Note: We’ve revised this post to reflect an April 15 update from Carbon Brief in which it raised its CO2 reduction projections for 2020. More details appear at end of post. — C.K., April 29.

A new post this week from Carbon Brief’s Dr. Simon Evans, Coronavirus set to cause largest ever annual fall in CO2 emissions, projects a 5-6 percent fall this year in worldwide emissions of carbon dioxide from last year’s level on account of the coronavirus.

Dr. Evans is highly regarded for his analyses of global energy trends, and his new post does not disappoint. His projections, shown at left, draw on what he calls “five key datasets and projections covering roughly three-quarters of the world’s annual CO2 emissions, including the entire output of China and the US, the EU carbon market, the Indian power sector and the global oil sector.” Those sectors’ projected reductions, shown in the rust-red bar near the top, sum to around 2,000 million metric tons, equivalent to 5.5 percent of the 2019 worldwide total.

The five trailing blue bars in the Carbon Brief graphic underscore the prospective downturn’s unprecedented extent. They denote actual reductions during traumatic world events, from the 1919 Spanish flu pandemic and the 1945 close of World War II to the 2009 financial crisis, which shows the smallest emissions drop. Using tons of decline as the metric — after all, the climate system responds to tonnages of CO2, not percentage changes — none of the earlier five contractions rivals Carbon Brief’s projected 2020 downturn. The closest is the 845 million tonne reduction in 1945, caused not just by the collapse of economic activity in defeated Germany and Japan but also by the battered economies of victor states such as the Soviet Union and the United Kingdom.

Last month, we at Carbon Tax Center published a post estimating that global emissions this year could plunge by as much as 7,640 million metric tons from their business-as-usual level. That would be nearly four times as great a reduction as the 2,000 million tonne drop in Dr. Evans’ Carbon Brief post, a huge gap but one largely explainable by these differences between our respective approaches:

1. Carbon Tax Center’s figures are in Btu’s, a good but imperfect proxy for carbon emissions, whereas Carbon Brief employs CO2 directly.
2. CB’s calculations omit sectors outside of its “top five,” which account for 24% of worldwide carbon emissions.
3. CB conservatively applies its estimated reductions to a 2020 baseline that would have exceeded 2019 emissions by 1,000 million tonnes, effectively handicapping its 2020 reductions.
4. CB chose to base its top five sector reductions on official, and necessarily conservative, sources such as the U.S. EIA, the IEA, and CB’s own mid-Feb. analysis of China’s CO2 reductions.
5. CTC took a deliberately aggressive approach to estimating reductions in order to stake out an outer limit.

 

We add this sober warning from Dr. Evans’ post:

To put the potential 2020 coronavirus effect in a broader climate context, it is worth adding that global emissions would need to fall by more than 6% every year this decade – more than 2,200MtCO2 – in order to limit warming to less than 1.5C above pre-industrial temperatures. (This figure is based on the 2018 Intergovernmental Panel on Climate Change (IPCC) special report, which found that global emissions in 2030 needed to be 45% below 2010 levels, in order to limit warming to 1.5C.)

It should go without saying that the forced nature of the 2020 emissions contraction disqualifies it as a model for going forward. Nevertheless, surpassing, even under great duress, and even for just one year, the recurring 2,200 million tonne per year contraction cited as essential by Carbon Brief, is not to be sneezed at.

A useful way to think about CTC’s “extreme” 7,600 million tonne estimate is that it would buy the world three to four years worth of the 2,200 Mt reduction otherwise needed each year to the next … and that in 2023 or 2024 worldwide emissions would need to fall, from the reduced level, by 2,200 million tonnes each year, to get onto the IPCC trajectory for keeping warming to less than 1.5C.

Point being: while Covid-19 is not how the world should have started down the road to reducing emissions, it has gotten our attention and is, at least, a start.

Carbon Brief’s April 15 amendment to its original April 9 post (linked to at the top of our post) reads: Update 15 April 2020: This analysis was updated in light of new forecasts for global oil demand in 2020, which suggest a significantly larger drop this year. The original version had put the potential impact of coronavirus at 1,600MtCO2 in 2020, equivalent to 4% of 2019 emissions.

Calculations by the Carbon Tax Center suggest that the worldwide economic contraction from steps being taken to slow the spread of deadly COVID-19 could halve this year’s rise in the atmosphere’s carbon dioxide concentration.

This finding is largely illustrative and encased in caveats. First, the average CO2 level wouldn’t actually fall; rather the business-as-usual annual rise of around two ppm would be trimmed to just one. And for that to happen, the slowdowns in travel, industrial production, goods movement and commercial activity, and the accompanying reductions in use of fossil fuels and carbon emissions, would have to be steep and prolonged, as our calculations show below.

The most critical caveat, of course, is the widespread deaths and massive dislocations bound up with these events. Megadeaths and cataclysmic job losses are not anyone’s preferred path for slowing climate change. Nevertheless, the calculations provided here may be instructive.

