Ed. note: With President Obama visiting Saudi Arabia amid low oil prices and a renewed focus on the kingdom’s role in the 9/11 attacks, we reached back to early 2002 for this previously unpublished but eerily timely essay by journalist Daniel Lazare. His call then for the U.S. to tax oil is, of course, part of his and our message today for taxing carbon: The goal is a society in which communities are stronger and more cohesive, the environment is cleaner, and democracy is enhanced as “we the people” create the kind of society we want rather than the one the carbon interests want us to have.

Since Sept. 11, the press has been turning the spotlight on Saudi Arabia, and it’s safe to say that Americans don’t much like what they see. The problem is not just the fifteen out of nineteen suicide bombers who turned out to be Saudi citizens or the fact that the Saudi government has been less than fully cooperative with the follow-up investigation. Rather, it’s the nature of Saudi society itself.

Kind of like a Vatican with 25 percent of the world’s proven oil reserves, it has used its petro-earnings to export a militantly intolerant brand of Islam that has spread an arc of violence from Indonesia and Central Asia to lower Manhattan. The world’s most rigid theocracy now that the Taliban are gone, it is a medieval outpost in which all religions other than Islam are banned and homosexuality and “sorcery” are grounds for capital punishment. Women are forbidden to drive, dissent is prohibited, voting does not exist, and up to two million housekeepers and nannies from places like Malaysia and Bangladesh are held in virtual slavery.[1]

Amazingly given its vast oil wealth, Saudi Arabia is also skirting the edges of bankruptcy. Corruption is one obvious factor, but a deeper reason has to do with what the James Surowiecki referred to recently as “the resource curse” in his column in The New Yorker.[2]

In the short run, oil makes a country rich. But, in the long run, it makes it poor by encouraging its inhabitants to think of wealth not as something they create by developing new machines and services, but as a pre-existing quality they merely extract from underground. Instead of working for a living, it teaches them to sit back and count the proceeds from foreign oil concessions.

For the historically minded, the analogy that comes immediately to mind is sixteenth-century Spain, which used it immense gold and silver earnings from Mexico and Peru to finance a series of imperial misadventures (including the “Invincible Armada” of 1588) that left it economically prostrate. The current Saudi ruler, Crown Prince Abdullah, has vowed to close a $12-billion budget shortfall this year by privatizing public utilities and cutting back on social spending. But since lavish social spending – everything from multi-billion-dollar construction grants to the $40,000 a year that even the lowliest prince receives for each member of his family[3] – is the glue that holds Saudi Arabia together, it is hard to imagine how Abdullah can economize in this fashion without cutting himself off at the knees.

It’s a mess, all right, one that is likely to render the Persian Gulf region even more unstable than it already is. But what the press has so far failed to notice is the curious symmetry underlying U.S.-Saudi relations.

If Saudi Arabia is the world’s biggest oil exporter, it is because the United States is willing to serve as the world’s biggest oil importer. If the Saudis have been notably unsuccessful in diversifying their economy so as to reduce their reliance on oil exports, the U.S., with its growing number of McMansions and SUV’s, has made so little headway in reducing its own oil dependency that it has all but given up. If America all but made the current Saudi regime by agreeing since 1945 to insure its security against all outside threats, then the Saudis in a certain sense have made the current American economy by insuring an uninterrupted flow of low-priced energy that has allowed businessmen to cover the landscape with suburban homes, shopping malls, fast-food drive-ins, and other forms of hyper-sprawl.

It’s a partnership that both governments regard as profitable, but which is anything but. The reason is the aforementioned resource curse, which turns out to be a two-way street affecting Americans no less than the Saudis.

In economic terms, the resource curse can be expressed in terms of a widening gap between the nominal and the real, between the ostensible price of a given commodity and its true cost to larger society. Just as the Saudis regard ultra-cheap, ultra-plentiful crude as a boon, Americans regard their own super-low fuel prices as an unalloyed blessing because it allows them to cruise in big cars on big highways for just pennies a mile.

