CS3 In the News
By Justin Gillis
I would guess a few Green readers had the experience, over the holidays, of arguing yet again about global warming with a parent or brother-in-law who thinks it’s all a big hoax. Maybe there’s some undiscovered substance in roast turkey that makes people want to pick fights around the dinner table.
Fortunately, the M.I.T. climate scientist Kerry Emanuel has provided us with a solution to this problem: an updated edition of “What We Know About Climate Change,” his 2007 book explaining the science of global warming.
I’m happy to report that the new edition of this slender volume is an improvement — perhaps even the single best thing written about climate change for a general audience. It is a little longer than the first edition, 93 pages instead of 85, but it’s still an easy read — most people will get through it in a single sitting.
The new version updates the science to the latest numbers, of course, but it also adds a couple of chapters about the potential solutions to climate change and the bizarre politics that have cropped up around it in recent years.
The book is dead accurate, not only presenting scientifically what we know, but also leveling with readers about what we don’t. It conveys the risks posed by that ignorance. Yet Dr. Emanuel manages to keep the language so taut and simple that nobody is likely to be intimidated by the book or to feel put out at being asked to read it.
The point, he said in an interview, is to give people some ammunition when they encounter the kind of contrarianism about climate change that has become pervasive in the United States.
“Young adults who are disputing this problem with their own parents or an uncle or something — they can hand the book to them and say, ‘Will you at least read this?’ ” Dr. Emanuel said. “One at a time, you might change minds.”
The book is officially scheduled for publication on Tuesday, by M.I.T. Press, but it has long since moved into retail channels and is widely available in hardcover for $11. At Dr. Emanuel’s behest, the publisher set an especially low price, $7.50, for the digital edition.
He does not talk much about this in the book, but for anybody who plans to give it to a political conservative, it might be worth pointing out to them that Dr. Emanuel spent most of his adult life as a registered Republican. He changed his registration to independent recently, but he told me that his convictions have not shifted much — he was driven out of the Republican Party by its embrace of global warming skepticism, among other recent positions.
“I came of age in the 1960s and ’70s,” Dr. Emanuel said. “A lot of what was actually going wrong in the country was because of rigid ideology, and a lot of what I considered rigid ideology was on the left. Now I think it’s the right that’s guilty of that, that’s really gone off on this ideological tangent.”
Conservatives will find a few points in the book that especially resonate. For instance, while Dr. Emanuel assails the irrationality of dismissing an entire branch of science as some kind of elaborate hoax — many Republicans have done lately — as he also takes green groups to task on certain points, including their skepticism about nuclear power.
He sees nuclear energy as one of the few ways to reduce carbon dioxide emissions, which contribute to global warming, on a large scale. And he is doubtful that renewable energy sources like wind and solar power can be ramped up fast enough to meet the challenge.
If Dr. Emanuel has been talking about his politics more lately, so have some of his colleagues, like Richard Alley of Penn State, one of the country’s most notable explainers of climate science, who describes himself as a churchgoing Republican.
These scientists are hoping that their conservative credentials will help open some otherwise closed minds, but their ultimate point is that the science itself has nothing to do with politics — and everything to do with physics.
Get the inside scoop and follow LIVE reports from Geneva by twitter and blog.
Ten MIT students are having an experience of a lifetime as they join officials from around the world for the fifth and final meeting to address global controls on mercury – taking place January 13-18 in Geneva, Switzerland. It is expected that a global treaty on mercury will be finalized during the talks.
Funded through part of a U.S. National Science Foundation grant, the students hope to help negotiators by presenting the latest scientific results (See more).
The students will be reporting on the progress of the talks and their experiences on their blog. Keep updated on the day-to-day action: mit.edu/mercurypolicy.
They’ll also be tweeting LIVE from Geneva. Follow them @MITMercury, #MITMercury.
They are joined by their instructor Noelle Selin, an assistant professor of engineering systems and atmospheric chemistry. Of the experience, Selin says: “Knowledge about the policy-making process is a critical skill for the next generation of scientists. This is a unique opportunity for science students to see treaty-making firsthand, at the history-making session that is expected to finalize a global mercury treaty.”
Student Leah Stokes, a PhD candidate in MIT’s Environmental Policy and Planning program says, "Attending the mercury treaty negotiations is a rare chance to see international environmental policy-making in action and learn how scientists and policymakers work together to produce results.”
Fellow student Julie van der Hoop, who is getting her doctorate in the MIT/WHOI Joint Program in Oceanography, adds, "As a doctoral student who studies human interactions with marine mammals, I’m excited to observe the role of scientists at these negotiations to learn how to best share my own research in the future. It's forums like this where I hope my work will have an impact someday. “
The other students attending include: Alice Alpert, PhD student in the MIT/WHOI Joint Program in Oceanography; Ellen Czaika, PhD candidate in the Engineering Systems Division; Bethanie Edwards, PhD student in the MIT/WHOI Joint Program in Oceanography; Amanda Giang, SM candidate in the Technology and Policy Program; Danya Rumore, PhD student in Environmental Policy and Planning; Rebecca Saari, PhD Candidate in Engineering Systems; Mark Staples, SM candidate in the Technology and Policy Program; and Philip Wolfe, PhD Candidate in the Department of Aeronautics and Astronautics. Learn more about the students and their instructor Noelle Selin Here.
Learn about the latest mercury research out of MIT: Strategies to Reduce Mercury Revealed Ahead of International Talks.
