Republicans and Democrats Really Do Agree on Climate!

On July 29, 2018 an op-ed by the social psychologists Leaf Van Boven and David Sherman reported that majorities of both Republicans and Democrats agreed that “climate change is happening, threatens humans and is caused by human activity — and that reducing carbon emissions would mitigate the problem.”

They summarize the results of two national polls, in 2014 and 2016, that they administered (together with a third colleague; here we’re omitting some details of the way the experiments were carried out).  Important conclusions they present include:
 

·        “…most Republicans were in basic agreement with most Democrats and independents on this issue.”

·        Probably the “problem is not so much that Republicans are skeptical about climate change, but that Republicans are skeptical of Democrats — and that Democrats are skeptical of Republicans.”

·        In experiments with different input information, “Republicans supported climate policies that they [were told were] backed by Republicans and were neutral toward policies backed by Democrats. Democrats supported policies that they [were told were] backed by Democrats more than they supported policies backed by Republicans.”  This emphasizes that members of both parties succumbed to intensified tribalism on this issue.

·        “Among social psychology’s fundamental lessons is that people are profoundly affected by what other people think. In their desire to be upstanding members of their political tribe, people are pulled toward embracing the stances of their peers and loath to publicly disagree with them.”

·        The authors found “a consistent, if somewhat surprising, pattern: Political disagreement was substantially smaller when it came to Republican-backed policies.  In particular, there was very little distance between Republicans and Democrats when evaluating a Republican-proposed carbon tax.”

As a result, the authors surmise there may be bipartisan support for a plan proposed last year by six Republican economists and statesmen, former cabinet members and high-level officials in former Republican administrations.  This writer described this proposal in a previous post.  Its essence is a revenue-neutral carbon fee imposed on all fossil fuels (coal, petroleum and natural gas) in proportion to the amount of carbon dioxide each produces when burned.  It is revenue-neutral because all fee proceeds are distributed back to American taxpayers.   

A similar proposal has just been introduced in Congress by Republican Representative Carlos Curbelo.  The carbon fee is US$24/metric ton of carbon dioxide emitted, increasing with time.  The difference is that this proposal is not revenue-neutral, but uses the proceeds for highway construction, climate research and support to low income households.
 
The social psychology results described above are likely not outliers in public attitudes on climate change.  The Yale Program on Climate Change Communication (working with George Mason University‘s  Center for Climate Change Communication, and other research organizations) has been surveying American public opinion on this subject for many years.  In a report on May 8, 2018 they found:

·        “Most registered voters (73%) think global warming is happening, including 95% of liberal Democrats, 88% of moderate/conservative Democrats and 68% of liberal/moderate Republicans, but only 40% of conservative Republicans.

·        A majority of registered voters (59%) think global warming is caused mostly by human activities, including 84% of liberal Democrats, 70% of moderate/conservative Democrats, and 55% of liberal/moderate Republicans…, but only 26% of conservative Republicans.

·        A majority of registered voters (63%) are worried about global warming, including 88% of liberal Democrats, 76% of moderate/conservative Democrats, and 58% of liberal/moderate Republicans, but only 30% of conservative Republicans.”

·        Most registered voters support policies that would reduce use of fossil fuels and promote investing in renewable energy to replace the lost conventional energy.

Conclusion
 
Tribalistic outlooks separating Republicans and Democrats concerning global warming and its effects may be resolving, in favor of collective action to address the issue.  It is indeed critical to embark on meaningful policies at the federal level as soon as possible, in order to minimize the continuing rise in the global average temperature.  Popular attitudes and Congressional approaches are coalescing to promote political action.

© 2018 Henry Auer

The European Union Continues on Its Course to Lower GHG Emissions

The European Union confirms the next milestone along its energy Roadmap. The nations of the world are working toward establishing a new climate treaty by late 2015 that would lower future greenhouse gas emissions (among other provisions). Independently, the European Union (EU) agreed to a significant goal in reducing emissions of greenhouse gases (GHGs) on October 23, 2014.  The EU is a supranational organization of 28 member nations.  As detailed below, it has had policies in place for almost a decade to reduce GHG emissions.  The new pronouncement extends its timelines and codifies goals it had already established earlier.  Specifically, the EU agreed to lower GHG emissions by 40% below the emission levels of 1990 by 2030.  The goals also include achieving a 27% share of energy from renewable sources, and increasing energy efficiency by 27%.