With highway fuel prices as much as 80 percent below West European levels,[4] Americans count themselves lucky to live in a country where government does not dare interfere with the sacred right of individual mobility. They do so, however, only because, like the Saudis, they systematically ignore the larger social dimension. Because prices at the pump reflect only a small portion of the costs, every gallon they burn leaves them just a little poorer than when they started. The more Americans consume, the more they “dissave,” with ever more baroque consequences.

What are the social costs? Well, air pollution is the most classic example of an expense that fossil-fuel users have succeeded in shunting onto society as a whole. The expense of caring for uninsured motor-vehicle accident victims, which a federal study recently estimated at $13.8 billion a year,[5] is another cost that highway-fuel users should take responsibility for but, unfortunately, do not.

Global warming, due largely to the use of carbon-based fuels, is a third such item no matter how much the Bush administration wishes it would go away. Although Sunbelt conservatives will no doubt disagree, the disembowelment of one aging industrial city after another thanks to rampant highway construction and subsidized automobile use is also a social cost, as is the esthetic blight caused by to suburban sprawl.

This is not to say that all suburban developers must be stopped in their tracks. But it is to say that every time someone puts up an Arby’s or a McDonald’s, it imposes a visual tax on passers-by that, under the present system, redounds exclusively to the benefit of small minority of investors. A social asset is degraded so that a private asset can be artificially enhanced.

The list goes on. Gridlock is what economists call a negative externality because it imposes a real cost on anyone stalled in traffic or whose deliveries or employees are delayed. A major study of the 50 largest U.S. metropolitan districts found that, with only half a dozen exceptions, rush-hour traffic delays had increased by double-digit percentages between 1982 and 1994 – by 14 percent in New York, for example, 20 percent in Boston, 25 percent in Chicago and L.A., 32 in San Francisco-Oakland, and a whopping 55 percent in San Diego.[6]

True, highways are still gloriously empty in portions of the heartland where George W. Bush believes “the strength of this country” lies.[7] But Americans, by and large, don’t live in those wide-open spaces (which is why they’re wide-open to begin with). They live in crowded metropolitan corridors where population densities are fully the equal of those in Western Europe and rush-hour traffic increasingly moves at a snail’s pace.

Finally, there are the military costs, the fastest growing externality of all. In a paper published last August by the Cato Institute (which, like a stopped clock, is also occasionally correct), an economist named Donald Losman estimated that the U.S. spends $30 to $60 billion a year in and around the Persian Gulf to protect $10 billion a year in oil.[8] If such expenditures were incorporated into the price of fuel, there’s no doubt that Americans would arrange their priorities differently.

Moreover, Losman’s figures considerably understate the problem. Military expenditures in the region have soared in the wake of Sept. 11 and are likely to soar higher still if the war spreads to Iraq. Rather than reducing its exposure, U.S. policies thus have the effect of thrusting it more deeply into a volatile corner of the world. Rather than making it less vulnerable, they make it more.

While it is impossible to say that the Twin Towers horror would not have occurred if U.S. energy policies had been different, there’s no doubt that current policies makes such events more likely to occur. Three thousand crushed and incinerated bodies are a reminder that no matter how much Americans try to ignore the reality gap, it will not go away.

What can be done? For Saudi Arabia, the answer is not much. Theoretically, it could emulate Norway by using its petro-earnings to shore up the welfare state while imposing stiff energy taxes in order to protect itself against the ravages of underpriced oil. But Saudi Arabia is no Norway, to say the least. Rather than an advanced democracy, it is a primitive backwater that has somehow stumbled onto fantastic riches. Rather than a modern welfare system, the only way it knows to distribute the wealth is through the time-honored methods of corruption, baksheesh, and patronage, practices that destroy the social fabric rather than in any way mending it.

Once again, the relevant model may well be early-modern Spain, which, by the seventeenth century, had plunged into such depths of xenophobia, religious obscurantism, and economic despair that it was only in the 1960s that it was able to begin climbing out. If so, there is no way the Saudis will be able to avoid an equally great wringing-out, one that is also likely to prove painful and protracted.

On the other hand, there is a great deal the United States could do if it wanted. Although the punditocracy doesn’t yet realize it, the seller’s market of the 1970s and early ’80s, when OPEC was in its heyday, is long gone, probably for good. With the price of crude down some 75 percent in real terms over the last two decades, the economic advantage has shifted from producers to consumers. Instead of the exporters, it is now the importers, most especially the U.S., that are in a position to set prices nearly at will.

