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Why I Called Out My “Green” Mayor’s SUV Habit

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I set off a media firestorm in New York City last week.

It was Friday morning, the day after Trump repudiated the Paris Climate Agreement, and Mayor Bill de Blasio was using his weekly “ask the mayor” turn on the popular Brian Lehrer radio show (NPR) to tell New Yorkers “We’re going to step up our game” to address climate change. I called in and the screener put me through as “Charles from Manhattan.” Here’s what I said:

Mayor de Blasio, you spoke eloquently a moment ago about stepping up our game in light of Trump’s withdrawal from Paris. How about you stepping up your game, leading by example, getting out of your SUV armada, and if you need to go to the Park Slope “Y” five days a week, rather than a gym near you, why don’t you take mass transit? Or even once in awhile ride a bike, like the vast majority of your fellow New Yorkers, so you will know how we are suffering under a transit system — yes governed by the governor, not by the mayor — but you need to lead by example.

My on-air scolding of NYC Mayor Bill de Blasio last week set off a media firestorm. But his SUV habit reveals deeper failings.

I finished with this:

One of the reasons we are in this climate crisis is because the average person sees elites not playing by the rules that elites seek to impose on everyone else. And you’re not going to be able to lead when you’re sitting in your SUV being chauffeured every day, twelve miles from Gracie Mansion to Park Slope just so that you can ride an exercise bike.

Then it was Mayor de Blasio’s turn. He defended his climate record and called my criticism “cheap symbolism,” as reported by Politico (abridged slightly here):

Charles, I understand the emotional appeal of what you’re saying but I’m just not going to take the bait, my friend.

I have instructed folks in my government to turn our fleet into electric cars. We are moving to renewables, we are retrofitting our buildings, that’s the real leadership — it’s not whether I go to the gym.

Whether I go to the gym does not affect the policies that affect millions of people. I’m going to keep going to the gym. I’m proud to say we have a hybrid. It’s a good car, it’s very fuel efficient. I use the subway when it makes sense to use the subway, and I do stay in touch with what people are going through and I knew it for years and years, because for many years I never had any car.

So it’s easy for you to say that, but it doesn’t really have anything to do with how we change the world. We change the world with policies that affect people and the policies of this city are going to lead to addressing climate change in a much more aggressive way than it’s ever been addressed in the history of New York City.

But again, the issue is not cheap symbolism here. The issue is, are we gonna take action. That’s really the motherlode of addressing emissions in this city. It comes from buildings. We’re going to be very very aggressive about that.

That was that, or so I thought. What I soon learned was that the City Hall media bullpen was going nuts. One of the reporters put my voice together with my first name, and the papers started calling for quotes. By nightfall, their stories were up, with front-page headlines in the Daily News and the NY Post branding the mayor a “green hypocrite” and even the staid New York Times putting my exchange with the mayor at the top of its Metro section.

I told The Times that collapsing transit was “the fundamental climate issue and the fundamental sustainability issue for the city and state.” (Link is above pic.)

I was able to go deeper in those interviews. My most-teachable moment came on Saturday. The NY Post was doing a follow-up and I said that transit riders “need a voice and we don’t have one,” when neither the mayor nor the governor rides a subway or bus.

There are levels galore, here. Let’s unpack them.

First, when we quantify the direct carbon consequence from the mayor’s mini-fleet of SUV’s from home to gym, we see it’s really small: just 24 pounds of CO2 per trip, which monetizes to a mere half-a-dollar’s worth of climate damage.

(Burning one gallon of gasoline releases 19.57 lb of CO2, we’ll call it 20 lb. Let’s assume two SUV’s, each averaging 20 mpg, though actual mileage is probably less. They’re going 12 miles, so we get 2 (vehicles) x 20 lb/gal x 1/20 gal/mile x 12 miles, which yields 24 pounds of CO2. In 2015 Pres. Obama directed federal agencies to use a “social cost of carbon” of $37 per ton of CO2, in 2007 dollars; that equates to $44/ton in 2017 dollars, which is just 2.2 cents per lb of CO2. So the mayor’s 24 lb per trip is imposing a direct climate cost of 53 cents (24 lb x 2.2 cents/lb).)

It’s true that the official U.S. cost of carbon (since rescinded by Trump) is a low-balled estimate, but even quadrupling it raises the direct climate cost of the mayor’s tailpipe CO2 to just two bucks — befitting the fact that global CO2 is the end-product of billions of actions that are individually insignificant but collectively fraught.

A second level of costs arises from the spatial impacts from driving in a dense city. These are experienced most acutely as traffic congestion and its attendant time cost. And here I mean not mayoral time lost to traffic (since de Blasio gets to read and talk by phone while being ferried to the gym) but the time his auto trip effectively takes from others on the roads, by virtue of occupying space and slowing them down.

As long-time subscribers to this blog may know, I’ve done a lot of analysis of traffic congestion costs in New York City, even to the point of quantifying the time costs from a single additional trip in or near the city’s Manhattan core. This analysis is embedded in the kaleidoscopic spreadsheet I maintain to model “congestion pricing” for New York (download here, Excel required; go to Delays and Delay-Costs tabs) but more conveniently summarized in Time Thieves, an article I wrote a half-dozen years ago with then-Princeton student Will Fisher.

The takeaway for our purposes is that a single mile driven by just one vehicle during ordinary congested conditions in or near Manhattan slows down other vehicles by a combined 8 or 9 minutes (think of it as hundreds of vehicles delayed by a few seconds each). Factoring that by the 24 miles in the mayor’s ride to the gym (12 miles by 2 vehicles), the cars, trucks, cabs and buses in the mayor’s “traffic field” are absorbing an aggregate slowdown of 3 to 4 hours. By any reasonable estimate of the average value of time of those vehicle users, the aggregate cost of the time taken from them by each mayoral ride from his residence to his gym is easily in excess of a hundred dollars.

I told fellow New Yorkers via the NY Post that vulnerable mass transit undermines our city’s sustainability.

That’s two orders of magnitude greater than the direct carbon cost per trip — indicative of the fact that traffic congestion manifests as an inefficiency problem far more than as a climate problem, at least directly. It also demonstrates that the mayor’s (or any other New York car user’s) promise to switch to an electric vehicles won’t put a dent in the societal costs of driving in a congested metropolis.

Yet even those several hours of extra congestion dissolve into insignificance in a city of 8.5 million people and 2 million registered vehicles. The crux of the matter — which I tried to telegraph in my radio remarks but didn’t really nail until that second NY Post interview the next day — is found in this syllogism:

  • New York City is inherently green by virtue of its urban density. This idea was most lucidly distilled by the writer David Owen in his 2009 book, Green Metropolis. Density both facilitates and enforces shorter trips, non-automobile travel, and compact and contiguous living and working spaces, all of which translate directly into smaller carbon footprints.
  • What makes this density possible is our mass transit (subway) system. But it is deterioriating from insufficient investment in equipment and maintenance. (The local press corps is all over this; see for example these vivid stories last month by The Times’ Emma Fitzsimmons, 1 and 2.)
  • Politicians are ignoring this crisis. Neither NY State Gov. Andrew Cuomo, who controls the state-chartered Metropolitan Transportation Authority, nor Mayor de Blasio, who has a voice in running the MTA along with a bully pulpit to call out problems and demand solutions, has stepped up to take responsibility. Neither of them ever rides a subway or bus, except in a photo-op.

It’s safe to say that Mayor de Blasio isn’t steeped in this logical chain connecting density, transit and leadership. For evidence, look no further than the end of his radio rejoinder to my harangue, in which he called the city’s building stock the “motherlode” of emissions and, thus, his climate focus. While it’s true that heating and powering the city’s offices and apartments generates a good deal more CO2 than fueling our cars and trucks, that’s because extensive and efficient mass transit keeps down automobile use. Take that away — as the governor and mayor are effectively doing by turning their backs as the subways fall apart — and transportation emissions will surely rise.

But the stakes are higher still. Low-CO2 NYC can’t grow or even maintain its current population without reliable and humane transit. Businesses and families won’t suffer a city dependent on undependable transit and will locate in less inherently-green cities or suburbs instead. And while in theory leaders could care enough about transit to make it work even if they never stepped onto a train or bus, ours have shown no inclination to do so in their combined decade in office (6.5 for Gov. Cuomo, 3.5 for Mayor de Blasio).

Maybe the only way the situation gets turned around is if each of them is stuck on a jammed, sweltering, subway … or is forced to wait on a packed platform as the minutes tick and the tension mounts. And not just once, but again and again.

That, in a nutshell, is why I called up and berated the mayor. As I told The Times, I’d been pondering it for weeks. The combination of Trump’s craven Paris announcement and the mayor’s wrapping himself in the mantle of climate savior gave me an opening and also pushed me over the edge.

I’ll close with a bit of irony inspired by Nicole Gelinas, the trenchant urban affairs analyst at the Manhattan Institute and New York Post columnist. In her Monday column, Bill de Blasio is a climate change hypocrite, she noted:

People will use less carbon — eventually — not because they’re nice, but because it will be more expensive. The world’s governments could achieve this effect more quickly through a carbon tax. Why not get it over with now? Because it’s too hard, politically and practically, to change people’s behavior by making them pay the full purported cost of carbon — that is, asking you to pay for next decade’s hurricane with your gas purchase today. (emphasis added)

Yes and no. Enacting a carbon tax is hard, but not necessarily impossible. But in this case, as we’ve seen, even a stiff carbon tax wouldn’t impel de Blasio to switch to subway from SUV; and that’s probably true even if he were paying for the ride from his own pocket.

