in cleaner energy and energy efficiency measures. Other carbon pricing schemes such as “cap-and-trade markets”or “carbon auctions”would not provide the same level of certainty as a fixed price. A fixed tax on carbon emissions would commoditize the externality and turn carbon into a valuable resource, help currently expensive “clean coal”investments like Carbon Capture and Sequestration become viable options for continued use of carbon fuels.
The U.S. Chamber of Commerce’s Institute for 21st Century Energy, the Center for Climate and Energy Solutions (C2ES), and the Midcontinent Independent System Operator (MISO), have released reports that study the potential price impacts on the U.S. and costs of carbon under the EPA’s CPP. The Chamber’s report identified major losses in GDP, employment, and real disposable income if the proposed CPP regulations are enforced under section 111(d) of the Clean Air Act. When losses are calculated together, the Chamber estimates the cost of CO2 at $143 per ton. C2ES’ report utilizes six separate economic models to determine the future effects of the impacts the CPP may have. Because of the six separate models, the report does not pin-point a specific price per ton of carbon but concludes that under each scenario, there is an increase in retail electricity rates which could be anywhere from 6.9 to 13 percent. On average, C2ES notes that the increase will cost households less than a modest $87 per year. MISO’s study estimates compliance costs at about $83 billion and places the equivalent price per ton of CO2 at $60 under the draft rule.
Recently, the World Resources Institute (WRI) released a report demonstrating that a 40-42 percent reduction in greenhouse gas emissions below 2005 levels by 2030 would be possible using a price on carbon – – far in excess of the reductions slated by the Clean Power Plan. Modeling done by WRI using DOE models predicts a robust increase in economic growth. The report found that employment would be expected to grow in the renewable energy sector and the U.S. could experience positive economic impacts to public health benefits associated with reductions in air pollutions and longer-term climate benefits. The report goes further to describe other benefits, which may include a decrease in total house-hold energy spending by 15 percent in 2030.
We commend Congressman Delaney. Congress should seriously consider legislation like his that puts a fixed price on carbon and uses the proceeds to cut taxes on both business and families. Such an approach can create a national comprehensive energy and economic policy that increases jobs, grows the economy, protects the environment and gives the electric energy sector the certainty it needs to continue to produce reliable, affordable, and dependable electricity.
The Honorable George Frampton
President, Partnership for Responsible Growth; 2015-Current
Chairman, White House Council on Environmental Quality;1998-2001
Assistant Secretary, Department of Interior for Fish, Wildlife, and Parks; 1993-1997
By Dan Miller Managing Director, The Roda Group
I commend Congressman Delaney on considering a carbon fee to reduce fossil fuel greenhouse gas pollution. As Joseph Aldy states above, “A well-designed carbon tax should be cost effective, efficient, and administratively simple.” The simplest and perhaps most effective approach is known as the Fee and Dividend policy.
With Fee and Dividend (F&D), a rising price (starting at $10/ton and rising $10/ton every year for 10 years) is put on the carbon content of fossil fuels. The fee is paid by the fossil fuel companies at the mine, well, or port of entry. 100% of the money collected — every penny — is paid out to every legal resident on an equal basis. Because wealthy people generate far more CO2 than an average person, and because governments generate lots of CO2 but don’t get a dividend, it turns out most people would earn more from the dividend than they pay in higher energy and product prices.
Also, to reduce global emissions and protect American industries, a border duty would be put on products coming from countries that do not have their own fee on carbon. Those countries would be faced with the choice of sending lots of money to the United States or keeping it themselves. They will chose to keep it themselves. Global participation in reducing greenhouse gases is necessary to address climate change. It is not something we can do on our own.
A recent study by Regional Economic Models, Inc. (REMI) concludes that an F&D policy will, over 20 years, create 2.8 million jobs, grow GDP by $1.4 trillion, while reducing greenhouse gas emissions by more than 50%. And note that the study does not account for reduced climate impacts due to the lower emissions, so the actual economic benefits of the policy will be much larger than the study predicts.
Compared to the Congressman’s proposal, F&D is simpler, more transparent, less regressive, and will lead to more greenhouse gas reductions (because of the higher carbon fee). F&D also has the advantage that it will be welcomed by the public. F&D is similar in concept to the Alaska Permanent Fund (APF) that pays every Alaskan citizen a portion of the fees collected from fossil fuel companies for extraction rights. APF has strong support in Alaska, including among conservatives. Also, conservatives will also appreciate that F&D does not grow government at all and does not pick winners or losers. It simply puts a price on the “bad thing” and lets market forces find the most efficient solutions.
Unlike Cap and Trade schemes, a steadily rising carbon fee will allow fossil fuel companies, energy utilities, entrepreneurs, investors, and others to know ahead of time what carbon fees will be in the future and let them plan accordingly.
A well designed carbon fee will spur innovation, investment, and deployment in clean energy and energy efficiency and will help us begin to address the greatest challenge facing us and future generations.
By Lewis J. Perelman Principal, Perelman Group
While I have not studied the REMI report in detail, its rosy conclusions seem suspect.
First, this critique of a similar plan seems applicable:
“…even in the unlikely event that government returned carbon dioxide tax revenue to the American people on a dollar-for-dollar basis, this would be revenue-neutral for government but not for the American people. The entire purpose of a carbon tax is to raise the price of inexpensive coal and natural gas so high as to become more expensive than carbon-free wind and solar power. However, if the carbon tax fulfills its goal of raising coal and natural gas prices higher than wind and solar prices, energy providers will no longer use coal and natural gas and energy producers will therefore pay little if any carbon tax. As a result, consumers will pay dramatically higher energy prices but receive little if any compensating tax cuts in return. American families’ net disposable income will drop, which will reduce spending and destroy jobs in all other sectors of the economy. The only beneficiary of this energy-policy Ponzi scheme will be the renewable energy industry. ”
http://j.mp/1JUuRo3
Second, the ‘border adjustment’ assumed in the REMI report is effectively a tariff, which may be disallowed under WTO rules, and which at least would be contested and otherwise lead to retributive action. “Leakage” is a chronic problem of regulatory climate protection schemes that over two decades of COP talks have failed to resolve. Similar conflicts of interest between Rich and Poor similarly have stymied the Doha Round of global trade talks for over 15 years. REMI evidently gets its cheery results by assuming such key problems do not exist.
Third, the return of carbon tax revenues to consumers in this and similar proposals generally seems to provide only for returning the tax on fuel directly consumed by individuals. Will the tax also be rebated to all businesses that pay it? If not consumers will face higher prices for many goods and services, as businesses pass the cost of the tax along. If 100 percent of the tax is refunded to those who pay it, it’s hard to believe it would have any notable impact on consumption — its supposed purpose. The program becomes basically a Keynesian exercise in increasing money velocity by taking it out of people’s pockets, subtracting some not trivial frictional costs of administration, and then returning the money to the same pockets to pay for the illusory higher prices. If the frictional costs are paid for by increasing the money supply, the overall effect is inflationary. This might have a stimulative effect at some times, but at others it would only prompt the Federal Reserve to raise interest rates to dampen the resulting inflation and thus subtract any stimulus.
By Dan Miller Managing Director, The Roda Group
Lewis: It is important to note that the current price of fossil fuels does not cover its true cost to society. The external costs of fossil fuels are real and must be paid, mostly through higher taxes, insurance premiums, uninsured losses, food prices, etc. And while the benefit of artificially low fossil fuel prices are temporary, the resultant CO2 — and, therefore, the external costs — lasts for hundreds to thousands of years. It is as if we are borrowing from our children and all future generations.
This situation where the true costs of fossil fuels are not included in their price has resulted in what Lord Nicholas Stern calls the “biggest market failure in history.”
So putting a fee on the carbon content of fossil fuel does not lead to a less robust economy. Indeed, it leads to a more efficient economy because the price we pay for energy will more accurately reflect its true total cost.
As for you comments on the border duty, this has been studied and it has been determined that it is allowed under WTO rules as long as the tariff is not discriminatory (i.e., as long as we have our own carbon fee). You can read more about carbon fees and the WTO here.
By William Prindle Vice President, ICF International
Congressman Delaney deserves credit for putting forth the carbon tax concept. I would like to post some cautionary notes, along the lines of “a carbon tax can be good energy and environmental policy IF, AND ONLY IF:”
1. A carbon tax does not become a substitute for other clean energy policies. Some conservatives might accept a modest carbon tax, but would use it as a weapon to oppose any number of other equally or more worthy clean energy or environmental policies. The risk is that a political deal could be struck over a nominal tax, while sacrificing any number of existing and new policies that are more effective for key markets. Building energy codes, appliance efficiency standards, fuel economy standards, and utility energy efficiency programs have been very effective at moderating U.S. energy demand; they and other proven policies should not be sacrificed for a single conservative economic idea.
2. The absolute level of the tax is high enough to drive major market shifts. $30/ton is not a bad start–but with a total impact of under 30 cents per gallon of gasoline and 3 cents per kWh of electricity, it falls within the existing range of prices accounted for by differences in seasonal prices, state utility rates, state gas taxes, etc. In some energy supply markets, $30 may be enough to exceed the “spark spread” among energy commodity prices but in others, it will just impose costs without shifting resources choices. Also, carbon taxes are generally more effective in energy supply markets: they give investors clear signals on where to place their bets. But demand markets are affected by significant market barriers like the principal/agent split incentive problem, and by elasticity effects such as income and cross elasticity that blunt the price elasticity effects an economist would expect, so carbon price signals have limited effects in many end-use markets. I also note that in retail electricity rates, with carbon content per kWh already falling due to other policies, carbon tax impacts will be increasingly diluted over time, requiring higher and higher levels of taxation to achieve the same effect. This all boils down to the fact that carbon prices would have to be very large to override barriers and other effects, which would impose needless economic pain across broad markets with diluted effects on carbon emissions. This only strengthens the argument for targeted policies that cost less per unit of impact.
