Hurrah: Copenhagen dampens banks' green commitment

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More precise is Burnable Hydrocarbon Tax Now. It is a slogan without a defined policy. It does not tell us what specific hydrocarbons must be taxed and whether the tax is levied on the producers or the burners or the users of the energy produced. Whichever, the tax is highly regressive.

Is the imposition of a tax by the major producers and burners likely or even feasible? The cap and swindle crowd argues a straight forward tax is politically impossible.

I don't think Copenhagen had much to do with the choice of tax or cap/trade. The different nations would announce their targets at Copenhagen, but the strategy to meet those targets would still largely be decided on the national level. The one complication being carbon offsets in developing countries; it's easier to work in the concept of paying for preserving rain forest in Brasil if you have a carbon market.

May we sign you up as another proponent of Eli Rabett's Simple Plan to Save the World. Quick, Nick will be here any minute

"I don't think Copenhagen had much to do with the choice of tax or cap/trade"

I disagree. While the specific mechanisms are not specified, establishing a cap for every country (and adding the whole mechanism of carbon trading) means that we are stuck with many of the complexities of cap-and-trade.

I think a move away from caps is important. Much better to focus on a price on carbon, and let individual countries figure out how to achieve that.

Here I am ER. I just enjoy the fantasy world you guys live in. Since I have been posting here I have been lectured on how it was all Bush's fault. How with Obama we would have cap and trade or even better a carbon tax, and that the whole world would go along. That there was going to be a bilateral deal between the US and China......

Meanwhile everything I put in my post continues to match reality. Unlike Eli's "plan."

And by the way I use your ridiculous name, so if you want to be familiar it's not Nick it's Nico.

[I think this is a big arguement, and whilst we clearly have different views on the matter, we can all disagree politely. Eli's name is deliberately a bit silly so you're allowed to say ridiculous. But it can be hard to know what people expect to be called. On the internet, where no-one knows you're a rabbit until you chew carrots, I think abbr is best as a default, so WMC is my preference for those I don't "know"; but for those I do which includes you, William is just as correct -W]

Scruffy: I don't see how that makes any sense. The entire point after all is to reduce emissions below some point. So it makes perfect sense for the different nations to negotiate how much they're willing to try to reduce emissions, and whether that commitment is binding and verifiable, and then make it their responsibility to figure out how.

No matter what the tax-proponents say, an emissions target is implicit in their thinking; it makes no sense otherwise. You will try to guess what carbon tax will result in the emissions cut you want. The cap is still in your thinking; there's just no guarantee you'll meet it.

[I think I disagree with this, or at least the thrust. The tax people (that includes me) think that emissions need to be reduced. I think that emissions need to be reduced so far from their current levels that we aren't even *close* to having decided how to do it (in terms of infrastructure changes). Given that, talking about levels is wildly premature. What we need to do is get people used to the idea of an increasing price for carbon, and (IMO, though I know NN disagrees) the best way of doing this is a simple tax on carbon. Once you have people used to the idea, and you build the infrastructure needed to support the tax, it can be increased to meaningful levels. But that is decades off.

By contrast, the cap-n-trade stuff *looks* like it gets you meaningful emissions targets: but they are all (ho ho) hot air, as Kyoto showed -W]

I also think a Pigovian tax is preferable to C&T. If the tax is revenue neutral (like Hansen or Gore's suggestions) then I think it becomes a much more open process and less susceptible to claims of fraud (and, actual fraud).

Saying that Kyoto was hot air is a little unfair - had the U.S. stayed in, it most definitely would have been binding. (Of course, one can argue that had the U.S. stayed in, it would never have been ratified since the scuttlebutt on the streets was the part of the impetus for ratifying was to annoy the U.S.).

Also, there is some indication that the EU ETS has actually reduced emissions there.

Just like starting with a cheap tax that is politically palatable, and then increasing it to actually useful levels, one can start with a cap that is borderline non-binding and then ratchet it down until it is useful. I'm not convinced they are that different.

I have no problems with a tax (indeed, I think price-certainty is more important than quantity-certainty for a stock problem like GHG levels), but honestly, my preferred option is whatever we can implement soonest that will give a) a price, and b) a signal that we're serious about this.

