Wyoming, the epicenter of U.S. fossil fuel extraction, is hemorrhaging jobs, the New York Times reported today:

Tumbling prices for oil and gas, along with bankruptcies in the coal industry, have pummeled Wyoming’s energy-dependent economy and eroded a thin safety net for poor and older residents. Energy development helped Wyoming weather the nation’s thin years seven or eight years ago, but now officials estimate that energy companies have shed some 5,500 jobs — a huge number in a state with 580,000 residents.

The coal bust is stark. U.S. coal-fired electricity plants produced nearly 15 percent fewer kilowatt-hours last year, which is down almost a third from their 2007 peak. Total coal mining fell 10 percent, to a 30-year low, and while 2015 state coal extraction data aren’t available, Wyoming, the source of 40 percent of U.S. coal output, of which almost all is exported over huge distances by train or “by wire,” surely took a huge hit. And though production of “hydrocarbons” (oil and gas) is up nationwide, much of the action is now in fracking regions like North Dakota and Pennsylvania; moreover, drilling of new wells has plummeted along with prices.

As the Times reports, the job losses are exacerbated by parochial decisions by the Republican-dominated state government including a refusal to expand Medicaid under President Obama’s health care law. “A literacy program that helped people get high-school equivalency degrees was eliminated,” added the Times, “as were programs that provided dental care and property-tax rebates to low-income old people.”

This is painful to read on many levels, which for me include indelible memories of good times in Wyoming and Montana in the mid- and late seventies. As I wrote, years later:

Defending the American West from ruinous energy development was a particularly intense, gut-level part of that struggle for many of us, including me. I was living in New York then but spending as much time as I could in the Northern Rockies, hiking the high country and getting out onto the land, meeting ranchers, Indians, environmentalists and fellow eco-freaks. I fished for my breakfast in Shoshone streams, played barrelhouse piano in a Montana renewable-energy road show, and got high inhaling Amory Lovins’ Soft Energy Paths at 12,000 feet in the Wind River range.

The irony is that the energy technologies we insisted could take the place of environmentally and economically ruinous fossil fuel exploitation have finally arrived . . . and Wyoming is perfectly positioned to take advantage. The state ranks #8 out of all 50 in wind energy potential, behind only Texas, Montana, Nebraska, Kansas, Iowa and the Dakotas, according to estimates by the National Renewable Energy Laboratory.

The NREL data further suggest that developing only the windiest areas in the state — where 80 meter-tall turbines could achieve 30% annual capacity factors — could generate more than 1.9 trillion kWh a year, or triple the electricity now generated from the state’s entire annual coal output. Yet actual Wyoming wind production is around a thousand times less. (See calculations below; note that NREL’s wind potential excludes a quarter of the state’s windy lands that are protected, developed or otherwise inappropriate, and draws on 2010 assumptions that predate recent new productivity from larger turbines and more sophisticated controls.) Yes, unlocking that potential requires big investments in transmission, but the hellish processions of massive unit trains bearing Wyoming coal to the Midwest and South could diminish and cease.

Wyoming looks well positioned for solar as well. The map at left suggests that the Equality State (yep, that’s its motto) is in the top ten, behind California, Nevada, Texas, the Four Corner states, and perhaps Nebraska and Oklahoma. Actual solar electricity generation in Wyoming is nil, however.

Many forces have stopped extensive wind and solar development. Some, like the nation’s only wind production tax, are state-specific; others, like the absence of a carbon price, are more generic. Both of these reflect and reinforce the political power of the fossil fuel industry along with cultural and cognitive biases that valorize carbon fuels at the expense of sustainable energy.

Only time will tell whether the latest downturn in Wyoming’s cycles of boom and bust will lead to a change of heart and in public policy and enable the jobs disappearing from the extractive industries to be replaced by jobs in renewables. For now, this state of rugged but empty landscapes is about to get even lonelier.

