Carbon Tax Center

Pricing carbon efficiently and equitably

To Punish the Saudi Regime, Tax Carbon

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It’s often said that a carbon tax is first and foremost a tax on coal. I’ve probably said it myself, and David Roberts wrote as much the other day in his useful post for Vox, The 5 most important questions about carbon taxes, answered, pointing out that “A carbon tax hits coal first, hardest, and, at least early on, almost exclusively.”

Coal is first up in carbon taxing’s crosshairs for two reasons: its energy value comes almost exclusively from oxidizing carbon, whereas oil and gas burning also derives considerable heat from oxidizing hydrogen into harmless water vapor; and in the U.S. coal is used almost exclusively to generate electricity, a commodity that many other sources can make as well.

A decade after startup, a robust U.S. carbon tax would eliminate one-fifth of petroleum usage.

But oil would hardly be immune. A U.S. carbon tax — not a token, Exxon-style one but a robust fee on fossil fuels’ carbon content that ramped up steadily — would, before long, put a sizable dent in petroleum use. Ditto, natural gas, as the carbon tax level rises still higher.

A vigorous U.S. carbon tax would squeeze every owner of oil wells, petroleum infrastructure and hydrocarbon reserves: shareholders of Exxon, Shell, BP et al.; the Koch Brothers; and, most of all, Saudi Arabia’s national petroleum and natural gas company, Aramco — the world’s #1 oil extractor and largest holder of oil reserves.

The list of ways that a carbon tax would lessen oil use is nearly limitless. Driving, costing more, would  begin to shrink. Fuel-efficient cars that stretch each gallon — higher-mpg vehicles and electrics — would gain market share. Freight movement by truck would start to be switched to rail and water, while supply chains became more local. Air travel would get pricier even as new aircraft engines were designed for greater fuel efficiency. In millions of economic decisions, proximity would be favored over distance and sprawl. Transit, cycling and higher-density development would gain.

These changes wouldn’t happen everywhere or immediately, of course, but they would gather strength as the carbon tax ramped up and society’s defaults got reset. And while we can’t micro-model every behavioral and structural change from carbon taxes (there are literally billions), the rich academic literature of price-elasticity makes it possible to rough-estimate the aggregate impacts of raising the prices of petroleum products for households and businesses.

In our modeling at the Carbon Tax Center, we estimate that a U.S. carbon tax that started modestly at $15 per ton of CO2 but increased each year thereafter by $10 per ton would, by its tenth year, shrink U.S. oil usage by 3.3 million barrels a day, cutting usage by one-fifth.

The NY Times caption of this Hani Mohammed / Associated Press photo it ran on Oct 17 read: “The Saudi-led war in Yemen has become one of the worst humanitarian disasters in years.”

That shrinkage amounts to more than 3 percent of current world oil consumption. A drop of that magnitude — even ignoring that many other countries would follow suit — would deliver a powerful one-two punch to Saudi pockets: lesser sales and a lower price.

With less money to throw around Washington and the Middle East, the corruptive power of the Saudi regime would begin to diminish. Its wherewithal to bomb Yemen back to the Stone Age, silence dissident journalists like Jamal Khashoggi, punish Canada simply for expressing “grave concern” about arrests of activists in Saudi Arabia, and so on — and immunize itself by spreading cash around U.S. universities, think tanks, artistic institutions — would be diminished as well.

All of which makes another reminder that the benefits of taxing fossil fuels according to their carbon content go beyond even helping arrest climate damage. Human rights activists — indeed, everyone who wishes to see justice done for the brutal murder of Mr. Khashoggi — should join the movement to tax carbon emissions.

 

 

 

 

 

 

 

Five Key Sentences from New York magazine’s IPCC Blockbuster

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David Wallace-Wells, the writer for New York magazine who jolted us last year with his searing climate-change story, The Uninhabitable Earth, has posted a follow-up, UN Says Climate Genocide Is Coming. It’s Actually Worse Than That.

You guessed right, the sequel is about the new IPCC report. We began the week covering the report’s first-time recommendation of a high carbon price to drive emission reductions. We can’t fully do justice to Wallace-Wells’ latest with a summary — it’s too layered for that. To convey a sense of his argument and his urgency, we’re excerpting five key passages (disclosure: some are longer than mere sentences), with comments.