U.S. Reductions
Federal bean-counters divide U.S. energy use into four categories: Industrial, Transportation, Commercial, Residential. We assume that the first three contract by 50 percent as factory production tumbles, aviation evaporates, commuting recedes, recreational travel dissipates, and offices, stores and performance spaces remain empty. (April 2 addendum: U.S. gasoline demand for the week ending March 27, before the economy fully shut down in all 50 states, was 27 percent less than in the same year-earlier week, according to Energy Information Administration data.) We assume that residential energy use, which currently is around a fifth of the total, rises by 10 percent due to enforced home-stays.

These assumptions add up to a 37 percent shrinkage in U.S. energy use measured in Btu’s. The fall in carbon emissions might be a bit greater since carbon-free energy sources — nuclear power, wind turbines and solar panels — would keep humming while dirtier coal and petroleum bore the brunt of the cutbacks. We’ll watch to see how other modelers handle the complex calculations.

Rest of World
U.S. carbon emissions now (2017) account for only 15 percent of the world’s total. To baseline the rest of the world’s CO2 we turn to the superb data compilations and visualizations assembled under the aegis of “Our World in Data.” Analysts Hannah Roser and Max Ritchie divide the globe into nine regions, plus International Transport (largely long-distance shipping and aviation).

We assigned various percentage reductions to each region as shown in the graph at right, starting with our U.S. figure of 37% derived above. Other reductions range from highs of 40% (International Transport) and 30% (European Union) to lows of 10% (Africa) and 15% (most of Asia; also Latin America). The worldwide average — again, this is speculative calculating — is 21%.

We again stress that these are guesses and are skewed to the high side; as dire as things are, it still seems unlikely that fossil-fuel burning and consequent carbon emissions will fall this steeply. Moreover, deep contractions probably won’t be sustained for a full year.

Translating CO2 emissions to CO2 levels 
The numbers are largely illustrative and we’ve pushed them hard. Summing the reductions shown in the graph, they imply that 2020 emissions conceivably could fall short of the 2017 baseline or “default” value by 7 to 8 billion metric tons (gigatonnes).

The redoubtable “Skeptical Science” brief, Comparing CO2 emissions to CO2 levels, tells us that each 7.8 gigatonnes of emitted carbon dioxide adds 1 part per million to atmospheric concentrations of CO2. Equivalently, reducing emissions by 7-8 gigatonnes — whether absolutely or relative to a baseline trajectory — averts a 1 ppm rise in atmospheric CO2.

Keep in mind that this would constitute a permanent drop. Atmospheric concentrations of CO2 would be 1 part per million less than otherwise not only at the end of 2020 but at the end of 2021, 2022 and every year going forward. The boon to climate and humanity, though slight (considering that the world has overshot the postulated 350 ppm maximum safe level by more than 50 ppm), would be indelible.

We hope in future posts to explore how much of the current reduction in CO2 might be negated by economic “bounceback” (short answer: not much); and, more importantly, how the economic and social upheavals from the coronavirus crisis might open up political pathways leading to decisive, longer-term action to bring down carbon emissions without widespread suffering.

Addendum, April 11: See our new post today, CO2 emissions will shrink this year. How much?, for a discussion of parallel but different projections of worldwide 2020 CO2 contractions from Carbon Brief.

I was there to catch a man
I thought I had him by the hand
I only had him by the glove
The War on Drugs, I Was There, 2011

Australia, engulfed in flames, choking in smoke, a billion animals perished, once had a powerful climate solution by the hand: a carbon tax. The nationwide tax on fossil fuels was in effect for just two years, but what an impact it had, helping the country cut its carbon emissions while economic activity climbed unimpeded. During the carbon tax’s middle year, 2013, Australia’s CO2 to GDP ratio had its sharpest drop ever (see graph below).

Australia stands apart, then, not just in the magnitude of its climate-charged horror but in deploying a climate-change antidote, only to lose it to a right-wing, coal-financed backlash. Not even Trump’s dismantling of the Obama pro-climate Clean Power Plan and auto-mileage standards, unsettling as it has been, stands out as cruelly as Australia’s renunciation of its carbon tax.

Unwanted child, stepchild, bastard child … Australia’s carbon tax was all of that. It took effect on July 1, 2012, the keystone of a deal between the Labor Party headed by incoming prime minister Julia Gillard and the pro-carbon tax Green Party, whose votes Labor needed to attain a majority.

As Australian journalist Julia Baird noted in a 2014 NY Times op-ed, Gillard’s earlier pledge to not tax carbon emissions and her “perceived lack of conviction in the policy itself” damaged the tax’s credibility and her own viability. The subsequent electoral victory of a “Liberal” (read: right-wing) government committed to repealing the tax led to its rescission on July 17, 2014.

Yet the tax appears to have performed brilliantly. With just two years of data, we can’t draw sweeping conclusions. Nevertheless, we have these ineluctable facts about the 24 months in which Australia taxed carbon emissions from all major sources except petrol-fueled transport:

• CO2 emissions from burning fossil fuels in Australia fell 2.4 percent in 2013 and 1.1 percent in 2014 — the two steepest year-on-year declines since 1990, when modern record-keeping began.
• Emissions in 2014 were 14 million metric tons less than in 2012. The decline was powered by a 19 million metric ton drop in the electricity sector, which is highly carbon-intensive and thus the most responsive to carbon pricing. (Increases in mining and manufacturing emissions somewhat offset that downturn.)
• Economic activity was unaffected by the carbon tax, as indicated by the minimal difference between the 3.01% average annual rise in GDP for the years 2012, 2013 and 2014 vs. the 3.07% average rise for the remainder of the 1990-2017 period for which we had data.