What’s needed are new social norms that will make my radio complaint so ordinary that it’s not news; and unnecessary besides, because the idea of being chauffeured 12 miles to a gym would be nearly extinct. That is where a carbon tax would help.

What the WSJ Got Wrong About the Shultz-Baker Carbon Tax Proposal

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The carbon tax proposal that the Climate Leadership Council unveiled last month upends orthodoxies on both sides of the political divide. It is revenue-neutral, which goes against the desires of many on the Left to invest carbon tax revenues in a “just transition” to clean energy. It distributes those revenues as “dividends” to U.S. families, an income-progressive outcome that frustrates those on the Right who might accept a carbon tax as a way to pay for reducing the corporate income tax, at least in theory.

Editorial endorsements for the Shultz-Baker carbon tax proposal, as of March 1.

We at CTC heartily endorsed the council’s proposal in a blog post hours after its release. So did a dozen leading newspapers, including the Dallas Morning News, the Houston Chronicle, the Financial Times and Barron’s, some of which were likely impressed that the CLC rollout was led by GOP icons James Baker and George Shultz, both of whom held multiple cabinet posts in earlier Republican administrations. But that wasn’t good enough for the Wall Street Journal, whose editorial page sometimes reads as if written by the Koch Brothers-financed, climate change-denying Americans for Prosperity. Its Feb. 25 editorial attacking the CLC proposal, The Carbon Tax Chimera, didn’t so much rebut the proposal as excoriate it.

Messrs. Shultz and Baker responded in a letter in the Journal last Friday, We Thought We Would Hit Your Sweet Spot. Their letter isn’t aimed at the Journal’s editors, who are tethered to hard-right climate denialism, but to the paper’s remaining readers who recognize that catastrophic climate change poses risks to their bottom line (and themselves) and are looking for a policy response they can support. In the same spirit, we present this point-by-point rejoinder to the Journal’s editorial by Dr. Peter Joseph, group leader of the Marin County, CA chapter of Citizens’ Climate Lobby. Dr. Joseph is an outspoken advocate for the fee-and-dividend approach to carbon taxing which forms the heart of the CLC proposal.

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1. WSJ: The climate may change but one thing that never does is the use of climate change as a political wedge against Republicans.

Dr. Joseph: Following Sen. John McCain’s 2008 campaign acknowledgment of climate change, it was Republicans who turned climate change into a wedge issue by conflating scientific uncertainty — a necessary and ever-present part of scientific inquiry — with the well-established scientific consensus about global warming. The Journal seems not to appreciate that the Shultz-Baker plan, tailored to appeal to fiscal conservatives, can serve as Republicans’ escape ladder from this untenable position once they let go of the “I am not a scientist” trope and decide to join every other major political party – including conservative — in the Western democracies and get serious about this threat.

2. Also never changing is the call from some Republicans to neutralize the issue by handing more economic power to the federal government through a tax on carbon.

Revenue neutrality with 100 percent of the revenues returned to U.S. families as carbon dividends actually deprives the federal government of more economic power by channeling all the money back to citizens and reserving decision-making power to households, companies and markets.

3. The risk is that Donald Trump takes up the idea, which would hurt the economy with little benefit to the environment.

A fully refunded carbon tax will cut emissions with greater efficiency and less economic drag than regulations. It also produces greater environmental benefits and promotes business stability. The Climate Leadership Council estimates that by 2025 its plan will reduce CO2 emissions reductions by 28% below the 2005 baseline, meeting America’s Paris commitment. The Carbon Tax Center, modeling a more robust rise in the tax level after the initial $40/ton, estimates that the council’s plan would, by 2030, reduce our annual CO2 emissions from 2005 levels by 40 percent.

4. Such a tax might be worth considering if traded for radically lower taxes on capital or income, or is [sic] narrowly targeted like a gasoline tax.

Some economists recommend tax swaps, with Republican-leaning economists preferring cuts to the corporate income tax and Democratic-leaning ones favoring cutting the payroll tax. But politics point strongly to the dividend approach. The tax code is so complex, and Treasury Department bookkeeping so labyrinthine, that it’s extremely difficult to pull off a tax swap that’s immune to suspicions that the government is “stealing” the money. Accountability is crucial. Plus, the carbon tax has to rise each year, since it can’t start at the high levels that are required without seeming punitive. This requires the public to trust that the tax revenues will actually come back to them. A dividend like the council’s can win their trust, since the dividend checks rise in concert with the tax level.

5. But in the real world the Shultz-Baker tax is likely to be one more levy on the private economy.

Reinjecting billions directly back into the Main Street economy will act as a stimulant, not a drag. When families, particularly at the lower end, receive money regularly, they spend it. Sectors other than the hydrocarbon industry will benefit, and the predictable glide path toward the low-carbon economy will allow industry to adapt.

Former Secretary of State & Treasury James Baker, at the Climate Leadership Conference’s Feb. 8 rollout of its carbon tax proposal at National Press Club.

6. Even if a grand tax swap were politically possible, a future Congress might jack up rates or find ways to reinstate regulations.

The carbon tax signal should escalate predictably, and as long as the public receives the funds they won’t be inclined to revolt, since a clear majority will be made better off. As for wealthier households, many will hardly notice that their dividend checks don’t cover their carbon tax bite. Provided the tax levels are robust rather than token, Congress will have no incentive to “jack up rates” later on. Remember, Washington keeps none of the money.

7. Another problem is the “dividend.” A carbon tax would be regressive, as the poor spend more of their income on gasoline and household energy.

Full dividend return converts a regressive policy into a progressive one. The key is the dividend: since wealthier people have larger-than-average carbon footprints (they buy more stuff, live in bigger houses, fly more, etc.), they’ll pay in, while most middle-income and virtually all low-income families will take out. Models show that close to two-thirds of the population comes out ahead with full revenue return via dividends rebate. Citizens will retain the freedom to lower their consumption and use the spread between their carbon dividend check and carbon footprint costs as an incentive to reduce personal emissions and make some money, if they choose, without being required to do so by the government.

8. The plan purports to solve this in part by promising to return the tax to the American public. But the purpose of taxes is to fund government services, not shuffle money from one payer to another. No doubt politicians would take a cut to funnel into renewable energy or some other vote-buying program.

Taxes fund programs, agencies and services that make America great. But a fully refunded “tax” such as the council’s isn’t really a tax if the government doesn’t keep the money. It’s a fee, not intended to generate operating revenue but to correct a market failure. True, politicians might find it difficult to let huge sums slip through their fingers. As then-ExxonMobil CEO Rex Tillerson quipped in a 2009 speech advocating a revenue-neutral carbon tax, “I know that’s hard for a politician to say.” He suggested the tax be called “a refundable greenhouse gas emissions fee.” The U.S. government will return the funds unmolested as required by law.

9. The rebates would also become a new de facto entitlement with an uncertain funding future.

The dividends will rise initially, then level off and eventually — and predictably — decline as the rising fee does its job of lowering carbon intensity. (That decline is another argument against using the carbon revenue for tax swaps or government programs, as the eventual budget shortfalls would require a future Congress to raise taxes.) At the same time, energy from wind and sunlight, whose fuel is free, combined with efficiencies and innovative processes and products, will stabilize or decrease the costs of goods and services. What matters to citizens is their overall household budgets. There will also be savings in healthcare costs as the air gets cleaner, and presumably military expenditures as we wean off unstable sources of foreign oil.

10. Meanwhile, the energy import fee looks like an appeal to Mr. Trump’s protectionist impulses…The idea is an attempt to export U.S. climate and tax policy with the threat of tariffs, which other countries may resent.

The Journal would do well to look more broadly at the council’s border carbon tariff. It’s an incentive to other countries, a tool to ensure a level playing field for U.S. manufacturers, and an act of leadership by the world’s most vibrant economy. A sustainable climate and a habitable earth require controlling global emissions. Without a global carbon price, too many nations will be unable to fulfill the reduction targets they promised in Paris, which are all voluntary. The global economy is the only enforcement mechanism there is. From a practical political standpoint, without a border carbon tariff no carbon charge will ever get through Congress if it disadvantages U.S. exporters.

11. The tax rate would also be influenced by international climate models that have overestimated the increase in global temperature for nearly two decades.

Must the WSJ editorial page continue to cling to this wearisome canard, in the face of year after year of record-setting temperatures? As for alleged IPCC “overestimates,” presumably referring to the alleged “pause” in surface temperature increases, that spurious claim has been thoroughly debunked. The excess retained heat energy has been going into the oceans, where it’s accelerating the disintegration of the polar ice shelves — dams restraining the great land ice sheets —threatening much higher sea level rise than previously predicted and threatening to inundate vast stretches of our nation’s and the world’s coastal areas.

12. A carbon tax is always pitched as “insurance” against climate change, but no one thinks it will change the trajectory of temperatures.

That might apply to an anemic price signal. It hardly applies to a carbon tax that starts at $40 per ton of CO2 and rises from there. The data indicate that most known fossil fuel reserves must remain in the ground to prevent catastrophic warming. Only a robust price signal can enable markets to resist the disastrous allure of trillions of dollars worth of carbon products. A rising fee on carbon emissions is the most powerful lever we have to phase out fossil fuels as fast as practicable.

