I think the key insight that's missing in these discussions is we need to tax carbon at the point of extraction, not at the point of consumption. We need to make mines and wells unsustainably expensive to operate. If people really need oil, they'll find ways to manufacture it more cheaply from biowaste.
The trouble is that this is a Hard Problem because a huge fraction of the world's carbon is extracted in or by countries whose geopolitical standing would be crushed by this. But unless we do this, the same amount of carbon will ultimately be extracted and subsequently burned by somebody.
(Also when push comes to shove nobody actually gives a shit about any of this, and any politician who deliberately does anything to raise fuel prices will find their head on a pike)
" If people really need oil, they'll find ways to manufacture it more cheaply from biowaste."
What? No.
We don't care about the extraction.
If oil must be burned, don't care whether it's Oil from wells or Oil from biowaste.
If it's oil for burning an engine, and we need that engine to operate for some economic reason - then we actually want people to consume the cheapest version.
We don't want to make people jump through hurdles to 'run an engine that we need to run' for no reason.
We may want to make sure that running that engine is economically essential, in which case keeping prices high, or, by some regulation.
The act of 'extraction' is not a problem, there's not much negative from that.
Other than geostrategic issues (i.e. Russia) we don't care where it comes from.
What we want to do is tax the fuel itself - not emissions.
The emissions are a direct function of the fuel.
We know X litres of gas will create Y tonnes for Co2 and that's it. So tax the fuel instead of getting people to figure out emissions.
Oil that is used for other reasons, we don't really care about.
We could put a fuel tax, and a natural gas tax up right now - we already have mechanisms in place for that.
>If oil must be burned, don't care whether it's Oil from wells or Oil from biowaste.
Yes, we really do. There is vastly more carbon in the atmosphere than a hundred years ago. Where did it come from?
You can burn oil made from biowaste all day and all night and it won't raise CO2 levels one little bit. Why? Because all that carbon came from the atmosphere to begin with! All the carbon in living things comes from plants, who get it from atmospheric CO2. It's a closed cycle.
The problem is solely, 100%, taking carbon that has been safely in the ground for millions of years, and through a convoluted process putting it in the atmosphere and never retrieving it. And then being shocked that atmospheric CO2 levels are returning to what they were millions of years ago, in the period aptly known as the "Carboniferous".
When you think about it, the real problem is the mismatch between how much CO2 is released and how much is absorbed. It took millions of years to absorb the CO2. It will take us 400 to "burn it all". If we had to burn coal within the limits of what the planet can absorb it wouldn't be a very effective power source. It could barely compete with trees.
Yes. The real real problem is energy. We are expending stored energy at a rate much higher than it was stored. Using plants to sequester carbon is a slow and long-winded way of extracting solar energy, although it has a number of advantages too - low-tech, self-sustaining, self-storing, convenient medium for immediate low-tech use i.e. burning.
To sustain our current per-capita energy consumption beyond our accumulated biomass stores, the limiting factor is land area. There's probably not enough space on Earth to devote to growing biomass purely for energy. Solar panels reach 10 times the generated power per unit area, easily, and we can do even better by exploiting energy accumulation that happens without technology, like wind.
"You can burn oil made from biowaste all day and all night and it won't raise CO2 levels one little bit. Why? Because all that carbon came from the atmosphere to begin with! All the carbon in living things comes from plants, who get it from atmospheric CO2. It's a closed cycle."
Oil comes from plants and animals, crushed under the weight of the earth, it's also a 'natural cycle' - but that doesn't matter at all.
"The problem is solely, 100%, taking carbon that has been safely in the ground for millions of years, a"
No, it has nothing to do with that at all.
It doesn't matter where or how the carbon gets into the air.
Anything that is going to be used as a fuel, we tax, relative to the amount of CO2 it emits, and that's that.
If as it turns out it's incredibly more efficient to burn 'biofuel' than it is to extract Oil - fine. But it's probably not the case.
