Why We Need a Carbon Tax VI. Because of China!

Posted on July 3, 2014 by jackheidel

Over the past two months I have posted several blogs about the seriousness of global warming and demonstrated that the best way to address it is with a carbon tax of about $20 per ton of CO₂ released into the atmosphere. Here is a summary of my argument:

The reality of global warming can hardly be questioned. For example, the extent of summer ice in the arctic ocean is shrinking rapidly.
Expecting the Environmental Protection Agency to be able to administer an effective program by giving each state a target for CO₂ emissions reductions is cumbersome and arbitrary.
The current EPA program of trying to reduce carbon emissions by 30% over the next 15 years will set up an economic incentive to substitute natural gas for coal and slow down the further development of nuclear energy and renewable energy sources such as wind and solar power. This is because natural gas is plentiful and inexpensive. But the burning of natural gas still releases half as much CO₂ as coal and so will continue to contribute to global warming.

In yesterday’s New York Times, the reporter Eduardo Porter in “China’s Hurdle to Fast Action on Carbon” calculates that even under conservative growth assumptions, China will almost double its carbon emissions between now and 2040. And this doesn’t even consider all of the other developing nations which also will increase their use of inexpensive energy sources in order to increase their standards of living.
In other words, even if the EPA is able to force a big switch from coal to natural gas in the U.S., any such reduction in carbon emissions will be dwarfed by increases from other countries.
A carbon tax on CO₂emissions will not only give a big boost to all non-fossil fuels, it will also unleash American ingenuity to figure out how to accomplish carbon sequestration in the use of fossil fuels. This will enable the U.S. to achieve a much greater reduction than 30% in carbon emissions over the next 15 years and beyond. Furthermore the new technology which we develop to do this will be immediately available for use around the world.
With such a program the U.S. would actually be demonstrating how to effectively attack global warming instead of just advocating for it!

Why We Need a Carbon Tax V. We’re Playing with Matches!

Posted on June 26, 2014 by jackheidel

“Risk is like fire: If controlled it will help you; if uncontrolled it will rise up and destroy you.” Theodore Roosevelt, 1858 – 1919

Just a few days ago I featured an Op Ed column in the New York Times “The Coming Climate Crash” by Henry Paulson, the former Secretary of the Treasury. He discusses global warming as an economic issue. The increasing number of severe storms, deeper droughts, longer fire seasons and rising sea levels it will cause will wreak tremendous economic damage on our country and the whole world as well.
A new report, “Risky Business” produced by the Risky Business Project, elaborates much further on this theme. “The American economy is already beginning to feel the effects of climate change. These impacts will likely grow materially over the next 5 to 25 years and affect the future performance of today’s business and investment decisions in the following areas: coastal property and infrastructure (damaged by storm surges and higher sea levels); agriculture (disrupted by higher temperatures); energy (costs will go up to provide more cooling).”
In addition to the large scale economic effects referred to above, global warming will affect each of us in a very direct way. For example, in Omaha NE where I live, in just a few short years the current average of about 10 days per summer with a temperature over 95 degrees F, will increase to about 25 such summer days.
All of these effects are assuming that we continue on our present course of rapidly increasing CO₂ build up in the atmosphere. We do have a choice in this matter. We can cut back but it will take a big effort to accomplish this. The whole world needs to cut back and it is up to the U.S. to lead the way.
Republicans need to step forward on global warming. It is highly irresponsible to say that any anti-carbon measures we take will just hurt our economy and ignore all of the harmful effects of proceeding on our present course. It is also irresponsible to say that we can’t act unless everyone else does too. If we are exceptional, and I agree that we are, then it is up to us to set an example for the whole world.
We need fiscal conservatives in office to address our very serious deficit and debt problems. But fiscal conservative have to win the trust of a wider group of voters to show that they are deserving of broader support.

Why We Need a Carbon Tax IV. The Economic Risks of Climate Change

Posted on June 22, 2014 by jackheidel

I have now posted more than 200 entries on my blog. I have discussed a wide variety of fiscal and economic issues in the last year and one-half. But there are really, in my opinion, just a fairly small number of basic themes in my posts, such as:

Eliminating deficit spending so that we can shrink our national debt over time to a substantially lower level than the current 73% of GDP.
Boosting our economy in order to put more people back to work as well as bringing in more tax revenue.
Maintaining an activist foreign policy including a sufficiently strong military force to protect our free and democratic way of life.
Maintaining high citizen morale by addressing other critical domestic issues such as economic mobility and increasing income inequality.
Addressing natural threats to our way of life such as global warming.

Today’s New York Times has an excellent article on global warming “The Coming Climate Crash” from a surprising source, former Secretary of the Treasury, Henry Paulson. He was in office when the credit bubble burst in 2008 and is therefore an expert on crisis management. His argument is that global warming presents a strong economic threat as well as an environmental threat. It therefore should be addressed by an effective economic policy, such as a carbon tax. He points out that:

Global warming is a far more intractable problem than a credit bubble, not at all amenable to a relatively quick fix by government action.

A threat from nature like global warming is not an ideological issue because it affects all of us in the same way, conservatives and liberals alike.
A future with more severe storms, deeper droughts, longer fire seasons and rising sea levels creates huge economic risks which we ignore at our great peril.
A carbon tax doesn’t outlaw the use of fossil fuels but rather creates a huge economic incentive for developing carbon sequestration when fossil fuels are burned.

