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How I lived through a carbon tax and survived to tell the tale

Posted on 8 April 2011 by Dan Moutal

A guest post by Dan Moutal, the voice of the Irregular Climate Podcast. Follow him on Twitter @ScruffyDan

Just over three years ago the province of British Columbia (BC) on Canada’s west coast implemented a revenue neutral carbon tax. And the world didn’t come to an end.

But three years on it is easy to find people who continue to unfairly criticise the policy and show that they simply don’t understand it.

For example this article from the New York Times:

John Hunter despises [the carbon tax].

"I've already insulated my house to be energy efficient. I already turn down my thermostat. Why should I have to pay $20 on my natural gas bill for something that is doing nothing for me?" the 64-year-old engineer said in an interview from his home in North Vancouver, British Columbia. His anger about the C$21.85 charge on his C$263 December bill prompted a protest op-ed in a local Vancouver paper. (One Canadian dollar equals roughly 1.02 U.S. dollars.)

What John Hunter might not realize is that the the carbon tax here in BC is revenue neutral. Meaning that every penny collected by the tax is returned to the public in the form of tax rebates (aka cheques in the mail) and lower income and corporate tax rates. So while John Hunter might have to pay a little extra to heat his home, he gets to keep more of his income in his pocket, and so does his employer. In fact it is entirely possible that Mr Hunter’s income tax savings are a fair bit larger than the $20 monthly charge on his home heating bill.

And since Mr Hunter has already taken steps to insulate his house and make it energy efficient, he is emitting less carbon and thus paying less taxes. The carbon tax gives people some amount of control over how much taxes they end up paying.  Instead of taxing the good (aka income), the carbon tax taxes the bad (aka GHG emissions). Emit less and you pay less taxes.

In fact thanks to the carbon tax, BC has the lowest income tax rates in Canada for people earning up to $118,000, as well as very low rates of corporate and small business taxes.

Yet that is rarely mentioned when the tax is criticized.

But let's back up a little; what exactly is the carbon tax policy here in BC? I need to be upfront and say that the tax here is modest. It started out at $10/tonne and has been increasing by $5 each year untill it reaches a maximum of $30/tonne in 2012. And as I mentioned earlier, all the money raised by the tax is refunded back to residents and businesses in BC.

So how has my life changed since the introduction of the tax? The short answer is that it hasn’t really changed much at all. The biggest change is that I get quarterly carbon tax rebate cheques from the government, because I fall into the low income tax bracket.

Sure gas and home heating is a little more expensive. But the economy did not collapse and I am proud to say that at no time did we travel back in time to the Stone Age.

And that price on carbon is exactly the point. By pricing emissions there are now greater incentives everywhere to reduce greenhouse gas (GHG) emissions. Activities or products which lead to lots of emissions are now relatively more expensive, while their low carbon counterparts are not. This leads to millions of small individual choices that result in less emissions. Those renovations Mr. Hunter made will pay for themselves sooner than they otherwise would, because of the carbon tax.

But there are limits to what a modest carbon tax like the one here in BC can do. At the maximum rate of $30/tonne, the results will never be sufficient to reduce BC’s GHG emissions enough to avoid the worst impacts of climate change, to say nothing of the GHG emissions of the rest of Canada or the world for that matter.

For that the carbon tax would have to be higher, with coresponding larger tax decreases elsewhere, and apply to a much larger jurisdiction.

Here in BC we have just taken a successful first step.

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Comments 201 to 248 out of 248:

