Brought to you by Dave Roberts and Greg Mankiw. Indeed, a carbon tax used to fund offsetting reductions in other forms of revenue acquisition, actually ought to be conducive to the understandable emphasis on growth uber alles that you see in places like India and China (less deadweight loss) and would just help ensure that as Asia's developing giants become richer they do so in ways that are less carbon-intensive than what you see in the existing rich countries.
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International Aspects of Carbon Taxation
18 Sep 2007 05:25 pm
Comments (7)
It is so sweet how the US is concerned about China and India. What are the emissions in the US per capita - about 1/3 higher than in other Western countries? Who are China and India manufacturing for? What's that to do with growth uber alles? There are only very few countries who have practiced this: US, Honk Kong, UAE, ..? So - what has CO2 to do with growth?? There CAN but does NOT have to be a connection (quite the contrary - Suntech anybody?)
I have been an environmentalist for decades (one of those who try to walk and not just talk) and although I am set to make substantial profits from a carbon tax (in fact it could double my income over night) - I would rather see some other changes first:
E.g. the same subsidies for solar as we have given nuclear, coal and oil! Is that asking for too much?
Make energy costs and energy markets transparent (and all other polluting markets like agriculture). California - by far the most intelligent, open-minded and forward thinking state in the US (and beyond) is investing only $ 3 billion in solar over 10 years.... They spend $5 billion per year on farm subsidies... Securing world peace and stability (in the middle east through oil) has cost us how many TRILLIONS?
With about 30% of the war costs - the US could be energy independent TODAY!!!??? With about the money that is spend on bugging our phones we could have...
There is no point in taxing gasoline in the US if the burger you are eating (from Amazon forest feed) is 10 times worse than driving a car for hours in terms of C02. Still - the livestock feed from the Amazon would NOT be taxed accordingly and neither would the Burger! Or say you tax the burger with 5 Cents.. you still put 15 Cents in tax money into it? There is NO transparency in sight with the "simple carbon tax"...
The New Republic has one of the more intelligent articles on this issue...
And for some reason I also see context to The Economist's claim that the ONLY reason why per capita income in the US is higher than in Europe - is that the US employee works many more hours.
However - if the US would stop wasting and burning tax money on saturated fats, oil, wars, tapping into individual rights by reading all our calls, emails, etc... the US would have the chance to grow faster than Europe, almost as fast as China...?
But no - we the US - want to close our borders, stop free trade, freeze our life-styles - pour all our taxes into the hands of a few rich farmers and oil barons as well empower the military with trillions so that we can take over small countries quickly (15 years max)...
Again - we humans should consider ourselves LUCKY that oil is running out and getting expensive. We, the world, should count ourselves LUCKY that California exists...
Can you imagine a world with Boston, DC, NY, London, Paris, Moscow, Austin, Tokyo but without Palo Alto, Berkeley or SF...??? What a disaster?
We need more immigrant Republicans who like gays and the environment.. We need about 100 times more Berkeley's. I would sacrifice Harvard, MIT, Oxbridge.. we need the bankers in NY and London as support functions but otherwise.. I mean really?
Modern-day Athens where are thou? Why does it take so many decades for the rest of the world to understand and copy the Bay Area?
We have too many linear, primitive New Romans on the East Coast and in Europe and in Asia... Too many people who pride themselves in being barbaric (modern terms used to disguise barbarism are: rational, realistic, pragmatic, .. in reality they today stand for: stupid, fearful, closet men?)
Sorry for the distraction away from carbon-tax... Methinks that some form of emission tax is a good idea (in certain cases like LIVESTOCK agriculture) - but from what I can read on political and economist blogs - the environmental discussion will take time to mature?
Organic minds rather than engineering ones are rare (especially wherever one finds red-brick architecture. Darwin was an exception but he has left us a long time ago.)..
Prost
For 3 billion dollars invested in nuclear power, or wind power, one could obtain 3-8 times larger reduction of the use of fossil carbon than from solar power. But both nukes and wind have vehement opponents (wind on local level, but effective nevertheless). I would suspect that geo-thermal power from the volcanic Shasta region would be more cost effective too.
