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The economic impacts of carbon pricing

What the science says...

Select a level... Basic Intermediate Advanced

The costs of inaction far outweigh the costs of mitigation.

Climate Myth...

CO2 limits will harm the economy

"Legally mandated measures for reducing greenhouse gas emissions are likely to have significant adverse impacts on GDP growth of developing countries [...] This in turn will have serious implications for our poverty alleviation programs." (Pradipto Ghosh)

If climate change proceeds without any efforts to reduce it, we can expect to incur serious economic costs. In fact, it's not unreasonable to expect that the effects of climate change will create greater economic instability worldwide.The solution is, of course, to reduce fossil fuel use. One way to do this is to shift away from fossil fuels towards renewable energy sources. The other way is to reduce energy demands through increased efficiency.

Both mechanisms have economic implications. In order to stimulate the private sector’s investment in renewables, governments can put a levy on fuels, which may be used to fund or subsidise new initiatives.

To reduce demand, there are a number of solutions available, but most seek to raise the cost of carbon through taxes. Such increased costs give rise to concerns that change underwritten by taxes or levies will damage economic prospects, particularly in developing countries.  However, there is a consensus among economists with expertise in climate that we should put a price on carbon emissions.

NYU Fig 9 

2015 New York University survey results of economists with climate expertise when asked under what circumstances the USA should reduce its emissions

The Representative Picture

In the Fifth IPCC Assessment Report (AR5), a new set of scenarios called Representative Concentration Pathways (RCP) will be used. The four RCPs replace the previous scenarios from the "Special Report on Emissions Scenarios" (SRES). Each RCP represents a set of initial conditions and projections to year 2100, based on a synthesis of the peer-reviewed literature.

The graphs below show the predicted RCP trajectories for economic performance:


GDP projections of the four scenarios underlying the RCPs (van Vuuren 2011). Grey area for income indicates the 98th and 90th percentiles (light/dark grey) of the IPCC AR4 database (Hanaoka et al. 2006). The dotted lines indicate four of the SRES marker scenarios.

The number of each RCP is the forcing (in watts per square metre) associated with a specific amount of emissions for each scenario, up to the year 2100. The graph of GDP clearly shows that the pathways that reduce emissions the most in that time frame (2.6 - green, and 4.5 - red) are those with the best long-term economic performance. In other words, the investment required to reduce emissions is repaid by increased economic performance. Business as usual strategies (high-emission scenarios RCP 6 and 8.5) are the least profitable; the money saved early on is dwarfed by the costs of damage and disruption done in the longer term.

Putting a Price on Carbon

There are a number of schemes under consideration, and a number already implemented. According to the article Pollution Economics in the New York Times, more than 20 percent of global greenhouse gas emissions are now subject to carbon pricing systems. About 60 other states, provinces or countries are considering similar approaches, according to a recent World Bank report.

It’s too early to judge long-term economic performance of the early adopters, but Canada’s province of British Columbia serves as a good example of how carbon pricing can reduce fuel use - in their case through a revenue-neutral scheme. A recent study found that since 1st July 2008, when the tax was introduced:

  • BC’s fuel consumption has fallen by 17.4% per capita (and fallen by 18.8% relative to the rest of Canada).
  • These reductions have occurred across all the fuel types covered by the tax (not just vehicle fuel)
  • BC’s GDP kept pace with the rest of Canada’s over that time
  • The tax shift has enabled BC to have Canada’s lowest income tax rates (as of 2012).
  • The tax shift has benefited taxpayers; cuts to income and other taxes have exceeded carbon tax revenues by $500 million from 2008-12.

Source: BC’s Carbon Tax Shift After Five Years: Results, Elgie & McClay 2013

In a separate report, the British Columbia Department of Finance found that in 2012, BC's taxes were among the lowest corporate tax rates in North America and the G7 nations. 


There is a consensus among expert climate economists that carbon pollution limits are needed to prevent climate change from badly damaging the global economy.  

A number of economic incentives are being tried with varying degrees of success. Regional schemes are already proving effective, flexible and popular. An important ingredient seems to be an accompanying tax reduction that makes the carbon tax revenue-neutral.

In the long term, unless we drastically reduce the rate at which we are still emitting greenhouse gases, we are very likely to incur huge costs as a result of climate change. Part of these costs will be in adaptation, and the inevitable disruption. In part costs will escalate due to turmoil and uncertainty throughout the economic world. There will also be costs that cannot be quantified, particularly when we try to value a human life and its loss.

We have to reduce our emissions. If we are to avoid draconian government intervention, carbon pricing schemes are a viable method of encouraging us to reduce fossil fuel use. Coupled with other measures to stimulate renewable energy development, putting a price on carbon may help us make the transition away from fossil fuels. And from our experience to date, it seems likely  that carbon taxes, instead of bringing an economy to its knees, may well help transform an outdated system into one fitting for a sustainable century.