Calculations for paragraph preceding solar map: Wyoming coal mines produced just under 400 million tons in 2014. Applying standard factors of 8,500 btu/lb for Powder River Basin coal and 1 kWh generated per 10,000 btu released in combustion, that tonnage would have generated 680 billion kWh. The 2015 figure is almost certainly less, and probably under a third of the 1,944 billion kWh annual Wyoming wind potential estimated by NREL using 2010 technology assumptions.

In February, 2016, shortly after we put up this post, the International Civil Aviation Organization, the United Nations’ aviation agency, announced an agreement with the global aviation industry to impose binding limits on CO2 emissions for all new airplanes delivered after 2028. The New York Times reported on this development here.

And in May, Brad Plumer at Vox posted an informative thought-piece, Solar planes aren’t the green future of air travel. But here’s what could be., exploring different trajectories for aviation efficiency and demand and their impacts on carbon emissions. It’s worth a read.

In July, Coral Davenport at the Times reported that the Obama Administration is moving to propose fuel-efficiency standards for commercial aircraft, probably during the lame-duck period after Election Day.

— Editor.

Shipping and aviation combined account for only an estimated five percent of global CO2 pollution. But some experts project this share doubling or even tripling as globalization accelerates. How can those emissions be reduced, and would a carbon tax help?

Shipping, which is believed responsible for 3% of world CO2, is already the most energy-efficient large-scale way to move cargo, pound for pound and mile for mile. Moreover, shipping fuel costs already comprise about half of operating costs, and efficiency standards for new large ships took effect last year. How would a carbon tax on maritime fuel (primarily residual fuel oil, a/k/a bunker fuel) spur further efficiency and innovation? Air carriers also have incentive to conserve fuel since it accounts for about one-third of ticket prices. How would a carbon tax on aviation fuel lead to reduced emissions in that sector?

A good starting point is two recent pieces by New York Times science reporter Henry Fountain describing design and operating innovations underway in shipping and aviation.

Shipping

The simplest and most immediate way to improve ships’ efficiency is to slow down. “Slow steaming” — reducing speed by at least several nautical miles per hour — can slash fuel consumption and thus CO₂ emissions. Efficiency can also be raised through advanced engine design and by reducing drag by polishing propellers, coating hulls with algae-inhibiting paint, reshaping bows and adding fins or ducts to propellers. One promising new device called “Silverstream” cuts water friction by laying a carpet of tiny bubbles along the hull so it rides mostly on air.

Then there’s fuel choice. The single largest force in reducing U.S. CO2 emissions in recent years has been displacing electricity generators powered by dirty, high-carbon coal, with lower-Btu and lower-CO2 combined cycle plants burning natural gas. Similarly, new ships fueled by liquefied natural gas (LNG) are beginning to replace freighters and tankers powered by dirty tarlike bunker fuels, reducing CO2 emissions by 15-20%. The climate downside to this trend is methane “slip” — emissions of unburned methane, a far more potent greenhouse gas than CO2 (per pound), a problem that marine engine manufacturers are beginning to tackle.

Perhaps the biggest pathway through which carbon taxes could cut greenhouse gas emissions from shipping would be by altering the cost equation between distant imports that must be transported thousands of miles, and domestically produced goods. The resultant reduced demand for shipping would translate not only to less CO2 (and methane) but less air and water pollution, fewer megaports and, perhaps most importantly, retention or creation of domestic manufacturing jobs. The potential job-producing impacts of a carbon tax covering shipping should interest those building “blue-green” alliances and clearly deserves further study.

Aviation

A month after his article on shipping innovations, Times reporter Fountain tackled aviation, reporting on innovative aircraft designs, new lighter materials and more efficient air traffic practices. Composite materials, which now comprise about half of the airframe of the new Boeing 787, have made new planes much lighter. More efficient jet engines are being installed on existing aircraft. And operational measures like altering flight paths to glide downward and better management of air traffic, both at airports and in the air, can further reduce emissions.

