How to Fix the Climate and Charge It to OPEC
Part 1. Fossil-Fuel Myths
1. Once Upon a Time. The true story of Sheikh Yamani the Enigmatic and the first OPEC crisis, which cost a fortune but worked wonders for energy and climate.
2. Wreck the Economy? Bush was wrong. A good climate change policy makes us only about 2 percent poorer by 2050—not an extra 2 percent every year.
3. Peak Oil or Liquid Coal? Oil will peak, but the world economy will not collapse. Fear of collapse, however, is used to frighten us into oil-shale and liquid-coal subsidies.
4. Is the Globe Warming? There is great uncertainty, and that risk is the reason to act.
5. Cheaper than Free? The fabulous story of the Hypercar. Don't count on it.
6. No Free Lunch? Ultra free-market economists say fuel economy and other standards cannot possibly be a good thing. Why they are wrong.
7. The Core Energy Plan. A preview of Part 3: the untax, charging OPEC, a race to fuel economy, and subsidies for advanced energy research.
Part 2. Energy-Market Realities
8. Learning from OPEC. The 1973-85 OPEC crisis worked exactly like a climate policy based on global carbon pricing but focused on oil. This increased the non-OPEC oil supply but caused ten times as much conservation.
9. The World Oil Market versus Energy Independence. It sets the domestic price of gasoline and even of Nebraskan corn ethanol. Ethanol will not bring independence.
10. Corn Whiskey versus the Climate. Producing more ethanol increases the world's supply of liquid fuel, which reduces the cost of oil, which causes more oil to be used, which harms the climate. This effect is big enough that corn ethanol is not green.
12. China, Coal, and Carbon Capture. Coal is a problem, but Jimmy Carter's synfuel plant is making a profit pumping CO2 underground for permanent storage.
13. Charge It to OPEC. In 1974, Kissinger set up the International Energy Agency to counter OPEC. The IEA, however, never tried a tough policy. But, as OPEC testifies, combining Kissinger's idea with climate policy would work.
14. A Market-Based Carbon Tax? A carbon tax is just as market-oriented as a cap-and-trade policy and provides a better basis for business to invest in green energy.
15. Cap-and-Trade Politics. Business likes cap and trade because they get valuable free permits. Caps are easily changed, and they make voluntary conservation useless.
Part 3. Core National Policies
16. An Untax on Carbon. Tax carbon, but refund 100 percent of revenues on an equal-per-person basis with an annual check in the mail, just like in Alaska.
17. Untaxing Questions. No, people will not spend their whole refund check on fossil fuel, and letting the rich buy their way out makes the tax fair to the poor.
18. Why Untaxing Is Fair. Most economists propose substituting carbon tax revenues for some other tax's revenues, so there is no net increase in taxes. That is economically "efficient," but it violates a widely agreed upon fairness principle.
19. Taxing Oil—Double or Nothing. Oil causes two problems that the market misses: climate change and security risks. So oil deserves a higher tax rate than coal. But sometimes OPEC "taxes" it so much we can declare a gas-tax holiday.
20. A Race to Fuel Economy. Instead of CAFE standards, just reward above average cars (in proportion) and penalize below-average cars. That will end fights over standards. It's a race to build high mileage cars, and we'll all be the winners.
21. Crash Programs. Subsidize some advanced research but not existing technology.
22. The Great Cost Confusion. Most people think the revenues of a carbon tax are its social cost. But if so, the untax is completely free. These notions are both wrong.
Part 4. Global Policy
23. Kyoto: What Went Wrong? Developing countries won't accept caps.
24. Global Carbon Pricing. Require every country to collect the same total revenue per ton of CO2 using any method they like—cap and trade, carbon tax, or untax.
25. Does the World Need a Cap? No. Adjusting the CO2 tax will work better.
26. International Enforcement. The sea-turtle case described by Stiglitz shows that the WTO can be used as the enforcement mechanism of last resort.
27. International Fairness. Kyoto will only work if developed countries spend hundreds of billions buying carbon permits from China and India. Under this fairness proposal, only countries with below-average emissions would get international transfers. China has average emissions.
28. Carbon Pricing: What Counts? Fossil subsidies count against the pricing requirement. Existing taxes count for it. Just getting rid of fossil subsidies would be a huge step.
29. A Consumers' Cartel. Any effective climate agreement will reduce oil use. Such an agreement is, like it or not, an oil consumers' cartel. For many, the benefits of lower oil prices are a stronger incentive for cooperation than is the threat of climate change.
Part 5. Wrap-Up
30. Finding the Path. The logic that leads to the policies of Carbonomics.
31. The Complete Package. A concise list of the above policies and the reasons for them.