As each day brings new stories of suffering from the terrifying temperatures (including a continent-wide average 107.4ᵒF on Dec. 18) supercharged by climate change, we can only speculate what might have turned out differently if the country hadn’t abolished its carbon tax in 2014.

For one thing, the 18 million metric ton rise in nationwide emissions since 2014 (to 2017, the last year for which the government has issued data) might have been averted if the carbon price signal had stayed in place. Emissions might even have shrunk if the tax had risen from its roughly $20 per ton level — and if the national government had embarked on a New Deal-style project to harvest the country’s vast solar and wind resources.

Even more, Australia’s action might have rippled through the world. The example of a proudly macho and avowedly hedonistic society explicitly pricing its carbon emissions could have turned heads, particularly in the United States, with its many cultural resemblances to Down Under. The fantasy of a land that produced Mad Max and Crocodile Dundee serving as a global role model for carbon taxing and reduction is delicious, though alas, no more than that.

Had Australia continued taxing carbon, British Columbia, the other English-speaking jurisdiction with an explicit carbon tax, wouldn’t have been dismissible as a unicorn. Carbon tax campaigners in, say, Washington state, whose voters considered but rejected a carbon tax in 2016, would have had more than one drum to pound.

It could be said, of course, that Australia’s rescission of its carbon tax is merely one of a number of missed opportunities around the world to tackle climate change by transparently pricing carbon emissions. In an alternative U.S., influential left-greens like Van Jones, Naomi Klein and Food & Water Watch might have backed that Washington carbon tax referendum — or, at least, not lent their voices to the opposition. Earlier, at the start of the Obama presidency in 2009, U.S. “big green” groups could have thrown their weight behind straight-up carbon taxing rather than try to muscle the convoluted, Wall Street-friendly Waxman-Markey cap-and-trade bill through Congress.

But Australia’s fateful choice is harder to bear. A country of 26 million people didn’t merely pass up a potential opening six years ago; it turned its back on an actual, promising beginning by bringing to power a confirmed climate denier, Tony Abbott, who axed the tax in 2014 and just a month ago, as his country was becoming a cauldron, complained to an Israeli radio audience that the world was “in the grip of a climate cult.”

When summer ebbs and the fires and smoke recede, Australians should consider how and why they disarmed themselves in the fight to stop climate change; and then make a new start by reinstating a policy that, in the brief time granted, appears to have worked wonders.

For more on Australia’s carbon tax history, click here (the Australia section of CTC’s “Where Carbon is Taxed” page).

As a companion piece to our post earlier this week, IPCC: Not just a carbon price, but a really high one, we reprint a post last week from the University of Gothenburg (Sweden), on the award of the 2018 Economics Nobel Prize to William D Nordhaus, Yale University, New Haven and Paul M Romer, NYU Stern School of Business, New York, USA. We’ve edited it slightly for readability.

These are two very well-deserving winners, according to Thomas Sterner and Ola Olsson, professors at the School of Business, Economics and Law at the University of Gothenburg.

Nordhaus and Romer have developed methods for answering some of the currently most critical and challenging questions of how to create long-term economic growth and global welfare. Thomas Sterner, professor of environmental economics at the School of Business, Economics and Law at the University of Gothenburg described both Nobel Prize winners as pioneers in their fields and likes the combination of them:

Their research generates knowledge about what type of policies should be pursued in order to solve the global climate problem and at the same time give people a decent standard of living. Nordhaus was a pioneer and defined the climate issue as an important research field that he focused on in many fundamental articles in leading journals. In a way, he should have won the Nobel Prize a long time ago.

“Both winners really deserve the prize,” said Ola Olsson, professor of economics at the University of Gothenburg. “They were strong candidates individually, but I suppose the decision to have them split the prize is a bit surprising.”

William D. Nordhaus was one of the first economists to include the climate in economic growth models. His so-called DICE model has become somewhat of an industry standard among both supporters and critics. The model (or the family of models it has led to) has been the centrepiece of intense discussion regarding assumptions, results and recommendations.

And the criticism has not been unfounded. Nordhaus has, despite being a pioneer, downplayed the need for climate measures or has promoted policy that today would appear to pose a great risk to many people, according to Sterner. He does indeed support the idea of climate measures and policy intervention, yet at a mild level with low climate taxes.

Says Sterner:

In his articles, Nordhaus arrives at scenarios with a rise in temperatures of 3.5°C by the year 2100 (and a continued increase thereafter) as being optimal. Admittedly he discusses several scenarios and as a good scientist has several caveats about unexpected non-linearities etc. The choice to label the 3.5°C as optimal is still unfortunate. This is in stark contrast to the IPCC report that was published today, which advocates attempts to stick to the Paris agenda’s lower goal of 1.5°C rather than 2 °C. So, Nordhaus is not even close to these goals and considers 1.5 degrees totally impossible. About the 2-degree goal, he writes that it will not be possible to achieve “without negative emissions by the middle of this century,” something Nordhaus probably considers to be out of the question.

