Prices Matter – Page 2

Carbon Tax Center

Pricing carbon efficiently and equitably

Congestion pricing, coming soon to New York City, could bode well for carbon-taxing.

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Externality pricing is coming to New York City in a big, barrier-busting form known as congestion pricing. Judging from how it’s unfolding, it might just be bold enough to give a much-needed boost to the cause of U.S. carbon pricing.

In a long-awaited step, New York’s Metropolitan Transportation Authority this week unveiled its prospective tolls to drive a car or truck into Manhattan’s central business district. Barring a last-minute reversal, the Western hemisphere’s first congestion pricing program, and the world’s biggest by far in terms of revenue, will begin next June, just six months from now.

NY Gov. Kathy Hochul (top) and CTC director Charles Komanoff (below) speaking at Dec. 5 Union Square rally celebrating the march toward congestion pricing in NYC.

The plan took half-a-century to legislate and another four-and-a-half years to flesh out, culminating, for now, in its formal approval by the MTA board on Wednesday. Autos will be charged $15 to drive into Manhattan south of 60th Street between 5am-9pm weekdays and 9am-9pm weekends and holidays. Night-time tolls will be 75 percent lower, at $3.75. Trucks will pay more than cars, and for-hire vehicle trips that touch any part of the 8-square-mile congestion zone will be surcharged $1.25 (for yellow cabs) and $2.50 (for “ride-hail” vehicles, largely Ubers). Peak-period car trips to the zone via tunnels under the Hudson and East Rivers, which already pay double-digit round-trip tolls, will get $5 off, but other exemptions or discounts will be few except for low-income residents of the zone and commuters to it. (Many details here, by the author; and here, by the MTA’s toll-setting panel.)

The 2019 state legislation authorizing the tolls requires that they generate $1 billion a year net of administrative costs — a revenue stream sufficient to bond $15 billion in transit investments. Eighty percent of that, $12 billion, is earmarked for subway improvements such as station elevators to increase accessibility and fully digital signals to allow more frequent train service; the other $3 billion will be invested in expanding commuter rail service between the suburbs and Manhattan.

[Click here to watch/hear Gov. Hochul’s remarks depicted above. Click here for Komanoff’s.]

Revenue Most Visible

The billion-dollar a year take from New York congestion pricing puts it in the same league as the Northeast states’ Regional Greenhouse Gas Initiative, which currently reaps $1.2 billion a year from sales of carbon emission permits for burning fossil fuels to make electricity. Yet “RGGI” is largely invisible to the public. So too are California’s economy-wide carbon cap-and-trade program, which started in 2013, and British Columbia’s 2008 carbon tax as well as subsequent cap-and-trade schemes elsewhere in Canada, .

Those other mechanisms rest on what former CTC staffer James Handley habitually derided as “hide the price” subterfuges. Congestion pricing, in contrast, hides nothing. Motorists know full well what they’ll soon have to pay to drive into the nation’s most gridlocked (and transit-rich) district. True, the surcharges on for-vehicle trips can be tricky to track — they add to rather than replace incumbent FHV surcharges of $2.50 and $2.75 for “taxi zone” trips in yellows and ride-hails, respectively. But congestion pricing’s main event is the fees for private car trips.

And “main event” is putting it mildly. Though the $15 peak car toll is many times less than the socially optimal toll (per Paul Krugman, whose July encomium to congestion program relied indirectly on my traffic-cost modeling) or the congestion costs imposed by a single car trip, which is nearly the same thing, it’s still a gut-punch for diehard drivers. Not only that, imposing a hefty price on car travel to capture externality costs rather than merely to pay for infrastructure provision is, let us say, deliciously transgressive in the USA. Kind of like taxing carbon emissions.

The point being: successfully implementing congestion pricing in New York — not simply putting it in place but having it deliver tangible benefits like more-reliable travel, more-livable streets and re-invigorated public transportation — conceivably could burnish carbon pricing not just in New York but nationwide.

Enacting Carbon Taxes Remains Devilishly Difficult

Let’s be clear, though. As if getting New York congestion pricing within inches of the goal line hasn’t been hard enough, enacting a national, i.e., federal carbon tax worthy of the name — one that hits triple digits within a half-dozen years or less — will be devilishly more difficult. Consider these differences between New York congestion pricing and national carbon taxing:

    1. The economic incidence of NY congestion pricing is far more income-progressive than national carbon pricing. A bulwark of CP advocacy here has been unstinting support from the Community Service Society — the city’s and nation’s oldest antipoverty NGO. It’s hard to picture comparable support for nationwide carbon pricing. Not even “dividending” carbon revenues, which CTC strongly supports, can guarantee that millions of U.S. households won’t pay more in higher fuel costs than they’ll get back in monthly carbon dividends. Inevitably and unfortunately, some will slip through the dividend’s safety net, allowing opponents to cast even the most judicious revenue treatment for carbon taxing as insufficient to protect the poor.
    2. NY congestion pricing comes with a natural route for managing the congestion revenues: investing them in long-term mass transit improvements. It was this facet, more than the promise of lessened auto traffic, that brought the city’s rich tapestry of transit advocates into the fore of the congestion pricing campaign. Even motorists — some of them, anyway — grasp improved transit’s value to them as a means of dissuading others to invade “their” road space. National carbon pricing has no such obvious path for distributing or investing its revenues. Sure, spending carbon revenues on renewables and efficiency, particularly in historically disadvantaged communities, has a nice ring, but in practice there’s no clear carbon revenue spending path that won’t disaffect vast numbers of stakeholders. Now factor in the orders-of-magnitude difference in annual dollars — a billion or so in the case of NY congestion pricing vs. half-a-trillion for a comprehensive triple-digit U.S. carbon tax. Talk about a donnybrook gap!
    3. America’s geographic vastness and cultural separateness make it nearly impossible for citizens to consistently find common ground, as evidenced by our red-vs.-blue and urban-vs.-rural polarization. Even as New York City’s sense of conjoined fate has frayed somewhat, many residents still manage to cultivate a sense of connectedness to each other. Nationally, that ship has sailed. Woody Guthrie’s “This Land Is Your Land” anthem is 80 years old. Fond hopes from the 1990s or early 2000s that combating climate change might re-invigorate Americans’ shared humanity seem almost as distant.

Antidotes

To these three difficulties we have three antidotes.

Over the prior decade, the wealthiest U.S. household quintile spent 3.3 times as much on gasoline as the poorest — evidence of the power of carbon dividends to more than offset the natural regressivity of higher energy prices.

The first is the power of carbon dividends. Even if they can’t keep whole every single low-income U.S. household — there are, after all, 65 million below-median-income families, each with its own consumption profile — the vast majority of those households will reap more in dividends than they’ll pay with the carbon tax. Not just that, the dividend approach bypasses political fights over where and how to invest the revenues.

A second possible antidote is the exigency of the climate crisis itself. Unlike NYC traffic congestion or failing transit, which public policies like congestion pricing can vanquish going forward, climate collapse can’t be reversed. This ineluctable fact could, or should, motivate climate advocates to re-evaluate their largely ideological objections to robust carbon pricing (which we discuss elsewhere in terms of climate justice campaigners and self-identified progressives). Given that people of color, whether in the U.S. or the Global South, are disproportionately vulnerable to climate chaos, hope remains that carbon-pricing opponents may reconsider their antipathy to the most efficacious policy for slashing emissions and actually protecting the populations they profess to care about.

The third, as always is organizing. Carbon-taxing proponents need to keep up the pressure. We also need to expand our tent, as we wrote about last month in Gainsharing: Carbon Taxes Can Put Clean Energy Back in the Black. We’ll have more to say soon on that score.

Gainsharing: Carbon Taxes Can Put Clean Energy Back in the Black

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Note: This post distills and extends ideas from our Nov. 1 post, The Carbon-Tax Nimby Cure.

From the East Coast to Idaho’s high desert, big green-energy investments are foundering.

Composite of (top) first U.S. SMR complex (NuScale facility, artist’s depiction) and (below) offshore wind farm (Orsted’s UK Hornsea facility). Neither was in line for more than token revenues tied to displaced carbon emissions. Both have been cancelled.

Just in the past week, Danish wind giant Orsted scuttled the 2,248-megawatt Ocean Wind farm it was developing off New Jersey’s Atlantic coast, while NuScale scrapped its planned 462-MW complex of six 77-MW small modular reactors (SMRs) near Idaho Falls.

Both ventures were viewed as door-openers to new forms of large-scale U.S. carbon-free green power. They would have contributed mightily to decarbonizing their respective grids, taking the place of fossil fuel electricity now spewing nearly 4 million metric tons of carbon dioxide each year.

Their demise, along with dimming prospects for Equinor’s 2,076-MW Empire Wind farm off Long Island, NY, suggest that the vaunted crossover point at which big green-energy investments will come seamlessly to fruition fast and hard enough to rapidly decarbonize our grids is receding.

The 1983 title denoted “hard energy” facilities like giant power stations and LNG terminals. Nowadays it also seems apt for big green-energy projects.

The causes are no mystery: supply bottlenecks, spiraling materials costs, 40-year-high interest rates, Nimby obstruction. Not all of these will necessarily persist, but suddenly the combination looks daunting. Big energy projects, once derided as “brittle” by energy guru Amory Lovins, are rife with negative synergies. Nimbys stretch project schedules and impose punishing interest costs, particularly on big wind farms, a phenomenon we wrote about a week ago in The Carbon-Tax Nimby Cure.

