Komanoff: The Time Has Never Been More Right for a Carbon Tax (U.S. News)
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Komanoff asks: If efficiency hasn’t cut energy use, then what? (Grist)
Komanoff: Senate Bill Death = Win for Climate (The Nation)
Q&A: Charles Komanoff (Mother Jones)
Driving in the United States didn’t just inch upward during the past two years, it practically erupted. Total on-road vehicle-miles traveled (VMT) by cars, trucks and buses jumped by 87.5 billion last year, after increasing the year before by 105.2 billion, according to FHWA data. The two-year increase, nearly 193 billion miles — that’s just under 600 miles for every U.S. resident — is the largest in U.S. history (see graph).
Percentage-wise, the increases may not look momentous — 3.5 percent in 2015 and another 2.8 percent last year. But the two-year growth percentage, 6.4 percent, is the highest in almost three decades. And it comes after a spate of articles and reports celebrating (or decrying, depending on one’s point of view) the arrival of “peak driving,” or, at least, peak driving per capita.
So what’s going on?
The prime factor couldn’t have been population growth; it totaled just 1.4 percent from 2014 to 2016. And let’s not over-credit 4.2 percent economic growth over the same period, since the level of driving is more molasses-like than GDP, as we discuss further below. (Also note that GDP subsumes population, so the two factors wouldn’t be additive.) What about pent-up demand from the 2008-2011 economic slowdown? It makes for good anecdotes but probably not enough to move the dial.
My candidate for key cause of the surge in U.S. driving is super-cheap gasoline, or, more precisely, the precipitous drop in U.S. gasoline prices since 2014.
The nationwide average pump price was $3.43 in 2014, the fourth consecutive year in the mid-three dollar range. It dropped nearly a dollar in 2015, to $2.51, and fell again in 2016, to $2.20. Adjusted for general inflation (which is how we economists calibrate these things), the 2014-2015 price drop was 26.8%, and the 2015-2016 drop was 13.3%. The two-year real fall in price, 37%, is the largest over two consecutive years since at least 1950.
A drop in gasoline prices would cause an uptick in driving. If it’s cheaper to drive a mile, or 100 miles, it stands to reason that people will drive more miles. But how much more? How sensitive is the amount of miles driven (VMT) to the price of gasoline? Or, more precisely, how sensitive are changes in VMT to changes in the price of gas?
The answer: the relationship between VMT and gas prices isn’t super-sensitive; but it’s more than zero, and enough to make a big difference in the amount of driving when gas prices take a large turn.
Let’s look at how the math works. The parameter we’re looking for is the gasoline price-elasticity of VMT (driving). Let’s say it’s negative 0.1. (Negative because a lower price means more driving; and just 0.1 because the connection is probably slim.) Now let’s say the price of gasoline drops by one-fourth, or 25%. Based on the assumed -0.1 price-elasticity, we would expect a 3% rise in driving. (Mathematically, that’s because 0.75 raised to the negative 0.1 power, written as 0.75^(-0.1), is 1.029, which denotes a 2.9% increase.)
Does that feel right? Would a one-fourth drop in the price of gas — not just over a single day or month, but over a sustained period — actually lead people to drive 3% more? Would people take more car trips, or longer trips, to that extent? It seems reasonable that they would, though how much is an empirical question. (Which is why the entire vast literature on price-elasticities is based on observed behavior.)
In the table at right I’ve run the actual drops in the price of gas through that calculation, for two possible VMT price-elasticities: (negative) 0.10, and half that value, or 0.05. For the 0.10 value, the drop in the price of gas would have evoked much or most of the observed rise in driving. For the lower 0.05 value, not so much but still a significant portion. (The influence for 2016 should actually have been greater than shown because of the lagged effect from the 2015 price drop.)