I do think that the implications that cap-and-trade will lead to massive fraud in a way that carbon-taxes won't is also unfair and wrong. There are plenty of markets out there (pig futures anyone?) that have been operating for decades without fraud. The recent unfortunate episode with credit-default-swaps was more due to the weird bundling and distributing of risks and bad rating policy than due to the "trading".

-Marcus

I agree with some of Marcus's points. However it happened, emissions are down in the EU, so it's not so easy to discuss events there as hot air.

If you just want people to get used to some idea, that idea can be either a tax or a trading system. But even an initial trading program will have some cap, no matter how modest. An initial carbon tax could be set too low to have any real impact on emissions, and then people will wonder what's the point.

I also agree that there has come a distrust of markets based on the latest fiasco that is somewhat naive. People have been trading all sorts of things for centuries; there's nothing inherently unstable or fraudulent about it.

"Economists should cease proffering policy advice as if they were employed by a benevolent despot, and they should look to the structure within which political decisions are madeâ¦. [We should] postulate some model of the state, of politics, before proceeding to analyze the effects of alternative policy measures."

-James Buchanan Jr.

IOW its pointless to talk about the pros/cons of C&T/carbon tax without discussing the political feasibility of each. And as we all know what's politically feasible in one country aint necessarily so in another. In the U.S. tax is a four letter word. Same goes in parts of Canada (B.C. and QC notwithstanding). OTOH there is some familiarity with C&T in North America from the acid rain days, which is why many people thought that this approach was the most practical first step.

In the EU where taxes are much more politically acceptable they still chose to go with C&T. Why? Preference for emission certainty over price certainty? Nah. As WMC points out C&T naturally creates a group with a vested interest in its continuation (i.e. traders). But this is not necessarily a bad thing. Put another way, is it better to have a less efficient system that is more politically robust or a more efficient system that has far fewer interests to defend its existence?

If I had to chose between a weak carbon tax or a weak C&T system (i.e. one with generous caps and offset provisions), I'd probably still choose C&T simply because it probably has the best chance of widespread adoption in western countries.

I'd also point out that how you deal with leakage from uncapped jurisdictions (e.g. China) isn't necessarily as simple as imposing a carbon tariff (aka border tax adjustment) as suggested by Mr. Rabett. google Thomas Brewer for more on this.

It's a way of concentrating minds.

Seriously, a four line suggestion is obviously going to have to be expanded on, but we know from experience with VAT that such mechanisms can work. Any bunny can explain VAT in one sentence, but the actual regulations take books.

Seriously Marlowe, can you suggest a better way of dealing with leakage?

Nico Nierenberg continues the traditional dance of working with those who obstruct progress and then bragging about how his prediction has come true of how progress will not be made.

Any bunny can explain cap and trade in two sentences, and we know from acid rain that it works in principle.

Marlowe: What evidence is there that cap/trade is less efficient, anyway? In theory, I think it's more efficient, in that it should provide the cheaper way to deliver some amount of emissions cuts.

Fair enough Bunny. But doesn't the point about regulations taking books lead one to question the simplicity of a carbon tax? I should point out that this is one of those situations where in principle I'm in favour of one thing (carbon tax) but when I put on my practicality hat, I'm forced to concede that the alternative is likely to be the best game in town, even while recognizing its obvious drawbacks (it is less ineffecient, more complicated, and has far more potential for gaming). Perfect being the enemy of the good and all that.

I'd also point out that under a C&T system it is much more difficult for big oil to pass on costs as the implied compliance costs for them are far less transparent than a straight carbon tax. This is important when you consider how inelastic gasoline/diesel demand is and how sensitive people are politically to anything that raises their fuel prices.

Leakage is a very thorny issue and I don't think that there is a silver bullet. Under C&T free allocations for trade-exposed sectors (e.g. cement, fertilizer) is one way to go, output-based rebates is another, and BTAs are another option. IMO it's again not a question of which one is best, but rather which one you can manage to implement, and it seems to me that the risk of trade wars induced by CBAs is something that one ignores at their peril.