A Win for Energy and America
By John Reilly
THE NEW - STILL DIVIDED - CONGRESS reconvenes this month, and its first order of business is the looming federal deficit. The president made his desires clear in his victory speech: "We want our children to live in an America that isn't burdened by debt . that isn't threatened by the destructive power of a warming planet." Meanwhile, congressional leaders recognize the need for compromise.
Some suggest that closing the deficit would require both budget cuts and increased revenue. The riddle in any tax reform is the need to reduce the tax burdens on wage earners and investors, while generating revenue for essential government services. A carbon tax might answer this riddle. It could help avoid some tax hikes and spending cuts, while stimulating the economy, securing America's energy future, and giving utilities and energy companies greater certainty.
The Congressional Budget Office found that a tax on carbon dioxide, starting at $20 per ton, could raise $1.25 trillion over the next decade. Our research puts those numbers higher - at $1.5 trillion - while cutting emissions by more than 20 percent by 2050. With the money raised, Congress could maintain income tax cuts and avoid serious cuts to social programs.
Lowering taxes and maintaining funding for social programs would give Americans more money to spend, boosting the economy. This is particularly true in the short term, if tax cuts and spending are skewed toward lower income households, which spend more of their income, stimulating weak consumer demand. On the other hand, cutting these programs and raising other taxes would drag down our economy, so much so that the loss would more than offset the cost of a carbon tax.
When it comes to the pure economics, a carbon tax makes the most sense. But what is a win for our economy is also a win for the energy industry. For years, many in the industry have called for a clear, market-based approach to secure America's energy future. Instead, they've received mixed signals and patchwork regulations. Meanwhile, narrow tax incentives have allowed the government - not the market -to choose winners and losers. This approach has been inefficient and ineffective.
A carbon tax, if part of broad tax reform, could bring an end to this approach, providing certainty to utilities and energy companies and allowing these businesses to make the investments needed to usher in America's clean, prosperous and secure energy future. A carbon tax would provide a clear market signal for U.S. businesses and consumers, giving them the flexibility to choose technologies that save energy and money, boosting sales of more fuel-efficient cars and other goods. With greater efficiency, fuel and energy costs could actually go down - not up - as the U.S. economy turns from spending and borrowing to saving and investing in our future.
Partisan gridlock and the political fear of anything labeled a "tax" may make this sensible solution seem impossible. But because it makes the most economic sense, it is receiving support from both sides of the aisle.
As the chairman of President George W. Bush's Council of Economic Advisers, Greg Mankiw, has said, "Economists have long understood that the key to smart environmental policy is aligning private incentives with true social costs and benefits. That means putting a price on carbon emissions, so households and firms will have good reason to reduce their use of fossil fuels and to develop alternative energy sources." There are usually hefty trade-offs and hard-set winners and losers in politics. This time, that doesn't have to be the case.
By: Kate Galbraith
AUSTIN, TEXAS — The harm that can be caused by consuming or breathing mercury is well known and terrible. A pregnant woman, eating too much of the wrong kind of fish, risks bearing a child with neurological damage. Adults or children exposed to mercury can experience mood swings or tremors, or sometimes even respiratory failure or death.
In January, representatives of dozens of countries will gather in Geneva to discuss combating mercury emissions, which are rising in Asia even as Europe and the United States have tightened controls. The meeting is the last of five negotiating rounds — the first took place in 2010 in Stockholm — and a legally binding treaty on mercury contamination is expected to come together next year.
The signing of that treaty is set to take place in the Japanese city of Minamata, where widespread mercury poisoning occurred in the mid-20th century after discharges from a factory contaminated the seawater.
But the extent to which countries will commit to reducing mercury, and whether they will follow through on those commitments, are open questions.
“What remains to be seen is the stringency of the requirements,” said Noelle Eckley Selin, an assistant professor of engineering systems and atmospheric chemistry at the Massachusetts Institute of Technology.
The negotiations “appear to be going in the direction of voluntary compliance,” said Leonard Levin, an air quality specialist with the Electric Power Research Institute, a nonprofit organization with headquarters in Palo Alto, California.
The negotiations in Geneva are being conducted under the auspices of the U.N. Environment Program and are to be followed in the summer by a major conference on mercury in Edinburgh, where scientists and policy makers will discuss how to implement a treaty.
Roughly one-third of the world’s mercury air emissions come from human activity, like coal-fired power plants. Another third of emissions come from natural sources, like volcanoes or wildfires, and the final third are “re-emitted” after their initial release.
Within the human-generated category, Asia contributes nearly 50 percent of mercury emissions, with North America at 7 percent and Europe and North Africa at 12 percent combined, according to Jerry Lin, a professor of environmental engineering at Lamar University in Texas. In addition to coal-fired power plants, a major source of mercury emissions is small-scale gold mining. Miners working on their own often use mercury to help extract gold and then boil it off, leaving behind dangerous contamination.
The effects of mercury contamination are not limited to the local environment. Mercury finds its way into the sea, affecting fish like bluefin tuna, and airborne emissions can travel between continents.
“The mercury today will continue to circulate in the system for a long time,” Dr. Selin said. “We’re talking decades to centuries.” Methyl mercury, the toxic form, even poses a substantial problem for the Arctic, she said, because it can accumulate in polar bears and seals.
Meanwhile, research into the health consequences of mercury “has been finding adverse effects at lower and lower exposures,” Philippe Grandjean, chair of environmental medicine at the University of Southern Denmark, said in an e-mail. New research has found that some people may be more sensitive to the effects of mercury, he said, because of factors like genetics.
The European Union has moved aggressively to combat mercury exposure. A ban on mercury exports began in 2011, and the Union has issued rules on storing mercury and restrictions on some products containing mercury, like thermometers. It is currently considering additional rules on mercury in dental fillings and batteries.