There’s more. New flexible aircraft wings are being tested to reduce drag. “Distributed propulsion” — locating an array of electric motors at the leading edge of aircraft wings for takeoff and landing, while using jet-fueled engines at the wingtips for cruising – is reportedly showing promise to reduce fuel consumption and resultant CO2 emissions. Of course, research and adoption of innovations like these depend heavily on rising fuel prices, which makes the 2015 price plunge so concerning.

In addition to driving new technology, a carbon tax would soften demand for air travel. The pull of a carbon tax would add impetus for more and better ground transportation alternatives, particularly high-speed inter-city and regional rail services to supplant short-hop flights. Technology such as video-conferencing can curb travel needs while saving time and money for businesses and individuals; a carbon tax would encourage such behavior to become our cultural norm. And even absent direct substitutes, costlier air travel would lose market share to other discretionary activities, almost all of which would be less carbon-intensive.

Culture Change?

We return to the questions posed earlier: with fuel costs already their single largest expense, why should fuel price increases spur changes in shipping and aviation designs, equipment and practices?

For one thing, whereas unrelenting fuel price volatility undermines incentives to conserve and innovate, a predictably-rising carbon tax would be more likely to ensure that investments in nascent shipping and aviation technologies actually pay off. The best ideas will move off the drawing boards and into practice faster and more widely.

More broadly, a carbon tax would not just move shipping and aviation down the fossil fuel demand curve; it would create a new, lower demand curve by boosting every substitute for, and every alternative to, high-carbon activity. In layman’s terms, a global, economy-wide, briskly-rising carbon tax would induce a culture change.

The need for a broad, all-inclusive price signal raises another key point. Not only was the December Paris climate accord mute about the best economic tool to achieve emission targets; the agreement left out international shipping and aviation altogether.

Climate activists are urging a carbon tax on shipping and aviation not only to spur reductions in climate pollution but as a revenue source to finance global climate mitigation. A new report from the International Monetary Fund suggests that a carbon tax of $30/ton of CO2 on offshore maritime and aviation emissions alone could generate $25 billion of revenue a year, while noting that national governments may have only weak claims to that revenue. Dedicating it to global climate finance might help resolve a thorny issue in climate negotiations while closing a gap in the Paris framework.

Photos: Flickr, New York Times

British Columbia, Canada’s third-most populous province, began taxing carbon dioxide and other greenhouse-gas emissions from combustion of fossil fuels nearly seven and a half years ago, pursuant to the province’s Carbon Tax Act. The province-wide tax commenced on July 1, 2008 at a level of $10 (Canadian) per metric ton (“tonne”) of CO2 and increased by $5 per tonne in each of the next four years, reaching its current level, $30/tonne, in July 2012.

The point of the tax is to reduce emissions of carbon dioxide and other greenhouse gases. It is therefore surprising that very little detailed quantitative analysis of the tax’s efficacy in reducing emissions has appeared to date. Answers haven’t been readily available to fundamental questions such as: Have British Columbia emissions of carbon dioxide and other greenhouse gas actually fallen? If they have, by how much? How have the reductions in BC emissions stacked up against the rest of Canada, which does not tax carbon emissions (save for modest taxes in Alberta and Quebec)? How does the recent trajectory of British Columbia emissions compare to that prior to the onset of the tax? Which sectors have shown the biggest, or the smallest, declines?

The Carbon Tax Center searched for answers to these questions during 2015. Not finding definitive data, we set out to develop our own. The result is a new report, British Columbia’s Carbon Tax: By the Numbers, which available here. A spreadsheet with supporting data is available here.

BC’s carbon tax is both the most comprehensive and transparent carbon tax in the Western Hemisphere, if not the world. A recent assessment by two leading environmental economists stated that “British Columbia has given the world perhaps the closest example of an economist’s textbook prescription for the use of a carbon tax to reduce [greenhouse gas] emissions.”

Moreover, the BC tax is gaining adherents. On the eve of the Paris climate summit, in November 2015, Alberta Premier Rachel Notley committed to a similar carbon tax. Alberta’s tax will begin in 2017 at $20 per metric ton and rise in 2018 to $30, matching the current level in British Columbia. Although Canada’s two most populous provinces, Ontario and Quebec, are moving toward carbon cap-and-trade systems, the new Trudeau administration in Ottawa could choose to fashion a national carbon tax from British Columbia’s, with the possibility of higher tax levels to evoke larger emission reductions.

