Nearly 15 years after journalist David Owen and I tangled — and then united — over Jevons Paradox, the New York Times today published a guest essay on that subject by a Murdoch-employed London journalist. David and I went deeper and did better, as you’ll see.

Jevons Paradox denotes the tendency of economies to increase, not decrease, their use of something as they learn how to use that thing more efficiently. Its archetype, observed by Britisher William Stanley Jevons in the 1860s, was that “as steam engines became ever more efficient, Britain’s appetite for coal [to power them] increased rather than decreased,” as Sky News editor Ed Conway put it just now, in The Paradox Holding Back the Clean Energy Revolution. Why? Because the “rebound” in use of steam as its manufacture grew cheaper more than offset the direct contraction in use from the increased efficiency.

Where does David Owen come in? In 2009 he published an op-ed in the Wall Street Journal claiming that congestion pricing would never cure traffic congestion, on account of the bounce-back in traffic volumes due to lesser congestion. (Funnily enough, the Journal never runs opinion pieces maintaining that induced demand prevents highway expansions from “solving” road congestion.) My subsequent rebuttal in Streetsblog — Paradox, Schmaradox, Congestion Pricing Works — changed David’s mind. The disincentive of the congestion toll, he told me, could probably stave off enough of the rebound in driving to allow congestion pricing to fulfill its promise of curbing gridlock.

A year later, when David revisited Jevons Paradox in a scintillating New Yorker magazine narrative, The Efficiency Dilemma, he made sure to point to “capping emissions or putting a price on carbon or increasing energy taxes” as potential exit ramps from the Jevons treadmill. I was thrilled, and I published a post in Grist riffing on “The Efficiency Dilemma.” I’ve pasted it below. I hope to comment on Conway’s NY Times essay in a future post soon.

If efficiency hasn’t cut energy use, then what?

By Charles Komanoff, reprinted from Grist, Dec. 16, 2010.

One of the most penetrating critiques of energy-efficiency dogma you’ll ever read is in this week’s New Yorker (yes, the New Yorker). “The efficiency dilemma,” by David Owen, has this provocative subtitle: “If our machines use less energy, will we just use them more?” Owen’s answer is a resounding, iconoclastic, and probably correct Yes.

Owen’s thesis is that as a society becomes more energy efficient, it becomes downright inefficient not to use more. The pursuit of efficiency is smart for individuals and businesses but a dead end for energy and climate policy.

This idea isn’t wholly original. It’s known as the Jevons paradox, and it has a 150-year history of provoking bursts of discussion before being repressed from social consciousness. What Owen adds to the thread is considerable, however: a fine narrative arc; the conceptual feat of elevating the paradox from the micro level, where it is rebuttable, to the macro, where it is more robust; a compelling case study; and the courage to take on energy-efficiency guru Amory Lovins. Best of all, Owen offers a way out: raising fuel prices via energy taxes.

Thirty-five years ago, when the energy industry first ridiculed efficiency as a return ticket to the Dark Ages, it was met with a torrent of smart ripostes like the Ford Foundation’s landmark “A Time to Choose” report — a well-thumbed copy of which adorns my bookshelf. Since then, the cause of energy efficiency has rung up one triumph after another: refrigerators have tripled in thermodynamic efficiency, energy-guzzling incandescent bulbs have been booted out of commercial buildings, and developers of trophy properties compete to rack up LEED points denoting low-energy design and operation.

Yet it’s difficult to see that these achievements have had any effect on slowing the growth in energy use. U.S. electricity consumption in 2008 was double that of 1975, and overall energy consumption was up by 38 percent. True, during this time U.S. population grew by 40 percent, but we also outsourced much of our manufacturing to Asia. In any case, efficiency, the assertedly immense resource that lay untapped in U.S. basements, garages, and offices, was supposed to slash per capita energy use, not just keep it from rising. Why hasn’t it? And what does that say for energy and climate policy?

A short form of the Jevons paradox, and a good entry point for discussing it, is the “rebound effect” — the tendency to employ more of something when efficiency has effectively cut its cost. The rebound effect is a staple of transportation analysis, in two separate forms. One is the rebound in gallons of gas consumed when fuel-efficiency standards have reduced the fuel cost to drive a mile. The other is the rebound from the reduction in car trips after imposition of a road toll, now that the drop in traffic has made it possible to cover the same ground in less time.

Rebound effect one turns out to be small. As UC-Irvine economics professor Ken Small has shown, no more than 20 percent of the gasoline savings from improved engine efficiency have been lost to the tendency to drive more miles — and much less in the short term. Rebound effect two is more significant and becoming more so, as time increasingly trumps money in the decision-making of drivers, at least better-off ones.

Rebound effects, then, vary in magnitude from one sector to another. They can be tricky to analyze, as Owen unwittingly demonstrated in an ill-considered 2009 Wall Street Journal op-ed criticizing congestion pricing, “How traffic jams help the environment.” He wrote:

If reducing [congestion via a toll] merely makes life easier for those who drive, then the improved traffic flow can actually increase the environmental damage done by cars, by raising overall traffic volume, encouraging sprawl and long car commutes.

Not so, as I wrote in “Paradox, schmaradox. Congestion pricing works”:

When the reduction in traffic is caused by a congestion charge, life is not just easier for those who continue driving but more costly as well. Yes, there’s a seesaw between price effects and time effects, but setting the congestion price at the right point will rebalance the system toward less driving, without harming the city’s economy.

More importantly, as Owen points out in his New Yorker piece, a narrow “bottom up” view — one that considers people’s decision-making in isolated realms of activity one-by-one — tends to miss broader rebound effects. On the face of it, doubling the efficiency of clothes washers and dryers shouldn’t cause the amount of laundering to rise more than slightly. But consider: 30 years ago, an urban family of four would have used the washer-dryer in the basement or at the laundromat, forcing it to “conserve” drying to save not just quarters but time traipsing back and forth. Since then, however, efficiency gains have enabled manufacturers to make washer-dryers in apartment sizes. We own one, and find ourselves using it for “spot” situations — emergencies that aren’t really emergencies, small loads for the item we “need” for tomorrow — that add more than a little to our total usage. And who’s to say that the advent of cheap and rapid laundering hasn’t contributed to the long-term rise in fashion-consumption, with all it implies for increased energy use through more manufacturing, freight hauling, retailing, and advertising?