How? Enron-inspired supply-side measures such as opening up the Arctic National Wildlife Refuge to drilling are clearly not the answer. Stepping up domestic production does nothing to restrain energy demand. By relegating conservation to a mere matter of “personal virtue,” in Dick Cheney’s infamous phrase, it insures that fossil-fuel consumption will remain at present levels or higher and that imports will therefore continue to grow.

Unfortunately, tighter CAFÉ regulations will not do the trick either. With their collective genius for zeroing in on the ineffectual, congressional Democrats have hitched their star to what Paul Portney, president of the environmental group Resources For the Future, describes as at most a “second-best solution.”[9] Regulations aimed at boosting fuel efficiency will do nothing to reduce congestion – indeed, by lowering the cost of driving, they might actually add to it by providing motorists with an additional incentive to take to the road. They will do nothing to roll back or slow the spread of sprawl and probably will have little impact on highway fatalities and injuries.

Even when it comes to fuel consumption, moreover, it is questionable how effective a purely regulatory approach can be. When lawmakers began working on CAFÉ regulations in the late 1970s, they felt they had no choice but to create an exemption for light trucks. After all, who wanted responsibility for putting farmers, builders, or other hard-working sorts out of business? But what legislators didn’t know was that automakers would use the exemption to create a product known as the sport utility vehicle that would proliferate so wildly that it would end up undoing much of the good work that CAFÉ had done.

Under the most optimal conditions, there is no doubt that no matter what CAFÉ standard Congress comes up with in the coming years, it will be festooned with all sorts of loopholes for automakers to enlarge. Assuming they are successful, fuel consumption will resume its upward trajectory, oil imports will grow, and the agony will merely be prolonged.

Rather than regulatory, an economic approach would be far more efficient. Simply put, the power of taxation must be brought to bear so as to reduce or eliminate the reality gap between the nominal price of fossil fuels and their social cost.

Like consumption taxes in general, fuel and other highway taxes are inherently regressive, but this can be offset in two ways. One is to use them to reduce payroll taxes for wage earners and the poor. Another is to see to it that at least a portion of the revenue goes into rail and other forms of mass transit, the benefits of which will flow disproportionately to urban centers where the hardest-hit workers are located.

Classical economic theory teaches that economic actors make the best decisions when they have the best information at hand. By closing the reality gap, that is precisely what fossil-fuel taxes are designed to do. By rendering prices more accurate, they increase the likelihood that money and capital will find their most productive outlet. Instead of channeling resources into oil wells and SUV’s, they will encourage Americans to put their funds where they will do most good – in urban redevelopment, in more advanced forms of transportation, in more efficient forms of industry generally.

The goal is not only a sounder economy but a sounder society, one in which communities are stronger and more cohesive, the environment is cleaner and more attractive, and democracy is enhanced as “we the people” learn to make full use of the tools before us to create the kind of society we want rather than the one the oil interests want us to have. While raising prices at the pump, fuel taxes would slash demand and hence send crude prices crashing through the floor. Just as the price hikes of the 1970s brought howls of protest from energy consumers, the reverse policy will likely bring howls of protest from energy producers. But if ever there was a class that deserved to have its ox gored, this is it.

Of course, energy taxes do not have a snowball’s chance in hell under anything like current political circumstances. The last time anything similar was attempted was in 1993 when Bill Clinton tried to persuade Congress of the merits of a BTU tax on carbon-based fuels. The proposal went down faster than you can say “Newt Gingrich.”

Given a Republican-controlled House, a Senate structurally biased in favor of rural interests, and a presidency that is similarly biased due to an electoral college that gives voters in rural states up to three times as much clout as those in urban, any such measure would likely fare no better today. But the fact that passage is unlikely doesn’t make it any less necessary. An empire that finds it easier to send troops to war than to institute common-sense reforms at home is one that is weaker than it thinks.

[1] Robin Allen, “A Time Bomb in the Desert,” Financial Times, June 10, 2000, Front Page – Weekend FT.