What, then, are the best estimates for the price-elasticity in the literature (again, we’re looking for the change in VMT as a function of changes in the price of gasoline)? For the past decade I’ve relied on a seminal 2007 paper by U-C Irvine transportation economists Ken Small and Kurt Van Dender in which they derived a long-run price elasticity of gasoline consumption for the U.S. of -0.38, with 46% of that being due to changes in the amount of vehicle travel. Multiplying those two figures yields a long-run elasticity of VMT with respect to the price of gasoline of -0.175.
(The Small – Van Dender paper is summarized on CTC’s Effectiveness page — drop down to the first bullet point. The paper, “Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect,” is available here. The result just given appears on p.24 (FN 27). Small and Van Dender also remark that the 46% share of gasoline price elasticity accounted for by VMT declined to 27% when recalibrated to prices and driving behavior observed toward the end of their sample period. It’s also true that their elasticity figures are long-run, whereas the VMT behavior we seek to explain here is short-run, implying a still-lower price-elasticity; on the other hand, when the price of gas changes it’s easier to change the amount of driving quickly than to change miles per gallon, which suggests that the short-run elasticity of VMT might not be many times smaller than the long-run figure.)
My takeaway is suggested by the table above: while numerically the gasoline price-elasticity of VMT is small, the fall in gas prices in 2015 and 2016 was so severe that it almost certainly explains a lot of the observed rise in driving. Of course, rising incomes would also have played a role, but likely a small one. The Small – Van Dender income-elasticity of driving is 0.11 in the short run and 0.53 in the long run. Assuming a value of 0.25 for our purposes, the 2.6% increase in real GDP from 2014 to 2015 would have been expected to evoke only a 0.6-0.7% increase in driving (since 1.026 raised to the 0.25 power is 1.0064); for the 1.6% rise in GDP from 2015 to 2016, the effect on driving would have been smaller still.
What does this exercise suggest about carbon taxes? Take it as yet one more demonstration that prices influence the level of usage of just about everything, including fuels, energy, even driving. The price sensitivities (elasticities) may not be enormous, but they are felt nonetheless. In 2015 and 2016 they were enough to power a record two-year rise in total U.S. miles driven. And they’ll also act in reverse, which is how a carbon tax — particularly one with a rising price trajectory that can filter out market volatility — can be so powerful in slashing gasoline use and fossil fuel use generally.
And remember, the price elasticity of gasoline use (and its carbon emissions) is at least twice as great as the elasticity of driving with respect to the price of gas, which is what we’ve explored here. (We explored the price elasticity of gasoline in this Sept 2015 post, which is one of our most-viewed ever.)
So when you see someone parading false facts like this one on the New York Times letters page earlier this month,
[F]act — as documented by the Energy Information Administration and experienced by anyone who must drive regularly regardless of cost — fuel prices have little effect on gas consumption. (The letter, from Food & Water Watch, is the third of five in that link.)
you’ll know how to push back.
February 8, 2017, 9:30 a.m. • For Immediate Release
The Carbon Tax Center voiced strong support this morning for a proposal by the Climate Leadership Council to enact a comprehensive nationwide carbon tax starting at $40 per ton of carbon dioxide and rising over time.
The Council is scheduled to release its proposal, “The Conservative Case for Carbon Dividends,” at the National Press Club this morning, Wednesday, Feb. 8, at 9:30 a.m.
A $40 per ton tax on carbon pollution starting in 2018 and rising thereafter by $5 per ton each year would, by 2030, reduce annual U.S. CO2 emissions from levels in 2005 (a common baseline year) by an estimated 2.3 billion metric tons, a 40 percent reduction.
Alternatively, measured against a moving “business as usual” trajectory with no national carbon price, the 2030 reductions would be 1.4 billion metric tons a year, or nearly 30 percent of unpriced emissions projected for that year.
(The Council’s proposal envisions that “A sensible carbon tax might begin at $40 a ton and increase steadily over time.” We chose $5/ton as a politically palatable annual rate of increase, and modeled such a tax using our carbon tax model.)