  1. Oh and on "those subsidies were put in place to encourage exploration because a reliable fuel supply is absolutely necessary to ensure the security of our country. " You mean the government was deciding what was the most reliable fuel supply instead of the market? I don't buy it. If FF was the best answer then it didnt need a subsidy. Nuclear or renewables might be answer to current problem but I still wouldnt back subsidies for them. Set it up so market finds the best answer.
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  2. @ Gilles You are missing the point. Of course we don't know exactly how to create a fully FF free energy system. If we did we would just get the government to mandate the solution. But we don't know and that is WHY you implement a price on carbon. So the free market can figure out all those pesky details. It is damned good at doing just that. Nothing beats it. This has been explained often to you in this thread, and again in the interviews I asked you to listen too. But you continue in missing the point. Is it too much to ask that you keep on topic?
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  3. @ Gilles " the issue is to replace them [FFs] at no cost, for a given standard of living. " Hang on!!! What?!? No cost? Why? Given the huge costs of inaction, it makes perfect sense to do this even at substantial cost, even though the best estimates show the costs are minimal, and if history is any guide overestimated. I think you really need to stop, and take some time to think this through. It is abundantly clear that you haven't.
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  4. 202 : My argument was that the natural increase of the resource extraction cost would have exactly the same effect - and actually this increase has been much larger than any tax these last years. You seem to miss a point : that the amount of FF that could threaten the Earth in FF intensive scenario can only be produce at an expensive cost anyway, because cheap FF are much less than that. So why would a carbon tax discourage people from using FF that would be sold anyway at a much higher cost than that a tax can produce ? either they're not discouraged by the extraction cost - and won't be either by a tax. Or they would be discouraged by a tax - but by high extraction costs as well. In both cases, the tax doesn't have any significant effect - which is precisely what is observed. Historically, taxes had some interest in the past when FF were cheap - the interest of sparing them and making them last a little bit longer. But this time is mainly over.
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  5. "Hang on!!! What?!? No cost? Why? Given the huge costs of inaction, it makes perfect sense to do this even at substantial cost," but it is at the expense of a substantial cost, how wouldn't it affect economy ? I'm rather lost in your various estimates of what increasing costs can produce, following what you're arguing : sometimes they don't produce anything (for instance in SRES BAU growth scenarios, the fact that cheap conventional resources will be exhausted and replaced by expensive unconventional resources doesn't seem to have any effect on their consumption !) , sometimes it is supposed to provoke recessions (peak oil fears), sometimes it just lead people to switch to other sources ... the economic rules seem to be very flexible following what we want to demonstrate !
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  6. @ Gilles. "and what is the point that oil is needed for transportation ? (but also for fishing for instance, and some left is used for heating where geothermal warmth is not available). Isn't transportation necessary for a modern economy ?" I keep on telling you, Gilles, but you keep on choosing *not* to listen-its a *very* annoying habit of yours. There already exists perfectly feasible substitutes for oil, but its going to take time to make the switch-the fact that you continue to choose *not* to accept that such a switch is possible only speaks to your ideological-based blindness on this matter. "A) it is possible when non-intermittent and steerable hydro and geothermal power is available - otherwise, it's just wishful thinking up to now." Well, so you keep on claiming, but you've not exactly been too upfront with too much *evidence* to prove your point. There are plenty of examples, across the globe, where various renewable energy technologies are *already* being used in a non-intermittent & steerable fashion. That's not wishful thinking, that's *here* & *now*-again, its only your ideologically based *blindness* that prevents you from seeing that (you'd much rather rely on fossil fuel industry propaganda). B) "again - you mix up technical feasibility and economical one - the issue is to replace them at no cost, for a given standard of living." ....and, yet again, you've provided *no proof* that they aren't economically feasible. Seriously, I might accept some of your more outlandish claims if you could provide even a *shred* of data to back up your claims-well, data from sources that aren't obviously fossil fuel industry propaganda (which, it seems, is all you bother to read). The reality is that *no* source of energy was, at its outset, economically feasible-but that didn't stop them being adopted. It took *decades* & many billions of dollars-in todays money-to get coal-fired electricity prices down, even to the level that fuel cells & renewable energy *started* at. However, your attitude seems to be that, no matter there starting cost, we should *never* ever switch to renewable energy-even though those starting costs are already competitive, with fewer subsidies, with fossil fuels. "Electric furnaces only oxidize carbon rich iron cast, or recycle already used metallic pieces, either by mixing them with iron cast, or by using carbon electrodes." Again, you've proven your inability to *read*. I never said otherwise. Funny, though, how more & more smelters are switching *away* from blast furnaces & towards arc furnaces. I guess you'd better tell them that they're *all wrong* to do that. "We don't know how to produce the current quantity of steel without coke." Again, so you keep claiming, but once again your claims are short on *facts*. As I've already said before, all you need is a substance that is as "willing"-if not more-to give up electrons to the metal oxide as carbon is. Not that I can see any reason why the carbon has to be fossil fuel based. I've already read about how they're using organic sources of carbon (like Biochar) to reduce metal oxides. Seems thats another claim thats short on actual fact, but long on ideology. C) "well, not bad ... what do you think is the growth rate ?" Totally irrelevant. Those numbers were from 2 years back, & are simply *proof* that it *is* possible to substitute oil for our transportation needs & that, as the infrastructure is put in place, that substitution will continue apace. [small snip]