Emission Trading Scheme. The EU began implementing policies to reduce GHG emissions as the Kyoto Protocol (KP) became effective.  Even before KP entered into force the EU created its Emission Trading Scheme (ETS) in 2005 in preparation for entering under its emissions restrictions.  The ETS is a cap-and-trade regime covering over 11,000 major fixed sources of GHG emissions, both governmental and corporate.  Unfortunately, for much of the time since then the ETS has failed effectively to set a market price for GHG emissions that would succeed to lower emissions.  Initially, too many allowances for emission were issued, so that their price tumbled.  As this was corrected, the Great Recession reduced economic activity, lowering demand for energy, again pressuring the price for allowances to fall.  As recently as 2013 the European Parliament temporarily suspended marketing new allowances.

The deliberations leading to the new declaration also had contentious issues .  Reducing emissions of carbon dioxide (CO₂), the most prevalent GHG, affects coal-burning generating plants most severely because use of coal emits almost twice as much CO₂ as does burning a fuel such as natural gas.  Countries in the EU heavily reliant on coal for electricity, such as Poland and other eastern European countries, were concerned that the excessive burdens of complying with the new constraints would hinder their economic growth.  The United Kingdom objected to goals for installing renewable power because of its new-found energy wealth in natural gas.  Germany has shut down its nuclear power plants after the Fukushima disaster, placing a greater burden on its existing coal-fired plants.

The new declaration keeps the EU within its overall timeline for long-term, major reductions in GHG emissions according to its energy Roadmap (see below).  But several environmental scientists and commentators consider the plan to be inadequate to achieve the stringent Roadmap objective in 2050.  They are concerned that the plan would leave too much of the intended reduction in emissions to be achieved later, in the two decades between 2030 and 2050, an achievement that may challenge the best technologies and policies available.  For example, Richard Black, the director of the British Energy and Climate Intelligence Unit, a nonprofit organization, doubted that this plan would “allow the E.U. to meet its long-term target of virtually eliminating carbon emissions.”

Background

The countries of the world currently face highly disparate energy situations and climate environments.  Their different conditions color their outlook as the world faces the problem of global warming brought on by humanity’s use of fossil fuels for energy.  In developed nations, which have benefited from the industrial revolution since its early days, citizens are comfortable with the lifestyle that abundant energy affords them.  Many are reluctant to change their ways to reduce emissions.  

Developing nations, on the other hand, have been applying energy-intensive technologies to expand their economies only in recent decades, desiring to catch up to the developed countries in relatively unconstrained fashion.  Their people too are reluctant to move away from fossil fuels to fulfill their growing energy needs. 

Impoverished countries and island nations experience the harms brought on by global warming for which they have not been responsible.  Their citizens hunger for the benefits that wider energy use could provide; those in island nations face encroaching seas as land-based ice sheets continue melting.

The United Nations Framework Convention on Climate Change (UNFCCC) has scheduled periodic global climate reports by the Intergovernmental Panel on Climate Change since 1990.  The UNFCCC led to negotiation of the Kyoto Protocol (KP) in 1997.  KP required developed countries to reduce greenhouse gas emissions, but excluded developing and impoverished countries from coverage.  KP entered into force in 2005 after the requisite number of countries ratified it (the U. S. never did, so it was not governed by its restrictions).  Most nations acceding to KP agreed to reduce emissions by varying amounts, generally less than 10%, below emission levels of 1990 by 2012. 

 

The  European Union issued a Roadmap for greenhouse gas emission reductions in 2011, intending to reduce annual emission rates by 80-95% below the level of 1990 by 2050 (see the following graphic). 

Source: “A Roadmap for moving to a competitive low carbon economy in 2050”,  broken down by economic sector. European Commission, March 8, 2011;

http://eur-lex.europa.eu/legal-content/EN/TXT/DOC/?uri=CELEX:52011DC0112&from=EN

  
 

Interim milestones were established for reductions in emission rates of 7% by 2005, 20% by 2020, and 40-44% by 2030.  The European Environment Agency determined in 2013 that the EU is on track to achieve the 2020 milestone.  Renewable fuel use had climbed to 14% of total energy consumption.  About two-thirds of this originates from burning biomass and waste; in Sweden and Austria hydropower is also an important renewable source of electricity.  Wind and solar power contribute relatively small amounts to generation except for Denmark and Portugal (wind) and Cyprus and Spain (solar).
 

The EU is the most proactive region among developed countries in establishing policies to lower emission rates of GHGs.  The U. S., in contrast, has no legislated national energy policy directed toward mitigating GHG emissions.  In light of this failing executive actions of the Obama administration have imposed major limits on fossil fuel use in the transportation sector, have limited emissions from new electric power plants, and are proceeding similarly to lower emissions from power plants already in service.
 

Emissions from the developed countries of the world considered as a group have been relatively unchanged in recent years, and are projected to continue that trend (see the graphic below).



Annual rates of energy usage for China, the U. S. and India.  Actual use up to 2010; projected usage thereafter.  1 quadrillion = 1 million billion.  Btu, British thermal unit.
Source: U. S. Energy Information Administration; http://www.eia.gov/pressroom/presentations/sieminski_07252013.pdf (slide 5).