“The robust carbon tax proposed by the Climate Leadership Council would vault the U.S. from the middle to the head of the global pack in reducing heat-trapping, climate-damaging emissions,” said Carbon Tax Center director Charles Komanoff. “It would also provide a template for other nations to follow, creating a real possibility of keeping the rise in global temperatures to 2 degrees Centigrade or less,” Komanoff said.
Using CTC’s model, Komanoff calculated that the future emissions reduction rate with the Council’s carbon tax would surpass by 50 percent the actual reduction rate since 2005, “a major achievement,” he said, “given that the past reductions were largely enabled by eliminating much coal-burning – the lowest-hanging fruit in eliminating carbon.”
CTC also endorsed the political “swap” in the Council’s proposal to rescind the Obama administration’s Clean Power Plan. “The important work of the Clean Power Plan was largely completed anyway,” said Komanoff, pointing out that well over 80 percent of the plan’s targeted reduction in electricity-sector emissions for 2030 had already been achieved by the end of 2016. “The proposed carbon tax is the logical and necessary next step,” he said, “instilling incentives throughout the U.S. economy to replace fossil fuels with clean energy.”
CTC further endorsed the Council’s proposal to “dividend” the carbon tax revenues to U.S. households on a quarterly basis. “We’ve studied ‘fee-and-dividend’ for years, and can vouch that it’s the most equitable, least bureaucratic and least corruptible way to distribute the hundreds of billions of dollars of revenue from a carbon tax, while also generating jobs,” Komanoff said.
Komanoff sounded a cautionary note about the dogged resistance of Congressional Republicans to climate action, but added that the Council’s proposal hits all the right marks for a business-friendly, small-government climate policy. “Republicans looking for a way out of their denialist, obstructionist stance on climate have been handed a lifeline,” he said. “Their children and grandchildren are counting on them.”
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About CTC: Since 2007, the Carbon Tax Center has stood at the front lines of the struggle for a sustainable climate and a habitable Earth. Our mission: to generate support to enact a transparent and equitable U.S. carbon pollution tax as quickly as possible — one that rises briskly enough to catalyze virtual elimination of U.S. fossil fuel use within several decades and provides a template and impetus for other nations to follow suit.
Think global, act local. I had that seventies slogan in mind last Sunday morning, at home in lower Manhattan. The pro-immigration rally in Battery Park was a few hours away, the sun was shining, and I walked around the corner to meet up with Erik Torkells, editor of the neighborhood blog, Tribeca Citizen.
Erik had a bag-snagger — a telescoping grappling hook for pulling plastic bags off tree limbs. Like many New Yorkers, he can’t abide the bags and other gossamer debris stuck, like tumors, to our half-a-million street trees. The contraption cost 400 bucks, and when he drew it from its canvas bag I could see why: it had four extenders, a fancy clamp or two, and a fearsome business-end worthy of a stevedore.
Bag snagging, I quickly learned, is serious business. Time-consuming, too. Over the next hour-and-a-half, and even with a big assist from my pal Rachel, who was passing by and gamely joined our little crew, Erik and I could only untangle a few dozen derelict bags from as many trees. And sad to say, we snapped a few spindly tree limbs in the process. (After we posted this, Erik put up a detailed account, Adventures in Bag Snagging; it’s obsessively terrific.)
If only there were a way to keep the bags out of the trees in the first place!
There is, of course, and that’s the main reason I went bag-snagging on Sunday, and why I’ve posted this piece as a Carbon Tax Center blog.
Beginning in February, a NYC local law enacted last spring — Local Law 63 of 2016 — will attach a nickel fee to carryout bags dispensed at supermarkets, grocery and convenience stores, and pharmacies. Shoppers who bring their own bags with them are of course exempt from the charge. Similar fees in dozens of U.S. cities, including San Jose, CA and Washington, DC, have curbed distribution of store bags by over two-thirds, reducing bag litter in gutters, streams and, yes, trees, and saving municipalities millions in trash collection and disposal.
Here in New York, however, implementation of the law was suspended to allow time for, er, more arguing. And now a last-ditch effort to pre-empt the law threatens to undo it before it can get started.
