Carbonomics

Carbonomics.jpgCarbonomics is a book that tackles energy and climate policy together. Right now, "drill baby drill" and "save the planet," are out to kill each other. But when OPEC first used its "oil weapon" against the US and Europe, the global response was to fight the OPEC cartel, and the [#Republicans] did that by organizing a counter cartel [#(the IEA)]  to fight OPEC. 

The first Republican policy was good for energy independence and good for the environment. And that's the kind of policy we need today. But it's been subverted.

Now the IEA is working closely with OPEC and the the US oil industry has an official advisory committee [#inside] the US Department of Energy.

  • Who's the biggest fan of OPEC?  Exxon !!
  • Who's the biggest enemy of global climate policy?  OPEC !!

Of course this means Exxon is also against climate policy and so is the coal industry. But oil is the key to the energy/climate problem, because oil is where the money is. To fight this much money, we need a clever political strategy based on sound economics. Environmentalist have done a pretty good job of sounding one alarm, but the Republicans, back in the 1970's, actually did much better on the policy-economics front, although, in the end, the oil industry took them over.

Carbonomics covers both national and international policies. Here's a sample.


China-green.pngThere's Money on the Table.
China Gets It.   Gore Doesn't.

China cares about global warming, but it knows how to bargain. Gore just cares: "If the United States leads, [#China will follow]." Wrong!

Why should China follow? Just to be nice? Like in Tibet? Meanwhile, Waxman's cap-n-trade bill is offering China a $5 billion bribe not to follow. Here's how that works. Cap-n-trade provides an "offramp." Industry can buy up to one billion tons of [#permits from foreign countries]. Under the Kyoto system, China's been selling close to half of these. So China could easily have made $5 billion off of the Waxman cap-trade bill — unless, of course, China cooperated with the Kyoto system and capped itself. So the Waxman-Gore bill was offering China a $5 billion bribe not to cooperate at the Copenhagen summit. And guess what? To the great surprise of environmentalists, China derailed that summit.

Exxon.pngExxon Profits Highest Ever — $45 Billion

  How did they do that? We helped; China helped; and OPEC helped. The US and China keep using more oil. OPEC holds down its supply. What a team. Exxon did nothing special this year. It just makes a killing whenever the world price of oil sky rockets—the same as all big oil companies.
This is why Exxon loves OPEC.
There is no way Exxon will ever back good energy or climate policy, because they both hurt OPEC and what hurts OPEC, hurts Exxon. Exxon and big oil are on OPEC's side not Americas side.

Pelosi.jpgPelosi Confused xlnk.gif on Cap and Trade

"You cap and you trade [to] pay for investments in energy independence." No, actually, that's the reason. Cap and trade was invented by economists, and its purpose was to put a price on pollution—not to raise money for environmental subsidies. Economists hate that! What economists recommend (listen up Nancy) is a revenue-neutral carbon tax — one that raises no money for subsidies. And the best such tax is the untax, which doesn't raise any money for anything — so it's not really a tax.


untax-cycle.gif

The Untax — No revenue, no subsidies.  It just works. 

Tax oil refineries and coal mines. That will raise energy prices. But refund all the tax revenues on a per-person basis just like Alaska does with its Permanent Fund. This will be stronger environmentally than a cap-and-trade tax that charges as much on average! And, the refunds will cover what we pay in higher energy prices.


 

 
[=Republicans]  Secretary of State, Henry Kissinger under President Richard Nixon
[=(the IEA)]  The International Energy Agency

[=inside] Believe It or Not

the National Petroleum Council, funded by the fossil energy industry, was made part of the Department of Energy when it was created in 1977.
[=China will follow]  Associated Press
[=permits from foreign countries]  "A carbon protection racket,"  Christian Science Monitor, July 27,2009

 

A Carbon UnTax

untax-cycle.gifAn Untax Is Not a Tax

What's a tax? That's when the government takes your money and spends it. Right?   What's an untax? That's when the government charges you but refunds all the money and doesn't keep any.  What's the point of that?

How to Refund?  Like they Do in Alaska—[#per Person]

An untax is almost magical, but not quite. There would be a charge for carbon emissions, but all the money would be refunded on an equal per-person basis. That's exactly what Alaska does with its tax on the oil pipeline—it puts the money in the "Alaska Permanent Fund" and out of that it pays every resident of Alaska, young or old, about $1,000 every year.

Is It Free?

If you stay as good as average, yes. And if you do better than average, you come out ahead. But if you do worse than average, it will cost you — but only for the amount you emit above average. This is why it works. People are rewarded for helping out and charged for using more than their share.

Who Is Actually Charged?