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    Moderator Response: [Dikran Marsupial] Please can we keep the discussion as impersonal and scientific as possible (whatever the perceived provocation).
  7. [snip]
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    Moderator Response: [Dikran Marsupial] Gilles, Marcus made many substantive points in his post that you could usefully address, notably provision of evidence, rather than concentrating on a (now moderated) inflamatory throw-away line at the end. Please do so, so that I don't need to waste any more of my time moderating your inflamatory responses.
  8. "There already exists perfectly feasible substitutes for oil, but its going to take time to make the switch-the fact that you continue to choose *not* to accept that such a switch is possible only speaks to your ideological-based blindness on this matter." I'm curious to know which "ideology" I'm supposed to have - it's just a matter of productivity of liquids hydrocarbons, you know. You can check that it has been used by *every* ideology, religion, or culture. Just take the list of main oil producers in the world, this is enough to see that oil is used by all industrial societies, totally irrespective of any ideological or cultural origin: Saudi Arabia Russia (former Soviet union) USA Mexico Iran Canada Nigeria Brazil "A) it is possible when non-intermittent and steerable hydro and geothermal power is available - otherwise, it's just wishful thinking up to now." Well, so you keep on claiming, but you've not exactly been too upfront with too much *evidence* to prove your point"" Marcus I am not *claiming* anything, I'm *asking* you if there is a country whose electrical grid is mainly power by non-hydro , renewable sources. It is not a *claim*, it is a *question*. Do you understand your own language ? I'm really curious to know which ideological common feature you can find between all these countries ... B) "....and, yet again, you've provided *no proof* that they aren't economically feasible. " Again, I'm not trying to prove anything. I'm asking you to explain why, if you think it is possible, it has never been achieved anywhere, even in the most favorable cases. I concentrate on Iceland because it is a perfect benchmark for me, since everything converges to make it an ideal case. If it has *not* been achieved there, where the hell do you think it will be ? "The reality is that *no* source of energy was, at its outset, economically feasible-but that didn't stop them being adopted." Actually, the reality is just the opposite, but you may need to refresh some historical facts : http://en.wikipedia.org/wiki/John_D._Rockefeller For electric furnaces , i repeat : we don't know how to reduce economically iron oxide without carbon - and that's true even in electric furnaces. If you want to produce the current steel production with charcoal - do it. Good luck. "C) "well, not bad ... what do you think is the growth rate ?" Totally irrelevant. Those numbers were from 2 years back, & are simply *proof* that it *is* possible to substitute oil for our transportation needs & that, as the infrastructure is put in place, that substitution will continue apace. " No - it is simply a proof that a rich country can make some advertising on "green technologies" on a very small scale, but quickly stops spending useless money when they're in deep economic trouble, and cannot afford anyway these expensive "danseuses", as we say in French. http://www.eenews.net/public/climatewire/2009/07/01/1
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    Moderator Response: [Dikran Marsupial] Please can both sides steer clear of discussion of ideology. Many thanks in advance.
  9. OK Gilles, I'm going to explain things s-l-o-w-l-y, so that even *you* can understand. I made it abundantly clear, time & again, that I was *not* talking about what is *currently* being done, but what can *potentially* be done-here & now. From my extensive reading on the subject, there are a number of inescapable facts: 1) There is *currently* no technical or economic impediment to making a transition to a 100% renewable energy electricity grid (& yes that includes hydro). The only impediments or political inertia & the overwhelming power of the fossil fuel lobby. 2) There is *currently* no technical or economic impediment to making a transition of our transport network to a mixture of hydrogen, electric & bio-diesel. 3) There is currently no technical or economic impediment to making our industrial sector 100% *Carbon Neutral* Now this conclusion is based, not just on reading material from Green Groups, but from reading Science & Technology magazines & the reports of hard-nosed energy & economic organizations (like the EIA). The transition won't happen overnight but, as long as vested interests don't get in the way, it is entirely possible to achieve these goals in about 20 years-probably less time in developing nations where a pre-existing energy network doesn't already exist. Now, unless you can provide *evidence* to prove my above claims wrong, then I'm probably just going to ignore any of your future hand-waving rants.
