Campaign News

Hello carbon tax friends: This week’s post is mostly a thought experiment about carbon taxes (“How much is enough”, a reference to Alan Durning’s 1992 book by the same name) but before going into the details I want to promote a few items:

1) Bob Lynette (who is active with Olympic Climate Action in Port Angeles) created a “Climate Change Hardball Pledge” and is asking folks to add their names to the pledge: “I will only support candidates who commit to timely, meaningful action to reduce climate-disrupting activities.”

2) I’m doing comedy-and-carbon-tax talks in the Tri-Cities and Yakima April 23-24 and talking carbon pricing at 350 Seattle‘s Connecting the Dots event on Sunday April 27. More info and registration here for Connecting the Dots. Also, WA Clean Tech Alliance is hosting a climate luncheon series, starting April 28; I’ll be on their June 9 carbon tax panel.

 

Okay, now on to “How much is enough”:

At a Climate Desk Live event two weeks ago in Seattle, host Chris Mooney asked about the BC carbon tax. (See time marker 1:26:45 in the video.) David Roberts of Grist responded that the BC carbon tax “works” in that “it is not hurting the economy” and “there are mild carbon reductions happening” but that “if your definition of works is reduces carbon as much as we need to it’s nowhere close to working. So then you need to think about, well, what size of tax would produce those reductions. And then all of a sudden you’re talking about a very different political beast.”

Roberts’s response was unduly negative—a bit like complaining that an overweight dieter who’s lost 10 pounds hasn’t lost 50—but it got me thinking: What kind of a carbon tax would “reduce carbon as much as we need to”? If the tax of $30 per ton of CO2 in BC is not enough, how much would be enough?

And here’s my answer: $100 per ton CO2. A carbon tax of $100 per ton of CO2, implemented globally during the first half of this century, would put a sufficient dent in fossil fuel emissions.  In that light, the $30 tax in BC is a great start, roughly one-third of where we need to get in the decades ahead.

Before I defend this claim, here are two caveats. First, I’m ignoring deforestation and other non-fossil greenhouse gases. Second, I’m assuming a global policy because the point of regional or even national policies is to influence international policy.

Okay: Where does $100 come from? First let’s translate: a rule-of-thumb is that $100 per ton CO2 works out to about $1 per gallon of gasoline, about $0.10 per kilowatt-hour of coal-fired power, and about $0.05 per kWh of natural-gas-fired power.

Now, $1 per gallon of gasoline may not sound like a climate game-changer, and that’s true. But the farther you get from the Northwest the more climate change stops being about gasoline and starts being about electricity, especially coal-fired power plants.

And $0.10 per kWh of coal-fired power is a climate game-changer. It would more than double the price of coal-fired power and effectively eliminate coal from the global energy budget.

That’s huge. Hansen et al. 2013 (see figure 2) considers both conventional and unconventional fossil fuel reserves and estimates there that earth contains about 800 more gigatons of carbon in terms of oil, over 2,000 more gigatons of carbon in terms of natural gas and over 10,000 gigatons of carbon in terms of coal.

But $100 per ton CO2 wouldn’t just eliminate coal from the global energy budget. It would also do a number on natural gas: that number would be at least $0.05 per kWh of natural-gas-fired power, perhaps more if you also included fugitive methane releases.

As for oil, well, $1 per gallon would provide a stronger incentive for the development of alternatives like biofuels and electric vehicles. I have some confidence that those alternatives are coming, but the truth is that without them it’s not clear whether any carbon price (or for that matter any other policy short of decimating the global economy) would “reduce carbon as much as we need to”. After all, Europe already has gas prices on the order of $8 a gallon, so there’s clearly a strong global willingness to pay for petroleum. That demand is likely to overwhelm any carbon policy unless and until viable alternatives appear.

But forget about oil. Climate change is a global problem, and as such it’s only modestly about oil and only moderately about natural gas. It’s mostly about coal, and $100 per ton is more than enough to deal with coal.

Comments ( 8 )

  • Jim Lazar says:

    Don’t “forget about oil,” Yoram.

    We fight wars over the stuff.