Carrot eater - I haven't actually seen any empirical evidence that compares the economic efficiency of a carbon tax with C&T (which I suspect is because neither has been in place for very long). But in principle I would suggest that C&T is less economically efficient because of all the transaction costs involved -- monitoring, trading, verification, offset protocol development, etc. With an upstream carbon tax it really is a lot simpler. Now you might say that you can't access cheap offsets with a carbon tax, but I'd argue that this isn't necessarily the case. For example, a government could use revenue collected from a carbon tax to finance abatement from ag and forestry...

WC,

I don't actually disagree with the idea that taxes might be able to cause minor reductions in carbon output in the countries that impose them. The net global effect will be less because some percentage of the carbon output will be "exported." Carbon targets might do the same thing although more awkwardly. I just don't think that this is likely to start us on a trajectory to a solution.

ER,

You give me way to much credit if you think I am actually in any kind of position to influence policy in a way that would make my predictions come true.

WC,

Sorry I didn't notice your in line comment, I will use WMC in the future, I thought I noted others using those initials although I now see the problem :-).

I had already informed ER that my name was Nico not Nick in an earlier post. He was free to call me Nicolas which is what I use here or NN, but when you shorten someone's name it is rude to use your own version.

And you can cut this whole thing out if you like, but calling me a murderer and a Commie sympathizer on the last thread does tend to annoy.

NN,

Is it fair to say that you're in the Pielke Jr/S&N camp that emphasizes R&D over carbon pricing? If so, then I'd suggest that the two aren't mutually exclusive. Moreover, focusing on the former undermines efforts to achieve the latter. Over at RP Jr's I asked him why a strategy centered on R&D was likely to be more effective than carbon pricing + R&D. He told me to read his book. Perhaps you could explain and save me the trouble?

R&D vs carbon pricing is a false dichotomy, and it misses the point. If the issue weren't time sensitive, you'd of course wait for the R&D to continue at whatever pace it's on. Maybe by 2200 some energy source will be found to be cheaper than coal, and practical on a wide scale. Then, the market will naturally and eventually transition to whatever that is.

Carbon pricing is simply a recognition that we might want things to change on a faster pace than that.

The real problem, perhaps, is not in our atmosphere but in ourselves.

http://www.scientificamerican.com/article.cfm?id=political-science-skep…

Imagine the movie script:

"I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very greenhouse gases I provide, then questions the manner in which I provide it.â

Marlowe and Carrot,

If there was a single government with the political will then carbon pricing would be an important way to speed innovation/R&D. But in this world that just doesn't exist.

A second order point is that if you were to assume that the world government was a democracy then it would never be able to implement the level of taxation necessary.

So I believe that instead of massively wasting time trying to gain international agreements to limit emissions, we should instead be trying to put together international agreements to speed innovation. This could truly be a positive role for government in this circumstance. This could consist of direct government research, grants, and prizes. (I tend to favor the third.)

I also think that it may turn out that air capture is the most practical "short" term solution. As opposed to trying to retool the world economy. Think of it as a catalytic converter for the planet. I have been following with interest a number of recent articles in Science and Nature on the topic.

NN: You're again losing the issue of time. If it were likely that more government grants and prizes alone would get you the technological improvement and implementation you need fast enough, then that's all you'd do. (You should be doing those things, anyway). But that does not appear likely, so you add the oomph of a carbon price to spur both R&D and early adoption.

Just because it's difficult to reach global agreements doesn't mean it's impossible. The Montreal protocol was successful; and say what you will, but some better-than-nothing scenario will likely emerge from Copenhagen.

Air capture is practical? Why on Earth would you rather handle huge volumes of air at low CO2 concentrations, instead of much smaller (but still big) volumes of air at higher CO2 concentrations (in the flue)? As it is, carbon capture and storage from flue streams appears rather uneconomical; why would something even harder be considered practical? Maybe some form of capture and sequestration will eventually be the answer, but that's far from obvious now.

Carrot,

I think I may write a blog post on the Montreal Protocol. It has been brought up since the 80's as the poster child for international agreements. But for a number of reasons it has essentially no similarity to a carbon emissions agreement.