My company does a lot of energy sector modeling: our models find long-term price elasticity effects for the electricity sector to be in the .25 range, meaning that to get usage to fall 25%, prices have to rise 100%. Efficiency potential studies show that a 25% reduction in usage is economic, but the question here is what costs do policies impose to realize that potential. Contrast the doubling of electric rates via carbon taxes to what’s happening in many states today, where energy efficiency programs add 2% or less to electric rates, but create demand reductions of 1-2% annually, which cumulate over time such that the percentage of demand decrease actually exceeds the percentage price increase. That kind of policy stands conventional price elasticity theory on its head, and makes this kind of thoughtful, targeted policy a better economic deal for the state’s ratepayers. If I were a state utility commissioner and had the choice between a 2% and a 100% increase in rates for the same benefit, I know which option I could choose.
3. The authorizing legislation provides for escalation and long-term certainty. Markets and investors need long-term energy price certainty, but political memories are too often short. A carbon tax that seemed like a good idea one year may become anathema to a later Congress. Look what happened to cap-and-trade, which was a Republican idea for a market-based solution to the acid rain problem, and which became the political deal of the 1990 Clean Air Act Amendments. 25 years later, cap-and-trade has become another conservative battle cry; who’s to say that 25 years from now in 2040, when the effects of climate change are further stressing our economy and our fiscal system, a battle cry to repeal the tax won’t emerge? So unless Congress includes safeguards that make repeal and rollback of the carbon tax very difficult, and unless the tax is authorized for at least 30 years, with specific escalation that takes the taxation level to at least $100/ton within ten years, a carbon tax deal could be a shaky deal at best. By contrast, the National Appliance Energy Conservation Act, signed by Ronald Reagan in 1987, had stood the test of time, including federal court battles, and is widely accepted by affected industries as workable policy. Finally, I note that today’s EU MINIMUM energy tax rates for unleaded gasoline pencil out to over $1.50/gallon, which is well over $100/ton in equivalent carbon prices. So we need to be real about what’s really required to bend the curve on carbon emissions, and a nominal $30/ton carbon tax, in and of itself, is just not going to get us there.
By Herschel Specter President, Micro-Utilities, Inc.
There are a number of subtle economic assumptions in some of the above comments that need a second look. First, as we would phase out fossil fueled electricity on our path to dealing with climate change, we would simultaneously reduce the carbon tax income collected from the very same power plants that release carbon. Fewer tons of carbon released each year ( a success story for climate change) means a decreasing amount of carbon tax money collected each year. Those economic models which assume a constant source of tax money collected each year need to be changed.
A rising carbon tax over time that could accelerate the demise of fossil fueled power plants which, in turn, could result in even less money collected over time. If one wants to maximize the total amount of money collected from carbon fees you have to “maximize the area under the curve” where the curve is a plot of the carbon tax in dollars/ton of carbon versus number of tons of carbon released per year. However, it is not clear that the maximizing the amount of money collected through carbon taxes is the best strategy for reducing the impacts of climate change.
A far more serious issue is the subtle assumption that as coal, and later gas electric plants, are phased out because carbon taxes make them economically unattractive, their replacement non-carbon sources of electricity would be economically priced and could become operational quickly enough to prevent power shortages. Neither of these implied assumptions may be valid.
Take, for example, Figure ES-10 in the National Renewable Energy Laboratory’s (NREL) report “Renewable Electricity Futures Study”. This figure predicts an increase in the cost of electricity over 2009 costs of about $25 to $48 per Megawatt-Hour by year 2050, i.e., when the percentage of renewable electricity would be in the 80%-90% range of total electricity use. Except where there are large amounts of hydropower, electricity costs appear to be higher in countries that have a large fraction of renewable electricity. A comparison of electricity costs versus the fraction supplied by non-hydropower renewables would be welcome.
The issue of cost shows up in another way. The cost of insufficient electricity is very high compared to the cost of electricity when available. NREL reports (NREL/BR-200-34231) that the U.S. economy loses between $119 to $188 billion dollars per year from power outages and power-quality issues. Yet the U.S. electric grid is about 99% reliable. If there were insufficient electricity because non-carbon replacement sources could not be put into operation quickly enough, the costs would be prohibitive. One could end up with a situation where mandating reduced use of fossil fuel use could create blackouts and brownouts and/or cause a significant increase in the cost of electricity for consumers.
Do not expect that nuclear power alone will solve this issue, even though it is the largest source of non-carbon electricity in the country today. Even if all the fear issues (many bogus) disappeared overnight, the country is not prepared to manufacture large numbers of new nuclear plants each year or to provide low cost capital, an essential for high capital cost activities.
The economic and political discussions above need to be broadened to include the above issues and need to examine our difficulties in manufacturing economically attractive non-carbon sources quickly enough to meet climate change goals.
By Lewis J. Perelman Principal, Perelman Group
Excellent points, Herschel.
By William Eacho Co-Founder, Partnership for Responsible Growth
Any carbon fee program must assume that the underlying activity will be phased out as the price rises, and as such the price must rise to offset the lost income, especially if the revenue-neutral aspect is used to reduce other income sources on some permanent basis. However, if the income is used in the short-term to reduce corporate tax rates, GDP rises and eventually offsets much of that lost icome as tax receipts from income rise wth GDP. It is also somewhat foolish to assume that technology is static. We live in a very dynamic world, and new technologies will surface once incentives are in place to develop them. The entire electrical grid is built on assumptions of older approaches to energy generation and distribution. As we properly cost the use of fossil fuels, to reflect their true external costs, renewables will grow in use and prices for renewables will continue to drop. Generation may be far more distributed, closer to consumption. The use of storage batteries will grow, which will adress intermittency. Nuclear will become more cost competitive. Etc. In other words, the market will respond, once we start pricing carbon appropriately and stop subsidizing it to make it appear cheaper than it really is.
By Herschel Specter President, Micro-Utilities, Inc.
This discussion might benefit from having a cost estimate to work with, as given below. My concern is that we may be overestimating the amount of money that may come from carbon taxes while underestimating the high cost of creating a carbon-free energy future. Tied to both of these issues is the matter of timing:. Can we truly do all that is necessary by 2050 or will the rate of progress be set by infrastructure and financial constraints? if the estimated cost of a carbon -free energy system far exceeds the income from carbon taxes, what do we do then, especially in light of the economic situation we are in as described above by Dr.Perelman?
First, economic models that assume the income from carbon taxes would be based on the dollar value of released carbon may only be valid for a limited amount of time. As pointed out in my earlier comment, the purpose of the carbon tax is to reduce carbon releases. As such, this economic structure puts itself out of business as the carbon sources are phased out. What we may want to examine is how much money could be extracted from the coal, gas, and oil industries before they become bankrupt. Early shut down of fossil fueled industries through bankruptcy means less carbon tax income. Have we overestimated the income from carbon taxes?
Let us now take a quick look at just one of the expenses to build a carbon-free future. In 2010 69.5% of our electricity was generated by fossil fuels, almost entirely from coal and natural gas. In 2010 19.6% of our electricity was generated by nuclear power. By 2050, if we are to effectively combat global warming, the fossil fueled plants would all be shut down. By 2050 the licenses of the fleet of presently operating nuclear power plants likely will have expired. Just to produce the same amount of electricity by 2050 as we did in 2010 means that we have to replace 69.6 + 19.6 =89.2% of 2010’s electricity. In 2010 the U.S. had an installed capacity of 1039 million kilowatts, 89.6% of which is 939 million kilowatts. if one assumes a low capital cost factor of $3000/ per kilowatt, it would take about $2.8 trillion dollars just to match the 2010 output, assuming a 90% capacity factor. This may be a very low cost figure if additional transmission lines have to be constructed and extensive use of energy storage is required. Many renewable energy sources, like wind power and photovoltaics , have capacity factors well below 90%, more in the 25 to 35% range. As such, the installed capacity of renewable energy would have to be up to three times larger than those carbon-free power plants that have capacity factors in the 90% range.
The above cost estimates do not include the cost of a much more electrified transportation system or the cost of creating a no-net carbon high energy density liquid fuel industry. The International Energy Agency has estimated that the global cost of a carbon-free future is in the range of $44 trillion dollars and there are reasons to believe that this figure is on the low side.
So the first issue to resolve is: If carbon taxes are far too small to pay for a carbon-free future, what do we do now?
The second issue is the rate at which we could increase our industrial capacity to build all these new power plants, millions of plug-in vehicles, install energy saving devices, etc.? Even if all the money we needed were available, it takes time to build massive new industries and install their products in a timely manner. What is the government’s role in getting this accomplished? New technologies take time and money to bring into everyday practice and 2050 is only 35 years away.
By William Eacho Co-Founder, Partnership for Responsible Growth
Let’s not underestimate the power of a dynamic economy to invent new approaches to generating energy, storing energy, and becoming more energy-efficient as we start to properly price carbon and stop subsidizing it. Capacity factors will change. The nature of transmission grids may change as well. New 4th generation nuclear technologies that produce no waste and carry no proliferation risk may attract funding. Incentives work.