As a sideline on this conversation. I'm VERY interested in dTal's point and if it stands up to scrutiny. To me, it makes sense. The carbon in the air now is from carbon that was sequestered. It was in oil, it was in trees, it was in the rocks. Then we let it go. We drilled oil, cut down the trees and burned them and built them, we made concrete.
So. If you take carbon out of the ground, and expect to see it floating in the air, you should be taxed. That's the idea.
But does this make sense? Just how much of the carbon in oil really is destined for the air? How much of the wood? How much of the stone? Or is there some other chain I'm missing? How much carbon would be sequestered in plants that produce biofuel? How much of a net negative is ethonol production anyway? What about other fuels? This subject seems complex to me.
You seem to think all this is wrong, and it could be! I really would be interested to hear where the logic breaks down.
If you planted a tree purely for the purposes of later burning it, it would 'capture' a bunch of Co2, then when you burnt it, it could release that Co2 creating a net 0 cycle.
It's not efficient as an energy cycle.
Not even considering the fact that wood burns in a very 'dirty' way and would require a lot of energy to 'clean' the emissions.
We probably wouldn't burn wood directly. Ethanol is also biomass. In fact, every single fuel we "burn" is biomass. The hard part is getting hold of carbon that isn't glued to some oxygen already. Once you have it, you can process it into whatever form best suits you.
You have to be careful when you speak of "efficiency". You have to specify, with respect to what expended resource, and what desired goal? If we say the expended resource is "land area" and the desired goal is "powering all of civilization", then indeed the the "efficiency" of growing trees and burning them is not so great, compared to say solar panels. But if the expended resource is "environmental damage" and the desired goal is "heating a cabin in the woods", burning tree wood is extremely efficient.
yes. That's a net zero. That's the point. If the point is carbon, then net zero is net zero. This is what dTal is saying. We shouldn't tax an activity that is net zero.
So it seems the real point is that it's "dirty"? We'd have to clean... what? Particle emissions? Most areas I see woodburning done have high quality air, low particle counts. Because their density is so low.
This keeps happening. The core rebuttable to dTal's argument is being left unstated. You keep saying it's wrong, you keep not saying why.
It depends on what would happen to the biowaste otherwise. Probably if the waste isn't turned into fuel, it will just rot and release the carbon anyways. In that case, it wouldn't make sense to tax the fuel. It only makes sense if the carbon would otherwise be safely stored and kept from going into the atmosphere.
Yes, the argument is 'burn stuff that's going to go into CO2 anyhow' but it just doesn't add up.
There are not that many dead trees, they don't release all of their Co2, you don't get that much energy, and it's a 'dirty emission'. Burning Hydrogen gives you CO2 and H20 - nice and clean. Burning wood gives you a lot of bad things.
So, I think it's worth talking about CO2 and other emissions (particulates, etc) separately. I totally agree that wood isn't great to burn from the standpoint of all the other stuff that goes into the air. And I agree that it's not a very efficient energy source either. It makes sense to use if you're chopping down trees near your rural home and burning them for heat in winter, but not as, say, a source of fuel for a power plant.
But I think that it's accurate to say that when you burn wood, you're emitting CO2 that would have been released as the wood decayed anyway. In that sense, you're not really contributing to climate change. This doesn't count any energy used in harvesting and transporting the wood, which of course could contribute to emissions.
To use another example, if you grow sugar cane, and using green energy sources, turn it into ethanol, and burn that in a car instead of gasoline, that's basically carbon neutral. If you hadn't grown the sugar cane, something else would have grown there, and decayed, and released the carbon into the atmosphere.
It would be valid to argue that if we had let the field turn into a forest, it would trap more carbon than the sugar cane would. And we should let forests regrow, where we can! But it's a one-time thing -- once the forest is grown, it would stay stable in the amount of carbon captured there. To continue to trap carbon, we'd need to keep harvesting the trees and doing something with them to permanently take them out of the carbon cycle, like turning them into buildings or somehow turning the carbon in them into something that doesn't decompose and burying it.
