Category Archives: global warming

Is A Carbon Tax Practical?

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The evidence for global warming is overwhelming and largely beyond dispute.  On the other hand, our industrialized world is highly dependent on the fossil fuels which produce it. This is what makes global warming such a hot political potato.
Capture9Yesterday the New York Times columnist Eduardo Porter described a carbon tax which has been implemented in British Columbia and has gained wide political acceptance.  Its general features are:

  • It was introduced in 2008 by the Liberal Party which is actually quite conservative. It survived a challenge by the left-leaning New Democratic Party in 2009.
  • The economy in British Columbia grew faster than its neighbors even as its greenhouse gas emissions declined.
  • The tax rose from $10 (Canadian) per ton of carbon dioxide in 2008 to $30 (Canadian) in 2012. It raised the cost of a gallon of gasoline by 19 cents (U.S.)
  • Despite the price increases, voters warmed to the tax. In 2015 only 32% of British Columbians opposed it, down from 47% in 2009.
  • Every single carbon tax dollar is returned to families and businesses through a variety of tax breaks.

British Columbia’s experience shows that a carbon tax can work in practice. Here are a couple of reasons why such a tax should appeal to a broad political cross spectrum in the U.S.

  • A properly calibrated carbon price in the United States could effectively replace all the climate-related regulations businesses hate so much, including renewable fuel mandates and President Obama’s Clean Power Plan.
  • A carbon tax could become part of a broad fiscal overhaul, using the revenue, for example, to offset cuts in payroll taxes.

Conclusion. The rapidly changing climate and weather patterns caused by global warming are a threat to human civilization. Reasonable measures can be taken to mitigate the effects with minimal economic disruption.  As the world’s strongest economy and leading superpower, the U.S. should be providing more leadership towards addressing this very serious problem.

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Why Economic Growth is Slowing Down

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The two main themes on this website, “It Does Not Add Up,” are that the U.S. national debt is too high and that our economy is growing too slowly.  How can we shrink the debt (as a percentage of GDP) and how can we make the economy grow faster?  I make use of all sources of information which shed light on these two fundamental issues.
CaptureToday I briefly discuss the work of the Northwestern University Economist Robert Gordon, summarized in his new book, “The Rise and Fall of American Growth.”  His basic thesis, see the above chart, is that human civilization experienced essentially no economic growth up until about 1700, then slow growth occurred mainly in the UK and US up until about 1870 followed by explosive growth mainly in the US up until about 1970.  Since 1970 growth has slowed way down except for a brief spurt from 1994 – 2004.
According to Mr. Gordon, these growth periods were caused by Industrial Revolution #1 (steam, railroads), IR #2 (electricity, internal combustion, modern plumbing, communications, petroleum), and IR #3 (computers, internet, mobile phones), all of which led to productivity growth spurts which have by now largely run their course. Not only are we out of industrial revolutions but there are, in addition, stiff headwinds working against economic growth.  For example:

  • The First Headwind: Rising Inequality. Downward pressure on the wages of the bottom 90%. Increased inequality at the top. Educational outcomes strongly correlated with socio-economic status.
  • The Second Headwind: Education. Stagnation in high school graduation rates and poor performance on international tests measuring achievement. High debt levels for college graduates.
  • The Third Headwind: Demography. The labor participation rate has dropped form 66.0% in 2007 to 62.6% today, only half caused by baby boomer retirements.
  • The Fourth Headwind: Repaying debt. The public debt, on which interest is paid, is now 74% of GDP and is predicted by the CBO to steadily increase. This will inevitably lead to either higher taxes or slower growth in future transfer payments.
  • The Fifth Headwind: Social deterioration at the bottom of the income distribution. Increasing number of children are born out of wedlock for high school graduates and dropouts, much higher for blacks than for whites. For mothers aged 40, the percentage of children living with both biological parents declined from 94% in 1960 to 34% in 2010.
  • Other Headwinds. Globalization and Global warming.

Mr. Gordon makes a voluminous case for the slowing down of economic growth, the basic reasons why this is happening, and the social forces which are making it worse. Next: How should public policy respond to this huge challenge?