Basic Rebuttal written by GPWayne and dana1981

Further Reading: The Intermediate and Advanced rebuttals contain detailed information about carbon pricing and tax schemes. Skeptical Science contributor Andy Skuce has also written an article about British Columbia’s experience here, with an update here describing the findings of the Elgie & McClay paper.

Last updated on 2 January 2016 by dana1981. View Archives

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Further reading

Only tangentially relevant but a nifty java animation at the Quaker Economist projects the world's future energy production and when it's expected to peak.


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Comments 51 to 100 out of 111:

  1. Jigoro @48> "And as I also said, NYC is the only area in the US which could possibly make the numbers work." New York heavy rail generates on average 0.20 pounds of CO2 per passenger mile. That's even lower than a Toyota Prius which generates 0.26. It might be helpful if you actually read these reports instead of just making things up as you go.
  2. From this thread: Eric (skeptic) - I don't often comment on politics here (I prefer to stick to the science), but I cannot let that last howler go by without a reply. "If I lived in Haiti I would be stripped of my land by the authoritarian government who would then pretend to mitigate climate change using proceeds from a carbon tax that would actually just be squirreled away in Swiss bank accounts." Haiti has less than 1% of it's forest cover remaining, because there has been no regulation of forestry use whatsoever. Individuals (who do not directly get assessed the full costs of their actions) cut down the trees for charcoal and land clearing. That's the "libertarian free market" in action. By contrast, consider the neighboring Dominican Republic, which shares a border with Haiti. The UN Food and Agriculture Organization (FAO) has rated the DR forestry programs as exemplary, with the government run conservation resulting in some of the best woodlands in the region. Libertarianism is an interesting extreme societal model, like a pure dictatorship, direct democracy, anarchy, true communism, etc. All of these have some benefits, and overcome some social issues - and all of them as pure systems have been failures. I believe a realistic view requires a mix of approaches, not extreme social experiments.
  3. KR, part of the answer is that the Dominican Republic has a "moderately free" society while Haiti is mostly unfree Haiti is pretty much bottom of the barrel for property rights, and if there are no property rights, then forests won't be protected. The other part of the answer is that the Dominican Republic enacted some market-value-oriented policies (scroll down this page: Their policy is comparable to the efforts by developed countries and has an emphasis on private ownership.
  4. My statement holds, Eric - a reasonable amount of regulation makes for a much improved situation. From your reference, "Inadequate regulatory and legal frameworks hamper private-sector development." Yet you claim that the "authoritarian government" of Haiti would prevent you from using your property as you wish? This is a very contradictory statement. Again, as I stated, a mix of approaches seems to work best. I would personally prefer a straight carbon tax to direct external costs to those causing them, and let the market decide from there, with reasonable regulation and administration to ensure that this actually occurs.
  5. KR, I agree with regards to Haiti. I disagree with regards to other economic modes. Most alternative modes--various forms of socialism, modern feudalism, and totalitarianisms--have occurred within the context of the dominant mode--capitalism. Capitalism is extremely aggressive, and the reasons for some of the failures of these alternatives has been the corrupting force of capital. A pure experiment is where all other variables are controlled. That would not be the case for Cuba, USSR, Nazi regime, Venezuela, various African experiments, China, etc. etc. All were (and are) heavily influenced by the forces of capital. I imagine that were we living in a socialist world, you would call capitalism an "extreme social experiment." As far as Haiti is concerned, one also has to take into account U.S. interference (and here. And, of course, Baby Doc and his compadres. Eric, Haiti is a study in disaster capitalism. The country was pillaged by non-Haitians, then pillaged by Haitians (with the help of non-Haitians), then repeatedly kicked in the gut by nature, and then descended on by thousands of NGOs, the IMF, and a whole slew of companies looking to make a buck in the labor market and the pool of NGO dough. What the Heritage folks want is an unfettered (and desperate) Haitian labor market. What the Heritage Foundation calls "freedom" is usually the opposite of social and environmental justice.
  6. DSL, I think we will always differ on what Heritage wants for Haitians, but you are correct that the country has been exploited. A lot of the deforestation came from plantations, see and continues with poor farming practices. The authors of this study on protection of the commons seem surprised that: Indicators of wealth were not significantly correlated with landholder cooperation or defection in three out of four measures. Thus, wealth does not apparently reduce the incentive to cooperate. Rather, relative wealth corresponds to a greater ability to contribute, and such contributions might be an act of "leadership" I am not surprised since that is how I act. KR, my point from the other thread was that wealth leads to environmental protection. The title of this thread is somewhat backwards. It is not that "CO2 limits will harm the economy" but that strengthening the economic security of all people on the planet will inevitably result in the luxury of conservation. I with you agree a reasonable amount of regulation is always needed and best performed by government (e.g. contract law enforcement). My statement about authoritarianism was too general. I was referring to the fact that I know how to manage my land better than any government agency be they Haitian or not and that Haiti had an index of respect for property rights equal to Cuba. I connected those two, probably incorrectly as the study I linked above suggests.
