The Failure of Carbon Pricing
September 24, 2007 |
Today Reuters did a very good piece about the failure of carbon prices to affect action on global warming. Coming out of Reuters' London Bureau:
LONDON (Reuters) - The battle to beat climate change has come down to one weapon -- the price of carbon. And analysts say it is not working.
Much lip service has been paid to cutting climate warming carbon emissions through measures such as improved energy efficiency, technological innovation, reduced demand, higher standards and carbon output restrictions.
But in most cases the vital incentive is supposed to be provided by achieving a high price for carbon, from which all else would follow. Neither has happened and time is running out.
Comments
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By comment 1 on 2012 09 12
Where I see things headed is a more sustainable civilization that can meet the needs of future generations. Our ability to control emissions and clean up the environment is based on having greater access to lower polluting energy sources rather than some idyllic lifestyle. Advanced energy sources such as nuclear fusion (even the controversial nuclear fission) would allow greater opportunities to clean up the environment while meeting human needs across the globe.
By R Margolis on 2009 06 04
Robert,
You are pointing to an interesting ethical problem. Humans are blessed and cursed with a limited-but-functional ability to see and comprehend the potential for endgame, be it climate change, overpopulation, other environmental mess, etc... and this capacity to see large-scale endgame increases as the time devoted to daily survival decreases.
It's obviously a good idea to care about the Endgame... but how do humans ethically limit other humans' energy consumption? It's one thing when it's intercultural... but how do you tell some other culture that what your culture has been doing for a long time is wrong?
Do you have the right to tell someone living a developing world existence that their way of life is "saner" than yours? Does that romantic idea remain somehow relevant even when disease, shorter life span and all the other grinding realities of poverty are accounted for?
How much control do we have over this larger Endgame Problem, and what do we have to give up (like the idea that all humans are basically equal, for instance) to have the kind of control you want to have?
Is there a way to think about this Endgame without prescribing permanent poverty for a huge chunk of the world?
By Deborah Fisher on 2009 05 31
Don't you ever worry where it's all heading? If we really did have access to limitless clean energy we would inevitably use that energy to ramp up population and completely trash the environment. About the only think keeping us in check is the fact that energy IS limited. Implicit in your last post is the suggestion that "much of the world" should adopt the high-consumption lifestyle of the rich West.
In my view we should be trying to gently back away from the obsessive growth mentality and return to a saner way of life. So would this be a good thing if it works?
http://www.guardian.co.uk/environment/2009/may/28/national-ignition-facility-fusion-energy
By Robert on 2009 05 29
For much of the world that has no electricity, conservation is not an option (i.e., cannot conserve when already at zero). Even in the developed world, energy sources such as wood simply will not provide enough energy to replace fossil fuels. Solar and wind require cheap energy storage technologies to avoid the double trap of paying for a part-time energy source and and part-time storage unit. We need energy sources that are cleaner, yet still abundant and reliable.
By R Margolis on 2009 05 28
R Margolis - It's a question of where you start. If the market can be rigged through caps, tax or whatever to favour clean energy sources then the technology will optimise over time though the normal workings of the market. Also, there is an enormous amount that can be achieved through conservation. We have halved our domestic energy bills in the last 3 years without any impact on standard of living (and it keeps me fit collecting wood for the log burner!).
At the moment it is a mug's game trying to harvest clean energy when there is all that nearly free dirty energy just waiting to be dug up. The externalised costs need to be internalised.
By Robert on 2009 05 27
Even if you could accomplish the political miracle of getting acceptance of high carbon prices, there is no easy, off the shelf, renewable energy technology that can replace coal and natural gas. Energy storage technologies of this scale to balance renewables simply do not exist. You need to at least have a path to the technology before you can transition the economy.
As for the steady state economy/population, it will still require a good deal of energy to maintain standard of living. Even if population is frozen at the current number, increases in energy will be required to alleviate poverty and provide basic health and economic services.
By R Margolis on 2009 05 27
Michael Shellenberger and Ted Nordhaus do not impress me. Anyone who preaches perpetual economic growth is seriously out of touch with reality.
The economy will stop growing. The human population will also stop growing.
These must occur by necessity and no amount of conservatives trashing the planet for the economy;s sake will prevent it from occurring.