For some reason, solar power, although technologically least cost effective, has the best political reception.
The hope of carbon tax is that to avoid tax, people will choose most profitable investments, and that they will maximize carbon reduction rather than "karma points".
That said, I would invest in solar power too, but in a very different manner.
Hugo: do you want to tax methane emissions of beef and milk producers? Good luck! In principle, excellant idea. We can have much less methane-related sources of proteins and calcium. Right now, cows are sacred (at least, the farms with cows).
pitor
your post is just blabla.. please show me (or explain to me) how nuclear or wind can compete with the economics of solar. All three sources are emission free (one of them can cause health troubles). two of them are by definition remote and not local (transportation costs must be included). Only one can deal with peak loads without the need for new grid enhancements...
Regarding methane emissions.. IF there is an emission tax it has to include ALL C02 EQUIVALENTS (like methane) otherwise it is utterly useless!
I would personally not tax anything... I would personally stop subsidizing CO2 and would use that money to subsidize emission free energy sources. Why tax - why tax - why tax??? (Again - I would personally gain tremendously if this Mankiw tax is introduced but this discussion should not be about me?)
I recommend the New Republic article on the matter!
PS: PLEASE somebody look at the oil price and then explain to me what a TAX would do? nothing! oil prices are rising so rapidly that a tax would not even be noticed.. Oil was at $20 only 5 years ago. Today it is at $84... tell me - what does a 30% CO2 mean in this context compared to my suggestion to stop subsidizing C02 (no more livestock and coal and oil subsidies.. no more "stability" policies surrounding oil - the 80s are long gone?)
It is estimated that 1 kWh of solar energy costs ca. 25 cents to produce, for wind the estimates were 6 cents and for nuclear 3 cents.
Nuclear cost depends a lot on regulatory regime and "learning curve". I think 3 cents would be close to what it costs the French. Wind costs depend a lot on location, but California has a lot of prime locations un-exploited, the off-shore strip and the mountain ridges of Cascades. Solar costs are rather easy to figure: assume 2000 sunny hours of noon equivalent per year, 3 dollars for installing 1 Watts of photovoltaics, you produce 2 kWh, let it go for 20 years, 40, so the first approximation is 7.5c, but there is also installation (up to 10c) maintenance (up to 14c) and interest (where is my financial calculator, ah, 5%/year, 20 years, add 60%, 22c).
Why tax? The cheapest electricity is from coal, it really costs around 3c/kWh, and it pumps a lot of carbon to atmosphere.
The installed power of electric plants is roughly a trillion of Watts, and replacing it with alternatives costs definitely more than a dollar per Watt. We will not make reasonable progress with subsidies alone (it would take the cost of 2-3 Gulf wars, and we cannot spend this kind of money on something actually useful).
About the tax on oil: I paid ca. 7.50 dollars per gallon in Scotland. Somehow, it is easy to notice when a full tank costs you 50 pounds (100 dollars). The public transportation in Scotland seems very good, trains between Glasgow and Edinburgh depart every 10-15 minutes and I rode in a full train. In Highlands you have buses serving fairly small villages (well, it is hard to rely on them, but, possible, anyway, most of Scots live near good public transit).
But I agree that taxes alone are just passed to consumers who adjust their lifestyle in a glacial pace (perhaps spending less on vegetables to afford gasoline, what if you have to go to work in your beat-up pickup truck). If we want to replace coal and gas fired power stations, we must make it profitable for the utilities, hence, do something to make alternatives cheaper. Either you make the difference by collecting income tax and passing subsidies, or by collecting excise taxes on carbon. The latter seems to be more direct and politically easier.
A good observation that we effectively subsidize corn, feedlot beef and sweeteners, in one fell swoop promoting profligate energy usage and bad nutrition. Modest first step would be to stop that. Subsidizing food alternatives could be considered too.
My calculation on the cost of solar energy was perhaps unfair. Maintenance should be the current cost, so only photovoltaics and installation should be multiplied by 1.6, hence 20c/kWh.