  7. Eric, wealth obviously corresponds to a greater ability to cooperate, but relative wealth is an important idea to consider, as is the source of the wealth--the relationship between the origin of the wealth and who controls that wealth. I don't think it's at all valid to take the quoted finding and apply it to the banking industry in the US. It applies to Haitian farmers, who, as the report notes, don't always see "wealth" as money. They often see it as labor: time and energy to engage in some of the target practices. There is a fundamentally different human response when wealth is perceived as labor (an individual's time and energy) and when wealth is perceived as capital. Strengthening the economic security of everyone is a noble goal, Eric, but it is only coincidental to the central goal of capitalism (Heritage's interest)--to generate capital. The system requires poverty, desperation, and unemployment. It requires taxation without representation (capital is a tax imposed by property owners on "their" laborers). It lifts all boats, but it requires the water to rise faster and faster, but the boats are chained to the dock of material and historical reality--some with longer chains than others. When some of the boats disappear beneath the water, we are asked to ignore them (original American landowners), appreciate their noble sacrifice (late 19th century labor), or turn them into a historical oddity that has no economic bearing on the present (US and European slavery and imperialism). You may know how to manage your land best according to your own interests, but what are those interests? There are a range of responses between the well-being of all humans and individual collection of capital. As the Haitian study notes, "The finding that cooperation is conditional on the expected behaviour of others contradicts a strong individualist assumption made by conventional policy and project interventions in Haiti (and other places)."
  8. By the way, and someone may have already posted this, but here's some grain for the mill. The argument is that the carbon tax debate is a sort of "middle-class" solution: we see the problem, but we don't want fundamental change, so let's try a carbon tax.
  9. DSL - I tend to agree with their overview of the changes in politics and economics for the last few decades. However, let's not get too precious about the dreaded middle classes. The education and the economic freedom of the middle class has driven most important social changes of the last couple of centuries. In the current circumstances, giving this group a real financial push in the direction of say, solar PV and electric cars is one way to kickstart growth in these sectors. The financial push happens to be coming from a carbon tax under the current proposals. So that's the way to go. (And far better than the opportunities for backroom deals, or worse, in establishing a cap and trade system. In my view anyway.) I might prefer a decisive government program to 'get it done', but I'm unlikely to see my general political preferences come to pass any time soon anyway. So I'll take the best I can get for the time being.
  10. I agree, to an extent, Adelady, but only with the recognition that, in addition to being the best target for bloodless fundamental change, the middle class is also the flywheel of "business as usual." Advocates for social change have been trying to resolve that contradiction for over a century with little success. I'm still mostly of the mind that it's going to take two boots to the head to get anything of significant consequence done.
  11. So I gotta ask, if a carbon tax/cap and trade scheme is supposed to fight global warming... why is it that since Kyoto was introduced in 1998, global GGE have soared in the 13 years since? Can you explain why it doesn't simply cause industry and capital to flock to non-annex 1 nations, and increase industrialization of larger population masses? (preempting the expected, US being non signatory is obviously not a factor: )
  12. batvette Because most countries just sat on their hands and waited for someone else to get the ball rolling. Kyoto was, like many international agreements, fine in theory but patchy in practice.
  13. DSL 'two boots to the head' - never forget the sacred mantra of property values. When people start realising that the value of their prized McMansion is declining relative to all the others with PV they'll be lining up to get in on the act. It's already happened in my family, with the older generation living in a retirement village. Don't want to leave you with property less valuable than all the others round here - was what my mum said.
  14. DSL, thanks for your thoughtful response (#57). I must point out in response that capital is most useful and grows when it is invested, accumulation of capital for only consumption purposes is not unusual but is useless and counterproductive for that individual. BIll Gates, as one example, is not a mere accumulator of capital, but a shrewd businessman who reinvested nearly all the capital that he had and then ended up with a lot more falling into his lap. But his investment could have gone the other way. I realize that has nothing to do with CC mitigation, but need to point out my alternative view of what capitalism is. Its history has some activities not considered moral today as you point out. I probably should not have used the ill-defined term wealth, but pointed out that particular amount of savings beyond immediate needs and long term savings can be spent on environment improvements and CC mitigation if one chooses to. If those savings aren't available they cannot be spent. It may well be that CC mitigation is an urgent need for Haitian farmers, but their worst problems often come from the weaker type of tropical storm that just sits and dumps rain as opposed to the hypothesized stronger (but perhaps fewer) storms. The question of costs is important for them as the