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  10. "I'm curious to know which "ideology" I'm supposed to have" I was referring to your [snip] pro-fossil fuel ideology. "I concentrate on Iceland because it is a perfect benchmark for me, since everything converges to make it an ideal case. If it has *not* been achieved there, where the hell do you think it will be ?" As I've said, Iceland is still on track to achieve a fossil free future by 2050. If they can achieve it, with such a small population & specialized economy, then larger more diversified economies should be able to achieve that goal *even quicker*. Unfortunately we're still being impeded by vested interests. "Actually, the reality is just the opposite, but you may need to refresh some historical facts : http://en.wikipedia.org/wiki/John_D._Rockefeller" You are *aware* that oil prices in the US were strictly controlled in the US, by government policies, right up until the end of WWII? By contrast, coal-fired electricity cost more than $2 per kw-h to generate (in today's money) back at the end of the 19th century. It took close to 50 years to get the prices closer to those we enjoy today. Cars were a very expensive luxury item when they were first put onto the market. It took many decades for them to become affordable for *all* people. The same is true of the first TV's. So in truth, with the exception of oil, my claim holds very true. "No - it is simply a proof that a rich country can make some advertising on "green technologies" on a very small scale, but quickly stops spending useless money when they're in deep economic trouble, and cannot afford anyway these expensive "danseuses", as we say in French." Did you even *read* the article you linked to? They haven't ditched the scheme at all, its simply going a bit slower. The point is that it *proves*, in spite of your hand-waving, that it *is* possible to replace hydrocarbons with hydrogen for such things as fishing boats & buses & other heavy vehicles. That remains the case in *spite* of the financial crisis.
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    Moderator Response: [Dikran Marsupial] inflamatory adjective snipped
  11. Marcus @ 209 Impediments galore exist in the legal world. Most of the alternative energy projects in the US are caught up in permitting red tape and lawsuits. Most of the opposition comes from "green" groups and their illogical not in my backyard attitude.
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  12. Dan @ 199 How was more than 100% returned? Where did the "extra" come from?
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  13. "I was referring to your [snip] pro-fossil fuel ideology." my whaat ? " Cars were a very expensive luxury item when they were first put onto the market. It took many decades for them to become affordable for *all* people. The same is true of the first TV's. So in truth, with the exception of oil, my claim holds very true." you just forget something : we already have cars. " its simply going a bit slower. " oh BTW, concerning your " Well Iceland currently has around 50 hydrogen powered buses, both at home & abroad-which isn't bad for a program only started in 2005." actually the link says :"The three original hydrogen buses did not lead to a wholesale transformation of the Reykjavik fleet. Instead, now all buses run on conventional fuels. "The bus project has now been terminated; we are waiting for the next generation to be built," Arnason said." seems they're going slower .. backwards.
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  14. @Gilles " the economic rules seem to be very flexible following what we want to demonstrate !" Please go back and read my previous comments, then go listen to the interviews I posted. The reason why high extractions costs wont reduce emissions has already been answered. (hint tar sands) @ Harry Seaward "How was more than 100% returned? Where did the "extra" come from?" Mostly from personal and corporate income taxes. The act which introduced the carbon tax also introduced tax reductions elsewhere. It turns out that these these tax reductions were larger than the amount collected by the tax. Hence more than 100% reduced.
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  15. 188, Harry Seaward,
    Yes, your quote below is absolutely correct, but...
    Yes, except that the quote wasn't directed at you, and had to do with a thread that had absolutely nothing whatsoever to do with capitalism.
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  16. 191, Harry Seaward,
    ...those sectors that you listed you are compensated based on your experience, education, seniority, etc... and not a common pay.
    I'm not going to let this devolve into an argument about capitalism, communism, and socialism, but I should point out that this statement denotes a deep misunderstanding of what socialism is (especially considering that it has no one definition, and has meant many things depending on the period of time, sociopolitical conditions, and the parties involved). As far as a carbon tax goes:
    Right now most Americans aren't buying into it and the trend is increasingly negative. I don't know where you are from, or what your profession is, but the general public is not in agreeance with you.
    Even if this were true, most people were in favor of slavery for much of American history. Being in the majority does not make one right. Beyond this, I'm not sure that it's true. Fox News polls would say so, but I'm hardly about to trust Fox. And even then, if they don't believe so, it's because the denialist movement has been so effective in obfuscating the truth. But the fact is, quite simply, that global warming is real, the planet will continue to warm, and that fact will eventually become quite undeniable. The only question is when the majority will realize it, and act, and if it will be in time to alleviate much of the suffering that will accumulate beyond what is already inevitable.
    However, a carbon tax is still a prime example of redistribution of wealth that is a tenet of the socialist dogma.
    Again, no. Modern, actual socialism has nothing to do with redistribution of wealth, and trying to label any tax as socialist is clearly a debate tactic, meant to frighten people.
    If the purpose on putting a tax on FF use is to make other energy sources more attractive...
    Yes, because it makes using FF themselves more expensive, and therefore makes non-FF alternatives competitive in pricing. A tax on FF gives the consumer a choice. Then the consumers can (remember capitalism?) drive the ways in which we move into a non-FF based economy, through the choices they make (remember capitalism?) without the artificial influence that exists now, i.e. that FF are cheap primarily because the entire infrastructure is already built around FF.