13. A 2016 paper from the Cato Institute makes the point that insurance policies hedge risks that are well-known, unlike climate change, whose risks are highly uncertain.

The Cato Institute, known for its climate denial, is hardly a source of sound advice. The scientific consensus tells us that the chances that climate change will wreak catastrophic damage on property, let alone ecosystems and civil society, are far greater than the probability that, say, one’s home will be destroyed by fire. Yet every homeowner has fire insurance.

14. Fossil fuels make up about 80% of U.S. energy; solar, wind and hydropower are more expensive and lack the scale to be a viable substitute.

Fossil fuels rose to dominance through political arrangements that externalized the true costs of dumping their combustion products into the atmosphere and oceans. One can argue that these costs were unknown until now. Today to not know is to deny reality. The carbon tax internalizes those costs, rectifying a massive market failure. Yet even without that tax, solar and wind are rapidly gaining market share and grid parity, and there are no limits to the eventual scope of their deployment. A carbon tax will accelerate this transition.

Harvard economics professor Greg Mankiw at the Feb. 8 CLC press conference.

15. Congress has never shown the self-restraint to collect an estimated $1 trillion in taxes and return it to the public. Any Republican who supported a carbon tax can expect no help from Democrats, who won’t restrain the Environmental Protection Agency.

As Secretary Tillerson observed, it is tough for a politician to utter the words “revenue neutral.” The public will have to demand it, and the business community, understanding that climate disasters are terrible for business, must lobby for it. Elected officials will then follow. The Shultz-Baker plan calls for suspending most EPA authority over CO2, an olive branch to anti-regulation interests. Evidence that Democrats and their environmental allies might be willing to relinquish control over the carbon tax revenue stream can be found in the resolution that California’s Democratic-controlled legislature passed last August calling on Congress to enact a revenue-neutral carbon fee and dividend proposal similar to the Shultz-Baker plan.

16. You won’t read this elsewhere, but what’s driven the recent reduction in U.S. carbon emissions is fracking for natural gas, which might never have happened had a carbon tax been in place.

While it’s undeniable that fracked gas contributed to overall reductions bydisplacing dirtier coal, a recent report by the Carbon Tax Center established that since 2005 the combination of electricity savings from efficiencies and increased wind and solar have played a greater part in reducing carbon emissions tha the replacement of coal by gas. Moreover, efficiency, wind and sunlight — unlike fracking — generate zero emissions of methane, which is also a potent greenhouse gas.

17. Human ingenuity and prosperity are the best insurance against climate change.

Perhaps. But even human ingenuity is hard pressed to overcome broken markets that fail to price carbon emissions’ damages. As Harvard economics professor Gregory Mankiw pointed out in the CLC press conference rolling out the carbon dividend plan (@32 min), a carbon tax is as close to a silver bullet as there is, precisely because it engages the enormous power of money and markets, with minimal risk, in a nonpartisan way. The WSJ should support it.

Dr. Joseph may be reached at pjmd1@me.com. He asked us to note that the views expressed here are Dr. Joseph’s and not necessarily those of Citizens’ Climate Lobby or Citizens’ Climate Education. — editor.

A Way Forward for Carbon Taxes

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Here we cross-post my article published in The Nation magazine this morning, under the headline, Progressives Need to Get Over Themselves and Support This GOP-Backed Carbon-Tax Plan. Except for a few extra links below, the two versions are the same.

To stay up to date on carbon tax policy, politics and economics, join our email list, click here.

  — Charles

Carbon tax haters can relax. The proposal for a national carbon tax released on February 8 by high-level Republicans, including uber-GOP consigliere James Baker, isn’t going anywhere. Financially and ideologically, the American right is wedded to carbon fuels. Trumpism runs on and reeks of them. Predictably, not a single Republican in Congress, and no one in the White House, has uttered a single positive word about the new carbon tax plan.

Nevertheless, the proposal’s intended audience may not be Beltway Republicans, but rather those ordinary Americans, majorities in both parties, who say they want action on climate, and who therefore might yet figure in the political equation over climate policy. That group includes progressives. We should pay attention: Carbon taxes matter.

nation-meme-1Our long-building climate crisis is already materializing as drowned coasts, punishing droughts, vanishing glaciers—and political upheaval. At its root is a century-old lie: market prices for gasoline and other fossil fuels that do not factor in the damage from burning them.

A clean energy revolution is at last underway, with wind power, solar electricity, and energy efficiency becoming not only cheaper by the day, but easier to deploy. Still, the clean energy transition will be slowed until prices of coal, oil, and gas reflect their true environmental costs. A carbon tax could do that, if designed properly.

How carbon taxes work is simple enough, at least in theory. Fuel use is infinitely varied and intricately woven into society in ways that regulations such as auto mileage standards can’t fully reach. Clear price signals, on the other hand, can be a nearly magic wand to help billions of invisible hands rapidly reduce and replace fossil fuels.

But with a carbon tax come difficult choices about the vast revenue it will generate. Carbon taxing had a test run at the ballot box last November in the state of Washington, and it ended badly.

On November 8, voters in the Evergreen State rejected by a nearly 3-to-2 margin what would have been the nation’s first statewide carbon tax. A win for “Initiative 732” would have given the United States a carbon tax beachhead, like Canada’s British Columbia, which has had a small but successful carbon tax since 2008.

Remarkably, the decisive factor in defeating I-732 may not have been money from big carbon or even popular aversion to higher taxes, since the initiative was tailored to keep Washingtonians’ tax burden unchanged. What doomed I-732 was a fissure within the climate movement, with centrist economists and other policy wonks in favor of the initiative and progressive greens opposed.

Stated briefly, climate activists in Washington split over opposing answers to two key questions: What are carbon taxes for, and who gets to design them?

Carbon taxes can cut emissions in two ways. As noted above, they raise the price of carbon fuels, thereby worsening their competitive position vis-à-vis cleaner fuels. In addition, the tax revenues raised by a carbon tax can be invested in clean energy infrastructure such as public transit and community solar.

The first path—the “price pull” of boosting market prices of carbon fuels—is what dazzles economists. The second route—the “revenue push” of investing in green infrastructure—appeals to many ordinary folks, especially on the left. Some progressives actively distrust policies that lean hard on price signals, partly for fear that workers in dirty industries will be penalized as investment migrates to cleaner alternatives.

For decades, reactionary forces in the US have been able to block seemingly every new public endeavor by labeling it tax-and-spend. The Washington state carbon tax proponents believed they had an antidote: don’t allow the government to spend the revenues from the carbon tax; rather, use those revenues to reduce other taxes. The political assumption seemed to be that going “revenue-neutral,” though it might frustrate the left—bye-bye public investment—could placate the right or at least capture the center. And so Carbon WA, as the advocates of I-732 called themselves, fashioned its ballot initiative around cuts to the state’s regressive sales tax.

Progressive greens recoiled. The Alliance for Jobs and Clean Energy, a state umbrella group of environmental justice organizations and mainstream allies, blasted I-732 for starving green jobs and ignoring frontline communities. So did nationally prominent progressive leaders like Naomi Klein and Van Jones. The measure’s electoral chances, which were never good, could not withstand this split. On election day, as Hillary Clinton was besting Trump in Washington state by half-a-million votes, the carbon tax was rejected, 59 percent to 41 percent.

But progressives can’t just walk away from carbon taxes. Carbon taxes are the only policy tool that, by slashing demand in a rapid, predictable way, divests our economy from fossil fuels and enables governments, business and consumers to make investments in the transition to clean energy. Carbon taxes also have the best chance of catching fire globally.

The carbon tax James Baker brought to the Trump White House on February 8 on behalf of the new Climate Leadership Council has a lot in common with I-732: the Council’s proposal is also avowedly revenue-neutral. But rather than lowering an existing tax, it relies on a so-called tax-and-dividend model: as the state of Alaska does with oil revenues, revenues from the Council’s national carbon tax would be returned equally to all American households in quarterly “dividends” digitally deposited in Social Security accounts. The tax would start at $40 per ton of carbon dioxide.

Earmarking all of the revenue to these dividends creates the political will to raise the tax every year, since the dividends rise in tandem with the tax rate. Ramping up the tax by $5 a year would shrink the use of carbon fuels so drastically that, by my calculations, US carbon emissions in 2030 would be 40 percent less than they were in 2005 (a standard baseline year).

Yet this progress comes with a catch. The Council would phase out much of the Environmental Protection Agency’s regulatory authority over greenhouse gases and would outright repeal President Obama’s Clean Power Plan to cut emissions from electricity generation. It would also immunize fossil fuel companies from lawsuits for damages done by their products—lawsuits such as those bound to arise from the revelations that ExxonMobil and other companies knew for decades about the climate damages their products cause, and lied about it.

nation-meme-2But government policy revolves around trade-offs, and on balance the Council’s carbon tax is worth supporting. After all, well over 80 percent of the Clean Power Plan’s targeted reductions for 2030 were already achieved by the end of 2016. Thus trading away the Clean Power Plan for a tax that could scour fossil fuels from the entire economy is like swapping an aging ballplayer for the next superstar.