David Wallace-Wells: Barring the arrival of dramatic new carbon-sucking technologies, which are so far from scalability at present that they are best described as fantasies of industrial absolution, it will not be possible to keep warming below two degrees Celsius — the level the new report describes as a climate catastrophe. As a planet, we are coursing along a trajectory that brings us north of four degrees by the end of the century. The IPCC is right that two degrees marks a world of climate catastrophe. Four degrees is twice as bad as that. And that is where we are headed, at present — a climate hell twice as hellish as the one the IPCC says, rightly, we must avoid at all costs. (emphasis added)

Doubling the rise in temperature quadruples the anticipated damage. We drew up this curve to illustrate our June 2017 post, “Showing the Cost Side of the Climate Equation in a New Light.”

Carbon Tax Center: It’s worse than that. The most likely “shape” of the planetary climate-damage curve (or function) is a quadratic. (See graphic, from our June 2017 post, Showing the Cost Side of the Damage Equation in a New Light.) Doubling the temperature rise doesn’t double the damage, it quadruples it. Tripling the rise magnifies the damage nine-fold. The silver lining, if there is one, is that each increment of temperature rise we can prevent through societal action pays back more than proportionately in damage avoidance.

DW-W [this sentence is from his previous passage]: New carbon-sucking technologies … are so far from scalability at present that they are best described as fantasies of industrial absolution.

CTC: We agree.

DW-W: Because the numbers are so small, we tend to trivialize the differences between one degree and two, two degrees and four. Human experience and memory offers no good analogy for how we should think about those thresholds, but with degrees of warming, as with world wars or recurrences of cancer, you don’t want to see even one.

CTC: Goodness, yet another way in which human cognition militates against fully grasping and grappling with climate change. We thought Dale Jamieson’s magnificent 2014 book, Reason in a Dark Time: Why the Struggle Against Climate Change Failed, and What It Means for Our Future, covered all the obstacles to understanding and action: It’s hard to attribute the myriad consequences we see in the world to climate change… Evolution built us to respond to “rapid movements of middle-sized objects,” not to the slow buildup of insensible gases in the atmosphere. And of course, climate change is the world’s largest and most complex “collective action problem,” in which each of us, acting on our own desires, contributes to outcomes we neither desire nor intend. And many more, to which Wallace-Wells has added the new one, above.

DW-W: Nothing in the IPCC report is news … not to the scientific community or to climate activists or even to anyone who’s been a close reader of new research about warming over the last few years. That is what the IPCC does: It does not introduce new findings or even new perspectives, but rather corrals the messy mass of existing, pedigreed scientific research into consensus assessments designed to deliver to the policymakers of the world an absolutely unquestionable account of the state of knowledge.

CTC: That’s helpful to those of us in the trenches. It aids us in seeing why the release of old news — include the lede that limiting the earth’s average temperature rise to 1.5°C is pretty much off the table — was served up by important media as news, period.

DW-W: The IPCC has also, thankfully, offered a practical suggestion, proposing the imposition of a carbon tax many, many times higher than those currently in use or being considered — they propose raising the cost of a ton of carbon possibly as high $5,000 by 2030, a price they suggest may have to grow to $27,000 per ton by 2100. Today, the average price of carbon across 42 major economies is just $8 per ton. The new Nobel laureate in economics, William Nordhaus, made his name by almost inventing the economic study of climate change, and his preferred carbon tax is $40 per ton — which would probably land us at about 3.5 degrees of warming. He considers that grotesque level “optimal.”

CTC: Yesterday we posted the comment by our colleague Thomas Sterner, declaring that Nordhaus’s “choice to label the 3.5°C [temperature rise] as optimal is … unfortunate.” Today we would rather dwell on the brighter side, that the IPCC for the first time called not just for a carbon price but for a high one, as we reported on Monday.

DW-W: A carbon tax is only a spark to action, not action itself.

CTC: Yes … and no. No, because a robust carbon tax will be far more than a mere spark — it will stimulate enormous changes in behavior, investment, decision-making and innovation, all of it toward vastly lessened use of carbon fuels. Yes, because the tax itself doesn’t reduce emissions, rather it instills incentives that will provoke the reductions.

We think the article is well worth reading. Let us hear your take.

From Sweden, A Deeper Dive Into Last Weeks’ Economics Nobels

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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.

Thomas Sterner, photographed by the author in NYC in 2014, says William Nordhaus’s Nobel was overdue despite concerns about his work.

“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.”

IPCC: Not just a carbon price, but a really high one

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We’re finally catching up with last week’s two big climate-policy stories: the new IPCC report on the dire consequences if global temperatures rise more than 1.5°C above pre-industrial levels, and the awarding of the Nobel Prize in economic science to climate-policy pioneer William Nordhaus of Yale.

Not just a price, but a high price, is how The Times summarized the IPCC’s key recommendation. See link + more in text.