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  17. "The reason why high extractions costs wont reduce emissions has already been answered. (hint tar sands)" The issue is that high extractions costs have reduced emissions ! It's very clear that the production of FF has leveled off during the spike of barrel price, and will do it again with the current new spike. And tar sands production hasn't risen - for the good reason that nobody wanted to buy more. Personally I'm not fond of "reasons" explaining non-existing facts ...
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    Moderator Response: [Dikran Marsupial] ISTR having pointed this out before, but extracting FF from tar sands takes up a great deal of energy. You can't measure total emissions by counting barrels of oil shipped, because that ignores the carbon emissions from energy expended in extracting it. For tar sands, that is very far from negligible. There is also the issue that oil sales are not necessarily driven purely by demand. Oil is not in plentiful or unlimited supply, and it is not necessarily to the economic advantage of those that hold the reserves to sell in such quantities as to satisfy demand. Thus the levelling off of sales does not necessarily imply that the cost of extraction is the cause of the levelling off, or that total carbon emissions are also levelling off. The Earth doesn't care if the carbon emissions are from tar sands oil or from energy expended in extracting the oil from the tar sands. The CO2 is a greenhouse gas either way. Also oil is not the only FF. IIRC also a major justification for tar sands is security of supply rather than cost. Apart from that the comment is fine.
  18. "you just forget something : we already have cars." Wow, is that the *best* you can do? Hilarious. In the 19th century, we already had a number of relatively cheap modes of transportation (horses, horse-drawn carriages, bikes, our own two feet). Yet that didn't stop the public & private sectors from collectively investing in the construction & sale of very expensive motor cars-or the construction of an entire fuel infrastructure. Similarly, when TV's first came out, we already had access to a number of relatively cheap entertainments (the radio, the theater, the movies). Yet, again, that didn't stop the manufacture & sale of relatively expensive TV sets-or the construction of an entire infrastructure to make us of the new medium. Now of course most renewable energy sources aren't starting off nearly as expensive-relative to existing energy options-as cars & TV's were relative to their pre-existing "competition". The *real* point of my analogy, though, was that once economies of scale got going, both cars & TV's (& coal-fired electricity for that matter) all came down in price until they were affordable to the masses. In the same vein, the life-cycle costs of renewable energy technologies will continue to improve as economies of scale (& improved manufacturing technologies) kick in. Meanwhile, increasing scarcity of fossil fuel resources will make the life-cycle cost of coal-fired electricity even more expensive. So much so that I feel confident in making the following prediction-the nations which have failed to make a switch towards a *mostly* renewable energy fueled economy, by around the middle of this century, are setting themselves up to the Third World Countries of both the latter half of the 21st century & the 22nd century.
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  19. @ Gilles The mods are right of course, but are still only looking at part of the puzzle. Oil isn't the only FF. Coal is also an issue, arguably an even bigger one than oil. And as oil prices have risen more than a few people have contemplated coal liquefaction, which absent a price on carbon would release even more GHG emissions. And we are still only looking at the liquid fuels part of the problem. High fossil fuel prices mean that more unconventional fossil fuels become economically viable, and in many cases (like the examples above) they are dirtier than the conventional fuels they replace. Hence why a price on carbon emissions is essential to lowering GHG emissions. Otherwise one can have both rising FF costs AND rising emissions. All of this was explained in the interviews I posted. Please listen to them, you can learn a lot from someone who has spent a great deal of time thinking about the issue.
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  20. @ Gilles " And tar sands production hasn't risen - for the good reason that nobody wanted to buy more." I couldn't let this slide by. It is absolutely false. The Tar sands are still booming. In fact The US just opened up its first tar sand operation. People are still addicted to oil. Demand is as high as it ever was.
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  21. Gilles#217: "high extractions costs have reduced emissions ! It's very clear that the production of FF has leveled off during the spike of barrel price" By 'the spike,' I take it that you mean 2007-2008. Yet your graph shows that production leveled off in 2005. Unless we have some kind of time-travel inverting causality here, I'm not sure how you accomplish this. How do you translate the spike, a short-term event (by the definition of the word 'spike') to a reduction in emissions, which did show a measurable decrease until the recession of 2008-2009 flatlined economic activity? And what, exactly, does increased price paid to a producer per barrel of oil have to do with extraction cost? Friendly word of advice: Until you have some legitimate understanding of the oil business, you really should stop believing everything you read on the peak oil blogs. Or at the least, apply some of the finely honed skepticism that you've displayed here.