Of course, not everyone will see it that way, particularly traditional green groups that helped write the laws and regulations that cleaned up the nation’s air and water. Some will regard the Council’s trade as a ploy to undo the EPA’s authority to protect not just climate—where it may be largely ineffectual anyway—but public health.

With Republicans tightly lashed to climate denial, the value of Baker’s carbon tax proposal may be less as a gateway to legislation and more as a spur for progressives and other citizens to take a clear look at carbon pricing.

Will progressives trust the verdict of economists that a revenue-neutral carbon tax can drive the energy transition so long as the tax level is high enough? Or do we support carbon taxes only if the revenues are invested in the clean energy transition? If so, how do we craft a spending program that reconciles the claims of competing interests? And what is our blueprint for building political power to enact such a carbon tax, when “tax” remains a dirty word in national politics?

Clear majorities of Americans want climate action. Remarkably, some polls have even found that majorities of Americans support carbon taxes like the Climate Leadership Council’s proposal. With the Democrats’ national defeats last November, the failure of climate activists to unite on the Washington state referendum is looking like an unforced error of cruel proportions. We can’t afford to repeat that mistake at the national level.

Energy-Efficiency Standards

Since the 1970s, energy-efficiency regulations (generally called “standards”) on appliances, vehicles and buildings have helped save large amounts of electricity and fuel in the United States, largely by forcing product design changes that would not have come about from “market forces” alone.

But energy standards by themselves will never achieve the deep cuts in energy usage needed for the clean-energy transition. Standard-setting takes a long time and invariably involves compromises with powerful industries (automobiles, consumer durables) that lead to confusing and wasteful loopholes. Moreover, standards by nature can handle only one product or usage-sector at a time and tend to be static whereas energy use is ever-evolving, especially in dynamic and “disruptive” late capitalism. In addition, standards provide no incentive for users (drivers, households) to change their behavioral patterns to maximize energy savings.

Carbon taxes combined with efficiency standards will achieve far more than standards alone by encouraging manufacturers and builders to proactively maximize energy efficiency while giving consumers ongoing incentives to make cost-effective choices valuing efficiency in shopping, traveling and purchase of homes and other durables.

We made many of these points in a blog post in September 2015, What an Energy-Efficiency Hero Gets Wrong about Carbon Taxes, from September, 2015. It was one of our most popular posts, and we reproduce it directly below. We hope to add content soon about the limits of automobile mpg standards.

  — Charles Komanoff, November 2015

What an Energy-Efficiency Hero Gets Wrong about Carbon Taxes (from Sept 2015)

It’s rare that critiques of carbon taxing are as quantitative as the post last month by David Goldstein on the Natural Resource Defense Council’s Searchlight blog.

Goldstein qualifies as a genuine energy-efficiency hero, in my book. He has spearheaded NRDC’s pioneering analyses of appliance engineering, manufacture and marketing since the 1970s and guided the council’s strategic interventions in utility governance and energy standard-setting in California and at the federal level. This in-the-trenches work has slashed power consumption and carbon emissions from refrigerators, air conditioners, light bulbs and building envelopes in all 50 states. Goldstein’s 2002 MacArthur Foundation “genius award” was richly deserved. (The Washington DC-based American Council for an Energy-Efficient Economy, ACEEE, merits a shout-out as well.)

Befitting his analytical bent, Goldstein’s critique sticks to the high road. No self-fulfilling taunts about carbon taxers’ naivete or the tax’s political infeasibility. His post does drag out a straw man, though, insisting up-front that “carbon emissions fees alone cannot solve the climate problem” — a position held by few carbon tax advocates. (We ourselves “recommend carbon taxes in addition to energy–efficiency standards.”) His criticism sharpens at the end: “In summary, carbon pollution fees, as a stand-alone policy, are incapable of doing much to solve the climate problem.”

Goldstein has certainly thrown down the gauntlet. He has four main arguments, which I’ll treat in order. Some math is involved, but it’s central to the issue.

Argument #1: Carbon Taxes Must Raise U.S. Energy Prices 44-Fold to Meet Our Carbon Targets

Let’s start with an assertion by Goldstein that is startling but accurate — mathematically:

If we wanted energy demand to drop by 85 percent [the minimum required for the U.S. to meet IPCC temperature-rise targets] due to price, the math behind elasticities shows that we would require a price increase of 44 times. This is an impossibility condition. (emphasis added)

Price-elasticity is how economists denote the extent to which a rise in price causes demand or usage of a good or service to diminish. Assuming, as Goldstein does for argument’s sake (and as we do in modeling carbon taxes), that the price-elasticities of the various forms in which energy is used in the U.S. have an average value of minus 0.5, then a doubling of energy prices, whether effected through a carbon tax or market fluctuations, will cause energy use over time to shrink by 29 percent. (See sidebar for calculations.) With two doublings in price, the shrinkage would be 50 percent.

Elasticity math. You can do it.

Elasticity math. You can do it.

Note that the second doubling in price produces less of a decrease in usage than the first, reflecting the famed Law of Diminishing Returns. Indeed, three doublings, increasing the price 8-fold, would only bring about an overall 65 percent drop in usage. To hit the 85 percent reduction target requires a 44-fold energy-price rise. Goldstein’s math is spot-on.

But not the use to which it is put. While an 85 percent reduction in energy use would indeed cure the United States’ carbon obligations (not to mention protect and conserve air, water and land), it far exceeds what’s required, thanks to the ongoing and parallel reduction in the carbon intensity of energy supply. This decarbonization of supply is prominent in energy and climate discourse, and has been evident in the electricity sector over the past decade. Measured as pounds of CO2 emitted per kWh generated, the emission rate for all electricity generated in the U.S. last year was 16 percent less than the rate in 2005. For that we can thank increased generation from lower-carbon natural gas and zero-carbon wind. (Solar electric generation, though growing very fast, started from a tiny base and wasn’t a notable factor in the decarbonization to date.) Energy efficiency has helped as well by reducing the need to fire up high-carbon coal plants.

A carbon emissions tax, which by its nature favors wind and solar over gas, and gas over coal, will help sustain and accelerate this encouraging supply-side trend. Indeed, the price-sensitivities built into CTC’s spreadsheet model imply that energy supply decarbonization will account for an estimated 53 percent of the overall projected CO2 reductions from any carbon tax. This means that reductions in emissions via demand, i.e., conservation and/or efficiency, that are Goldstein’s stock-in-trade need only accomplish a bit under half (47 percent) of the total task.

Price-Elasticity Curve for Energy-Efficiency Hero post _ 2 Sept 2015The relevant math, then, is this: Thanks to supply decarbonization, the U.S. can limit its reduction in energy usage to 59 percent and still achieve the 85 percent CO2 reduction target. While a roughly 60 percent reduction in energy consumption is still a tall order, it’s far less fantastical than 85 percent. Assuming energy price-elasticities average minus 0.5, that 60 percent reduction in usage could be effected with a “mere” 6-fold rise in energy prices. No 44-fold rise required. (See calculations at end of this post.)

 

Argument #2: A Carbon Tax High Enough to Be Effective Would Distort the U.S. Economy

To his credit, Goldstein appears to have anticipated my rebuttal above. He posits a 5-fold increase in energy prices, slightly on the easy side of my 6-fold rise, which he then dismisses on three grounds. Each is problematic, however:

1. “Energy would be pushing a fourth of GDP” (vs. today’s share of ten percent or less), says Goldstein, and, thus, would gobble up too much economic activity. The idea of expensive energy colonizing the economy is definitely a concern in a last-gasp laissez-faire economy in which the costly energy arises through “extreme extraction” of oil from the Arctic, deep waters, and tar sands. But a carbon tax would have the opposite effect, obviating most energy exploration, extraction, conversion, transport and combustion, in accordance with the 60 percent decline in usage posited above. In short, a carbon tax will make our society and economy less energy- and fuel-intensive, not more (while the energy barons, with their wealth clipped, will wield less political power).

2. A 5- or 6-fold increase in energy prices “is not politically possible. Electricity at 50 cents a kilowatt hour?,” Goldstein asks rhetorically. “Gas at $12 a gallon?” Here, Goldstein presumes that a carbon tax would lead to those lofty prices overnight, rather than phasing in over decades. In the latter scenario, the impacts will be softened, yet the price signals guiding long-term investments will be loud and clear. The impacts will be tempered further as the improved efficiency of usage lets businesses and households heat, cool, light and move with fewer units of energy. (Ironically, it was Goldstein and his NRDC colleagues who coined the mantra that what matters is electricity bills and not rates. Note also that CTC is on record criticizing proposed carbon taxes that would start with abrupt energy price rises, on account of the likelihood of economic dislocation.)

3. The carbon tax required to boost energy prices 5- or 6-fold “would be potentially devastating to the poor,” Goldstein argues. Potentially yes, if the wealthy are allowed to siphon off the carbon tax revenues that could buffer U.S. households from the higher energy prices. But the carbon tax designs with the most adherents are those that either use the proceeds to reduce regressive job-killing payroll taxes or distribute them pro rata to households as “fee-and-dividends.” In fact, the need for a socially and economically just distribution of carbon tax revenues only underscores the urgency for environmental progressives to coalesce now behind carbon tax legislation that can safeguard the 90 percent rather than solidifying the advantages held by the top 10 or 1 percent.