Moreover, I looked up the lowest price on Google, and with larger installations, one could buy directly from the producers, and perhaps one could cut the instalation and maintenance. For example, roofs of shopping malls and other commercial buildings could be used, they are large, flat and strong, and they use quite a bit of electricity on the spot too. Perhaps one could realistically cut the cost to 10c/kWh.
Then again, can one install ANYTHING on a roof for less than several dollars per square foot, and here we have also a lot of wires and other electric gizmos? But this also means a lot of job for craftsmen. Negawatt investments like residential geo-power would also be good for local economies.
Piotr
I was being too vague myself but you have done some good research. You rightly pointed out that any energy emission tax is actually only about coal!?
Here is the general break-down as it is being discussed among some non-biased energy think-tanks like the DC based Prometheus Institute. When it comes to the production costs of energy – the common figures used are:
Nuclear
Best price: 3-6c / kWh Good base load generator. Expensive upfront investment. Long development time. Transportation and grid costs not included. Last plant build in 1979 because of bad (hidden) economics. ANY new plant would at best cover the loss of OLD plants. Replacing old plants AND adding more capacity would take many decades and many trillions? Very similar to an Iraq war?
Hydro
Best price: 2-10c / kWh Good base load generator. Most remaining sites in developing countries. Not enough sites (max ca 15% of current demand).
Wind
Best price: 3-8c / kWh On-shore and Off-shore: Large turbines and farms very cost competitive with current technologies. But unpredictable intermittent. Not enough sites (max 50% of current demand). Transportation and grid costs not included.
Geothermal
Best price: 2-10c / kWh Good base load power where resources are available. Transportation and grid costs not included.
Ocean Technology
Best price: 8-15c / kWh Still experimental. Expensive ongoing maintenance. Not enough sites.
Bio-mass
Best price: 3-12c / kWh Better choices for replacing liquid fuels for transportation. Not enough land (max 40% of current demand).
Fusion / Fission
Best price: unknown Likely to only be economical for base load generation 30-50 years away. Too difficult / too unforgiving
Oil and Gas
Best price: who cares? There is not enough of it?
Coal
Best price: 3-6c / kWh Good base load. Current price does not reflect environmental costs. Transportation and grid costs not included.
Photovoltaic
??? (this is too important not to be researched by those who have real interest themselves?)
Before we continue it might be worth noting that there will obviously always be a certain mix, an energy portfolio of different sources. And there will obviously be a transition over the coming decades. What is the best future mix and what is the best transition strategy is what is of interest TODAY?
Except for ONE source - today’s energy solutions ALL share one thing in common: they are NOT local!
That is not an environmental problem per se but it is an ECONOMICAL problem! As you know – the RETAIL price for electricity is what influences supply/demand and inflation etc. The RETAIL price for electricity is made up of 3 more or less equal components:
1. Production
2. Transport
3. Last mile (grid)
Say the price / kWh is 12c. In reality – the consumer pays 4c for transport, 4c for the grid and 4c for the coal or nuclear energy… This has substantial implications. The grid in the US is OLD!! It needs overdue maintenance work, improvements and enhancements.
In other words – ANY energy source that CANNOT be produced locally needs to face these extra costs AND points of FAILURE!! There is only one energy source that does not pose the single point of failure syndromes..
But it gets WORSE! During peak time (11-15:00) we consume more energy than during the rest of the day combined. A Nuclear plant however cannot produce more during peak time – and even if it could – the grid must be able to handle it. This is why peak energy is the most important and most expensive..
There is only ONE energy source that actually produces the most energy during peak hours AND is local (does NOT need the grid).
Do you see where I am getting at? Even WITHOUT the ENVIRONMENTAL costs and considerations – there is a STRONG ECONOMIC CASE for a certain energy source HERE and NOW to at least cover PEAK LOADS. Nothing comes CLOSE!!
Either the source is too far away (wind/coal/nuclear) or there are not enough resources (wind/oil/gas)… only once beats all others in every respect!
Ok – that was ECONOMICS ONLY so far..