rest of us. Better erosion control is vital with or without CC. Their extra money whether from reduced demands for physical labor (thanks to capitalism) or from capitalism itself, helps. It is a very valid point that I manage my land according to my best interests. Some of mine are stabilizing the slope (being on an outside curve on the river means constant natural erosion), promoting native plants and wildlife (mild competition with friends who do the same), but also putting in a supply of wood for the winter, converting an area from almost useless fire hazard cedar to hardwood and native understory, and a little bit of gardening/farming. Some of the latter could conflict with the broader environmental good at least in the short run. I could also sell and let the next guy clear cut But I recognize the need for local environmental protection that dovetails with CC mitigation. I could probably afford the luxury of an electric car (with my present commute) if it were reasonable and had other benefits (not having to fill it up with gas). I already bought 4 decent sized solar panels in 2004 and have about 300 pounds of lead batteries in the crawl space and that was simply as a hobby. I did a lot of work with south facing windows and black paint including a solar-driven solar heat collector mounted on the foundation. There are probably a few other things I don't remember at the moment. But the point is that all this was possible because I had the extra money to spend on it and would not have been without it.
  15. Adelady, "fine in theory and patchy in practice" is a rather nonchalant and casual attitude to take considering this is the only "cure" for the patient implemented, the only type up for the future, and yet the patient's symptoms are ever worsening. So what were the failures in Kyoto's implementatation that were not in its underlying plan, which is providing restrictions against industrialized nations, little or none in "non-annex 1" nations, which invites industrial development and capital flow to third world countries which increases their GGE?
  16. actaully thoughtful... You took the subway everywhere because the streets were jammed with cars and there was nowhere to park when you got there anyway- additionally you had surface mass transit to complete the route to your destination. I've lived in the SF Bay Area and other parts of California, rail transit is not simply a matter of "if we want it to, it can work". It only works in areas of extreme population density where other factors work toward making people want to use it, like "why drive when youy have to spend an hour looking for a parking place and it's $5 an hour to park?". Furthermore having the surface transportation to transfer to is the deal breaker. San Diego has been implementing light rail with its Metro Trolley system since the '80', and it works okay if you live AND work AND only travel to destinations along its lines, which don't cover the city that well. Problem is providing the surface transit coverage for enough hours and distance to make trolley line travel appeal to people, has the city running a LOT of empty or near empty buses. Pollution aside, the city looks at this and cuts their bus coverage down by both times and routes. Now people get back in their cars.... In the end, hey you have the NY Subway System. Whoopee! Now how about the rest of us....
  17. In a recent press release, Lord Monckton claimed:- "Forestalling all of the 0.24 C° global warming predicted by 2020 would demand almost $60,000 from every man, woman and child on the planet. That cost is equivalent to almost 60% of global GDP to 2020. He repeated these figures at his National Press Club debate. Treasury modelling states that the carbon tax will reduce Australian GDP by 0.3% in 2020 ($171 per head per annum)and reduce our CO2 equivalent emissions by 25% over business as usual. Why should a global solution cost 60% of GDP? Not surprisingly, Monckton employs a number of "tricks" to exaggerate the cost of a climate change solution. Firstly he calculates the cost of implementing a solution with NO manmade CO2 emissions. This raises the cost to 0.3%*4 =1.2% of GDP. Next he uses the reduction from 2000 levels (5%) instead of the reduction from business as usual 2020 levels(25%). That multiplies the result by another factor of 5 to get to 6% of GDP. This is still not large enough, so Monckton calculates the gross value of the tax rather than the impact on GDP. Even when calculating the gross value of the scheme, he adds both the tax received and the expenditures from the tax (such as administration, renewable energy support and coal and steel support). By this means, Monckton estimates the net cost of the current scheme as $13 billion per annum or 1% of GDP instead of Treasury's figure of 0.3% This calculation brings Monckton's calculation of the global abatement cost up to 20% of GDP but Monckton has a few more "tricks" up his sleeve. Monckton assumes that the carbon pollution measures only the impact of CO2 - 51% of manmade forcings. He therefore doubles the cost again to allow for eliminating all the other manmade forcings such as methane - bringing us up to 40% of GDP. Of course the Australian carbon tax does tax methane emissions ( as the coal industry will attest to ). Monckton understands that Australia has 2% of global GDP but contributes only 1.2% of global CO2 because we have high energy efficiency. He therefore implicitly assumes that the cost of abatement in countries with low energy efficiency would be the same as Australia's. Multiplying 40% by 2%/1.2% brings Monckton up to his 60% of GDP. Just in case all the tricks haven't been enough to scare the public, Monckton has one last card to play. He calculates the cost per head over a 10 yesr period rather than a cost per year. The cost per head becomes $59,000 instead of $5,900 per head per annum. The bottom line is that Australia will reduce its emissions by 25% over business as usual levels at a cost of 0.3% of GDP per annum or $172 per head per annum. I could only conclude that Lord Monckton deliberately set out to deceive his audiences with a patently ridiculous cost for tackling climate change.
