A carbon tax and a carbon cap-and-trade program are fiscal policy tools that a government can implement to reduce carbon dioxide (CO2) emissions to the atmosphere (see figure) and help in the fight against climate change.
Carbon taxation policies are essentially fees imposed on the burning of carbon-based fuels or any other process that emits CO2. The purpose is to shift the social costs of the impacts from emitting CO2 into the atmosphere from the general public to the entities that emit most of that carbon dioxide. Of course, industrial scale emitters will pass the cost back onto their customers to the extent possible. For example, oil producers will pass the cost through to refiners who will pass the cost onto the John or Jane Does who buy gas and commute to work. Ideally, a properly designed carbon tax policy would be revenue neutral, in that the net cost to businesses and individuals would be spent by the government to mitigate the actual impacts, and such that John and Jane Doe would ultimately realize the benefits.
Unfortunately, it seems that governments around the world are mostly focused on implementing the taxation side of a fiscal policy to address climate change and doing a poor job of the consumer side. With carbon taxation, there will be some losers – those who pay more for their electricity and gasoline – and some winners – those whose homes are saved from rising sea level or those who won’t suffer from pollution related health issues. The challenge is how do you “sell” a tax that appears to take from one group of people and gives to another, and yet make all parties feel that they are winners?
To date the scientists have done excellent work studying the issues around climate change, preparing technical treatises, and creating lofty goals. And the politicians have been successful selling the concept to those individuals who do not really need to be sold, i.e. the wealthy who don’t need to worry about the cost, and the zealous environmentalists who want to protect the environment at any cost (especially when paid by others). However, they have been failing at creating the necessary social consensus required to get things done and selling the concept to the vast majority of the people who will ultimately pay the cost. The problem is that the cost of gasoline or food or electricity is visible, immediate, and unambiguous. By contrast, the costs of climate change are hidden within public and private health expenditures, emergency relief funds, and the degradation of, and subsequent remediation of, the environment. Although glaringly obvious from decade to decade, such costs are almost imperceptible from day to day. As a result, grass roots campaigns have emerged that have been successful in delaying or even cancelling some early efforts by focusing on the cost to the everyday person who is just trying to make a living.
A good example of this is the current situation in Canada. The Canadian Federal Government is in the process of implementing a carbon tax as a means to achieve Canada’s commitments under the 2015 Paris Agreement. It is set to start at $10 (CA)/tonne this year and increase by $10 per year to reach $50/tonne in 2022, and then higher beyond that, if necessary. It has been billed as “revenue neutral” and relatively “painless” to consumers, but a recent study has indicated that the $50/tonne tax will cost the average Canadian between $603 and $1120 per year, depending upon province. Conservatives are rallying around this cost and branding the initiative as another “tax and spend” program. Doug Ford, the new premier of the province of Ontario, which has been operating under a cap-and-trade program since 2017, quoted during his campaign: “Every cent spent from the cap-and-trade slush fund is money that has been taken out of the pockets of Ontario families and businesses.” A large part of Mr. Ford’s support came from suburban commuters who paid an estimated 3% more for gasoline (or should we say petrol?) under the program last year. One of his first actions as premier was to revoke the cap-and-trade program and vow to fight the national government over any attempt to impose the carbon tax.
However, failure of carbon taxation is not a foregone conclusion. There is an example of a successful emissions taxation policy – the cap-and-trade program in the 1990s to solve the urgent environmental problem of acid rain. But with acid rain, the culprit was clear – one could see the yellow haze plume coming from coal burning power plants. And the impact was both clear and emotional – burning eyes, increased acidity in lakes and rivers, and dying forests. The program initially created winners and losers, but with success, ultimately, everyone became a winner.