Executive Summary and Key Findings

British Columbia introduced a carbon tax in 2008. Since then, per capita emissions of carbon dioxide and other greenhouse gases covered by the tax have declined, continuing a downward trend that began in 2004. Averaged across the period with the tax (2008 through 2013; no data are available for 2014), province-wide per capita emissions from fossil fuel combustion covered by the tax were nearly 13 percent below the average in the pre-tax period under examination (2000-2007).

The 12.9% decrease in British Columbia’s per capita emissions in 2008-2013 compared to 2000-2007 was three-and-a-half times as pronounced as the 3.7% per capita decline for the rest of Canada. This suggests that the carbon tax caused emissions in the province to be appreciably less than they would have been, without the carbon tax.

To allow comparability, the above figures are per capita. They also exclude emissions from electricity production ― a minor emissions category for British Columbia, which draws most of its electricity from abundant (and zero-carbon) hydro-electricity, but a major emissions source for much of Canada. On a total emissions basis (not per capita), British Columbia emissions of CO2 and other GHGs covered by the carbon tax but excluding the electricity sector averaged 6.1% less in 2008-2013 than in 2000-2007. (The reduction was 6.7% when electricity emissions are counted.) The 6.1% contraction is roughly what would be expected from a small carbon tax such as British Columbia’s. (See sidebar on page 5.)

The carbon tax does not appear to have impeded overall economic activity in British Columbia. Although GDP in British Columbia grew more slowly during 2008-2013, the period with the carbon tax, than in 2000-2007, the same was true for the rest of Canada. From 2008 to 2013, GDP growth in British Columbia slightly outpaced growth in the rest of the country, with a compound annual average of 1.55% per year in British Columbia, vs. 1.48% outside of the province.

GHG emissions increased in British Columbia in 2012 and again in 2013, not just in absolute terms but also per capita. This suggests that the carbon tax needs to resume its annual increments (the last increase was in 2012; its bite has since been eroded by inflation) if emissions are to begin again their downward track.

Click here to read the full report.

Paris climate negotiators wrangling over global temperature goals might want to spend a moment pondering cheap gasoline.

Fact: after years of steady gains, average gas mileage of new vehicle purchases in the U.S. is down almost a mile per gallon this year, according to data from the University of Michigan’s Transportation Research Institute.

Fact: Through September, total miles driven in the U.S. this year are up 3.5 percent ― the largest increase in decades.

One thing is driving both trends: cheap gasoline. The average price of gas sold in the U.S. over the past ten months is 25 percent below last year’s price — the steepest drop in at least 70 years. Americans are responding by driving more and dumping sedans for SUV’s and pickups.

Gasoline consumption is on track to rise nearly 3 percent this year. The additional carbon dioxide will be the equivalent of a full year’s emissions from nine coal-fired power plants. (My yardstick is 600 megawatts per plant, operating at 70% capacity factor. See note at end of post for link to calculations.) And that doesn’t count the substantial “upstream” emissions from refining crude oil into gasoline.

Or, if you prefer, the likely 2015 increase in U.S. CO2 emissions caused by cheap gasoline, an estimated 30-35 million metric tons, will equal the entire annual emissions from burning all fossil fuels for all purposes from Ecuador . . . or Denmark . . . or Ireland . . . or Switzerland (take your pick). [Figures are here; multiply by 44/12 to convert from C to CO2.]

Can we be sure this year’s increase in gasoline use is entirely due to the drop in price? Not completely. But the inference is strong.

First, gasoline usage is at least mildly price-sensitive. Based on gasoline’s long-run price-elasticity, a 25 percent drop in price would touch off a roughly 10 percent increase in usage. The entire jump in demand wouldn’t be seen overnight, of course; it would take a decade or so for the lower price to work its way through car buyers’ purchase decisions (as well as manufacturers’ design choices). The 3 percent uptick this year is in line with what one would expect in the initial year.