Owen offers his own big example. Interestingly, it’s not computers or other electronic devices. It’s cooling. In an entertaining and all-too-brief romp through a half-century of changing mores, he traces the evolution of refrigeration and its “fraternal twin,” air conditioning, from rare, seldom-used luxuries then, to ubiquitous, always-on devices today:

My parents’ [first fridge] had a tiny, uninsulated freezer compartment, which seldom contained much more than a few aluminum ice trays and a burrow-like mantle of frost … The recently remodeled kitchen of a friend of mine contains an enormous side-by-side refrigerator, an enormous side-by-side freezer, and a drawer-like under-counter mini-fridge for beverages. And the trend has not been confined to households. As the ability to efficiently and inexpensively chill things has grown, so have opportunities to buy chilled things — a potent positive-feedback loop. Gas stations now often have almost as much refrigerated shelf space as the grocery stores of my early childhood; even mediocre hotel rooms usually come with their own small fridge (which, typically, either is empty or — if it’s a minibar — contains mainly things that don’t need to be kept cold), in addition to an icemaker and a refrigerated vending machine down the hall.

Air conditioning has a similar arc, ending with Owen’s observation that “access to cooled air is self-reinforcing: to someone who works in an air-conditioned office, an un-air-conditioned house quickly becomes intolerable, and vice versa.”

If Owen has a summation, it’s this:

All such increases in energy-consuming activity [driven by increased efficiency] can be considered manifestations of the Jevons paradox. Teasing out the precise contribution of a particular efficiency improvement isn’t just difficult, however; it may be impossible, because the endlessly ramifying network of interconnections is too complex to yield readily to empirical, mathematics-based analysis. [Emphasis mine.]

Defenders of efficiency will call “endlessly ramifying network” a cop-out. I’d say the burden is on them to prove otherwise. Based on the aggregate energy data mentioned earlier, efficiency advocates have been winning the micro battles but losing the macro war. Through engineering brilliance and concerted political and regulatory advocacy, we have increased energy-efficiency in the small while the society around us has grown monstrously energy-inefficient and cancelled out those gains. Two steps forward, two steps back.

I wrote something roughly similar five years ago in a broadside against my old colleague, Amory Lovins:

[T]hough Amory has been evangelizing “the soft path” for thirty years, his handful of glittering successes have only evoked limited emulation. Why? Because after the price shocks of the 1970s, energy became, and is still, too darn cheap. It’s a law of nature, I’d say, or at least of Economics 101: inexpensive anything will never be conserved. So long as energy is cheap, Amory’s magnificent exceptions will remain just that. Thousands of highly-focused advocacy groups will break their hearts trying to fix the thousands of ingrained practices that add up to energy over-consumption, from tax-deductible mortgages and always-on electronics to anti-solar zoning codes and un-bikeable streets. And all the while, new ways to use energy will arise, overwhelming whatever hard-won reductions these Sisyphean efforts achieve.

I wrote that a day or two after inviting Lovins to endorse putting carbon or other fuel taxes front-and-center in energy advocacy. He declined, insisting that “technical efficiency” could be increased many-fold without taxing energy to raise its price. Of course it has, can, and will. But is technical efficiency enough? Owen asks us to consider whether a strategy centered on technical and regulatory measures to boost energy efficiency may be inherently unsuited for the herculean task of keeping coal and other fossil fuels safely locked in the ground.

I said earlier that Owen offers an escape from the Jevons paradox, and he does: “capping emissions or putting a price on carbon or increasing energy taxes.” It’s hardly a clarion call, and it’s not the straight carbon taxers’ line. But it’s a lifeline.

The veteran English economist Len Brookes told Owen:

When we talk about increasing energy efficiency, what we’re really talking about is increasing the productivity of energy. And, if you increase the productivity of anything, you have the effect of reducing its implicit price, because you get more return for the same money — which means the demand goes up.

The antidote to the Jevon paradox, then, is energy taxes. We can thank Owen not only for raising a critical, central question about energy efficiency, with potential ramifications for energy and climate policy, but for giving us a brief — an eloquent and powerful one — for a carbon tax.

Author’s present-day (Feb. 22, 2024) note: I overdid it somewhat in belittling energy efficiency’s impacts on U.S. energy use in that 2010 Grist post. Indeed, in posts here in 2016 and again in 2020 I quantified and enthused over improved EE’s role in stabilizing electricity demand and slashing that sector’s carbon emissions.

Streetsblog USA today published my essay, Get the Facts About ‘Car Bloat’ and Pollution. I’ve cross-posted it here to allow comments.

 — C.K., Feb. 1, 2024

The increasing size of passenger vehicles has been catastrophic for road safety, traffic congestion, climate viability, and household budgets. Compared to sedans, brawnier sport utility vehicles and pickup trucks are far more likely to kill other road users, to clog urban streets and suburban roads, to guzzle fuel and emit particulates and carbon, and to keep their owners on a treadmill of car payments and pain at the pump.

Not only that, SUVs and pickups — collectively designated “light trucks” by regulators (“deregulators” is more apt) — may even engender more driving by owners seduced by their roominess, faux road-worthiness and illusion of indomitability. All 12 of the dozen models most preferred by gasoline “superusers” — drivers in the top decile of U.S. gasoline consumption — are SUVs or pickups, with the Chevy Silverado and Ford F150 topping the list.

As I wrote earlier this week, superusers manage the bizarre feat of averaging 40,000 miles a year* — a quantity of driving that consumes 13 percent of their owners’ waking hours — while burning 22 percent more fuel per mile than other U.S. drivers’ rides. Ivan Illich was right.

Just after Thanksgiving, The Guardian added its two cents with a story headlined, “Motor emissions could have fallen over 30 percent without SUV trends, report says.” Translated: Global CO2 emissions from passenger vehicles would have shrunk by nearly one-third if not for vehicle upsizing to SUVs and pickups.

Startling and damning, right? But it’s a vast overstatement: The true 2010-2022 “lost reduction” in passenger vehicles’ carbon emissions due to the growing share of big trucks worldwide was just 6 percent — five times less than the reported 30 percent.