[2] “The Real Price of Oil,” Dec. 3, 2001, p. 41.

[3] Said K. Aburish, “Saudi Arabia: Coming Change Bodes Ill,” Los Angeles Times, Dec. 16, 2001, p. M2.

[4] See http://www.iea.org/statist/keyworld/keystats.htm for retail price quotes as of 4Q2000.

[5] National Highway Traffic Safety Administration, “The Economic Cost of Motor Vehicle Crashes, 1994,” Washington, D.C., 1996, p. 2.

[6] Texas Department of Transportation, Urban Roadway Congestion – 1982 to 1994 (Austin, 1997), pp. 12, 19, 23, 32.

[7] Frank Bruni, “Bush, Deep in the Heartland, Hears Discouraging Words,” The New York Times, Aug. 15, 2001, p. A1.

[8] Donald Losman, “Economic Security: A National Security Folly?” available at http://www.catoinstitute.org/pubs/pas/pa409.pdf.

[9] Telephone interview, Friday, Jan. 4, 2002.

The acclaim that greeted China’s pledge in November 2014 to cap its carbon emissions by 2030 was broad yet hesitant. The promise by the world’s Number One emitter to halt the explosive growth in its climate pollution was momentous. But deferring the ceiling to 2030 meant emissions could continue climbing for 16 years, perhaps doubling, on top of the tripling recorded during 2000-2013.

We at CTC chose to see the glass as half-full, and wrote at the time:

Though China’s emissions can still grow in the intervening decade-and-a-half, its cap pledge virtually ensured that its rate of emissions growth would begin bending downward before 2030, on account of the lead time needed to overcome the “inertia” built into the factors that collectively determine emission levels. Moreover, the commitment from Beijing conferred instant legitimacy on political forces within China favoring clean energy and seeking relief from relentless air pollution that kills an estimated 1.6 million Chinese a year.

Our optimism has now been amplified, in spades. An analysis released this week, soon to be published in Climate Policy, forecasts that China’s CO2 emissions from fossil fuel combustion may peak as early as 2020 — a full decade before the cap target year. Moreover, rather than shooting past earlier benchmarks, emissions in 2030 would be 7 percent below the 2020 peak and even 1 percent under last year’s emissions, according to the forecast. Such a turnaround would exceed all but the most buoyant expectations that greeted the 2014 announcement and would raise the bar for the U.S. and the other 190 nations that submitted emission pledges at the U.N. climate summit in Paris in December.

This upbeat analysis comes from two of the world’s most prestigious climate think tanks: the Centre for Climate Change Economics and Policy, and the Grantham Research Institute on Climate Change and the Environment, both based in London. The authors are Fergus Green, a climate policy consultant from the London School of Economics; and Sir Nicholas Stern, director of the Grantham Institute and arguably the world’s most renowned climate economist.

The premise of the Green-Stern paper is evident in its title: “China’s Changing Economy: Implications for its Carbon Dioxide Emissions.” China’s economy is undergoing a pronounced transition, say the authors, and the implications for energy use and carbon emissions are profound:

The period 2000-2013, it is now clear, was a distinct and exceptional phase in China’s developmental history, during which the very high levels of greenhouse gases emitted were linked closely with the energy-intensive, heavy industry-based growth model pursued at that time. China is currently undergoing another major structural transformation — towards a new development model focused on achieving better quality growth that is more sustainable and inclusive.

During that 2000-2013 period, China’s primary energy consumption grew at a compound annual rate of more than 8% a year. In 2014, in contrast, primary energy consumption grew from 2013 by just 2.2%, and last year’s year-on-year increase through September was less than 1%. The “new development model,” which the authors date from the start of 2014, entails a marked decline in heavy industry’s share of GDP, with output of steel and cement, production of which is extraordinarily energy-intensive, actually falling in the first half of last year.

“These structural changes,” assert the authors, “are occurring on top of ongoing energy conservation initiatives within industry and other sectors [leading to] strong declines in the energy intensity of GDP over the last two years . . . at the same time as GDP growth slowed significantly.” Concurrently, non-fossil electric generation capacity underwent a veritable explosion, from 257 gigawatts in 2010 to 444 GW in 2014.