Alas, Joe Biden’s Inflation Reduction Act is not a panacea. IRA incentives primarily lift EV’s, rooftop solar, heat pumps, batteries and factories. By themselves they’re not going to refloat stalled clean power projects. The big push will have to come from somewhere else.

What a Robust Carbon Price Could Do for Green Energy

A robust carbon price could do the trick. Not a token price like RGGI’s $15, which is the per-metric-ton (“tonne”) of CO2 value of the 4Q 2023 permit price in the northeast US Regional Greenhouse Gas Initiative electricity generation cap-and-trade program; but $50 or more per tonne of carbon dioxide, preferably $100.

I’ve been calculating how much profit a robust carbon price could inject into clean-energy bottom lines. The numbers are so astounding that I checked and rechecked them. Here’s one: A $100/tonne carbon price in NY would allow Empire Wind to charge an additional $200 million or more each year for its output. How? Because the tax would raise the “bid price” for natural gas-generated electricity, the dominant power source and thus the price-setter on the downstate grid by so much — $30 to $35 per MWh, I estimate — that Empire Wind’s 7.25 million MWh’s a year could extract an additional $240 million in its power purchase agreement with the NY grid operator.

Lots to see here. The dollar figures, including the $/MWh bottom lines, are derived off-screen. Added revenues will be less if gas generators lower their grid prices somewhat, but will be more if the methane fee enacted as part of the 2022 IRA comes into play.

Same goes for NuScale. I estimate that its Idaho SMRs could command an additional $100 million a year (less than for Empire Wind because the project is smaller and not all of its output will replace fossil fuels). This additional value equates to $29 per MWh — nearly the same, coincidentally, as the $31/MWh climb in costs since 2021 that triggered NuScale’s cancellation, according to a report by the anti-nuclear Institute for Energy Economics and Financial Analysis.

These added payments to clean-energy developers are not “subsidies.” They arise by slashing ongoing subsidies now enjoyed by fossil fuel providers and processors — in this case the methane-gas extractors and the electricity generators that burn the fuel — by subjecting these fuels to carbon pricing. The added payments will come about as the carbon price forces the gas generators to raise their sale price to the grid (to recoup their higher price to purchase the gas), which then creates room for Empire (or NuScale) to raise its prices.

Every cent of the carbon tax revenues will remain fully available for public purposes, whether to support low-income ratepayers, or invest in more clean energy or community remediation, or, our preference at CTC, as “dividend” checks to households. None of it needs to be earmarked to Empire or NuScale for them or other clean-power generators to rebuild their profit margins. The gainsharing comes about through pricing carbon emissions, not disbursing the carbon revenues.

Adios, Nimbys?

The Not In My Back Yard crowd wasn’t an apparent factor in NuScale’s downfall. (“Regulatory creep” was, but that’s a story for another time, not to mention one I dissected 40 years ago for the peer-reviewed journal Nuclear Safety.) But they certainly were for Ocean Wind in NJ and will be in NY if Empire Wind goes down the drain.

But here’s the thing: Not only would the added revenue allowed by the carbon price help return Empire Wind to the black. It would give Equinor, the developer, the wherewithal to spread so much largesse among the residents of Long Beach, LI (my hometown!) that they could subdue the Nimbys who have been able to hold up permitting by spreading scare stories about the routing of the project’s power cables underground. Nimby-ism solved, not by suasion (a fool’s errand) but by motivating the masses in the middle who evidently require more tangible inducements than saving the climate (or their beaches or homes).

Let’s Think Big

Ocean Wind, Empire Wind and NuScale are just a few examples of carbon-free projects that could again pencil out with robust carbon pricing. The question remains, how do we get there?

The point of this new analysis isn’t so much to tie clean energy to carbon pricing, but to enlist the political power and prestige of clean-energy entrepreneurs and developers on the side of carbon-tax advocacy.

As we noted in our previous (Nov. 1) post, during headier carbon-pricing times (2007 to 2011) the Carbon Tax Center attempted, alongside allies like Friends of the Earth, the Friends Committee on National Legislation, and Citizens Climate Lobby, to induce the American Wind Energy Association, the Solar Energy Industry Association and other green-tech trade groups to join us in advocating carbon taxing. We put out similar feelers to the Nuclear Energy Institute and the American Nuclear Energy Council. Getting the U.S. nuke lobby behind carbon taxing should have been a no-brainer, given that carbon taxes that monetized the climate value of nuclear power plants’ combustion-free electricity could have supplied mega-dollars to keep extant reactors solvent.

2010 redux: Equation at left signifying “Renewable Energy cheaper than Fossil Fuels” was a cleantech meme. Button on right, created by then-CTC senior policy analyst James Handley, was less prevalent. Time to meld the two?

No dice. We weren’t granted even one conversation with the nuclear folks. The wind and solar people, for their part, insisted that unending cost reductions through increased scale and efficiency, along with green power’s inherent magical appeal, would propel them past any obstacle. Why besmirch our Randian aura with energy taxes, they seemed to say, when our tech is going to usher in energy abundance and spare earth’s climate?

Things look different now. Big, carbon-free power ventures — the ones that everyone from governors and ambassadors to scientists and schoolkids are counting on to get us off fossil fuels — are beset by troubles: financial, logistical, cultural.

Without genuine carbon pricing that accords clean energy the economic rewards to which it’s entitled, too many large-scale green energy projects are going to come up short. As we asked in that earlier post: Will clean-power developers look at this week’s NJ and Idaho losses, among others, and decide that they need a carbon tax every bit as much as the climate does?

The Carbon-Tax NIMBY Cure

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NY Gov. Kathy Hochul last month vetoed a bill that could have expedited a huge wind farm in the Atlantic Ocean off Long Island. Her veto imperils not just the project, called Empire Wind, but New York State’s hopes to decarbonize its electric grid and validate its claim to national climate leadership.

I’ll argue here that a state or federal carbon price — one more substantial than the relative pittance of $15 per ton now being charged for electricity sector emissions under the RGGI compact — could have helped the developers beat back the NIMBYs whose rabble-rousing helped force Hochul’s hand. Let’s review the project and then explain how its difficulties are connected to the absence of robust carbon pricing.

Empire Wind Will Be Large

There will be 138 turbines, identical and gigantic. At 387 feet, each turbine blade will be the length of a football field including the end zones. The distance from water surface to blade tip at full height will be 886 feet, roughly the extent of two celebrated Manhattan towers that a century ago were the world’s tallest buildings: the 792-foot Woolworth Building (#1 from 1913 to 1930) and the 1,046-foot Chrysler Building (1930-1931). An even funner fact, from the developer’s spec sheet, is this: just one complete rotation by one turbine’s three blades will “power a New York home for about 1.5 days.”

The anticipated annual electrical generation from Empire Wind 1 and 2 combined is 7.25 TWh (or, if it’s easier, 7,250,000,000 kilowatt-hours),assuming a 40% yearly capacity factor. Here are four alternative ways of visualizing the significance of that output:

  • Empire Wind’s 7.25 TWh is half again as great (i.e., 1.5x as large) as the entire production by New York State wind turbines in 2022 (that figure was 4.8 TWh);
  • 7.25 TWh is 5 to 6 percent as great as all electricity generated from all state sources in 2022 (130.5 TWh);
  • 7.25 TWh is one-sixtieth (1/60) as much as all U.S. wind-generated electricity last year (435 TWh), a figure that itself constituted a tenth of U.S. electricity production from all sources;
  • 7.25 TWh is close to (12 percent less than) the average annual 2010-2019 output of either of the twin Indian Point reactors in suburban Westchester County that until their recent forced retirement were downstate New York’s lone large-scale source of carbon-free electricity. (The entire Indian Point station’s average annual output over its final decade, 2010-2019, was 16.5 TWh.)

Putting aside that last benchmark — which is intended as a reminder of the carbon disaster of shutting Indian Point (and a cautionary tale against shutting its West Coast doppelganger, Diablo Canyon) — Empire Wind looms large in New York state’s goal of attaining a 70 percent carbon-free grid in 2030.

The state’s 2022 carbon-free electricity share was just 48 to 49 percent, down from 60 percent in 2019, before Indian Point’s closure commenced. If Empire Wind’s output were available today, the statewide share would stand at 54 percent, indicating that this single (albeit two-part) project can close a quarter of the gap from the current clean percentage to the 2030 target.

Hochul and the NIMBYs

Along with infusing the grid with billions of clean kilowatt-hours, building and servicing Empire Wind 1 and 2 is expected to create 1,300 permanent onshore jobs — 300 to manufacture turbine components at the Port of Albany, and 1,000 in operation and maintenance at the South Brooklyn Marine Terminal, according to Equinor, the developer. These numbers, along with the clean electricity, ought to be catnip for any Democratic politician.

Why, then, did Hochul on Oct. 20 veto a bill that could have cleared the path for the Empire Wind 2 power cable to run under Long Beach and connect to the electric grid in Oceanside?

There’s no shortage of possible rationales. Long Island flipped from shaky blue to all red a year ago, as Democrats lost all four Congressional races and a number of state legislative seats while Hochul herself was outvoted there in her unnervingly close re-election. She may be seeking to preserve political capital for a possible renewed push to undo exclusionary zoning that that keeps housing in Nassau and Suffolk counties unaffordable for newcomers or those without generational wealth. Moreover, Empire Wind itself has faced financial headwinds due to supposed supply chain bottlenecks and spiraling financing costs, with the latter due in no small part to the regulatory delays.