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The Close Connection between Fossil Fuels and Economic Growth

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One of my favorite economics journalists, Eduardo Porter, has a column which appears each Wednesday in The New York Times.  His column this week, “Imagining a World Without Growth,” shows that economic growth took off consistently around the world only about 200 years ago and that two things powered it: innovation and lots of carbon-based energy from fossil fuels.
Capture0The United Nations climate conference, meeting this week in Paris, is asking all countries to greatly cut back on their use of fossil fuels.  Mr. Porter, in an earlier column, described what severe cutbacks in fossil-fuel energy could look like:

  • In order to meet the consensus goal of keeping the earth’s atmospheric temperature from rising more than 2 degrees C from preindustrial times (and we’re half way there already), CO2 emissions will have to fall to at most 1.6 tons per year for every person on earth by 2050. This is less than 1/10 of the present U.S. average and less than 1/3 of the present world average.
  • Within about 15 years every car sold in the U.S. will have to be electric. By midcentury more than half of the U.S. economy will run on electricity. Up to 60% of power will have to come from nuclear sources.
  • To meet these ambitious goals the U.S. will have to decarbonize its energy supply at an average pace of 4% per year for the next 40 years. This is 10 times faster than the Energy Information Administration’s current plan.
  • This is not achievable by going after low-hanging fruit such as replacing coal with natural gas in power plants. Rather, for example, carbon capture and storage will have to become widely available starting within about 10 years.

Meeting the goal of limiting the average world-wide temperature increase to 2 degrees C will thus require a severe regimen of regulatory actions which will have negative economic consequences.  In fact it is difficult to image how such a strict regimen could ever be put in place or enforced without much public dissatisfaction.
We thus have two options for dealing with global warming.  We can ignore it at our peril or we can introduce a market mechanism to change people’s fundamental behavior and attitude about energy use.  What market mechanism?  A (revenue neutral) carbon tax, of course!  How else?

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A Path for Climate Change beyond Paris

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The United Nations climate conference has just opened in Paris.  The pledges that countries are making fall way short of what many say is needed to solve the problem of climate change.  The Deep Decarbonization Pathways Project based in Paris and New York describes what will be needed to get the job done:
Capture

  • The 2 degree C temperature increase benchmark is used even though it is an arbitrary threshold. “Hell is not going to break loose at two degrees – it will take hundreds of years to unfold.” The world has so far warmed .9 degree C since 1880, halfway to the threshold.
  • The technologies available today, such as solar power and wind turbines, while good enough to get a running start on the transition, are not good enough to finish it.
  • Many countries will need to keep burning coal or natural gas to generate power while capturing the carbon dioxide emerging from smoke stacks, compressing it and injecting it deep underground. In fact most fossil fuel energy producers do not appear to be putting much effort into this approach.
  • Governments could easily flub the energy transition by failing to plan far enough ahead. Most countries are setting 10 and 15 year targets that can be met with incremental changes.
  • To achieve emissions goals, entire economies, including transportation, needs to be electrified as much as possible. Spending a lot of effort, as the U.S. is doing, trying to make gasoline cars more efficient, may be going down a blind alley.
  • Another potential dead end would be an overreliance on natural gas, which emits only half as much carbon as coal. This helps in the short run but gas has to go away within a few decades. Thus heavy investment in natural gas pipelines and power plants now could undermine long term goals.

The point is that the DDPP, designed to hold a global temperature increase to just 2 degrees C from preindustrial times, is extremely demanding.  It will require massive governmental interference in the energy economies of both developed and developing countries all over the world.    A far, far better approach is for leading world economies such as the U.S., Western Europe, China and Japan to provide leadership by implementing a tax on carbon emissions and thereby create an economic incentive for the fossil fuel industry to decarbonize itself.