Only big carbon producers would be charged—refineries, coal mines, gas fields. This would hit all the sources of carbon without bothering individuals or most businesses. And when the price of oil is very high, we could slack off on the charge to refineries since the OPEC tax would be high enough.

Click to enlarge.
OPEC-US-energy-use.gif
US energy use went almost flat for the 11 years of high OPEC prices. Graph is Figure 8.1 from Dick Cheney's 2001 National Energy Policy Development Group.

Would It Work?

Yes. It's a way to put a price on carbon emissions, and pricing is the way markets get people to do things — prices, not regulations, drive the whole economy. By far the most effective carbon policy ever implemented — probably fifty times stronger than any policy implemented by environmentalists — was carbon pricing. And it only priced oil carbon, not coal or natural gas carbon. That was OPEC's 1974 – 1985 oil-price-spike policy. That caused the world to change in a million different ways, CAFE standards on cars, gasoline taxes in Europe, general energy conservation consciousness. The lasting effect of that policy is still saving more carbon in the US (compared to what would have happened) than all the carbon now emitted by driving.

You can read Carbonomics—the one book that explains the untax—free on Google xlnk.gif.

 

[=per Person] No we can't give you back your exact carbon charge.

That wouldn't work. Then the more you emit, the more you get back and that reward will exactly counteract the charge for emitting. But a per-person refund works perfectly.

 
 
 

 

Who's for the Untax?

Tax-or-Untax versus Cap-and-Trade

Cap-and-trade has been more popular in the US and Europe, but here's a list of arguments for and supporters of a tax-or-untax.

Arguments against cap-&-trade (C&T) and for a carbon tax or untax:

  • C&T is complicated. 
  • C&T is just a tax that lets the market set the tax rate.
  • Markets are unpredictable and so is the C&T tax rate.
  • C&T risk is costly to business and hence to consumers.
  • C&T is often used to provide windfall gains to emitters.
  • Under C&T, if you voluntarily emit less carbon, that just lets someone else emit more.

Information about carbon tax / untaxes

Who's in favor of what?

James E. Hansen, Climate Scientist, 2008. “Cap and trade” generates special interests, lobbyists, and trading schemes, yielding nonproductive millionaires, all at public expense. The public is fed up with such business.

John Larson, House Democratic Caucus Chairman of Connecticut.  NY Times xlnk.gif. One of the most vocal supporters of a carbon tax.h

Al Gore, February, 2009. "I certainly believe that the simplest and easiest way to solve this problem would be a C02 tax that is 100 percent refundable."

Paul Krugman. The most straightforward policy would be an across-the-board carbon tax.   •   [A pollution tax] commands the assent of virtually every card-carrying economist.

Martin Weitzman, a Harvard economist. “It’s much easier for me to think of scenarios where cap-and-trade goes crazy, prices fluctuate like mad, and people get turned off,” said “That could end up discrediting the system for a decade or a generation.”

Joseph E. Stiglitz has international carbon taxing including enforcement with trade sanctions as advocated here and taught us about the WTO precedent for using such sanctions. In January 2010 he published and op-ed advocating "a commitment by each country to raise the price of emissions (whether through a carbon tax or emissions caps) to an agreed level."

Fredrik Reinfeldt, Prime Minister of Sweden, Taiwan News xlnk.gif, June 10, 200

Thomas L. Friedman, NY Times xlnk.gif, April 7, 2009  "Advocates of cap-and-trade argue that it is preferable to a simple carbon tax because it fixes a national cap on carbon emissions and it “hides the ball” — it doesn’t use the word 'tax' — even though it amounts to one. ... That was true ... In the past two weeks, you could hear a chorus of Republicans, coal-state Democrats, right-wing think tanks and enviro-skeptics all singing the same tune: 'Cap-and-trade is a tax.'"

David de Kretser, Governor of Victoria, Australia, Stock & Land xlnk.gif, April 2009. Favors a carbon tax.

Greg Ebel, President and CEO of Spectra Energy Corp, Huston Chronicle xlnk.gif, April 2009. "But a carbon tax – not cap-and-trade – better stimulates the substantive behavioral shift we need ... The best carbon tax would be revenue neutral, allowing both businesses and individuals to innovate, invest and deliver lower carbon emissions from their activities and be neutrally affected or, potentially, even better off economically."

 

British Columbia

From the Economist (an excellent and moderately conservative magazine)

British Columbia’s carbon tax woos sceptics

Jul 21st 2011 | from the print edition

DURING Canada’s 2008 federal election campaign Stephen Harper, the Conservative prime minister, warned that an opposition promise to introduce a carbon tax would “screw everybody”. Partly for that reason, Mr Harper is still the prime minister. But in the same year, the provincial government in British Columbia introduced a carbon tax of its own. Despite the levy, its economy is doing well. What is more, the tax is popular: it is backed by 54%, says a survey in the province by Environics, a pollster. Gordon Campbell, the Liberal premier who introduced the tax, won a provincial election the next year.