  18. Two things: 1. I have a very high level of confidence in climate models, and am not the least but skeptical about AGW. You folks do a bang-up job of demolishing every quibble put into your path. Forgive me if I do not have the same confidence in economic models ... all the whizziest of the math whiz kids out of MIT didn't go into climate science when they could make ten times as much working on Wall Street, and not a one of them managed to predict our current economic debacle. 2. So far, I haven't seen a single mention of just how much good any of the proposed laws would do in terms of reducing the effects of global warming ... to me, a furry-minded layman, they all seemed much too little, and much too late. I would love to see comment on this. P.S. I realize politics are verboten on this thread (although that seems to be subject to considerable wiggle room). What bothers me most of all is that real live scientists are winning the arguments here, and on sites like it, but losing dismally outside them ... the 3% of GW skeptics seem to have swayed more than half the population with garbage arguments. I think we really do need to take a somewhat different approach to the problem if any public action is to be taken.
  19. Well this site mostly deals with the science. Climate Progress is one place to discuss the political solutions.
  20. Sphaerica and scaddenp: From the Heritage report (link in the OP):
    It is no surprise that the economy responds to cap and trade as it would to an energy crisis. The price on carbon emissions forces energy cuts across the economy, since non-carbon energy sources cannot replace fossil fuels quickly enough. Energy prices rise; income and employment drop....As the economy recovers and the caps tighten, the detrimental effect of cap and trade gets more and more severe. In the worst years, GDP losses exceed $500 billion per year.
    As DSL said above: "The system [capitalism] requires poverty, desperation, and unemployment. It requires taxation without representation (capital is a tax imposed by property owners on "their" laborers). It lifts all boats, but it requires the water to rise faster and faster, but the boats are chained to the dock of material and historical reality--some with longer chains than others." The system of capitalism does have those features that DSL points out. It has one more, relevant to the discussion on the other threads which should be on this thread. Namely that the externalities of burning fossil fuel are not currently priced into the fossil fuel. The increase in those prices from any of the proposals listed in the OP will (to borrow DSL's phrasing) keep some boats tied to the dock as temperatures rise and the consequences arise. An example of a boat tied to the dock is a small pizza place. The current propane bill to run the ovens is $1000 / month and will rise under the proposals to where the business will probably shut down. Another boat tied to the dock is the long distance commuter, common in my area. I pay $250 / month to ride in the van and that would likely be at least $350 using the Heritage gas price rise of 75%. I don't have a problem with that but other people will. In the sensitivity thread Sphaerica said "40% chance of a cost of $1 trillion to $2 trillion per year for decades to centuries (or more, with higher sensitivity)." I don't think centuries is realistic, that would assume practically static technology. But Heritage points out the GDP loss of $500 billion per year which is guaranteed unlike the 40% chance of the higher cost. The biggest difference between the two types of expenditures are that the cap and trade money goes into offsetting emissions whereas the 1-2 trillion that I proposed goes straight into infrastructure (mainly better water retention systems to prevent floods and alleviate drought). With that infrastructure we all benefit from more water resources for public and farming uses. Note that I do not propose doing "nothing" but put forth solutions here. Some of those would in fact require a modicum of cap and trade, but many would be implemented by policy changes (e.g. we pay farmers and tell them what to do already).
  21. Eric, you quote from the Heritage report, but miss the following passage in the OP:
    The reason the Heritage estimate was so high is that it evaluated the costs of a carbon cap, and then ignored the distribution of those funds. ... The Heritage Foundation report effectively assumed that the generated funds would disappear into a black hole. Their analysis was the equivalent of doing your household finances by adding up your expenditures while ignoring your income. It sure looks bad, but tells you nothing about your overall finances.
    The economic cost of acting now is incorrectly represented in the Heritage report, which smacks of a scare tactic. Yes, there will be a cost to mitigation and everyone will share the burden, but there will be a greater societal and personal cost to be borne if we delay.
  22. Doug H, I think they were assuming that all the proceeds would be used for emission mitigation and they did not count any economic benefits from that mitigation since they would presumably come much later.
  23. Some points. Firstly, expect fuel price to go up anyway. Look at IEA reports on effects of delayed investment in MENA. Combatting climate change is really about coal. Does your cap-trade money also pay for infrastructure improvements to ameliorate climate change effects in countries that have negligible contribution to global warming? And what is your geoengineering solution to ocean acidification? I would be rather surprized if the cost of effective geoengineering was cheaper than moving to non-carbon generation.