By Paul Werbos Program Director for Energy, Power and Adaptive Systems, National Science Foundation, retired
This is a good step forwards. Like others so far, I would support it, subject to caveats. Two of the caveats are NOT a responsible basis for amending the bill: (1) there are important “market failures” out there, calling for additional action; however, as we have seen, trying to get everything in one bill is an error, and it’s better to let this positive step go through; (2) it’s tricky to establish mechanisms for adapting the future carbon price — again so tricky it is is best to stick with this one, so long as it’s $30 in real terms. The most important caveats: the main beneft of a reasonable carbon tax would be to incentivize two important families of technology, carbon capture and reuse (CCRS) and sequestration of carbon in the agricultural sector; it would be very important and not so hard to do what USDA and the ag committees were calling for in 2009, to institute a USDA system for measuring carbon in the soil at the request and expense of a group of farmers, and to PAY them for increasing carbon in the soil, at the same $30/ton-CO2 rate or at least a healthy fraction of that. There is a lot of debate about how much carbon sequestration could result — but with a decent measurement and payment system in place, to create a more complete rational market, there is no need for government to decide that. There is perhaps some risk that farmers will sequester so much new carbon that it outweighs the total taxable emissions — but a lot of people sure wish we were facing THAT kind of risk! (Just to reassure people, however, one could say that the payments per ton of new carbon sequestered would be scaled down to make total payments equal total taxes, in the case sequestered carbon exceeds emissions.) To be correct on CCR, it is just a matter of being clear that NET emissions are being taxed.
By Donald Marron Director of Economic Policy Initiatives, The Urban Institute
Congressman Delaney poses a vital question: What should Congress do with the revenue from a carbon tax?
In principle, Congress could use the revenue to pay for offsetting tax cuts, to reduce budget deficits, to assist people, businesses, and communities hit hardest by the move to a lower-carbon economy, to invest in cleaner energy, to invest in climate adaptation, or to finance other spending priorities. The mix of those uses will help determine the economic, distributional, and environmental impacts of any carbon tax policy.
Given the amount of money at stake—the tax the Congressman proposes would raise more than $1 trillion in its first decade—the majority of the revenue will almost certainly go to offsetting tax cuts.
That makes sense politically. A carbon tax is an easier sell as part of revenue-neutral tax reform than as a stand-alone tax increase. Indeed, more than 100 Republican members of Congress, including several presidential aspirants, have signed a “No Climate Tax” pledge to “oppose any legislation relating to climate change that includes a net increase in government revenue.” If a bipartisan carbon tax is possible, it will involve substantial revenue recycling.
But the benefit of revenue recycling goes beyond simple politics. A carbon tax is regressive, imposing higher burdens, relative to income, on lower-income households than on upper-income ones. Some relief for those least able to pay is appropriate, and could easily be provided through refundable tax credits.
By raising energy costs, a carbon tax will likely slow economic activity. Using some revenue to offset that drag, such as by lowering other taxes, would also make sense. Cuts to corporate income taxes, which can reduce incentives to invest domestically, appear to be an effective way to do so.
Policymakers thus face a tradeoff in selecting among recycling options. Policies that do the most to help low- and moderate-income households, such as tax credits, do the least to offset the macroeconomic drag of raising energy costs. Policies that do the most to encourage growth, such as cutting the corporate tax rate, provide the biggest gains to upper-income taxpayers and offset only part of the carbon tax burden on low-income households. Congressman Delaney’s proposal charts a middle course, devoting substantial revenue to each approach.
Three other aspects of revenue recycling are worth highlighting. First, revenue projections are uncertain. A carbon tax and recycling plan that is intended to be revenue neutral could end up raising or lowering revenues significantly. So later course corrections may be necessary. Second, the time path of carbon revenues may not match the time path of promising recycling options. Revenue neutrality over the standard 10-year budget window, for example, probably does not mean revenue neutrality in later decades. Third, we have an opportunity to learn from other governments who have already faced this challenge. British Columbia, for example, paired its carbon tax with reductions in corporate and personal tax rates, a low-income tax credit, and a rebate for rural taxpayers, and the United Kingdom used carbon revenues to reduce payroll taxes. So there is precedent for significant revenue recycling.
For detailed estimates of the distributional impacts of a carbon tax, recycling options, and revenue-neutral plans and a review of leading macroeconomic studies of carbon taxes, please see the recent Tax Policy Center report, “Taxing Carbon: What, Why, and How,” that I co-authored with Eric Toder and Lydia Austin.
By Dan Miller Managing Director, The Roda Group
David: The Fee and Dividend (F&D)policy that I describe above addresses all of the concerns that you raise and is simpler and more transparent than offsetting tax cuts and payments to low-income individuals.
Unlike other carbon tax policies, F&D is not regressive. In fact, almost all lower-income and middle class people will receive more in their dividend than they pay in higher energy and product prices. As you point out, carbon policies that are offset with other tax breaks provide a benefit to the wealthy while putting the burden on the poor.
Also, F&D is — by definition — revenue neutral. 100% of the collected carbon fees are returned to the public on an equal basis. No revenues go to the government. Therefore, no future adjustments are needed.
While it might be possible to construct a somewhat complex policy that combines tax cuts and payments to individuals that approaches the fairness of F&D, F&D will still be simpler, more transparent, and more accepted by the public.
By William Eacho Co-Founder, Partnership for Responsible Growth
Fee and dividend may be better policy, but it won’t do as much for GDP growth as cuts to our excessively uncompetitive corporate tax rate would do. Plus, there is no political constituency with enough clout to make it happen in our present political environment. Better to be realistic, and incorporate it into tax reform.
By Dan Miller Managing Director, The Roda Group
William: While I may disagree with you about whether F&D or tax offsets would lead to more economic growth, I sadly don’t disagree with you about the current level of congressional support for the “better policy”. But while “best is the enemy of better,” sometimes better is just not good enough. An important aspect of F&D is that it more easily allows carbon fees to grow quickly to a level ($100/ton+) where the policy will have a material impact on emissions in a time frame that matters (CO2 lasts in the atmosphere for hundreds to thousand of years, so the speed of emissions reductions is as important as the levels of reduction).
Mother Nature makes the rules we need to follow and the sad reality is that our government isn’t prepared right now to implement policies that will allow us to avoid catastrophic climate impacts in the future. The good news is that, like gay marriage reform, policymakers can change their stand in a relatively short time frame. And it is clear that we are undergoing such a shift right now — as evidenced by this discussion on OEP! The shift is not yet complete and I believe that when it is, an F&D policy will not be beyond the consideration of congress.
By Donald Marron Director of Economic Policy Initiatives, The Urban Institute
Hi Dan: The fee & dividend approach would indeed be highly progressive and if implemented well could solve the problem of matching actual carbon revenues and actual amounts recycled. But it has some drawbacks as well.
Fee & dividend would do little to offset the long-run economic drag of raising energy prices. To reduce that drag requires some way of increasing America’s productive capacity, for example by increasing the capital stock or bringing more workers into the labor force. The dividend approach does not do that. Reducing income taxes can encourage investing and working and thus can offset at least some of the economic drag of a carbon tax. That’s why leading models on this topic–such as the ones developed by teams at Brookings, Harvard, MIT, NERA, and Resources for the Future that we discuss in our study–find that cuts in corporate and capital income taxes do much more for economic growth than the dividend approach. The Congressional Budget Office concluded the same in its survey of the economic effects of carbon taxes. (The REMI study of fee & dividend is an outlier in approach and result.)
Fee & dividend, if implemented well, would be budget neutral not revenue neutral. Carbon tax receipts would boost overall federal revenues and dividends would boost federal spending, with no net change in the deficit. One can debate whether the revenue vs. budget distinction matters economically. Politically, it’s a big deal. To many elected officials, revenue neutrality (tax reform, in essence) is much more attractive than budget neutrality (tax and spend, in essence). To achieve true revenue neutrality, a dividend approach would likely require dividends be structured as tax credits, which brings in new complications. Most of those complications are the same as for other proposals that would recycle some revenue through credits.
But there’s one special challenge for the fee & dividend approach: to achieve revenue neutrality, overall tax credits could total only 75% of carbon receipts. The reason is that the carbon tax reduces profits and wages and thus lowers income and payroll taxes. In a pure dividend approach, you can roughly compensate by making dividends taxable to the recipient. With tax credits, however, you have to directly reduce the size of the credits. (If this paragraph makes no sense, please see this CBO report.)
By Dan Miller Managing Director, The Roda Group
Donald: A couple of comments on your reply. First, the true cost of fossil fuels (direct and external costs) is very high so they do not benefit the economy over time like they appear to in the short run. Put simply, continued use of fossil fuels will destroy our economy. Putting a fee on carbon so that the direct price fossil fuels will more closely reflect its true costs will help our economy run more efficiently and reduce “economic drag”.
Second, while policymakers may indeed hang on the distinction between revenue neutral and budget neutral, I can assure you that most citizens would not. One of the main benefits of F&D — which may be troubling to policymakers — is that the policy is completely transparent to the public, very easy to understand, and is almost impossible to manipulate. You, me, Bill Gates, and a homeless person in Brooklyn all get the same check every month. 100% of the revenues collected are distributed to the public. There is no room for special interests.
I should add that carbon fees that are used to reduce corporate taxes are inherently unfair as they shift the burden from companies (and shareholders) to the poor. Yes, you can make payments to the poor to compensate, but then you end up with a complex, inefficient, and less effective policy.
