Why We Badly Need a Revenue Neutral Carbon Tax


A large and steadily growing majority of Americans believe that global warming, caused by the burning of fossil fuels, is a serious problem which must be addressed. What remains is to figure out how to do this with the least possible amount of economic damage to ourselves and others.
Capture1Consider that:

  • Energy consumption will increase 56% worldwide by 2040, overwhelmingly with the use of fossil fuels. Biofuels are a very inefficient source of energy and wind energy isn’t much better. Solar energy is dropping in price but is still much more expensive than natural gas.
  • The Environmental Protection Agency has just issued its Final Rule for a Clean Power Plan to reduce carbon emission levels in 2030 by 32% below 2005 levels.
  • California is now considering drastic legislation requiring a 50% reduction in petroleum use by 2030 which is likely to do much damage to the California economy.
  • In 2008 the Canadian province British Columbia introduced a revenue neutral carbon tax which has succeeded in reducing carbon emissions without damaging the BC economy.
  • The advocacy group, Washington Carbon, is trying to put a carbon tax on the Washington State 2016 ballot. Initiative Measure 732 would institute a tax on fossil fuels of $25 per ton of carbon dioxide. According to the Seattle Times many environmentalists are opposed to this initiative because it would be revenue neutral!

Conclusion: humanity is faced with the very serious problem of global warming and the response so far is chaotic and totally inadequate. The developing world is rapidly increasing its use of fossil fuels while the EPA is trying to put the brakes on our own use. Meanwhile states (and Canadian provinces) are establishing their own individual energy policies.
Isn’t it clear that what is needed is a conceptually simple unified approach to create incentives for all of us to cut back on carbon dioxide emissions? Isn’t it also clear that the best way to do this is with a national carbon tax?
It is up to the U.S. and other developed countries to take the lead in doing this. Once we are clearly doing what is needed, then and only then can we begin to lean on less developed countries to follow our example.



What Is the Best Way to Cope with Climate Change?


The Intergovernmental Panel on Climate Change has just issued it’s latest and most definitive assessment about the extent of global warming.  The earth’s average temperature has increased by .85 degrees centigrade since 1880 and is on track to increase to 2 degrees centigrade in a relatively short time span.  Such a major climate change will have severe repercussions for human life.
CaptureThere is much evidence for the IPCC’s gloomy prognosis.  Most convincing for me is that the extent of the summer artic ice cap is steadily shrinking, as demonstrated in the above chart.
The Environmental Protection Agency is attempting to decrease carbon emissions by regulation but there is a limit to what can be accomplished in this way:

  • The EPA’s goal is a 30% reduction in carbon emissions from 2005 levels by 2030. But the only way that this can possibly be achieved is by substituting the use of natural gas for coal, which reduces carbon emissions by 50%
  • The current low cost of natural gas is making nuclear power less economically viable even though nuclear power has no carbon footprint at all.
  • In addition to creating such constraints, this approach also has led the EPA to set complicated and arbitrary goals on carbon emissions for each state individually.

In other words, by employing onerous regulations the EPA will only, at best, be able to achieve a 30% reduction in carbon emissions by 2030. Of course, this is better than nothing but it is not nearly enough to significantly slow down global warming.  Even if European countries succeed in meeting similar targets as the ones set for the U.S., this leaves out the largest carbon emitter of all, namely China, as well as the rest of the developing world. Since it is impractical to eliminate the use of fossil fuels altogether, or even come close to doing so, the emphasis should be on limiting carbon emissions.  In other words, we should create incentives for carbon “sequestration,” i.e. the capture and storage of carbon when burning fossil fuels.   The way to do this is with a tax on the release of carbon into the atmosphere.  Such a carbon tax would provide a huge incentive for energy and power companies to develop the best possible sequestration techniques. With an economic incentive to do so, U.S. technological ingenuity will quickly develop effective methods for carbon sequestration.  Once discovered and perfected, their use would rapidly spread around the world. Climate change is real and we need an effective way to address it.  A carbon tax is the best way to get the job done.