A clear thread links the two stories: earth’s climate — and literally human society — faces repeated, widespread, unmanageable disruption unless the world’s nations and peoples begin a sharp and complete U-turn from fossil fuels to carbon-free energy; and this requires not just a “price on carbon” but a high one, as the New York Times spelled out in the headline of perhaps the paper’s key story last week.

Not only that, the price must be considerably higher than Prof. Nordhaus, the dean of climate-damage modeling, has called for throughout his illustrious careeer.

The story, by Times climate-economics reporter Brad Plumer, warrants quoting at length:

More than 40 governments around the world, including the European Union and California, have now put a price on carbon, either through direct taxes on fossil fuels or through cap-and-trade programs. But many of them have found it politically difficult to set a price high enough to spur truly deep reductions in carbon emissions.

The concept of carbon pricing received another implicit endorsement on Monday from the Nobel Prize committee, which awarded Yale’s William D. Nordhaus a share of the 2018 Nobel Memorial Prize in Economic Science for, among other things, making a case that “the most efficient remedy for the problems caused by greenhouse gas emissions would be a global scheme of carbon taxes that are uniformly imposed on all countries.” (emphasis added)

Plumer noted that since the 1970s, Prof. Nordhaus has “argued that companies that burn fossil fuels should be taxed at a rate that reflected the harms they were imposing on the rest of the world.” Needless to say, the companies would pass on most if not all of these carbon taxes in the form of higher prices for fossil-fuel derived electricity, gasoline and diesel fuel prices, etc. — a feature rather than a bug since these price incentives would do more than any other competing policy measures to motivate the companies themselves, along with millions of other decision-makers to change behavior, make investments and pursue innovations to minimize their tax exposure and, thus, shrink national and global use of fossil fuels and resultant carbon emitting.

“Economists have long been enthusiastic about carbon pricing because of the policy’s efficiency,” Plumer wrote in The Times. “Give companies a financial incentive to reduce their fossil-fuel use, and they will find creative and cost-effective ways to do so without the need for heavy-handed government regulations.”

That’s essentially our view at the Carbon Tax Center, except that we don’t necessarily view direct regulations like car-mileage standards as heavy-handed — just less productive than advertised, due to their scattershot, reactive nature; overrated, you might say.

How steep must a carbon tax (or carbon price “delivered” under a cap-and-trade permit system) be to enable the climate catastrophe of 1.5°C or greater temperature rises? As Plumer notes, the IPCC report estimated that the global-average price to emit a ton of CO2 pollution must be at least $135 by 2030, and perhaps as great as — are you ready? — $5,500.

The bottom end of the range, at least, is right in line with what CTC has been advocating since roughly 2010, with a carbon tax starting at $12.50 per ton of CO2 and rising by $10/ton each year. As we never fail to point out, within a decade the tax, passing $100/ton and still rising, would cut U.S. emissions by roughly one-third from today’s levels. While stronger medicine is almost certainly needed, we’ve tended to stick to that trajectory to stay within the lines of political feasibility — a convention we would gladly bend if the carbon tax, once implemented, proved more acceptable to the public and elected officials.

Plumer’s wonderfully informative article hints at that possibility:

Policies that are widely popular with voters, such as mandates for renewable energy, can help reshape the political landscape to make more ambitious climate action feasible. And policies that spur innovation and drive down the cost of cleaner alternatives to fossil fuels, such as electric vehicles, could potentially make higher carbon prices more palatable.

Nobel Laureate Nordhaus, in New Haven last week. Photo by Monica Jorge, courtesy NY Times.

In other words, as the perceptive Vox journalist David Roberts pointed out several years ago, continued advances in (and broadening uptake of) wind power, solar PV, electric cars, etc. could help carbon taxes be seen as a helpful bridge rather than a punishing hand. And, politically, that could make all the difference.

As for Nobel laureate Nordhaus, we haven’t been alone in criticizing him over the years for settling on an adamantly conservative formulation of carbon damages and the resulting “social cost of carbon” — one that arises from both his insistence on a high “discount rate” that shrinks future costs in present terms, and his exclusion from his modeling of the prospect that climate change will erode societies’ ability to generate new wealth by inhibiting the accumulation of technological and intellectual capital, among other losses.

Today, however, we applaud Prof. Nordhaus’s Nobel and share the hope he expressed in an interview this past weekend with The Times’ Coral Davenport, that “if we continue to work on this, the public will get there on the science, and make an exception to the toxicity of taxes.”

“It will help if [the carbon tax is] tied to something popular — if, as a result of the revenue from a carbon tax, you get a check in the mail, or it funds health care,” Prof. Nordhaus added in his interview. We’re all still searching for the right political formula. “I’m hopeful that grown-ups will take over and we will do what is necessary,” he said. “If we don’t, then things will just get worse and worse.”