Wait, am I cutting SUVs a break on their carbon spewing? Not at all. To deal effectively with climate we need to be clear about what’s destroying it.

The false 30-percent figure — which you’ll soon see wasn’t the fault of the Guardian — has begun worming its way into energy and climate discourse. This is unfortunate, since it serves to reinforce emphasis on the types of vehicles being made, sold and driven, when American motorists’ carbon profligacy is the inevitable result of our oversupply of pavement and our bias against full-cost pricing of driving.

Whence the error?

The Global Fuel Economy Initiative is a think tank funded by the European Commission, the Global Environment Facility, the UN Environment Programme and the FIA Foundation. Notwithstanding the fact that FIA is the “philanthropic arm” of the Fédération Internationale de l’Automobile (aka Formula One auto racing), GFEI produces high-caliber analysis and research.

GFEI’s November 2023 report, “Trends in the Global Vehicle Fleet 2023: Managing the SUV Shift and the EV Transition,” meticulously examined passenger-vehicle fuel consumption over the 12-year period, 2010 to 2022, and found that average fuel use (and, hence, per-mile carbon emissions) dropped by an average rate of 1.5 percent per year.

If not for more and heavier SUVs, the average annual decrease in emissions, according to the report, would have been around 1.95 percent, a rate that is 30 percent greater than the actual decline rate.

A 1.5-percent annual decrease in fuel intake per mile calculates to a total 16.6-percent total drop during the period. (See math box at the bottom of this post for the arithmetic.) Had the annual decrease been 1.95 percent, its 12-year drop would have been 21.5 percent. The gap between those two drops means that bigger car size worsened fuel economy 6 percent more than if car size had remained the same.

Accordingly, the headline in the story should have been, “Motor Emissions Could Have Fallen 6 Percent More Without SUVs, Report Says,” but that’s not exactly eyeball-grabbing. Don’t blame Guardian reporter Helena Horton, however. She wrote her story off of GFEI’s press release, which (incorrectly) trumpeted a lost 30-percent gain in fuel economy due to “the SUV trend.”

After being contacted by me, GFEI’s study director immediately acknowledged his comms team’s error and labored mightily to get The Guardian to run a full correction. As you can tell from the side-by-side story headlines above, he was only partly successful.

The image on the left shows the original Nov. 24 Guardian headline and lede, retrieved via the Web’s Wayback Machine. The image on the right shows the corrected headline and lede since Dec. 18. The alterations are subtle nearly to the point of invisibility. The new “30 percent more” is confusing (30 percent more than what?), and the subhead is unaltered and thus plain wrong to say that the fall in emissions “would have been far more” than it was, had vehicle sizes stayed the same. No, the fall in emissions would have been 6 percent more — not exactly “far more.”

Why it’s important to correct the error

The Guardian’s erroneous “30-percent-less” headline, though not its fault, has the makings of a honey trap. New York Times climate columnist David Wallace-Wells fell for it on Twitter, along with esteemed climate pundit David Roberts. The Colorado-based climate think tank RMI got ensnared as well, as did our own Kea Wilson at Streetsblog USA. (RMI and Streetsblog quickly corrected their flubs after I emailed.) Consider this post an antidote to future repetitions, or, at least, a means to correct them.

It’s also worth touching on the innumeracy required to imagine that auto upsizing — “car bloat” in the evocative phrase popularized by journalist David Zipper — as loathsome as it is, stood in the way of a 30-percent gain in world-average auto fuel economy. The typical difference between sedan and “light truck” mpg is only around 20 percent (though greater in the U.S., with our supersized SUVs and pickups), so even a complete global switchover from sedans to light trucks would have put only a 20-percent dent in fuel economy.

Of course, the actual carbon damage due to vehicle SUV-ification over the 12 years studied has been far less — just 6 percent as we saw above — on account of longer vehicle turnover times. This should have been readily apparent to The Guardian reporter as well as the journalists and advocates who repeated the error on social media or websites. Errant quantification is hardly journalism’s number one albatross — free-falling revenues and shrinking newsrooms are orders of magnitude more consequential — but it lurks under the surface.

With greater numeracy, it might be easier for journalists, advocates and policymakers to grasp that vehicle electrification and shrinkage alone aren’t going to cut auto emissions at the rate needed.

Driving too must shrink. Collectively, road pricing, congestion pricing, curb pricing, carbon pricing, better transit and livable streets are almost certainly at least as important for climate as improved miles per gallon.

Streetsblog USA this morning published my essay, Instead of Subsidizing the ‘Super-Drivers,’ We Should Soak Them: Piling subsidies on subsidies, even if well-meaning, fails to rein in the full cost of driving. I’ve cross-posted it here to allow comments and add tables and graphics.

 — C.K., Jan. 29, 2024

One-tenth of American motorists, we’ve just learned, consume more than a third of U.S. gasoline.

This lead-footed cohort, dubbed “superusers” in a recent analysis, burn almost as much fuel — and, thus, spew nearly as much carbon dioxide — as all auto drivers in China. Or, reformulated, the most motor-dependent one-tenth of U.S. drivers burn the same amount of gasoline and thus generate the same carbon emissions as all motorists in the European Union and Brazil combined.

The analysis, by Seattle-based Coltura, casts a harsh light on America’s transportation culture. Unfortunately the firm’s policy prescription — new subsidies to entice superusers into buying climate-friendlier electric vehicles — is a mere Band Aid, and an ineffectual one to boot.

What Coltura’s Analysis Shows

The most startling revelation from the Coltura analysis is the rank inefficiency of the superusers’ rides. You would think that anyone driving 110 miles a day — the purported average for the 21 million superusers identified in the report — would rush to the nearest used-car lot and drive off in a high-mileage vehicle. But you would be wrong. Coltura’s traveling tenth eke out a measly 19.5 miles a gallon, on average. That’s a whopping 18 percent worse than ordinary drivers’ average.

The toll on superusers’ household budgets is staggering: an average $530 monthly tab at the pump, according to Coltura. Upping their mpg to merely the same 24 mph average as other motorists would save them $97 a month. Those savings would hit $175 if the superusers clambered further up the mpg ladder and outdid the norm by the same percentage (18 percent) they now lag it. Annualized, that’s a cool two thou per vehicle.