Whatever the reasons, Hochul  went all NIMBY-friendly. Her veto message faulted Equinor for running roughshod over Long Beach residents (see pull quote at left) rather than calling out the obstructionists for teeing up a replay of 2012’s Superstorm Sandy that devastated the very communities that now are clamoring for the wind project to go away.

In her message, the governor ignored the tinfoil-hat essence of most anti-wind opposition, which one observer, a former New York City chief climate policy advisor, characterized as combining “propaganda from the fossil fuel industry, rumor mongering in local communities, and basic nimbyism.” As NY Focus helpfully reported in Long Island Politicians Claim Victory for Hochul Wind Power Veto, objections to the Empire Wind farm and cables run the gamut from shopworn (ocean views sullied by turbines 15 miles offshore) to debunked (health-harming electromagnetic radiation from the power cables) to chronologically impaired (“We’ve had a huge number of [dead] whales that are showing up on our beaches,” a state senator fretted, yet not even a single offshore wind turbine has begun operating on the Atlantic Coast).

Entire cable route through Long Beach is underground. Yet NIMBYs are holding hostage a not-quite-in-their-backyard project that would more than double NY wind power production. Incidentally, I was born and grew up in a house on Washington Blvd, just a few blocks past the left edge of the map. Equinor map adapted by CTC.

Hochul and her staff seem unaware that there is no placating NIMBYs, whether their sights are trained on giant offshore wind projects or small-bore items like transit-friendly higher-rise housing or bike lanes. To the naysayers, any palpable change in their way of life is either Armageddon in itself or a pathway to purgatory. The only way to deal with them is to give pro-development, pro-change forces the strength to vanquish the NIMBYs outright — which is where carbon pricing comes in.

Would You Like $240 Million in (Annual) Carbon Benefits With Your Order?

Offshore wind’s chief virtue — in some respects, its true raison d’être — is its ability to take the place of dirty, fossil-fuel electricity generation in the grid. This asset is particularly salient in the case of Empire Wind, insofar as the downstate New York grid, with only modest interconnections to greener grids upstate or elsewhere, obtains more than 90 percent of its annual electricity by burning methane (“natural”) gas.

As a result, nearly every kilowatt-hour from Empire Wind will directly displace a kWh from burning fracked gas. And though the 90% share will decline when the new Champlain-Hudson Power Express transmission line enters service, perhaps in 2026, nearly all of the “incremental,” hour-by-hour power production actually avoided by generation from Empire Wind will still be gas-fired when the project’s two parts come on line in 2028 and 2029.

Now picture a federal or state carbon tax — or “price” if you prefer. Set it at $100 per metric ton (“tonne”) of CO2, which is both a round number and the level the Carbon Tax Center has been advocating since our inception, to be reached after a ramp-up taking half-a-dozen years. Now apply the carbon tax to the CO2 emitted from one kWh generated by burning gas. You’ll find that the carbon tax associated with each such kilowatt-hour is 3.9 cents.

Calculations: 659 x 10^6 tonnes (CO2 emissions from 2022 U.S. gas-fired electricity) divided by 1.689 x 10^12 kWh (U.S. electricity generated with gas in 2022) multiplied by 10^4 ¢ charged per tonne yields 3.90¢/kWh.

Let’s bring that figure down to earth: With a $100/ton (okay, tonne) carbon tax, each gas-fired kWh in competition with Empire’s offshore wind would cost 3.9 cents more to generate than at present. (To keep the discussion simple, I’ve refrained from counting an additional tax on methane.) We trim that to 3.3¢/kWh because the Regional Greenhouse Gas Initiative (RGGI) already charges a carbon price on fuels used to generate electricity in New York and neighboring states; in the most recent (September) quarterly auction, that price reached $13.85 per short ton, equivalent to $15.25 per metric ton, which we deduct from our aspirational $100/tonne carbon price to avoid double-counting, reducing it by just over 15 percent.

The hypothetical 3.3¢/kWh additional carbon charge for gas-generated electricity (stemming from the $100 carbon price) multiplied by Empire Wind’s 7.25 TWh annual output yields $240 million per year. Those dollars represent a first estimate of the additional annual revenue Equinor could have sought in its 2018 and 2020 bids responding to NYSERDA’s solicitations to prospective developers of offshore wind projects. (See text box further below.) With a robust NY carbon price, in other words, Equinor’s Empire Wind venture would enjoy a far higher profit margin.

Offshore Wind’s Missing Carbon Price

Imagine what Equinor might have done with $240 million a year in additional Empire Wind revenue. It could have banked, say, half that amount to offset the price escalation and higher interest costs that this year lowered its prospective profit margins and compelled it to appeal to NY State to grant a higher price for its production. (Incidentally, the NY Public Service Commission’s Oct. 12 order denying Equinor’s petition seeking renegotiation of its power contract with NYSERDA provides a good capsule summary of NY state offshore wind activity; it can be found via this link; search for Cases 15-E-0302 and 18-E-0071.)

The other $120 million, or a good chunk of it, could have been used  — and might still be — to provide economic benefits to Long Beach and other communities that consider themselves “affected” by Empire Wind’s turbines or cables.

Empire Wind website paragraph about Taxes makes no mention of payments — voluntary or mandatory — to Long Beach and other communities.

As a thought-experiment, consider that $120 million distributed equally to Long Beach’s 11,700 households (assuming the city’s 35k population resides 3 per household) could provide recurring yearly dividends of around $10,000 per household, once the electricity began to flow. Perhaps more practical would be to set aside $75 million as a one-time payment to retire the so-called Haberman Judgment holding Long Beach financially responsible for blocking a proposed real-estate venture near the boardwalk and ocean beach several decades ago (see City of Long Beach 2023-2024 adopted budget, pages ii-iii).

Of course there are any number of other “improvements” that Long Beach, Island Park and Oceanside might elect to be funded by Equinor “payments in lieu of taxes.” I was surprised that Empire Wind’s online materials do not mention any such payments.

The idea is not to “win over” the NIMBYs — I consider that a fool’s errand — but to neutralize and politically overpower them by appealing to the larger community’s enlightened self-interest. Not so much the members of the Long Beach city council — who apparently (and astoundingly) went from 5-0 in favor of permitting the cable route to 0-5 between spring and fall of 2023 — but the citizenry that holds sway over them.

This isn’t my first time linking carbon pricing to big, hence potentially intrusive, green-energy projects. I struck that note in 2006, in Whither Wind, a long-form piece on wind and other green power for Orion magazine:

[I]if carbon fuels were taxed for their damage to the climate, wind power’s profit margins would widen, and surrounding communities could extract bigger tax revenues from wind farms. Then some of that bread upon the waters would indeed come back — in the form of a new high school, or land acquired for a nature preserve.

The urgency now is far greater. Today, as I was wrapping this post, the New York Times reported that the Danish offshore wind company Orsted canceled an equally large (2248 megawatts) wind farm, Ocean Wind 1 and 2, it was developing off New Jersey’s Atlantic coast. Orsted cited the same combination of faltering economics and local opposition (which of course weakens the economics further through delays) now besetting Equinor and Empire Wind. Note too that even though Empire Wind 1’s interconnection to the grid, also under the seabed but through Brooklyn, is not (now) threatened, the economics will almost certainly kill Part 1 if Empire Wind 2 through Long Beach goes down.

Long-time CTC followers will recall my standing frustration over wind and solar entrepreneurs’ lack of interest in pushing carbon pricing. Efficiency gains, cost reductions and the magical appeal of green power would carry them over any and every threshold, they imagined. Will today’s NJ offshore wind defeat and the one looming in NY be enough to convince clean-power developers that they need a carbon tax every bit as much as the climate does?

New York Times congestion-pricing table-setter bodes well for carbon taxing

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The New York Times yesterday published my op-ed, There’s Only One Way to Fix New York’s Traffic Gridlock, co-written with Columbia University climate economist Gernot Wagner.

Our essay is a meticulous and extensive (1,300 words) brief for making drivers feel the pocketbook costs of their vehicles’ traffic-jam causation, via the policy measure known as congestion pricing. In our telling, not only is this policy guaranteed to generate immense benefits for New Yorkers; as the title suggests, we declare it to be the only way to “free … drivers from the traffic snarls that pollute the air and crush the soul.”

From the Times’ home page, June 8, 2023.

The essay was nearly a month in the making and the product of extensive argument-shaping and fact-checking by the Times’ op-ed staff, bespeaking the paper’s commitment to presenting congestion pricing in a positive light. Its appearance broke the mold of the paper’s hesitant past coverage in two important respects:

1. It explicitly rests on the “comprehensive spreadsheet model” of New York traffic and transit I began developing in 2007 (coincidentally, the year I launched the Carbon Tax Center).

2. It let Gernot and me voice the inconvenient assertion that the regional transit agency charged with designing and administering congestion pricing — the Metropolitan Transportation Authority — “through a few fateful, faulty assumptions, underestimated drivers’ propensity to switch trips from cars to other transit options.” These flubs have tied congestion pricing advocates in knots, forcing us to rebut objections of environmental justice impacts that don’t stand careful scrutiny, although they understandably resonate with communities that historically have borne hugely disproportionate damages from highways, energy facilities and other polluting infrastructure.

It’s only a modest stretch to view the Times’ twin breaks with tradition as the Grey Lady’s version of Andrew Cuomo’s bombshell announcement in August 2017 that “congestion pricing is an idea whose time has come” — itself a rupture that set in motion passage of the state statute authorizing congestion pricing in March 2019.

