There’s a fairly decent recap of alternatives for reducing carbon in an op-ed in the LA Times today which I commend to your attention. The op-ed summarizes three alternatives—described as legislative mandate to reduce emissions, “cap and trade” (the approach favored in Europe to date), and a carbon tax—and in conclusion coming down on the side of a carbon tax.
That’s been my own position for some time but I’ve started to reconsider that for a number of reasons. The first reason for my going wobbly on the idea of a carbon tax is captured in this observation from the op-ed:
And it could be structured to be far less harmful to power consumers. While all the added costs under cap-and-trade go to companies, utilities and traders, the added costs under a carbon tax would go to the government — which could use the revenues to offset other taxes. So while consumers would pay more for energy, they might pay less income tax, or some other tax. That could greatly cushion the overall economic effect.
Well, it could, but our experience with governments raising one tax to offset another hasn’t been too good lately. And what other tax would be offset? A reduction in income taxes tends to favor those who have income that is taxed i.e. the rich. A reduction in property taxes tends to favor those who own property that is taxed. And so on.
But I have another concern as well. A carbon tax will at least at the margins tend to disadvantage businesses that need lots of energy, i.e. manufacturing, relative to those that don’t, i.e. service. The manufacturing won’t just evaporate; it will go elsewhere. Recently, “elsewhere” has been China.
Manufacturing in China may reduce carbon production in the United States but will it reduce total actual carbon production? I don’t believe it. And it’s my suspicion that smokestacks in China will be harder to bring under control than smokestacks in Ohio.
Isn’t there another way that doesn’t cause factories (and jobs) to move to China? For example, isn’t it possible to provide subsidies for energy-producers to enable them to reduce their emissions?
I hope that someone more knowledgeable than I will comment on this. I admit to substantial confusion in the matter.
Update
More on carbon taxes vs. carbon markets from John Tierney at the New York Times. Hat tip: Glenn Reynolds.
Missing from these debates seem to be some obvious questions. First, will they actually reduce global warming, even if adopted on a large scale? Secondly, if so, would they cost less in the long run than simply mitigating and adjusting to the effects of global warming, both negative and positive? In the rush to reduce our carbon footprint I would like to know if that course of action is really the best available.
Basically, that’s my point, Andy. It’s unclear to me how moving carbon production from the U. S. to China (or from France to Romania) reduces worldwide output.
Yeah, I meant to agree with you – I guess I didn’t make that very clear, sorry.
I’m not more knowledgeable, but my outline of a plant would be:
A. Increase in motor fuel tax. The transportation sector accounts for over 25% of CO2 emissions and is expected to be the growth area. There are other reasons to increase this tax, including national security and budgetary (cheap gas encourages the type of road construction and development that increase government costs).
B. Decrease lower income tax rates. Given that the fuel tax would be regressive, I don’t see how A. would be politically feasible without a revenue neutral reduction in income taxes at lower incomes.
C. Subsidize nuclear energy. Environmentalists learned a long time ago its easier to radically change centralized industry than households. Nuclear energy is the most feasible way to move rapidly towards CO2 reductions. The market won’t make this shift. The projected growth in electricity demand is pretty flat. Most of the coal-burners are merely going to upgrade and expand existing plants. The projections don’t take into account the potential shift of the auto industry to electric/hybrid cars. The McCain/Lieberman/Obama energy bill has these subsidies.
BTW/ According to this report subsidies for coal appear likely to exceed those for ethanol under the new Congress.
http://www.sj-r.com/sections/news/stories/115523.asp
“It’s unclear to me how moving carbon production from the U. S. to China (or from France to Romania) reduces worldwide output.”
Because it doesn’t. Indeed, by shifting production to nations with less-efficient and more-polluting power generation, it’s much more likely to INCREASE carbon emissions.
It’s also notable that when carbon-tax proponents were at it a couple of years ago, they claimed that a gas tax of $1/gallon would significantly reduce carbon emissions. Well, events have raised the price of gasoline by more than $1/gallon and the projected reduction in consumption simply has not occured. But the carbon-tax proponents still want the $1/gallon tax. Gee, could it possibly be about the tax revenues?
Tully to be fair, I don’t think (reasonable) people thought gas taxes would drop demand over night. The upward moving price of gas has been paired by the desire for more fuel efficient cars, which is projected to reduce the carbon footprint of the average person, but only in the time frame of the auto-fleet turnover of the entire country, which I think is 15 years or so.
Although I think Andy’s question of reduction vs adaptation is one not covered enough. How much does an extra tenth of a degree Celsius cost us, and how much does it take to prevent that same increase. I am also somewhat uninformed, but I think a large factor is how widely you want to look. If you look at just the US alone, and simply in $ terms, I suspect you might get a very different answer than if you look at the probability of destabilizing water-stressed regions in Africa and Asia, and the possible ripple effects to our potential economic growth in markets or offshore labor…
Thought I would pass this along. It’s a good interview on the News Hour about a month ago on Global Warming:
http://www.pbs.org/newshour/bb/environment/jan-june07/adaptation_04-25.html
The use of energy and the so-called “carbon footprint” is driven solely by end-users. The reason higher gas prices haven’t reduced gasoline consumption is because people are not reducing consumption, period. It is a FACT that America uses more energy, but America is us.
The focus on government solutions for personal issues is fundamentally flawed. CAFE standards, it could be argued, reduced oil consumption from what it would have otherwise been — but oil consumption is up, period. Tightening CAFE standards may reduce the increase temporarily, but it isn’t going to make carbon emissions lower than they are right now. I heard on the news this A.M. that Honda is discontinuing their hybrid vehicle, because it isn’t selling (although the Prius seems to be a success story).
If the ecologically concerned really want to reduce carbon emissions, they need to convince people, not governments, to reduce energy useage. IF they can’t convince people, government action will not be useful.
The focus should be global warming gases, not just carbon. Consider burning more wood for energy that might otherwise rot. Rotting wood releases methane, which is 20 times more efficient as a global warming gas than CO2. After 7 years methane oxidizes to CO2. CO2 averages 100 years before being absorbed. Thus eliminating the rotting cycle of wood may reduce global warming gases. Currently logging operations leave behind huge slash piles. These often are burned or just left to rot. Find a way to use scrap wood as a fuel source efficiently, such as encouraging wood pellet stoves or external wood burning furnaces, and you’ll make an reduction on overall global warming gases, while reducing overall energy dependence.