The connection to carbon taxing isn’t so much the petroleum waste from single-use bags, as the principle of charging a fee to encourage efficiency and conservation. To opponents, the fee smacks of punishment. To supporters, it’s a simple prod to finally do what our counterparts in Europe have been doing without grumbling for a century: keep a string or cloth bag with you to stick the groceries in.
In a way, the bag fee fight is the carbon tax struggle stripped to its essence: both policies internalize some of the cost of the harm in its price to incentivize less use. If anything, the bag fee is even more of a no-brainer. There’s no demonstrable burden on the poor. (The NYC law exempts food-stamp users.) There are no shut coal-mines to fret over, no analog to the low-wage worker forced to drive hours each day between two jobs. “You say you use twenty bags a week? Fine, bring your own!”
Sadly, that logic hasn’t worked on a handful of legislators. Perhaps they can’t make the imaginative leap to picture the simple but permanent behavior change. Or maybe they look upon the bag fee as an affront. Either way, the anti-fee forces might actually carry the day. Their repeal bill has cleared the NY State Senate, and now only the Assembly and the Governor stand in the way.
Why fight for the fee when a megalomaniacal demagogue in the White House is persecuting immigrants, refugees and Muslims and preparing to blow up the Paris climate accord? That one’s simple. The battles aren’t either-or, they’re both-and. We can progress on multiple fronts. Later that Sunday, my wife and I rallied with over 10,000 other New Yorkers in Battery Park, against the new administration.
Earlier this month, the New York Times asked Jennie Romer, the activist founder of Plastic Bag Laws, to comment on the rollback effort in Albany. “It seemed to be a very simple incremental policy to make real environmental change,” she told the Times. “And it has turned out to be an incredibly difficult fight.”
Yes, even seemingly incremental progress can be hard as hell. Still, we don’t stop.
If you’re a New York State resident, click here to find your Assemblymember’s contact info.
Bag-snagging photos by Erik Torkells.
Trump is bling, and bling is fossil fuels: The Boeing 757-200. The limo’s. The helicopters.
And also, evidently, the buildings. Not just the marble, but the lights, the escalators, and the machinery: motors, fans, compressors to (over) cool and heat.
We awoke this morning to find the Trump brand’s conspicuous energy consumption confirmed in spades, in EnergyWire. Thanks to their lead story, At blinged-out Trump hotels, ‘green’ isn’t part of the brand, we now know that out of nine Trump-branded properties in Manhattan that submitted energy use data under New York City’s energy benchmarking law, six were in the bottom 20 percent for energy efficiency, based on consumption per square foot.
Since those buildings are, ahem, huge, their outsize per-area energy usage puts their total fuel use and carbon emissions off the charts. To grasp how much, we zeroed in on one building, the Trump SoHo. According to the EnergyWire story, the combined hotel-condominium was in “the bottom [worst] 1 percent of properties of its type and size for energy intensity.”
We logged into NYC’s excellent Energy and Water Benchmarking Web site, navigated to Hotels and typed in the Trump SoHo address, 246 Spring Street. A bunch of graphs popped up, including the one at right, below, denoting CO2 emissions per square feet. From it, we were able to calculate that in 2014, the most recent year with available data, the fossil fuels burned to run the Trump SoHo emitted around 10,000 metric tons of CO2. (Calculations are at bottom.)
That’s a tough figure to put in perspective (okay, it’s within hailing distance of total carbon emissions for the entire country of Liechtenstein, which clocked in at 14,000 metric tons in 2013). So we converted it to dollars, using the carbon tax level that Trump’s Secretary of State-designate, Rex Tillerson, appeared to endorse on a handful of occasions during his tenure as ExxonMobil CEO: $25 per metric ton of CO2.
Ten thousand times 25 is 250,000, so at the (admittedly hypothetical) Tillerson rate, the Trump SoHo would be dunned around a quarter of a million dollars a year for its carbon emissions. (More precisely, the hotel’s electricity and energy providers would pay the tax and attempt to pass it through in higher charges.)