Sweden has “been really out in front” on national mercury regulations, Dr. Selin said. The country banned mercury from dental fillings and other products several years ago.
Starting in January, the United States will ban the export of elemental mercury, whose uses include gold mining. (The ban covers the Department of Defense and the Department of Energy, which keep large stockpiles.) The new policy results from the Mercury Export Ban Act of 2008, which was introduced by two senators — including Barack Obama, who represented Illinois at the time — and was signed into law by President George W. Bush.
In another key mercury development, last year, the Environmental Protection Agency in the United States completed its first rule aimed at mercury emissions from coal plants. The effect on the power industry is unclear, however.
The mercury limits are “probably achievable for existing plants,” said Mr. Levin of the Electric Power Research Institute. Additional rules, not yet completed, would cover emissions from new coal plants, and their effect is still being evaluated, he said.
Other regulations in the United States have also affected coal plants. Controls required for pollutants like nitrogen oxide and sulfur dioxide can also reduce mercury emissions, as a “co-benefit.”
For China, which is building new coal-fired power plants at a rapid rate, such “co-benefits” could prove crucial, said Dr. Lin of Lamar University. That is because it would be economically difficult to control only for mercury.
By:Elizabeth Kolbert
It’s been almost a century since the British economist Arthur Pigou floated the idea that turned his name into an adjective. In “The Economics of Welfare,” published in 1920, Pigou pointed out that private investments often impose costs on other people. Consider this example: A man walks into a bar. He orders several rounds, downs them, and staggers out. The man has got plastered, the bar owner has got the man’s money, and the public will get stuck with the tab for the cops who have to fish the man out of the gutter. In Pigou’s honor, taxes that attempt to correct for this are known as Pigovian, or, if you prefer, Pigouvian (the spelling remains wobbly). Alcohol taxes are Pigovian; so are taxes on cigarettes. The idea is to incorporate into the cost of what might seem a purely personal choice the expenses it foists on the rest of society.
One way to think about global warming is as a vast, planet-wide Pigovian problem. In this case, the man pulls up to a gas pump. He sticks his BP or Sunoco card into the slot, fills up, and drives off. He’s got a full tank; the gas station and the oil company share in the profits. Meanwhile, the carbon that spills out of his tailpipe lingers in the atmosphere, trapping heat and contributing to higher sea levels. As the oceans rise, coastal roads erode, beachfront homes wash away, and, finally, major cities flood. Once again, it’s the public at large that gets left with the bill. The logical, which is to say the fair, way to address this situation would be to make the driver absorb the cost for his slice of the damage. This could be achieved by a new Pigovian tax, on carbon.
In the past several weeks, as New York and New Jersey have continued to dig out from under the debris left by Hurricane Sandy, the possibility of a carbon tax has come to seem more likely than ever, that is, not very likely, but also not entirely out of the question. The reason for this is not so much the terrible cost of the storm, now estimated at more than sixty billion dollars. (The other day, Governor Andrew Cuomo said that Sandy had caused forty-two billion dollars’ worth of damage in New York State alone.) It’s that, as Washington edges toward the fiscal cliff, it has become obvious to just about everyone, except maybe House Republicans, that Washington needs more revenue.
Not long ago, the Congressional Research Service reported that, over the next decade, a relatively modest carbon tax could cut the projected federal deficit in half. Such a tax would be imposed not just on gasoline but on all fossil fuels—from the coal used to generate electricity to the diesel used to run tractors—so it would affect the price of nearly everything, including food and manufactured goods. To counter its regressive effects, the tax could be used as a substitute for other, even more regressive taxes, or, alternatively, some of the proceeds could be returned to low-income families as rebates (although, of course, this would cut down on the amount that could go toward deficit reduction).
Shortly after the C.R.S. report came out, the conservative American Enterprise Institute teamed up with its liberal counterpart, the Brookings Institution, to host a seminar on the subject, a collaboration that prompted the Wall Street Journal’s Web site to declare, “CARBON TAX IDEA GAINS WONKISH ENERGY.” “I think the impossible may be moving to the inevitable without ever passing through the probable,” Bob Inglis, a former Republican representative from South Carolina and a carbon-tax backer, told the Associated Press.
Perhaps because a carbon tax makes so much sense—researchers at M.I.T. recently described it as a possible “win-win-win” response to several of the country’s most pressing problems—economists on both ends of the political spectrum have championed it. Liberals like Robert Frank, of Cornell, and Paul Krugman, of Princeton, support the idea, as do conservatives like Gary Becker, at the University of Chicago, and Greg Mankiw, of Harvard. (Mankiw, who served as chairman of the Council of Economic Advisers under President George W. Bush and as an adviser to Mitt Romney, is the founding member of what he calls the Pigou Club.) A few weeks ago, more than a hundred major corporations, including Royal Dutch Shell and Unilever, issued a joint statement calling on lawmakers around the globe to impose a “clear, transparent and unambiguous price on carbon emissions,” which, while not an explicit endorsement of a carbon tax, certainly comes close. Even ExxonMobil, once a leading sponsor of climate-change denial, has expressed support for a carbon tax. “A well-designed carbon tax could play a significant role in addressing the challenge of rising emissions,” a spokeswoman for the company said recently in an e-mail to Bloomberg News.
One key player who has not embraced the idea is Barack Obama. The White House spokesman, Jay Carney, was asked about the tax last month, en route, as it happens, to visit storm-ravaged areas of New York with the President. “We would never propose a carbon tax, and have no intention of proposing one,” Carney told reporters. This was taken by some to mean that Obama was opposed to the tax and by others to mean just that he was not going to be the one to suggest it.