By Lewis J. Perelman Principal, Perelman Group
Re: “Using some revenue to offset that drag, such as by lowering other taxes, would also make sense. Cuts to corporate income taxes, which can reduce incentives to invest domestically, appear to be an effective way to do so.”…
A key problem with this and other ‘revenue neutral’ proposals is their disconnection from the reality that the federal government already is spending more than it is taking in, deficits persist, and its debt is growing. Meanwhile, the Congressional Budget Office projects that in just a few more years the cost of entitlements will exceed all federal tax revenues.
It has been understood for years that resolving the fiscal mess requires curtailing the soaring cost of Medicare, Medicaid, Social Security, and other entitlements. and reforming taxation in ways that increase total revenue. In that context, carbon tax proposals such as Rep. Delaney’s seem out of order.
By William Eacho Co-Founder, Partnership for Responsible Growth
You are conflating two issues. Yes, we need to address deficits, which have been declining as our economy returns to growth. But there is no political path to a new revenue source, so a carbon fee must be revenue neutral, or mostly neutral, to have a chance of passing Congress.
By Aparna Mathur Resident Scholar, American Enterprise Institute
The economic incidence of a carbon tax depends heavily on what happens to the revenue. My paper with Adele Morris provides new estimates for the net burden on households by income class and region when the revenue is used to reduce other taxes such as corporate income taxes. This approach is of particular appeal because it offers the potential to both cost effectively improve the environment and also provide an efficiency-enhancing tax reform. The most efficient form of revenue recycling would offset the most distortionary taxes, meaning the ones that have the highest marginal deadweight loss. In this paper, we consider the effect of an illustrative carbon tax of $15 per metric ton of carbon dioxide in the year 2010. We analyze how the carbon tax affects households of different income differently and what happens if the carbon tax is accompanied by reductions in taxes that fall on labor and/or capital income.
What share of other taxes could a carbon tax replace? In 2010, the U.S. corporate income tax raised $191.4 billion, while the personal income tax brought in $898.5 billion. Therefore, our carbon tax of $15 per metric ton generating revenues of $102.3 billion would replace slightly more than half of the corporate income tax or 11.4 percent of personal income tax revenues. In practice, those shares would evolve over time as carbon tax revenue and other revenues evolve at different rates.
In the tax swap simulations, we subtract the burden of other taxes that the carbon tax revenue could displace, such as the corporate and personal income taxes, and compute the net effect on households. We analyze revenue-neutral tax shifts under three assumptions about how those other taxes lower households’ capital and labor income: all borne by labor, all borne by capital, and a 50/50 split. Although all of the tax swaps lower the overall burden of the carbon tax (as a share of household income) on the poorest two deciles, tax swaps also exacerbate the regressivity of the carbon tax on the high end. This means that the benefit to the highest income households of the reduction in other taxes is greater than their share of the burden of the carbon tax.
The degree of variation in the carbon tax incidence across regions (with no offsetting tax decreases) is modest; the maximum difference in the average rate across regions is 0.45 percentage points of income. However, a tax swap is likely to increase the variation in burden across regions. The incidence of a tax swap can vary significantly across regions, and the regional incidence depends importantly on whether the swap reduces labor or capital taxes. This is driven primarily by the uneven distribution of capital incomes across regions.
Of the tax swaps, the labor tax swap results in the least variation in net burdens across regions, with a maximum difference across regions of 0.5 percentage points of income. In contrast, the capital tax swap produces a maximum difference across regions of 1.66 percentage points. This suggests that capital incomes are more unevenly distributed across regions than labor incomes.
In sensitivity analyses, we find that reductions in tax revenues from emissions abatement would produce proportional reductions in tax burdens (albeit introducing costs of abatement that we do not model). We also find that a carbon tax is less regressive if some of the burden is borne by households through their sources of income from labor and capital as well as through higher retail prices. The more of the tax that is borne by owners of capital, the lower the burdens on the poorest households.
A number of scholars have examined such “tax swaps.” Although the studies use different tools and arrive at different conclusions about how much of the macroeconomic cost of a carbon tax can be mitigated, it is clear that reducing existing tax distortions can be an important way to lower its overall burdens. For example, in the study that is closest to ours in its approach, Marron and Toder (2013) study a carbon-for-corporate tax swap and model the distributional impacts using the Tax Policy Center’s microsimulation model of the U.S. tax system. They find that a corporate tax swap could benefit households at all income levels. However, the benefit of the tax reduction rises as income rises, making a revenue neutral carbon-for-corporate tax swap particularly regressive. Metcalf (2013) considers how tax reductions financed by a carbon tax could be used to mitigate the need for specific relief for firms in select energy-intensive, trade-exposed (EITE) industries. Using carbon tax revenues to lower the top corporate income tax rate significantly benefits EITE sectors in terms of lowering their corporate tax liability as a percentage of income. Payroll tax relief is less effective in this context. Also, using carbon tax revenues to finance investment incentives, such as an investment tax credit could encourage a more rapid transition to newer, more energy-efficient capital in manufacturing sectors. Goulder and Hafstead (2013) consider the GDP impacts of a carbon tax and conclude that the tax reduces GDP by 0.56 percent when revenues are returned through lump sum rebates as compared with 0.33 and 0.24 percent when revenues are recycled through reductions in personal and corporate tax rates, respectively.
It is clear from many of these studies that one complication of pursuing the most efficient revenue recycling could be the distributional results. Some of the most distortionary taxes fall on high personal incomes and corporate income, so lowering those marginal tax rates is regressive, even while it provides the greatest efficiency gains and minimizes the cost of the program. Put another way, the most economically efficient recycling benefits poor households (who pay very little in taxes) proportionately less than rich households (who pay much more in taxes). Thus, there is an intrinsic tradeoff between optimizing the macroeconomic effects of the tax reform and making it distributionally neutral or progressive.
By David Kreutzer Senior Research Fellow, Energy Economics and Climate Change, The Heritage Foundation
This carbon tax is clearly not a climate policy, else it’s proponents could and would make a case for its impact on global warming. Would the congressman please tell us how much this tax would change world temperatures?
Using the EPA’s model, totally zeroing out US emissions by 2050 would, at best, moderate warming by a couple of tenths of a degree C at the end of the century. This tax would have an even smaller impact.
Also, if this tax is just part of a bigger plan, please make that plan more specific so we can try to estimate that plan’s impact and discuss the likelihood of its implementation.
By William Eacho Co-Founder, Partnership for Responsible Growth
Of course it is climate policy. The most efficient and effective way to address the challenge of climate change is with a global, uniform price on carbon. Incentives work. Behavior changes in response to incentives. A US carbon fee, which if revenue-neutral as proposed and which makes the US corporate tax rate more globally competitive, would boost GDP growth domestically. If a border tariff adjustment program is put in place, it would quickly be matched by all our significant trading partners. No country wants to pay the US a border tax on its exports if it can choose to keep that revenue at home. If such a carbon pricing protocol (with border adjustments) were adopted by the G-8, we would soon see the vast majority of the globe match it…a global, uniform price on carbon. The US economy would benefit as we have access to low-carbon, plentiful, energy resources. A global, uniform price on carbon, growing high enough over time to change behavior and properly internalize external costs, would be a far more effective way to address the challenge to our economic prosperity and national security posed by our changing climate.
By David Kreutzer Senior Research Fellow, Energy Economics and Climate Change, The Heritage Foundation
You still didn’t offer an alternative impact on world temperatures. Zeroing out CO2 emissions in all the developed countries still gets you less than 1/2 degree moderation (and the tax proposed here is a long way from zeroing out CO2.)
In essence you are proposing a tax on the order of hundreds of dollars per ton to be imposed on the developing world–one billion plus of whom cannot afford electricity without any carbon tax.
By Dan Miller Managing Director, The Roda Group
David: As William pointed out, a properly implemented carbon fee with border adjustments can lead to a worldwide uniform carbon fee. Also, as pointed out in the above discussion, putting a price on carbon can lead to growth of GDP, so it’s a good thing to do even if climate change wasn’t real.
But climate change is real and most credible sources tell us we are on a path to +4ºC or more by the end of this century. To answer your question, a worldwide carbon fee will help us stay closer to +2ºC (which is probably still too high). What does +4ºC mean? According to climate scientist Kevin Anderson of the Tyndall Centre in the UK:
So promoting “low cost” fossil fuels to developing countries is not in our or their best interests. Floods, droughts, extreme weather, soaring food costs and inundated cities are not a formula for economic development.
By David Kreutzer Senior Research Fellow, Energy Economics and Climate Change, The Heritage Foundation
Dan: There is very little that should be avoided at all costs. Kevin Anderson’s assertions and invocation of “widespread” views are not sufficient reasons to totally ignore costs. In any event, recent estimates of the equilibrium climate sensitivity don’t show us getting near 4 degrees of warming for centuries (if ever) even without action and with significant economic growth in developing world.
Getting rid of the most affordable sources of energy do not make for a stronger economy. There is no shell-game that makes it otherwise.
By William Eacho Co-Founder, Partnership for Responsible Growth
We do not believe there should be a different approach in developing or developed countries. That paradigm is a recipe for failure, as developing countries are the leading emission producers. Nor is there any indication that a tax in the order you suggest (hundreds of dollars per ton) is needed to bend the emissions curve down. The goal needs to be a global, uniform price on carbon…not just one in the developed world. Our plan leads to a global price, common to developed and developing countries. Our approach also incentives new technology development, which will make renewables more accessible and affordable…all good news for developing countries that are presently overly dependent on heavily subsidized fossil fuels.