What’s that, you say, superusers are lugging drywall and cement mix and portable generators all over the county and can’t do with a more modest ride? Nonsense. According to Coltura, only 19.1 percent of superusers are blue-collar workers. Throw in another 0.7 percent who work in agriculture, and at most 20 percent routinely haul mountains of stuff requiring a pickup or SUV. The rest are professional/legal (16 percent), business/finance (15 percent), office/administration (10 percent) and other non-physical workers. Even if we prorate the 17 percent of superusers classified as “other,” at most 24 percent of Coltura’s traveling tenth qualify as Grainger’s “the ones who get it done” who might need a kick-ass vehicle with which to do it.

If you really want your head to explode, check out Coltura’s list of superusers’ 20 most popular vehicles, shown below. The Chevy Silverado is the choice of 7.4 percent of superusers, followed closely by Ford’s F-150 (6.4 percent). Both are EPA-ranked at 20 mpg. You have to drop down to #12 on the list to find the first vehicle that’s not an SUV or pickup: a 27-mpg Honda Accord. All told, no more than a handful of the top 20 are sedans.

Their Solution … And Ours

What to do? Ordinarily, one wouldn’t need to care that close to 20 million Americans are too Foxed-up or broke to dump their vampiric, oversized vehicles or off-ramp their road-warrior routines. After all, superusers have chosen to bust their budgets and warp their daily lives, right? Except, duh, the climate we all inhabit is breaking under their emissions — not to mention the myriad other damages from driving 110 miles a day: crashes, traffic, “local” air pollution. As I said up front, society has an interest in enticing them, somehow, into less-inefficient vehicles.

Coltura’s solution is to tie electric-vehicle incentives, messaging and perhaps even provision of charging infrastructure, to drivers’ current gasoline consumption. Validated superusers, based on sworn statements of odometer readings and vehicle make and model (hence, mpg) would qualify for extra rebates, financing and other inducements beyond those offered in the Biden Inflation Reduction Act. These would weaken the glue — economic, ideological or otherwise — that binds superusers to their gas-guzzlers even though it’s worth asking: Why do we need to subsidize someone into buying an EV when switching to a battery-powered car or truck would at once zero out the $6,000 that the average superuser shells out annually on gasoline?

At first blush, Coltura’s approach has a ring of reasonableness. But vagueness suffuses it, not just in the Coltura report, but in its lead authors’ 2022 podcast interview with climate-energy pundit David Roberts. In fact, on closer examination the whole idea comes off as a pig in a poke, with its administrative apparatus, the gaming, the appeals, the interminable wrangling to fashion the “right” incentives and eligibility. Not to mention the inevitable special pleading of “disadvantaged” motorists who almost qualify as superusers but not quite. And the jockeying in states or Congress to pay for the incentives and the bureaucracy.

What makes this prospect especially dispiriting is the existence of an alternative policy instrument that, compared to Coltura’s “targeted” but cumbersome intervention, could do far more to cut gasoline consumption — not just by superusers but by all U.S. motorists: concerted increases in U.S. motor fuel taxes.

Gasoline taxes can be raised in two ways: by boosting the U.S. excise tax, which has been stuck at 18.4 cents a gallon since Oct. 1, 1993 (losing half its heft to inflation since then); or by instituting a carbon tax, which would raise the prices of all fossil fuels including petroleum products.

The impact on usage would be small in the short run, but it would rise over time, as households switched to higher-mpg vehicles, cities and suburbs up-zoned, and cultural norms adapted to costlier driving. EV’s would be elevated, of course, but vehicle electrification would be only one of many means of getting off gasoline.

My regression analyses of U.S. gasoline demand — a subject I’ve studied for decades — suggest that a $1 increase in the price at the pump would trigger only a 3- to 4-percent drop in usage overnight, but triple that impact within a decade — roughly the same decrease as eliminating one-third of U.S. superusers’ consumption. But that’s just a start. My 1960-2015 data don’t reflect changing societal currents, nor do they capture digital tech’s potential to match people with nearby jobs or connect similarly-directed travelers to enable work and play with fewer miles driven.

“Making other arrangements” in the face of climate chaos is how the social critic James Howard Kunstler once referred to this social reconfiguration. Sadly, as the caterwauling against New York’s congestion pricing program by entrenched interests from New Jersey politicians to teachers’ union bosses attests, the American ethos today is to cling to dysfunction rather than attempt change.

This isn’t to make light of either the jarring changes that superuser motorists will face from robust fuel taxes, or the political difficulty of enacting them. (The website of my Carbon Tax Center is replete with potential antidotes to both, even as it acknowledges the difficulties.)

Nevertheless, these hurdles shouldn’t deter carbon-tax advocates from advocating much higher fuel taxation. Piling subsidies on subsidies, even if well-meaning, only makes our system more complex and opaque. If we don’t advocate for full-cost pricing that tells the truth about motorization, who will?

For a moment last week it looked like the New York Times was heeding CTC’s summons to tax carbon emissions as a way to make faltering clean-energy projects profitable.

The come-on appeared in the headline for an opinion piece, Missing Profits May Be a Problem for the Green Transition, by the Times’ climate columnist David Wallace-Wells. MISSING PROFITS! Was Wallace-Wells pursuing the idea I floated two months ago in a CTC blog, that a U.S. carbon tax could lift the prevailing price of grid power by enough to offset the cost creep that is killing off off East Coast wind and solar projects along with an innovative nuclear power venture in Idaho?

Not quite. The “missing profits” in the Times column did not refer to the revenue boost that carbon-free power projects should but don’t get for the climate benefit they create by keeping fossil fuels in the ground. Rather, it referred to collapsing returns inflicted on renewable energy projects by higher interest rates, stretched-out schedules and cost escalation endemic to first-of-a-kind projects like enormous offshore wind turbines (East Coast) and small modular reactors (Idaho).

Nevertheless, “missing profits” is a keeper phrase. Though it’s less poetic than “gainsharing,” the neologism we deployed in that Nov. 10 post (Gainsharing: Carbon Taxes Can Put Clean Energy Back in the Black), the phrase is more to the point: The lack of robust carbon pricing manifests as missing profits that beset every project, policy and gesture that promises to reduce use of fossil fuels and, thus, to avert and reduce carbon emissions.