The motive forces behind this upsurge ― the air pollution crisis, the problematic rise in fuel imports, and the government’s prioritization of zero-carbon power sources as loci of innovation in global markets ― seem certain to endure. Meanwhile, industrial consumption of coal, which Green and Stern say accounts for half of China’s coal usage, appears to be falling as well, not just because steel and cement output are dropping but because production processes are finally becoming more efficient.

Another factor pointing to lower economic and energy growth going forward, say Green and Stern, is “China’s excess capacity in construction and heavy manufacturing.” In effect, part of the past huge growth in fuel use and emissions was an artifact of stockpiling industrial capacity that no longer needs to be expanded, they suggest. Moreover, they assert, “The structural nature of the turnaround in these industries is now widely recognized throughout the Chinese government and the industries themselves. Accordingly, the prospects for declining investment, rationalization and falling production across such sectors in the context of China’s new development model now appear strong.”

The upshot is two-fold: first, a lesser rate of GDP growth going forward; second, a continuation of recent declines in the energy intensity of GDP. According to the authors, the primary energy required to produce a unit of economic output fell by nearly 4 percent a year during 2005-2013, and they believe this decline rate can continue indefinitely. They also point to China’s 2020 targets of as much as 300 GW of wind capacity and 150 GW of solar (the latter revised last fall from 100 GW), along with lesser but still sizeable amounts of new nuclear capacity. Even coal-fired power generation is ripe for greater efficiencies, say Green and Stern, as older and less-efficient plants are replaced by newer ones able to wring more kWh’s from the same Btu’s.

Needless to say, maintaining and extending these positive trends won’t be painless, especially in light of ongoing expansions of coal-fired capacity — “despite already enormous amounts of excess capacity” — that have pushed utilization rates for coal-fired power plants below 50%. The authors identify three policy imperatives:

• Rein in expansion of new coal infrastructure in electricity and industry;
• Institute “green dispatch” that prioritizes non-fossil generation over fossil generation, and more efficient fossil generators over less efficient ones;
• “Increase effective carbon prices on fossil fuel energy sources, especially coal.” “Effective carbon pricing,” write Green and Stern, “would alter the economics on the supply-side in ways that would disadvantage high-carbon generators and support green dispatch. A rising coal tax would be a highly efficient and administratively effective measure, well-suited to China’s institutional context, though a well-designed and implemented emissions trading scheme operating in the electricity sector could in theory achieve similar results.”

Green and Stern see CO2 emissions peaking “at some point between 2014 and 2025, depending on how the above factors play out.” A table in their paper (summarized above) presents recent-historical (2005-2013) growth rates for GDP, the energy intensity of GDP, and the CO2 content of each unit of primary energy; and possible future growth rates for each for three future periods: 2014-2020, 2021-2025, and 2026-2030. Resulting future CO2 growth rates are then:

• 1.24% per year for the current period;
• negative 0.24%/year for 2021-2025, owing to assumed 1% slower GDP growth and a 0.5% per year acceleration in the decarbonization of energy;
• negative 1.18%/year for 2025-2030, due to a further assumed 1% per year drop in GDP growth.

Emissions would be massively less than near-universal expectations from just 18 months ago. Yet China can and must do even better. The third Green-Stern policy recommendation, to “increase effective carbon prices,” is key. With robust carbon pricing in place, even the optimistic new scenario from Messrs. Green and Stern could soon come to be regarded as conservative.

Dozens of armed ultra-right ranchers seize a federal wildlife refuge in eastern Oregon and proclaim it “a base place for patriots from all over the country.” On the other side of the globe, Saudi Arabia goes on a rampage, subjecting neighboring Yemen to nightly bombing raids and then executing a revered Shi’ite leader named Nimr al-Nimr, prompting a furious reaction in Iran and bringing the Persian Gulf to the brink of war.

Given the immense distance separating such events, there couldn’t possibly be a connection between them — could there?