There is a natural life cycle for civilizations. You may have noticed that the Roman Empire, British Empire and Soviet Union no longer exist. Nothing lasts forver.
If anyone imagines that Global Technological Civilization will last forever that person is delusional and has probably swallowed the lies of the economists.
Our civilization is already dying. The death of technological civilization has already become evident in a thousand different ways.
Yet these two fools claim that the economy must keep growing forever and that humans should care more about the economy than anything else.
Humans should keep in mind that Homo sapiens can go extinct. The economy won't mean much when humankind is extinct.
Instead of worrying about the economy, humankind really should worry about survival.
By David Mathews on 2009 05 27
Tom, we're trying to expand the discussion and illuminate the bill's weaknesses so that climate legislation can be strengthened. That's why we've made all our analysis open and transparent and highlighted the most critical areas for improvement.
By Teryn Norris on 2009 05 26
I think it may be a little disingenuous to claim Romm is "trying to shut down debate" on Waxman-Markey - any more than BI is.
By Tom Schueneman on 2009 05 26
Personally, I think the only policy that can ultimately work is to place a global cap on the amount of coal, oil and gas that is extracted each year, then reduce this cap by an agreed percentage each year with the objective of leaving as much as possible permanently in the ground. That is pretty much what Hansen is saying (although he focusses mainly on just coal). Market forces are incredibly powerful. Faced with this new world shortage of fossil fuel they would rapidly find an optimum mix of new energy sources and conservation so that business could continue without undue interruption.
Politically such a global carbon-capping scheme is just not possible at the moment, but this could change quickly as new climate-related natural disasters occur.
I don't think Waxman-Markey will have any effect whatsoever on US emissions and definitely not on global emissions. I am deeply sceptical of any piece of legislation as complex as W-M, but equally I don't think a simple carbon tax would work either - how would you stop the revenue being funnelled into carbon-intensive public sector projects? In the meantime W-M gives the impression of taking the problem seriously but in reality just kicks it into the long grass for another 20 years.
TBI's idea that some technological breakthrough will make clean energy cheaper than fossil fuel energy is nice, but in my view a long-shot. Definitely worth major investment, but don't rely on it coming up with the solution. Worse still, even if clean energy can be made cheaply there is every reason to expect all available reserves of coal, oil and gas will be extracted anyway - liquid fuels are useful for aviation and a host of other applications not easily addressed by cheap, clean electricity.
Political will is the key. If coal was viewed with the same abhorrance as asbestos then it would be banned overnight.
By Robert on 2009 05 26
I too have had my comments critical of cap-and-trade deleted at Climate Progress. But I commend Joe Romm for maintaining that very informative site which has served as a useful forum for technical and political discussions. I hope he will continue that good work after ending his role as a spear-carrier for policies he initially opposed.
Thanks to Roger Pielke, Jr. for refreshing our memory.
The climate progress we need ultimately must come from technical progress, so how does Waxman-Markey help there? Not much. The best its advocates can say is that it is a first step, and that even a flawed bill is better than doing nothing.
The price per ton of CO2 is ridiculously small, and big emitters don't even pay anything for most of their indulgences. Europe has shown that cap-and-trade does not reduce emissions. And what happens to the auction money? What is expected to go to clean tech research and deployment will go instead to health care. http://thehill.com/leading-the-news/conrad-open-to-energy-taxes-for-healthcare-reform-2009-03-29.html
And then there is the "trade" part of cap-and-trade: a new junk market for Wall Street to scam with, using tree offsets. Who will guarantee that these trees are thriving, how will we keep them watered during a worldwide drought when our own forests are drying up and burning, and how will anyone know what these traded offsets are really worth? Both in origination and in risk packaging, there is ample latitude for fraud, just as there was with mortgage-backed securities.
Looks like the environmentalists supporting the Democrats have been played for fools. This will dampen enthusiasm for the next steps we need, and ultimately must hurt President Obama.
By Wilmot McCutchen on 2009 05 25
Waxman has a clip on you tube floating around where he admits he has not read the bill. Jowe Romm most like also has not.
our constitution still denies taxation without representation. If there are penalties and tax components, don't we have the right to know?