Leave the idea, take the expression, “Godfather” movie character Pete Clemenza might have said.

What was the idea, then, in Wallace-Wells’ Times column? Mostly that the prospective profits from wind and solar projects are downright meager compared to returns on oil and gas supply investments.

True enough, and unsettling. But the antidote advanced in the column is almost diametrically opposite ours. We want a robust U.S. carbon price “to put clean energy projects back in the black.” In contrast, Uppsala University (Sweden) geographer Brett Christophers, the avatar of Wallace-Wells’ column, wants “public ownership of the power sector.”

I haven’t read Christophers’ new book, The Price Is Wrong — its publication is set for March. But its contours seem clear from Wallace-Wells’ column and from Christophers’ own NYT guest essay last May, Why Are We Allowing the Private Sector to Take Over Our Public Works?

In that essay, Christophers took dead aim at the Biden administration’s signature climate achievement, the Inflation Reducation Act. “The I.R.A. will help accelerate the growing private ownership of U.S. infrastructure and, in particular, its concentration among a handful of global asset managers,” he warned.

“It is wrong,” Christophers continued, to cast the I.R.A. and other Biden legislation as “a renewal of President Franklin Roosevelt’s New Deal infrastructure programs of the 1930s.”

The signature feature of the New Deal was public ownership: Even as private firms carried out many of the tens of thousands of construction projects, almost all of the new infrastructure was funded and owned publicly. These were public works. Public ownership of major infrastructure has been an American mainstay ever since. [I]n political-economic terms, Mr. Biden, far from assuming Roosevelt’s mantle, has actually been dismantling the Rooseveltian legacy. (emphasis added)

That may be, though claiming Biden is dismantling FDR’s legacy is quite a stretch. For his part, Wallace-Wells summarized the conundrum of green power’s newly spiking capital and interest costs as follows:

For Christophers, this is a challenge that implies its own solution: public ownership of the power sector. If all that stands between our bumpy “mid-transition” status quo and an abundant clean-energy future for all is an initial hurdle of investment, why strain to extract that investment from private investors who’d prefer to invest elsewhere?

Again, perhaps. But treating renewables’ upfront-cost hurdle as a minor matter to be tweaked, as Wallace-Wells suggests, has an air of whistling past the graveyard. What if the findings from the International Energy Agency and Bloomberg New Energy Finance, touted by Wallace-Wells and countless others, that new wind and solar arrays pencil out cheaper than equivalent electricity generated with coal or methane, are simplistic or plain wrong?

To his credit, Wallace-Wells allowed in his column that U.S. public power agencies traditionally have been “obstacles to a rapid transition [from fossil fuels]” rather than “models of hyperdecarbonization.” But it’s also true that some entities of government, including New York State, have strong public works traditions. Indeed, some historians view Franklin D. Roosevelt’s tenure as governor as a testing ground for ideas such as unemployment insurance and old-age pensions that his presidency made foundational to the New Deal.

In this light, CTC sees potential in New York’s new (2023) Build Public Renewables Act, which authorizes the NY Power Authority to build and own renewable power projects. At the same time, we’re mindful that public financing of clean power constitutes a subsidy, albeit an indirect one, and that the U.S. tax code already provides considerable subsidies to wind and solar power — subsidies that the I.R.A. extended to the entire electrification effort (EV’s, batteries, transmission, manufacture) of which wind and solar are key components.

Still, the virtues and pitfalls of public investment in clean power are worthy of public conversation, not just in the U.S. but “in the poorer parts of the world,” as Wallace-Wells notes, where hundreds of millions lack access to electricity of any stripe, in part because “capital costs of new infrastructure can be prohibitively high even in the absence of supply shocks and global inflation conditions.”

Our focus at CTC, however, is the United States, home of the world’s most inventive entrepreneurs and its most efficient capital markets. Without shutting the door against public investment, we are tantalized by the possibility that clean power’s cost hiccups could be overcome through robust carbon pricing. Unlike subsidies, carbon pricing won’t “accelerate the growing private ownership of U.S. infrastructure and, in particular, its concentration among a handful of global asset managers” — the specter raised against the I.R.A. by Brett Christophers in his May 2023 Times guest essay.

Carbon pricing doesn’t play favorites and is resistant to gaming. It’s ecumenical, technology-neutral and pervasive. It raises all low-carbon boats — energy efficiency and conservation as well as renewables. Whether it can actually make clean-power projects profitable on a vast scale is a question we at CTC intend to explore.

The talented data analysts at Rhodium Corp. reported this week that U.S. emissions of greenhouse gases fell nearly two percent last year, even as national economic output rose by 2.4%. This was good news, further evidence of “decoupling” emissions from economic activity. But it was also bad news because, says Rhodium, the 1.9% drop in GHG’s was woefully short of the 6.9% annual decrease required from now to 2030 to meet our Paris target of a 50-52% reduction in GHG emissions below 2005 levels.

Here we examine the locus of the good news: the 8% drop in electricity generation in 2023 vs. 2022 that enabled the 2% drop in overall emissions despite rises in emissions from transportation and some other sectors.

(Note: Rhodium’s report couches emissions as GHG’s, whereas we calculate and speak in terms of CO2; a request to Rhodium to express their data as CO2 wasn’t answered.)

The chart at left seems to reinforce the customary line that the leading driver of reduced U.S. carbon emissions is the switch to gas-fired power generation from coal-fired electricity. Indeed, the 101 TWh increase in gas-fired kilowatt-hours accounted numerically for three-quarters of the 134 TWh drop in coal, indicating the close (if inverse) link between the two. Since modern “combined cycle” gas-burning plants emit a whopping 60% less CO2 per kWh than coal-burners, substituting the one for the other is a climate win, even allowing for the greenhouse impacts of methane released in gas drilling and transmission.

What’s missing from this narrative is the role of energy efficiency in suppressing demand for electricity, which we depict in the graph’s two right-most bars and in the callout graph below, at right.