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  22. I'm sorry gentlemen, but do you have already looked at how much oil do tar sands, CTL, and so on , really produce ? and their contribution to the CO2 increase ? and the planned production for the next 30 years ? before believing all the speeches you hear here and there, first, check the numbers. Marcus : there is a lot of things to answer, but i will only mention one : the fuel cell was * already* invented when the cars appeared, and furthermore first cars were *electric*. All these technologies have had plenty of time to develop and improve - darwinian selection has acted to choose the more efficient. There is absolutely no law saying that things always improve indefinitely - your comparisons are irrelevant. Some things improve more than others, (and then you select them by an a posteriori bias) , but everything we'd like to happen doesn't always happen. Usually , people start realizing that at the age of 10 or so. I know that oil isn't the only FF, but it is the first one to reach its maximal production, so it's a test of the theory "when prices increase, the amount of reserves increases and so the production doesn't decrease" . Applied on oil, the theory fails - I don't know why it would succeed with oil and natural gas. Muoncounter : "By 'the spike,' I take it that you mean 2007-2008. Yet your graph shows that production leveled off in 2005. Unless we have some kind of time-travel inverting causality here, I'm not sure how you accomplish this. " That's a very good point , but may be you could ask another question : but why did prices climb to the sky in 2007 -2008 ? I think your remark gives the answer. This is precisely because the theory fails. The beginning was : first geological constraints limiting the production , then increase of prices. At this point, things derail. Theory says : increase of prices -> more accessible resources -> more production. Why didn't it work? because first increase of oil prices increased also the prices of all commodities , that use oil to be produced , and then extraction costs increased as well ! it wasn't so profitable after all. And then came the recession - no demand anymore. You may think that the recession has nothing to do with oil, I think things are more complicated , but anyway , it gives the answer : demand will not increase because high prices provoke recessions - and if there is no demand, producers won't invest in expensive resources that nobody will buy.
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  23. Applied on oil, the theory fails - I don't know why it would succeed with coal and natural gas, sorry.
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  24. Dan, your interview doesn't bring anything new , it is the conventional wisdom of economists - exactly that that failed to predict oil crisis. And of course it doesn't address at all the issue of how preventing other people , either elsewhere in the world or in the future , from using the spared FF you let at their disposal.
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  25. @ Gilles "it wasn't so profitable after all." Yet: Exxon 2008 profit: A record $45 billion "it is the conventional wisdom of economists - exactly that that failed to predict oil crisis." Being able to forecast future oil price spikes (aka short term fluctuations) isn't the same thing as predicting what will happen with a gradually increasing price on carbon. Not even in the same ballpark, though it is the same sport (economics). It is much the same as the difference between predicting weather and climate. But you might want to read up on another Canadian Economist (one who does this kind of forecasting) Jeff Rubin. You might surprised at what he predicted. But you are right. That a gradually increasing price on carbon will reduce GHG emissions IS the conventional wisdom of economists. That is why I have so much confidence that it will work. I like the conventional wisdom of experts. Or as some call it consensus (BTW did you look at the document I posted about the consensus of economic opinion?) And finally then we come back to this: "it doesn't address at all the issue of how preventing other people , either elsewhere in the world or in the future , from using the spared FF you let at their disposal." Round and round we go. Back to square one. (Hint: a price on carbon cannot be applied in only one jurisdiction and expected to solve our emissions problem, but we have already been over that before.) I should stop and climb out of this rabbit hole but I have a terminal case of: Duty Calls And I want to see what other gems you might post.
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  26. "@ Gilles "it wasn't so profitable after all." Yet: Exxon 2008 profit: A record $45 billion" I meant : investing in the exploration of new fields wasn't that profitable after all. Of course high prices increase their income , obviously. The fact is that they made high profits precisely because they didn't all spend this money for finding and starting the exploitation of new fields. That's why a new oil shock is impending - and why production didn't increase that much, despite your economist's forecasts. "It is much the same as the difference between predicting weather and climate." 150$ a barrel was a spike, but prices over 80 $ are definitely a long term trend. Cheap oil is over - and I defy you to find any forecast from your favorite "experts" having predicted this would happen so soon, ten years ago. "That a gradually increasing price on carbon will reduce GHG emissions IS the conventional wisdom of economists. " so why would the production keep on increasing after the exhaustion of conventional resources in BAU scenarios, since non conventional resources require high prices anyway ? You say "because FF companies will earn a lot of money and can turn to more expensive resources", but you didn't explain why the demand would keep increasing! " That is why I have so much confidence that it will work. I like the conventional wisdom of experts." I advised you first to compare their predictions with facts. A french expression says : "An expert is someone who will know tomorrow why what he predicted yesterday didn't happen today". But maybe you say the same in English :)
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  27. @ Gilles "you didn't explain why the demand would keep increasing!" Seriously? Lets see, we have a growing population, and an emerging middle class places like in China and India. That pretty much guarantees that demand for energy is only going to go up. Hence the need to make the dirty energy more expensive than the clean stuff. Otherwise we should expect more CO2 emissions as people shift from oil, to dirtier (but eventually cheaper) sources of FF.