Actually, there is, and it starts with the conservative complaint about the infantilizing effects of welfare. This is the old right-wing argument that instead of making people richer, “free stuff” (to use Jeb Bush’s phrase) in the form of food stamps and aid to single mothers encourages a culture of dependency that discourages thrift and hard work and ultimately deprives recipients of the tools they need to get ahead. Rather than raising them up, government aid turns them into spoiled children who demand more and more and throw ever more violent tantrums when they don’t get it.

As George Will once said about riots in the French banlieues:

Welfare states are, paradoxically, both enervating and energizing — and infantilizing. They are enervating because they foster dependency; they are energizing because they aggravate an aggressive sense of entitlement; they are infantilizing because it is infantile to will an end without willing the means to that end, and people who desire welfare states increasingly desire relief from the rigors necessary to finance them.

Because the welfare state undermines the labor ethic, in other words, it undermines society in general, leaving the poor angrier and more impoverished than ever.

These are fighting words as far as liberals are concerned. But instead of rejecting them out of hand, when not turn them around and apply them to the real welfare chiselers, the ones truly raking in the big bucks?

Take the ranchers currently occupying the Malheur National Wildlife Refuge in southeastern Oregon. They claim a right to graze their cattle on federal lands free of charge and demand that the grasslands in question be “returned” to the states, even though the states never owned them in the first place. “It’s happening all across the United States,” explained protest leader Ammon Bundy. “We have the EPA taking properties away from American people … restricting whole industries, putting whole states and counties into economic depressions. We have a slew of other federal agencies that are doing the exact same thing and they’re doing it by controlling the land and the resources.”

But rather than removing such properties, the U.S. Bureau of Land Management has been renting them out for decades at well below the market rate — indeed, as much as 99.5 percent below according to a 1993 study. For the BLM as a whole, that amounts to an annual $11 billion giveaway, more than double what the feds provide via Temporary Assistance for Needy Families, the main welfare program for the poor. And where approximately two million families benefit from TANF funds each month, just three thousand ranchers have managed to corral half of all BLM subsidies.

This is welfare on a truly gigantic scale, yet Bundy and his followers want even more. And unless the feds give it to them, they’re going to seize government facilities at gunpoint and take it themselves.

Even greater infantilism is on display in Saudi Arabia, where the royal family claims exclusive control of a quarter of the world’s proven oil reserves. Saudi oil deposits are so extensive and so close to the surface that extraction costs are only a fraction of those in the U.S. The upshot is an income stream amounting to hundreds of billions of dollars a year in oil export, one that requires the House of Saud to do next to nothing in return.

By comparison, Ronald Reagan’s famous welfare queen, the one with “eighty names, thirty addresses, twelve Social Security cards [who] is collecting veteran’s benefits on four non-existing deceased husbands,” was a piker.

But there is bad news for the kingdom’s seven thousand or so princes. After peaking at $114 in July 2014, oil prices have plunged to less than $35 a barrel, a sickening 70 percent swoon that has left Saudi finances in tatters.

How have the Saudis responded? Exactly as George Will says French welfare recipients would respond to a massive cut in benefits, i.e. by blowing stuff up and taking out their anger on the world at large.

In March, with oil down to $60 a barrel, the Saudis vented their fury on Yemen, launching air attacks that have killed thousands of civilians and destroyed historic urban centers such as Sana’a and Saada to rubble. “Yemen after five months looks like Syria after five years,” declared Peter Maurer, head of the International Red Cross, following a mid-summer visit. With oil prices dipping another 25 percent, the kingdom followed up with a ground invasion in late August. Despite raking in trillions over the years, it pleaded poverty at the Paris climate talks in early December, claiming it could not afford to comply with mandates to present a comprehensive carbon mitigation plan.

“We developing countries don’t have the capacity to do this every five years,” a member of the Saudi delegation reportedly complained. “We are too poor. We have too many other priorities. It’s unacceptable.”

Mega-welfare in the form of lottery-level petro checks has thus left the House of Saud poorer and less self-reliant. But the ultimate tantrum came on January 2 when the kingdom ushered in the new year by executing 47 prisoners, including Nimr al-Nimr, a fiery Shi’ite preacher who had vigorously denounced the royal family’s arch-Sunni bigotry but nonetheless urged his followers to rely on “the roar of the word” rather than violence. When angry Shi’ites responded by storming the Saudi embassy in Teheran, the kingdom upped the ante by severing diplomatic relations and leaning on other Arab gulf states to do the same.