 

Energy use by developing countries will continue growing up to at least 2040, in contrast to the projected behavior of industrialized countries.  In the graphic above, expected energy use by China and India, which exemplify developing countries, expands dramatically in future years.  As noted earlier, energy use for the U. S., an example of a developed country, grows only very modestly to 2040.
 

Conclusion

The declared intention of the European Union to continue meeting its milestones under the energy Roadmap to 2050 is a major contribution to mitigating worldwide GHG emissions.  Similarly the executive actions taken by the U. S. have set it along a similar path, even if not enshrined in law.  These examples show “leadership by example” for the rest of the world as negotiations proceed toward a new worldwide climate treaty intended for completion at the end of 2015.  The continued expansion of fossil fuel use by major developing countries such as China and India, among others, stands in marked contrast to the examples of the EU and the U. S.  If left unaltered, policies of developing countries could potentially impede negotiation of a meaningful treaty.  Yet significant progress toward mitigation of GHG emissions must be made in order to keep the world’s long-term average temperature from increasing more than 2ºC (3.6ºF) higher than the prevailing temperature before industrialization.  This is the upper bound adopted at the Copenhagen (2009) and Cancun (2010) conferences of the UNFCCC.  The nations of the world must succeed in these negotiations.

© 2014 Henry Auer



China Plans a Nationwide Carbon Market

China recently confirmed its plan to place the entire nation under a carbon market (cap-and-trade regime) to lower its annual rate of emitting carbon dioxide (CO₂), the important greenhouse gas, beginning in 2016.

 

• China intends to continue lowering its carbon intensity, i.e., the amount of CO₂ emitted for each US$ of gross domestic product (GDP) that the economy produces.

 

• The goal is to reduce the carbon intensity by 40-45% below the 2005 value by 2020.  Averaged over this 15-year period, this corresponds to a reduction of 2.7-3% per year.  This can arise from increased efficiencies in energy production and use from fossil fuels, and by increased production of energy from renewable sources.

 

• While this accomplishment would be highly significant, the objective does not directly address China’s total CO₂ emission rate.

 

• China’s net annual rate of emitting CO₂ is projected to grow between 2014 and 2040, with much of the increase occurring in the period up to 2020 (see the graphic below).

 

Global projected energy-related carbon dioxide emission rates per year to 2040.  RED, China.  OECD, Organization for Economic Cooperation and Development, representing already industrialized countries of the world; “rest of OECD” excludes the U. S.  Non-OECD represents developing countries of the world; “rest of non-OECD” excludes China and India.

Source: http://www.eia.gov/countries/cab.cfm?fips=CH

 

 

• The average growth rate for China’s energy-related CO₂ emissions from 2010 to 2020 is about 5.3% per year, comparable to the growth in overall energy consumption, about 5.5% per year.  Note that these objective data already reflect any improvements in carbon intensity.

 

• The national carbon market envisioned for China would be far larger than any other carbon market operating in the world today.

 

Significance

 

Cap-and-trade systems are one of two principal strategies for limiting greenhouse gas (GHG) emissions (especially CO₂); the other is a direct tax on carbon-containing fuels.  Cap-and-trade regimes limit emissions by capping each year’s allowed amount of GHG emissions, and lowering the cap each year.  Low-efficiency facilities can acquire more allowances from more efficient ones by trading on an open market or exchange, thus establishing a price for emissions. 

 

A small number of cap-and-trade regimes exists already.  They have varying degrees of effectiveness.  The European Union’s Emission Trading System was highly ineffective for several years because it distributed too large a number of allowances.  The U. S. has not enacted any federal law regulating GHG emissions.  Recently, however, President Obama’s administration has raised efficiency requirements for vehicles and has issued draft rules limiting emissions from electric power plants.  The Regional Greenhouse Gas Initiative, in nine northeastern American states, operates an effective system, but one which is limited both in its goals and because it applies only to large electric power generators.  The state of California is implementing a significant cap-and-trade regime covering its entire energy economy. 

 

As noted above, China’s national cap-and-trade system will be the largest in the world by far.

 

China has been the world’s largest emitter of GHGs since 2009.   China is projected to dramatically increase its overall energy consumption over the period 2010-2040, continuing its rapid growth in use of energy in recent years (see the graphic below).  Most is supplied by fossil fuels.

 



Annual rates of energy usage for China, the U. S. and India.  Actual use up to 2010; projected usage thereafter.  1 quadrillion = 1 million billion.  Btu, British thermal unit.

Source: U. S. Energy Information Administration; http://www.eia.gov/pressroom/presentations/sieminski_07252013.pdf (slide 5).