Paul M. Romer’s model of endogenous economic growth has been central in research ever since his most important article was published in 1990. Romer shows how technological progress can be integrated into the analysis of long-term economic growth. The issues analyzed include how private companies can produce technological ideas despite the fact that these ideas often can be described as so-called public goods that anyone can use.

“Romer’s research complements Nordhaus’s in a very interesting way,” Sterner said, “since he has studied the mechanisms that drive economic growth and that are utilized to improve macroeconomic models like DICE, in which Nordhaus has integrated a climate economics module. Romer emphasizes the importance of endogenous growth that is based on ideas and research. This is precisely the type of research that will be needed to make the technological development more sustainability oriented,” said Sterner.

Olsson added: “Romer’s analysis has had a strong impact on how we view long-term economic growth in developed countries that is driven by technological innovations.”

Carbon pricing is catching on around the world, but only at “a snail’s pace,” and carbon-pollution prices remain far too low to make much of a dent in emissions, says a new report from the Organization for Economic Cooperation and Development.

Effective Carbon Rates 2018: Pricing Carbon Emissions through Taxes and Emissions Trading reports that the “carbon pricing gap” — the amount that current carbon prices lag an admittedly low benchmark price — shrank from 83% in 2012 to an estimated 76.5% this year. The figures cover 42 countries with advanced economies and account for 80% of all carbon emissions.

A key pillar of globalism, the OECD grew out of the postwar Marshall Plan and is dominated by three dozen “developed” countries in North America and Europe but also includes Turkey, Chile and Japan. Its “effective carbon rate” is defined as the sum of revenues from three types of policies:

1. taxes on specific fuels
2. carbon taxes
3. prices of tradeable emissions permits

The report compares that rate to the revenue that would be raised with economy-wide carbon prices at benchmark levels of 30 or 60 euros per metric ton (about $35/$70US at current exchange rates, or $32/$64 per “short” ton). The report didn’t count the impact of fossil fuel subsidies that lower market prices of carbon fuels, though these tend to be fairly low in the 42 countries studied.

For individual countries, the carbon pricing gap — the distance between actual pricing and the €30/tonne benchmark — ranges from 27% to 100% in 2015, the latest year for which complete individual-country data is available. The US, with a gap of 75%, ranked 31st among the 42 countries studied. Top rankings go to Switzerland (27%), Luxembourg (30%), and Norway (34%).

Russia, at the bottom of the list, has no carbon pricing at all. China ranks 39th, with a 90% shortfall from the €30/tonne benchmark, though the report notes that implementation of nationwide carbon-permit trading in China “could lead to a significant drop in the global carbon pricing gap, to 63% in the early 2020s.”

The report is upfront about its benchmark’s limitations. The World Bank–affiliated High Level Commission on Carbon Pricing warned last year that carbon prices must range from $40 to $80US per tonne by 2020 and $50-$100/tonne by 2030 to meet the emission targets of the Paris Climate Agreement. (And remember that those goals are almost universally regarded as too low.) Moreover, the 30 euro benchmark falls below even the bottom of the 2020 range. And advanced economies — which most of the countries studied are — should err toward the high end of that range, according to the Commission, to leave room for developing economies to reap at least some of the fruits of industrialization.

Applying a more realistic 60€/tonne benchmark (about $64US per short ton) casts the pricing shortfall into even sharper relief: under that benchmark the 2015 US gap would be 88%.

Perhaps surprisingly, the largest of the three contributors to OECD’s effective carbon rate is neither explicit carbon taxes nor tradeable carbon emssion permits, but taxes on specific fuels, especially in road transport. European countries, especially, began taxing gasoline and diesel fuel at high rates decades ago, not as a climate measure but to reduce car dependence in urban areas, to help rail and other public transit maintain market share, and to fund social programs. Years later, those taxation policies are now, properly, being recognized for their role in protecting climate as well.

This guest post is by Rachael Sotos, an aspiring political theorist and long-time CTC supporter who lives in Santa Cruz, CA.

The gaping flaw in the Paris Climate Agreement was hidden in plain sight even before Trump repudiated the 190-nation compact this year. Notwithstanding the precedent-shattering achievement — an agreement signed by virtually all of the world’s sovereign nations — Paris comprised an unenforceable system of pledges, aptly named Intended Nationally Determined Contributions (INDCs).

True, the first step in any long journey is often the hardest, and the Paris agreement includes a five-year time frame to review and hopefully strengthen the pledges made in late 2015. But let’s be clear: neither the INDCs nor the brave pledges of some U.S. governors and mayors since “Trexit” will radically curb emissions. The world needs a binding agreement with coercive mechanisms to meaningfully address climate change.

Throughout the climate crisis we have been living in a “state of nature” famously described by the 17^th century British political theorist Thomas Hobbes. Which makes this a good time to consider Harvard economist Martin Weitzman’s essentially Hobbesian allegory: a World Climate Assembly (WCA) “that votes for a single worldwide price on carbon emissions via the basic democratic principle of one-person one vote majority rule.”