At the higher carbon tax levels that would make truly monumental dents in emissions, say, $100/ton, the annual charge would be a million bucks a year. That might get someone’s attention (and provoke an intervention by the energy managers from the Trump-branded 40 Wall Street skyscraper in Lower Manhattan, which improbably had an excellent (91) Energy Star score, according to EnergyWire).
But beyond poking fun — and it’s important to keep poking the new administration — the Trump properties’ energy profligacy matters a great deal for our planet. That’s because energy efficiency is critically important for reducing climate-damaging emissions.
For four decades and counting, visionaries like Amory Lovins and practitioners like the American Council for an Energy-Efficient Economy have documented (and fought to win supportive policies for) the capacity to provide more energy services (warmth, light) with fewer energy inputs. Last month, we published a Carbon Tax Center report identifying electricity savings that have caused electricity usage to flatten even as economic output increased, as the unheralded but key factor in the 27 percent cut in CO2 emissions from the U.S. electricity sector since 2005. (Shorter blog version here.)
There’s been a lot of debate about whether our 45th president can bring back coal. One way to stop that — and avert more fracking too — is to maintain and accelerate progress in U.S. energy efficiency, especially in buildings. In that endeavor, as in virtually every other, the right direction is full speed away from anything spelled T-R-U-M-P.
Note: As we were posting this article, we saw a post by the Energy and Policy Institute presenting strong evidence that ExxonMobil lobbied the Massachusetts state legislature to oppose two carbon tax bills, one of them revenue-neutral, during the 2016 session, i.e., when Tillerson was still CEO.
How we did our calculations: First, we ignored the label in the Greenhouse Gas Intensity graphic asserting that the “GHG intensity for this property (Trump SoHo) is 3,877.16.” If that figure is supposed to refer to kilograms of CO2 per square foot of floor space per year, as the x-axis suggests, it’s inflated by a factor of 150-200. Instead, we estimated a figure of 23 kgCO2/ft^2 from the last bar in the chart, which clearly refers to Trump SoHo, and multiplied it by the hotel’s square footage (reported in another graph on the same Web page; click the Go To Visualization button), which is 395,075, to obtain approximately 9,100 metric tons. As a check, we read an annual figure of 535,000 Btu per square foot from another chart, Weather-Normalized Energy Use Intensity, obtaining roughly 211,000 million Btu per year, to which we applied the CO2 emission factor for natural gas (most NYC on-site energy and much of its electricity is from natural gas) of 117 pounds per million Btu. The result, 24.7 million pounds, is approximately 11,000 metric tons.
We put up 42 blog posts last year, an average of one every nine days. Half-a-dozen addressed the Washington state carbon-tax initiative, I-732, explaining why we backed it strongly. Ten pertained to the elections, with four on Trump, three on GOP denialism, and three on the Democratic candidates’ carbon tax stances.
Several of our posts used our carbon-tax model to quantify impacts of different carbon taxes and contrast those that would make a big dent in emissions (like Sen. Sanders’) and those that wouldn’t (ExxonMobil’s). Other posts ranged from soda taxes (a possible political template for pollution taxes) to climate science, from China (where emissions appear to be peaking) to Wyoming (still in the thrall of coal, while renewables languish).
Collectively, they got lots of eyeballs. Below we’ve collected screenshots from the ten most popular, in reverse chronological order. Links in titles will take you to the full posts. For the really curious, our directory of 2016 posts (and 2015, 2014, 2013 …) is here.
Dec. 13: The Good News: A clean electricity boom is why the Clean Power Plan is way ahead of schedule
Nov. 10: After The Trump Win
Supporters of nuclear power wasted little time pointing out how much carbon-free electricity production will vanish from closing the Indian Point reactors 25 miles north of New York City.