Their point is that nowadays carbon from dead plants and animals generally gets recirculated, but this wasn't always the case. Back before the enzymes to break down lignin and cellulose existed, when trees died the carbon they had extracted from the atmosphere didn't recirculate. And if we hadn't started digging up fossil fuels and burning them, that carbon would have remained buried basically forever. So where the oil comes from does matter.
A lot of people actually do give a shit, myself included! I like the approach of coupling a carbon tax with a dividend -- it's a lot more palatable to centrists and people who lean right, because it isn't going to what they might consider government waste -- the money from the tax just gets returned to the people. This is the policy that Citizens' Climate Lobby pushes (the EICDA [1]), and there are a LOT of people working on getting it passed.
Taxing at the point of extraction or consumption should be equivalent, right? No one extracts for the sheer fun of it.
It seems to me we could take a page out of Europe's VAT book which is ultimately paid by the consumer but tracks the "value added" throughout the supply chain from raw resources to finished goods.
So the implementation I like (https://energyinnovationact.org/) would tax the production, but companies could get a tax rebate for non-fuel consumption, such as manufacturing plastics. That puts the onus on companies to get their rebate and is a lot easier to enforce, but is pretty fair -- plastics don't cause emissions aside from the energy used in their production (which would already be taxed if it comes from fossil fuels). I guess one issue would be if you're burning a lot of plastic garbage, like I've heard is common in Japan, though I don't know if that's a big contributor to emissions.
I think it's fair to say it would become common, if you imposed punitive taxes on everything except plastic.
Once it's out of the ground, it's a matter of time before it ends up in the atmosphere, unless unusually careful sequestration measures are taken. Better to subsidize those, and tax generation, rather than try to micromanage the bit in between.
All consumption is equal, to a first approximation. To avoid it ending up in the atmosphere you'd have to go out of your way to ensure that whatever fossil-fuel-based product gets sequestered back in the ground after use - all of it, and somewhere where nobody can easily dig it up again and burn it.
Because you should tax the thing you want to stop. Burning carbon is absolutely fine, provided the carbon originally came from the atmosphere and not buried deposits. It's the open-loop cycle that's the problem. The moment you dig it up, eventually it's bound for atmosphere. You want to financially encourage the development of "green" petroleum - nobody will bother if it's taxed all the same.
Also, if you try and individually tax the hundreds of thousands of different uses for carbon, according to how much carbon each thing uses, inevitably you'll get it wrong, and this will create inefficiencies and perverse incentives to do arbitrage between the various poorly calibrated taxes. What you want is for the market to figure it all out!
We know how bad one unit of "cigarette" is for our health, but we don't know how bad one unit of xxx is for the environment. An apple can have a co2 footprint of multiple tons of co2 or zero tons of co2. We can't know for sure.
Products don’t come with a label measuring how much oil was burned in their production. Even if the manufacturer wanted to know, tracing that detail through their entire supply chain is really difficult. Preventing fraud is also very challenging.
Whereas if you tax at extraction this is automatically take into account at every step of the supply chain. The market does all the hard work for you.
Taxing carbon at the point of consumption is like taxing a product if the manufacturers' employees have smoked at the point of consumption. How are you going to enforce that? A product that was manufactured by smokers and non smokers looks identical.
Carbon is a global problem indeed. The most global I would say. So clearly we can't have such a tax be only on local production. Makes me wonder if Bitcoin could play a role.
The political problem is the hard part. People hear tax carbon and think "finally, those big SUVs and trucks I hate will be taxed!" and don't think "my annual international travel will become unaffordable" but that is more likely the outcome if you tax all carbon equally. The reality is people want to tax other peoples carbon and that's more like class/urban vs rural warfare than anything to do with the environment.
For me the pragmatic approach is to assume that the third world isn't going to become carbon neutral anytime soon so we are better off preparing for the inevitability of climate change rather than trying to prevent it. Sadly things like large scale geoengineering projects, genetic modification of local flora to support the new climate and other pragmatic measures aren't palatable to the crowd most worried about climate change.