Though Hobbes is reviled by some for advocating absolutist politics, he is also credited with discovering modern political economy and laying the foundations for both modern tax law and rational choice theory. One could even say that Hobbes employed allegories of extreme negative externality to legitimize top-down modes of political authority.

In Leviathan (1651) Hobbes asked his readers to abstract from all familiar, inherited and trusted modes of collaboration, to imagine themselves in a “war of all against all,” bellum omnium contra alles. Rather than a literal prehistorical period, his “state of nature” is the ever-present possibility of market failure in extremis. Absent coercive administrative power, Hobbes argued, there could be no property rights, secure contracts or absolute moral duties apart from self-preservation. Each person is a covetous judge of his or her own situation, and every defensive acquisition is justified.

Enter Prof. Weitzman amid growing recognition that global warming is history’s greatest market failure. Weitzman postulates that when the “impending climate catastrophe … is felt on a worldwide grassroots level,” there will be pressure for top-down solutions, and nations will be “ready to forfeit their free-rider rights to pollute.” The time will come, he argues, when “world public opinion is ready to consider novel governance structures that involve relinquishing some national sovereignty in favor of the greater good.” One such structure is Weitzman’s imagined World Climate Assembly (WCA) — a global plebiscite via which people of all nations contract with each other to jointly create “an overarching global governance mechanism” with sufficient awe-inspiring “countervailing force” to eradicate that Achilles Heel of climate agreements: free-riding. (Weitzman’s paper is available here.)

Hobbes was a master of “novel governance structures.” Sweeping aside the hierarchical hodgepodge of inherited feudal allegiances, he envisioned formally equal individuals (for “the weakest can kill the strongest”) renouncing their unfettered “natural rights” in favor of the coercive power of a national sovereign (technically parliamentary or monarchical). This was his “awe” inspiring, man-made Leviathan — the social contract that people voluntarily enter as self-interested modern individuals, thus ensuring safety and well-being, salus populi.

To be clear: Weitzman’s World Climate Assembly is a mechanism, not global government. What is to be voted-upon at the WCA is an internationally harmonized but nationally retained minimum carbon price. Nations, states within nations, or regions such as the European Union can all chart their own path toward climate commitment. While a system of uniform emissions taxes is easiest to conceive, national or regional cap-and-trade regimes with price floors and hybrids approaches are also possible. Nations or regions will retain and distribute collected carbon revenues as they see fit. Green fund transfers are permissible, but the primary coercive mechanism is “law of the single price.”

WCA representatives will “vote along a single price dimension for their desired level of emissions stringency on behalf of their citizen constituents,” Weitzman envisions, with the votes “weighted by each nation’s population.” Weitzman presents extensive calculations suggesting that the global majority would likely vote for a uniform minimum emission price “tolerably close to the world Social Cost of Carbon.”

In the end, he postulates, the “median” voter-nation would find its emissions abatement costs exactly offset by the benefit of having all other nations reduce their emissions. Half of the world’s population would likely prefer a lower minimum price, with the other half preferring higher; but all will prefer democratically legitimized coercion to the inadequacy and uncertainty of the INDCs. Under Weitzman’s Leviathan, no rich and powerful nation, not even the United States, will be able to trump the greater good.

And if Hobbesian “absoluteness” includes hostility toward institutional division of powers, it nonetheless has attractive features for confronting the climate crisis. According to Hobbes, people willingly renounce their “natural” rights to violence and unlimited acquisition only when their political world allows reasonable certainty of the actions of others.

In the language of game theory, the “state of nature” is the original “assurance” or “coordination” problem. Weitzman plays along, characterizing his WCA as “automatically incentivizing all negotiating parties to internalize, at least approximately, the global warming externality.” Certainty regarding the likely behavior of others is bolstered by the knowledge that the international trading system overseen by the World Trade Organization can be marshalled to impose punitive tariffs on non-complying nations.

Still, the most important feature of a uniform emissions price is its acting as an automatic “countervailing force” that can counter “narrow self-interested free-riding . . . via a simple, familiar, transparent formula that, in Weitzman’s words, embodies a common climate commitment based on principles of reciprocity, quid-pro-quo, and I-will-if-you-will.”

This is Hobbesian “absoluteness”: when we are all in it together and know that we will all be subjected to the same regime, e.g., the law of the single price, we are much more likely to renounce convention and shoot for the moon. In the language of game theory: cooperation is also a stable outcome.

What is being agreed upon, then, is a thoroughly modern Hobbesian social contract centered in transparently assured fossil fuel demand destruction. And while there will be difficulties along the way, Weitzman reminds us that “even just negotiating” within the majoritarian framework bolstered by a coercive countervailing mechanism is a step out of the state of nature.

This post, which I co-authored with Josha MacNab of the Pembina Institute, appeared in The Hill last week in slightly altered form. — C.K.

Against the backdrop of a Trump administration seeking to drag the United States’ economy back to the coal age, Canada’s clean growth strategy is a breath of fresh air. Now more than ever, Canada needs to continue to innovate on decarbonizing its economy, and a central plank of that strategy is putting a price on carbon pollution.