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  28. Bottom line. Left to BAU eventually prices will get high enough to lower demand and slow down emissions. With oil I admit you have half a point. The era of cheap oil is over and transportation technology is beginning to move away from FF use. Obviously there is still a long way to go but there is progress on this front. Emissions due to oil will still likely go up as demand continues to increase, but if gas prices continue on their upwards trajectory we can expect demands to begin to slow as well. Will that happen fast enough? That remains to be seen. My guess is no, hence only half a point. But as mentioned before oil is only part of the problem. Coal is responsible for more emissions than oil and there is still a whole lot of it left. It will remain artificially cheap thanks to the fact that the most significant costs associated with the burning of coal are externalized. A whole lot of coal needs to be burned before prices rise enough to make a dent in demand. A carbon tax prevents people from switching from mildly dirty fuels like oil to very dirty fuels like coal.
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  29. The summary of the summary: A carbon tax makes the dirtiest fuels the most expensive. This encourages the use of cleaner fuels and allows the free market to find and develop substitutes for the dirty fuels. It really is that simple.
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  30. it would really be that simple if the carbon tax were much more than the natural rise of prices - what i'm arguing is that it is not true, and so that there is no reasonable situation where the natural rise would be inefficient to curtail demand, whereas a carbon tax would be efficient - and the demand side is totally unaware of where the money is going, in a tax or in FF producer's pocket. There may be a difference for the producers, but the amount of the tax would be nevertheless negligible with respect to the price rise necessary to make non conventional profitable. Is it really that difficult ?
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  31. Gilles#226: "The fact is that they made high profits precisely because they didn't all spend this money for finding and starting the exploitation of new fields. That's why a new oil shock is impending - and why production didn't increase that much" Gilles, that's just silly. No company spends their entire profit in exploration and development; there are things called 'budgets' which are determined earlier in a given fiscal year and not necessarily changed because of an oil price spike. Oil companies like an environment of slow and steady price growth. You are also making the typical mistake of assuming there's an immediate bump in production as a result of new exploration; even in the best of times, it can take years. You made the same mistake here in #222: "Theory says : increase of prices -> more accessible resources -> more production. " Your 'theory' is nearly as incomplete as your understanding of the oil business. Perhaps some time away from the economic textbooks and peak oil blogs would provide you with some actual insight.
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  32. On the phone again @gilles "it would really be that simple if the carbon tax were much more than the natural rise of prices" Yes. Which is what I have already said is needed for the carbon tax to be significantly reduce GHG emissions. Well sort of, since the carbon tax is an increase in price in addition to other factors. A modest tax won't achieve very much. Obviously. Jaccard's calculations indicate upwards $200 per tonne of emissions is ultimately needed.
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  33. "You are also making the typical mistake of assuming there's an immediate bump in production as a result of new exploration; even in the best of times, it can take years. " Ok, let's admit it takes years to develop fields. So can you explain this kind of plot , showing how EIA's forecasts have been wrong these last years : there are actually two weirds things to explain : first, how they can have been so wrong in the short term scale, since fields need years to be develop, they should have known fairly well the rise of production in the years after 2005 - where no rise at all occured actually. And second, where have the more-than-15 Mbl/d disappeared in 2030 (more than the Saudi arabia or Russia production), in only 3 years ? if it the a matter of years, we should have plenty of time to find and exploit them , even after a rather limited plateau around now (which shouldn't last if you believe them...) But do you believe them ?
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  34. "Jaccard's calculations indicate upwards $200 per tonne of emissions is ultimately needed. " and what is the "natural" price per tC above which you can produce profitably the amount of unconventional resources , that the tax is supposed to avoid, by comparison ?
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  35. @ Giles Depends on the specific resource. As I recall the tar sands became viable when oil was roughly 30-40 dollars a barrel. But lets do a back of the envelope calculation: According to wikipedia tar sands are estimated to emit about 67 megatonnes by 2015. So a $200/tonne tax would increase the oil sands extraction costs by almost 13.5 billion. And that is only half the story, because energy consumers will emit more GHGs when they burn the oil, so they will also have to pay the carbon tax. All of a sudden low/no carbon technologies begin to look really attractive.
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  36. sorry is your $200 per t CO2 or per t C ?
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  37. per tonne of CO2 equivalent emissions, I think... hmmm, might have to do some digging, but for now lets assume my memory isn't completely bonkers.
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  38. so 1t C producing 3t CO2, what Jaccard proposes is about 600 $/t C China currently burns about 3 Gt C/yr. What you propose is to tax them up to 1800 G$/yr The average income of chinese people is about 3000 $/yr/cap, giving about 4000 G$/yr what you propose means taxing half of the income of people much poorer than western ones. I'm sure this will impact their consumption - I'm not sure they will accept it.