In either case, the White House is making a big mistake. Pigovian taxes are rarely politically popular—something they have in common with virtually all taxes. But, as Obama embarks on his second term, it’s time for him to take some risks. Several countries, including Australia and Sweden, already have a carbon tax. Were the United States to impose one, it would have global significance. It would show that Americans are ready to acknowledge, finally, that we are part of the problem. There is a price to be paid for living as we do, and everyone is going to get stuck with the bill.
By: David Frum
Editor's note: David Frum, a CNN contributor, is a contributing editor at Newsweek and The Daily Beast. He is the author of eight books, including a new novel, "Patriots," and his post-election e-book, "Why Romney Lost." Frum was a special assistant to President George W. Bush from 2001 to 2002.
Global emissions of carbon dioxide hit a record high in 2011, scientists from the Global Carbon Project reported last week.
Another record is expected in 2012.
The earth continues to warm, and to warm fast, with serious consequences for human life and welfare. 2012 saw the worst drought in the United States in half a century. Russia suffered its second bad drought in three years. Climatic shocks to these two countries are raising food prices worldwide, posing an especially acute threat to the world's poorest. Major storm events strike harder and more often, because warming oceans create conditions for fiercer hurricanes.
The New York Times reported Friday:
"Emissions continue to grow so rapidly that an international goal of limiting the ultimate warming of the planet to 3.6 degrees, established three years ago, is on the verge of becoming unattainable."
This ominous news arrives as delegates gather in Doha, Qatar, for the latest annual round of climate talks sponsored by the United Nations. Few expect the Doha talks to produce much decision.
Yet there is good news on the environmental front, important news.
Carbon emissions in the United States have declined since 2009 -- not emissions per person (those have been declining for decades), but emissions in absolute terms. The weak economy explains part of the decline, but the real hero of the story is the natural gas fracking revolution.
A decade ago, half of all the electricity generated in the United States was generated by burning coal, the most carbon-dense fuel of them all. Today, coal's share of the electricity mix has plunged to one-third, as utilities substitute cheap natural gas. Gas production has become much cheaper with the growth of fracking -- forcing open rocks by injecting fluid into cracks. Gas emits about half as much carbon per unit of energy as coal.
Environmentalists have responded warily to the advent of gas. They prefer zero-emissions power sources like wind and solar -- sources made more uncompetitive than ever by ultracheap natural gas. (Today's price: about $3.50 per thousand cubic feet, down about 70% from the prices of the mid-2000s.)
Moreover, natural gas does little (as yet) to address emissions from automobile tailpipes.
But maybe there's a way to cheer environmentalists up. Take three worrying long-term challenges: climate change, the weak economic recovery, and America's chronic budget deficits. Combine them into one. And suddenly three tough problems become one attractive solution.
Tax carbon. A tax of $20 a ton, rising at a rate of 4% per year, would over the next decade raise $1.5 trillion, according to an important new study from the Massachusetts Institute of Technology. That $1.5 trillion is almost twice as much as would be recouped to the Treasury by allowing the expiration of all Bush-era tax cuts for upper-income taxpayers.
The revenues from a carbon tax could be used to reduce the deficit while also extending new forms of payroll tax relief to middle-class families, thus supporting middle-class family incomes.
Meanwhile, the shock of slowly but steadily rising prices for fuel and electricity would drive economic changes that would accelerate U.S. economic growth.
The average age of U.S. cars and trucks has reached nearly 11 years, a record.
Millions of Americans want new cars. They are waiting for market signals as to what car to buy. They want to know that if they choose a fuel-efficient vehicle, they won't feel silly three years from now when their neighbor roars past them in a monster truck because gas has plunged back to $2 a gallon.
After five years of depression, the housing market is also ready for renewal. Again, Americans are waiting for market signals: Should they buy smaller houses nearer to work? High and rising fuel prices will encourage developers to build more mixed-use complexes that allow more people to live car-free: walking to work, entertainment, and shopping. The surest way to reduce fuel costs is to drive less.
The return to more urban living is a trend big enough to sustain America's next great economic boom. To the extent researchers can measure, the daily commute appears to be the single worst recurring source of unhappiness in American life.
If changes in city shape can offer more Americans the opportunity to walk to work through an attractive shopping mall, rather than waste 50 minutes in a car in a traffic jam, those changes will advance human happiness, spur new construction work, and incidentally save the planet.
A carbon tax will also enable the United States and Europe to press China and India to reduce their carbon emissions. A properly designed tax would apply not only to domestic goods and services, but to imports as well.
China and India would discover that their products no longer seem so cheap when a carbon tax at the border adds back the environmental costs of dirty manufacturing. To export to the world's richest consumers, China and India will have to clean up their act -- an incentive more persuasive than a hundred Doha conferences.
More jobs and growth; reduced deficits without raising income taxes; lower taxes for middle-class families; a kick in the pants to Chinese polluters; and more happiness for American commuters -- one policy instrument can do it all. What's not to love about a carbon tax?
MIT researchers, using field practices, find emissions from shale gas production to be significantly lower than previous estimates.
While the United States lags in developing a broad-based climate policy, the nation’s carbon emissions reached a 20-year low this year. Many have attributed some of that drop to a booming supply of low-carbon natural gas, of which the United States is the world’s largest producer. But does natural gas – and specifically the quickly-developing production of shale gas – create other emissions, such as methane, that could be just as harmful? A new study by MIT researchers shows the amount of methane emissions caused by shale gas production has been largely exaggerated.