Argument #3: Energy Demand is Price-Inelastic, So a Carbon Tax Won’t Affect It

Goldstein next revisits energy price-elasticity in an attempt to show that its actual value lies closer to a barely behavior-influencing (minus) 0.1 than the more robust (minus) 0.5 figure he granted earlier for argument’s sake. But curiously, he builds his case on a commodity that no end-user actually purchases: crude oil. Refineries consume crude, of course, but the businesses and households whose decisions determine aggregate demand consume petroleum products: The fuels whose price-elasticities need to be estimated empirically are gasoline, diesel fuel and jet fuel ― not crude oil.

Over the years there’s been no dearth of claims by representatives of Big Green groups that changes in the price of gasoline elicit little change in usage. Most of these claims are either mere assertions or rest on cursory and selective glances at the data. Perhaps this year’s surge in gasoline sales will finally put that notion to rest: U.S. gasoline sales in the first half of 2015 were 3 percent above 2014 sales — the biggest year-on-year increase in gasoline demand since the late 1970s (subject to the caveat that the comparison covers only six months in each year). The driving force behind this surge isn’t economic activity, since GDP for the first half of 2015 grew only at a middling rate of 2.8 percent; the reason is free-falling pump prices. (NB: The original version of this post had first-half 2015 sales growth at 3.3% over 2014; that figure has been changed to 3.0%, with revised data. The assertion that this is the biggest increase since the late seventies remains valid.)

Year-on-Year Changes in U.S. Gasoline Consumption for Energy-Efficiency Hero post _ 25 Sept 2015In any event, the way to estimate gasoline’s (or other fuels’) price-elasticity is with multivariate regression analysis. Here’s a summary of the estimation I performed for gasoline for CTC’s carbon-tax spreadsheet:

Using an approach suggested by retired energy economist Vince Taylor, who earned his PhD at M.I.T. from Nobel laureate Robert Solow in the 1960s, and whose insights animated my 1981 magnum opus on nuclear power cost escalation, I “regressed” the annual percentage changes in U.S. gasoline consumption from 1960 through 2014 on three independent variables: (i) the same year’s percentage change in economic activity (GDP); (ii) the same year’s percentage change in the average real retail price of gasoline; and (iii) the average percentage change in that price over the 10 years prior to the current year. The third variable was intended to reflect lags inherent in Americans’ responses to changing gasoline prices, insofar as automobile purchases and location choices that affect usage tend to change over years rather than weeks or months. The parameters may be referred to as income-elasticity, immediate price-elasticity, and lagged price-elasticity, respectively.

Two “models” best fitted the data, both statistically and conceptually. (All variables were statistically significant.)

  • One model yielded an income-elasticity of 0.47; an immediate price-elasticity of (minus) 0.12; and a lagged price-elasticity of (minus) 0.21. The sum of the immediate and lagged price-elasticities was (minus) 0.34.
  • The other model added a “dummy” variable to adjust for an arguably atypical six-year period covering 2002-2007. This variable was premised on the unusually high discounts/rebates offered for SUV’s during that period, as well as America’s post-9/11 paranoia and Iraq War-inspired triumphalism that may have contributed further to higher purchases and use of SUV’s. (SUV’s average more gas per mile than sedans, of course.) The regression results were, respectively: +0.46, -0.13, -0.24, and +1.4%, indicating an income-elasticity of 0.46; an immediate price-elasticity of (minus) 0.13; and a lagged price-elasticity of (minus) 0.24. The sum of the immediate and lagged price-elasticities was (minus) 0.37. (We ignored the dummy variable as transitory; its inclusion in the model was to filter out influences that could distort the elasticity estimates. May 2016 addendum: we repeated both regressions with 2015 data added. The only change was a slightly reduced income-elasticity in the three-variable model in the prior bullet, to 0.46, from 0.47.)
  • From the two sets of regressions, we rough-averaged the respective price-elasticity sums of (minus) 0.34 and (minus) 0.37. The result, a figure of (minus) 0.35, is the price-elasticity we use in our spreadsheet model to estimate the long-term responsiveness of gasoline demand to a carbon tax.

In the CTC carbon-tax model we specify higher price-elasticities for other energy-use sectors: (minus) 0.5 for diesel fuel, (minus) 0.6 for jet fuel, and (minus) 0.7 for electricity. We premise them on businesses’ greater capacity to respond to higher energy prices than drivers’, and on our gleanings from the extensive literature of price-elasticity.

The takeaway? The price-elasticities of U.S. energy usage, while not necessarily high (all are below one), are not only much greater than what Goldstein suggests; they’re large enough to establish beyond any doubt that taxing carbon emission will indeed reduce energy usage, rather than merely punishing consumers into paying more for the same amount of energy.

Argument #4: The Best Path to Carbon Reductions is Prescriptive Energy Policies

So what is the Goldstein-NRDC solution, if not carbon emissions pricing? Here’s Goldstein’s prescription:

This [pessimistic] analysis does not apply to actually implemented or proposed cap-and-trade plans, such as the one adopted by California pursuant to AB32 or the one proposed in the Waxman-Markey bill, both of which rely primarily on non-price energy policies. The overwhelming bulk of emissions savings come from (1) improved building and equipment efficiency standards, (2) integrated land use and transportation system planning that meets goals for travel reduction, (3) emissions standards on fuels and vehicles, (4) requirements for utilities to purchase and integrate renewable energy sources, (5) regulatory reforms that encourage utilities to rely primarily on energy efficiency, and (6) a host of other policies that are independent of energy prices. Numerals added; otherwise quoted verbatim.

That’s NRDC’s credo in a nutshell, and much of it is admirable — particularly #1, which I touted at the start of this post; also #4, which helped jump-start the U.S. wind-power industry (though perhaps no more than did the federal Production Tax Credit for wind electricity), and #5, an effort in which I participated peripherally as a utility reform advocate at the dawn of the “demand-side management” era several decades ago.

On the other hand, it can be argued that the vaunted CAFE standards (#3) were only able to be legislated in the mid-1970s and ramped up several times since then because of rising gasoline prices — somewhat mooting the standards and demonstrating the power of prices that Goldstein largely discounts. Moreover, Goldstein’s #2 is stunningly squishy (“planning that meets goals for travel reduction”); yes, Goldstein had to shoehorn his description but the fact is that NRDC’s standards-and-regulations approach, which has proven so potent in making appliances more efficient, is powerless to rein in the use of vehicles.

The Crux

And therein lies the fundamental difference between Goldstein’s (NRDC) and my (CTC) respective approaches. Miles-per-gallon rules reduce carbon emissions per vehicle-mile driven, but they do nothing to affect the other half of the formula that equally determines emissions: the number of vehicle-miles driven.

In contrast, a carbon tax effectively makes every action that reduces fossil fuel use less costly, by raising the rewards from using less fuel. Taxing carbon will open up multiple paths that will influence the literally billions of daily decisions that determine energy usage and, hence, carbon emissions.

In driving, a carbon tax will affect whether and how far and often to drive . . . which car to take on a family trip . . . how high an mpg rating to demand in the next lease or purchase . . . and, at the societal level, whether public transit investments “pencil out” and might be prioritized over wider highways, and whether hyper-efficient car designs pencil out in corporate boardrooms and venture-capital spreadsheets.

Second Sidebar for Energy-Efficiency Hero post _ 3 Sept 2015

The power of carbon-taxing, in a nutshell.

The same goes for other energy-use sectors. Costlier diesel fuel will not only stiffen legislators’ and regulators’ spines in promulgating truck mpg standards; they’ll incentivize local and regional provision over far-flung shipping of food, raw materials and consumer goods, thus cutting down on freight-miles and resultant emissions. Rising electric rates — at least during the decades until carbon fuels are eliminated — will not only strengthen NRDC’s and ACEEE’s case for ever more-efficient appliances; their price pressures will help restrain the size and number of appliances sold and also motivate consumers to use them more efficiently.

Costlier electricity and natural gas will likewise discourage developers from building, and families from insisting upon, gargantuan homes whose outsize volumes must be heated and cooled. Not to mention that a carbon tax provides an antidote to the oft-postulated “rebound effect” by which increased energy efficiency, by reducing the implicit price of energy services, can engender greater energy usage and inadvertently cancel some of the intended savings from those efficiencies. A carbon tax acts as a direct brake on that implicit price reduction and, thus, on the rebound effect.

The point is clear: No other policy can match a carbon tax’s reach, or its simplicity. As we wrote last year in comments we submitted to the Senate Finance Committee concerning energy subsidies and pricing:

The U.S. energy system is so diverse, our economic system so decentralized, and our species so varied and innovating that no subsidies regime, no matter how enlightened, and no system of rules and regulations, no matter how well-intentioned, can elicit the billions of carbon-reducing decisions and behaviors that a swift full-scale transition from carbon fuels requires. At the same time, nearly all of those decisions and behaviors share a common, crucial element: they are affected, and even shaped, by the relative prices of available or emerging energy sources, systems and choices. Yet those decisions cannot bend fully toward decarbonizing our economic system until the underlying prices reflect more of the climate damage that carbon fuels impose on our environment and society.