Isn't it a false dichotomy? To say that we have to prepare rather than prevent? I don't think there's a fixed budget for action here -- while you can say that to some degree, resources uses for prevention would take away from preparing, and vice versa, it's far from a 100% tradeoff. If we completely stopped doing anything to prevent climate change, most of that saved effort would not therefore go into preparing for the effects, it would just be spent on other things.
And international travel becoming more expensive is probably true. To the degree that international travel is emissions-heavy, it needs to slow down and stop. But if you change the markets, other things may change. We may shift more to slower style travel like energy-efficient airship cruises powered by hydrogen, or invest heavily into ethanol to the point where airline travel becomes less expensive again. And maybe I'm wrong, and it will never again be as cheap as it was in the era of fossil fuels. But we have to get to carbon neutral -- if that comes earlier because we invent efficient carbon capture, great, but I really think that ending our use of fossil fuels is going to be vital.
And maybe I'm weird, but I am perfectly happy with my own carbon use being taxed to solve this problem. I really don't want it to be a class warfare issue -- we absolutely should do what we can to make it easier on people who will be hit the hardest, those with low income who have jobs that require a lot of car travel, for example.
Here's the economic argument against, from conservative economist John Cochrane (try to check the tribalism and focus on the arguments), who used to be a proponent of carbon taxes.
The standard vision in policy discussions assumes infinite substitutability. As soon as the cost of clean energy is lower than the cost of carbon-emitting energy, everyone substitutes completely to the latter and the oil and coal stay in the ground. This is the key question. What the graphs make clear is that the majority of carbon must stay in the ground (or go back there) if we want to avoid a large temperature rise. (Again, I do not quibble with the climate side of the models here. Whether the large temperature rise actually hurts GDP is a separate issue, which I'll return to in the next post.) But as long as the elasticity of substitution is finite, as here, then the carbon comes out of the ground. As you use less and less, the remaining uses become more and more valuable, so it's worth it, privately and to society, to keep using it although at lower scale.
This follows from a model that implies that even extremely high carbon taxes will only post-pone 4 degrees temperature rise by 50 years or so.
So I learn from this that a key focus for R&D is not so much on lowering the cost of alternatives, but increasing their substitutability for fossil fuels. Just because the cost of solar cells is plummeting does us little good. We need to increase their substitutability. This consideration once again points to nuclear and carbon capture and storage as really important technologies. We're really talking about how to replace coal-fired base-load electric plants in parts of the world that badly need electricity. Nuclear and capture and storage, though they might not be the least expensive, seem to offer much better substitutability options. That both are forbidden topics in climate debates is sad. Substitution also involves other large carbon emitters. It's hard to make steel and concrete without emitting lots of carbon.
This thought emphasizes a point that Bjorn Lomborg hammered away on in many different ways during a previous presentation: Simply making carbon more expensive will not work.
> only post-pone 4 degrees temperature rise by 50 years or so.
This sounds awesome. How is this an argument against?
I don't understand the substitutability argument. Yes, we need to spend a lot of effort making non-carbon mechanisms to substitute for carbon mechanism. To do that, we need an incentive for this research. The carbon tax is a good incentive.
Carbon tax is also politically neutral -- it doesn't care whether you substitute with nuclear, carbon capture or something prettier.
Got any more arguments for a carbon tax disguised as arguments against it?
I am not an economist, but I'll point out that all of these economists would respectfully disagree with John Cochrane: https://www.econstatement.org/
Including 28 Nobel laureates, former Federal Reserve chairpeople, and a few thousand other economists.
But intuitively, I do agree that simply making carbon more expensive won't work. You have to take the money and inject it back into the economy in a way that alleviates the regressive nature of a plain carbon tax while making the revenue available to boost the low-carbon economy. Carbon dividends, if you trust most economists, is the most efficient way to do that.
you need to pay out the earnings of the tax to the population again. This way the population easily can substitute consumption with usually more expensive alternatives
I'm not sure why Cochrane's so obsessed with using taxation (oh - he's an economist. OK.)