By David Kreutzer Senior Research Fellow, Energy Economics and Climate Change, The Heritage Foundation
What we never get is what carbon tax would be necessary or how much temperature moderation you get from the one being proposed.
The tax under discussion here, as proposed by Congressman Delaney, would rise to an inflation adjusted $175/ton in 40 years and an inflation-adjusted $840/ton by the end of the century. As mentioned, it will have a trivial impact even if matched by the rest of the developed world. The developing world is very likely to balk at an agreement that binds them to such high tax rates.
By David Kreutzer Senior Research Fellow, Energy Economics and Climate Change, The Heritage Foundation
The point is not that taxing carbon won’t reduce emissions. The point is that no matter how much we in the US (and/or the rest of the developed world) cut emissions, it will have a negligible impact on moderating world temperatures.
By Dan Miller Managing Director, The Roda Group
David: I do not believe that your comment that “recent estimates of the equilibrium climate sensitivity don’t show us getting near 4 degrees of warming for centuries (if ever)” is supported by the scientific community (including the IPCC). Picking a single study (perhaps the Norwegian study?) does not provide a basis for ignoring the scientific consensus.
In any case, as discussed above, putting a price on fossil fuels can improve the economy. Fossil fuels are not really “affordable” when their true total costs are accounted for.
By David Kreutzer Senior Research Fellow, Energy Economics and Climate Change, The Heritage Foundation
Below is a list of recent research estimating the equilibrium climate sensitivity (ECS). The ECS address the critical question of how much warming will we get from additional CO2 instead of the trivial, and uncontroversial, question of the ”97% consensus,” that simply asks if it causes warming. The average best estimate of the ECS of these recent studies is below two. And since you seem to have such faith in the IPCC, it is worth noting that the most of the authors in the Otto et al. paper are also IPCC authors. The Otto et al. best estimate is about 2.
Here is a chart plotting warming above pre-industrial levels against CO2 levels for various ECS values. (Courtesy of Will Happer, Cyrus Fogg Brackett Professor of Physics at Princeton and former director of the Office of Science at the Department of Energy.)The plot for each of the ECS values is labeled with the number of years to reach an additional 2.0 degrees of warming.
For and ECS of 2.0 it will take two centuries to get to 2 degrees of warming—obviously, much more to get to 4 degrees. Even with an ECS of 3.0 it will take over a century to get to 2 degrees of warming. So, my claim that it will take centuries to get to 4 degrees is, indeed, backed up by scientific research
If you have different numbers, post them and we can debate. But simply claiming you don’t believe the scientific community supports something (whatever that would mean anyway) isn’t a very strong argument.
Aldrin, M., et al., 2012. Bayesian estimation of climate sensitivity based on a simple climate model fitted to observations of hemispheric temperature and global ocean heat content. Environmetrics, doi: 10.1002/env.2140.
Annan, J.D., and J.C Hargreaves, 2011. On the generation and interpretation of probabilistic estimates of climate sensitivity. Climatic Change, 104, 324-436.
Hargreaves, J.C., et al., 2012. Can the Last Glacial Maximum constrain climate sensitivity? Geophysical Research Letters, 39, L24702, doi: 10.1029/2012GL053872
Lewis, N. 2013. An objective Bayesian, improved approach for applying optimal fingerprint techniques to estimate climate sensitivity. Journal of Climate, doi: 10.1175/JCLI-D-12-00473.1.
Lewis, N. and J.A. Curry, C., 2014. The implications for climate sensitivity of AR5 focring and heat uptake estimates. Climate Dynamic, 10.1007/s00382-014-2342-y.
Lindzen, R.S., and Y-S. Choi, 2011. On the observational determination of climate sensitivity and its implications. Asia-Pacific Journal of Atmospheric Science, 47, 377-390.
Loehle, C., 2014. A minimal model for estimating climate sensitivity. Ecological Modelling, 276, 80-84.
Masters, T., 2013. Observational estimates of climate sensitivity from changes in the rate of ocean heat uptake and comparison to CMIP5 models. Climate Dynamics, doi:101007/s00382-
McKitrick, R., 2014. HAC-Robust Measurement of the Duration of a Trendless Subsample in a Global Climate Time Series. Open Journal of Statistics, 4, 527-535. doi: 10.4236/ojs.2014.47050.
Michaels. P.J. et al., 2002. Revised 21st century temperature projections. Climate Research, 23, 1-9.
Otto, A., F. E. L. Otto, O. Boucher, J. Church, G. Hegerl, P. M. Forster, N. P. Gillett, J. Gregory, G. C. Johnson, R. Knutti, N. Lewis, U. Lohmann, J. Marotzke, G. Myhre, D. Shindell, B. Stevens, and M. R. Allen, 2013. Energy budget constraints on climate response. Nature Geoscience, 6, 415-416.
Ring, M.J., et al., 2012. Causes of the global warming observed since the 19th century. Atmospheric and Climate Sciences, 2, 401-415, doi: 10.4236/acs.2012.24035.
Schmittner, A., et al. 2011. Climate sensitivity estimated from temperature reconstructions of the Last Glacial Maximum. Science, 334, 1385-1388, doi: 10.1126/science.1203513.
Skeie, R. B., T. Berntsen, M. Aldrin, M. Holden, and G. Myhre, 2014. A lower and more constrained estimate of climate sensitivity using updated observations and detailed radiative forcing time series. Earth System Dynamics, 5, 139–175.
Spencer, R. W., and W. D. Braswell, 2013. The role of ENSO in global ocean temperature changes during 1955-2011 simulated with a 1D climate model. Asia-Pacific Journal of Atmospheric Science, doi:10.1007/s13143-014-0011-z.
van Hateren, J.H., 2012. A fractal climate response function can simulate global average temperature trends of the modern era and the past millennium. Climate Dynamics, doi: 10.1007/s00382
By Dan Miller Managing Director, The Roda Group
David: I refer you to the IPCC AR5 report:
http://www.ipcc.ch/pdf/assessment-report/ar5/wg1/WG1AR5_Chapter10_FINAL.pdf
See Figure 10.20 on Page 925. As you will see, there have been many studies, using several different methods, to estimate Equilibrium Climate Sensitivity. The confidence range estimates go from 1.5ºC to 4.5ºC with a mid-point of 3ºC. Of course, since we are dealing with direct threats to the security of our nation and the world, assuming (hoping for) a low ECS would not be prudent. The safe thing to do would be to assume the worse-case value, but no one is doing that.
It should also be noted that the last time CO2 was its present value — 400 ppm — sea levels were about 75 feet higher than today. And with today’s +0.85ºC warming, we know we are headed to an almost ice-free Arctic fairly soon and that West Antarctic Ice Sheets are collapsing and their loss is “unstoppable” according to NASA.
So if you want to argue that climate change isn’t much of a threat and doesn’t require urgent action, you can do that. I just don’t think that any of the climate scientists I know would agree with you.
By David Kreutzer Senior Research Fellow, Energy Economics and Climate Change, The Heritage Foundation
The more recent ECS estimates are coming in at lower levels than the AR4.
The West Antarctic Ice Sheet collapse has been in works for quite a while. The “collapse” will take centuries with a sea-level rise of inches per century for the next century or two. Whether it is due to AGW is tenuous at best, but, as you note, is already baked in. So no carbon tax–no matter how high or how broadly applied–will have any impact.
There have been times in the past with much higher CO2 and much lower sea-levels. Nobody serious is talking about 75 feet of SLR any time soon. Those calling for an ice-free arctic “fairly soon” have been doing so long enough that their predictions look buffoonish.
All of this misses the point of the discussion. How much difference will this carbon tax make? Not much.
By Dan Miller Managing Director, The Roda Group
David: I believe your position is that we should continue business-as-usual fossil fuel emissions and avoid taking actions such as putting a price on carbon or capping emissions with regulations. Well, we followed your plan in the past and now we have have committed ourselves to the collapse of the West Antarctic Ice Sheet (WAIS), +2ºC of warming, and many other negative impacts. Now, as the world finally gets ready to take long-overdue action, you are arguing that why bother since we are already committed to WAIS collapse, significant warming, etc.!
While our past inaction has committed us to significant climate impacts, that is no reason to double down on our bad behavior and commit ourselves to even worse impacts. Yes, a worldwide price on carbon won’t stop the WAIS collapse, but it will prevent other even more serious impacts and will slow (not stop) the rate of warming and sea level rise.
You also suggest warming scenarios and sea level rise rates that are, shall we say, on the optimistic side. If we were arguing about, say, the rate of formation of black holes, this would all be a interesting academic exercise. But we are talking about our children’s futures. Arguing for inaction based on optimistic assumptions is not in their best interest.
And on top of all of that, a well designed price on carbon will spur economic growth, which is your baseline concern. So, a carbon fee is both in our short-term economic interest and in the interest of our children’s future.
By Jane Twitmyer Principal, CACW|Watts
New information on anoretic ice melt from Scientific American …
http://www.scientificamerican.com/article/stable-antarctic-ice-is-suddenly-melting-fast/
“Overall, the ice shelves along the southern Antarctic Peninsula have lost almost one fifth of their thickness since the early 1990s. Scientists say the likely cause is a change in winds across the Southern Ocean, a result of climate change. The shifting winds are pushing warmer water toward the ice shelves, melting them from below, and against the glacial ice along the coast, melting it as well. Around 2009, Wouters says, thinning of the ice shelves and melting of the glaciers “passed a critical threshold which triggered the sudden ice loss.”