Carbon Taxing Going Forward

Two carbon tax bills now before Congress — submitted by Reps. Jim McDermott (D-WA) and John Larson (D-CT) — ramp up the tax level steadily and predictably to reach triple digits (i.e., $100 per ton of CO2) a decade on. Our modeling suggests that either bill, by the end of its tenth year, will have reduced total U.S. carbon emissions from fossil fuel burning by more than 30 percent, vis-à-vis 2005 emissions — with the reductions rising as the tax level continues ramping up. As noted, a little more than half of the reductions will come about by sustaining and accelerating the ongoing decarbonization of the U.S. fuel mix, not just in electricity but by motivating increased electrification of sectors like driving that are now dominated by hydrocarbon fuels. The remainder will result from energy efficiency and conservation, i.e., reduced usage per unit of economic activity.

Such a carbon tax has myriad other advantages, including the ease with which it can be replicated globally, that no other approach can match. One unsung advantage is that taxing carbon harmonizes with other measures for reducing energy consumption and carbon emissions. My or other individuals’ energy-savings don’t undermine the tax’s effect on other economic actors ― whereas under cap-and-trade, autonomous energy-saving actions lower the price of the emission permits and thus attenuate the price signal. Likewise, a carbon tax reinforces the economic effectiveness of the appliance and vehicle and building efficiency standards so ably championed by David Goldstein and NRDC, just as those standards play an essential role in overcoming the market failures that are hard to counteract with price signals alone.

It’s 26 years and counting since my first carbon tax op-ed, and almost 9 years since I co-founded the Carbon Tax Center. We at CTC have long since abandoned the hope that NRDC or the other big green giant, the Environmental Defense Fund, would lead the charge for a U.S. carbon tax. We’re okay with that, but we ask our environmental colleagues to refrain from devising and attacking straw-man versions of carbon taxes.

We’ve never said that “carbon emissions fees alone can . . . solve the climate problem.” Rather, we believe that the climate problem can’t be solved without them.

Calculations for 9th paragraph in post: If decarbonization of supply is to account for 53% of the CO2 reduction, and reduction in usage for the other 47%, then K, the percentage change in usage needed to reduce CO2 by 85%, is calculated by the equation: K x K x .47/.53 = 0.15. That is solved by K = 0.41, which equates to a 59% reduction in usage. To effect such a reduction, assuming price-elasticity of -0.5, the factor increase in energy prices, M, is given by the equation: M^(-0.5) = 0.41. The solution is M = 5.95, denoting a 6-fold price rise.

Naomi Klein Is Wrong On The Policy That Could Change Everything

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On this last day before the elections, the afternoon light was waning in my Manhattan office and I thought I could be done fending off attacks on I-732, the Washington state carbon tax initiative.

Not so fast. A CTC supporter wrote me, cryptically, “Naomi Klein should know better by now, no?” I checked Klein’s Twitter feed, @NaomiAKlein, and, uh oh, there it was: a piece by Klein in The Nation, The Carbon Tax on the Ballot in Washington State Is Not the Right Way to Deal With Global Warming.

The policy that could do the most to start changing everything is on the ballot in Washington state.

The policy that could do the most to start changing everything is on the ballot in Washington state.

I read her piece. It’s mercifully brief, just ten paragraphs, so I thought I would let it go. But Klein, author most recently of This Changes Everything: Capitalism vs. The Climate, is charismatic, fluent and highly visible in the climate movement. And just about everything she said in her Nation piece is so misinformed or short-sighted that it feels important to respond. So here goes, in point-counterpoint.

Klein Paragraph 1: The imperatives of the climate crisis and the logic of economic austerity are at war—and Washington State is on the front lines.

CTC: Powerful lede, but is Klein actually tagging I-732 with the dreaded “austerity” label? What exactly does she mean? (Spoiler alert: she never says.)

Klein Paragraph 2: So-called “revenue-neutral” carbon pricing — whereby the proceeds are used to fund tax cuts — has long been a cherished hobbyhorse of free-market economists and the odd Republican who favors climate action. It’s also the policy of choice for big polluters like ExxonMobil. And now this right-wing friendly model is being pushed in Washington State, thanks to Initiative 732.

CTC: “Tax cuts.” A percentage point cut in Washington’s state sales tax — the principal means by which I-732 ensures that raising energy prices through a carbon tax won’t injure low- and middle-income families — is dismissed as a mere “tax cut,” a phrase that of course conjures giveaways to the hedge-fund class. What Klein labels right-wing is actually friendly to and designed for the very groups she purports to care about: families below or near the poverty line; undocumented immigrants; over-leveraged folks struggling to stay middle-class.

Klein Paragraph 3, abridged: [If I-732] is approved by voters, it would be a disastrous precedent that could set back the climate justice movement for a decade  — time that we simply can’t afford to lose.

CTC: Klein turns logic on its head. Following a decade of nearly total legislative silence on carbon taxes — a silence imposed not just by Republican denialists but by a myopic U.S. green movement — Klein frets that enacting an actual carbon tax in the USA and blowing open the door to a possible national carbon tax will set back climate action for another ten years?

Klein Paragraph 4: Some have accepted the logic that something is better than nothing, even arguing that a “tax swap” could substitute for a just transition to a low-carbon economy. The evidence proves otherwise. In British Columbia, two-thirds of the tax cuts have ended up in corporate pockets, while carbon emissions have been rising in recent years and the fracking industry has boomed.

CTC: By design, most of the BC carbon tax revenues end up in taxpayers’ pockets through personal income tax cuts as well as a low-income tax credit. A 2015 study by University of Ottawa graduate students found BC’s carbon tax “highly progressive” distributionally. In any case, I-732 is explicitly and intentionally structured differently, to apply 75 percent of carbon tax revenues to cut the Washington sales tax.

Yes, CO2 emissions in British Columbia are up slightly since 2012, but that’s because the BC tax level has stayed fixed. In contrast, the Washington carbon tax would rise 3.5% a year faster than the general inflation rate. And If fracking has boomed in BC, don’t blame the province’s carbon tax for its lack of a keep-it-in-the-ground movement.

Klein Paragraph 5: By some estimates, I-732 would raise gasoline and electricity prices less than 15 percent by 2040 in Washington State—hardly enough to jumpstart an urgent, sweeping phase-out of fossil fuels. Meanwhile, it would offset carbon revenues by cutting taxes for big corporations, including major polluters. (According to the Seattle Times, Boeing could see windfalls of tens of millions annually.)

memo-to-naomi-klein-_-pullquote-for-7-nov-2016-postCTC: Klein’s math is off; by 2040, the tax-caused rise in gasoline prices would be 25 percent. But the bigger point she ignores is that a carbon tax in any one state like Washington (or a lone province like British Columbia) can’t be set high because of interstate competitive pressures — which is also why I-732 sets aside 10-15 percent of its revenues for tax reductions for businesses like Boeing. The whole point of the Washington state initiative is to establish a template for other states or, if control of Congress can be flipped, for a national carbon tax that can rise briskly and deliver massive carbon reductions, as we noted in a blog post last month.

Klein has five more paragraphs, but in the interest of time let’s cut to the chase:

Klein Paragraph 9: A paltry, revenue-neutral carbon tax simply cannot deliver the massive green energy investments and community-driven solutions we all need. Science-based climate action means an unprecedented, rapid, and decisive shift to renewables; a truly equitable carbon tax can play an important role in spurring the transition, but it won’t work unless we make the polluters pay, and put their immoral profits to work repairing the damage they have knowingly created. The way to do that is to mobilize the broadest possible coalition—led by the front-line communities who stand to benefit most from building a cleaner and fairer economy.

CTC: Talk about “making polluters pay” is great rhetoric, but in our society as currently configured that includes all of us who flip on switches, turn on ignitions and buy stuff. And since the society we live in (to echo another post of mine last month) doesn’t appear to favor massive green energy investments and community-driven solutions, we have to rely even more heavily on robust carbon taxes; and these need to be largely revenue-neutral if they’re going to (i) not drive low-income families further into poverty and push middle-income families deeper into debt, and (ii) be politically acceptable.

Klein’s call to put fossil fuel company profits to work repairing damages is more of the same empty rhetoric. The task before us is to shrink, shame and strangle the fossil fuel companies. If Klein can offer a way to do that more quickly and effectively than a briskly rising U.S. carbon tax — one that I-732 can start paving the way for — I’m all ears.

Until then, could she please turn down the volume?

Addendum: CTC contributor Dan Lazare presciently dissected Klein’s limited comprehension of the power of carbon taxing almost two years ago, in this space, with Why Is Naomi Klein So Cool on a Carbon Tax? It’s a great read.

The Political Meltdown That Could Save The Climate

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Anyone with a lit screen knows by now that shell-shocked Republicans are abandoning the Trump ship in droves. As the exodus threatens to become a stampede, with a longtime GOP operative declaring that “The Republican Party is caught in a theater fire; people are just running to different exits as fast as they can,” talk of election “win probabilities” is pivoting from the presidential race to Congress.

A Trump collapse could give Democrats back the House,” reported Vox this weekend, citing analysis that a mere six-point Clinton plurality could swing the 31 needed seats in its wake. While that’s probably over-optimistic, a more decisive margin over Trump might do the trick.

The ramifications for climate could be huge: Democratic control of both the White House and Congress clears a path for a federal carbon tax without having to somehow vault over GOP denialists. Which could make next month’s ballot referendum in Washington state, Initiative 732, even more momentous. Enacting the country’s first carbon tax wouldn’t just produce a template for other states; it could spark national legislation establishing a U.S. tax on carbon emissions, perhaps as early as 2017.

Infographic from Yeson732.org. The revenue-neutral carbon tax design has alienated some Washington-state climate advocates.