They suggest that the Times may be lying in wait for the right political winds to let advocates of carbon pricing make a parallel case with respect to climate. Not that a carbon tax is “the only way to fix America’s carbon crisis” but, rather, that it’s a complementary policy tool to last year’s Inflation Reduction Act, and an essential one to ensure that green energy actually replaces rather than merely supplements use of fossil fuels.

For the benefit of non-subscribers blocked by the Times’ paywall, and also to enable comments as well as add a few graphics, we present Gernot’s and my op-ed in full.

— C.K., June 9, 2023

The plan to charge drivers to enter Manhattan south of 60th Street, which last month moved closer to federal approval, will deliver two notable gifts to New York and the region when it begins, perhaps as soon as next April.

The first is that congestion pricing will cut traffic not just within the so-called charging zone but on the hundreds of streets and highways that cars use to go to and from that zone. This reduction of almost two million miles traveled in the region each day will free many drivers from the traffic snarls that pollute the air and crush the soul.

Using a detailed benefit-cost analysis that assumes a pricing structure of $15 at peak times, $10 as traffic begins to thicken and $5 at off-peak times, we calculate that the value of those projected time savings to drivers and truckers amounts to nearly $3 billion a year, with time saved in the boroughs and counties surrounding Manhattan exceeding those on the island.

These estimates are based on a comprehensive spreadsheet model of the region’s traffic, developed by one of us (Mr. Komanoff). State officials used that model to write the statute authorizing congestion pricing, which the New York State Legislature passed in 2019.

The other gift will be the $1 billion a year in congestion pricing revenue that the Metropolitan Transportation Authority will use to secure $15 billion in bonds to pay for improvements to mass transit in the city. Those upgrades will reduce waiting times and onboard delays — and the precious time subway passengers lose as a result.

Either outcome would be a godsend. The combination has the potential to be transformational for New Yorkers.

Our op-ed rests on the benefits and costs summarized in the chart.

Why, then, do many people seem anxious about, if not downright opposed to, congestion pricing? Entitlement plays a part: Why should we suddenly be forced to pay for something that had been free? Another reason surely is disbelief. Many people don’t believe that the revenues — the $1 billion a year from drivers — will actually improve mass transit services. The M.T.A. is a money pit, people say.

They may have a point. But the subway, bus and commuter rail services that the M.T.A. operates are also a marvel and a necessity. After the pandemic lockdowns, the system still delivers 2.5 times as many people a day into the Manhattan core as cars and trucks do, though that is down from four times as many before Covid struck. Still, the M.T.A. must build and manage far more effectively. The same political will that got congestion pricing written into law must be marshaled to eliminate layers of consultants, to bring work rules into the 21st century and to make design-build contracting, in which the project designer and the contractor work together under one contract from the beginning, the rule.

People are also unconvinced that congestion pricing will, in fact, cut congestion. Urban gridlock has come to appear immutable in the United States, perhaps nowhere more so than in the Manhattan core, where travel speeds were averaging a maddening 7 miles per hour before the pandemic. Why should congestion pricing succeed where a century of other remedies — like widening roads to only then narrow them again — has failed?

This question is even more salient after the M.T.A.’s environmental study of congestion pricing, released last summer, which concluded that Manhattan traffic will diminish only because trips that now pass through the city’s center would divert around the island, possibly adding traffic and air pollution to parts of the Bronx, Staten Island, Nassau County on Long Island and Bergen County in New Jersey.

We believe that the M.T.A., through a few fateful, faulty assumptions, underestimated drivers’ propensity to switch trips from cars to other transit options. We don’t say this idly — our estimation is based on decades of studying traffic in and around Manhattan and on basic economic principles.

How much traffic will diminish will depend on the toll design selected by the civic leaders who make up the city-state Traffic Mobility Review Board. They’ll be aiming for the same sweet spot that London, Stockholm and Singapore have attained through their successful congestion pricing programs: 15 to 20 percent fewer car trips into the zone, a cut big enough to reduce the many negatives traffic brings and enough to reap the targeted $1 billion a year in revenues to improve the subways, buses and commuter rail systems. (New Jersey Transit rail and bus and PATH would not share in these revenues.)

The congestion charges have not been set. But the M.T.A.’s model and ours agree that if exemptions are kept to a minimum, it could be as little as $15 for a rush-hour trip into Midtown and $5 to $10 during off-peak hours for E-ZPass holders. (In  London, drivers pay 15 pounds during the day, or nearly $19.)

The benefits of congestion pricing — faster, less stressful travel above and below ground and safer, healthier streets and communities — don’t negate the distress of drivers who understandably don’t want to pay where they now drive free, but they assuredly eclipse it.

In addition to the nearly $3 billion worth of saved time for drivers, we estimate that the myriad other benefits add up to an additional $2.5 billion. Those benefits include fewer crashes, better health from cleaner air and more walking and biking, and time saved for transit riders, thanks to improvements enabled by the congestion pricing revenue. Subtracting the $1 billion drivers will pay to enter the congestion zone, the result will be over $4 billion in annual net benefits, or almost $12 million each day.

Moreover, only a small slice of area residents habitually drive into the Manhattan core. Very few are among the working poor, as the Community Service Society of New York, one of the nation’s oldest antipoverty organizations, found when it endorsed congestion pricing in 2019 and again last year. Many drivers, too, may come to feel less of a sting from paying the toll once they actually experience the less-snarled roads.

Schroon River in New York’s Adirondack region on May 12, photographed moments before Gernot called to suggest we pitch an op-ed pegged to the week-earlier removal of a key hold-up to congestion pricing. Our first draft began there.

Last month, the Federal Highway Administration tentatively approved an M.T.A. report that identified how to alleviate possible harm to disadvantaged communities. Now the public has until Monday to review it.

To opponents of the plan, we say:

The M.T.A. is responding to public concerns. To hasten federal approval, the agency has committed to toll discounts for frequent low-income drivers into the zone and also to encourage pollution reductions such as electrifying diesel-powered refrigeration trucks at the Hunts Point Market in the South Bronx and expanding New York City’s clean trucks voucher program to help pay to electrify diesel trucks elsewhere. These commitments followed public feedback on earlier versions of the plan.

Every car is causing congestion. Stalled highways and jammed streets aren’t just the fault of Uber or U.P.S. or bike lanes or public plazas. Everyone driving to or in New York’s central business district (except in the wee hours) adds to congestion. We estimate that right now, a single round trip by car from Sheepshead Bay in Brooklyn to Radio City Music Hall in Midtown during most of the day causes $100 to $200 worth of additional delay for everyone else. That makes a prospective $15 or even a $20 peak congestion toll a downright bargain in comparison.

Congestion pricing is the only durable antidote to persistent traffic congestion. The Columbia University economist and Nobel laureate William Vickrey demonstrated 60 years ago that there’s no way out of gridlock without making drivers pay for taking up limited street space. Otherwise, there will always be more car owners wanting to use the available space than there is space to accommodate them.
Drivers all over the city and well beyond stand to gain from this plan. Yes, it will be painful to pay for something that has been free. But it is even more painful to spend hours idling in traffic, knowing that a better path beckons.

Charles Komanoff is a transportation analyst in New York. Gernot Wagner is a climate economist at Columbia Business School.

For Long-Term NY Transit Funding, Look to a State Carbon Tax

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The New York City public affairs site Gotham Gazette today published my essay, For Long-Term MTA Funding, Look to a State Carbon Tax. I’ve cross-posted it here to allow comments and to bring it directly to the Carbon Tax Center’s readership.

 — C.K., May 4, 2023

That huge sigh of relief from New York City mass transit advocates last weekend was for the state budget handshake to tack more than a billion additional dollars a year onto a key MTA funding stream, the Payroll Mobility Tax. According to both my calculations and an announcement from Gov. Kathy Hochul, the agreed-to 75% rise in the tax rate on employee salaries paid by businesses in the five boroughs will add $1.1 billion to the PMT’s ongoing annual $1.8 billion take.

(The numbers prorate imperfectly because the rise in the tax rate, to 60/100 of one percent, applies only in the city; the rate in the seven suburban MTA counties remains 34/100 of one percent.)

The upward bump in the PMT is part of the package to avert a fare hike and service cuts that would have jolted the entire metro region. Raising the same $1.1 billion via the subway farebox, for example, would have required a whopping 35% jump in fares, a calamity that would have triggered enough new car, cab, and Uber trips to slow vehicles in Manhattan by 5% and boosted city and regional carbon emissions by nearly 400,000 tons of CO2 a year — enough to negate the climate benefit of 90 new large wind turbines, according to my modeling. And these figures don’t include lost jobs and commerce from worsened transportation. Reducing service to save the same amount would have produced similar bad outcomes.

Score a big win, then, for transit and New York. But the new revenue comes with a downside: taxes on payrolls discourage hiring and compound our area’s anti-business aura. Moreover, this revenue infusion will almost certainly be not the last but the first in a series the MTA will require throughout the decade to limit future fare hikes and improve service even as ridership continues to lag pre-pandemic volumes. Counting on raising the PMT next time, and the time after that, will be a fool’s errand. There has to be a better way.

I believe there is: enact a modest statewide carbon tax and dedicate a third to a half of the revenue to shoring up public transportation budgets around the state, though principally in New York City.