 

The drastic increase in China’s energy consumption in recent years has resulted in a corresponding growth in its annual rate of CO₂ emissions.  Projecting forward over the period 2010-2040 the Energy Information Administration believes the emissions growth rate will average about 2.1% per year.

 

A major factor contributing to China’s high rates of CO₂ emissions is its reliance on coal to provide almost 70% of its energy.  Of all the fossil fuels, burning coal emits 50% to 90% more CO₂ than the others in order to obtain the same amount of heat energy.

 

China’s Five Year Plans (FYPs) have programmed in the changes detailed here. 

According to the report “Delivering Low Carbon Growth – A Guide to the 12th Five Year Plan”, during the 12^th FYP, covering 2011-2015, the carbon intensity was to improve by 17%, and the 13^th FYP (2016-2020) already included the reduction of 40-45% with respect to the carbon intensity of 2005 mentioned at the outset.  The proportion of energy provided by non-fossil fuels is to be 11.4% in the 12^th FYP and 15.0% in the 13^th FYP.  The actual increase in primary energy consumption was 6.3% per year in the 11^th FYP, and intended to be 3.75-5% in the 12^th FYP.

 

Market-based incentives.  Already during the 12^th FYP China set up 7 regional and provincial pilot cap-and-trade projects, placing limits on CO₂ emissions.  The experience gained from these pilots is to provide useful background for setting up the nationwide system.

 

China and other developing countries, together with developed countries, have to agree to meaningful reductions in the world’s GHG emissions that are currently being negotiated under the United Nations Framework Convention on Climate Change.  China, for one, has emphasized its achievements in lowering its carbon intensity, even though its use of fossil fuels has been increasing resulting in increased annual rates of GHG emissions.   Agreement on a new emissions treaty is intended during 2015, and it is foreseen to enter into force by 2020.  All nations of the world should approach these negotiations in good faith, and strive to achieve agreement on meaningful reductions in GHG emissions.

© 2014 Henry Auer

China Considers Programs to Limit Greenhouse Gas Emissions

Summary.  The world’s use of energy is expanding.  Much of this demand is concentrated in developing countries of the world, especially China.  Their energy needs are furnished primarily by fossil fuels, leading to high annual rates of emission of the greenhouse gas carbon dioxide, increasing in China historically by 6.4% per year.  Coal is its principal fuel.

Jiang Kejun, a scientist at China’s Energy Research Institute, is urging its national energy policymakers to limit CO₂ emissions more aggressively by emphasizing expanded renewable energy sources and energy efficiency.  Mr. Jiang notes that “time for effective action is very limited.”

The drastic, yet feasible, measures promoted by Mr. Jiang are resisted by energy and industrial interests in China, since they adversely affect China’s economic growth rate and threaten the viability of existing energy investments.  In the meantime, China is starting a handful of pilot projects using a cap-and-trade emissions market to limit emissions.  Additionally a carbon tax and direct limits on emissions are also under consideration.

Since China is a major contributor to increased greenhouse gas emissions, it is important that it undertake all feasible policies to limit them.  Global warming from manmade greenhouse gases is indeed a worldwide problem, requiring a global approach to solve it.  The total accumulated level of atmospheric greenhouse gases must be stabilized by reducing annual emission rates toward zero.

Introduction.  The worldwide demand for energy has been increasing relentlessly throughout the period of industrialization.  Most of this energy is provided by burning fossil fuels (coal, oil and natural gas) which results in corresponding increases in the atmospheric content of carbon dioxide (CO₂), a significant and prominent greenhouse gas (GHG).  Combustion of fossil fuels is projected to continue increasing by several percent annually over the coming decades in the absence of meaningful worldwide efforts to minimize GHG emissions.

The annual emissions rate among industrialized countries of the world has been increasing very slowly in the last 10 years or so, because of both intrinsic economic factors and as a result of various reduction policies put in place.  Almost all the increase in the worldwide GHG emissions rate originates from developing countries, especially China, India, Brazil and Russia.  This results from the compounded effects of large populations and high rates of economic expansion as these countries strive to attain middle class living conditions.

This post focuses on actual and proposed policy changes in China that are intended to slow its rate of emitting GHGs.  China has the highest population of any country in the world, and its people are rapidly becoming more prosperous, placing great pressure on its economy to provide them a middle class life style.  These factors are shared across all the rapidly growing developing countries such as those listed above.

China’s economy has been expanding rapidly in recent years.  For the decade 1999-2009 the annualized growth rate of China’s economy (measured as real gross domestic product) was 10.3%.  This has slowed in the most recent years; China expects its growth rate to be 7.5% in 2013.  Such strong growth is necessarily fueled by corresponding growth rates in its use of energy, most of which comes from burning fossil fuels.  For example, the graphic below shows that most of China’s electricity has been generated from fossil fuels (turquoise shading).