Second, U.S. gasoline consumption stayed within a fairly narrow band from 2008 to 2014. Prices at the pump held steady as well, except during the worst of the great recession. What’s different this year is the plunge in price.

This year’s jump in CO2 emissions is bad enough. What’s really worrisome is that cheap oil — hence, cheap gasoline — is going to be with us for awhile. So say the experts who prepare the government’s Annual Energy Outlook forecast. I recently compared the 2025 forecast gasoline price between the 2012 AEO, which preceded the price collapse, and the 2015 AEO, which reflects it. Correcting for inflation, the government is projecting a 29 percent lower price of gas in 2025 than it projected three years ago.

When you run the lower price forecast through the price-elasticity for gasoline, you get this startling projection: in 2025, U.S. motorists will buy — and burn — nearly 13 percent more gasoline than would have been expected under the earlier (higher) price forecast. The associated increase in U.S. CO2 emissions in 2025 because gas will be cheaper is going to be huge: it equates to the annual output of 36 coal-fired power plants.

But let’s not stop there. Cheaper crude oil is bringing not just cheaper gas but cheaper diesel and cheaper jet fuel. I’ve run the reduced 2025 AEO price forecasts for all petroleum products through their respective price-elasticities, and the result is truly scary: Compared to projected 2025 emissions with the pre-plunge price trajectory, lower petroleum prices will result in 450 million metric tons of additional U.S. CO2 emissions in that year.

The increase will equal 8-9 percent of today’s U.S. CO2 emissions from all fossil-fuel burning. It will undo nearly all of the vaunted reductions in U.S. emissions since 2005. It will be the emissions equivalent of 100 additional coal-fired power plants. And that’s just for the U.S.

The antidote, of course, is a carbon tax — either a straight-up carbon tax or a hybrid one that surcharges petroleum products. A surcharge would reflect non-climate harms from oil consumption like traffic congestion, also place a charge on oil revenues’ corruption of governance in the U.S. and the Middle East.

Former U.S. Treasury Secretary Larry Summers wrote last January that cheap oil created a political opportunity for a carbon tax. We followed that here with First Tax Oil, Then Carbon. But to our knowledge no one has quantified how dire the need is — until now.

Cheap oil will make a mockery of just about every scenario to move the U.S. and other countries decisively off carbon fuels. Except scenarios based on carbon taxes.

Note: Calculations of increased oil consumption, resulting increase in CO2 emissions, and coal-plant equivalents, may be found in CTC’s carbon-tax spreadsheet model (Excel file).

If any climate legislation could garner at least nominal bipartisan support, it might be Rep. John Delaney’s Tax Pollution, Not Profits Act. Delaney is in his second term representing Maryland’s 6th CD, which runs from the DC suburbs to the western end of the state. His proposal, introduced on Earth Day at the American Enterprise Institute in Washington, would tax carbon dioxide and CO2 equivalents from methane and other sources at a rate of $30 per metric ton, increasing annually at 4% above inflation. The measure includes border tax adjustments to protect energy-intensive domestic industry from unfair competition from nations that haven’t enacted carbon taxes.

Delaney’s measure offers a sweetener to conservatives: a promise to apply roughly half of carbon tax revenues to reduce the top corporate income tax rate from 35% to 28%. The bill would also provide monthly payments to low- and middle-income households and fund job training, early retirement and health care benefits for coal workers. At least as critically, at the AEI unveiling, Delaney committed near-apostasy by suggesting that his carbon tax could substitute for the Obama administration’s Clean Power Plan, final regulations for which EPA issued last month.

The Carbon Tax Center assessed the Delaney proposal’s effectiveness using our 7-sector model. We project that in its third full year the measure’s $30 price would reduce U.S. CO2 emissions to 8% below emissions in the year before enactment. Unfortunately, its schedule of 4% annual real rises is too tepid to continue reducing emissions more than fractionally over the longer term. The low upward price trajectory is a shortcoming shared by the American Opportunity Carbon Fee Act, introduced by Senators Sheldon Whitehouse (D-RI) and Brian Schatz (D-HI) in June.