“While increased efforts need to be made to reduce emissions from the gas industry overall, the production of shale gas has not significantly increased total emissions from the sector,” says Francis O’Sullivan, a researcher at the MIT Energy Initiative and the lead author of the study released this week in Environmental Research Letters.
The research comes amidst several other reports on the impact of “fugitive” methane emissions – gas leaked or purposefully vented during and immediately after the stage of shale gas production known as hydraulic fracturing. While many of these reports studied the amount of potential emissions associated with the hydraulic fracturing process, the MIT researchers stress that this is only part of the puzzle. Consideration must also be given to how this gas is handled at the drilling sites, the study shows.
“It’s unrealistic to assume all potential emissions are vented,” O’Sullivan says, “Not least because some states have regulations requiring flaring as a minimum gas handling method.”
Sergey Paltsev, the study’s co-author and the assistant director for economic research at the MIT Joint Program on the Science and Policy of Global Change, says companies also have an economic reason for wanting to capture this “fugitive” gas.
“When companies vent and flare methane they are losing gas that they could have captured and sold” Paltsev says. “When we compared the cost of installing the right equipment to capture this gas to the loss in revenue if it isn’t captured, we found that the majority of shale wells make money by capturing the potential ‘fugitive’ emissions.”
In talking with industry representatives and officials at the U.S. Environmental Protection Agency (EPA), O’Sullivan and Paltsev found that companies are already capturing about 70 percent of potential “fugitive” emissions. In factoring that into their analysis, the researchers find emissions from shale gas production to be strikingly lower than previous estimates of potential emissions.
Their analysis was based on data from each of the approximately 4,000 wells drilled in the five main U.S. shale drilling sites during 2010. Wells in two of those sites, Texas’ Barnett shale and the Haynesville shale on the Texas-Louisiana boarder, had been studied by Robert Howarth from Cornell University last year when he looked at potential emissions released by the industry. His study garnered much attention because it claimed the greenhouse gas footprint of shale gas was larger than that of conventional gas, oil, and, over a 20-year time frame, coal. That study, however, used very limited well datasets.
In studying potential emissions, Howarth found 252 Mg of methane emissions per well in the Barnett site and 4,638 Mg per well in the Haynesville site. The MIT researchers, using their comprehensive well dataset, found that the potential emissions per well in the Barnett and Haynesville sites were in fact 147 Mg of methane (273 thousand cubic meters of natural gas) and 633 Mg (1,177 thousand cublic meters of gas), respectively. When accounting for actual gas handling field practices, these emissions estimates were reduced to about 35 Mg per well of methane from an average Barnett well and 151 Mg from an average Haynesville well.
According to Adam Brandt, an assistant professor at Stanford University, this analysis “provides an important contribution to the literature by greatly improving our understanding of potential shale gas emissions using a very large dataset.”
Brandt says, “Previous studies used much smaller and more uncertain datasets, while O'Sullivan and Paltsev have gathered a much larger and more comprehensive industry dataset. This significantly reduces the uncertainty associated with potential emissions from shale gas development.”
A U.S. Department of Energy study released in August confirmed that while electricity generated by gas produces half the emissions of coal generation, natural gas production does make up 3 percent of the nation’s total emissions. While the overall benefits far outweigh the small increases during production, Paltsev believes the EPA’s efforts to reduce those emissions through new air quality standards are a “step in the right direction.”
Read an op-ed by MIT researchers in response to the Howarth study here.
By Keith Johnson
With the fiscal cliff looming and parts of the U.S. still digging out from the aftermath of Hurricane Sandy, calls for the U.S. to adopt a carbon tax are gathering steam–even though there’s little sign of interest from Congress or the White House.
Today the conservative American Enterprise Institute is holding an all-day, on-the-record discussion of the idea. And the Brookings Institution is unveiling a slate of new measures meant to make the government more effective, including a carbon tax that could raise $1.5 trillion over ten years. All that follows a cascade of carbon-tax advocacy in recent days from the chattering classes and a slate of academic work over the summer (not to mention our own two cents).
The idea of a carbon tax is simple: Put a price tag on the harmful emissions from fossil fuels, such as oil and coal, and use the revenues to fund clean-energy development, pay down the deficit or slash taxes. Proponents often describe it as a win-win-win policy, because carbon taxes would penalize things that are bad (pollution) and lower taxes on things that are good (labor and capital).
“The time seems ripe for this discussion. The president is committed both to raising tax revenue and to dealing with climate change. A carbon tax kills two birds with one stone,” said Gregory Mankiw, a Harvard economist who advised the Romney campaign and has long pushed for more efficient taxation, including a carbon tax.
The Brookings proposal would impose a $20 fee on each ton of carbon, raising an average of $150 billion per year over a decade. Congress and the president would have to decide exactly how to use the money. Research by MIT and Brookings suggests that business-related tax breaks, whether corporate taxes or taxes on investment, would provide the biggest boost to economic growth and job creation.
But at least $30 billion a year should be earmarked for energy research and development, says Mark Muro, a senior fellow at the Brookings Metropolitan Policy Program. That’s because even a price on carbon emissions would not automatically make low-carbon energy such as wind, solar, geothermal and the like economically competitive with traditional fuels. Some research indicates that a $20 carbon tax would actually amount to less support for clean energy than the existing panoply of tax breaks and subsidies.
Alas for the wonks, a carbon tax is a new tax, and that isn’t a popular idea in Washington. Opponents of carbon taxes are rolling out their own intellectual artillery, arguing that the tax would stunt economic growth for little benefit. Grover Norquist, president of Americans for Tax Reform, said taxing energy consumption “would inevitably lead to higher taxes … even if originally passed with offsetting tax reductions elsewhere.”