  24. scaddenp, I have not thought about how to mitigate ocean acidification, but other people have. The problem with applying a technological fix there is that the ocean are vast and neutralizing processes are bulk (e.g. liming, iron seeding, etc). Despite that problem there will be ways to apply technology to apply some sort of micro scale processing. I essentially agree with sphaerica that paying for ways to avoid turning solid or liquid carbon into gaseous carbon (e.g. alt energy) is much cheaper than processes to turn the gaseous carbon back into solid or liquid or otherwise sequester it. I don't think that is static though, the sequestration will get cheaper with nano-tech and other technology cross fertilized from commercial uses. I think geoengineering will come down in price as well, but not as much as sequestration (e.g artificial photosynthesis). I am only favoring a 1/4 to 1/3 cap and trade solution because paying for other infrastructure (e.g. dams in poor countries) has other benefits along with ameliorating the droughts and floods. It seems a lot simpler to pay for those with some sort of general fund than to try to estimate the costs of droughts and floods and apply that to the external costs of creating CO2.
  25. Eric (skeptic) - "...the sequestration will get cheaper with nano-tech and other technology cross fertilized from commercial uses..." You will still have the energy requirement to bind carbon again, reversing at least in part (depending on the final chemical makeup of the binding) the exothermic reaction of burning the fossil fuel in the first place. That's going to require at least as much energy as releasing it in the first place obtained - again. And where will you get that energy? I don't consider nanotech (having argued these issues with Eric Drexler at one point) a panacea, nor any other technical development. Such developments are just not predictable (otherwise I would have a flying car right now, next to my jet-pack), and every advance comes with tradeoffs of some sort. Personal opinion - we should do what we can with current approaches (renewables, minimum carbon energy sources, conservation), tax carbon usage to include external costs with the monies going towards both those externals (health care, pollution mitigation) and increasing less expensive supplies (renewables again). If future technical advances are helpful, by all means, we should use them. But we cannot depend on inventing ourselves out of the hole...
  26. Eric, Personal Housekeeping Robots. Flying cars. Jetpacks. Life on the moon and Mars. Are you really going to depend on predicted, timely advances in technology? With the exception of faster computers and mobile phones, how much has technology and life really changed since 1970? Even 1950. Seriously. What can you name that qualifies as a quantum leap from those time periods? You're putting all of your eggs into one basket that you don't have yet, and they've promised you the basket will be delivered within 20 years, or your money back... not.
  27. "Trillions of dollars on things aimed only at reducing CO2 emissions, just in case?" So tell me what the cost of adaption will be if you are wrong and who will be pay for it? The polluters - or those affected? All the science says tells you it is happening. It is not "just in case". Desperately trying to find excuses for inaction is fooling yourself. Try a first step. The IEA analysis has revealed that fossil fuel consumption subsidies amounted to $557 bn in 2008. Now tell me how killing those subsidies is costing the economy?
  28. scaddenp77 : "Now tell me how killing those subsidies is costing the economy? " Have you even looked which where the countries subsidizing fossil fuels on the link you indicate ? 1. Kuwait 2. Iran 3. Saudi Arabia 4. Qatar 5. Venezuela 6. Lybia 7. UEA 8. El Salvador 9. Turkmenistan 10. Algeria and it goes on and on, with no OECD country. So are you saying we should ask those countries to stop subsidizing fossil fuels ? Why do you think they are subsidizing fossil fuels in the first place ?
    Response: [DB] Please provide a link to the source you used to derive the above list of countries as it does not appear in scaddenp's linked source.
  29. Energy subsidy data
    Response: [DB] Considering that the majority of the globe in the linked source you provide has invalid data, the needed context to derive any substantive conclusion is entirely missing. And thus no weight should be given to it.
  30. Helena: The list you provide is nowhere to be found in the 2-page PDF scaddenp links to. The online database available at the IEA website (the database itself is here). The database appears to corroborate your list. That said, that the IEA does not provide detail on any major economies does not in fact mean that they do not subsidize their fossil fuel industries (suggesting the IEA estimate may be an underestimate) in at least some cases. For example, Ed Brayton of Dispatches from the Culture Wars links to an article documenting the effective tax rates and tax subsidies of the largest companies in major industries in the US. Of note, over the period 2008-2010 the "Utilities, Gas & Electric" category pays a mean effective tax rate of 3.7% (surely a subsidy in its own right) as well as receiving $31 billion in subsidies, and the "Oil, gas and pipelines" category pays a mean effective tax rate of 15.7% as well as receiving $24 billion in subsidies. (Those effective tax rates are contrasted with the nominal corporate tax rates all US corporations are expected to pay on profits of, as I understand it, 35%.)
  31. I'm assuming Helena's list is derived from one of the metrics used by the IEA database. Is that correct?
  32. Guys that's where the 557bn $ figure comes from ! Just click on the links of IEA website, all the numbers are there : Last page, just add the numbers up. So, are we gonna ask those countries (to my knowledge most people here are from US/Canada/EU) to cut their subsidies ? Ranking in bn $ (2008) : Iran, Russia, Saudi Arabia, India, China, Egypt, Venezuela, Mexico, Indonesia, Argentina, Iraq, Uzbekistan, UAE, Pakistan, Ukraine, Malaysia, Kuwait, Algeria, South Africa, Thailand, Chinese Taipei, Turkmenistan, Ecuador, Bangladesh, Libya, Qatar, Vietnam, Nigeria, Kazakhstan, Azerbaijan, Angola, Colombia, Sri Lanka, Peru, Brunei, Korea, Philippines. Sum = 557 bn $.
    Response: TC: Added link.