By William Eacho Co-Founder, Partnership for Responsible Growth
David Kreutzer: It is rather shocking to see an opinion from a Heritage Foundation employee, an entity which claims to support free market principles, and especially from an individual with an economics background, which claims that a price on carbon would not change behavior and therefore reduce the rate of growth of temperature. Of course incentives work, that is Econ 101. And of course the developing world would rather match us than pay us at our border. Incentives matter, and once you get the incentives aligned properly, the free market will respond.
By William Eacho Co-Founder, Partnership for Responsible Growth
David: Your point appears to be that a carbon fee imposed by developed countries, with resulting emission cuts, will not have any appreciable effect on global temperatures. I agree, we must have global action. A global, uniform price on carbon is needed. Of course the developed world will have some impact, and by leading the rest of the world to a global uniform price on carbon, its impact will spread. A carbon pricing protocol, with a border tariff adjustment imposed on trade with non-participants, will quickly lead to global participation as all countries will recognize it is in their best interests to participate. The greatest impact on global temperatures will come as developing countries grow in a more sustainable manner than developed countries did.
By Elias Hinckley Partner, KL Gates
So I read all of the counter arguments to Congressman Delaney’s proposal as coming down to either “a carbon tax would be hard” or “there isn’t the political will do pass a carbon tax”. I have a slightly different view – this is really about getting to a better solution and more accurate set of market signals. As explained in some detail here. The idea that we shouldn’t try to do something right because it is hard runs contrary to everything America is supposed to be.
By Catrina Rorke Director of Energy Policy & Senior Fellow, The R Street Institute
The carbon tax is an elegant mechanism for imposing a price on carbon dioxide emissions from the energy sector, especially when compared to the alternatives.
The patchwork of federal regulations to reduce greenhouse gas emissions from the energy sector is sprawling, including standards for CAFE, renewable fuels, efficiency, building codes and drilling operations, and pending regulations for new and existing power plants under the Clean Power Plan (CPP). Taken together, these policies layer large, but attenuated, costs on the energy sector and on energy consumers. Worse, by tackling each corner of the economy differently, they fall well short of the president’s commitment to reduce emissions 26 percent below 2005 levels.
With a relatively modest carbon tax, we can wipe out existing policies and still do better at achieving emissions reductions. David Bailey and David Bookbinder use Environmental Protection Agency data to determine that an average national carbon price on the electricity sector of $27 per ton in 2020 — rising to $29 per ton in 2030— would be functionally equivalent to the CPP. The Carbon Tax Center’s carbon-pricing model suggests the price actually could start much lower, at around $2.15 in 2015, and increase to $34.40 by 2030.
The most alluring part of the carbon tax, though, is that it could open the way for conservatives to enact a host of policies they already support. Just as environmentalists have cited the threat of catastrophic climate change to solicit support for EPA overreach, agricultural interests have agitated for renewable fuel standards and business interests continue to petition for massive subsidies for renewable power, conservatives can use the threat to make the case for smaller, smarter government.
It is relatively simple to select a carbon price that will meet the carbon dioxide emissions reduction trajectory established by the suite of standards and regulations put in place by this administration. With that price established, there are plenty of policies that we can simply write off the books; we have achieved their climate targets and rendered them unnecessary.
The first place to start is EPA authority to regulate greenhouse gas reductions under the Clean Air Act (CAA). The CAA was designed to reduce the types of pollution that spawned the environmental movement of the 1970s: localized sources causing acute harm. As the CAA has been adapted to cross-state sources, low-level, long-lived pollution and climate emissions, it’s proved inadequate to the task. With a carbon tax, we can remove EPA’s regulatory authority to use the CAA for climate policy and eliminate the expensive, invasive and sprawling CPP.
Then, we must tackle the rest. The Renewable Fuel Standard is an enormous market intrusion that does a better job of supporting corn prices than reducing greenhouse gas emissions. CAFE standards for the automotive fleet are prescriptive intrusions into the automotive market that limit consumers’ ability to purchase larger, less-efficient vehicles; a carbon price could achieve those same emissions reductions without eliminating consumer choice. The Department of Energy (DOE) has released dozens of efficiency standards under this administration for everything from light bulbs to ice cream freezers, all of which are made superfluous by a price signal.
Tax incentives and subsidies also should be on the table. We spend tens of billions of dollars a year subsidizing energy sources across the board. If our aim is a diverse, lower-carbon electric supply, we can eliminate those expenditures. Loan guarantees intended to help companies commercialize technology are wasteful and unnecessary now, and would be inexcusable under a carbon-tax regime. The research and development juggernaut at DOE can be pointed to significant and meaningful advancement in energy technology, not incremental improvements in proven and commercialized technologies.
This is a short and not nearly comprehensive list of ways to shrink the footprint of government and get it out of the marketplace, all made possible by imposing a modest tax on carbon. All of this is possible before we’ve even touched the revenue.
A carbon tax raises real amounts of money. The proposal by Rep. John Delaney, D-Md., would raise more than $1 trillion in its first decade. In Washington, any purse that size will be a great temptation for special interests, so revenue treatment is enormously important. There are many options, but few winners: deficit reduction, payments to disadvantaged communities and industries, clean energy investments, climate mitigation strategies, myriad spending priorities or cuts to existing taxes.
This last priority is the most persuasive. Conservatives must insist on true revenue neutrality. Carbon policy and its resulting revenue should not be used to grow the size of government. Economists agree that cuts to existing, inefficient taxes, like the corporate income tax, will do the most to stimulate the economy at the same time that carbon policy increases energy prices. Back-of-the-envelope calculations suggest that, by imposing a relatively modest carbon tax and taxing capital gains and dividends as income, we could eliminate the corporate income tax completely.
If there are alternate priorities for spending dollars on things like research and development, innovation or other climate-related priorities, let politicians have that debate and find the money elsewhere. An effective carbon tax can only be possible with complete revenue neutrality.
Rep. Delaney has made space for an honest discussion about the direction in which we should take carbon policy. The carbon tax is an opportunity to shrink the size of government, while making real and meaningful progress on reducing carbon emissions. Dedicating the revenue to tax reduction could allow the United States to move from having the highest corporate income tax rate in the OECD to having no corporate income tax whatsoever. That’s a win-win for conservatives.
By Dan Miller Managing Director, The Roda Group
Catrina: I agree with you that an effective carbon tax can replace a myriad of regulations. However, I believe you are conflating policy targets with climate targets. The current policies such as CPP don’t come close to reducing emissions at the rate and level that scientists tell us is necessary to avoid dangerous climate change. CPP, CAFE, and other such policies were set as what was possible, not what was needed, given the reluctance of congress to address climate change. But the good news is that higher carbon fees can be implemented while still preserving conservative principals such as revenue neutrality and not growing government.
Using carbon fees to lower corporate income taxes may be attractive in some ways but, unfortunately, it is the most unfair approach in that it shifts the tax burden from corporations (and their shareholders) directly onto the poor and non-shareholder middle class. Because of the regressive nature of this approach, most people suggest combining tax offsets with payments to the poor. This results in a complex, inefficient, and less effective policy. Another problem is that many people (the less poor and the middle class) do not receive offsetting payments and still must pay the higher prices brought on by the carbon fee. This results in a drag on the economy and makes the policy unattractive to the public.
A better approach is to have a steadily rising fee on carbon and return 100% of the money collected to every legal resident. This achieves conservatives’ desire for complete revenue neutrality and has the added benefit that it is not regressive. In fact, most people would earn more on the “dividend” than they pay in higher prices. A recent economic analysis shows that this approach will, over 20 years, grow GDP by $1.4 trillion, create 2.8 millions of jobs, and lower emissions by over 50%… much more than the current policies will reduce emissions (but probably still not enough to avoid dangerous climate change).
By Jane Twitmyer Principal, CACW|Watts
I would like to emphasize a few fossil costs that contribute to the un-level playing field of energy pricing that Elias Hinkley’s article, referenced in his comments, described so well. There is a long list of environmental costs offloaded from the market price of fossil fuels in addition to the potential global warming devastation that is, and will be, caused by CO2 emissions as they continue to accumulate in our atmosphere. A carbon tax in some form just pays for those offloaded items.
The short list of avoided costs include: the health effect of particulates; mercury, a teaspoon of which can pollute an entire lake; the risks created by the extraction and transportation of coal and natural gas including the toxic coal residue from burning coal that is left in leaking pits, as well as the earthquakes now known to be caused by reinjecting, deep into the earth, fracking’s flow-back fluids because they cannot be reintroduced into the earth’s water cycle. The current expenses in monies and health are not negligible. Returning it to each and everyone of us seems the fairest approach.
Since corporate political power has been successful in stopping change, maybe environmental risks bonds would be a doable solution for incorporating some of those avoided costs. The MIT’s new Study on the Future of Solar Energy said, “A policy of pricing CO2 emissions will reduce those emissions at least cost.” ‘Least cost’ should be a conservative position but MIT believes that passing the policy is quite another matter.
Policies like fee and dividend will bring transparency to change, as did Germany’s Feed-in-tariff, but our approach to building new industry by emphasizing corporate and investment write-offs has left with 100 year-old tax expenditures we evidently can’t remove. Germany’s Feed-in-tariff was built to reward production until enough demand was created. http://www.nytimes.com/2015/05/06/opinion/thomas-friedman-germany-the-green-superpower.html?_r=0
I would also like to comment on the belief that an expanded use of renewable energy will slow economic growth and cause reliability problems. Both are based on questionable assumptions. Here is one estimate of the economic promise of global efficiency ….