Regarding the environment and emission taxes…
If I understand the Mankiw tax correctly – it would apply ONLY to coal when we speak of ENERGY? Oil and gas are disappearing anyway and will face high prices – so only coal remains which is CO2 rich? All other energy sources except for hydro are rather environmentally friendly? (hydro’s environmental destruction should NOT be underestimated but it is more implicit than coal and oil).
But if the goal of the emission-tax is to save the environment and hence humans – we have to do more than tax energy (coal)????? Otherwise I would rather call it COAL TAX and NOT EMISSION TAX?
We know that livestock agriculture causes more DIRECT CO2 emissions than all cars, trucks and planes COMBINED. We know that livestock agriculture causes more soil erosion and deforestation than anything on the planet. Yes – burning coal or oil causes CO2 but getting rid of a forests and biodiversity has priceless “opportunity costs” in terms of CO2.
In other words, if one were to calculate all DIRECT and INDIRECT CO2 emissions, coal and oil – EVEN TODAY - are less dangerous than a burger or KFC.
I hope that ANYBODY who has a degree in Economics or Business or anything.. will agree that there is not point in pouring $X trillions in subsides into something – only to tax it back seconds later. Are we bored or are we soo rich that we can burn money instead of coal?
Why would you introduce an EXTRA law or regulation to help ease a SYMPTOM rather than stopping the expansion of the cause and the actual problem?
Nuclear, coal, oil and gas have received trillions in subsidies already.. compared to ALL energy sources and compared to livestock agriculture – green energies have received NOTHING so far!! With the nuclear money that we are giving to India (and soon Pakistan, Iran etc) we could have turned the whole world into an emission free generator. Coal and nuclear have received the most non-transparent gifts from the government (strange financing, strange infrastructure support, etc.).
It is therefore ironic that we pouring NADA, NOTHING (in comparison) into the ONE industry that would also produce many local and distributed jobs, etc.
My strategy in a nutshell would therefore be:
Before one has REAL CO2 accounting in place (which is a prerequisite for an emission tax) – I would STOP subsidizing CERTAIN CO2 emissions (livestock). If it turns out that politicians do not want to include ALL CO2 emissions (livestock, burgers, milk-shakes, chocolate, café late) into their tax – I would also ONLY pick and chose when it comes to energy taxes.
I.e. I would tax ONLY coal (here and now). Oil and gas is a joke anyway (who cares unless you are a corrupt Russian farm-Mafiosi and are sitting on some Gasprom stock? Given the high oil prices it even makes sense to dig out the pathetic tiny Russian and Alaskan reserves? Not good but soon all over anyway.. – the worst scum that humans can produce is drawn to these “industries”. Many old, fat dicks..)
I would use the $ that is being saved from the stop of CO2 subsidies (ca $20 billion from the farms and $10 billion from other sources) to subsidize emission-free energy and farming. No complicated taxes – no international treaties.. Economic benefits for everybody here and now. China and the rest will voluntarily follow (due to cost-benefit). No Mafiosi in Russia and China made as much money as Mr Shi in only 5 years (Sun Tech). Let them build mainframes – let us build the PC & Internet revolution.
Again – The New Republic has one of the few good assessments about this strange situation? But I strongly recommend watching the following lecture on the Economics of Energy.. and a certain looming revolution: http://www.researchchannel.org/prog/displayevent.aspx?rID=7757&fID=2226
What is hence our BIGGEST ENVIRONMENTAL challenge in the US? It is called USDA (and the handful of people who get $20 billion per year and put 0.5% of it back into lobbying...) As long as the farmers put 0.5% of their 20 billion back into the pockets of politicians - it will be hard to get rid of the WORST CO2 subsidy in the history of the US?
I hope that helps explain my position. I have left some other important arguments in favor of solar out for now... but it’s a start?
Comments closed October 02, 2007.
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Heads in the Sand
Tangentially, I recently watched a fascinating hour long YouTube video from David Rutledge arguing that there are considerably fewer hydrocarbons left in the ground to be extracted than most estimates account for, and thus there will be considerably less carbon put into the atmosphere than the lowest range IPCC estimates.
Dunno if he's correct or not, but it's the first interesting piece of global warming dovishness I've seen.
Posted by Petey | September 18, 2007 5:34 PM