  33. The IEA database doesnt cover many developed countries yet. You can get OECD consumption subsidy estimates here and in spreadsheet form here. Note USA at 15 billion in consumption subsides. I'm not exactly sure why you think it matters who is subsidizing. All that matter is that it stops. You should end of paying more for energy if you use fossil fuels but less in tax. OECD estimate of producer subsidies are around $100B and detailed here.
  34. "All that matter is that it stops." Why do you think those subsidies exist in the first place ? "You should end of paying more for energy if you use fossil fuels but less in tax." Not sure to get it...
  35. Why? Beats me. Usually someone with a lot of pull in government is reason for subsidies. It means the government is trying to pick winners instead of the market. Better to give citizens their taxes back and let them choose. Why right-wingers support subsidies is beyond me. My country pretty much went cold turkey on subsidies on anything other health care and education during 80s and 90s. I note we (NZ) are still listed as subsidizing to tune of NZ$14M in management of data,R&D and data aquistions; and $38M in fuel duty exceptions for off-road vehicle use -(justified by fact duty is levied to pay for the roads). How does your country do?
  36. "It means the government is trying to pick winners instead of the market. Better to give citizens their taxes back and let them choose." Would you also kill all subsidies to renewables ?
  37. Yes, if there is any. (None here). Again, that puts government in the position of picking winners. If price support is necessary for de-carbonizing then price carbon accordingly. Use pigovian tax on carbon to keep the libertarians happy. ETS is another way, (we have very half-hearted version slowly coming in) but I am not convinced it is effective nor cost-efficient. I would consider supporting "subsidy" in way of R&D, particularly into say next-generation nuclear where there are hurdles that make normal market mechanism for funding difficult. It would depend a lot on the detail of the R&D.
  38. Helena: "also kill all subsidies to renewables ? " Not a real comparison. Subsidies exist to encourage companies to take risk. The coal industry got land grants. Oil depletion allowances have been part of US tax code since the 1920s, when the oil industry was still in its developmental stages: The federal government has always been in the energy business, and with good reason. Private capital may be good at identifying and incubating new technologies, but bringing those technologies to commercial scale often requires significant public capital. Land grants, for instance, helped build the coal industry, Depression-era spending created hydroelectric dams, and the Defense Department helped develop the first nuclear reactors. The oil and gas business benefited hugely from tax breaks like the oil depletion allowances that go back to the 1920s and were intended to encourage production in what was then a risky game. You can't compare subsidies for an established, highly profitable industry to subsidies for risk-taking new ventures and startups.
  39. Muon, my point was that the 557 bn $ figure is money from countries that are free to do whatever they want, buying social peace through energy subsidies and allowing the development of the poorest being two examples. I guess scaddenp's point would be that it's always easier to take risks ("subsidies for risk-taking new ventures and startups") with other people's money.
  40. With regards to It means the government is trying to pick winners instead of the market. Better to give citizens their taxes back and let them choose as raised by scaddenp In point of fact, due to a number of factors, most especially: (a) negative externalities of fossil fuel use (which are the main point of this site given its focus on the rapid global overheating caused by fossil fuel CO2 emissions) (b) the information asymmetry between producers & consumers of energy products (c) various perverse incentives that can exist when the interaction of energy producers & consumers results in collective action problems I would suggest that markets aren't very good at picking winners in cases where these three phenomena are at work: they are well-known market-distorting effects (negative externalities especially, since they lead to over-production of goods with externalized costs). IMO quite obviously, the fact that factor (a) is in play at all suggests that markets can easily pick - and stubbornly hang on to - 'loser' energy generation technologies. With regards to my point was that the 557 bn $ figure is money from countries that are free to do whatever they want, buying social peace through energy subsidies and allowing the development of the poorest being two examples as raised by Helena, I should note that not a lot of social peace has come from those energy subsidies taken on their own, then (e.g. Egypt & Saudi Arabia), and I am sure I would appreciate a reference showing that energy subsidies, in and of themselves, are sufficient to alleviate widespread poverty (especially when one considers the climate-related disasters that, say, Russia & Pakistan recently had to contend with).
  41. Helena's "it's always easier to take risks ("subsidies for risk-taking new ventures and startups") with other people's money." Well indeed, as that seems to constitute the bulk of the activity in stock exchanges these days...
  42. Suggested reading: “Ka-Ching: Big Oil’s Mighty First-Quarter Profits: Keeping Tax Breaks for Biggest Oil Companies Is Ludicrous,” Center for American Progress, May 1, 2012 To access this article, including financial data for the 1st Quarter of 2012, click here.
  43. So Helena, I take you agree that killing the subsidies is a good start, (you still seem to assuming that absence of data in the online database for developed countries means that most of subsidies are elsewhere,despite the OECD figures.) And lets not have high school debating tricks please about ducking the substantive question.