“overall energy consumption in the EU could be cut by 35% by doubling the region’s rate of energy productivity improvement from currently roughly 1.6% to 4% per year by 2030. This particular analysis finds that enhancing energy productivity has significant benefits for society, ranging from reduction of household energy bills (about one-third in Europe) to the creation of millions of jobs.” Rates will rise but bills will decline.
See Quintel, Energy Transition Model at http://www.energytransitionmodel.com.
http://www.ecofys.com/en/news/global-index-report-ranks-countries-by-their-energy-efficiency-performance/
Finally, real electricity reliability and security will come from not being totally dependent on the grid. To ensure reliability, Sandy decimated New England is moving toward islandable micro-grids. Governor Cuomo has just announced awards to help 83 communities in NY to create “Local Clean Energy and Resiliency … which will ensure critically important institutions such as police and fire stations, hospitals and schools can continue operating during and in the aftermath of an extreme weather event.” DOD is leading the way by creating self-sufficient bases. Ft. Carson is their prototype. San Diego Gas and Electric’s Borrego Springs’ 30MW system is another demonstration of energy reliability in a difficult area.
According to Deloitte’s annual Energy Report says … “Companies are also moving towards self-reliance when it comes to energy supply. A solid majority (55 percent) of businesses say they generate some portion of their electricity supply on-site, up from 44 percent in 2014. By industry, technology, media, and telecommunications (TMT) companies (67 percent) and healthcare organizations (65 percent) are leading the trend toward greater self-reliance, perhaps due to the critical nature of their operations, requiring a high degree of reliability.”
Real energy security for the US will be achieved by dramatically reducing demand through efficiency, on-site generation and battery technology.
http://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-er-deloitte-resources-study-series.pdf
https://www.youtube.com/watch?v=wFMkL2QIduY Solar facts and figures
By Ike Kiefer Captain, US Navy (retired)
In AR5, the IPCC acknowledged the good news that the Earth’s green plant coverage has increased 6% since 1982; that plant fertility, precipitation, and growing seasons are increasing; and that crop yields are up sharply and rising. AR5 also predicted that human disease will decrease 30% by 2030 and that warmer temperatures will reduce winter mortality (cold weather harvests 17 times more souls in winter than heat does in summer).
Equally significant and unreported is that AR5 officially reduced the median value of both the equilibrium climate sensitivity (ECS) and the transient climate response (TCR) coefficients that mathematically describe the relationship of global mean surface temperature (GMST) to atmospheric CO2 ppm. Furthermore, the report authors chose to do this on the basis of “scientific judgment” instead of a straightforward mathematical best-fit because if they had simply derived the numbers from the actual temperature data, the values would have had to be revised much more dramatically to values too low to be publishable under the current political regime in the UN. The models used to justify the higher numbers the alarmists want to see have been invalidated by the 15-year warming hiatus officially acknowledged in the report.
While warming is depicted by the doomsday crowd as bringing only harm, it actually delivers trillions of dollars in benefit in improved rainfall and fresh water, increased crop yields, and reduced mortality as mentioned above. The warming also decreases the thermal gradient between the equator and poles that drives large-scale weather patterns, and the official scientific prediction is for decreased hurricane and typhoon strength and frequency. Furthermore, the consensus of 14 integrated assessment models that tally up both the costs and benefits of warming is that the benefits have been overwhelmingly net-positive to date, and continue to be positive for another 2.0 deg C of warming. With a more plausible ECS of 0.5 to 1.0 that fits the actual warming data, reaching that point is centuries away. It may never even be reached at all if human population peaks by 2100 as is currently projected by the UN, and the energy intensity curves of developing nations follow the same rising and then falling trajectory as has every developed nation to date. It also may become a moot point should predictions of solar scientists about a new Maunder Minimum prove to be true.
Sensational forecasts of rapid warming and climate disaster a la “Revenge of Gaia” and “An Inconvenient Truth” have failed to develop. Global sea ice coverage remains unchanged from the first observations in 1979, and there has been no acceleration in sea level rise. The pH of the oceans remains safely caustic, not acidic. Increasing atmospheric CO2 has been and continues to bring more benefit than harm to both humans and the environment. If objective logic and empirical evidence ruled rather than fear-mongering rhetoric and ideology, we would be debating the size of the premium to be paid to carbon emitters rather than the size of the tax to impose upon them. Restoring fossil carbon (and also fossil fresh water) from buried hydrocarbons back to the living ecosystem is returning to the biosphere what was previously in the biosphere. Humans are not introducing to the Earth something it has not seen and flourished with before.
By Jane Twitmyer Principal, CACW|Watts
Here is some non-political research and conclusions that are the opposite of your assertions …
There is a strong scientific consensus and growing public awareness that rising atmospheric carbon dioxide concentrations are making the oceans more acidic and impacting marine ecosystems and fisheries. Through the OAI, which is coordinated and supported by all four Ocean Institutes, proposals are being funded that investigate ocean acidification in coastal settings of the Atlantic Coast of the United States, from Cape Hatteras, North Carolina, to the Gulf of Maine.
http://www.whoi.edu/page.do?pid=124356
In a chemical reaction, CO2 dissolves in the ocean, raising the level of acidity. Since the Industrial Revolution, the oceans have become 30 percent more acidic; it is possible that by the end of the century, the surface oceans could become 150 percent more acidic.
http://www.neaq.org/conservation_and_research/climate_change/climate_change_and_the_oceans.php
Are sea levels rising?
When water warms, it expands and takes up more volume. This effect is called “thermal expansion.” Long-term measurements demonstrate that sea levels are rising worldwide both from thermal expansion caused by warming temperatures and from the addition of water from inland glaciers, which are melting nearly everywhere at accelerating rates. Increased melting is also occuring at the ice caps in Greenland and West Antarctica.
Many scientists now think that sea levels will rise by at least one to two feet by 2100. A rise of two to six feet is possible, if emissions of greenhouse gases remain unchecked and significant melting of the ice caps occurs.
http://www.neaq.org/conservation_and_research/climate_change/climate_change_and_the_oceans.php
By Ike Kiefer Captain, US Navy (retired)
The 2,500 climate scientists who participated in AR5 considered thousands of studies, weighed each according to its quality and coherence with other lines of evidence, and developed some level of consensus among each other for each published opinion and prediction in their collective report characterized with a confidence level (likely, very likely, somewhat likely, etc.). This method is superior to the Jane method of cherry-picking individual studies. I find it ironic that so many on this forum who are determined to be alarmists have now become the ones denying the IPCC.
The scientific fact is that the magnitude of anthropogenic warming to date of 0.6C is smaller than the acknowledged “corrections” that the keepers of the GMST data have made to the raw data to cool the past and warm the present (> 1.0 C). When the signal is smaller than the noise, its validity is very questionable. Scientists across the spectrum of disciplines, when they inspect the data, are becoming more and more skeptical. Those who are keeping abreast of climate science in 2015 are aware of this growing backlash. Those who made up their minds that the science was settled in 2007 or prior are the ones still beating the panic drums.
By Jane Twitmyer Principal, CACW|Watts
From the IPCC …. “Only the collapse of marine-based sectors of the Antarctic ice sheet could cause GMSL rise substantially above the likely range during the 21st century. Expert estimates of contributions from this source have a wide spread (Bamber and Aspinall, 2013), indicating a lack of consensus on the probability for such a collapse. “
“Slower components of the Earth system such as sea level rise and ice sheet would take much longer to respond, and there may be critical thresholds or abrupt or irreversible changes in the climate system.” That abrupt irreversible change is what is now being talked about. The antarctic ice sheet is found to be melting much faster than previously thought.
Given the uncertainty and the new info, prudence seems in order when it comes to increasing the possibilities of harm effects. Here is very recent “Jane method” info.
http://www.nasa.gov/topics/earth/features/20100108_Is_Antarctica_Melting.html
http://www.csmonitor.com/Science/Science-Notebook/2015/0713/Scientists-find-surprisingly-high-heat-beneath-West-Antarctic-Ice-Sheet
http://www.livescience.com/50850-antarctica-larsen-ice-shelf-collapsing.html
By Dan Miller Managing Director, The Roda Group
Ike: Your personal “Don’t worry, be happy” interpretations of IPCC and other climate science unfortunately does not match the climate scientist’s interpretation of their own work. Every major scientific academy in the world disagrees with you.
http://nationalacademies.org/onpi/06072005.pdf
By Ike Kiefer Captain, US Navy (retired)
Dan,
Your linked document (did you even read it?) is more than ten years old and dates from before AR4 in 2007 let alone AR5 in 2013. It contains the statement “The Intergovernmental Panel on Climate Change (IPCC) projected that the average global surface temperatures will continue to increase to between 1.4 centigrade degrees and 5.8 centigrade degrees above 1990 levels, by 2100.” If you would catch up on the last 10 years of research and actually read the IPCC 2013 scientific report from working group 1, you would see these numbers have been revised downward and the alarmist tone of the earlier reports is gone. Furthermore, it is not wise to confuse the opinions of the boards of social organizations of scientists with the opinions of the member scientists themselves. The American Physical Society suffered the resignation of many members when it postured to take a political position unsupported by evidence, and is now reconsidering that statement. Truth is not a popularity contest. Please argue from evidence and not appeals to authority or popularity. The AGW dogma from the the 1990s continues to drown out the facts. When the Pope weighs in on Gaia’s behalf, it has truly become a religion instead of a science.