Most fossil-fuel burning is going on in power plants. By diverting power generation to renewables, you remove the demand; fossil fuel prices fall, prospecting falls, extraction falls.
Yes, I know, there's flight, shipping and personal transportation. But power generation is most of it. And I'd just like to see less flight, shipping and personal transportation.
Yale's Climate Opinion Maps[0] would suggest that more Americans than not are with the majority of economists, also. It gets less complex politically when you pair it with carbon dividends, which return the revenue back to households.
It's also fun to compare the effectiveness of pricing carbon with other solutions using En-ROADS [1], built by MIT and Climate Interactive.
However, this is a national policy thing that requires our direct participation in politics. Our elected officials need to be hearing about this from an increasing number of citizens and, frankly, be put into a position of worrying about their re-election chances if they don't support it (and other robust climate policy).
The problem is that we can't seem to tax anything from companies with more than a certain level of resources, since they can just use shell corporations and loopholes to avoid them.
Canada's "carbon pricing" (the government tries to avoid the word "tax" due to its negative connotations) is designed to be almost revenue-neutral to avoid this exact problem. 90% of the money is rebated directly to the people. The other 10% is used to fund green projects.
>Those payments mean that around 80 per cent of households receive a payment that more than covers annual carbon costs; the other 20 per cent are higher-income households that have bigger carbon bills, and so end up being out of pocket.
This claim in the article is directly contradicted by the Canadian government.
>Indeed, most households will see a net loss resulting from federal carbon
pricing under the HEHE plan in 2030-31 (Table 3-2). That is, their overall
costs—which now include the federal levy and GST paid (fiscal impact) and
lower employment and investment income (economic impact)—exceed the
rebate and the induced reduction in personal income taxes arising from the
loss in income.
No, the two claims are not at all inconsistent. Households are seeing more money than they would otherwise, which was the point of the comment you're replying to. See page 10 of your link:
>Taking into account only the fiscal, or “use-side” impacts, we project most
households will see a net gain, receiving more in rebates from federal carbon
pricing under the Government’s HEHE than the total amount they pay in
federal fuel charges (directly and indirectly).
The quote you're pulling specifically factors in a projected "economic impact" of lost investment, which it compares to the "fiscal impact". The economic impact is precisely the point. The fiscal impact is how to make the medicine go down.
It would be great news if we can sacrifice some economic growth in the short term in order to create a potentially popular wealth transfer program that also efficiently disincentivizes burning fossil fuels. If this approach can be scaled up, then the economic losses incurred will be outweighed several times over by averting climate change catastrophe. That's the whole idea.
I guess I shouldn't be surprised that the politicians and the media never mention the economic impact cost of this plan, and only tout the rebate.
>It would be great news if we can sacrifice some economic growth
The bank of Canada is projecting "significant macroeconomic consequences, touching every region and sector" and "asset values across the financial system could be subject to sharp declines in valuation, which might generate credit and market losses, and it might increase the stress on the financial system".
The Bank of Canada also seems to recognize the economic costs of doing nothing. Full context of both your quotes:
>"Climate change and the transition to a low-carbon net zero economy will have significant macroeconomic consequences, touching every region and sector of the Canadian and global economies," the bank said in a statement tied to the United Nations' COP26 global climate summit in Scotland.
And:
>Separately, Bank of Canada Deputy Governor Toni Gravelle said the steps needed to mitigate the effects of global warming would lead to massive restructuring and the risk that some parts of the economy would shrink.
>"Asset values across the financial system could be subject to sharp declines in valuation, which might generate credit and market losses, and it might increase the stress on the financial system," he told a climate panel in Toronto.
If 100% of the money went back, you'd get back equal (or more) what you paid, if you are responsible for the average (or less of the same) of CO2 production per citizen.
Since there are many more poor people than there are rich people which are responsible for disproportional much more emission, the people below the average are the majority
Most Canadian households do get back more than what they paid.