Air capture is currently the most powerful source of limiting CO2 in the atmosphere. It is currently implemented by the biosphere which continues to suck up about 40% of the carbon we emit. It is certainly theoretically possible. I will probably also put together a post highlighting recent articles on the topic.

Thanks NN. So to summarize:

1. carbon pricing internationally is somewhere between hard and impossible.

2. international coordination on R&D less hard

3. Therefore we should go with government funded R&D + prayer ?

A few of observations.

First, carbon pricing need not proceed on a global all-or-nothing basis. As you well know many jurisdictions have already adopted carbon pricing policies in one form or another. Obviously the more that participate the better. But it's also important not to overstate the risk and impact of leakage on a carbon pricing policy. As numerous studies have shown, the risk of leakage is pretty limited to energy-intensive trade exposed sectors (i.e. cement and fertilizer). Collectively these industries don't contribute much to global emissions compared to other sectors (e.g. electricity and tranportation).

Second, I remain sceptical that effective internationally coordinated R&D efforts would be any easier to implement than a modest cap or tax. Aren't countries around the globe in the business of competing with each other? Wouldn't many of the same realpolitik issues that plague carbon pricing arise (e.g. IP rights)? IMO, all publicly funded R&D efforts should be seen as a complementary measure to carbon pricing (which induces private sector R&D) rather than an alternative policy approach.

On the air capture thing, unless you're talking about biochar, CCS (either chemical or geological) is way, way up on the cost curve; probably somewhere near space-based solar. Definitely has the potential to be a game changer, but do you want to bet the farm on it? Shouldn't we exhaust other options first (e.g. energy efficiency)?

One area where I think we'll find agreement is that far too much time over the past 20 years has been spent discussing targets and timetables that were based on wishful thinking rather than political realities. Enviros would have been smarter to support much more modest caps in the beginning so that the groundwork could have been laid rather than fighting for really big targets in the distant future. On this issue of tactics I think Pielke is right. On the other stuff not so sure.

NN: Whatever similarity or dissimilarity there is between Montreal and Kyoto and Copenhagen, that alone should keep you from making broad statements about international frameworks. Make statements that preemptively note the differences. And while there are certainly differences in scale, nature and difficulty, I'd note that some people were saying all the same things before Montreal.

And I think the notion that air capture is practical because the ocean and trees are carbon sinks is beyond silly. The Earth's primary energy source is solar fusion; does that mean fusion is practical for powering our needs? I'm aware there is work being done on air capture, but there's work being done on a lot of things. If we're talking about feasibility, we need to talk costs - current and projected.

Marlowe,

I don't think we are so far apart. I would be interested in the research that you refer to, as I think leakage from manufacturing would be pretty significant. It takes quite a bit of energy to produce a car, or food for that matter. So when you import it, you are exporting quite a bit of carbon production.

Carrott,

Funny you should say that about fusion. As bitterly slow as the progress has been on fusion, there is a much higher probability that it will solve the CO2 issue than global agreements. For my money air capture is a higher probability than either.

http://www.climateshifts.org/wp-content/uploads/2009/12/COP.jpg

What does it profit a bank?

Why are you speaking as if there is a choice between global agreements and technological progress? False dichotomy, again.

And again, whatever you end up writing about air capture or fusion or whatever, ground it with actual engineering numbers. What is the cost today, and what might the cost be in 30 years? How does it compare to other ideas? (and then think to yourself how much more attractive it would look for both R&D and commercial implementation, if there were a carbon price in place).

NN,

see here for a good primer and list of references:

http://www.climatestrategies.org/our-reports/category/17/204.html

Apparently, one proof carbon taxes are neither likely nor feasible is that no two people even agree on what they should be.

I'm looking for an article called "How long must I sit and wait for somebody - Anybody - to make scores of governments raise taxes on their people." It's a tough Google.

Consider looking to solve the problem without government. People don't need government sanction or direction. Communication is instantaneous worldwide.