The first bar, showing a gain of 47 TWh labeled as Efficiency, denotes the reduction in total U.S. electricity generation over the first 9 months of 2023 vs. the year-earlier 9-month total. That contraction enabled U.S. grids to cut back on fossil-fuel generation. Without it, either the reduction in coal-fired electricity would have been less than the 134 TWh shown, or the increase in gas-fired electricity would have had to be greater than the actual 101 TWh, or a combination of the two. (The other sources — nuclear, hydro, wind and solar — already produce at their maximum capability.) Power-sector emissions would have been greater in either case.

But the efficiency story doesn’t end there. U.S. economic output wasn’t flat in 2023, it grew by 2.4% over 2022 (per preliminary figures reported by Rhodium). In earlier periods of U.S. history, that economic growth would have required greater electricity production. For most of the last century, the ratio averaged around 2-to-1, i.e., use of  electricity grew twice as fast as GDP. From 1975 to around 2005, the relationship was around 1-to-1. Since 2005, in a profound development that few predicted (and which few have acknowledged, other than CTC), U.S. electricity usage has been virtually flat, even as economic activity has risen by more than 40 percent.

I’ve used a 1-to-1 relationship for this post, i.e., I’ve assumed that if not for increased energy efficiency, the 2.4% year-on-year growth in U.S. economic activity would have required a 2.4% increase in electricity production. Numerically, nearly 80 additional TWh would have been required (calculated as 2.4% of 2022 9-month U.S. electricity production, including rooftop solar, of 3,283,000 TWh). Adding that amount to the actual decrease in electricity yields the true efficiency figure of 126 TWh shown in the right-most bar.

The biggest enabler of the 2022 drop in U.S. coal-fired electricity generation, then, wasn’t the 101 TWh increase in power production from natural gas, though that played a big part. It certainly wasn’t solar, which grew by nearly 15%, a hefty rise, but by just 27 TWh in absolute terms. Nor was it the U.S. wind sector, which actually contracted in the first nine months of the year (see first chart, above). It was the increase in the efficiency with which electricity supports economic activity, which enabled a 126 TWh drop in electricity use vis-a-vis the historical 1-to-1 relationship between use of electricity and GDP.

That’s not the standard spin. Rhodium reports that “coal is playing less and less of a role on the grid, while both natural gas and renewable generators are filling the gap.” True, but it leaves out the vital — I would say central — role played by energy efficiency in constraining U.S. electricity demand so that the increase in gas-burning could be held to 101 TWh.

For sheer distortion it’s hard to top Canary Media’s take, shown at left, that “the buildout of renewable energy helped to curb America’s greenhouse gas emissions by 1.9% in 2023.” While that’s true, the gain in renewable power output was a sideshow to electricity efficiency. Indeed, netting the 27 TWh increase in solar output by the combined 23 TWh decrease in hydro and wind generation leaves next to nothing in the way of net renewables growth.

Remember the adage about victory having a thousand fathers while defeat is an orphan? In climate circles and energy policy, last year’s modest success in reducing emissions has multiple parents: more gas-burning, more solar arrays, more renewables. Yet the true climate guardian n 2023 and prior years — increased efficiency in electricity usage — goes unremarked. This inattention is mirrored in policy. The Inflation Reduction Act subsidizes everything from electric cars and heat pumps to battery storage and manufacture of wind turbines and solar cells. It doesn’t, for the most part, subsidize ways to use energy more efficiently.

That’s not deliberate, it’s inherent in the nature of energy efficiency, savings and conservation: they involve ways of doing more with less, and they come in a million guises. They can’t be subsidized, but they can be rewarded, by taxing carbon emissions.

As we’ve been saying for decades: Taxes on fossil fuels, levied “upstream” at mines, wells and import docks, raise the value of every personal, corporate and collective action to reduce unnecessary use of energy. There’s no way around taxing carbon.

Please admit California’s Pajaro Valley to the storehouse of evidence that charging a fee to use scarce resources can stretch those resources, to the benefit of all.

Never heard of Pajaro Valley? Me neither, until I came across NY Times climate reporter Coral Davenport’s compelling end-of-year story, Strawberry Case Study: What if Farmers Had to Pay for Water? Turns out I once hitch-hiked there en route to the spectacular Big Sur coast south of Monterey. But the payoff today is in the story’s subhead: With aquifers nationwide in dangerous decline, one part of California has tried essentially taxing groundwater. New research shows it’s working.

What’s working? A charge for groundwater extracted to grow strawberries, raspberries, brussels sprouts, lettuce and kale, administered by the state-chartered Pajaro Valley Water Management Agency to prevent saltwater from the adjacent Pacific Ocean from intruding into underground aquifers. The fee, which began several decades ago at a nominal $30 per acre-foot of water to recover PVWMA’s water-metering costs, now runs as high as $400, according to Davenport.

Lest that rise seem meteoric, and today’s price appear punitive, consider that currently the agency’s total annual water fees, $12 million, equate to barely 1 percent of annual Pajaro Valley crop revenues of $1 billion. What’s more, an acre-foot — the standard volumetric for water supply — is enormous, roughly 326,000 gallons. Even the projected 2025 groundwater fee of $500 per acre-foot translates to just 0.15 cents to a gallon, or a mere one-hundredth of a cent for an 8-ounce glass of water.

To be sure, that calculation is merely illustrative; water for drinking and water for growing crops are two different things. But consider what Pajaro Valley growers get from paying for water.

First, their payments are helping assure increased supplies of crop-worthy water. Revenue from the water fees enabled PVWMA to undertake a $6 million project that captures excess rainwater from a creek near the ocean and injects it into underground wells to be used for irrigation, and a $20 million water recycling plant that cleans 5 million gallons of sewage a day and pipes it to farm fields. Next up, Davenport tells us, is an $80 million system to capture and store more rainwater for irrigation. By replenishing and “stretching’ supplies of groundwater, these investments help ensure that brackish water from the ocean doesn’t seep into Pajaro Valley wells.

Just as importantly, the growers receive a potent incentive to use available water supplies more efficiently. “Gone were the days of sprinklers that drenched fields indiscriminately,” Davenport writes. “To save money, many Pajaro farmers invested in precision irrigation technology to distribute carefully measured water exactly where it was needed.” (See text box.) Though the article doesn’t mention it, these investments by dozens of individual growers might not have materialized had not all growers been subject to the same incentives to conserve as well.