Reappraising Carbon Taxes

On January 1, Washington state launched its carbon-pricing program, the nation’s second all-sectors carbon charge, with a starting price around $20 per ton of CO2, though most of the emission allowances fetched even higher prices in the first carbon auction, in March. I estimate that the same $20 price applied to all fossil fuels burned in New York State could generate revenues of $3 billion a year (see table).

Dedicating a third of those proceeds to the MTA would add a billion dollars to the authority’s annual revenue. Other slices of the revenue could cure deficits at smaller transit systems around the state.

Even with these allocations, roughly half of the new $3 billion in annual carbon revenues would remain available for a range of purposes from home weatherization to rebates offsetting higher fuel costs for lower-income rural New Yorkers.

Of course, no new tax is ever welcomed with open arms. In recent years, moreover, carbon taxing has lost political standing with left and right alike. Right-wingers, in thrall to fossil fuels, denigrate the very idea of climate concern. Opinions on carbon pricing on the left, while far more nuanced, tend toward an “eat your peas” quality, seeing the promised revenues but not the powerful tides unleashed by the increased fuel prices.

Could a state carbon tax have a chance in New York this time around? I believe so, if only because MTA deficits are untenable and a statewide carbon tax looks like the least-bad long-term antidote.

Consider:

  1. New York wouldn’t be the first state to price all carbon emissions. California has done so for a decade, and, as noted, Washington just followed suit.
  2. Two-thirds of the $3 billion in carbon tax revenue could go to other, non-MTA uses across the state.
  3. Nearly half of the revenues would come from charges on fossil (natural) gas, the very fuel that climate activists are targeting in order to electrify heating and cooking while also shrinking climate-damaging methane leaks from pipelines, wells, and buildings.
  4. Carbon taxing’s regressive bias (it takes more dollars from the rich but more proportionally from the poor) would be blunted by its helping keep a lid on transit fares.
  5. The affluent suburban counties that will be on the hook for the carbon tax caught a big break by their exemption from the increase in the Payroll Mobility Tax. Moreover, some pro-climate suburbanites might even support a climate-helping carbon tax.
  6. Upstate households will be cushioned from the tax by the region’s preponderance of low-carbon electricity from nuclear, hydro, and wind power.
  7. Aid to transit could be packaged as an urban corrective to suburban- and rural-facing Inflation Reduction Act federal subsidies for solar panels, electric vehicles, and heat pumps. (Notably, the IRA does not fund urban-friendly mass transit and e-bikes.)
  8. Left-leaning climate-justice advocates who shy away from carbon pricing might warm to a policy that cuts emissions by attracting car trips to buses, trains, and subways.

This panoply of advantages points to diverse potential sources of support for a transit-benefitting state carbon tax:

  • NYC transit and “livable streets” advocates;
  • Economic-justice advocates who recognize affordable transit’s value in combating poverty;
  • Climate campaigners who see carbon pricing as a complement to other carbon-cutting policies;
  • Suburbanites concerned that future hikes in the Payroll Mobility Tax will come for them;
  • “Electrify-everything” proponents working to eliminate fossil gas from residences and other buildings;
  • Developers of low-carbon electricity — not just solar and wind providers but proponents of retaining the state’s four upstate reactors and building new ones;
  • Energy-efficiency engineers, contractors, and workforces;
  • Labor unions whose members fabricate, erect, and maintain the spectrum of green energy projects that a carbon tax will help make more abundant by making fossil sources costlier.

Competing Claimants?

Electricity producers in New York already pay a carbon fee under the multi-state Regional Greenhouse Gas Initiative (RGGI) cap-and-trade program. In addition, Governor Hochul and the statewide climate coalition New York Renews have advanced competing carbon pricing concepts, both of them, somewhat confusingly, dubbed cap-and-invest. Hence, an MTA-focused carbon tax, which would employ a carbon-based charge on fossil fuels extracted or imported into New York State rather than a carbon cap enforced through sales of emission permits, wouldn’t arrive on a blank slate.

RGGI currently charges electricity producers around $14 for each ton of CO2 their generators emit. This levy is generating $365 million of statewide revenues a year, paid as surcharges on power bills, which goes to support investments in energy-efficiency and renewable electricity. While in theory the RGGI charge could be netted against the new carbon tax, the relative ease and importance of decarbonizing electricity production make it preferable to retain it and add the carbon price on top.

Cap-and-invest presents a trickier set of issues, partly because neither the governor’s prospective program included in the new budget nor NY Renews’ more elaborate plan has been fully fleshed out. In addition, the latter is the fruit of years of deliberation and consensus-building among the coalition’s hundreds of participant grassroots groups, who now constitute a formidable host.

At this writing, NY Renews envisions applying $10 billion in carbon revenues over several years in no less than 73 individual spending buckets grouped in four uber-categories: Climate Jobs and Infrastructure includes elements like aiding electric bus manufacture ($100 million) and offshore wind power supply chains ($300 million). Energy Affordability earmarks $1 billion to wipe out utility customer debt and $2 billion to support building electrification. Community & Worker Transition Assistance devotes $600 million to the “just transition” from jobs in carbon fuels to positions in renewable energy. And Community Directed Climate Solutions sets aside $2 billion to unspecified projects in historically underserved and overburdened urban neighborhoods and rural areas.

The NY Renews plan should be seen, then, as a holistic roadmap to make over not just how energy is supplied in the state but how it is consumed and governed. Billion-dollar-a-year allocations to the MTA aren’t the kind of investment its members have envisioned. Nevertheless, exploratory calculations suggest that the carbon payoff from service improvements paid for by a state carbon tax would be impressive.

As an illustration, I have calculated that an average 20% speed-up in subway trips achieved by running more trains at higher speeds would save straphangers and drivers each around 100 million hours a year (the latter from car trips switching to trains) while reducing car and truck emissions by 900,000 tons a year. Even more CO2 would be eliminated because of New York City’s improved competitive advantages vis-a-vis less “inherently green” suburbs and exurbs.

To be sure, so striking a gain in subway performance would almost certainly carry a price tag well over a billion dollars a year. Still, the prospective benefits underscore both the carbon-cutting potential of infusing new funds into subway service and the need to score competing claims for their climate value.

Broader Considerations and Next Steps

Over time, the carbon tax’s revenue base will shrink as its price incentives kick in and other carbon-cutting policies also gather steam. The resulting loss in tax revenues could be counteracted by periodically raising the per-ton tax rate. New York City could supplement the tax through revenue-generating street-management measures such as curbside pricing and other forms of road pricing.

Earlier this year, Community Services Society CEO (and MTA board member) David R. Jones and Riders Alliance executive director Betsy Plum proposed expanding New York City’s Fair Fares program to allow an additional 772,000 lower-income New Yorkers to qualify for half-fare transit passes. The cost, which they put at $142 million a year, should be a candidate for the carbon spending package.

This discussion has centered on the carbon tax’s creation of a new funding pot to maintain and improve transit affordability and performance. But taxing carbon emissions stands to benefit society in two other major ways. It will diminish financial incentives propping up carbon fuels and also support societal paradigms promoting care over harm.

A carbon tax is more than just a pay-for, in other words. Simply making it more expensive to buy and burn carbon fuels discourages fossil fuel use in a multiplicity of ways. Moreover, the very act of pricing carbon emissions can spur “externality taxing” in other realms, from congestion pricing to taxing the sugar content of soft drinks. Making New York the third U.S. state with broad-based carbon pricing will also add momentum to long-sought federal carbon emissions pricing.

Shoring up MTA finances, while reason enough to enact a state carbon tax, isn’t the lone consideration. The crisis of transit funding should be seen as a catalyst to pricing fossil fuels more closely to their true societal costs — a vital goal in its own right.

The next MTA funding crisis-as-opportunity will be upon us soon. The Legislature should move swiftly to study the benefits of taxing carbon emissions as a way to hold the line — and more — on transit fares and service, well in time for next winter’s budget negotiations. Transit and climate advocates and their counterparts in the Hochul administration should consider integrating a transit-focused carbon tax into their agendas.

Taking $3 billion a year for any public purpose, no matter how noble, is no small matter. The time to start selling a transit-supporting state carbon tax is now.

A Bitcoin Mining Exposé Strengthens the Case for a Carbon Tax

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The Nation magazine this morning published my essay, A Bitcoin Mining Exposé Strengthens the Case for a Carbon Tax. I’ve cross-posted it here to allow comments and add tables and graphics.

 — C.K., April 20, 2023

Clean electricity, the backbone of the Biden administration’s strategy for slashing carbon emissions, is becoming daunting to expand.

US wind farms, which last year generated more electricity than all hydropower and solar panels in the 50 states combined, often face years of contention. The entire mid-Atlantic offshore region, an area brimming with wind potential, could be proscribed by Pentagon fretting over interferences with aircraft deployment, Bloomberg News disclosed this week.

But if red tape for green power is a bother, why not get the benefits with none of the fuss? Send commando teams to the 34 large-scale Bitcoin mining sites in the United States that were identified in a New York Times front-page exposé this month. In synchrony, have them sever the facilities’ power cables, which combined demand some 3,900 megawatts of electricity—nearly as much as 3 million households combined.

In a flash, legions of electricity-gulping, combination-seeking computers in Texas, New York, and 13 other states would cease whirring. Like a power surge but in reverse, the fossil-fuel generators energizing so-called cryptocurrency mining—literally, trillions of combination-seeking calculations every second—would dial down. The corresponding drop in carbon emissions would be the same as if thousands of new industrial-size wind turbines could be instantly erected and connected to grids, supplanting electricity now furnished by burning coal and methane gas.