CTC policy associate Bob Narus contributed information and ideas to this post.

OECD report: miles to go on carbon pricing 

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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

We added the pull quote shown above. The OECD report articulates the economic and geopolitical case for carbon pricing even as it documents the hesitant pace of progress.

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.”

Schematic from OECD report. The bottom category, specific taxes, is most countries’ primary contributor to the effective carbon rate.

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.

“Climate Caucus” greenwashing in full force as midterms approach

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We mentioned here in mid-summer that climate journalists were disdaining the Climate Solutions Caucus as “greenwashing for GOP denialists.” Now a prominent energy-and-climate newsletter is out with a roundup of Republican caucus members’ re-election efforts that adds fuel to that charge.

At least 10 and perhaps many more of the 43 Republican members of the House Climate Solutions Caucus appear likely to be gone when the 116th Congress convenes in January.

The new report in ClimateWire, by Washington-based E&E News reporter Mark K. Matthews, quotes campaign materials by GOP Reps. Mia Love of Utah, Steve Knight of California and Peter Roskam of Illinois that cite their caucus membership as evidence of climate and/or environmental concern.

This is from Rep. Love’s latest mailer to constituents:

Mia Love knows that we need action, not words, on improving our environment. That’s why she regularly engages with her fellow members of the Climate Solutions Caucus to craft and advance policies that promote environmental stewardship.

Similarly, the ClearPath Action Fund, which aims to “elect Republican clean energy champions,” is insisting in Facebook ads that Rep. Knight’s caucus membership demonstrates that he “puts California before party politics.” An aide to Rep. Roskam, meanwhile, recently pointed to his joining the caucus as evidence that he “has always been a friend to the environment,” reports ClimateWire’s Matthews.

Yet neither Love nor Knight nor Roskam is known to have written, sponsored or even endorsed any substantive “green” legislation during their Congressional tenure. “Engaging” with caucus members, it’s fair to say, is basically a smokescreen to cover Republicans’ stonewalling on federal climate action.

More than fear of a Democratic “blue wave” is making GOP Congressmembers flaunt their caucus badges. Environment again matters these days, a turnaround that the Pew Research Center first reported back in January:

Economic issues — improving the job situation, strengthening the economy and reducing the budget deficit — are viewed as less important policy priorities than they were just a few years ago. Other issues, which had been less prominent public priorities in the past, have grown in importance. The share of Americans saying that protecting the environment should be a top policy priority has increased 18 percentage points since 2010 (from 44% to 62%), and seven points in the past year alone. (emphasis added)

Or, as veteran political journalist Stuart Rothenberg pointed out this week in Roll Call, “It’s NOT the Economy, Stupid. With growth up [and] unemployment down, voters are focusing on other issues,” environment among them. Needless to say, massive climate-charged flooding in the Carolinas and forest conflagrations across California and the West, coupled with the Trump administration’s “climate arson” in gratuitously torching methane-leak rules and other no-brainer regulations, are likely to keep climate and environment on the front burner in the run-up to the November midterms.

How fares the Republican half of the Climate Solutions Caucus in all this? Not well. Our donut chart (above) displays all 43 GOP caucus seats according to their re-election chances, as rated by the widely admired Cook Political Report. Seven members aren’t running for re-election and another three are deemed likely to lose on Nov. 6 or “leaning” that way. Another ten races, including those by Knight and Roskam (mentioned earlier) are considered tossups, making a total of 20 in jeopardy — not counting six rated as leaning toward a win (that group includes Mia Love along with Rep. Carlos Curbelo of Florida) and six likely to win. We singled out Curbelo in July for “blazing a path” with the first Republican carbon-tax bill in a decade.

Only eleven of the 43 races for the GOP Climate Solutions Caucus aren’t “competitive” for Democrats, according to the Cook report, which is why Matthews of ClimateWire headlined his post, “Climate caucus’s GOP ranks could plummet.”

That GOP caucus members are especially vulnerable to a November blue wave isn’t surprising, since it’s their district’s blue or purple tinge that led many of them to declare climate concern in the first place. Regardless, a wave that swamps the caucus’s Republican side could open the floodgates to congressional hearings and, eventually, action, on genuine climate solutions.

Oct. 2 addendum: The Democratic challenger to Rep. Peter Roskam (R-IL), mentioned at the top, is Sean Casten, whom the NY Times today described as “a scientist and clean-energy businessman” in its contrarian article, Floods. Wildfires. Yet Few Candidates Are Running on Climate Change. 