By seven on 2009 05 25
I have been reading ClimateProgress for over a year. It's entertaining and topical, but I agree with all your critisisms of Romm. He shuts down debate with anyone who disagrees with him in even the slightest detail.
I have now been moderated to death and then banned twice on his blog. If you read the comments that survive they are now all of the "Joe
you're a fantastic guy I want to have your babies keep up the good work" variety.
By Robert on 2009 05 24
I'll have to agree with Romm on the need for high carbon pricing to effect real change, assuming that exacting equitable compensation for the externalized but very real costs of fossil fuel use is "high".
Unless and until market signals functionally reflect real ecological and social costs, markets will be the problem, not the solution.
But cap and trade does indeed risk smoke and mirrors, and other political and corporate shenanigans.
A carbon tax, though, will do nicely. Hasn't been successfully done before? Neither has any new policy implementation, until it has. Folks in the pre-world war II 20th century would have thought the endangered species act or the creation of the EPA to be pipe dreams.
By theCascadian on 2009 05 24
Here are some quotes from Romm:
On the use of offsets generally:
"Q: What is the difference between carbon offsets and mortgage-backed securites?
A: Lipstick.
Carbon offsets and mortgage-backed securities are quite similar in that is impossible for the vast majority of people, even experts, to know what value they have, if any."
http://climateprogress.org/2008/10/02/q-what-is-the-difference-between-carbon-offsets-and-mortgage-backed-securites/
On the use of offsets in last year's Lieberman-Warner bill:
"Now when I redo the math, it seems the most likely outcome of this bill is that U.S. energy-related CO2 emissions in 2025 would we about the same as they are now, and possibly higher. If that's the best we can do for a piece of legislation that's deader than a dead parrot -- it is a dead parrot whose body has been given to a veterinary anatomy class for dissection and had its heart removed -- why bother?"
http://climateprogress.org/2008/05/27/boxer-bill-update-probably-no-us-co2-emissions-cut-until-after-2025/
On the USCAP proposal:
"The USCAP plan would call for a reduction of 1.0 to 1.4 billion tons of U.S. GHGs in 2020, while allowing 2 billion or more tons of offsets, at least half of which don't even have to be in this country. When would US carbon dioxide emissions see serious reductions under this plan? Who knows?"
http://climateprogress.org/2009/01/15/nrdc-edf-uscap-us-climate-action-partnership-plan-coal-offset/
And on forestry:
"Offset projects should simply not include tree planting."
http://www.grist.org/article/the-first-rule-of-carbon-offsets-no-trees
On an earlier McCain plan:
"If emissions reductions can be done through a rigorous and verifiable process, then they can and should be included in the overall cap. The probability that there are offset-like emissions reductions floating around the ether that are both abundant and cheap is quite small. That is why a major offset-based strategy would "involve substantial issuance of credits that do not represent real emissions reductions," as the Stanford study concluded. That report's policy conclusion:
*****We argue that the U.S., which is in the midst of designing a national regulatory system, should not rely on offsets to provide a reliable ceiling on compliance costs....
Offsets can play a role in engaging developing countries, but only as one small element in a portfolio of strategies.... *****
The entire foundation of McCain's climate plan is built on quicksand."
http://www.huffingtonpost.com/joseph-romm/mccain-climate-plan-a-fra_b_101390.html
On the use of offsets in cap and trade:
"Let's hope Congress actually listens to GAO and sharply scales back the use of offsets in future climate bills."
http://climateprogress.org/2008/12/05/gao-rips-rip-offsets-the-use-of-carbon-offsets-in-a-cap-and-trade-system-can-undermine-the-systems-integrity/
By Roger Pielke, Jr. on 2009 05 23
Amen to: "More money for R&D must be accompanied by a complementary set of policies, perceived as predictably stable for the foreseeable future, to pull new technologies into applications and the marketplace on the vast scale needed to make a difference for greenhouse gas emissions." A mission-driven approach to research is what is needed. Pure science dawdling in such areas as hot fusion, particle physics, string theory, exotic catalyst materials, etc. will do no good. So what is the mission? Lots of confusion on that point. I propose: scalable post-combustion CO2 capture and conversion, retrofittable to existing pulverized coal power plants.