@ Marcus - you say:
"(indeed, I think price-certainty is more important than quantity-certainty for a stock problem like GHG levels)"

Can you (or anyone else) elaborate on that a bit? Are you implying that "flow" problems would be more appropriately dealt with by a cap, and "stock" problems are more amenable to a tax?

My suspicion/intuition is that as stumble forward we are going to discover more externalities with a potential need for a price - and we may well find that stock problems (flow problems) generally yield better to price (quantity) or vice versa. But my hunch is also in the opposite direction to yours...

I'm thinking of the implications of the Allen, et al. and Meinhausen, et al. papers in Nature last year regarding the "trillionth tonne" dilemma for carbon - where the problem is not just with the absolute cumulative stock we load into the atmosphere but with a (fixed) budget of remaining allowable emissions - for all practical future timescales... My hunch is that we should be controlling the quantity and letting the remaining scarcity signal the price... But I don't know and would be interested in why you think price is best for a stock problem...

Interestingly, subsequent to my question above, I googled ["stock problem" "flow problem" tax cap], and up pops Myles Allen himself here, to say that:
o âWe need a carbon price nowâ, either through cap-and-
trade or a carbon tax... is a dangerous fantasy...
o No conceivable carbon price will stop all fossil fuel
consumption.
o We canât solve the problem by making carbon more
expensive.

So, uh, maybe I shouldn't be pointing to his work in support of either! (I must admit, his comment surprises me. He references the Montreal Protocol and fishing quotas, but then seems to dismiss carbon pricing??? Would be interested in the text/dialogue that went with this...)

I'm always amazed that "emissions trading" still comes up all the time. There are extremely good arguments based on history that it will not work, but the EU went ahead with such a scheme. To everyone's great surprise (well, not really), it was an unequivocal failure. However, that certainly did not prevent people from trumping it up as a "success" and claiming that it can be the basis of even greater success in the future. Some people have a bizarre notion of success; the EU ETS has only been a success in promoting bureaucracy, and that is definitely an extremely bad thing in a world where we need to figure out how to be more productive and have a controlled reduction in the population.

Now looking to the UK there is a great deal of hypocrisy on the part of politicians. While there's a lot of warm and fuzzy talk about being good global citizens and reducing CO2 emissions, politicians are not giving a single cent to industry efforts to do something valuable - oh no, they're fixated on busywork to give the impression that they care, but there is no scientific basis whatsoever for the claimed benefits of their actions.

I recall a colleague (who has been chief of some large research organizations) telling me a few years ago that he no longer attends government sponsored meetings on climate change mitigation since the room is invariably filled with lawyers and accountants who want to talk about how they can make money off an Emissions Trading Scam. Euh ... Scheme. He claimed that in most of the meetings he had attended he was the sole scientist in the room. That guy has a habit of understating things as well so I think there's a good chance he's right about being the sole scientist at the meetings.

Rust -
I suspect his last slide is tongue and cheek in the sense that there is no single solution (i.e. carbon price ALONE is not sufficient, since we would never let prices reach a point where emissions would decline suffficiently based on elasticity alone).

What he seems to be pushing for is biomass pyrolysis with biochar sequestration (i.e. carbon-negative energy) but I've never seen estimates on cost that wouldn't at least double to triple the cost of electricity production...

Montreal protocol is not particularly useful as a guide on GHGs IMO for several reasons:
1) only a couple of manufacturers, mainly DuPont in the U.S.;
2) DuPont already had an alternative in the wings (HFCs) when the protocol was developed (see Karen Litfin's Ozone Discourses for a good summary);
3) Whle the use of CFCs is/was fairly widespread it is nowhere near as ubiquitous as fossil energy nor as central to the basic functioning of our economy.

Slightly off-topic but a question for WMC if he's paying attention. Myles seems to be assuming in his runs that the airborne fraction doesn't change over time (i.e. there is no saturation/degradation of carbon sinks. Is this correct and is the same assumption made for IPCC SRES runs?

@Paul Kelly: If we look at the case of Norway (which as far as I know is the only state to tax emissions), there is a penalty (although you could call it a tax) for CO2 emissions from natural gas production. The penalty is high enough that producers have taken action to reduce CO2 emissions. So people who claim that such measures will never work have a severe problem with denial of reality.