So, what is needed to change the dialog and generate broad public support for a carbon tax? In this hyper-partisan political climate in which neither politicians nor news media is trusted to tell the truth and climate deniers appear to have the loudest voices, the best chance of success is to implement carbon fiscal tools in a visible, well-planned and as equitable a manner as possible. The following are some suggestions:
This should be sufficient to change the hearts and minds of an uncertain public.Published by Our World of Energy
Guest blog by S. A. Shelley
Are we on the cusp of mass adaptation of Electric Vehicles (EVs) for transportation? Probably not for at least a while longer. When doing the financial analysis comparing EVs to Internal Combustion (IC) Vehicles at the personal or family level, the comparison usually yields these results: (more…)Published by Our World of Energy
Guest blog by S. A. Shelley
I love the guys and gals over at Lawrence Livermore National Laboratory (LLNL). They tend to produce some of the coolest energy studies with nifty graphics (all the while hiding the space aliens from us). Earlier this year, as it does every year, LLNL published the U.S. energy flow chart which illustrates total US energy production by source and how it is consumed. (more…)Published by Our World of Energy
By W. H. Luyties, editor OWOE. With the election of Donald Trump as president of the US and control of all 3 branches of the government in the hands of Republicans, who have historically been strong supporters of fossil fuel interests, one lightning rod topic has been the push to increase coal and oil production in the US. This has energized both proponents of fossil fuels, who see an opportunity to possibly save their industries (coal) or increase production (petroleum), and opponents, who fear the environmental consequences of such a change. But is this a real threat to the global move away from fossil fuels, or is it simply rhetoric to energize a political base? (more…)Published by Our World of Energy
There is no doubt that the practice of net metering for residential solar photovoltaic systems has been a key enabler of the rapid growth of rooftop solar generation in the United States (see OWOE: How does net metering encourage private investment in home solar systems?). But has it outlived it usefulness? Or, has it even become a barrier to greater renewable penetration into the marketplace?Published by Our World of Energy
Guest blog by S. A. Shelley
Revenue Trap: ” A focus on revenue at the expense of weakened strategy and reduced profits.”
Oil prices seeming to whipsaw back and forth, weekly, daily, even hourly is the result of many oil and options traders clearing trades at whatever slim profit they can eke out. Of course, multiply that slim profit by the huge volumes traded and well, Wall Street still makes a hefty profit whether oil is up or down.
Other folks are starting to talk about oil supply and demand hitting a new equilibrium, or that shale production has peaked. Fair enough. In fact, I agree that efforts to constrict oil supply are starting to have some effect. I doubt however that restricting oil supplies will be effective in the long run. OPEC claims that compliance with the production quotas is strong, but on the other hand, some OPEC members have recently vowed to opt out of the quotas and to even increase production. Don’t forget about some of the African members of OPEC who were free to pump and sell as much oil as they could. (more…)Published by Our World of Energy
Almost a year and a half ago OWOE blogged “What about transportation?” in which we took a brief look at the challenges facing a renewable energy transformation of the transportation industry, which accounts for approximately 30% of US energy use. In what has been a relatively short period, the answer to that question has become much clearer. Let’s take a look at what’s happened since then.Published by Our World of Energy
Guest blog by S. A. Shelley Absolutely, the United States can become energy self-sufficient, but it is unlikely to become self-sufficient in oil production.
Since the end of last year and the beginning of this year, several governmental and intra- governmental bureaucracies, independent think-tanks of all sorts and large energy producing companies have issued annual energy outlooks in one form or another. I characterize them as “Business as Usual” (BP, Exxon, etc.), “Business is Changing” (Shell, Carbon Tracking Institute, etc.) and “Fanciful Delusion” (OPEC). In all forms these reports are interesting reading. (more…)Published by Our World of Energy
The nuclear power industry in the United States has had a history of wild swings from optimism to pessimism to fatalism. After the first wave of over 100 nuclear reactors that were planned in the 1960’s and 1970’s was completed, there has been a span of 2 decades without a new reactor being built. Then, starting in the early 2000’s, a new feeling of optimism arose as the nuclear industry, electric utilities, the US government, and even some environmental organizations realized that nuclear power could be the solution to the world’s global warming problem. And with the high cost of fossil fuel (at a time before fracking technology drove natural gas prices to historic lows), most in the industry believed that new nuclear plants could be built quickly and be cost competitive with other new power sources. These plants would incorporate new technology and advanced safety features, would be governed under new streamlined government regulations to avoid costly design changes mid-construction, would apply lessons learned during construction of the earlier plants, and would have access to competitive financing with federal loan guarantees. This was considered the beginning of the “nuclear renaissance”. Between 2007 and 2009, 13 companies applied to the Nuclear Regulatory Commission (NRC) for construction and operating licenses to build 31 new nuclear power reactors in the US. Today, plans for virtually all of those reactors have been cancelled, and nuclear power generation reached a peak in 2010 and has since been declining (Figure 1).Published by Our World of Energy
Guest blog by S. A. Shelley Imagine a future where your choices for purchasing a new car include numerous options for electric vehicles (EV’s) and internal combustion vehicles (ICV’s). But competing with the typical federal or state subsidies for the EV’s are hefty rebate checks from OPEC or Russia for purchasing a fossil fuel burning ICV. That may sound crazy, but in today’s age of large supplies of easily produced shale oil, inexpensive renewable energy options, and changing societal demographics, it’s only a matter of time before the current oil glut results (see EIA figure below) in stranded oil resources that are too expensive to produce for many of the suppliers, drastically reduced supply-side control from oil producers, and a critical need for oil suppliers such as OPEC to find creative ways to stimulate demand.Published by Our World of Energy