  • Nils says:

    Thanks for the post. $100 may be a good guess. But if we’re assuming that for climate stabilization (say, 450-550 ppm CO2e), global emissions must disappear before 2100 and rich countries should aim for 80% reductions by 2050, $100 seems only like a starting point. Check out slide 30 of this PPT:

    http://www.aei.org/files/2012/11/13/-fawcett-clarke-and-weyant-presentation_100923874600.pdf

    Anyhow, accompanying policies could lower the needed carbon prices below what’s shown on that slide (whereas technology failures like lack of CCS could make it even harder).

  • Rob Briggs says:

    Hi Yoram,

    How about embracing James Hansen’s approach to answering that question? Begin ramping the carbon price at $10.00/ton CO2 per year and keep going until CO2 emissions drop to 90% of 1990 levels. That will be your price, empirically derived. The fee needs to be phased in anyway to minimize economic dislocation, so there is little cost in near-term benefits to using a ramp rather than declaring a price. Why don’t you poll your Tri-Cities and Yakima audiences to see what they think?

    It does beg the question how steep the ramp needs to be. To that I would suggest looking at James Hansen’s paper here [http://www.plosone.org/article/fetchObject.action?uri=info%3Adoi%2F10.1371%2Fjournal.pone.0081648&representation=PDF] and using the rate that energy price elasticity studies suggest are required to meet the ~6% decline rate (from memory, don’t quote me) that Hansen and others now suggest are needed. $10.00/ton CO2 per year may be a bit too low.

  • Michael Foster says:

    Man, I like your response Yoram!
    Yes, David Roberts’ response was unduly negative, but what a great point. I’m glad you put it to the test.

    I just read that Exxon tests their vulnerability to a carbon bubble and stranded assets using $80/ton without noticing any impact on their business; hence they can account for global action and still say, ‘we don’t think we’re going to see any assets stranded’.

    I am thinking frequently about how we push for a meaningful carbon tax starting price. That initial deposit will set the course for what follows.

    I love how Bob’s pledge came out. I really like what he’s doing. I’ve been pushing the same idea from the other side, a “No New Carbon Pollution” Pledge for candidates, to vow to oppose new projects/infrastructure/policies that will generate an increase in emissions. Mike O’Brien, Sally Bagshaw and the like all say sure we’ll sign it but who else will? And yet, if it’s worded well, I like the idea of a litmus test for candidates which effectively declares “I like pollution!” “We’re not polluting fast enough,” if they refuse to sign.

    I wonder if WCV or another group would be interested in offering it to candidates? Who is most likely to want to put that to candidates? We have an election coming up.

    Plant-For-The-Planet ambassadors can ask candidates to take the pledge for publicity, but they are not “the voters”.

    It would be great to get every candidate on the record before November. Are you for or against “New Carbon Pollution”?

  • Bob Jeffers-Schroder says:

    I agree with you completely! I also signed the pledge which has been my voting policy for several years.

  • Paul Thiers says:

    Hi Yoram,

    Thank you for this useful post. Does your calculation take into account the reduction in the background price of fossil fuels as the tax reduces demand? I’m thinking of a Jeavons effect here where a tax on coal reduces demand which causes lower base price, keeping use above the target. If this is likely to be significant then a flexible tax can be used to maintain the high total price even as demand declines. This means that the portion of the total price being collected as tax has to increase as coal use drops. So when you say that BC’s $30 is one third of where we need to get in the coming decades, this might be better phrased as $30 is one third of where we need to be now.

    Just something to think about.

    • Yoram Bauman says:

      Good point, Paul, but I’m thinking supply is pretty elastic, especially for coal.

      • Paul Thiers says:

        I hope you are right. My fear is that Asian markets will provide additional demand. Domestic production continues to show sensitivity to domestic demand, but has been floating above demand for the last four years. (the EIA data is here: http://www.eia.gov/totalenergy/data/monthly/pdf/sec6_2.pdf )

        Transportation bottlenecks may help with this, of course. Many people here in Southwest Washington are doing what they can to fight coal and oil exports. But if they fail, I think a dynamic tax may be needed to keep the price plus transport high. We want this policy to push China towards the transition as well.

        Again, not something to foreground now. Just something to keep in mind.

Leave A Comment

Your email address will not be published. Required fields are marked *