In contrast, carbon tax proposals introduced in this Congress by Rep. John Larson (D-CT) and Rep. James McDermott (D-WA) would rise briskly to exceed $100 per metric ton within a decade, which we estimate would reduce U.S. emissions below this year’s levels by more than one-fourth in that time (and by nearly a third below 2005 emissions).

In an online discussion forum hosted by OurEnergyPolicy.org, Rep. Delaney asked for comments on his proposal. Below, we group and summarize those comments. [Read more…]

Even in ecologically-minded Washington and Oregon, states where voters want government action on climate change, a divide among environmentalists threatens to undermine progress on the issue. A Carbon Washington ballot initiative to create a statewide carbon tax is gaining momentum, as we wrote last month. Yet several environmental groups are attacking the proposal as politically infeasible and socially regressive.

Instead, state and regional groups like Climate Solutions and the Alliance for Jobs and Clean Energy are pushing “clean” fuels standards. Their proposal, patterned on regulations in California and British Columbia, would mandate a mere 10% drop in the carbon intensity of transportation fuels over 10 years ― a small fraction of the deep reductions needed.

Their course is difficult to fathom. Carbon taxes would cut emissions more and cost less than clean fuels regulations. And dividing environmentalists in order to pursue a lesser policy makes no sense strategically. Here are three reasons why a clean fuels standard doesn’t stack up:

1. Clean fuels standards won’t be effective

A model used by the Washington State Department of Commerce allows us to compare projected emissions reductions from the clean fuels standard with the carbon tax proposed by Carbon Washington in a measure known as I-732. (The tax would start at $10/ton of CO2, rise to $25 in year two, then increase 3.5% annually plus inflation.)

The 10% clean fuels standard would lower overall Washington CO2 emissions only 4% by 2040, not even a quarter as much as the 18% reduction projected from the I-732 carbon tax.

The reason is simple: a clean fuels standard only attacks emissions from the supply side of one sector, albeit an important one, transportation. In contrast, a carbon tax works across the entire economy, influencing every carbon-related decision about both supply and demand in every sector ― manufacturing, heating, electricity, etc. This means that, while a clean fuels standard only affects the carbon content of liquid fuels, a carbon tax also incentivizes less fuel usage, period. This transforms economies, cutting pollution and congestion through a vast array of actions encompassing urban density, freight logistics, walking, cycling, transit, and more mindful decision making.

In short, the difference in emissions between a carbon tax and a clean fuels standard is the difference between a society that takes current levels of automobile dependence as a given, and one that seeks to support a myriad of ways to transition to something different.

2. Clean fuels standards are more expensive

The Oregon Environmental Council writes:

The Clean Fuels Program costs the state virtually nothing. The burden of responsibility for reducing pollution is placed on the oil industry.

This conspicuously ignores how the oil industry passes down its costs of compliance to consumers in the form of higher prices. The Oregon Department of Environmental Quality (DEQ) has said gas prices will rise between 4 and 19 cents per gallon. An industry lobby group, the Western States Petroleum Association, is garnering support to repeal clean fuels by highlighting this not-so-hidden price increase.

Consumers aren’t stupid, they generally realize more regulations mean higher prices. A carbon tax raises fossil fuel prices too, of course ― that’s the point; but the revenue it generates can be disbursed to consumers as income or sales tax cuts, or via a straight-up “dividend” check, as Oregon Climate has proposed. [Read more…]

Notwithstanding the hype in the New York Times — “the strongest action ever taken in the United States to combat climate change,” “an aggressive plan to sharply limit greenhouse gases” — the final version of the US EPA “Clean Power Plan” being released today at the White House by President Obama actually constitutes a marked slowdown in reductions in electricity-sector emissions.