Annual electrical energy generated for major input sources of energy.

Source: http://www.eia.gov/countries/cab.cfm?fips=CH

 

In 2011, according to the U. S. Energy Information Administration (EIA), 65% of electric generation and 70% of its total energy use was powered by coal, the fossil fuel that produces about twice as much CO₂ per unit of electric energy obtained as natural gas, which supplied 3% of its energy.  Among renewable sources, 22% of electric power was obtained from hydropower (brown shading), 6% from wind power and only 0.2% from solar.

China’s domestic production of coal increased 9% from 2010 to 2011, becoming the world’s largest producer; including imports China alone consumes half the world’s coal output.  According to the Huffington Post, China brings a new coal-fired power plant on line every 7-10 days.  In addition to electricity generation, coal powers much of China’s industrial production.

By 2020, China seeks to provide 15% of its energy from renewable sources.  Hydropower will supply most of this, with wind power being next. 

China is expected to dramatically increase its overall energy consumption over 2010-2040, continuing its rapid growth in use of energy in recent years (see the graphic below).

 

 

Annual rates of energy usage for China, the U. S. and India.  Actual use up to 2010; projected usage thereafter.  1 quadrillion = 1 million billion.

Source: http://www.eia.gov/pressroom/presentations/sieminski_07252013.pdf (slide 5).

 

As China has drastically expanded its energy consumption in recent years, so too has its annual rate of CO₂ emissions correspondingly.  In 2010 it emitted 7,885 million metric tons of CO₂ (1 metric ton = ~1.1 U. S. (short) ton).  This represents the culmination of an average increase in annual emissions rate of 6.4%.  Projecting forward to the period 2010-2040 the EIA believes the emissions growth rate will fall to 2.1% per year.

It is clear from this background that any international effort to limit global warming by reducing GHG emissions must include China, as well as other developing countries whose emissions rates are increasing. 

Recent Efforts by China to Lower Its GHG Emissions Rate.  The rapid expansion of fossil fuel-driven electricity generation, automobile use and heavy industry in China has led in recent years to severe air pollution in Beijing and other large urban centers.  The New York Times reported on Aug. 31, 2013 that one environmental scientist, Jiang Kejun, working at the Energy Research Institute, is urging the national energy policymakers to limit CO₂ emissions more aggressively than at present.  He is taking advantage of the growing tide of public concern over urban air pollution, which is causing China’s leaders to support “firmer, faster measures for cleaner air” that likely include reducing emissions.   With this change in public opinion behind him, Mr. Jiang and his colleagues advocate a program by which China’s annual emissions rate should reach a maximum by about 2025, and according to which that maximum would be lower than previously predicted.  It advocates more intensive emphasis on developing renewable energy sources, implementing energy efficiency technologies, optimizing China’s economic structure, technology innovation, low-carbon investments, and development and deployment of carbon capture and storage (CCS, see an earlier post and the Note at the end of this post).

Mr. Jiang, like most climate scientists, recognizes that “time for effective action is very limited.”  It still remains for Chinese policymakers to adopt such aggressive measures.  The Times report notes instead that other, less drastic, policies are being implemented or contemplated.  A pilot project is setting up a cap-and-trade emissions market in Shenzhen.  Six more pilots are planned to start by 2015.  The affected emissions are only a miniscule portion of China’s total amount.  Other proposals, not yet implemented, include a tax on carbon dioxide emissions and guiding limits on emission rates.

Growth vs. Emissions Limits.  China’s government has to balance its decades-old imperative of rapidly expanding its economy with the newer considerations of constraining emissions from fossil fuels.  Expansion has relied on conventional technologies that are fossil fuel-intensive; such facilities have useful service lifetimes of several decades and continue to emit GHGs throughout this period.  Policies constraining GHG emissions threaten the investments made in these facilities, since they may have to be extensively retrofitted or removed from service to accommodate emissions limitations.  Even so, over the past decade or so the government has successfully adopted a policy of increasing China’s economic emissions efficiency, the weight of CO₂ released in producing a unit national gross domestic product.  This measure has been reduced significantly over this period, by 2-4% per year.  Nevertheless, since fossil fuel energy demand grows annually by an even larger percentage (see above), China’s net CO₂ emissions continue to increase in spite of gains in efficiency.

Analysis

Global warming refers to the increase in the long-term (annual to decadic) worldwide average temperature above the temperature before the industrial revolution.  It is directly related to total accumulated level of CO₂ and other GHGs in the atmosphere, not to the annual rate of worldwide GHG emissions.  CO₂ in particular, once emitted, persists in the atmosphere for a century or even longer.  There is no natural mechanism that depletes atmospheric CO₂ in this short a time frame.  Therefore even if the countries of the world agree to lower emission rates, GHGs continue to accumulate, until the effective rate approaches zero.  The long-term average worldwide temperature will continue increasing throughout this period, and will stabilize at a new, higher temperature when emissions rates fall toward zero.