Jerry Brown Is Right. Trump’s Methane-Rule Rollback “Borders on Criminality.”

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Addendum, Sept 19: The Trump administration yesterday formally adopted the proposed rules we wrote about last week, below. The New York Times’ Lisa Friedman reports the details. 

“This is insane – it borders on criminality,” said California Gov. Jerry Brown yesterday about President Trump’s proposed revisions to Obama administration regulations on methane emissions from oil and gas wells.

Brown has authority to speak, and not just because on Monday he signed SB (California Senate Bill) 100, which commits the Golden State to a 100% carbon-free electricity sector by 2045. Brown’s entire 16-year career as governor (1974-1982 & 2008-2016) has been one of breathtaking, broad-based innovation in energy efficiency, renewable energy and environmental protection.

The longest-serving governor of the largest state pulls no punches.

Not just in California but across the U.S., fridges and A/C’s consume less electricity, cars burn less gasoline, and tailpipes pollute less because Brown’s administrations pioneered the required engineering, regulations and politics. If any human being living or dead has done more than Gov. Brown to cut carbon emissions, I’d like to know her name.

The Obama reg’s targeted natural gas leakage, venting and flaring by requiring more frequent inspection of leaks from gas wells and pipelines and expedited repairs. The Trump revisions will cut inspection frequencies at wells and compressor stations and extend repair deadlines, as reported yesterday by Romany Webb, Senior Fellow and Associate Research Scholar at Columbia University’s Sabin Center for Climate Change Law. Watering down the Obama rules will mean more heat-trapping methane released to the atmosphere.

Exactly how much more methane is hard to pinpoint but EPA estimates appear to be around 50,000 excess tons in 2020, rising to just over 100,000 in 2025. (Those are the two years displayed in Table 1.1 of EPA’s Regulatory Impact Analysis; the figure rises over time because the Obama reg’s being watered down apply to new wells only.) We’ll use the approximate 2025 figure, 100,000 tons per year as representative of the next 10-15 years.

“Methane is a highly potent greenhouse gas,” Ms. Webb reminds us in her informative post, “trapping approximately 87 times more heat in the earth’s atmosphere than carbon dioxide in the first 20 years after it is released, on a pound-for-pound basis.” Applying that multiplier, the additional 100,000 tons of methane per year will have the same climate-change impact as 8-10 million tons a year of additional CO2.

Total U.S. emissions of CO2 currently run between 5 and 6 billion tons, while emissions of methane and other GHG’s add the equivalent of another 1 billion or so (all figures are in short tons and are approximate). The Trump/EPA rollback will thus add less than two-tenths of one percent (0.2%, or one part in 500) to America’s climate pollution emissions.

If the rollback’s numerical impact is so small, why is it so odious?

First, the Obama rules being watered down were the opposite of revolutionary; they adhered to the time-honored (and bipartisan) pollution-control paradigm of covering only new or expanded emissions sources, an accommodation that circumvents arguably costlier “retrofitting” of existing sources.

Second, they’re eminently doable. Inspecting and fixing leaky wells and other gas infrastructure is good housekeeping, pure and simple. And they’re easy to follow.

Third, the methane rules bring substantial co-benefits: They create jobs. They cut down on “local” (toxic) pollution. They protect workers. And they’re at least partially cost-offsetting since the saved methane can be delivered and sold.

Fourth, they’re a giveaway to an industry that needs none: the U.S. oil and gas sector. With over a quarter of a trillion dollars a year in profits, and with annual contributions to Congress nearing a third of a billion dollars a year, America’s oil and gas industry is the last segment of our society in want of more federal largesse. (Figures are from Oil Change International; contributions figure includes coal companies.)

Last, as OCI reminds us in its mission statement: The production and consumption of oil, gas, and coal are major sources of global warming, human rights abuses, war, national security concerns, corporate globalization, and increased inequality. Anything that further incentivizes fossil fuel extraction and usage, as the Trump-EPA methane reg rollback will do, only exacerbates that.

In short, the rollback is quintessential Trump: spiteful, short-sighted, ignorant, amoral.

Jerry Brown is right on Trump and right on climate. He’s wrapping up his lifetime of public service on the highest possible notes of policy, leadership and moral clarity. The opposite of what we suffer with the White House.

A middling carbon tax could recoup Trump’s gutting of mpg standards … and then some

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Before you take umbrage at the headline, let me be clear: President Trump’s announcement yesterday proposing to freeze federal car-mileage standards at 2020 levels and revoke California’s longstanding authority to set auto emissions standards tighter than federal standards is contemptible.