Even one-time proponents of a carbon tax in Congress have disavowed the idea. While President Barack Obama mentioned climate change in his victory speech last week and has let the Environmental Protection Agency clamp down on emissions from coal-fired power plants, he has yet to outline any comprehensive plan to tackle climate change in his second term.
The carbon-tax crowd is a big tent, bringing together deficit hawks, growth mavens and climate worriers. The ideological diversity could be a plus–but only if advocates can leverage it to win political support from both sides of the spectrum.
By: Dylan Matthews
Grover Norquist made headlines Monday night for saying that while he thinks a “carbon tax swap” — in which such a tax finances cuts to the income tax — is bad policy, he doesn’t think it violates his anti-tax pledge. This isn’t as big a deal as you might think, not least because the chances of a carbon tax were always slim, but it does raise the question: What would a carbon tax swap actually look like?
A paper in August by MIT’s Sebastian Rausch and John M. Reilly — which Brad highlighted upon release — asks how much you could cut various taxes if you imposed a carbon tax, starting at $20 per ton in 2013 and increasing by 4 percent every year thereafter. The answer: not that much.
The first table below shows how much you could cut various taxes if 100 percent of carbon tax revenues are used to finance the cuts. The second table shows potential cuts if only half of the revenue goes to other cuts. The latter scenario seems likelier as part of a deficit reduction deal, as the former would be revenue-neutral and thus do nothing to balance the budget:
Source: Rausch and Reilly
In 2015, a 100 percent swap would only allow income tax rates to fall 0.59 percentage points, relative to all the Bush tax cuts expiring. So the top rate would be 39 percent rather than 39.6 percent. That’s hardly a game-changer. The possible income tax cuts are barely perceptible when only half of revenue funds rate reductions.
The situation is a bit more promising for tax and corporate taxes. A full swap would finance a 1.59 point reduction in the payroll tax in 2015, almost as much as the two point cut in place for the past two years. Alternately, it would allow the corporate income tax rate to drop below 33 percent from its current level of 35 percent.
Rausch and Reilly found that cutting the corporate (blue line) or personal (red) income tax as part of a swap would be regressive, but using it to pay for a payroll tax cut (black) or social programs for the poor like Medicaid (green) would be highly progressive. Here’s how each would affect the incomes of people across the income spectrum:
Source: Rausch and Reilly
The Medicaid option is a big boon for people making up to $75,000, and a net tax increase above that point. A payroll tax cut benefits everyone but those making over $150,000, while personal or corporate tax cuts help everyone but the very poor.
Another option, proposed by Gilbert Metcalf, a Tufts economist currently heading up the environmental tax division at Treasury, is using a carbon tax to fund an exemption in the payroll tax. Currently, Social Security taxes apply to the first dollar you earn, until you reach the cap (currently $110,100). Metcalf finds that a $15 per ton carbon tax would allow the government to exempt the first $3,660 a given worker earns from the payroll tax, similar to how personal exemptions allow all income tax payers to exempt the first few thousand dollars they earn.
Metcalf’s plan would be more regressive than the ones Rausch and Reilly looked at. The bottom 30 percent of the income distribution would see taxes increase by as much as 1.1 percent of income, while middle class people would see modest tax cuts and the very rich would be unaffected. That suggests that policymakers concerned with progressivity would do better to use a carbon tax to fund entitlements or a payroll tax rate cut than an exemption.
This week, a reinvigorated Barack Obama returned to the White House knowing that he was poised on the edge of a fiscal cliff. Rather than relishing his victory last week, Obama must immediately set about crafting a compromise on deficit reduction with congressional leaders. The stakes could hardly be higher — for science, for US citizens and, indeed, for the world. In the event of failure, a budgetary time-bomb of tax increases and sweeping budget cuts will detonate on 2 January. As well as resulting in indiscriminate cuts to funds for scientific research and many other areas, it could knock the United States back into recession and deliver yet another blow to an already fragile global economy.
Faced with such dire consequences, one might expect that all the financial options would be on the table, especially the good ones. Unfortunately, this is not the case, at least not yet.
So far, lawmakers have rehashed long-standing disputes about the size of government and the social safety net, but have ignored ideas that could transform the fiscal challenge into an opportunity. One such proposal is the carbon tax, which could bring financial and political benefits for all and chart a new course forward for energy independence and global warming (see page 309). It is a solution that is every bit as improbable as it is logical, but one should remember Winston Churchill’s assessment of the United States’ tendency to do the right thing — once all the alternatives have been exhausted.
Just consider the possibilities. To put a levy on carbon would raise revenues that could be used to offset lower tax rates for individuals and businesses. This is what conservatives say they want to do. It would put more income — and thus choice — in the hands of consumers. Economists like the idea for more fundamental reasons. Generally, it is best to tax things that one wishes to discourage (such as smoking) rather than those that should be encouraged (such as working). Environmentalists like the idea of a carbon tax because it could generate some much-needed revenue for clean-energy research and development while reducing carbon emissions.
The numbers are not negligible. An analysis conducted in August by economists at the Massachusetts Institute of Technology (MIT) in Cambridge showed that a carbon tax of US$20 per tonne of carbon from fossil fuels, if instituted in 2013 and increased by 4% per year, would raise $1.5 trillion over the course of a decade. Averaged out, this amounts to $150 billion annually — a sizeable chunk of the trillion-dollar deficits that the US government has been running in recent years. Scholars at the Brookings Institution, a centrist think tank in Washington DC, advocate ramping federal investments in energy research up from $3.8 billion now to $30 billion annually, to drive down the cost of low-carbon energy (including cleaner-burning coal). It is an ambitious proposal, and would leave a pile of cash that could be redistributed elsewhere for beneficial use.