According to published reports, the administration plan calls for a 32% reduction in U.S. power-sector CO2 emissions in 2030, relative to actual 2005 power-sector emissions. That’s slightly more ambitious than the 30% reduction envisioned in the initial Clean Power Plan released in June 2014. Since 2005 power-sector emissions were 2,413 million metric tons (MMT), the targeted 32% reduction would be 772 MMT, or 7% of total projected U.S. emissions (from all sectors) of 5,684 MMT (projected by CTC in the absence of a U.S. carbon pollution price).

Nearly half of that reduction has already been achieved, however. Actual 2014 U.S. power-sector emissions were 2,038 MMT, or 375 MMT less than the 2005 baseline level of 2,413 MMT. Expressed on an annual average basis, power-sector emissions of CO2 fell during 2005-2014 by 42 million metric tons a year.

To fulfill the total 772 MMT 2005-2030 reduction target, the “remaining” 2014-2030 reduction in power-sector emissions need only be 397 MMT. The implied annual rate of reduction over the next 16 years is just 25 million metric tons a year. That’s 40% less than the actual annual 2005-2014 reduction rate in power-sector emissions of 42 MMT per year.

It is probably true that we’re not likely to see a repeat of two factors that contributed to the 2005-2014 reduction in power-sector emissions — the long and deep recession that began in 2007-2008, and the advent of cheap fracked methane that grabbed market share from higher-polluting coal-fired generation. But two other emissions-reducing phenomena remain in full swing: ongoing cost reductions in carbon-free wind and solar photovoltaic power, and the harnessing of both digital tech and new business models to boost energy efficiency in buildings, appliances and businesses.

In this light, it seems premature, if not downright bizarre, to bestow “legacy status” on a plan that targets just one sector (albeit a key one), and that settles for cutting emissions in that sector at a lesser pace than the rate at which they’ve already been falling for a decade.

We’ve just posted an update to our spreadsheet model — our powerful but easy-to-use tool for predicting future emissions and revenues from possible U.S. carbon taxes. We say taxes, plural, because the model accepts any carbon tax trajectory you feed it and spits out estimated nationwide emission reductions and revenue generation, year by year. Here’s a rundown of what’s new in the update.

1. A year of new data: The most obvious change is the addition of 2014 baseline data on energy use, CO2 emissions and emission intensity for each of the model’s seven sectors.

Our spreadsheet model lets you compare different carbon tax trajectories.

2. Smoothing the carbon tax impact: A new feature lets users smooth the impact of the tax to reflect real-world lags in households’ and businesses’ adaptation to more-expensive fossil fuels. (You get to set the adaptation “ceiling” rate; any excess gets carried over to future years.) This feature is helpful for trajectories like the Whitehouse-Schatz bill, whose rate starts with a bang at $45 per ton of carbon dioxide but then rises only slowly. Under our default setting, the reductions from the $45/ton initial charge are spread over four years rather than, unrealistically, assigned to the first year.

3. Future baseline is calibrated to official forecast: We tweaked a few model parameters to make our 2040 emissions forecast without a carbon tax match the analogous forecast in the Energy Information Administration’s “Annual Energy Outlook.” This allows for apples-to-apples comparisons with other models that are explicitly calibrated to the EIA/AEO forecast.

[Read more…]

It is true that the stroke of the presidential pen with which Barack Obama last week granted Shell Oil Corp. permission to drill off Alaska’s Arctic Coast cannot also put into force a U.S. carbon tax, without authorization by Congress. And it is all too possible that when climate reality eventually sweeps over the Capitol, the resulting carbon tax may be modest in scale and take a lot longer than a decade to reach the $100/ton level that would drive massive reductions in fossil fuel use and CO2 emissions.

All the same, it’s instructive to compare the capacity of Arctic drilling to supply oil with that of a robust carbon tax to quench the need for it. The outcome — the carbon tax wins — may not surprise. But the lopsidedness is startling: in just its tenth year, the carbon tax proposed last November by Rep. Jim McDermott (D-WA), starting at $12.50 per metric ton of carbon dioxide and rising annually by $12.50 as well, would be eliminating the need for oil at around a dozen times the rate at which Shell would be pulling the stuff from the Arctic.