When arguing for the carbon tax, Mr Campbell faced the same political obstacles that have stymied such plans elsewhere. Only environmentalists were enthusiastic. Businesses feared it would add to costs and slow the economy. The leftish New Democratic Party (NDP) worried it would hurt the poor. But these fears have proved groundless. “The carbon tax has been good for the environment, good for taxpayers and it hasn’t hurt the economy,” says Stewart Elgie, a professor of law and economics at the University of Ottawa.

It helped that the law introducing the levy required its proceeds to be recycled back to individuals and companies as cuts in income taxes. The new tax was initially set at C$10 ($10) per tonne of carbon-dioxide emissions, rising by increments of C$5 per year to C$30 in 2012. It seems to be working as planned. Since 2008 fuel consumption per head in the province has dropped by 4.5%, more than elsewhere in Canada. British Columbians use less fuel than any other Canadians. And British Columbians pay lower income taxes too.

The new tax has not weakened the province’s economy, which has been boosted by high world prices for its commodity exports. Unemployment is slightly below the national average, and growth slightly higher. Because the tax started low and its rises were set out in advance, businesses had plenty of time to make plans to cut their carbon use.

A recent poll by the Pembina Institute, a green think-tank, found that 70% of British Columbians think their province should be a leader in cutting emissions. Christy Clark, Mr Campbell’s successor as premier, is committed to keeping the tax. Adrian Dix, the NDP leader in the province, says his party should have supported it. Both leaders want future carbon revenues to be used for energy-efficient infrastructure projects rather than more tax cuts. Only John Cummins, the Conservative leader in British Columbia, still opposes the tax.

At C$25 per tonne, British Columbia’s tax already exceeds the price of carbon in Europe’s emissions-trading scheme. But it is still too low to prompt radical changes in behaviour: it adds just five cents to the price of a litre of petrol. Getting the most energy-intensive industries to make big cuts might take a tax four times as high. Even so, British Columbia has shown the rest of Canada, a country with high carbon emissions per head, that a carbon tax can achieve multiple benefits at minimal cost. Unless Mr Harper reconsiders his opposition to the idea, in the future it might be him who faces being screwed.

California

California's Climate Plan: Cost Is No Object

July 16, 2009. If you want to set back environmentalism, just enlist California's Air Board. They gave us those millions of Zero Emission Vehicles back in the 1990's. This time we're getting way-cheaper-than-free climate control. They say "It's amazing." Here's how they do it: Pick your favorite projects, make costs estimates, then ... just do all of them, even the horribly expensive ones.

Dumb: In 2008 they came up with a plan -- their Scoping Study -- which calls for 27 different carbon reduction measures. They figured the savings from these would be about double their costs to get emissions to 30% below what they would have been. Chairwoman Mary Nichols remarked "It's amazing." They decided to get five independent reviews—none of the reviewers knew who the others were. Five Ph.D. economists all came to exactly the same conclusion. It's amazing all right, amazingly unbelievable.

Dumber: I can understand over-optimism about your pet projects. But they compiled a list of how much it cost to use each of the 27 measures they picked, to save carbon. And what bothers me is that those costs ranged from plus $156 per ton of CO2 saved to minus $408. Now if someone told you that you could buy something for $156 or you could be paid $408 for taking the the exact same thing, what would you do? Well if you're the Clean Air Board you'd say, Oh, I'll have a random amount of every measure. In fact, the measure they bought second most of was Renewable Electricity for $133/ton carbon saved. By their own calculation, they could have bought a whole lot more carbon reduction for under $20/ton using cap and trade. But they didn't. They wanted a whole bunch of the $133 carbon instead. There is no difference. Saving a ton of carbon dioxide one way or another has precisely the same impact on the climate.

I am not making this up. The State Legislative Analyst’s Office, said "Selection of particular measures and the mix of measures appear not to have been directly influenced by cost-effectiveness consideration." Right. I mean who would have thought to consider cost-effectiveness? We're talking environment. It's sacrilegious to consider cost.

What's going on? What I really don't understand is why most environmentalists will not say one word about this. The five reviewers did and they are all environmentalists. But does it really require a Ph.D. to figure out it's best to buy the cheap one and not the super expensive one? Or is their something funny going on in the environmental world?

Bottom line for saving the environment:  Don't waste other peoples money. (1) It's morally reprehensible, (2) It will make you unpopular, (3) This will reflect badly on environmentalists generally. (4) This will mean we take less care of the environment.

Wasting other people's money means:  Using tax dollars to abate carbon but not buying the cheapest abatement available, and instead, buying your pet projects.