  44. I think this article fails to adequately answer the "skeptical" viewpoint quoted at the top, since it focuses mainly on the USA. The world outside of North America contains an enormous number of very poor people who would benefit from being able to live in air-conditioned apartment buildings instead of sweltering, rat-infested slums. Can such an improvement in the masses' quality of life be achieved without increasing their carbon footprint? I suspect that the answer is no. I am not a "climate skeptic". I think that man-made climate change is real, is happening, and will probably have catastrophic effects. But a solution that involves making cheap electricity more expensive must surely be expected to place a terrible burden on the many humans who can barely afford electricity now. Arguments that carbon pricing would increase the GDP of a highly developed economy such as the United States seem irrelevant to this problem.
  45. D.B. - two things. First, yes poor people can be provided with power without significantly increasing their carbon footprint, if that power is provided from renewable sources. Second, the poor are disproportionately impacted by climate change, so you have to take that factor into consideration as well when evaluating the economics of the situation.
  46. 94, D.B., I think my problem with that particular argument is that the developed world isn't bending over backwards right now to improve quality of life around the world, and the carbon footprint involved is in no way the "limiting factor." That argument amounts to "there are poor people, and if we were to actually decide to try to help them, this would make it even harder, so we shouldn't do anything." The reality is, however, that western perceptions of what will be helpful (and in fact are feasible) are simply not relevant. The simplistic idea that you'll simply change every society to live like "The West" is absurd. Real solutions involve things like this.
  47. Responding to Comment here markx - "equitable" <> "equal". What I means is that most of the extra carbon in the air is from the west. Other countries need to emit to grow their economies while the west has the wherewithal to decarbonise. I would also notice that in the west, it is predominantly the rich convervatives on the right that deny climate change and resist calls for decarbonising. Mind you a carbon-tax on the border would ensure that exporters to the west would rapidly look for ways to decarbonise too. Let the market work its magic.
  48. Mal Adapted - We are already paying the external costs of fossil fuels, in health and environmental damage. Shifting those costs to the producers, as with a carbon tax, does not subtract the value from the economy twice. To use your phrasing, there is no such thing as a free lunch - but approaches such as carbon tax don't mean you have to pay for two of them... Adaptation to climate change (with Business As Usual/BAU) will by conservative estimates cost 10x what mitigating additional CO2 now will, (by, for example, shifting those costs to the producers, hence providing incentive to move to renewables). If we want to minimize economic damage, that's the approach we should take.
  49. Mal Adapted wrote: "If they were, we'd all be paying much more for heat, electricity and transport already" We do already pay much more for these things... we just pay the extra costs in taxes that go to the subsidies, healthcare costs, food costs, water costs, wars, increased natural disaster cleanup, et cetera. If we switched to renewable energy we might be paying more for the upfront cost of energy (though even that isn't certain), but the total cost would be much much less... so we'd have more money available... so the 'impact' to the economy would be positive. And hence no, "radically reordering our economic and political systems" (aka 'we must declare martial law and abandon all technology!'). "And at least in the early stages of transition to sustainability, without some kind of assistance the poorest may actually freeze to death in the dark -- at infinite cost to them." Who did you think it was dying from AGW, food prices, water prices, wars, pollution, et cetera now? The rich?
  50. It appears I've given the impression I'm opposed to a carbon tax. For the record, I think a carbon tax is the most efficient way to internalize some of the external costs of fossil fuels and encourage their replacement with renewables, and the sooner a substantial carbon tax is in place the better. Some of our disagreement here is because we're focusing on different time scales. My argument is that (assuming the tax isn't rebated in the right way), average buying will decline while the carbon tax is in place, before the transition to renewable energy is complete. After that, once energy unit costs stabilize and once the socialized costs you enumerated are no longer being paid (and little or no carbon tax is being collected), it's reasonable to predict that average buying power will be about the same as today. However, the socialized external costs of fossil fuel use we're currently paying don't include things like the death of coral reefs from ocean acidification, the imminent extinction of the polar bear and the costs of weather disasters 50 years from now. These costs will be incurred even if all carbon emission ceases today. It's doubtful that a carbon tax could internalize them. The argument of Naomi Klein that I linked to, and that I think is ineluctable, is about more than systems of energy production. It's about the costs that have been external to total gross global product until recently, but are now being socialized: groundwater overuse in the Great Plains; overfishing of all seafood stocks; growth of urban areas forcing agriculture onto less productive soils; the list goes on and on. This is the liquidation of global natural capital I was referring to, and as long as any of it continues, global society will not be sustainable. I can't escape the conclusion that ending liquidation of all natural capital will require "radically reordering our economic and political systems", and neither can some of the more forward-looking deniers. They want to keep socializing the loss of natural capital while they continue converting it to private gain. That's the freedom they're afraid of losing, as well they should be.

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