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Creating a Carbon-Free World

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Tomorrow the United Nations climate conference opens in Paris.  According to Peter Thiel, the venture capitalist, “We can talk about a carbon-free world, or we can create one.” Continues Mr. Thiel, “The single most important action we can take is thawing a nuclear energy policy that keeps our technology frozen in time.”
CaptureConsider:

  • Wind and solar together provide less than 2% of the world’s energy and they aren’t growing anywhere near fast enough to replace fossil fuels.
  • China’s coal consumption is growing at 2.6% per year and India’s at 5%. In India there are 300 million people without access to electricity. The Paris plan wants India to be satisfied with a .6 metric ton of oil equivalent per person, when a minimum of at least four tons per person is needed for the development of an advanced nation.
  • Safety fears about nuclear power are overblown. The 1979 accident at Three Mile Island caused no significant amount of radiation to be released. The 1986 Chernobyl disaster was caused by a faulty design and operator incompetence. Fewer than 50 people were killed by released radiation compared with 13,000 killed every year by smoke from coal-fired power plants. The 2011 Fukushima disaster resulted in no deaths from radiation.
  • A new generation of American nuclear scientists has produced designs for better reactors which have the potential to overcome the biggest obstacle to the success of nuclear power: high cost.

I hear many people say that the U.S. needs to provide leadership in getting the world to stop using fossil fuels.  A carbon tax would provide an economic incentive to either move away from fossil fuels or clean them up.  But even a revenue neutral carbon tax would face strong political resistance. Climate change activists should consider supporting nuclear energy development as perhaps the most viable alternative to fossil fuels.

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The Evidence for Rapid Climate Change

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My last post, “Why We Badly Need a Revenue Neutral Carbon Tax” makes the case for combatting global warming with a sensible free market mechanism such as a carbon tax rather than a hodge-podge of arbitrary national and state regulatory actions. Since many of the Facebook responders to this post deny the reality of global warming in the first place, I have decided to present the overwhelming evidence for its existence.
When ninety-seven percent of climate scientists worldwide agree that climate change is real and they have assembled a massive amount of measurement data to back up this claim, I think we have to take them seriously. For example:

  • The Global Surface Temperature is Rising. Global average temperature has risen 1.4 F since the early 20th century as shown in the chart just below which also shows the close correlation with carbon-dioxide concentration.
    Capture2
  • The Sea Level is Rising. It has risen at an average rate of 1.7 mm/year over the last 100 years and at the rate of 3.5 mm/year since 1993 which is equivalent to one inch every seven years.
  • Global Upper Ocean Heat Content is Rising. The top 700 meters have warmed by .3F since 1969. Thermal expansion of the ocean water as it warms contributes to the sea level rise.
  • Glacier Volume is Shrinking Worldwide. Just Greenland and Antartica alone have lost at 150 cubic kilometers of ice annually in recent years.
  • Declining Artic Sea Ice. Both the extent and thickness of artic sea ice has declined rapidly over the last several decades (see chart below).
    Capture1I accept the reality of the scientific evidence for global warming but I am certainly no “alarmist” in terms of what our response should be towards addressing it. It will be many, many years before renewable energy sources like wind and solar are able to make a substantial dent in worldwide energy needs.
    The best thing to do in the meantime is to attempt to decrease carbon dioxide emissions from fossil fuels through carbon capture and storage. A carbon tax would create a huge economic incentive for the coal and oil industry to solve this problem. If and when they figure it out, it is likely that the technology involved would rapidly spread around the world.
    This would represent a real solution to a very serious problem.

Why We Badly Need a Revenue Neutral Carbon Tax

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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.

 

 

Climate Change Requires N2N

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I have been reporting for several days on a fascinating new book, “Smaller Faster Lighter Denser Cheaper” by Robert Bryce and, in particular, what it means for climate change.
CaptureHere are some key points:

As Mr. Bryce says, “It’s time to focus our inquiry on the key question: if we agree that too much carbon dioxide is bad for the Earth’s atmosphere – what are we going to do? What’s the best “no regrets” climate policy as we move forward?” Here’s how to proceed:

  • We will need much more energy in the decades ahead in order to raise the living standards of the more than two billion people who are still living in energy poverty.
  • Hydrocarbons now provide 87% of the world’s total energy needs. There are still no affordable, scalable substitutes for the vast quantity of hydrocarbons that we use today.
  • People in the industrialized countries cannot and should not hinder the efforts of the world’s poor to gain access to cheap, reliable sources of energy.
  • We must give a very high priority to adapting and hardening our cities, networks and structures so they can better survive severe weather events.
  • N2N (natural gas to nuclear) provides the best no-regrets energy policy because those fuels can provide significant environmental benefits with relatively low economic costs.
  • The combination of natural gas and nuclear energy has reduced America’s carbon footprint by 54 billion tons over the last six decades. By comparison, wind, solar and geothermal sources reduced emissions by just 1.5 billion tons over the same period.