By Dan Miller Managing Director, The Roda Group
Ike: Your information is cherry picked, misleading, and just plain wrong. I stand by what I said. I won’t engage you in a point-by-point rebuttal again because it detracts from the discussion at hand.
By William Eacho Co-Founder, Partnership for Responsible Growth
Wow…so flooding brings “improved rainfall”? And drought increases crop yields? The USG now estimates we will lose over 50% of US crop land this century. The deniers like to say that matters not, we will simply grow crops further north, closer to the poles. But further north areas get less sun, reducing yields. You mention the so-called “hiatus”, created by taking an unusually warm starting year of 1998, and which is clearly no longer sustainable as an argument since last year was the warmest on record and the last decade saw four of the warmest ten years ever. You make a series of factual assertions which are simply so far from reality that one gasps in astonishment.
By the way…the US Parks have been measuring temperatures in Acadia National Park in Maine since the Park was founded 99 years ago. Temperatures have increased 1.5 degrees. The oceans are increasingly acidic to the point that oyster larvae in the Pacific Northwest can not grow shells. The evidence of global warming is all around us…and the likelihood is, we are worse off than we thought. Wouldn’t it make sense to try to keep CO2 in the range that has supported the development of the human species?
By Ike Kiefer Captain, US Navy (retired)
Again, you reveal you haven’t read the most reputable sources. IPCC 2013 says unequivocally that there is no evidence to date of increased droughts or flooding or hurricanes on a global scale. In fact they said the evidence is that flooding was worse in the five preceding centuries than in the 20th. Increased precipitation can come as simple rainfall, not just as damaging weather.
Please provide source and date of claim that USG predicts we will lose 50% of US crop land this century. I think the source will illuminate the credibility of all your sources. The only reason US crop land is currently shrinking is urban sprawl and increased yields. We are now feeding ourselves and much of the world using only 243 million harvested acres, and have released more than 150 million acres of unneeded farmland to development and conservation. This trend will likely continue and is good thing. It is not a coming collapse or famine as you imply.
“Warmest year ever” claims are based on the same signal in the noise problem discussed above. Just this January another 0.12 deg C bias was artificially added to the data series by Thomas Karl et al. to erase the pause in warming since 1998. The upward corrections are now so large they reverse a raw data cooling trend in the US from the dustbowl into a warming trend. The bald-faced data manipulation is now past the point of absurdity. It is thanks to the satellite-measured global temperature data freely shared by UAH and RSS that this manipulation of the surface temperature records has come to be exposed.
By Jane Twitmyer Principal, CACW|Watts
Here are some quotes from the 2014 IPCC Synthesis Summary Report …. They were selected to address some of the things you addressed.
“Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia. The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, and sea level has risen. {1.1} ”
“Without additional mitigation efforts beyond those in place today, and even with adaptation, warming by the end of the 21st century will lead to high to very high risk of severe, wide- spread and irreversible impacts globally (high confidence). ”
“Each of the last three decades has been successively warmer at the Earth’s surface than any preceding decade since 1850. …..The globally averaged combined land and ocean surface temperature data as calculated by a linear trend show a warming of 0.85 [0.65 to 1.06] °C 2 over the period 1880 to 2012, when multiple independently produced datasets exist (Figure SPM.1a). {1.1.1, Figure 1.1}”
“Earth System Models project a global increase in ocean acidification for all RCP scenarios by the end of the 21st century, with a slow recovery after mid-century under RCP2.6. The decrease in surface ocean pH is in the range of 0.06 to 0.07 (15 to 17% increase in acidity) for RCP2.6, 0.14 to 0.15 (38 to 41%) for RCP4.5, 0.20 to 0.21 (58 to 62%) for RCP6.0 and 0.30 to 0.32 (100 to 109%) for RCP8.5. {2.2.4, Figure 2.1}”
“Climate change is projected to undermine food security (Figure SPM.9). Due to projected climate change by the mid-21st century and beyond, global marine species redistribution and marine biodiversity reduction in sensitive regions will challenge the sustained provision of fisheries productivity and other ecosystem services (high confidence).”
By Ike Kiefer Captain, US Navy (retired)
Jane et al., there is only one report in each IPCC AR cycle that is written by consensus of the 2,500 international climate scientists themselves: the Working Group 1 report. All the other reports are written by smaller teams of national representatives to the UN hand-picked for their political loyalty to their parent governments. Most are not scientists, let alone climate scientists. For example, the head of the IPCC for 13 years, Rajendra Pachauri, was a railroad engineer and author of erotic literature (http://www.powerlineblog.com/archives/2015/02/pachauri-out-at-ipcc.php ). Fortunately, in AR5, the actual climate scientists did not bow to the politics, but stuck to the evidence. Please reference the WG1 Report Climate Change: The Physical Science Basis (available here http://www.climatechange2013.org/ )if you want to discuss the science. That is what I am referencing. You can quote Pachauri or the Pope or the other working group and synthesis reports if you want political propaganda or religion.
By Scott Sklar President, The Stella Group, LTD
Taxing pollution is a solid economic policy approach that addresses the negative economic consequences of pollution. But the flaw is to just look at carbon while not addressing other pollutants which harm air, water and soils causing COPD, and are hormone disruptors, immune suppressors, and carcinogens. So while carbon should be one factor (as well as methane and other greenhouse gases), so should these other outputs that ruin assets and economic activity and impair human capacity. Many of these pollutants do not biodegrade and are carried into our food supply, as well as into the air and water we breathe. Since those responsible for this pollution do not pay for their consequences such as loss of property or impairment of human health , they bear no risk. Much easier to change behavior in the market by taxing consequences of actions rather than regulatory regimes which take time and cannot keep up with changes. So the approach makes sense if expanded to a broad range of pollution threats.
By Bruce Best Director, Ocean Power Systems
Congressman Delaney I fully understand your goals and as a political animal you are looking at a government solution to a very serious problem. While I very much applaud your efforts I would suggest that you chances of getting any kind of tax passed in time to do any good are almost nil. Worse you will give the deniers more reasons to dig in and stall progress. That your point of view has been the standard of political, educational and governmental people that wish to help, is from your point of view very reasonable.
While I understand your positions I think you are very wrong. I think this because I have assembled a team of senior level engineers from various industries and ex-US NAVY personal to help me with some ideas about renewable energy of a base load type using ocean currents and our large rivers.
I got sick for a few years and while I was recovering we continued to work as we could and we discovered something of an economical nature that could change your view of how to progress. It certainly did mine. The savior of the planet will not come from taxes levied but from plane old economics applied in a slightly different manner in combination with steam aged technology but applauded differently. One that uses supply and demand and pure economic conditions as they exist right now.
To understand you must first have some knowledge of something called the supply demand curve. It is the limit of both profits and the physical generation of every power grid. Supply and demand in the utility scale world are far more linked than in economics. YOU DO NOT generate any more power than is needed for it wastes fuel and could damage the grid. YOU DO NOT generate any less power than is needed for that will damage most things hooked up to the grid. There are many examples of what happen when either condition occurs.
What nobody sees unless they look is that this is a constantly varying level of demand. Very low in the spring and fall, early mornings, very high in late summer afternoons with high cooling loads. In general and smoothed out it looks like a bell shaped curve with the ends turned up to form a smaller bell for winter. On average all grids only generate abut 40 to 45% of their peak capacity but they need the capacity to meet peak demand.
Right now we are asking utilities to meet a highly variable demand with systems of renewable energy that are even more variable and we are having problems and trying to fix this condition with demand control that is called the smart grid and delusions of massive energy storage.
Why do we not just take a breath and think for a moment. There are three of renewable energy sources that have received almost no funding that are constant and available 24/7/52. If you use those sources you can eliminate almost all the need for storage and can turn the cost of the smart grid into a profit generator.
Sooner or later if you apply these base load renewables you will be generating more than you can deliver to the grid for there is no demand. Normally you would reduce fuel consumption but since you have NO FUEL COSTS than I would suggest that you supply a highly variable demand ready that is capable of adsorbing any extra power that you can not use on the grid. This could easily be hydrogen generation from water. From there you can make synthetic hydrocarbon fuels again using extra power you can not sell.
Here is where the economics comes in. You are now using your capital resources for your renewable base loads at near 100%, 24/7/52. You now can produce two products using almost all of the same capital and you have no fuel costs. Traditional renewables are very lucky to meet 40% duration, and nuclear and carbon are not much better. Now you have a option to make carbon neutral liquid hydrocarbon fuels as well as carbon free energy from the same equipment. Better efficiency lower costs.
There are very few cases where you get to have your cake and eat it too, but this gives you home grown energy as well as liquid fuels that are competitive in the market place and now you do not need to support it with a tax, you can tax it as a home grown industry. A foreign power can not shut off the supply if they are mad and the U.S. and make the equipment and sell it around the world, first to our friends and then to everybody. We become the low cost energy leader with all the advantages that brings as well as the leader in reducing climate change by making a better product at a lower cost.
We would need to blend existing technologies like the existing energy loser of synthetic fuel production as well as the existing power grids. This is a very simple version of the reason why you should be looking here for if you can produce these products the deniers have no place to stand. How do you tell people that they should be using a product that is more expensive and not as good. For the first time you have pure economics of lower cost in your favor and not in the camp of the polluters.