Economics

Undergirding Davenport’s upbeat reporting is a 2023 working paper, The Dynamic Impacts of Pricing Groundwater, by three economists at U-C Berkeley’s Dept. of Agricultural and Resource Economics. In academic parlance, “dynamic” doesn’t connote a Marvel superhero, it refers to changes over time. By examining changes in water usage over time, the authors conclude that each “21% price increase led to a … 22% reduction in average annual groundwater extraction” by Pajaro Valley growers.

The implied price-elasticity is roughly negative 1.3. (The paper helpfully reports that “The reduction in annual water use doubles between the first year and the fifth year after the tax, with the implied price elasticity of demand ranging from negative 0.86 to negative 1.97.) This empirically-derived price sensitivity is far greater than the price elasticities assumed in CTC’s carbon-tax model, befitting not only the greater salience of water use for growers vis-a-vis energy use for consumers and even most businesses, but the greater agency of Pajaro Valley growers who, Davenport’s reporting suggests, over time have increasingly bought into PVWMA’s groundwater fee in both theory and execution.

After reading Davenport’s article I reached out to hydrologist, climatologist and water sustainability expert Peter Gleick, whose latest book, The Three Ages of Water: Prehistoric Past, Imperiled Present, and a Hope for the Future, was published last year by Hachette / Public Affairs. Peter praised the article while preferring to denote the PVWMA groundwater charge “not [as a] tax but a fee or simply a price for a commodity.” He added, “When we pay for something, we’re more conscious of how we use it. When something is free, we’re more likely to misuse and abuse it. That’s certainly been the case historically for California groundwater.”

Carbon Taxes?

A number of posts in this space have touted — we might say “flogged” — other instances of resource or externality pricing, as possible templates for large-scale carbon pricing. In 2016 we wrote about Berkeley’s soda tax, actually a tax on the sugar content of soft drinks, and summarized research showing that sales of sugar-sweetened beverages fell 21% in that city while rising 4% in “control groups,” i.e., neighboring municipalities where soft drinks continued untaxed. Last year we explained why Congestion pricing, coming soon to New York City, could bode well for carbon-taxing — a message we previously broadcast several times in 2019 as the enabling legislation was being enacted in Albany, in March and in April.

We also dug deep in 2017, writing about an incipient NYC nickel fee on carryout bags dispensed at supermarkets, grocery and convenience stores. (The fee was a month away from taking effect, and though we haven’t yet seen before/after comparisons, anecdotal evidence suggests that trees in New York City are today far less encumbered by windblown plastic bags that we referred to then as “gossamer debris stuck, like tumors, to our half-a-million street trees.”) We can also go back half a century, to 1972, when NYC environmental officials conjured a “dirty oil surcharge” that forced petroleum suppliers to cough up a fee for each barrel of high-sulfur oil they brought into the city, a remarkably successful (but little known) instance of externality pricing that I memorialized in a 2009 post for Grist, Pollution Taxes Work.

Needless to say, none of these fees — not the soda tax, not congestion charging, not the carryout bag fee, and not the dirty oil surcharge — has paved the way for full-on carbon pricing. While each of them has been or will be a resounding success, their scale is far too local and the stakes far too small to translate automatically to national or even state-level carbon pricing. The same will hold for California’s Pajaro Valley groundwater fee. Indeed, California water districts are wrestling today with the hard work of fulfilling a state mandate requiring every part of the state to devise a plan to conserve groundwater.

Happily, Davenport notes that PVWMA officials and even some growers are advising their statewide counterparts to emulate their approach, including “local control” rather than state or even county governance. Dedicating the groundwater-fee revenues to investments to expand and extend supply, as Pajaro Valley has done, seems a no-brainer.

Less happily, Davenport notes that the Westlands Water District, which serves the state’s giant Central Valley breadbasket, is pushing a plan “that would allow growers to pay for credits to use groundwater above a certain allocation.”  The growers “could buy and sell the credits, starting at about $200 a credit,” Davenport notes. While this scheme certainly improves on the status quo of charging little or nothing for groundwater use, it’s complicated and drenched in market ideology, much as carbon cap-and-trade systems needlessly encumber what could and should be straightforward carbon pricing.

Let’s not end on that dour note, however. All instances of resource charging — whether to stretch a limited resource or to internalize pollution or other externality costs — make it easier to build support for enacting new ones. Davenport’s story — here’s the link again — is both brilliant reporting and cause for optimism.

We close with a snap of the story opening and photo as they appeared on the front page of today’s (Jan. 4, 2024) Times, above the fold. Below it are calculations in which we derived figures in the first part of this post.

 

Calculation #1: Glasses of water in an acre-foot.

• One acre = 43,560 ft^2, so one acre-foot = 43,560 ft^3.
• One ft^3 (cubic foot) contains 957.5 fluid oz. (per inchcalculator.com; that figure jibes with the 62.4 lb weight of one cubic foot of water).
• A standard water glass contains 8 fluid oz. Thus, one ft^3 of water can fill 957.5/8 = 120 glasses.
• One acre-foot then contains enough water to fill 43,560 x 120 = 5.2 million glasses. Spreading a per-acre foot charge of $500 over that many glasses computes to 0.01 cents each.

Calculation #2: Groundwater-use price-elasticity inferred from empirical finding that a 21 percent price increase evokes a 22 percent decrease in usage.

• It is tempting to reduce this roughly 1-to-1 relationship to a (negative) 1.0 price-elasticity. However, that would ignore the law of diminishing returns and, mathematically, the convex relationship between changes in price and changes in usage.
• The price-elasticity is derived by solving for e in the equation, (1 + 0.21)^e = (1 minus 0.22).
• Using base-10 logarithms, we have: e times log 1.21 = log 0.78, which (omitting one or two steps) leads to e = negative 1.3.

Israel’s bombardment of Gaza in response to Hamas’ October assault on Jewish civilians is prompting much soul-searching. One reappraisal that caught my eye was Who’s a ‘Colonizer’? How an Old Word Became a New Weapon, which ran earlier this month in The New York Times.