In other words, we need to be practical about the new sources of energy which will be needed to meet growing world demand. Renewable energy sources cannot nearly provide what is needed. Exploiting the current abundance of natural gas while further developing nuclear energy is the best way to proceed.

Smaller Faster Lighter Denser Cheaper

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I look at a lot of books and every once in a while I find one that I really like. Such is the case for “Smaller Faster Lighter Denser Cheaper”  by Robert Bryce, a scholar at the Manhattan Institute.
The book starts out: “We are besieged by bad news. Climate change, pollution, famine, water shortages, war and terrorism, the mess at Fukushima, political gridlock, and the ongoing debt problems and economic malaise in Europe and the United States are dominating the headlines.” This leads some people to embrace “collapse anxiety,” the feeling that our problems are so great that our prosperous Western lifestyle cannot be sustained and soon may crash.
Capture“This pessimistic worldview ignores an undeniable truth: more people are living longer, healthier, more peaceful, lives than at any time in human history. Amid all of the hand wringing over climate change, etc. the plain reality is that things are getting better, a lot better, for tens of millions of people around the world.”
“Dozens of factors can be cited for the improving conditions of humankind. But the simplest explanation is that innovation is allowing us to do more with less. We are continually making things Smaller Faster Lighter Denser Cheaper.” Computers are becoming smaller and faster. Nearly everything we use is getting lighter. Our engines and farms are getting denser. Innovators are driving down costs and making goods and services cheaper.
For example, how does the SFLDC perspective apply to energy use?

  • In July 2012 blackouts hit northern India leaving 600 million people without electricity, even though India’s coal use doubled between 2002 and 2012. India relies on coal for 2/3 of its electricity production and has enough coal reserves to last a century. In India and worldwide, coal use will almost surely continue to increase.
  • Consider the following power densities (footprints) of various forms of energy:
    i) biofuels: .3 watts per square meter
    ii) wind energy: 1 watt per square meter
    iii) solar photovoltaic panels: 6 watts per square meter
    iv) oil well: 27 watts per square meter
    v) natural gas: 28 watts per square meter iv) nuclear plant: 50 watts per square meter

Conclusion: From a power density point of view biofuels are a very inefficient source of energy and wind energy isn’t a whole lot better.
What is the best energy policy going forward? Stay tuned!

The Problem of Soaring World Population

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As I remind readers from time to time, this blog is focused on the fiscal and economic problems of the U.S. Our biggest fiscal problem is not having enough tax revenue to pay our bills.  Our biggest economic problem is a stagnant economy which leaves too many people unemployed or underemployed.
My last three post have been on the subject of climate change. This is a worldwide problem which has a huge effect on the U.S.  There’s going to be a cost in cutting way back on carbon emissions.  But there will soon be a much greater cost if we don’t cut back and therefore suffer the growing adverse environmental effects.
Now there is another looming problem.  The journal Science has just published the article “World population stabilization unlikely this century,” reporting that world population, now 7.2 billion, is likely to reach 9.6 billion by 2050 and 10.9 billion by 2100.  Much of the increase will take place in Africa due to higher fertility rates because of a recent slowdown in the pace of fertility decline.
CaptureThe implications of a growing world population are huge:

  • First of all, it will add even more stress to an environment which is already being increasingly stressed by global warming.
  • Secondly, it will aggravate a slowdown in middle-income wage growth throughout the developed world. This is very evident in the above chart. What is happening is that the force of globalization is shifting lower skilled work to lower paid workers in the developing world. A larger population in the developing world will simply exacerbate this trend.

The noted economist, Tyler Cowen, has a different perspective on this problem, “A Strategy for Rich Countries: Absorb More Immigrants,” in today’s New York Times.  But Mr. Cowen’s approach is untenable for the long run.  The idea that you can offset an increase in the elderly population with an even bigger increase in the younger population will lead to an ever-growing overall population.
What then is the answer to over-population?  It is either more birth control or less sex.  Take your pick!