Infographic from Yeson732.org. The revenue-neutral carbon tax design has turned off some Washington-state climate advocates.

Let’s be clear: a U.S. carbon tax isn’t just helpful climate policy. It’s the core of any program for shrinking carbon emissions massively, relentlessly and globally. Only a briskly rising carbon tax rewards and thus bends every investment, decision and behavior toward less use of fossil fuels. Only a carbon tax can be replicated so the world’s nations can meet the commitments they made in Paris a year ago and ratified last month. And only a carbon tax produces revenues that can protect low- and middle-income families as fossil fuel prices rise — as they must to blow open the gates to the renewables-and-efficiency revolution at full scale.

The holistic power of carbon taxing is what motivated the grassroots organizers at an upstart group called Carbon Washington to crisscross the state last year and collect the 350,000 signatures that placed “I-732” on the Nov. 8 ballot. It’s also what makes it vexing that many green groups in the state have refrained from supporting I-732. Some are actively opposing it.

The schism has been covered widely (and insightfully) in recent weeks, most recently by Natasha Geiling in Think Progress. “Opposition to Washington’s historic carbon tax initiative is coming from the unlikeliest of sources,” reads her headline, which then asks, “It’s the only carbon tax on the ballot in the country. So why are some environmental groups fighting it?”

The answers are many. Carbon WA drew up I-732 without consulting fully with the entire spectrum of climate advocates. The design of its carbon tax is more attuned to the market than to government, with the carbon revenues “returned” to households (see graphic) rather than invested directly in clean energy and community remediation. And perhaps the in-state green groups are guided more by local and state concerns while Carbon WA set its sights nationally and globally.

Those points can be parsed endlessly. But the central fact for climate, which the Republican implosion is making more salient daily, is that the fissure in Washington state threatens to sink the initiative and botch our chance to put a carbon tax on the national legislative agenda starting months from now. Polling on I-732 suggests that a deficit in August may have flipped into a slight plus, but a fifth of voters are still undecided, and disunity among climate advocates makes it tougher to seal the deal.

There’s no second chance at this in the Evergreen State. Washington’s legislature has shown no appetite for a carbon tax, and a new referendum can’t get on the ballot until 2018. Organizing in other states has fallen short as well. Whether we like it or not – and the economist in me makes me a big fan – I-732 is the only game going.

The U.S. elections will doubtless take further twists in the final four weeks, but the possibility of debating and actually winning a national carbon tax is suddenly, miraculously upon us. The referendum in Washington state is going to function as the first big test. Whatever its imperfections, the climate movement’s greatest imperative must be to come together and pass I-732.

Elon Musk’s Powerful Case for a Carbon Tax

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Nov. 2 addendum: Read Musk’s carbon tax pitch, transcribed from Leonardo DiCaprio’s new climate change documentry, Before The Flood, at bottom.

Visionary inventor-entrepreneur Elon Musk is constantly in motion. Last week he was in Nevada checking on his Gigafactory, which purportedly will be the world’s largest-footprint building (as big as 107 football fields) and make enough batteries each year to power 1.5 million Tesla Model 3s. Yesterday Musk revealed his intention to merge Tesla Motors and SolarCity — a $2.6 billion wager that Tesla owners will use those batteries to store power from SolarCity panels.

This is big business, big climate and big vision rolled into one. Large-scale deployment of batteries could let solar and wind resources dominate electricity production without need for carbon-emitting grid support by fossil fuel plants. Replacing gasoline-powered autos with electrics will almost certainly squeeze carbon emissions out of transportation faster than biofuels or other low-carbon liquid fuels.

Elon Musk carbon tax meme _ 2 aug 2016In Nevada, Musk also spoke up for carbon taxes, though hardly for the first time. Four years ago, for example, at the Wall Street Journal’s ECO:nomics conference in Santa Barbara, CA, Musk disparaged tax credits for green cars and declared that “the best method for addressing climate change in the automotive industry is to impose a tax on carbon dioxide emissions,” according to the trade journal plugincars. But what he said last week was so richly detailed and articulated that it deserves to be quoted in full.

As reported by Benjamin Spillman in the Reno Gazette-Journal, Musk was asked whether the Gigafactory would have been economically viable without over a billion dollars in state incentives, plus federal tax credits for electric vehicles and solar panels. He replied:

[I]f you accept the scientific consensus[,] every oil burning activity is subsidized, dramatically. If you believe there is a value to the CO2 capacity of the atmosphere and oceans and that CO2 capacity is not being paid for by the price at the gas pump or the coal that is being burned for electricity generation or whatever its use may be then every single fossil fuel burning activity is massively subsidized.

After reminding his Nevada audience that climate change “has become sort of an ideological issue because there are people who think that global warming is not true,” Musk continued:

[A]ll we are doing [with a carbon tax] is trying to match the inherent subsidy for fossil fuels . . . on the sustainable energy side. Fossil fuels are already getting a massive subsidy if you believe in global warming. If you don’t then [the subsidy] seems really unfair. If you do then it is like oh we are just trying to correct it.

But Musk was just warming up to the carbon taxing subject:

The real right way to correct [the subsidy] would be to establish a carbon tax. If you ask any economist they will tell you that is the obvious thing to do, put the correct price on carbon because we currently have an error in the economy which misprices carbon at zero or something closer to zero. It is a fundamental economic error.

He then turned to the supposed conflict between libertarian ideology and taxation:

For people that have a sort of libertarian bent they get a little confused. . . They need to appreciate the high level principle of why they are opposed to government intervention. They are actually opposed to government intervention because it causes false pricing. If the government says we are going to massively incent the production of corn, so that effectively corn gets mispriced and we make too much corn, that . . . does not benefit the country if you make too much of something because of a government driven pricing error . . . That is sort of what people with a libertarian bent are opposed to.

However if you have . . . an unpriced externality [with] the CO2 capacity of the oceans and atmosphere priced very close to zero then any government action to increase the price above zero reduces the error in the economy. [What libertarians] should actually be opposed to is anything that increases the error in the economy, a pricing information error. So pricing carbon, if you believe in global warming, does not increase the price of the error it decreases the price of the error.

Spillman tweeted these remarks, and Musk retweeted his approval:

Whether or not you identify as libertarian, you should savor Musk’s bracing clarity on (and for) carbon taxing. Maybe in time, other solar and wind advocates will bolster their customary pleading for subsidies with their own clarion call for carbon taxing.

Addendum, Nov. 2, 2016: Musk did a star turn in support of carbon taxes in the Leonardo DiCaprio climate docu, Before The Flood. This transcript is courtesy of EcoWatch. The film is up on YouTube through Nov. 6. Afterwards, only in theaters.

DiCaprio is in the Nevadan desert visiting the “gigafactory,” the latest project of Tesla founder Elon Musk. Once at full operation by 2020, the vast factory aims to be producing annually 500,000 electric vehicles and batteries/cells equal to 85 GWh/yr. Musk explains why this could be a game-changer:

Elon Musk: What would it take to transition the whole world to sustainable energy? What kind of throughput would you actually need? You need a hundred gigafactories.

Leonardo DiCaprio: A hundred of these?

Elon Musk: A hundred. Yes.

Leonardo DiCaprio: That would make the United States…

Elon Musk: No, the whole world.

Leonardo DiCaprio: The whole world?!

Elon Musk: The whole world.

Leonardo DiCaprio: That’s it?! That sounds manageable.

Elon Musk: If all the big companies do this then we can accelerate the transition and if governments can set the rules in favour of sustainable energy, then we can get there really quickly. But it’s really fundamental: unless they put a price on carbon…

Leonardo DiCaprio: … Then we are never going to be able to make the transition in time, right?

Elon Musk: Only way to do that is through a carbon tax.

Can These Ads Get Republicans to Act on Climate?

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The curtain is up on a series of pro-climate action ads in that climate-denialist stronghold, the Wall Street Journal editorial page. Four ads are up, with eight more to follow by mid-July, produced and paid for by the center-right advocacy group, Partnership for Responsible Growth.

A good deal of craft has gone into the ads, along with a bundle of money — that space doesn’t come cheap. It’s fair to ask what the payoff might be.

Climate ads in the WSJ. Four down, eight to come.

Four ads are up, eight are coming soon. Click the link in the top line of this post to read them without squinting.

Presumably, the objective is to help induce a critical mass of G.O.P. Congressmembers to support meaningful carbon-pricing legislation, before it’s too late. A president alone can’t implement economy-wide carbon pricing, and barring a broad leftward upheaval in November, at least one chamber in the next Congress will still be Republican.

Getting a few dozen Republicans to break ranks and support a carbon tax would overcome the House Republican bias baked into the electoral math. A bipartisan bill would also give cover to Democratic Senators and Reps from coal states and exurban counties — there are still some left — whose votes would be needed as well.

Of course, that’s been the situation since the G.O.P. took the House in 2010. Cynics who pronounced carbon taxing dead under a Republican Congress have been proven right — thus far. Yet some facts are changing, and not just in the air, with global-average temperature records breaking monthly. Solar and wind electricity in the U.S. now generate more than twice the electricity, jobs and dollars they produced half-a-dozen years ago, with much of that in red states. A low-carbon or even zero-carbon world can’t be written off as a pipe dream.

