Saturday, June 8, 2013

The beauty of the carbon tax

We need that carbon tax, immediately.

Soylent Green was perhaps one of the first true global warming films- a gritty, low-budget Charlton Heston vision of our future where warming has destroyed the natural world, and corporations (combined with overpopulation) have degraded humanity to a soy-based triscuit-eating ragged mob. Images of green and wild nature are so precious and exotic that they are played once and only once to the people of this time- at the moment of their death.

It is set in 2022, so it is safe to say that this specific future is not going to happen on time. Our descent into unrecoverable biosphere loss is happening more slowly. And it is worth saying that humanity should be able to get along decently well. Water will be short, fossil fuels more expensive, productive land in short supply, and inequality sharper. We will face serious issues, but the greater problem is that the riches of the natural world will gradually become a faded memory, an Eden slowly forgotten as the generations march on, each dealing with their particular stresses and shortages.

Farley Mowat's "sea of slaughter" graphically portrayed this process, where the unimaginable riches of the pre-Columbian New World, in sea life, bird life, and forest life, were not just cut down, burned up, and eaten. They were also forgotten, and the (somewhat) impoverished country with ravaged seas and oyster beds, extinct birds and mammals became the new normal- America the Beautiful.

Under our noses, the summer arctic ice is disappearing, with the species that depend on it. Corals are dying and eventually are likely to surrender entirely to a combination of sea level rise, warming, and acidification. Pollinators are dying, frogs are dying, and the list goes on inexorably.

What to do? The most important thing to know is that we have the technical tools we need. For all the hand-wringing about green power, about intermittency, poor storage technologies, and slow progress on solar conversion efficiencies, etc., there is plenty of renewable power and technology out there. It is just a bit more expensive than the fossil fuels we are getting for the price of extraction. This difference is being made worse by the fracking boom, tar sands steaming, and other novel extraction technologies, which rip open new layers of fossil carbon.

But at what cost? At unimaginable long-term cost. And the crying shame is that by just flipping one small switch, we could put ourselves on an entirely different trajectory. That switch is the carbon tax.

Estimates from the US EIA, of the effect of various carbon taxes.

With a modest carbon tax of about $25 per ton carbon emitted, which is about what comes from burning 112 gallons of gasoline, coal-burning power plants would be headed for permanent extinction, since they are the most flatulent of fuels. The breakeven for sustainable energy viability is roughly around $100 per barrel of oil, which we are close to in the current markets. Unfortunately, breakeven is not quite enough to prompt a fundamental switch in the energy infrastructure. Additionally, various market forces, such as the vast capacity of the OPEC countries, tends to keep oil prices just below the point where they would cause a fundamental shift in the West's attitude to its addiction.

This carbon tax, which amounts to about $100 billion per year, or about $1,000 per household, would be substantial, but quite manageable. Compare this scale to the roughly $50 billion of annual subsidies the fossil fuel industry gets from the government, quite apart from the various harms it does indirectly, in the short and long terms. The tax is not meant to fund the government or slow the economy, but rather to change the incentive structure of our energy system from pro-fossil to pro-sustainable. It could all be sent right back to households on a per capita, or even more progressive basis, becoming a simple and far-reaching efficiency incentive.

(Parenthetically, one might ask whether emissions trading regimes are better or worse than carbon taxes/fees. They are more specifically directed, with top-down control of the allowable cap of emissions. They are also a less blunt instrument, since we know that consumer use of fossil fuels like gasoline is relatively insensitive to price, over the short term, at least. But the directed-ness of cap-and-trade systems is also a weakness, since the imposed cap may not be ambitious enough compared with what is technically feasible. In any case, either system would be better than doing nothing, which is our current, shameful, and short-sighted policy.)

Once sustainable energy becomes economically and consistently viable on the large scale, via this textbook use of the economic tool of taxing a clear public danger, then the incentives for future development and innovation will turn significantly. Right now, it is the oil and gas industry that makes the greatest revenue of any industry, and has the resources to fund absurdly complex oil rigs in the middle of nowhere, (i.e. the oceans and the arctic), amazing oil drilling methods into the jaws of hell, and pump-it-up schemes to loosen "tight" gas. Imagine what sustainable technologies could develop with that kind of money. The rampant burning of fossil fuels would eventually become a dimly remembered image, but an ugly one.

"Why should professional economists working for the IMF, the EC and the ECB be above the professional standards and accountability that apply throughout the professional world?"
  • Green tip: LED replacements are available for MR16 50W track lights, but look carefully at lumens, temperature, and dimmability with your particular dimmer.

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