As the New York Times reported last Friday, NY Gov. Andrew Cuomo and Entergy Corp. have reached an agreement to shut the twin reactors permanently in 2020 and 2021, respectively. Both units are in their fifth decade of operation. Though their electricity output has finally attained consistently high levels, their checkered record and proximity to New York City have made them an abiding source of concern of safe-energy activists as well as the state’s governor and attorney general.
Like most operating nuclear power facilities, Indian Point produces a good deal of nearly carbon-free electricity. Charges by some antinuke activists that reactors have sizable carbon footprints are overblown. Most rely on outdated assumptions (e.g., that uranium “enrichment” still takes place in power-guzzling Cold War-era plants) or questionable accounting (charging today’s reactors for putative energy costs of far-future waste storage).
That production gave rise yesterday to the tweet shown at left from Jesse Jenkins, an electricity researcher with the Breakthrough Institute, purporting to “put the Indian Point plant closure into perspective” by showing that its electricity generation dwarfs that of other New York state sources of carbon-free energy.
Jenkins’ figures are probably right (I haven’t checked them, but he’s good with numbers). But they’re incomplete. They omit New York’s share of the largest U.S. source of carbon-free electricity in recent years: the electricity savings embodied in the divergence of total electricity usage from total economic activity.
We quantified that divergence in a new report last month, The Good News (blog summary version here). The bottom line, in numerical terms, is that in 2016 the U.S. was able to avoid generating a little over 500 TWh of electricity — almost one-eighth of the electricity it did produce — because electricity usage barely grew compared to 2005 consumption. (A TWh, one billion kWh, is a convenient metric.)
For reasons we spelled out in the report — structural shifts from energy-intensive heavy manufacturing to service industries; ratepayer-funded efficiency programs in tandem with government codes and standards for buildings, appliances and other end-use equipment; rapid penetration of digital technologies in energy management, product design and manufacturing, to name several — U.S. electricity generation in 2016 will likely be a mere 20 TWh above the 2005 level of 4,056 TWh, rather than in the 4,500-4,600 TWh range it would have reached if nationwide demand for power had grown after 2005 at the same relative rate to GDP that held during 1975-2005.
Almost by definition, those electricity savings are widely distributed and have taken place in every state. New York’s share may have been greater than the national rate, given its concentration of large office buildings and multifamily housing that are particularly ripe for money-saving energy-efficiency retrofits. For conservatism, we assign 3.8 percent of the 507 TWh of national avoided generation in 2016 to New York, based on its share of U.S. electricity usage in 2014, the most recent year with state data.
That works out to 19.1 TWh of electricity generation avoided statewide last year — all of it carbon-free — because the economy here, in tandem with the country as a whole, reduced its electricity-intensiveness between 2005 and 2016. (We use 2005 as a baseline because it’s both the benchmark year for many climate policy targets and the year in which U.S. electricity use began to markedly detach from economic output.) That figure surpasses by a wide margin the 16.4 TWh of annual electricity production that Jenkins ascribes to Indian Point, as our expanded chart shows.
It is true that electricity savings and nuclear power generation aren’t necessarily in conflict. Shutting Indian Point will require New York State policy, investment and consumers to push harder — much harder — on wind and solar as well as energy efficiency to achieve the carbon reductions that Indian Point now provides and would keep providing if the plant were re-licensed and continually refurbished to permit it to operate indefinitely.
But it is also true that Indian Point isn’t fully complementary with efficiency and renewables. The reactors’ inability to easily vary their output makes it harder for the state electric grid to integrate naturally variable wind turbines and solar power. Indian Point’s presence on the grid also depresses the prices offered for renewable electricity and energy savings alike. Conversely, the prospect of terminating both reactors several years from now will expand the horizons for carbon-free electric energy in New York state on both the supply and demand sides.
We hope this post adds useful context to Indian Point’s now-pending closing. It has been a major source of carbon-free electricity for New York state, but as of 2016 it’s no longer the pre-eminent one. Recognizing the contributions of energy efficiency in reducing greenhouse gas emissions will make it easier to fashion policies and organizing strategies that protect our climate, with or without nuclear power.