The mpg freeze will mean more carbon emissions hastening the plunge into climate chaos not only for Americans but for the seven billion other people with whom we share the planet. The California revocation will bring down the curtain on that state’s half-a-century of innovation in low-emissions regulation and technology.

Both moves are archetypal Trumpian policy-by-pique. Their sole purpose is to stick mud in the eyes of Gov. Jerry Brown, who with his father, Gov. Pat Brown, pioneered green state governance; of President Obama, for whom ramping up auto mpg requirements was a cornerstone measure to combat global warming; and of untold numbers of Americans who care deeply for our environment.

The policy, a gift to oil companies, will accomplish nothing while sowing vast damage. Like Trump himself, it is spiteful, sickening and stupid.

Emission trajectories shown reflect carbon tax that would diminish CO2 from autos as much as Trump’s mpg freeze will raise them. Economy-wide decreases in analysis-year 2035 are eight times as great as auto impacts alone.

But what’s also true is that a mid-range carbon tax could recoup the lost ground. I calculate that a U.S. carbon tax that started next year at a level of $5 per ton of carbon dioxide and increased by $5 a ton each year, with no letup, would, by 2035, be curbing carbon emissions from gasoline use by the same amount that Trump’s cessation of tighter mpg standards will increase them — around 140 million metric tons of CO2 a year.

Moreover, such an economy-wide carbon tax would bring about parallel drops in emissions throughout the economy — in electricity generation, freight-hauling, aviation and industry. I estimate that in 2035, when the hypothetical carbon tax would have reached $85 per ton, those reductions would amount to an additional 980 million metric tons. All told, the carbon tax would suppress carbon dioxide emissions eight times as much as Trump’s mileage freeze will elevate them.

To reflect the hypothetical nature of the carbon tax I express its benefits in the subjunctive (“would”) while employing the definite tense (“will”) for Trump’s intended rollbacks. This is a necessary concession to the arduous and uncertain task of passing a U.S. carbon tax, in contrast to the president’s all-too-real administrative powers — notwithstanding the fierce legal and political challenges that will be mounted against those moves. The point is not to trivialize the White House’s latest destructive act but to highlight the vast potential of a robust carbon tax to cut emissions.

A carbon tax covering gasoline would stand in for higher mpg standards, in part, by nudging consumers to more fuel-efficient vehicles and, thus, incentivizing manufacturers to design and market them. More than that, the higher fuel price could inflect drivers’ day-to-day decisions on how far to travel and, for multi-car families, which car to take, not to mention how aggressively to drive. Vehicle miles traveled (VMT) would shrink somewhat as well, as decision-needles tilt toward car-sharing, trip-chaining, public transit, and walking and biking.

This isn’t to overstate the link between higher fuel prices and lower gasoline use. In our modeling at the Carbon Tax Center we employ a “long-run” gasoline price-elasticity of just 0.35 (discussed and derived here), by which prices at the pump must rise by a third to cut usage by a tenth. It also bears repeating that not all Americans have agency to respond to price rises. But while a binary frame may be useful for viewing individuals’ fuel-use decisions, the aggregate level of fuel use (and the resulting carbon emissions) is the product of literally billions of daily and longer-term decisions.

Moreover, autos (cars and light trucks) make up just one-quarter of U.S. carbon emissions — even when “upstream” oil refining is factored in. The sectors yielding the other three-quarters of U.S. CO2 — electricity, freight, air travel, industry, heating, construction — are more price-elastic, which is why a carbon tax that would recoup the reductions from the higher mpg standards would yield another 7-fold’s worth of reductions.

So yes, Bill McKibben is spot-on to call the mileage freeze Trump’s “stupidest decision yet in his endless attempt to roll back environmental protections.” And yes, a carbon tax of any stripe, let alone one that could rise to $85 per ton by 2035 as in our modeling exercise here, remains nowhere in sight so long as Republican extractionism and malice rule Congress and the White House.

But that’s not cause to ignore or abandon the long-term campaign for a robust U.S. carbon tax. Quite the opposite.

Our Numbers Explained: We used the Rhodium Group’s May 2018 analysis, Sizing Up a Potential Fuel Economy Standards Freeze. For 2035, Rhodium projected a 114 million metric ton fallback in CO2 reductions if oil prices are low, and 32 million tons if prices are high. (The high-price fallback projection is smaller because expensive gasoline would do some of the work of mpg standards in engendering fuel efficiency while also dampening the amount of driving.) We conservatively used the higher figure and added 20 to 25 percent to capture upstream (refinery) emissions, yielding a target of 140 million metric tons. Through trial-and-error, we found that CTC’s carbon-tax model (downloadable as an Excel spreadsheeet) also projects a 140 million metric ton reduction from gasoline use, with a hypothetical carbon tax that would start next year at $5/ton and rise by $5/ton annually, in constant-2017 dollars. The economy-wide (all sectors) reduction is 1,122 million metric tons.