Here are the numbers:

♦ Royal Dutch Shell’s Chukchi Sea project is projected by the U.S. Bureau of Ocean Energy Management to extract 4.3 billion barrels of crude over a 44-year period. (See Chukchi Sea Oil & Gas Lease Sale 193 Draft Second Supplemental Environmental Impact Statement, Volume 1 [pdf]; go to pp. 6 or 62 or 182 of 694.) This equates to daily production of 268,000 barrels. An estimated 2.2 trillion cubic feet of methane (natural gas) would be extracted as well; on a btu basis that equates to 360 million barrels of oil, or 23,000 barrels a day. Combined extraction of hydrocarbons is then around 290,000 barrels a day. (Note that we have not netted the energy expended to “discover,” extract and transport the oil.)

♦ For the carbon tax, we modeled McDermott’s Managed Carbon Price Act of 2014, setting the annual increases as the midpoint between the bill’s floor and ceiling prices. The price per U.S. (not metric) ton of CO2 in the tenth year, 2024, is $113.40. (Our model, which we’ll update soon, had the tax starting in 2015.) As indicated in the graph, the reductions in petroleum requirements would be substantial in every consuming sector. They sum to 3,486,000 barrels a day — 12 times the 290,000 bpd equivalent anticipated from Shell’s Arctic venture.

The estimated oil savings from the McDermott carbon tax amount to nearly one-fifth of U.S. oil consumption in both 2013 (the last data year in our model) and 2024 projected without a national carbon price. The biggest reduction in absolute terms is in what we call personal ground travel (chiefly driving), which dominates petroleum use. But on a proportional basis the savings would be greater in commercial sectors such as freight movement, oil refining, and construction, as the unmistakable price signal from the annually rising tax drives innovation enabling lower usage.

Still, the projected reduction in gasoline consumption for personal ground travel in 2024, 1.4 to 1.5 million barrels per day, commands attention. [Read more…]

The Carbon Tax Center is often asked why a carbon tax is needed; wouldn’t removing tax subsidies be sufficient to let efficiency and renewables compete on even terms with fossil fuels?

Our stock answer is that the subsidies the tax code confers on fossil fuels (as well as on some other extractive industries) are peanuts compared to their environmental subsidies, especially free dumping of CO2 into the atmosphere. The needed market corrective is huge and can come about only via a significant tax on carbon pollution.

But bioenergy presents a starkly different picture. As recently as a decade ago, bioenergy sources — biofuels for transportation and biomass for electricity — seemed to have gained full-fledged membership in the “renewable energy club” along with wind, solar, small hydro and geothermal energy. To boost bioenergy production, Congress endowed biofuels with subsidies that now amount to about $1 per gallon of ethanol and $2 per gallon of biodiesel.

Congress also enacted mandates that, if left in place, will compel a tripling of U.S. biofuel output by 2022. Biomass for electricity generation is also poised to gain a huge boost if the final version of EPA’s Clean Power Plan carries over a longstanding but highly questionable assumption that biomass burning is “carbon-neutral.”

Since that honeymoon, closer scrutiny of bioenergy’s lifecycle emissions has been revealing a complicated and far less promising picture. Biofuel production typically involves substantial fossil fuel inputs. Moreover, biofuel mandates and subsidies tend to push land out of other carbon-sequestering uses including food production. And closer study of biomass burning is calling into question the “carbon-neutral” assumption: that growing wood or other biomass captures the same amount of CO2 that subsequent burning for electricity generation releases.

We discuss these issues in detail — and with abundant links to the key literature — in our new “Carbon-Taxing Biofuels” page. While our views are still evolving, we think it’s clear that removing bioenergy subsidies and mandates and preventing EPA from letting electricity generators claim credit for biomass as carbon-neutral would do more to internalize the climate costs of bioenergy than even a hefty carbon tax.

It’s a thorny issue that will only grow more important. Take a look at our new page and let us know what you think.

Photo: Iowa State University Extension Service