British Columbia’s groundbreaking 2008 carbon tax introduced carbon pollution pricing to the Western Hemisphere. With 86% of Canada’s population now covered by a carbon price, and 100% to be covered by 2018 under the national benchmark, our country is well-positioned to be an international beacon of progress and a major competitor in the clean global economy.

Here are four big reasons Canada should strengthen its resolve to move forward on carbon pollution pricing.

1. Canada is not alone

Given the effectiveness of carbon pricing in reducing climate-damaging emissions, it should come as no surprise that 25% of global carbon pollution is already or about to be covered by a carbon price. That represents over 40 countries, including seven of the world’s 10 largest economies.

China has already piloted cap-and-trade in 5 provinces and 2 cities, making it the second largest carbon market in the world, after the European Union. Later this year China’s carbon pollution market is expected to go national, making it the world’s largest. Carbon pollution pricing is now a maintream approach and Canada is positioned to demonstrate how to do carbon pollution pricing well.

2. Carbon pollution pricing will help Canada become a clean tech powerhouse

The global clean tech market is currently worth $1.15 trillion and expected to more than double to $2.5 trillion in 2022, according to Analytica Advisors. Yet Canada’s share of this vital pie is shrinking (from 2.2% to 1.3% of the market over the last 10 years) as other countries outpace us in clean tech development.

Carbon pricing is one of the tools clean tech entrepreneurs cite as key to supporting innovation. By moving forward on carbon pricing and other clean growth policies, Canada can catch up and be positioned to take advantage of growing and shifting global market opportunities. Currently, 23% of Canadian clean tech exports are destined for non-U.S. markets, but this share is anticipated to increase to more than 30% in the next four years.

3.  Carbon leakage and competitiveness concerns can be addressed by smart design

Identifying and mitigating competitive disadvantages must be a priority for Canada to ensure that pricing carbon pollution doesn’t result in carbon leakage and doesn’t adversely impact the economy. Canada’s Ecofiscal Commission estimates that around 5% of Canada’s economy (with variation between 2-18% depending on the province or territory) could be subject to competitiveness impacts if the country has a higher carbon pollution price than jurisdictions with whom we trade. Craig Alexander, chief economist at the Conference Board of Canada, recently argued that competitiveness impacts would be less than 0.15% of GDP and not a justification to delay.

Where impacts are felt, carbon leakage issues can be addressed by the design of the pricing framework. Any measures taken to address competitiveness concerns for emissions-intensive, trade-exposed sectors should maintain the incentive to reduce pollution, as well as be targeted, transparent, consistent, temporary and simple.

4. Carbon pollution pricing lets the market drive the solutions

Along with some 140 other countries, Canada committed 18 months ago in Paris to do its part to reduce carbon pollution sufficiently to stay well below 2 C of warming. In order to achieve that goal, government has two main levers with which to shift to a lower-carbon economy: pricing and regulation. As a market-based mechanism — with support from both ends of the political spectrum — carbon pollution pricing sets the rules of engagement and lets the market pick the most efficient and effective ways to grow the economy. It supports innovation and ensures that those technologies and solutions that deliver the best results are the ones that thrive and go on to be competitive exports to a rapidly decarbonizing global economy.

With the U.S. waffling on its commitment to the Paris Agreement, it’s more important than ever for Canada to step up to be a global leader and demonstrate that addressing climate change is how we will build a strong economy that can weather the storms to come.

Josha MacNab is the British Columbia director at the Pembina Institute, Canada’s leading clean energy think-tank. Charles Komanoff, an economist, is the cofounder and director of the New York-based Carbon Tax Center.

On the eve of China president Xi Jinping’s scheduled two-day visit with the U.S. president, we took a deep dive into data on China’s energy use and carbon emissions. With the help of Fordham University student (and CTC intern) Cristina Mendez, who drew on official Chinese government statistics along with outside sources including Carbon Brief, we find that China has essentially capped its carbon pollution emissions — far ahead of the 2030 date for capping CO2 to which China committed in the landmark 2014 agreement between President Xi and then-U.S. President Obama.

That agreement followed a year-long diplomatic offensive initiated by then-U.S. Secretary of State John Kerry, and effectively ended the “axis of denial” by which China and the United States, by far the world’s largest climate polluters, pointed to the other’s inaction to justify its own. The bilateral accord in turn paved the way for the December 2015 Paris climate agreement in which nearly 200 nations pledged to rein in their emissions of carbon dioxide and other climate-destroying greenhouse gases.

A naysayer could point out the divergence between U.S. and China carbon emissions since 2005 (a standard “baseline” year for comparisons over time). In that year, U.S. emissions of CO2 from burning coal, oil and gas were around 5,810 million metric tons (“tonnes”), just a shade below China’s estimated 6,160 million tonnes in the same year. Since then, U.S. emissions have fallen by around 800 million tonnes while CO2 from fossil fuel burning in China grew by over 3,000 million tonnes.