As The New York Times put it, “the Saudi government seemed willing to endure the potentially high political costs of the killings in order to deliver a warning to would-be militants, political dissidents and others that any challenge to the royal family’s rule would not be tolerated.” The more difficult its financial position, the more obdurate Saudi Arabia grows, turning its back on a growing chorus of criticism both domestic and foreign.

How would Saudi Arabia have responded if oil prices were still bouncing along in the $100 range? It is hard to imagine that they would have done the same. Despite talk about the Saudis cutting prices in order to punish Russia, Iran, and U.S. shale producers, it appears that the royal family has gotten caught in a downdraft of its own making and can’t figure a way out. As prices have plunged, the atmosphere in Riyadh has thus grown bleaker and bleaker. “The Saudis seem to be sort of in a retaliatory mood,” one Saudi watcher said regarding setbacks in Syria. A $100 billion budget-deficit, observed Rutgers professor Toby Craig Jones, “may soon force the kingdom to slash spending on social welfare programs, subsidized water, gasoline and jobs – the very social contract that informally binds ruler and ruled in Saudi Arabia.” As such ties fray, the position of the Saudi ruling family will grow more precarious rather than less.

If welfare weakens society as people like George Will maintain, then the lesson of Saudi Arabia is that super out-of-control welfare destroys it all the more decisively. The upshot is greater and greater instability, which, in the Middle East, translates into stepped-up terrorism and war.

Which brings us to carbon taxes.

The purpose of a carbon tax is to unwind a bloated welfare system that serves the interests of the oil companies, auto companies, and petro-sheikdoms rather than the poor. By internalizing the cost of climate change, it encourages society to accept responsibility for the carbon it injects into the atmosphere — not the most beleaguered segments, but society as a whole, which, in an age of galloping economic polarization, is increasingly of, by, and for the wealthy.

Tantrums thrown by the super-rich are wreaking havoc across much of the world. Conservatives have thus gotten it only half-right. It’s not welfare to those below that is leading to infantilization du monde, but the far greater welfare payments to those on top.

Rachael Sotos is a political theorist and adjunct professor with a background in philosophy, classics and environmental studies.

Climate Shock: The Economic Consequences of a Hotter Planet, is both a tidy summation of the state of the art in climate economics and a powerful call for action. For all the uncertainties and challenges, “the overall policy framework needed for addressing climate change is clear and has been for decades,” state co-authors Gernot Wagner and Martin L. Weitzman (p. 23). “Carbon dioxide is the problem. Pricing it properly is the solution.”(38)

Wagner, a senior economist at the Environmental Defense Fund, and Weitzman, a celebrated economist at Harvard, are an intriguing blend of young and elder, and realist and idealist. They exhort economists and climate advocates to get past the “epic debates” between taxes and cap-and-trade and, while consensus builds toward carbon pricing, to engage in the work required for “second -, third-, and fourth-best solutions”(26): electricity grid reform, stronger CAFE standards, and strategic application of subsidies and U.S. EPA regulations. “At the very least,” they say, “these regulations could provide a real bargaining chip when it comes to U.S. Congress considering comprehensive climate policy and a direct price on carbon down the line.”(19).

Flying their Pigovian colors from Preface to Epilogue, the authors are emphatic and unambiguous; “Putting a proper price on carbon isn’t a question of if, it’s a question of when.”(xi) Our best hope is “a high enough price on carbon to reflect its true cost to society.”(152)

Unfortunately, the bracing clarity of Climate Shock appears to have been lost on some reviewers. Earlier this month, NY Times columnist Joe Nocera misconstrued Wagner and Weitzman’s extensive discussion of geo-engineering as surrender to the political obstacles to carbon pricing. On Nocera’s reading, insofar as “a carbon tax on the worst emitters has gotten nowhere,” it’s time for Plan B: “chemo for the planet.” Au contraire, Wagner and Weitzman do not delve into geo-engineering scenarios like sulfates dispersal in lieu of ambitious policies to reduce emissions. Rather, they insist, “the specter of geo-engineering should be a clarion call for action. Decisive, and soon.”(29)

If Nocera reconfigured Wagner and Weitzman to suit his own techno-utopian ends, Yale Nobel economist Robert J. Shiller, also in the Times, willfully invested Climate Shock with libertarian designs. Directly contravening the thoughtful and informative discussion of social change presented in Climate Shock (and previously thematized in Wagner’s 2011 But Will the Planet Notice?), Shiller proposed idealistically-motivated incrementalism as a way around Kyoto’s failure “to impose strict taxes on carbon emissions.”