The way that there are net losses to households is by calculating the "economic costs" of lost investment and jobs. This is exactly what carbon taxes are meant to do: internalize the externalized costs of burning fossil fuels.
When I think of lost jobs I think of lost busy work. Surely, if you are complaining about the lack of busywork, climate change mitigation will give you a lot of busy work, just not much profit.
>Indeed, most households will see a net loss resulting from federal carbon pricing under the HEHE plan in 2030-31 (Table 3-2). That is, their overall costs—which now include the federal levy and GST paid (fiscal impact) and lower employment and investment income (economic impact)—exceed the rebate and the induced reduction in personal income taxes arising from the loss in income.
Where's that money going? Administering the program? Being taken by the government as tax revenue?
From a pure fiscal standpoint, there is still a net gain to most households.
The net loss here is calculated by subtracting the "economic cost" of lost investment and jobs due to carbon pricing. This is kind of the point; you would probably expect industries that are more fossil fuel intensive to be taking a hit if carbon taxes are doing what we want them to do.
The more you tax something, the less of it you get. Imposing a non-zero cost on carbon will always be strictly better at reducing carbon emissions than imposing a zero cost on it. How effective it is depends on how big a tax it is, of course, but usually governments addicted to a tax tend to increase said tax, which in this case makes it better, since it will disincentivize emissions even more.
Curious, can you link to any reading on this subject? The canonical high-tax situation I think of is income tax in NYS and CA, and it seems that has only pushed prices and incomes UP, rather than down. But maybe it works differently for income tax because physical work locations are not truly competitive across location and most folks have visas, schools, family, friends, etc. pinning them to a location and reducing flexibility.
What is the basis for the claim that income tax in NYS and CA pushed prices and income up? This seems extremely unlikely, unless you are looking at pretax income or something.
This is what Canada is doing. Equal rebates for everyone - use less and you get a subsidy, use more and you're the one doing the subsidizing.
Now of course Canada's carbon tax is tiny, but there's probably some behavioural economics rationale behind the idea that even a tiny cost can have outsized impact on behaviour.
Rebates for people in certain provinces. Others have implemented a cap-and-trade shell game where the residents receive nothing but they still experience rising prices because of costs to nation-wide businesses being passed on either way.
Shamefully, I've committed the cardinal sin of people from my province: forgetting the other 60% of my countrymen and forgetting that things do vary between provinces.
Clarification question: when you say you're with the majority of economists who say "tax carbon", are you implying that the majority of economists conclude you should tax carbon in some form? Or are you saying that you agree with most of the economists who do, whether or not they are a majority?
I am implying that the majority of economists conclude you should tax carbon in some form. I am in the minority of non-economists who agree with that consensus.
I think it pays to be more specific. Carbon is a generic term that can include all carbon-based lifeforms, including humans. Also, taxing normal people for CO2 emissions just gives more money to the people who designed these systems in the first place.
If you tax CO2 emissions by everyone, and then distribute the money equally among the population, normal people end up with more money afterwards because they tend to emit less CO2 than rich people.
It is also better at reducing emissions, because then less CO2-intensive options become cheaper than the alternative.
It’s just a simple question. If we’re going to add more to the tax burden with the promise that the money then be equally distributed, it’s fair to wonder who would be in charge of making sure it’s actually done correctly.
Now we’re talking. The best way to sell it will be to call it a tax reduction and start by reducing the tax burden on people with a net worth less than $1B, adjusted for inflation. Then fund the entire program to align incentives by implementing a CO2 tax on those with a net worth of > $1B, inflation adjusted, with no loopholes for deductions. Do that and outlaw lobbying and it would have a chance at working.
If the majority of economists really do say that then I guess the only solution is to not tax carbon, or, at the very least, to not do what a "majority of dismal scientists" suggest. Over here in Europe we're still feeling the political and societal effects of the austerity measures introduced after 2008-2010, measures which were strongly supported by the majority of economists back then.