Global warming is just that, a worldwide phenomenon that merits international attention.  Countries whose emission rates continue increasing (see the graphic above) are of special concern; this includes large sources in developing countries such as China and others.

The worsening crisis of urban air pollution in China’s major cities appears to be the trigger leading China’s leaders to contemplate putting emissions limits in place.  The corresponding crisis of global warming itself apparently has been insufficient so far to lead to a similar intensification of effort, in spite of harmful extreme weather events occurring in China and elsewhere in Asia.  Such events are at least made worse by, if not wholly due to, the adverse effects of global warming.  Mr. Jiang’s programs, if approved for action, should make a major contribution to reducing China’s GHG emission rate. 

As we grapple with the need to limit GHG emissions in order to stabilize global warming we should understand that abating emissions may be considered a zero-sum enterprise.  When contemplating investing in new energy facilities either we  can continue building conventional facilities (fossil fuel generating plants; fossil fuel-powered cars) with need to expand fuel pipelines and transporting fuels, or we can build renewable energy facilities coupled with new electric transmission lines (providing the energy for electric-powered modes of transportation).  Choosing renewable energy contributes to lowering emissions rates, preserves economic activity and maintains the demand for labor. 

It is strongly recommended to develop renewable energy whenever the choice confronts us.

Note

Carbon capture and storage is an experimental technology, currently operational yet open to improvement, that captures CO₂ from fixed power facilities, compresses it and forces it into underground reservoirs intended to retain it for thousands of years.  As such it is particularly suited for deployment in China, since coal fuels so much of its electricity generation.  Unfortunately, currently there are only four pilot scale CCS projects in China, far fewer than elsewhere in the world.  Not all of them are directly related to capturing and storing CO₂ emissions from power generation.  If CCS technology becomes operational, each power plant would incorporate it and deliver the resulting CO₂ into stable geological storage sites.

© 2013 Henry Auer

The Case for a Carbon Tax

Summary.  Increased burning of fossil fuels, producing higher rates of emission of greenhouse gases, generates worsening patterns of extreme weather events that affect human wellbeing.  In response to this trend, policies are being proposed to abate emissions.  This post summarizes two recent newspaper articles proposing use of a carbon tax, or a more limited gasoline tax, for lowering emissions.  It is judged that a carbon tax is simpler and more effective than establishing a cap-and-trade regime for limiting emissions.

 

Introduction.  Humanity’s rate of use of fossil fuels for energy has grown to high levels in recent decades, and is projected to continue increasing for the indefinite future.  As a result, the annual rate of emission of carbon dioxide (CO₂), the main greenhouse gas, as well as other greenhouse gases such as methane, has likewise been increasing.  Most CO₂, once it enters the atmosphere, remains there indefinitely for a century or longer, for there is no naturally occurring mechanism that removes it. 

Climate scientists hold greenhouse gases responsible for the recent long-term increase in the world-wide average temperature.  In turn, the warmer planet harbors an increased potential for more, and more intense, extreme weather and climate events such as rainfall and resulting floods, heat waves and resulting droughts, and wildfires.  These events have catastrophic effects on human populations, and inflict serious economic harms.

These considerations lead climate scientists and economists to develop mitigating policies intended to slow the growth in the rate of emissions.  This would have the effect of lowering the rate of increase in the CO₂ content of the atmosphere.  It must be noted that, because CO₂ remains resident in the atmosphere for a century or longer, its atmospheric concentration cannot be reduced within reasonable time frames; even if emissions ceased entirely, the result would be merely to stabilize the CO₂ concentration at the new, higher level.  One policy intended to abate the rate of emission of CO₂ is to impose an economic hurdle to use of fossil fuels.  This post describes recent opinion articles proposing use of a carbon tax or a gas tax to accomplish this.

Two Economics Commentators have recently come out in support of a carbon tax.  Robert Frank, professor of economics at Cornell, commenting in the New York Times, advocates a carbon tax for the following reasons.  First, he summarized some of the adverse weather events in the U. S. mentioned above in the Introduction, emphasizing that climate scientists today believe that man-made greenhouse gases building up in the atmosphere contribute to the causes of these events.  Dr. Frank cites a global climate model study by Sokolov and coworkers that concludes that the global average temperature in 2045 has a median probability of increasing by 1.85ºC (3.3ºF), and by 5.1ºC (9.2ºF) by 2095, beyond the present level, which has itself already increased about 0.7ºC (1.3ºF) above the temperature that prevailed before humans began burning fossil fuels.  These predictions, based on Sokolov’s current more comprehensive model, are higher than earlier ones by his group and by others.