Data adapted from NY Times April 9, 2023 story. Link in text above. FF% is estimated percent of *incremental* power demand supplied from coal or methane gas.

Fanciful? Consider the numbers. The Times helpfully enumerated each Bitcoin mine’s fossil-fueled draw on state and regional power grids along with the associated carbon emissions. It took only a few further steps for me to translate those emissions into generic megawatts of clean power that would defray them. Using today’s customary 300-foot-tall, 3.6-megawatt wind machines as my standard, I calculated a staggering 3,700 turbines.

There you have it: The US Bitcoin industry is single-handedly neutering the entire climate benefit from nearly 10 percent of US wind energy. That’s more electricity than is generated with wind in any single state, save Texas and Iowa.

This raises two uncomfortable questions for the climate movement: Why isn’t it rallying against Bitcoin mines and other parasitic users of carbon fuels? And why isn’t it taking the obvious step of calling for a tax on carbon emissions to reduce those usages while simultaneously extracting revenues from them?

Second question first. Generating the electricity consumed by those 34 Bitcoin mines causes 16.4 million tons of carbon dioxide emissions each year, according to the Times. If the United States had a $100 per ton carbon tax—the current price of carbon emission permits in the European Union’s cap-and-trade system—the carbon levies at the mine mouth and wellhead would be extracting $1.5 billion a year from the fossil fuel companies that power the Bitcoin operations, and depositing it into the Treasury.

To be sure, that money would only fund a mere 2.4 hours of federal spending a year—barely a single baseball game’s worth, under the new hurry-up-and-pitch rules. On the other hand, the tax moneys are twice what Fox News will pay Dominion Voting Systems under the settlement reached this week. And they’re recurring.

But it would not be extinguished. That’s where the climate movement comes in.

Had the tax been in place a decade ago, as I and others urged, the extra expense might have stopped some cyber-currency ventures from the git-go. But if it were put into place today, a robust carbon tax could at least impel Bitcoin miners to economize on electricity, charge more for transactions, or actually contract with greener power providers rather than merely pretending to, as the Times found.

Although no one can pinpoint precisely how a carbon tax would shrink Bitcoin mining’s carbon footprint, let alone any single sector’s, abundant empirical evidence suggests that total US carbon emissions would be around a third less with a triple-digit national carbon tax than without. Bitcoin would not be exempt.

The movement has targeted banks and pipelines for more than a decade, with not much to show in the way of lesser carbon emissions. Why isn’t it disrupting Bitcoin mining and other bloodsucking machines—helicopters, private jets, yachts, super-sized SUVs—that feed on fossil fuels and are predominantly playthings of plutocrats? Why isn’t it going all out to stop highway expansions and eliminate restrictive zoning that lock in energy waste for generations?

Yes, climate activists stopped Keystone XL. They won a ban on fracking in New York. They’re fighting to drive oil drilling out of Los Angeles. Valiant, heroic work. But these and other keep-it-in-the-ground victories are creating little climate benefit. Why? Because the same underlying demand, largely unaffected by those protests, is met by supplies from elsewhere.

The bank protests seem even less focused. Conoco doesn’t need financing from JPMorgan Chase or Wells Fargo to drill in the National Petroleum Reserve in Alaska. The only “bank” it requires is the collective fuel tanks of America’s 280 million motor vehicles, plus aircraft, off-road vehicles, and pleasure boats.

Marching on Citibank does send a message, and activating seniors who might otherwise sit at home posting about their grandkids is soul-stirring. But if divestment and bank-shaming were going to slow the assault on climate, we would have seen bigger results by now.

“If the world wants to limit warming,” Norwegian energy researcher Espen Erlingsen told the Times this month, “it will have to limit demand for oil and gas because [the] industry can deliver this kind of volume for many more decades.”

Amen. The climate movement’s strategy isn’t working. Trying to bottle up supply instead of throttling demand is whack-a-mole without end, chasing after but never stopping capitalism’s dynamism from erupting in crypto mining and 1,001 other climate-destroying products and technologies.

By itself, a carbon tax won’t cure that. But it would at least start to steer innovation and cultural norms away from endless new climate horrors.

Addendum: My concluding sentence — perhaps too subtle a literary reference — is elucidated in Brian A. Oard’s delightful Mindful Pleasures website. Please note that the ultimatum was uttered not by Sabbath but by his lover, Drenka. — C.K.

U.S. auto fuel-economy is flatlining. Here’s why that’s not news.

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It should have been big news: A report this month from the U.S. Environmental Protection Agency admitted that the fuel economy of new light-duty vehicles sold in the U.S. last year was no better than the year before. The mix of cars, SUV’s and pickups sold in 2021 averaged the same crummy 25.4 miles per gallon as in 2020.

Screenshot from ACEEE Dec. 12 press release. Link is in text.

Flatlining new-vehicle mpg is bad news. It portends more climate damage, worsened pollution and strained household budgets, along with geopolitical turmoil, fattened oil company earnings and brawnier petro-states. It’s also a betrayal of long-standing promises by Democratic presidents, EPA administrators and environmental groups that, together, they would make auto companies achieve ever higher mileages, like 54.5 mpg in 2025, as the Obama administration pledged a decade ago. (See White House 2012 press release, below.)

What happened?

Don’t just blame the Trump administration’s four-year mpg slow-walk and roll-back. The American Council for an Energy-Efficient Economy was forthright in its Dec. 12 press release: EPA Finds No Progress in Vehicle Efficiency as Automakers Sell More Big Models (emphasis added).

“The [auto] manufacturers are canceling out all the efficiency progress as they sell more large vehicles,” said ACEEE senior transportation researcher, Avi Mersky. “And it’s completely allowed under the federal rules.”

CBS News usefully chimed in:

The EPA said in a statement that all vehicle types are at record low carbon dioxide emissions, but “the market shift away from cars and toward sport utility vehicles and pickups has offset some of the fleetwide benefits.” (emphasis added)

In the 2021 model year, cars and station wagons, the most efficient vehicles, fell to 26% of U.S. new vehicle production, well below the 50% market share as recently as 2013, the EPA said. SUVs were a record 45% of new vehicle sales for the 2021 model year, while pickup trucks hit 16%.

2012 press release copied from National Archives. Poignantly, it promised that the nearly doubled auto efficiency would bring consumer savings as large as $1 per gallon cheaper gasoline.

Let that sink in: in just eight years, the U.S. market share of new sedans and station wagons fell practically in half, to 26 percent from 50 percent. (And no, CBS, that shift didn’t just offset some of the mpg benefits, it offset all of them, though credit the network for covering the story at all.)

The Hill did well, with EPA report: Vehicle fuel efficiency flat in 2021. Otherwise, there wasn’t much coverage. Sure, Christmas was coming, and there were year-end stories to report. Still, it’s striking that such a big failure in a sector that now produces nearly a quarter of U.S. carbon emissions merited so little attention. (See our CO2 pie chart, further below.)

The silence of the greens

Robustly rising automotive fuel economy was, for decades, a cornerstone of mainstream environmental advocacy. So-called CAFE standards (the acronym denotes Corporate Average Fuel Economy) would, before long, turn most of America’s 200 million passenger vehicles into fuel-sippers, relieving pressure to drill in the Alaska National Wildlife Refuge and other sacrosanct natural areas, enabling some oil refineries to close, and cutting air and carbon emissions. Just make sure EPA kept ratcheting up the mpg standards, and all would be well.

Things turned out differently, of course. Not only did U.S. miles driven resume rising after a relative caesura from the mid-aughts to the mid-teens, but the fleet mpg average barely budged, due to “the market shift away from cars and toward SUV’s and pickups” noted by CBS News. Compounding the shift, long-standing CAFE loopholes grant bigger vehicles looser mileage targets.

Autos now (2021) account for 24% of U.S. CO2. Note that other transportation emissions (trucks, planes) are recorded separately.

Most of the big U.S. green groups just watched the shift unfold, essentially throwing in the towel. Either they didn’t grasp its extent or they viewed it as unstoppable. Maybe they felt constrained by their members’ and donors’ preference for the roomier and supposedly outdoors-friendly sport utilities. Who knows? But they basically gave up on improving actual vehicle fuel-economy, and the impact has been stark.

Even as the U.S. electricity sector has seen a substantial decline in carbon emissions, an estimated 36 percent drop from 2005 to 2021, the drop for automobiles has been only one-seventh as much — a measly 5 percent. The vastly improved mpg performance that was going to swamp growth in driving simply didn’t materialize.

What did eventuate from the big bulk-up of U.S. passenger vehicles has been a far greater menace to pedestrians, cyclists and users of smaller vehicles. Due to their greater mass and taller profile, those super-sized sport ute’s and pickups are tougher to maneuver and control, are harder to see around, are often driven with a greater sense of entitlement, and cause more damage when they hit someone.

Automotive researcher-journalist David Zipper tied things up recently for Bloomberg News, in a post trenchantly titled, “US Traffic Safety Is Getting Worse, While Other Countries Improve,”:

Uniquely, the US has seen larger SUVs and pickup trucks dominate its domestic car market. While the profitability of this trend has delighted automakers, the weight and height of these vehicles places other road users in greater danger. Research has linked the ascent of SUVs to the surge in US pedestrian deaths.

Possible futures for U.S. passenger vehicles

In his Bloomberg post, Zipper also noted that in other countries, “higher gasoline taxes (as well as weight-based fees adopted by countries like France) have slowed adoption” of large vehicles. (Doubtless there’s also a reinforcing cultural factor, or “path dependence,” that frowns on supersized vehicles and demurs from designing infrastructure around them, which discourages their use and thus helps keep the higher taxes on bigger vehicles politically defensible.)