By Wilmot McCutchen on 2009 04 11
One of the most talked issues today is about financial crisis. Everything is affected by this not only the situation of every citizen but also the situation of the environment. When the drift was first spotted in the early 1980s, it stirred only academic interest. But this year, as more economists and politicians began to take note of it. The great American middle class is no longer so great. It is shrinking steadily, goes the theory, and shedding its members into the economic extremes of wealth and poverty. Borrowers of payday loans just don't live up to the stereotype of them
By Payday Loan on 2009 02 05
Thanks again, Ted. I think we may benefit by focusing on areas of agreement. I think economists generally feel that significant increases in R&D are needed. That
By Dan Kirshner on 2009 01 18
Great piece. "Innovation is a Darwinian process of idea generation and selection." But like Victor Hwang, I am concerned about the basis for selection when it occurs solely in the private sector. We need a long horizon, as Alic seems to agree, but you don't get that in the private sector. But I take your point about the Pentagon brass being the client and selectors for Defense R&D. Still I can see a New Energy consensus similar to the Defense consensus, it's just that it won't necessarily be about climate change. A lot of it will be about national security and economic revitalization. Steve Chu would seem to be the right man to preside over the R&D selectors in DOE.
By mark braly on 2009 01 04
Revenue recycling has become the last refuge of carbon pricing advocates. But it will not resolve the constraints in the political economy that proponents believe it will. There are huge regional equity issues that confound virtually any simple revenue recycling scheme. Moreover, the public isn't buying what revenue recycling proponents are selling. They are quite certain that revenue recycling policies will raise their energy prices and highly skeptical that they will ever actually see the money. Moreover, most don't want the money, don't support the creation of a new national entitlement program, and, by significant margins, would prefer to see any money raised from carbon regulation invested in clean energy RD&D. The notion that revenue recycling will pave the way to sustained political acceptance of high carbon prices is fantasy. The way forward is to design policy that can get us where we need to go with a low and transparent price for carbon. That is why public innovation policy is so critical and central to any serious plan to achieve deep reductions in carbon emissions.
By Ted Nordhaus on 2009 01 02
Thanks, Ted. I think you've identified the key issue on pricing, namely, what is "conceivable politically"? But this can't be separated from the issue of "how much does it cost?" Obviously, if the money is spent on useless things, it's costly. Just a 50-cents-a-gallon petroleum tax (let alone coal, etc.) would raise about $150 billion per year -- five times the clean-energy Apollo project proposed in Breakthrough! But consider NOT spending the money -- which is the option most economists discuss. A simple version is: just return all the revenues to U.S. citizens on an equal-per-person basis, just like Alaska does with its pipeline revenues. Now it "costs" almost nothing. Do you agree?
By Dan Kirshner on 2009 01 01
Nice to hear from you Dan. I trust the "ideological discipline" crack was meant ironically. In the course of putting together this special issue, our intention was to provide a range of views, reflecting a diversity of expertise, on what will be necessary to spur the scale of energy innovation we need. We have invited quite a few folks who are carbon tax advocates to weigh in on the Breakthrough blog and will continue to do so. We will also continue to point out that no carbon price, at least none that is even remotely conceivable politically, will do what pricing advocates purport it will do, namely drive radical innovation and broad deployment of clean energy technology. A modest carbon price will pull the technologies we need the last few yards into the market but will not drive the dramatic improvements in cost and performance that will be necessary to get to that point.
By Ted Nordhaus on 2008 12 30
How can you allow this post? I just read Adam Zemel's post (http://thebreakthrough.org/blog/2008/12/the_times_it_is_achangin.shtml) in which he concludes "it is hard not to see the carbon pricing paradigm collapsing on all fronts."
And you let this guy say "Energy R&D without a carbon tax will fritter money away." Where's your ideological discipline?
By Dan Kirshner on 2008 12 30
Very interesting piece. It is also good to hear that John Alic is still active in technology assessment.
By R Margolis on 2008 12 23
There is a large movement that would rather "would rather discredit than discuss" any questioning of the dogma that 'there is global warming which will be catastrophic and is caused only by greenhouse gases which must be controlled by the Kyoto approach.' These climate jihadis are not going to brook any dispute from deniers or from you.
BTW, if you are going to complain about smear tactics, you might reconsider using the term "deniers," which is certainly pejorative and arguably incorrect.
By Robert L. on 2008 04 09