Conservatives loathe taxes, and US politicians obsess over energy prices, but a revenue-neutral carbon tax would get around these problems. The MIT analysis found that the economy benefited regardless of whether the money was reinvested in social programmes or redistributed in the form of lower taxes and cash payments to offset higher energy costs for the poor. For environmentalists, the problem with a carbon tax is that it does not technically limit emissions, but the MIT model suggests that it would perform quite well: carbon emissions fall to 14% below 2006 levels by 2020 as consumers and businesses find ways to reduce their energy use in response to higher prices.
Opposition to the idea may not be what it was. For example, on 13 November, the American Enterprise Institute hosted a conference in Washington DC on the economics of a carbon tax. The institute is a conservative think tank, and its officials have previously raised doubts about climate science. The idea has also been bubbling up in other right-leaning think tanks as a conservative solution to reduce greenhouse gases.
The problem is that to enact a carbon tax would depend on political courage and a willingness to break with party orthodoxy, rare traits in Washington today. President Obama has made energy and climate part of his agenda for the second term, but his first — and perhaps biggest — opportunity to make good on that promise will come in the next few weeks. As US politicians contemplate diving into the fiscal abyss, they would be wise to consider a painless policy that benefits everyone.
(The author is a Reuters market analyst. The views expressed are his own.)
By Gerard Wynn
(Reuters) - Academics and lawmakers have proposed a U.S. carbon tax to curb carbon emissions and trim the debt pile, but the idea depends on prominent Republican support, so far absent.
Without a deal on cutting the fiscal deficit the United States faces a $600 billion package of automatic tax increases and spending cuts which could tip the country back into recession.
While that is clearly a step too far, the consensus is that a more gradual combination of spending cuts and/or tax hikes is required to avoid a borrowing crisis.
Many economists have argued for a carbon tax: it would lead to net welfare benefits compared with for example hikes in income tax, even before allowing for avoided climate change.
But it faces formidable problems.
It would acknowledge a climate threat, hike energy prices, hurt U.S. competitiveness (without including complicated compensating measures), and sound very much like a failed cap and trade bill.
To progress, supporters would have to paint a nightmare alternative including cuts in defense and social spending and income tax rises, and demonstrate clear daylight with a proposed cap and trade scheme which failed to win Congress approval in 2009.
Some energy executives and notably Exxon's chief executive have previously said they much prefer a carbon tax.
A cap and trade bill only narrowly passed the House of Representatives by 219-212 in June 2009 before mid-term elections saw Republicans take a House majority, and failed to pass the Senate.
PRICE
A carbon tax, or cap and trade scheme makes emitters pay for climate damage from burning fossil fuels and so drives a shift towards cleaner alternatives.
The notion of using carbon pricing to cut the U.S. budget deficit dates back to the Congressional Budget Office (CBO) report in March 2011, "Reducing the Deficit: Spending and Revenue Options."
The CBO reviewed cap and trade, or a carbon tax among 104 other options for raising tax revenues or cutting spending.
It reported that a scheme which applied a carbon price of $20 tax per tonne of CO2 would raise nearly $1.2 trillion by 2021.
Costs would be passed to energy consumers, its biggest political problem not always mentioned by economists, requiring some compensation which would steal funds from deficit cutting.
"The government could use some of those revenues to accomplish various goals such as reducing taxes, offsetting the costs of the cap-and-trade programme for certain groups or industries that are put at a competitive disadvantage by the programme, or reducing the federal deficit," the CBO report said.
ECONOMICS
A Massachusetts Institute of Technology (MIT) study in August found that a carbon tax would have a net economic benefit compared with allowing certain Bush-era tax cuts to expire, while still cutting the deficit.
Effectively they would swap one tax (on income, if Bush cuts expire on December 31) for another (on carbon).
The authors attributed the net economic benefit to a greater "drag" on the economy from income tax than a carbon tax.
The study did not quantify other benefits such as avoided climate change or lower crude oil imports, or try to compensate energy consumers.
"Given that all other options for dealing with the Federal deficit require difficult tradeoffs, it would seem hard to pass up one that offers so many advantages," the authors concluded in their paper "Carbon Tax Revenue and the Budget Deficit: A Win-Win-Win Solution?".
As Joseph Stiglitz said, in support of a carbon tax in his 2006 book "Making Globalisation Work":
"The country as a whole might be better off; it can use the revenue from the carbon tax to reduce other taxes, such as those on savings, investment, or work. These lower taxes would stimulate the economy, with benefits far greater than the cost of the carbon tax. This is consistent with a general economic principle: it is better to tax things that are bad like pollution than things that are good like savings or work."
ENERGY
Support from economists is one thing.
Given expected higher fossil fuel energy prices and therefore lower consumption, an endorsement by Exxon Chief Executive Rex Tillerson three years ago was more startling.
But that was in the context of shooting down cap and trade proposals when no alternative tax was suggested, and may therefore be more significant for rejecting one than supporting the other.
"As a businessman it is hard to speak favorably about any new tax. But a carbon tax strikes me as a more direct, a more transparent and a more effective approach (than cap and trade). It could be levied under the current tax code without requiring significant new infrastructure or enforcement bureaucracies," Tillerson told a Washington energy security conference in 2009, as quoted in the Exxon journal "The Lamp".
"A carbon tax is also the most efficient means of reflecting the cost of carbon in all economic decisions - from investments made by companies to fuel their requirements to the product choices made by consumers.