Agreed: Carbon Pricing Isn’t Working. Now What?

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A headline like “Why Carbon Pricing Isn’t Working” isn’t the kind of news carbon tax advocates like to see. But Jeffrey Ball, writing in the July/August Foreign Affairs, has a point:

[E]xisting carbon-pricing schemes tend to squeeze only certain sectors of the economy, leaving others essentially free to pollute. And even in those sectors in which carbon pricing might have a significant effect, policymakers have lacked the spine to impose a high enough price. The result is that a policy prescription widely billed as a panacea is acting as a narcotic. It’s giving politicians and the public the warm feeling that they’re fighting climate change even as the problem continues to grow. (emphasis added)

To be clear, Ball, a scholar-in-residence at Stanford and nonresident senior fellow at the Brookings Institution, likes and wants carbon pricing. His quarrel isn’t with the concept but with the political execution — or lack of it:

If governments proved willing to impose carbon prices that were sufficiently high and affected a broad enough swath of the economy, those prices could make a real environmental difference. But political concerns have kept governments from doing so, resulting in carbon prices that are too low and too narrowly applied to meaningfully curb emissions.

Ball is discussing both carbon taxes and cap-and-trade here. Cap-and-trade regimes have been limited to a few economic sectors — most typically, electricity generation. And the caps set so far have been too high (i.e., loose) to generate the robust carbon prices that can really impact these sectors. Though reforms are in the works in both Europe and the U.S., Ball is rightly skeptical about how far they will go.

I-95, Miami. A robust carbon tax can help un-jam highways while also cutting carbon emissions.

The news for carbon taxes isn’t much better, so far. A commission of economists convened by the Carbon Pricing Leadership Coalition last year recommended a tax in the $40-80/ton range by 2020. Only six countries — Sweden, Switzerland, Liechtenstein, Finland, Norway, and France — have carbon taxes that high, according to the World Bank.

Ball’s alternative is what he calls “more targeted moves,” but his reasoning seems muddled. He argues that politically feasible levels of carbon taxation won’t change how much or which vehicles people drive, but then endorses higher gasoline taxes to motivate those very changes. (For the record, we estimate the price-elasticity of gasoline to be negative -0.35, meaning that the price of gas has to rise by one-third to reduce usage by one-tenth.) He also contends that carbon taxes give builders no incentive to erect energy-efficient buildings, yet there is abundant evidence that buyers and tenants are willing to pay premiums for efficiency-certified properties (see here and here) — a preference that will only grow if energy prices rise.

Ball urges carbon tax proponents to redirect their efforts to more conventional approaches — basically, regulating the bad stuff and subsidizing the good stuff:

[P]ursuing these measures directly offers a politically realistic path to significant environmental benefit. . . . To the extent that the carbon-pricing experiment lets policymakers and the public delude themselves that they are meaningfully addressing global warming, it’s not just ineffectual; it’s counterproductive.

There’s a double standard here, however. The regulations and subsidies that U.S. environmental and climate advocates have won over the years have a mixed record. Production-tax credits and renewable portfolio standards helped jump-start the meteoric rise in wind and solar, but those gains, while impressive, accounted for a mere one-fifth of the 25 percent drop in carbon emissions from U.S. power generation since 2005 (energy efficiency and the rise in fracked gas each accounted for two-fifths). In transportation, cheap gasoline is a key reason that U.S. drivers are burning more gasoline now than a dozen years ago.

Moreover, directing massive subsidies to carbon capture and sequestration — another remedy Ball endorses — doesn’t look much more politically realistic than serious carbon pricing. And as a general proposition, subsidizing alternatives to carbon-burning fuels is at best only half as effective at cutting emissions as raising the prices of those fuels, as CTC demonstrated in its groundbreaking comments to the Senate Finance Committee four years ago.

If arresting global warming were politically easy, we would have done it already. But it’s not, and discounting perhaps the most potent arrow in our quiver when every other alternative is far more limited in scope doesn’t make much sense. Addressing the climate crisis is hard work; we might as well expend that effort on a policy that could actually do the job.

Unicorn or Harbinger? A Republican Carbon Tax Is Readied for Debut.

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“House Republican will introduce $23 climate fee next week.” That’s the headline of an article today in E&E News reporting that Rep. Carlos Curbelo, a two-term Republican representing Florida’s 26th Congressional District, is finalizing a bill that would impose a carbon-emissions fee on most U.S. fossil fuel-burning sectors and also eliminate or at least pause some federal regulations on climate change.