That’s a swing of nearly 4 billion tonnes between the changes in the two countries’ emissions, a huge difference that can’t be swept under the rug. Nonetheless, it is tempered by four key considerations.

1. China’s carbon emissions, though now nearly twice those of the United States, are well under half of U.S. emissions on a per capita basis. With almost 1.4 billion people, The population of China is more than four times the U.S. population of 325 million. U.S. per capita CO2 emissions, which we estimate at 15.4 metric tons last year, are nearly two-and-a-half times as great as China’s 6.4 tonnes per person.

2. A considerable part of China’s CO2 comes from electricity and direct fuel burning to manufacture goods exported to the United States. Those emissions far outstrip U.S. emissions to supply agricultural and other products to China.

3. Based on historical CO2 emissions — which determine the amount of atmospheric carbon pollution now trapping Earth’s heat, given the roughly hundred-year time scale for a carbon dioxide molecule to distintegrate — U.S. climate-damage responsibility is roughly double China’s, even without normalizing for population. (For that calculation we added the past dozen years of respective emissions to the World Resources Institute’s compilation of the world’s nations cumulative carbon emissions during 1900-2004.)

4. Most importantly, if we wish to look forward: The apparent capping of China’s CO2 emissions over the past three years marks a sea-change in that country’s previously inexorable rise in carbon pollution over the prior several decades. It was only in 1988 that China’s CO2 emissions from fossil fuels (along with cement manufacture, which is otherwise excluded from the data in this post) passed 2 billion metric tons, based on a terrific WRI times-series visualization. The implied annual growth rate to 2013, when the total (without cement) surpassed 9 billion, was greater than 6 percent per year. From 2005 to 2013, China’s compound average emissions increase rate was 5.3 percent. To bring emissions to a screeching halt since then, without war, famine or other cataclysm, is close to miraculous.

Two charts tell the story. The first, directly above, shows the overwhelming dominance of coal in China’s energy supply, but moderating since 2011 and falling since 2013. This is significant because coal is the most carbon-intensive fossil fuel, not to mention the most polluting in terms of “conventional” pollutants such as sulfur dioxide and fine particulates that kill several million Chinese people each year and sicken hundreds of millions more, as the New York Times has reported on multiple occasions. (See, for example, here, here and, perhaps most damningly, here.)

The second graph, below, highlights the changes in that supply over the past three years. Coal is down, while all other energy sources are up. In carbon terms (not shown in the graph), the combined increase in oil and gas use slightly more than offset the decline in coal burning, thus statistically creating a minuscule net estimated increase in CO2 of four-tenths of one percent from 2013 to 2016. Perhaps more importantly, energy output from carbon-free hydro-electric dams, non-hydro renewables (chiefly wind turbines and solar-photovoltaics) and nuclear power all increased, with their combined gain easily exceeding the net expansion in fossil fuel use.

The United States is not without its own climate triumph; as we pointed out in our recent “Good News” blog post and report, U.S. electricity-sector emissions (from power plants burning fossil fuels) fell 25 percent from 2005 to 2016 — a reduction equalling nearly four-fifths of the Clean Power Plan’s intended 32 percent drop in power-sector emissions from 2005 to 2030. (Note that our 25 percent figure is down slightly from the 27 percent reduction we reported in December, with preliminary 2016 data; both the post and report have been updated to reflect full-year emissions.)

But that’s electricity only — the “low-hanging fruit” for the U.S. and most other countries. U.S. emissions from transportation are up, as we’ll report shortly in a separate post. Far more worrisome, of course, is the Trump administration’s neanderthal assault not just on climate-related standards, regulations and research but on the very notion of energy efficiency and environmental stewardship.

The point of this data exercise is to underscore China’s historic achievement in flattening its carbon emissions. It may be premature to crown China as the new global leader in climate action, as some commentators have proposed lately. Let’s not forget that it was Germany’s pump-priming for renewable energy a decade or more ago that propelled the Chinese solar-PV industry down the cost curve. And lately the United Kingdom has been driving down carbon emissions at a remarkable rate.

But turning the corner on carbon emissions, as China apparently has done while providing material prosperity for well over a billion people, is no mean feat. The U.S. president will likely remain oblivious, but other Americans can acknowledge and celebrate China’s achievement.

Energy data for 2005-2015 are from BP, Statistical Review of World Energy, 2016, June 2016. We calculated 2016 energy data by applying year-on-year percentage changes in China Energy Portal, 2016 detailed electricity statistics, Jan. 20, 2017, and National Bureau of Statistics of China, Statistical Communiqué of People’s Republic Of China on the 2016 National Economic And Social Development, Feb. 28, 2017, Section XII. Resources, Environment and Work Safety, both accessed April 5, 2017. For coal, we applied the estimated 1.3% drop to 2016 in coal consumption stated in Jan Ivar Korsbakken & Glen Peters, A closer look at China’s stalled carbon emissions, March 1, 2017, posted to Carbon Brief, rather than the 4.7% drop asserted in NBS-China’s Statistical Communiqué. Emissions data are from BP Statistical Review (2005-2015), with 2016 calculated from the 0.3% rise to 2016 (excluding cement) estimated in Korsbakken & Peters.