The piece, by veteran NY Times correspondent Roger Cohen, centers on two opposing ideas — clashes, if you will. One, particular to the current war, concerns the charge that Israel is an outpost of “settler colonialism” and the counterclaim that the Jewish state, “far from being colonialist,” in Cohen’s words, “is a diverse nation largely formed by a gathering-in of the persecuted.” The other is what Cohen calls “a fundamental reframing” of history away from an East-West conflict canonized in the American and French revolutions, toward a North-South struggle “focused on the millions of lives lost to the slave trade and the genocide of the native American peoples.”

Cohen’s grappling with colonialism and colonization took me back to 2018 and the image shown at left. Outside a “Climate Action Summit” convened in San Francisco by Jerry Brown toward the end of his fourth and final term as governor of California, activists from the Climate Justice Alliance hoisted a banner proclaiming “Carbon Pricing Is Colonialism.”

To me, the message was shocking but not surprising.

Shocking, in equating carbon pricing — an admittedly technocratic but singularly powerful policy tool for cutting carbon emissions and, thus, aiding vulnerable nations and communities considered most gravely threatened by climate chaos — with the centuries-long colonial project that subjugated and plundered the Global South to benefit the colonizing North, and whose psychological and financial toll endures.

Unsurprising, in light of the climate-justice movement’s embrace of intersectionality, and with it, conflation of carbon pricing with predatory capitalism that, over centuries, bestowed riches on Europeans and North Americans by stealing the lands of Indigenous people, the labor of people of African descent, and the mineral resources of the entire Global South.

What Is Colonialism?

Wikipedia usefully defines colonialism as “a practice by which one group of people, social construct, or nation state controls, directs, or imposes taxes or tribute on other people or areas, often by establishing colonies, generally for strategic and economic advancement of the colonizing group or construct.”

Notwithstanding Wiki’s disclaimer in the same paragraph that there’s “no clear definition” of colonialism, this one is distinct and, with its reference to taxes, pertinent.

How Carbon Taxing Actually Works

Suppose carbon emissions were taxed in every country. Would that entail colonizing of poor nations by the rich? It could, but only if the carbon-tax wealth — the revenue generated by the tax on carbon emissions — was siphoned off by the rich countries.

There is no carbon-taxing or pricing system under which that would take place.

Keep in mind that carbon taxing is a charge on carbon emissions. If Country A exports fossil fuels to Country B, the carbon tax arises when the fuels are burned, which takes place in Country B. The tax is imposed in and collected by Country B, and the revenues adhere to Country B.

What about Country A? Its carbon tax applies to fuels burned there — to power vehicles, to generate electricity, to run factories, to heat buildings, and, yes, to operate the machinery that extracts the fossil fuels from the ground and brings them to docks for export. Each of those combustion processes generates carbon emissions in Country A which will be taxed by Country A and whose revenues will stay in Country A.

There are genuine debates to be had as to how Country A, the exporter, will spend its revenues, just as there are or should be debates in Country B concerning disposition of its carbon revenues. Nevertheless, under no conceivable carbon-pricing regime will revenues from Country A’s carbon tax flow to Country B.

Where in this picture is colonialism?

Is it in the prospect that taxes on carbon emissions in Country B and other importing countries will cut demand for Country A’s fuel exports . . . which will lower demand for Country A’s fuels and depress its commerce in extracting and exporting fossil fuels? No. This lowering of demand is part of the intent of taxing carbon — “a feature, not a bug,” per the expression.

Shrinking global demand for carbon fuels and thereby reducing Country A’s carbon commerce isn’t colonialism. It’s not a coercive transfer of wealth or imposition of tribute. Rather, it’s part of how the world cuts emissions and protects the climate, accomplished entirely by and under the control of Country A.

The Colonial Adjacency of Carbon Offsets

Carbon offsets are accounting devices to enable “polluters,” who may be countries, companies or individuals such as air travelers, to avoid having to reduce their own emissions, by purchasing offsets or “carbon credits” that ostensibly cut emissions elsewhere, e.g., by planting trees or destroying greenhouse chemicals like Freon. Plagued from the start by the rap that they are little more than get-out-of-jail-free cards for the Global North, and further undercut by repeated evidence of fraud, carbon offsets have not only hindered effective climate action but have also ended up sullying the cause of carbon pricing.

The Carbon Tax Center’s website section on carbon offsets recounts their history and controversy. Suffice it to say that offsets’ ties to various carbon cap-and-trade programs such as the European Union’s Emissions Trading System and California’s AB-32 carbon cap-and-trade program have led climate-justice campaigners to condemn not just offsets or carbon cap-and-trade but any proposed or actual form of carbon pricing — even straight-up carbon taxing with no offsets whatsoever.

What the Colonial Powers Owe Their Former Colonies

Let’s be clear that the developed countries owe an immense debt to the Global South for exhausting most of our planet’s carbon budget: trillions for climate adaptation; massive financing for clean-energy infrastructure; and large-scale technology transfer. Sweeping debt forgiveness would help as well. These obligations are, or should be, compulsory. But they have nothing to do with carbon pricing. They certainly won’t be exacerbated by taxing carbon emissions whether in the Global South or North. Rather, the emission reductions that carbon pricing will spark will buy extra time for former colonies to manage, adjust and thrive as the payments, financing  and technology ramp up.

Carbon Pricing is Anti-Colonial

We conclude this with its headline. Carbon pricing is utterly and intrinsically anti-colonial. Nations levy their own carbon price and collect the revenues, which they allocate or invest as they see fit.

It’s not perfect. No policy is. And it’s not a silver bullet. When it comes to protecting and restoring climate, there’s no such thing.

But carbon taxing promises huge reductions in carbon emissions — 30 percent or better within ten years if ramped up steadily, in the case of the United States. And it’s complementary with virtually every other carbon-cutting action, be it regulatory, investment, or even clean-energy subsidization, to go far beyond that 30 percent mark. Moreover, pathways abound for allocating, or, our favorite approach, dividending the revenues to keep whole the vast majority of the most-vulnerable households

Carbon pricing is a policy path any nation can undertake on its own and manage as it chooses. If that’s not the essence of political autonomy, what is?

Environmental justice misgivings about carbon pricing, and antidotes to same, are discussed at length on our Carbon Pricing and Environmental Justice page.

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.

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. 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.

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.

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.

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 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.

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.

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?

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).

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.

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?