What the EPA Is Doing about Climate Change


My last post, “The Latest Scientific Report on Climate Change,” summarizes a new report from the Intergovernmental Panel on Climate Change. It makes a very strong case that global warming is real and that it will badly disrupt human civilization before the end of the twenty-first century if not substantially mitigated.
What are we doing about it? The Environmental Protection Agency reports on its many actions as follows: “What EPA is doing about Climate Change

  • Inventorying of U.S. Greenhouse Gas Emissions and Sinks has been tracking all GHG emissions since 1990.
  • Developing “Common Sense” Regulatory Initiatives. For example, EPA’s vehicle greenhouse gas rules will eliminate 6 billion metric tons of GHG pollution by 2025. EPA is developing carbon pollution standards for the power sector which will cut carbon emissions 30% below 2005 levels.
  • Partnering with the Private Sector. EPAs partners reduced over 345 million metric tons of GHG in 2010 alone.
  • Advancing the Science. EPA works with the IPCC to understand the environmental and health impacts of climate change.


Here is how the Washington Post describes another EPA activity, the recently announced Clean Power Plan. “The rule provides every state with a target carbon-emissions intensity for its power plants, with preliminary standards kicking in by 2020 and full goals to be achieved by 2030.  As the map (below) shows, the rule generally asks the least from the states with the worst carbon-intensity at present – those that are very dependent on coal generation, such as West Virginia, Kentucky and North Dakota.  While cross-state variations in the intensity of pollution controls are a standard feature of regulation under the Clean Air Act, they usually have a compelling justification: the negative effects of emissions are local, and so areas suffering from pollution problems must be more stringent.  But greenhouse gas concentrations are uniform globally, making it somewhat awkward to subject identical emitters to divergent standards simply because their home states’ power mix is more or less carbon-intensive.”
CaptureThe purpose of this whole discussion is to illustrate how complicated it already is and will continue to be to achieve a significant reduction in GHG carbon emissions by regulation alone, even the relatively modest 30% reduction which the EPA is trying to accomplish.
Fortunately there is a better way of achieving an even bigger reduction in carbon emissions.  Stay tuned for my next post!

Why We Need a Carbon Tax III. Natural Gas Is Not a Real Solution


Most people agree that global warming is for real and that it is caused by a buildup of greenhouse gases in the atmosphere, mostly from carbon dioxide.  We need to respond to this existential threat and the U.S. should lead the way.  The Environmental Protection Agency’s new regulations call for a 30% reduction in carbon emissions, from 2005 levels, by 2030.  Since fracking has led to a natural gas boom in the U.S. and the burning of natural gas only emits half as much carbon as the burning of coal, it is very likely that the new EPA rules will lead to a major replacement of coal by natural gas in U.S. energy production.
CaptureBut there is a downside to this approach as pointed out in yesterday’s New York Times, “The Potential Downside of Natural Gas,” as follows:

  • Natural gas is starting to replace nuclear power which has no carbon footprint. Last year five reactors announced that they would close because of the low cost of natural gas. This will increase CO2 in the atmosphere.
  • Fracking for oil produces natural gas as a side product which may not be easily marketable. This excess natural gas is either burned off or escapes unburned releasing methane which causes even more damage than CO2.
  • The low cost of natural gas is also slowing down the development of renewable energy sources such as wind and solar power.

A far more efficient system of reducing carbon dioxide in the atmosphere would be to tax its emission from any fuel source.  The most commonly mentioned amount is $20 per ton which would raise the price of gasoline by about 10 cents per gallon.   This way the use of all forms of fuel, including coal, oil and gas, would be taxed equally based on how much carbon they emit.  This would create a huge economic incentive for developing carbon capture in fuel combustion, which is the ultimate solution to eliminating CO2 emissions.
In other words, we have a huge problem on our hands which needs an effective solution.  Half measures will not get the job done and will just cause lots of confusion and political controversy in the meantime.  It’s time for some real leadership!