The surprise wasn’t the front-page New York Times headline, “Diplomats Confront New Threat to Paris Climate Pact: Donald Trump.” It was inside, as The Times gave voice to concerns from America’s two top trading partners that U.S. backtracking on carbon emissions would give American exports an unfair trade edge and compel them to slap carbon tariffs on our products.

“A carbon tariff against the United States is an option for us,” Mexico’s under secretary for environmental policy and planning told Times climate reporter Coral Davenport. “We will apply any kind of policy necessary to defend the quality of life for our people, to protect our environment and to protect our industries.”

According to Davenport, “Forcing United States industries to turn to cleaner energy sources with the hammer of an import tariff is not far-fetched.” As she explained it:

Countries imposing costs on their own industries to control carbon emissions could tell the World Trade Organization that U.S. industries are operating under an unfair trade advantage by avoiding any cost for their pollution. The tax would be calculated based on the amount of carbon pollution associated with the manufacturing of each product. That would impose a painful cost on the heaviest industrial polluters, particularly on exporters of products containing steel and cement.

(Our Web site devotes a full page to carbon tariffs, a/k/a border tax adjustments.)

Canada “is also discussing a tariff,” Davenport reported. After noting that Ontario and Quebec (along with British Columbia) “already have carbon tax policies that include fees imposed on fossil-fueled energy generated across provincial borders,” she quoted a Canadian attorney specializing in climate and trade: “I see that extending across the Canadian border if the U.S. pulls out of Paris. If you want to sell your goods in Canada, you’d have to meet the same emissions standards.”

The irony is that virtually all past policy discussions of carbon taxes and trade centered on the United States’ supposed need for carbon tariffs to ensure a level playing field with imports from non-carbon-taxing countries. With president-elect Trump now vowing to walk away from the Paris Agreement and pump up fossil fuel burning, the shoe has switched to the other foot.

To be sure, the rumblings from Mexico and Canada have an element of posturing. They resound with domestic audiences, although not enough for former French president Nicolas Sarkozy, who raised the carbon tariff idea last week but lost the conservative party’s nomination in Sunday’s vote. Nevertheless, the appeal of carbon tariffs is undeniable. Protecting both domestic jobs and the climate makes a potent one-two punch.

The potential downside is also two-fold: provoking the powerful USA, and igniting a trade war. Davenport quoted several sources who tamped down the idea of carbon tariffs on U.S. goods. Although one was a Koch Brothers factotum, others, from China and the European Union, dismissed such talk as premature and potentially risky.

Another dissenter was Harvard economist and climate specialist Rob Stavins, who fretted that carbon tariffs against U.S. goods might ignite a retaliatory trade war. “That would be an example of the cure being worse than the disease, Stavins warned.”

But would it? Short of World War III, what remotely foreseeable disaster could be worse than breaking the Paris Agreement and sending the world spiraling down toward climate ruin?

All the same, carbon tariffs are best deployed as leverage, and perhaps only as a last resort. Even conveying such a threat must be done deftly. But Nov. 8 has upended the global climate applecart. “[I]f one big country backs out [of the Paris Agreement] it could trigger a whole wave of trade responses,” said Dirk Forrister, CEO of the International Emissions Trading Organization. As Forrister told Davenport of the Times:

A carbon tariff is a power tool. It’s not one that any country would use lightly. Things would have to get pretty serious for any country to take it out of the toolbox and use it. But given the current situation it’s a possibility that they would do it.

Things are serious all right. The time to wield a possible carbon tariff may be coming sooner than anyone imagined.

Here we reprint a letter published in the Financial Times on April 25 by noted environmental economist Thomas Sterner. Link was added by CTC. Text and headline are unchanged.

Last week, representatives of more than 130 nations, including French President François Hollande, signed the climate pact in New York. The agreement is a success because it has widespread support but it contains little of substance on instruments.

Elinor Ostrom, the economist and Nobel laureate, insisted that the most difficult part of a negotiation is to get the participants to the table. Paris did that. Now every country must ratify, but that is still just the start. To end the fossil fuel era within a generation we need our very best instruments, and yes, that does mean a carbon tax. This is all the more urgent because of current low prices.

The fossil fuel industries are not going to give up voluntarily — they will fight back. The recent fall in oil prices from $140 to $30/bbl will provide impetus for increased consumption and emissions may soon rise again. The price fall is partly the result of expectations of stricter climate policies. Fossil producers have understood that, come 2030, business will not be good — so they have done everything in their power to maximise capacity and sell now.

The Saudis have realised that their old strategy of defending OPEC in order to control the oil market in the very long run will not work in the face of climate realities. This is an example of the “green paradox.” Expectations of future taxation lower current prices. The green paradox has already happened in a big way and cannot really happen again (fossil fuel prices cannot fall much more).

We, the consuming importers, would be stupid if we did not seize the opportunity to tax fossil fuels now. This is the best way of stimulating efficiency and renewables — it also gives money to the Treasury (instead of to the producers), and it helps keep the fossil rents low — making it easier to close mines and oilfields.

Thomas Sterner
Professor of Environmental Economics
Gothenburg, Sweden and Collège de France, Paris