(Update: The Curbelo bill was introduced on July 23 as H.R. 6463, the Market Choice Act.)

E&E calls Curbelo’s pending bill “a rare effort by a Republican to address global temperature increases by reducing greenhouse gases.” That’s an understatement. To the best of our recollection, the bill would be the first carbon tax proposed by a sitting G.O.P. Congressmember or Senator in roughly a decade.

Any needle-moving from the Curbelo carbon tax would be in the political realm, not in direct emission cuts.

Politically, then, the appearance of Curbelo’s bill will be a big deal. In terms of straight-up carbon reductions, however, the bill is underwhelming. Our quick take from inputting the bill’s key elements into CTC’s carbon-tax spreadsheet model is that in 2020, U.S. CO2 emissions would be 22% below 2005 levels. To put that in perspective, actual U.S. emissions a year ago were 14% less than in 2005; thus, the 2020 bump from the Curbelo bill is at most 8 percentage points — less, actually, given the ongoing decarbonization of our electricity sector. (The Congressman’s draft fact sheet for the bill optimistically pegs the 2020 reduction at 24%.)

By 2032, the emissions drop from 2005 would reach 30% (per Curbelo) or 29% (per our modeling). But seeing as nearly half of that decrease was already in place without a carbon tax in 2017 — a year that is closer to the 2005 base year than to 2032 — the Curbelo proposal has to be seen as fairly thin on actual climate deliverables. Which is what one would expect from a carbon price that barely exceeds $20 per ton (the bill’s $23 starting price is per metric ton) and rises by only 2% a year above general inflation, although the bill contains a provision to ratchet up the increase if reductions fall short of specified targets.

Nevertheless, there’s a bigger picture to consider. Just yesterday we put up a post bemoaning the possibility that the anti-carbon-tax Scalise Resolution would pass, as it did in 2016, without a single Republican dissent. Now it looks like Rep. Curbelo is set to dissent in spades by shattering the decade-long G.O.P. prohibition against sponsoring or endorsing — let alone introducing — a carbon-tax bill.

If any D.C. Republican was going to take such a step, it was likely to be Carlos Curbelo. His 26th CD, extending from southwest Miami to the Everglades and covering the Florida peninsula’s entire southern tip, is a climate ground-zero twice over — sea-level rise plus hurricanes — and a classic swing district (it went blue by double-digits in the last two presidential races). A year after taking his seat in January 2015, Curbelo co-founded the bipartisan Climate Solutions Caucus with fellow Floridian Ted Deutch, a Democrat representing the 22nd CD. Whether by conscience or calculation or a combination of the two, Curbelo clearly read the handwriting and elected to break ranks with his party’s denialist orthodoxy.

The Curbelo bill itself is full of political calculation, which isn’t necessarily a bad thing. It would clear the books of the long-standing federal highway excise taxes — 18.4 cents per gallon of gasoline, 24.4 cents for diesel. The carbon tax, with its built-in annual increases, would more than make up the difference, though at the cost of a percentage point or two of economy-wide carbon reductions due to the diluting effect of the swap. The Highway Trust Fund would be a big net winner, receiving 70 percent of the entire revenue take. Whether that’s bad or good depends on whether the increased revenue is allocated to highway expansions or “fix-it-first” infrastructure repairs.

G.O.P. carbon-tax trailblazer Carlos Curbelo. Pic credit: Miami Herald.

The bill stands no chance of passage this year, of course, or in almost any imaginable Republican-controlled Congress. Indeed, under the G.O.P.’s Hastert Rule, Rep. Curbelo would need 117 Republican co-sponsors simply to clear the “majority of the majority” threshold and get the bill to the House floor.

If Rep. Curbelo were a Democrat, we would be measuring his bill against Democratic carbon-tax proposals such as Rep. John Larson’s America Wins Act (HR 4209), whose carbon price starts at $49/ton and which devotes $1 trillion to infrastructure (plus transition assistance for coal country and a relatively small “dividend” for households), and which has a few dozen Democratic co-sponsors. And while the Larson bill’s 2%-plus-inflation price increase trajectory has the same slope as Curbelo’s, it operates on a much higher base and thus packs more punch.

But that comparison runs the risk of missing the point: that a “long national nightmare” of Republican silence and inaction on climate may be starting to end. Whether other G.O.P. lawmakers will stand with Curbelo remains to be seen. He is at least blazing a path, and for that he deserves our thanks.

CTC supporter and volunteer Bob Narus contributed research and ideas to this post.