Those are political facts. Interestingly, three of the four Journal ads thus far are limited to scientific ones: “Carbon Dioxide Traps Heat On Earth,” proclaims Ad #2. “The Earth Has Warmed And We Did It,” says #3, followed by #4, “What Goes Up Doesn’t Come Down.”

True, the emphasis will change if, as we hope, the series builds to a call for a briskly rising (and revenue-neutral) carbon tax. If so, the initial ads will have been conversation-starters. That would be fine, ordinarily. But while we were taking notice of the ads, the July Harper’s arrived, with a provocative essay by the activist-writer Rebecca Solnit that makes one ask if the series ventured off on a good foot.

Solnit’s essay, The Ideology of Isolation, is an unflinching critique of extreme right-wing thought. It begins:

If you boil the strange soup of contemporary right-wing ideology down to a sort of bouillon cube, you find the idea that things are not connected to other things, that people are not connected to other people, and that they are all better off unconnected. The core values are individual freedom and individual responsibility: yourself for yourself on your own.

Any student of ecology, or anyone with a passing acquaintance with John Muir, the 19th century explorer-mountaineer-naturalist who founded the Sierra Club, can see where Solnit is going: the ideology that insists we’re not connected to each other, save for a contingent series of market interactions, is the same ideology that denies the interconnections that make up ecosystems and indeed the physical world.

Muir’s glittering aphorism, “When we try to pick out anything by itself, we find it hitched to everything else in the universe,” demands we pay attention not just to flora and fauna but to the megatons of heat-trapping gases we’ve been sending skyward since the dawn of the Industrial Revolution. In contrast, the right-wing ideology of disconnection doesn’t just give us license to ignore our effluent, it practically requires that we do so. Solnit again:

On a more fundamental level, the very idea of climate change is offensive to isolationists, because it tells us more powerfully and urgently than anything ever has that everything is connected, that nothing exists in isolation. What comes out of your tailpipe or your smokestack or your leaky fracking site contributes to the changing mix of the atmosphere, where carbon dioxide and other greenhouse gases cause the earth to retain more of the heat that comes from the sun, which doesn’t just result in what we used to call global warming, but will lead to climate chaos.

The central meme in ad #2, that the greenhouse effect “isn’t a left or a right issue, it’s science,” may be sweetly reasonable, but the reader has to believe in science in the first place. As Solnit notes,

If you begin by denying social and ecological systems, then you end in denying the reality of facts, which are after all part of a network of systematic relationships between language, physical reality, and the record, regulated by the rules of evidence, truth, grammar, word meaning, and so forth. You deny the relationship between cause and effect, evidence and conclusion, or rather you imagine both as products on the free market, which one can produce and consume according to one’s preferences.

"When we try to pick out anything by itself, we find it hitched to everything else in the universe."

“When we try to pick out anything by itself, we find it hitched to everything else in the universe.”

And if those preferences are for the riches and influence that come from owning and exploiting fossil fuels, the resulting facts and science won’t lead ineluctably to the position that climate change is real, occurring and principally man-made. In that scenario, the Partnership’s carefully crafted ads may simply bounce off Journal readers and fall harmlessly to the ground.

To be sure, a campaign as professional as the Partnership’s Journal ads isn’t necessarily seeking to change minds through education. The mere fact of the ads — the idea that Republican backers and lawmakers are being addressed on climate from the center-right — is at least as likely to move the political needle as the logical thread in the text.

All the same, there’s another scenario kicking inside the Beltway — we heard talk of it in DC this month — that suggests that a healthy if not House-regaining shellacking by the Democrats will compel the G.O.P. to finally divest itself of its anti-science brand; and that accepting the reality of climate change and a “Republican solution” in the form of a carbon tax could be part of that reformation.

That scenario might have pointed to a more overtly political approach, though that may be where the Partnership’s series is headed. Meanwhile, the initial set may be viewed here. What do you think?

What the Sanders-Clinton Clash over a Carbon Tax Says about Democrats and Climate Change

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To grasp how deep the fault line now runs through the Democratic Party and between its presidential candidates, look no further than the exchange between Bernie Sanders and Hillary Clinton over a carbon tax in Thursday night’s debate:

SANDERS: I am proud that I have introduced the most comprehensive climate change legislation, including a tax on carbon. Something I don’t believe Secretary Clinton supports.

MODERATOR (to Clinton): Go ahead and respond.

CLINTON: Well, I’m a little bewildered about how to respond when you have an agreement which gives you the framework to actually take the action that would have only come about because in the face of implacable hostility from the Republicans in Congress, President Obama moved forward on gas mileage, he moved forward on the Clean Power Plan. He has moved forward on so many of the fronts that he could, given the executive actions that he was able to take.

And, you know, I am getting a little bit concerned here because I really believe that the President has done an incredible job against great odds and deserves to be supported.

SANDERS: All right, here is — here is a real difference. This is a difference between understanding that we have a crisis of historical consequence here, and incrementalism and those little steps are not enough.

bernie debate carbon tax challenge to Hillary _ 14 April 2016Not right now. Not on climate change. Now, the truth is, we have got to tell the fossil fuel industry that their short-term profits are not more important than the future of this planet. And that means — and I would ask you to respond. Are you in favor of a tax on carbon so that we can transit away from fossil fuel to energy efficiency and sustainable energy at the level and speed we need to do?

CLINTON: You know, I have laid out a set of actions that build on what President Obama was able to accomplish, building on the Clean Power Plan, which is currently under attack by fossil fuels and the Right in the Supreme Court, which is one of the reasons why we need to get the Supreme Court justice that President Obama has nominated to be confirmed so that we can actually continue to make progress.

I don’t take a back seat to your legislation that you’ve introduced that you haven’t been able to get passed. I want to do what we can do to actually make progress in dealing with the crisis. That’s exactly what I have proposed.

And my approach I think is going to get us there faster without tying us up into political knots with a Congress that still would not support what you are proposing.

To be clear, what bewilders Secretary Clinton is not a carbon tax, but, as she said, “how to respond.” As a policy wonk par excellence, Clinton almost certainly knows the power of a carbon tax very well.

Clinton probably grasps that taxing carbon emissions cuts to the heart of the climate issue by rewarding each and every step that reduces use of carbon fuels; that it harnesses the power of the market — the market! — to spur innovation and investment in clean energy; and that it makes climate polluters pay and diminishes their political power, thus helping untie the political knots she professes to decry.

But cutting to the essence on climate or virtually any other issue, and heeding the political groundswell demanding bold action, just doesn’t seem to be in her DNA, not to mention the DNA of the wing of the Democratic Party that her husband enshrined during his presidency.

The charitable interpretation is that Clinton is wisely refraining from saddling herself with a position that the Republican Party can use to attack her between now and November — as a tax-and-spend Democrat who will damage the middle class. And indeed, a carbon tax is so revolutionary as well as sensible and necessary that Clinton, in stark contrast to Sanders, would likely have a hard time not just defending but championing it against the Republican nominee.

Instead, she would fall back, as she did Thursday evening in Brooklyn, on gasoline mileage and the Clean Power Plan — measures that, as we have explained here ad nauseam, are fine so far as they go, which, alas, isn’t very far. The Clean Power Plan, we pointed out nearly two years ago, merely requires electric power generators (which by now barely account for a third of U.S. climate pollution) to switch from coal to gas and add wind and solar generation at a far lesser rate than they’ve been doing for a decade. As for the vaunted increase in vehicle miles per gallon, it is already being badly eroded by near-record-cheap gasoline, much of it enabled by the explosive rise in U.S. fracking that Clinton supports (and Sanders opposes). [NB: Link in preceding sentence was added in June 2016.]

It’s not that Obama’s actions that Clinton has latched on to aren’t useful. Rather, they don’t go nearly far enough. As Sanders pointed out, “we have a crisis of historical consequence here, and incrementalism and those little steps are not enough.” Nor do they create a policy template for the rest of the world. Outside of Western Europe and perhaps Japan, no other countries possess the bureaucratic machinery to administer the stupendously complex regulations that Clinton touted Thursday evening, and which apparently constitute the limits of her climate vision. While a carbon tax brings its own challenges of transparency and accountability, those now appear manageable in the wake of the Paris climate accord, to which nearly two hundred nations will formally commit at the UN this coming Friday.

To be clear, Clinton is correct that President Obama has accomplished — through creative and steadfast presidential fiat — most of what was possible in the face of implacable Republican opposition. But were she to be honest with herself, she would admit that it’s not nearly enough, especially with emerging revelations leading Scientists [To] Warn of Climate Peril Within Decades, Not Centuries, as the New York Times put it last month.

And were Clinton to seek to inspire Democratic voters, and indeed, the clear majority of Americans who have come to support carbon taxes, provided they’re made economically fair,  she wouldn’t be ducking Sanders’ (and the moderator’s) questions about them. She would be vying with Sanders to see who can fashion the most effective and appealing carbon tax and who can best persuade the American people to demand Congress pass it.

China Emissions Will Peak Soon (If They Haven’t Already): New Study

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

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

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

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

China's 2030 CO2 emissions would be 7% less than 2015, under the Green-Stern "illustrative scenario."

China’s 2030 CO2 emissions would be 7% less than 2015, under the Green-Stern “illustrative scenario.”

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

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

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

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

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

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

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

Figures in table underlie the historical and forecast CO2 in graph, above.

Figures in table underlie historical and forecast CO2 in graph, above.

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

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

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

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

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

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