Saturday, June 19, 2010

Tax carbon, or it will keep taxing us

When will we take our addiction seriously?

Far more serious than America's fiscal deficit / debt is our ecological deficit- the garbage we are spewing into the oceans and air. While in this blog I enjoy taking potshots at religion as our clearest and most outrageous example of cultural self-delusion, and have spent some effort on the delusions of the deficit terrorists and conservative economists generally, and also love to post updates on biology that interests me, none of those issues compare in importance with that of evironmental sustainability.

While the BP blowout sends perhaps one to two million gallons (or ~4,000 tons) of oil into the ocean daily, humanity is sending roughly 30 million tons of CO2 into the oceans daily by way of the atmosphere. Day in, day out, with no end in sight. This pollution may be invisible and less drama-turgic than an oil slick, but it is creating far-reaching and ever-mounting problems for everyone in the biosphere. And that means us, too! Al Gore has told us all about it, But out of sight, out of mind, and why deal today with what can be put off till tomorrow?

Washington's ditherfest on this issue reflects the general apathy of the country, (in addition to large dollops of corruption), which feeds off dramatic events like an oil spill, while finding it hard to attend to deeper and longer-term issues, especially those with economic commons characteristics, prone to pseudoscientific obfuscation, or hard to see directly. In short, it takes moral fiber to face up to the many ills of our carbon addiction:

1. Climate change, with disruptions to Earth's climate not seen for tens of millions of years. Do we have a duty of love and care to our fellow-travelers on planet earth? Should we give future generations of humans a degraded biosphere? Beyond the carbon cycle, we are also upsetting the nitrogen cycle with huge amounts of fertilizers, being responsible now for most fixed nitrogen on the planet. We are laying waste to whole ecosystems in slow motion. Will we take responsibility?

2. Pollution- coal pollution kills 24,000 people in the US, along with countless other health and environmental problems. We are scrubbing some acid from some power plant flues, but there are numerous problems with the remaining pollutants, including continuing acid rain. Mining coal rapes some of America's finest wild country, not to mention its danger to miners. Coal-fired pollution from China is starting to drift clear across the Pacific to us in California. Oil drilling isn't risk-free or clean either- nor is gas drilling. A carbon tax would cleanly target the most polluting fuels with the highest penalties, and would hopefully eliminate the scourge of coal use entirely here in the US.

3. Strategically, we accumulate endless problems incurring trade deficits to send money to Iran, Saudi Arabia, Venezuela, and the other petro-countries for their oil. We get poorer, and they incur the notorious "resource curse" that impedes governance and human development. We import about 1.2 million tons of petroleum per day, costing roughly $700 million per day. The external costs of this in military responsibilities throughout the Middle East and beyond, combined with foregone policy choices in places like Nigeria and Saudi Arabia due to our economic dependence, are incalculable. Our position is reminiscent of Rome's, dependent on Egypt and North Africa for its life-line of grain. That didn't turn out well, either.

So, what will it take to get us off oil? A recent newshour panel talked about new research investments needed to get this ball rolling.

It would be great to have spiffy new technologies and magical solutions. But we have all the materials we need at hand already, in the form of renewable, nuclear, and other technologies. What we need is the will and incentive structure to use them. Wind and solar power are on the edge of economic viability, combined with storage technologies for load balancing on a smarter grid. A serious and sustained carbon tax would give them the playing field they need by pricing-in the many ills attendent to fossil fuel use. Such an incentive structure will naturally bring out sustained technological innovation as well, without a lot of government involvement and direction. It is time to use economics to do the planet and ourselves some good for a change!

How high would such a carbon tax need to be? Energy consumption in Europe is roughly half of ours per capita, with gasoline and natural gas prices roughly double ours, due mostly to taxes. Europe's fossil energy consumption seems to have peaked, with renewables a growing part of their source mix. This would indicate that a carbon tax in the US that would double consumer fuel prices would take us a substantial distance towards higher efficiency and more renewable sources. Technological development that would extend this curve to the complete elimination of fossil fuels is in my view likely, but still a matter of speculation and future evaluation/policy adjustment. Remember that the current policy on acid rain, modest though effective, turned out to be much less costly than anyone estimated.

However partial such solution, it will still be a rather large political and economic pill to swallow, given our spineless political system dedicated to incumbant interests. The climate bills under consideration are only baby steps toward this solution, even after the BP blowout has so dramatically illustrated the stakes. If one thinks of humanity's long term residence on the planet, however, time is very much of the essence, as is effective action.
  • Toles on a carbon tax.
  • Some notes on a culture of responsibility.
  • Who manages our companies?
  • And Krugman gets it, on Europe's descent into double-dippery.
  • Bill Mitchell quote of the week, here quoting Alan Greenspan, of all people(!):
"'The U.S. government can create dollars at will to meet any obligation, and it will doubtless continue to do so. U.S. Treasurys are thus free of credit risk. But they are not free of interest rate risk. If Treasury net debt issuance were to double overnight, for example, newly issued Treasury securities would continue free of credit risk, but the Treasury would have to pay much higher interest rates to market its newly issued securities.'"

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