"Such a tax should be made revenue neutral. In other words, the size of government need not increase due to the imposition of a carbon tax. There should be reductions or changes to other taxes - such as income or excise taxes - to offset the impacts of the carbon tax on the economy."
POLITICS
The biggest practical problem of a carbon tax is softening its impact on energy consumers and energy-intensive industries.
The European Union has demonstrated that distribution problems can be solved, where for example power plants in poorer east European countries face a softer transition, and factories which face international competition get free emissions permits.
But political efforts now to raise European carbon prices face opposition from some member states, concerned about higher energy prices, even though it would raise funds for government coffers, in the same way as a U.S. tax.
In the face of undoubted, entrenched opposition from certain stakeholders including energy-intensive manufacturers and farmers, the only chance for a carbon tax in the United States is if Democrats prioritize it, and Republicans accept it as the least-worst option, for environmental legislation.
By: Steven Mufson, November 9
Here’s a riddle: If Congress doesn’t want to raise income tax rates but wants to raise revenue, what can it do?
One answer: Pass a carbon tax.
A relatively moderate-sized carbon tax could raise $1.25 trillion over the next decade, a huge chunk of the money needed to bring the federal budget deficit under control. And the idea is getting a closer look now that the election is over and the “fiscal cliff” is looming.
Because it would tax fossil fuel use, the carbon tax pleases economists who want to encourage investment and discourage consumption. Climate activists hope it would reduce greenhouse-gas emissions by penalizing the use of coal, oil and natural gas. And for lawmakers opposed to any change in tax rates or deep cuts in spending, the carbon tax could be a lifeline.
“In the general scheme of things, taxes discourage whatever you’re taxing,” said William Pizer, associate professor of economic and environmental policy at Duke University. “If something is discouraged, it might as well be something bad like pollution instead of employment and savings.”
Pizer said that a $20-a-ton tax on carbon dioxide would raise gasoline prices by about 20 cents per gallon and boost electric bills slightly. It could be most efficiently collected “upstream,” at coal mines, oil and gas wells, or terminals for oil tankers arriving at U.S. shores.
There are drawbacks. Higher prices fall most heavily on lower-income earners who spend a larger portion of their pay on fuel. The tax would hurt certain regions more than others. It would need to be tweaked to protect firms that export to countries where companies don’t pay any carbon tax. It would also have to be reconciled with existing carbon trading schemes in the Northeast and California.
“Taxation is a painful thing, but this is one of the least inefficient ways of raising taxes,” said Nick Robins, head of the climate change center for banking giant HSBC. “At a time of low economic growth, it can be quite a good thing because it is taking costs out of the economy. If you can do that, it would be a good thing.”
As a matter of negotiating strategy, now might be a bad time for the Obama administration to advertise interest in a carbon tax. Doing so would make it a “lightning rod,” said Pizer, a former Treasury official. But, he added, once people see the pros and cons of other taxes and once they reach an impasse and need more revenues, a carbon tax might be an attractive alternative.
“From a policy-making point of view, it is clear that there is no way that this Congress is going to glom onto a carbon tax as an environmental policy,” said Philip R. Sharp, who served two decades in the House and is now president of Resources for the Future. “But it could become an important enabler for other things the Congress wants to do, namely eliminating the deficit and tax reform.”
In the past, conservatives have supported the idea of a carbon tax, though most of them have opposed using the receipts to swell government coffers.
N. Gregory Mankiw — a Harvard University economics professor, adviser to GOP presidential nominee Mitt Romney and former chairman of President George W. Bush’s Council of Economic Advisers — has long supported a carbon tax because he says the price of fossil fuels doesn’t reflect their true societal costs. In the past, he said he would use the receipts to lower other taxes.
In 2007, Kevin Hassett of the American Enterprise Institute, said a carbon tax would not only help energy security and attack global warming, it could also raise a quarter as much revenue as the corporate income tax and could be used to cut those rates.
In 2009, Exxon Mobil chief executive Rex Tillerson — in part to slow momentum toward a cap-and-trade system for reducing greenhouse-gas emissions — endorsed the carbon tax and said it should be set “somewhere north of” $20 a ton.
“As a businessman it is hard to speak favorably about any new tax. But a carbon tax strikes me as a more direct, a more transparent and a more effective approach,” he said at the time. He added that “a carbon tax is also the most efficient means of reflecting the cost of carbon in all economic decisions — from investments made by companies to fuel their requirements to the product choices made by consumers.”
But he, too, said it should be revenue neutral.
One leading GOP advocate of the carbon tax just flipped position. House member and Sen.-elect Jeff Flake (R-Ariz.) co-sponsored a carbon tax bill in 2009. But Friday, a spokesman told The Hill newspaper that Flake “has no plans to reintroduce it or support it as part of a tax reform package.”
The American Petroleum Institute (API) opposes a carbon tax. “Anytime we look at an energy issue, be it a tax or regulatory issue, we ask what does it do to promote or inhibit energy production and what is the impact on the American people,” said Jack Gerard, API president. “Clearly, it would increase costs to the American public. Is that what he [President Obama] wants to do? I would think not.”
But compared to the fiscal cliff , even a carbon tax might look attractive. A study by the Massachusetts Institute of Technology said “the economy is better off with the carbon tax than if taxes remain high to maintain Federal revenue.”
“We’ve been just surprised at the number of political groups across the political spectrum considering this,” said Sharp of Resources for the Future. “Contrary to what almost everybody universally would have said two years ago, we have gotten ourselves in such a pickle on the fiscal side of things that it opens up the possibility.”