Guest post by Steve Stoft and Dan Kirshner:
Carbonomics: How to Fix the Climate and Charge It to OPEC is a new book aimed at bringing together those concerned with climate change and those concerned with energy security. It shows that carbon taxes work best for both concerns and that caps drive the two sides apart.
Carbonomics analyzes cap-and-trade problems, including many covered by the Carbon Tax Center, as well as these:
(1) Cap and trade puts the same price on all carbon – permits for oil carbon are interchangeable with permits for coal carbon and other carbon. So cap and trade does not put any price on the costs of oil shocks and oil security (for example, military expenditures to secure oil supplies and shipping lanes). This slights the concerns of those focused on these issues.
(2) Many of those advocating a binding U.S. cap on carbon see it as a step toward getting China and India to adopt binding caps. But China and India have been rejecting binding caps for 15 years – for good reasons. Although China has passed the U.S. in total carbon emissions, on a per-person basis China’s emissions are still far below ours. Requiring China to hold its emissions to their 1990 level would be like capping the U.S. at a pre-1900 level in terms of emissions per person.
(3) Caps make individual and local carbon emission reduction efforts useless, since emissions will still reach the cap. Reduce your carbon footprint – perhaps by buying a super-hybrid – and you’ve just made more space under the cap for someone else to buy an SUV.
Carbonomics shows how carbon taxes avoid these three cap-and-trade problems:
Special, adjustable tax rate for oil. Oil’s two costly side effects – climate damage and security costs – call for a higher tax rate for oil than for domestic coal. This is difficult to accomplish under cap and trade. Further, an exception to this higher tax rate should be made when OPEC helps push the price to $140 per barrel – that’s higher than needed for climate and security together. An oil-specific tax can be easily dialed back in such circumstances – while again this is difficult under cap and trade. Then again, when the world price of oil drops precipitately – as it did after its peak in July 2008 – a floor price is essential to protect investments in everything from hybrid cars to new cellulosic ethanol plants.
Base a climate agreement on equal effort. China has said it is willing to make a binding commitment. Committing to the same carbon tax rate as the U.S. means there is nothing stopping China from becoming as rich as the U.S. And, rather than negotiating 180 separate caps – one for each country – it will be easier and fairer to require such an “equivalent level of effort” (tax rate) from each country. Carbonomics anticipates a flexible implementation; if a country wants to base its own policy on cap and trade it need only ensure that its permit prices have as much force as the required international tax rate.
Reward all emission reductions. A carbon tax rewards any carbon savings. If you buy a more efficient hybrid, you save money. And a would-be SUV buyer doesn’t get a break – they still face the same incentive to avoid an inefficient vehicle.
While the issue of cap and trade versus carbon taxes is central to Carbonomics, the book covers many related issues: (1) PastOPEC crises show that carbon pricing works wonders. (2) There’s still room for an automotive fuel efficiency incentive, in the form of a “race” that rewards improvements. Such a “race to efficiency” is a lot more like a tax than a cap or traditional regulation. (3) Synfuel subsidies are decidedly not a joint solution to climate change and energy security concerns. (4) What type of research is worthy of government funding? (5) The dangers of using cap or tax revenues for subsidies. (6) And much more. Carbonomics also advocates a particular kind of carbon tax – one that is fully refunded on an equal per-person basis, as put forward by NASA climate scientist James Hansen. Carbonomics argues that such a revenue-neutral tax is the only carbon policy that can succeed.
OPEC photo by Kamran Jebreili/AP Images. The polar bear photo is owned by the Aflo Company, which provides no information about the bear, although it is almost certainly in a zoo.
Steve Stoft and Dan Kirshner are economists based in Berkeley, California. Carbonomics: How to Fix the Climate and Charge It to OPEC is available on Amazon, and can be downloaded for free from stoft.com.
David Collins says
Thanks for the lead to CARBONOMICS. There is now evidence aplenty of Anthropogenic Global Warming: that it is for real, and that it is not gonna be nice unless "something" gets done, and gets done pronto. It is getting to appear that one essential part of the aforesaid "something" is a well-implemented Carbon Tax. (Or Chicken Soup.) What I do not see much of are signs of actions to implement said Tax/Soup. Oh, more science is definitely called for, and more work on abatement methods (of which Tax/Soup is just one, and one worthy of more investigation), but what about harnessing the mule named Tax/Soup to the cart named Abatement?
Judy B says
You must think us fools. You don’t think we know that this is going to filter down to us paying the brunt of it? you tax the companies, they raise their prices to cover the tax, the tax is also added to our utility bills, opec increases cost , gas goes up and even more with the tax per gallon. the only one unable to raise cost to cover this is the common man. paychecks go down in a sence that buying power has just decreased dramatically. due to decreased buying power, less sales, companies close, loss of more jobs. isn’t this where we are now? as plants exchange co2 and o2 how about a break for planting more trees on your property? When you consider all of the little extra taxes we pay in addition to income taxes you already take 50 percent or better of our income. how much do you think you can squeeze the turnip?
David Collins says
The most novel point made in CARBONOMICS is to impose a separate tax on petroleum. Our country is saddled with a plethora of problems related to the long-lasting availability of cheap fuel and other petroleum byproducts. Furthermore, although assuredly rising prices for both motor vehicle fuel and coal for power generation send the needed signals for investment, but given the wide fluctuations in petroleum prices, a separate tax structure is needed for the material and its derived fuels and other products.
Furthermore, noting the above comments by Judy B, it is essential to go for the tax-and-dividend system, to alleviate such apprehensions.
James Handley says
I recommend Stoft’s short, hard-hitting e-book "Cap Secrets": http://stoft.com/ebooks/cap-secrets.pdf
Steven Stoft says
Dear Judy B.Actually the book Carbonomics makes all your points about the tax getting passed down, and makes them just as strongly as you do. Then it says to refund 100% of the tax on an equal per person basis. The result is that (1) the tax still works, and (2) everyone that uses less carbon than average acutally gets back more in refunds than they pay in taxes. Sorry that is not in the article.
Carbon tax, wont that be a tax on energy companys who burn fossil fuels such as coal. Gee I guess I get to look forward to more of my money going to the government. No doubt in my mind the rest of the world China, India just to name a few will follow our lead. But my main question is why wont Al Gore debate anyone who is opposed to global warming and why was President Bush’s house greener than Gore’s. Something terrible wrong and the weak just follow along and except what there told…..