Higher gasoline taxes are a form of carbon tax, of course. Indeed, resistance to increasing taxes on gasoline has always been a central sticking point to enacting carbon taxes — ironically so, given that those who cry the loudest tend to be big-car owners whose choice of vehicle effectively has them taxing themselves by locking them into purchasing more gallons.

Nevertheless, another locus of opposition to taxing gasoline to reduce its use has been — surprise! — the same green groups that habitually put all their chips on CAFE standards and other regulatory mechanisms. Sometimes these groups have even badmouthed the idea that gasoline use is somewhat price-elastic, mistaking short-term inflexibility for long-term (a confusion I pointed to in my 2015 post, What an Energy-Efficiency Hero Gets Wrong about Carbon Taxes — scroll down to “Argument #3”).

The supposed impossibility of reducing the use of gasoline by raising its price has been part and parcel of Big Green’s attachment to mpg standards — despite the fact that mileage reg’s do nothing to reduce driving and its vast negative consequences: not just traffic congestion but also poor health (sedentary living, car crashes, noise) and general unaffordability (car loan costs, upkeep expenses, costlier housing due to cars’ consuming urban and suburban land).

This does not bode well for enacting weight or weight-distance charges on the increasingly electric fleet of U.S. passenger vehicles. Yet weight-based fees might be our best bet for reining in the size and weight of EV’s and, thus, serving four vital societal objectives: (i) ensuring that shortages of lithium or other minerals critical to electric-vehicle batteries don’t hold back electrification of transportation; (ii) curbing the amount of electricity that must be generated to drive the EV fleet; (iii) easing the stresses that larger vehicles impose on urban and suburban form; and (iv) reducing traffic carnage, especially to pedestrians, cyclists and users of small vehicles.

With the Inflation Reduction Act of 2022, which we at Carbon Tax Center strongly supported from the git-go (our extensive, ongoing write-up of the IRA is here), the Biden Administration has put in place an array of mutually reinforcing, intelligently crafted subsidies and incentives to electrify U.S. passenger travel. Climate and transportation advocates alike should now work to craft and enact incentives to steer vehicle electrification toward smaller, lighter, less-dangerous and city-friendlier forms of individual and family transportation. The choice between carbon taxes or weight-based charges or hybrids of the two is less important than getting strong incentives in place widely and soon.

SCOTUS Ruling: Bad for Climate, Good for Carbon Pricing?

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Note: This post was amended on July 6 to include @bobinglis’s June 30 tweet, shown below.

Maybe we’re grasping at straws. But we see a possible silver lining in this week’s grievous Supreme Court ruling striking down US EPA’s authority to regulate carbon emissions via the Clean Air Act.

The gleam of hope is not that the decision didn’t dismember the federal government’s entire “administrative state” apparatus — you know, the tapestry of rules, regulations and procedures designed to further societal health, safety and accountability. We fear investigative journalist Amy Westervelt may be right that the ruling is a harbinger of steps in that very direction.

Rather, our thin beam of optimism is the opening the ruling could provide for carbon tax proponents to persuade our fellow climate advocates to lean less on fraught, slow and even quixotic approaches for tackling climate change, and to instead turn increasingly toward carbon taxing as a more-holistic and bulletproof way to bring down stubbornly high carbon emissions, both in the U.S. and worldwide.

In recent years, this space has done battle with what we’ve regarded as inadequate or even illusory climate strategies.

* We’ve criticized the decade-long campaign to divest financial and social institutions from fossil fuels, arguing in our posts and on our evergreen pages that capital will easily find ways to finance whatever legal product consumers demand, especially a product so economically and psychologically fraught as gasoline.

* We’ve hit back at the IMF’s unfortunate labelling of fossil fuels’ vast externality costs — both climate damage and immediate human-health harms — as “subsidies,” for fostering the fantasy that citizens need only stop their governments from bestowing public tax dollars on fossil fuel companies, and Big Carbon will crumble and wither away.

* We’ve even questioned the keep-it-in-the-ground movement, arguing, heretically, that “Oil that doesn’t flow to refineries through the Dakota Access Pipeline [to take one example] will instead come from somewhere else – Kuwait or Texas or a hundred other places – to be burned in cars, trucks and planes.” Our movement’s focus, we’ve argued, must be demand, not supply.

* And we’ve looked long and hard at the climate value of environmental regulation — the very approach the Supreme Court threw under the bus yesterday. Look at how, a year ago, we contrasted the fabulous success of the 1970 Clean Air Act and its 1977 and 1990 amendments in  slashing concentrations of particulates and other harmful pollutants in “ambient air,” with the less-technology-amenable issue of carbon emissions:

These and similar successes have led many climate advocates to urge similar regulatory pathways to curb carbon emissions. [Yet] regulatory approaches may offer only modest prospects for controlling and reducing emissions of carbon dioxide and other greenhouse gases, for several reasons. For one thing, the absence of antipollution devices for capturing or lowering CO2 emissions limits the scope of technology-forcing regulation. For another, promulgation of regulations is necessarily piecemeal and reactive. Moreover, the regulation-setting and administering process itself is cumbersome, delay-prone and subject to legal challenge by carbon interests.

From Niskanen Center post. Link is in text. We’ve added emphasis to #2 and #5.

We backed up that argument with reasoning from a penetrating paper by Case Western University law professor Jonathan Adler. The sidebar at right has Prof. Adler’s own “key takeaways” from the summary version he published on the Niskanen Center’s website. We highlighted two: A, climate regulations that aren’t clearly authorized by legislation will be particularly vulnerable to legal challenges — as we saw this week, when the six right-wing justices took advantage of the absence of explicit mentions of climate or carbon in the Clean Air Act and its amendments. And B, compared to emission-control regulations, a Congressionally enacted carbon tax should be less vulnerable to such challenges.

This isn’t to say that a carbon tax is just around the corner. We readily admit that a path to enacting a meaningful federal carbon tax — not a token, Exxon-style levy that damages coal but not oil or gas, but a robust carbon price that can reach triple digits in a half-dozen or fewer years — is almost impossible to discern.

Rather, now that essentially all of the prominent alternatives have been eviscerated or emasculated, it’s time for climate advocates to rethink, and, hopefully, relinquish, their anti-carbon-pricing positions.

The Carbon Tax Center has strived to be a climate team-player. At least since the start of the Trump administration, we’ve acknowledged the near-impossibility of passing a federal carbon tax in the current political configuration, and have instead pulled for less-ambitious but more-achievable (or so they seemed) incremental steps.

Just last fall, we wrote that “There’s logic in refraining from the one overarching policy that could lead the way to the deep cuts Biden is seeking: an economy-wide carbon tax. Giving businesses and households money to go green [instead] is more palatable, though less potent, than charging them for burning carbon.”

But we’ve also strived to be truth-tellers. That’s why we called that 2021 post, “Without a Carbon Tax, Don’t Count on a 50% Emissions Cut.” And it’s why we’re a little less inclined than some of our climate comrades to go into full mourning over yesterday’s Supreme Court decision .

Please also note that unlike the indefatigable Bob Inglis, who bravely fought for carbon pricing as a six-term Member of Congress (1993-1999, 2005-2011) from South Carolina’s 4th District, we’re not calling on “Conservatives in Congress” to push for carbon taxing. We would love it if even a few did, but that ship sailed over a decade ago, as we’ve summarized on CTC’s Conservatives page.

To sum up: Yes, the Supreme Court ruling was ignorant. Yes, it was destructive. Yes, it’s almost certainly a harbinger of worse. But it didn’t demolish policies that were on course to rescue our planet and make Biden a climate hero.

Yesterday’s decision did damage, but maybe it pulled some wool from our eyes as well.

The Climate Movement In Its Own Way

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The Nation magazine today published my essay, The Climate Movement In Its Own Way. I’ve cross-posted it here to allow comments and offer context.

Use link at top to access the original version of this post in The Nation.

It’s a follow-on to my April 4 essay, also in The Nation, The Case Against Closing Nuclear Power Plants, which I posted here under the title, For Climate’s Sake, Don’t Shut U.S. Nukes. 

The new piece calls on progressives in the climate movement — a bulwark of the magazine’s readership — to move beyond ideology and make the climate movement more pragmatic and holistic by supporting carbon pricing.

In introducing my April 4 post, I wrote:

[This post] implicitly embodies a hope that my willingness to examine my own deeply-held convictions in a new light may encourage others to do likewise with their own climate dogma. Reconsideration of ideologically-based objections to carbon pricing by self-proclaimed progressives would be a good place to start.

Consider today’s post an explicit expression of that hope. 

  — C.K., April 30, 2022

PS: The new post had to be shoehorned into a tight word count. The version below restores a half-dozen phrases cut from the version in The Nation.

The Climate Movement In Its Own Way

After decades of critically documenting nuclear power’s outsize costs, I finally admitted to myself that the carbon benefits from continuing to run US nuke plants are substantial, and in some respects irreplaceable. I made the case for keeping them open in an April article on TheNation.com.

Closing New York’s Indian Point reactors last year was a climate blunder, I wrote. Not just because fracked gas is now filling the breach, but because the need to replace the lost carbon-free power means that new wind and solar farms won’t drive emissions down further. California, facing the same equation, should shelve its plan to shutter the Diablo Canyon nuclear power plant in 2024, I said.