Government regulation of fossil fuels by the Environmental Protection Agency represents a timid and arbitrary half measure that won’t have nearly the impact of a sound economic incentive like a carbon tax. Let’s get serious and do things the right way!

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

Posted on June 5, 2014 by jackheidel

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.
But 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!

Why We Need a Carbon Tax II. The Scientific Evidence Is Very Strong

Posted on May 8, 2014 by jackheidel

A few days ago I made the argument that “we need a carbon tax” because global warming is real and our response to it should not be defaulted to regulatory action by the EPA and individual states acting on their own. Just two days ago the U.S. Global Change Research Program released a voluminous new report, the “Third National Climate Assessment”, giving many examples of how dramatically global warming is already affecting life in the United States as well as all over the world.
Perhaps the most direct effect in the U.S. is an increase in average temperatures of almost 2 degrees Fahrenheit since 1900. This means that summers are longer and hotter and that winters are shorter and warmer, on average. Hotter temperatures mean that there is more moisture in the atmosphere and rain comes in heavier downpours.
It is going to be harder and harder for doubters to deny the accumulating evidence. Global average temperatures have also increased by almost 2 degrees F in the past century. The most dramatic, and visible, evidence worldwide for climate change is the shrinking of the artic polar icecap measured each year in September. Although the ice extent fluctuates from one year to another, the pattern of decline, as shown below, is clearly evident.
A worldwide response is urgently needed and the wealthiest country in the world should step up to the plate and lead the way. A carbon tax does not mean an end to using to using fossil fuels but simply provides a strong incentive, without government picking winners and losers, to cut back on carbon emissions. We can be confident that, with a strong economic incentive, American technology will figure out how to remove carbon from fossil fuels during combustion.
The sooner we begin a program along these lines, the better off we will all be in the very near future as the world continues to get warmer.

Why We Need a Carbon Tax

Posted on May 4, 2014 by jackheidel

The Los Angeles Times recently ran the article “U.S. electricity prices may be going up for good” (reprinted in today’s Omaha World Herald), stating that “Experts warn of a growing fragility as coal-fired plants are shut down, nuclear power is reduced and consumers switch to renewable energy.”
The article goes on to say that “the problems confronting the electrical system are the result of a wide range of forces: new federal regulations on toxic emissions, rules on greenhouse gases, state mandates for renewable power, technical problems at nuclear power plants and unpredictable price trends for natural gas.”
“New emissions rules on mercury, acid gases and other toxics by the Environmental Protection Agency are expected to result in significant losses of the nation’s coal generated power, historically the largest and cheapest source of electricity. Already two dozen coal generating units are scheduled for decommissioning.”
“At the same time, 30 states have mandates for renewable energy that will require the use of more expensive wind and solar energy. Since these sources depend on the weather, they require backup generation – a hidden factor that can add significantly to the overall cost to consumers.”
Here is what we should do instead:

First, we agree that global warming is for real. For me, the clearest and most irrefutable evidence is the rapidly diminishing extent of the artic polar icecap each summer. There is much evidence that cause of global warming is the use of fossil fuels, coal, oil and gas, which releases carbon dioxide into the atmosphere.
Secondly, even though the problem is worldwide, and China emits more CO₂ than the U.S., nevertheless the U.S. has a responsibility to provide the leadership of which only it is capable.
The problem is, as the LA Times article makes very clear, our disorganized and inefficient response to the problem. Separate and haphazard responses by individual states are not nearly enough, rather we need a coherent national response.
A national carbon tax of perhaps $20 per ton of CO₂ emitted would provide a uniform market mechanism to encourage the reduction of carbon emissions from fossil fuels or their replacement by alternate sources of energy. Coal power plants, for example, would not be forced to shut down but would have to figure out how to emit less carbon in order to remain economically viable.

This would be a big improvement over our current situation!

Global Warming Is For Real. What Should We Do About It?

Posted on December 8, 2013 by jackheidel

Although the threat of global warming is vastly overhyped, it is happening nonetheless. Perhaps the best single indication of this is the shrinking of the north-pole ice cap. The New York Times reported just a few days ago, “Large Companies Prepared to Pay Price on Carbon”, that at least 29 major companies “are incorporating a price on carbon into their long-range financial plans.” This includes five big oil companies ExxonMobil, ConocoPhillips, Chevron, BP and Shell. Specifically, these major companies have all come to accept the reality of global warming and are preparing for a carbon tax to be levied before long.
The Congressional Budget Office has recently released a report “Effects of a Carbon Tax on the Economy and the Environment”, which concludes that a tax of $20 to emit a ton of CO₂ would raise a total of $1.2 trillion over a decade. Such a tax would, for example, raise the price of gasoline by 10 to 15 cents per gallon.
Once we admit that global warming is for real, and that we need to address it in a serious way, a carbon tax is almost certainly the most efficient, and least economically harmful, way to do it. A tax on carbon output would do many things. It would give a big boost to renewable energy (solar and wind) with, or without, special subsidies for renewables. It would speed up the transformation from the use of coal to natural gas, since natural gas only contains half as much carbon as coal does. And it would create an economic incentive to speed up the development of carbon capture in order to make the burning of coal more cost competitive.
Of course, a new $120 billion per year carbon tax will affect the economy. But it will do the least damage if the proceeds are used entirely for deficit reduction. So we can address a serious environmental problem which effects life on earth and can do so in a way which also addresses a very serious fiscal problem.
I believe that the American people are up to making a sacrifice like this if the consequences of inaction are clearly explained to them.

It Does Not Add Up

Jack Heidel's blog on fiscal responsibility

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