According to Shiller, Wagner and Weitzman “say that we should be asking people to save our climate by taking many small, individual actions.” Climate Shock actually says the opposite: “the numbers don’t add up. They’ll only begin to add up when environmentalists use their collective political powers to move the policy needle in the right direction, toward a price on carbon.”(40) (See also CTC director Charles Komanoff’s recent takedown of Shiller’s piece in regard to both facts and theory.)

Shiller’s misreading is doubly unfortunate because, as Wagner and Weitzman point out, the imperative to seriously engage policy must be directed toward average citizens, “those in the middle of the political spectrum,” as well as those already conversant with climate economics.(136) Certainly we should all do what we can to encourage virtuous cycles of ethical engagement and political participation – “Recycling well leads to better environmental policies, which allow for a more environmentally enlightened citizenry; a more enlightened citizenry, in turn, leads to more people recycling well.”(132)

Indeed. But, as Wagner and Weitzman are right to remind: in a greenwashed world seemingly structured to distract and misinform the average person, the most virtuous deeds can dead end. In the practical economics of everyday life, single actions sometimes crowd out other forms of engagement: “when people substitute single, individual actions – like recycling – for larger policy actions – like voting.”(133) Pigovians from start to finish, Wagner and Weitzman are emphatic: “if you have to make a choice between recycling and voting for a price on carbon, choose voting.”(137)

Yet another review, this one by Yale economist William D. Nordhaus in the current New York Review of Books, is notable on several grounds, not least of which is Nordhaus’s outsized reputation as a pioneering climate economist and modeler. Respectful in tone, Nordhaus engages of Climate Shock’s discussions of geo-engineering, the economics of uncertainty and the pitfalls of negotiating climate treaties. Strangely, however, Nordhaus takes up Weitzman’s path-breaking analyses of catastrophic risk without acknowledging any critiques of his own perennially optimistic approach.
[Read more…]

A new report from a British Columbia think tank reveals the inside story behind B.C.’s successful tax on CO2 pollution. “How to Adopt a Winning Carbon Price, Top Ten Takeaways from Interviews with the Architects of British Columbia’s Carbon Tax,” published by Clean Energy Canada, draws on extensive interviews with senior government officials, elected representatives and a broad range of experts who helped shape or respond to this groundbreaking policy.

British Columbia inaugurated its carbon tax on July 1, 2008 at a rate of $10 (Canadian) per metric ton (“tonne”) of carbon dioxide released from coal, oil and natural gas burned in the province. The tax incremented by $5/tonne annually, reaching its current level of $30 per tonne of CO2 in July 2012. At the current U.S.-Canadian dollar exchange rate (1.00/0.80), and converting from tonnes to short tons, the B.C. tax now equates to around $22 (U.S.) per ton of CO2.

In the tax’s initial four years (2008 to 2012), CO2 emissions from fuel combustion in British Columbia fell 5% — or 9% per capita, considering the province’s 4.5% population growth over that span. [NB: These figures are revised downward from the original version of this post; see editor’s note at end.] During the same period, emissions from the rest of Canada increased slightly. Revenue from the tax has funded more than a billion dollars worth of cuts in individual and business taxes annually, while a tax credit protects low-income households who might not benefit from the tax cuts. [Read more…]

China Carbon Tax In Doubt (Reuters)

Price Floor Could Fix EU Carbon Trading System (D. Burtraw, Resources for Future)

Is The Solution To Climate Change In Vancouver? (Think Progress)

Australia’s Carbon Tax Cuts CO2 + Reaps $7.6b Revenue (Financial Rev.)