“Total bullshit,” a lifelong anti-nuker wrote me. “You should be ashamed.” More representative of the comments, though, was this: “Continued reliance on nuclear power going forward now is part of the price of our collective past failures.”

Amen. The failures propping up US carbon emissions are multiple. Not just Senator Joe Manchin, who torpedoed President Biden’s Build Back Better clean-energy legislation. Not just the Senate Republicans, any one of whom could have cast the critical 50th vote. And not just Big Carbon, whose dark money and disinformation perpetuate climate inaction.

Through its own poor choices, the climate movement is failing as well.

Too many of our climate campaigns are ill-considered. Too much of our legislative agenda is narrow-gauged. Too often, our lens for assessing climate proposals is ideological rather than pragmatic.

Consider the decade-long campaign to induce pension funds and banks to divest their fossil-fuel holdings. Exxon-Mobil’s share price wobbled for years, but since early 2020 Exxon’s stock has risen faster than the market average. Is Big Oil shamed and starved for new capital today? Not with roaring demand for oil and gas. US motorists’ insanely over-powered, super-sized vehicles account for about a tenth of worldwide petroleum consumption. Yet challenges to American motordom come mostly from outgunned cycling and transit campaigners, not the climate movement.

Now, with most federal action blocked, climate activists sought and won a ban on gas heat in new buildings in New York City, though they failed in their first push for a statewide ban.

The drive to “electrify everything” is laudable, given that electricity can be decarbonized whereas gas furnaces and stoves cannot. Yet trying to take the ban statewide elbowed aside bolder ideas, such as legalizing accessory dwelling units and stopping highway widenings.

To be sure, not everyone is ready to admit that fatter highways and pastoral, exclusive suburbs are carbon disasters. But only broader campaigns can link climate to other pressing concerns like homelessness, housing unaffordability, costly gasoline, and traffic violence.

The granddaddy of US climate failures, of course, is the absence of the one policy that economists believe could unlock the vast emissions reductions needed to meet the Paris Agreement goal of limiting global warming to 1.5 degrees Celsius: national carbon taxation.

A robust federal carbon tax isn’t just the sharpest card in the climate policy deck. It’s like adding a whole new deck to the one we already have.

A straightforward “price on carbon” — administered not via easily gamed cap-and-trade schemes but through “upstream” levies on the carbon content of fuels — was once thought appealing to left and right alike. It is now abjured by both.

The right, of course, is both repellently all-in on fossil fuels and hyper-aware that its wealthy base of profligate carbon consumers would pay the most through a carbon tax. Which makes the left’s antipathy to carbon taxes not just surprising but downright bizarre.

This hesitation has multiple strands: seeing carbon pricing as another contrivance of the predatory capitalism that built white wealth off the land and labor of Indigenous and African-descended peoples; suspicion that carbon pricing lets polluters avoid reducing local emissions by purchasing “offsets”; a misplaced conviction that carbon pricing in California has worsened disproportionate pollution burdens on disadvantaged communities; and excessive faith that a regulatory approach can untangle the multiple strands that enforce fossil-fuel dependence.

Economic models abound to show how fast carbon taxes will shrink the use of fossil fuels. Models aren’t life, but they agree broadly that a robustly rising federal tax could, within a decade, dial back US emissions by about a third.

To turn our backs on carbon reductions on that scale is, I believe, suicidal.

Our worsening climate stalemate led me to abandon my silence as existing nuclear power plants were extinguished. A similar rethink on carbon taxes by progressives won’t win over climate denialists. In time, though, with a more far-sighted left ascendant, it could become a stepping stone to climate progress.

Charles Komanoff, a longtime environmental activist and expert on nuclear power economics, directs the Carbon Tax Center.

No such thing as Green Bitcoin

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Call me a neigh-sayer, but the pretty horses decorating yesterday’s NY Times story about Argo Blockchain, Inc.’s “Green Bitcoin” venture can’t hide the oxymoron that lies beneath: no matter how many wind turbines and solar panels Bitcoin miners build or buy to run their ravenous processors, crypto is fundamentally filthy.

Image from March 22 NYT front-page Business Section. The caption read, “Wind turbines next to Argo Blockchain’s new facility in Dickens County, Texas; the site would be fueled mostly by wind and solar energy.” Photo: Carter Johnston.

The reason is straightforward: all the new green energy we can capture from the air and the sun needs to serve a higher purpose: replacing fossil fuels. Wind farms and photovoltaic arrays stop the combustion that’s causing climate change only when they take the place of coal- and gas-fired power plants. If they’re hooked up to Bitcoin computers, they can’t substitute for anything. The net gain for climate is zero.

To be sure, it’s better to run Bitcoin machines with renewables than with fossil fuels. But even 100%-renewable Bitcoin isn’t climate-positive, since the land supporting the new green stuff powering the Bitcoin mining is perforce unavailable to aid the climate. At some point — a year from now, five years on, ten — some other entrepreneur, one focused on renewables rather than crypto-currency, could have built the same arrays and dedicated their output to the grid. That would actually push out fossil fuel generation and achieve the carbon cuts the climate needs.

If it helps, think of the difference between the engineer’s perspective and the climate economist’s. The engineer counts X many kilowatt-hours of wind and solar feeding Bitcoin computers that draw the same X kWh’s and calls it a wash: “carbon-neutral.” The climate economist sees those figures but also debits the Bitcoin operation for the opportunity cost of its computer banks whose voracity renders the green kWh’s unable to take the place of fossil-fuel kWh’s. The “wash” that the engineer touts is actually the persistence of coal- and gas-fired electricity generation that will keep spewing carbon.

What I call the climate economist’s perspective is something I’ve cultivated lately, since I started rethinking the climate consequences of the closure of the Indian Point nuclear power plant, in New York City’s far-north suburbs. In 2020, in a post I called Drones With Hacksaws, I equated shutting a large source of essentially carbon-free electricity such as Indian Point to unleashing a swarm of hacksaw-wielding drones to lay waste to a hypothetical giant offshore wind farm by lopping off its thousand or more turbine blades. The climate consequences of the two acts were, I argued, identical, since both involved doing away with steadily-functioning zero-carbon power sources whose operation obviated the need to run carbon-fuel-burning power plants.

This photo of the Argo Blockchain electrical distribution panels ran below the horses picture in the NYT story. Powering them takes lots of juice.

Applying this perspective to Argo Blockchain helps us see that from a climate perspective, its wind turbines (and promised solar arrays) add up to nada. The potential climate good from the company’s green power sources is squandered in powering an artificial and unnecessary service. From a climate standpoint, Argo’s wind and solar arrays at best break even, rather than provide a net benefit.

The Times story missed a lot of details: how much electricity Argo Blockchain’s Bitcoin mining facility outside Lubbock, in northwest Texas, will consume; how much of it will come from the row of wind turbines visible in the distance; how much of world Bitcoin “demand” the facility will satisfy. But it did include these helpful pointers:

Crypto mining does not involve any picks or shovels. Instead, the term refers to a verification and currency creation process that is essential to the Bitcoin ecosystem. Powerful computers race one another to process transactions, solving complex mathematical problems that require quintillions of numerical guesses a second. As a reward for this authentication service, miners receive new coins, providing a financial incentive to keep the computers running.

In Bitcoin’s early years, a crypto enthusiast could mine coins by running software on a laptop. But as digital assets have become more popular, the amount of power necessary to generate Bitcoin has soared. A single Bitcoin transaction now requires more than 2,000 kilowatt-hours of electricity, or enough energy to power the average American household for 73 days, researchers estimate.

Earlier this year, the New Yorker magazine writer David Owen used crypto mining as an object example in his Jan. 15 article, How The Refrigerator Became an Agent of Climate Catastrophe. After citing a 2011 U.S. Energy Department (D.O.E.) study touting massive carbon reductions from federal regulations upgrading refrigeration efficiency, Owen trenchantly pointed out that “In 2011, the D.O.E.’s forecasters presumably didn’t anticipate that improvements in energy efficiency would make it increasingly economical to power and cool the server farms that mine and manage cryptocurrencies.”

Owen’s article, which is well worth reading for its narrative power and climate relevance as well as its iconoclasm, was his latest exposition of Jevon’s Paradox, the phenomenon by which increases in energy efficiency lower the price of “energy services” and thus lead to more use, undercutting the efficiency gain. The antidote, of course, is to ensure the energy services — cooling, travel, lighting, and so forth — don’t plunge in price by raising the price of energy provision, as I pointed out a decade ago in a post in Grist, If efficiency hasn’t cut energy use, then what?

We could do that, of course, with a carbon tax.

When it comes specifically to blunting Bitcoin and other cryptocurrencies, there are three broad ways that carbon taxing could help.

Carbon taxing can at least nudge greenward the mix of power sources used by Bitcoin miners: less coal or gas firing, more wind and solar. That won’t make Bitcoin green, but it will lessen its climate-destructiveness.

Second, carbon taxing could cut into Bitcoin’s growth by increasing electricity distribution companies’ economic incentives to bid green power supplies away from cryptocurrency manufacturers, thus making Bitcoin mining cost more.

Last, carbon taxing could conceivably strengthen social-shaming of Bitcoin entrepreneurs and users by reframing crypto as a refuge for losers.

This notion, though admittedly speculative, would be the most enduring. There’s a range of consuming activities that need to be deemed off-limits on account of their unsustainability, destructiveness and uselessness: helicopter flights, driving giant SUV’s, monster-size homes. Crypto belongs on that list.