Dr. Frank then suggests gradually imposing a carbon tax in the U. S., citing an earlier recommendation by the U. N. Intergovernmental Panel on Climate Change for a tax of US$80/metric ton (1.1 U. S. tons) of emitted carbon, which works out to about 70 US cents per U. S. gallon of gasoline.  However, in view of the more dire temperature rise situation currently foreseen he also suggests a tax that could be as high as US$300/metric ton, translating to a rise in the price of gasoline of about US$3.00/U. S. gallon.  Many countries around the world already have taxes on fuel about this high, and, he notes, nations have adapted by developing more efficient cars.

Dr. Frank cites two beneficial economic effects of a carbon tax.  First, it would contribute to reducing the U. S. fiscal deficit, which is highly desirable.  In addition, phasing in the tax gradually only after the present economic distress in the U. S. had passed would provide a timed incentive to make energy use in all its aspects more efficient even before the tax took effect, thus contributing overall to a reduced rate of emitting greenhouse gases.  The U. S. could contribute to a worldwide increase in energy efficiency by imposing carbon-based tariffs on imports.  This, for example, would provide incentives for foreign emitters of large amounts of greenhouse gases to develop efficiencies in their own lands.

Dr. Frank concludes “If the recent meteorological chaos drives home the threat of climate change and prompts action, it may ultimately be a blessing in disguise.”

Eduardo Porter, an economics columnist with the New York Times supports a more limited carbon tax in the form of a gas tax.  Mr. Porter noted that President Obama’s administration has ruled that motor vehicle fleet average gas efficiency has to reach 54.5 miles per U. S. gallon by 2025, almost doubling the present efficiency.  (In a previous action his administration had set a standard of 36.6 miles per U. S. gallon by 2017.)  The administration foresees that by 2025 these standards should result in a reduction of fuel use by 12 billion gallons, with a concomitant lowering of greenhouse gas emissions when burned.

But Mr. Porter has several concerns with the use of vehicle efficiency standards to lower use of fossil fuels for transportation.  First, he states that the engineering, production and societal costs to attain such efficiency may be excessive, representing an ineffective use of productive resources.  This is so even accounting for the reduction in harms inflicted by lowered incidence of weather extremes, and better health such as lower incidence of asthma, according to economists.  Second, he warns that more efficient vehicles may have the “perverse incentive” of inducing drivers to travel more, not less, because the expense per distance traveled will be lower.  In other words, vehicle efficiency standards do not change behavior toward reducing use of fossil fuels.  Further, they only take effect as people move from older, less efficient cars to newer, efficient ones, a process that stretches out over the decade or more needed for the fleet standard to be put in place.

Instead, Mr. Porter favors a gas tax.  First, a gas tax directly affects drivers’ behavior right away, even with their existing vehicles.  They would travel less, and when they decide to buy new cars, they would opt for more efficient ones which in turn provides the incentive to manufacturers to optimize efficiency.  This effect has already been observed when gas prices rose in the past for brief episodes.  Second, any inequity in imposing a gas tax can be reversed by offering tax credits at income tax time, say, to people with lower incomes; behavior at the pump is affected by the price tag staring drivers in the face rather than by the distant, subconscious, expectation of a return of the tax at a later time.  Third, the gas tax spurs car makers to make the most efficient vehicles they think drivers would buy in response to the newly imposed gas tax.  Mr. Porter cites a currently circulating analysis by Prof. Christopher Knittel, an energy economist at the Massachusetts Institute of Technology, that found that if a gas tax had been imposed in the 1980’s, after the Arab oil embargo, gas mileage could have improved by 60% by now.  Instead, car makers have emphasized increasing size, weight and power. 

Tom Friedman, a foreign affairs columnist for the New York Times, has repeatedly called for a tax on carbon as the most direct way to lower consumption of fossil fuels, in order to minimize the growth of greenhouse gases in the atmosphere and to reduce U. S. importation of petroleum from abroad.  Others at the New York Times espousing a carbon tax, both conservatives and liberals, are David Brooks, Nicholas Kristof and Bob Herbert.

In 2011, Profs. Daniel Esty (Commissioner of Energy and Environmental Protection for the state of Connecticut) and Michael Porter published an op-ed article in the New York Times espousing a carbon tax.