Another thing is that the people involved in those emission reduction operations all denounce "cap and scam" and "emissions trading scams" as nothing but blatant corruption. So who are we to believe - an industry which is taking effective steps to reduce emissions and who are convinced that penalties/taxation are an effective tool (even though as capitalists they are not keen on the added expense) or politicians who say that what is already being done and proven to be effective can never work and they have a much better plan - a plan which industry people who know what they're talking about absolutely condemn and which has in fact been proven to be worse than worthless (thanks to the EU ETS).

@carrot eater: Sorry to spoil your party, but emissions in the EU have increased, even with the movement of a lot of production to non-EU countries like China. There is a claimed decrease on a per-capita basis (which may be genuine) and a claimed overall decrease, but an overall decrease is not real - it is a lie which relies on the "carbon offset" scam. That's part of the problem with "carbon offsets" (and 'cap and trade' since the 'trade' part is the old carbon offsets delusion) - you simply lie about what is being accomplished.

Hey Mad care to provide a link? I thought they declined...

http://www.eea.europa.eu/pressroom/newsreleases/2009-greenhouse-invento…

Now why would you say such a thing?

> the biosphere which continues to suck up about 40% of the
> carbon we emit ...

And how much of the total biosphere have we lost in the last dozen or so centuries? Approximately half, would you say?

Remember fifteen feet or so of topsoil gone from the American great plains, and all of the big trees. Same in Europe.
Almost all of the big fish gone, and the whales -- not there consuming the smaller organisms and making way for replacement primary producers. And the "Fertile Crescent" of the old books, now mostly mineral subsoil. And the Sahara.

Hmmm.

Seriously, has anyone done the simple math? If we restored the biosphere to where it was a dozen centuries ago -- would it approximately double or treble in living material?

Would that take the CO2 out of the air?

I'd be willing to bet my life on it, if there were any way to make the bet. I've been doing restoration for thirty years, up to 50 acres now, just in case it matters.

EU emissions, like all other things, requires first asking which EU. The EU has grown substantially in the past twenty years. Emissions have declined/remained steady in the "core EU" (Germany, France, Benelux, Denmark, etc, while they have increased at the edges, the Warsaw Pack Europe, Spain, Portugal, Greece, etc.

Another thing which tilts the table is that the Warsaw Pact countries (E. Germany, Poland, Czech Republic, Slovokia, Latvia, etc. went through a terrible depression in the early 90s which really depressed emissions and everything else.

Is Britain still a part of the EU??

It's not so much time, but the cumulative nature of greenhouse gases in the atmosphere that makes R&D, if not a loser, nothing more than a delaying tactic. If you wait for the mixing ration to go to say 440 ppm in say 2040, and then assume that the technology appears, is implemented worldwide, the majic wand is waved, and emissions go to zero, allow Eli to point out you are hallucinating.

That is why delay is dangerous and pushing air capture is wishing for a pony. There are technologies that could be implemented today and have a significant effect if there were C&T or carbon taxes.

One last comment on Dupont, they developed the HFCs BECAUSE they recognized that there was a serious problem with the CFCs. The HFCs were deployed only when the Montreal Protocols put a floor under the price of the CFCs. OTOH, non carbon energy sources were limited by the ability of the oil producers to open the taps. No one was going to invest in solar, when the Saudi's could drop the price of oil to zilch. France developed nuclear power as a strategic investment, not an economic one, but they also put a huge tax on petroleum products.

As a fusion researcher, I have to say that the idea that "there is a much higher probability that (fusion) will solve the CO2 issue than global agreements" is pretty ridiculous. Even the optimistic scenarios ( http://www.iter.org/proj/Pages/ITERAndBeyond.aspx ) don't see a demonstration tokamak power plant putting energy into the grid before 2040. At that point, we are already toast under business as usual. Fusion makes no difference to the current policy analysis.

And presumably widescale adoption of any alternative to fossil fuel would require a "global agreement" (i.e. carbon price) anyway: taking coal out of the ground and burning it is always going to cost almost nothing if you can ignore the externalities.