Analysis

Cap-and-Trade Mechanisms to Lower CO₂ Emissions. Two principal economic mechanisms have been devised to lower the rate of emissions of greenhouse gases, including CO₂.  One is the cap-and-trade mechanism.  In this regime the government jurisdiction (region, nation or state) administratively establishes how many emission allowances, usually worth the right to emit 1 ton of CO₂, for example, that each fixed point source of emissions (e.g., a power plant) is allowed.  These are granted or sold to the source.  Accordingly, cap-and-trade requires initially establishing the emissions rate for each source, which relies on reporting from the sources without bias.  The total of all allowances constitutes the “cap”.  Allowances have value, because a source that succeeds in reducing its emission rate can “trade” them on an open market to other sources whose emission rate exceeds their allowances.  Cap-and-trade is intended to lower overall emission rates with time, as the administering government lowers the cap each year; this would result in increasing the price  of each allowance.  The result is to lower emissions, while reflecting the price of the allowances by an increased cost for generating power or using energy, which is passed on to consumers.

Thus cap-and-trade uses market forces to, on the one hand, induce conservation behavior by consumers, and on the other hand, to induce efficiencies in generation of energy.  A further complication, though, is the right usually built in to cap-and-trade regimes to “offset” excess demand for allowances by “importing” allowances from outside the territory of the regime; these also must be monitored effectively by those administering the regime.

Cap-and-trade, it can be seen carries several difficulties and inefficiencies.  Its administration is very complex: there is the need to allot allowances and lower them each year; market mechanisms must be established; and offsets must be monitored.  Additionally, the market for allowances establishes third-party traders having no interest in global warming, but only in trading an object (allowances) for profit among themselves, potentially leading to market abuses and speculation. 

The European Union established a cap-and-trade in the last decade, but it was initially judged a failure because it wound up issuing more allowances than necessary, leading to a collapse of the market.  On the other hand, the American regimes in California, and in the Northeast Regional Greenhouse Gas Initiative, are operating cap-and-trade regimes at various stages of progress.

A Carbon Tax or a Gas Tax.  The second principal mechanism for lowering emission rates is imposition of a tax on all forms CO₂ emissions, frequently including other greenhouse gases, or a more limited tax on gasoline only.  A carbon tax impacts all sources of energy and economic activity that depend on fossil fuels.  A gasoline tax is more restricted to limiting use of fossil fuels for personal and commercial transportation.

Administratively a carbon tax is far simpler than setting up a cap-and-trade regime.  It too is based on economic behavior, affecting the demand side of the market, as opposed to the supply side impacted by cap-and-trade.  Typically a carbon tax is imposed gradually, beginning at a low level and increasing annually to an economically meaningful level.  A political “sweetener” for a carbon tax could be a rebate to needy taxpayers to compensate for the increased year-long expense arising from the tax, as noted above. 

This writer believes that a carbon tax is preferable over a cap-and-trade regime for its simplicity, efficiency and effectiveness. 

Mr. Porter’s article above cites U. S. government studies on the overall “social cost of carbon”, per ton of CO₂ emitted.  This arises from harms due to extreme weather and climate events, and adverse effects on health and nutrition from global warming.  These calculations are subject to great uncertainties, but economists place the cost at between US$5 to 68, and increasing even more as time passes.  It thus behooves all societies, including our own, to take active measures to lower emissions, striving to attain zero emissions as soon as possible in order to minimize the harms from extreme events.

Gas taxes are very effective in affecting drivers’ travel habits.  The graphic below

Sources: New York Times presenting data from the U. S. Department of Energy and the World Bank; http://www.nytimes.com/interactive/2012/09/11/business/Fuel-Taxes-and-Consumption.html?ref=business

 

shows per capita use of fuel for driving in developed countries decreases as the size of the gas tax increases.  The U. S. has the lowest gas tax correlated with the highest amount of fuel used per capita. It is seen that most of the benefit appears to be attained at a tax level of about US$2.20 per gallon (although other factors not apparent from the graphic may also be in play.)  As an example, in Great Britain, according to Mr. Porter, the gas tax is about US$3.95 per U. S. gallon.  Ford, the American car maker, sells a model of its+ compact Focus there whose efficiency is 72 miles per U. S. gallon.  A Focus model sold in the U. S. gets only 33 miles per U. S. gallon.  Clearly, automakers currently have the technology and capability to mass produce fuel efficient cars.  While further research can be devoted to enhancing efficiency, this shows that the state of technology today is sufficient to garner significant improvements today.
 

Conclusion.  Frank and Porter have proposed imposing a carbon tax or a gasoline tax to abate further increases in the rate of emission of greenhouse gases.  A carbon tax is judged to be more straightforward, efficient and effective than implementing a cap-and-trade regime for reducing emissions.  No government bureaucracies need to be created, and the simplest of motives driving economic activity by individuals have an immediate effect on behavior.  Where deemed necessary, tax rebates could be devised to ease the tax burden on people with low incomes.  A carbon tax additionally would have positive effects on American society, for it would contribute to resolving our severe fiscal problems.  Policymakers should give serious consideration to this mechanism for abating greenhouse gas emissions.

© 2012 Henry Auer