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  39. We have been over this already. The tax doesn't start at such levels. It starts small, and ramps up over time. This sends a powerful price signal to both consumers and producers which results in lower GHG emissions. So by the time the tax reaches such high levels people are already emitting less GHG emissions. This was directly addressed in the interviews with Jaccard. His work forcasts that the tax will increase total energy costs by about 1% per year, as dirty energy is replaced by clean energy. But yes such a tax will be a hard sell, but that is always the case when you are pushing a policy that implements some short term pain, for long term gain. Can you please go back and listen to the interviews, as well as read the various links I have provided.
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  40. sorry but why does he estimates that the tax must reach so a high value if alternatives are much cheaper ? i don't understand - as soon as the tax makes FF more expensive than alternatives, people should switch to them - so why go so high ?
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  41. Without going back and looking at the details, I can't be sure, but I can think of a few reasons right off the top of my head. Most importantly think of the amount of our energy infrastructure than needs to be replaced. It is one thing to make solar (or wind or whatever) cheaper than coal, but it is quite another to convince energy producers to shut down their coal fired power plants. Same thing goes for cars airplanes, ships, and pretty much anything that emits GHGs. And while some forms of FF have alternatives that are almost ready to go, some forms (or uses) of FF don't. Not yet anyways. Also there is the fact that we haven't yet figured out exactly how switch off FFs just yet. This means betting on a specific low/no carbon tech brings with it a fair amount of risk with it (which is why I would like the free market to figure it out and not the government), so any price advantage of low/no carbon tech has to be large enough to justify taking the risk. Otherwise it would make sense for companies to just go with the slightly more expensive sure bet. And there is also the massive inertia of FF interests, which brings with it a large resistance to change (this is somewhat related to the above notion, but exasperated by the immense power of FF interests) And finally there is the fact that economic models tent to overestimate the costs of environmental policy, because the underestimate the creativity of the free market.
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  42. Dan, I was referring to developing countries, that have no infrastructures to replace because they're just currently building them, and for most of them, don't rely on private companies but on their own national ones - which interest do they have to build now useless thermal plants (one per week in China) that they should close in less than 20 years ? the only relevant argument would be "Also there is the fact that we haven't yet figured out exactly how switch off FFs just yet. This means betting on a specific low/no carbon tech brings with it a fair amount of risk with it " maybe they just don't want to take this risk ?
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  43. @ Gilles "I was referring to developing countries, that have no infrastructures to replace" My comments apply to developing countries just the same. They pretty much all have energy infrastructure that needs to be replaced. "maybe they just don't want to take this risk ?? well yes without a carbon tax they wouldn't.
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  44. 243 Really Dan I'm surprised - why do China build more than one coal power plant per week if they don't need them ? " well yes without a carbon tax they wouldn't." and who will tax them ? It's also surprising that you reckon that there is a real risk that we couldn't replace all FF with renewables after all - which I agree with of course. But telling that, how do you compare it with the risk of CC ?
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  45. @ Gilles Please go back and re-read my comments, I never said China didn't need the power plants they are building or that there is a significant risk that we can't switch away from FF. But we are getting off topic. It seems that you have already agreed that a carbon tax can work to reduce emissions. That was the whole point of this post. Obviously selling people on short term pain for long-term gain is difficult. No argument from me there. But arguing over The exact details of how large a carbon tax should be, how fast it should ramp up are beyond both of us (neither of us have working economic models at hand). I just pointed to some research done by an economist who spends his time thinking about these issues. If you have links to research that comes to a dramatically different answer then I would be happy to look at them. Otherwise there is not much lest to discuss.
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  46. " I never said ... that there is a significant risk that we can't switch away from FF." You never said there is, or you never said there isn't ?
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  47. There is some risk, but I am not convinced it is significant. There have been a few reports that claim we already have all the tech we need to move away from FFs. What we need then is a massive deployment effort. But even if I am wrong, it is hard to imagine that any risk management policy would state we should avoid the possible risks of moving off FFs and condemn ourselves to the massive risks of climate change.
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  48. Dan#247: "we already have all the tech we need to move away from FFs" Yet it's not happening. We're still making things worse. Here is a report of state-by-state CO2 emissions from electric power generation in the US. Carbon dioxide emissions from power plants rose 5.56% in 2010 over the year before, the biggest annual increase since the Environmental Protection Agency began tracking emissions in 1995. Electricity generators released 2.423 billion tons of carbon dioxide (CO2) in 2010, compared to 2.295 billion tons in 2009, ... power plant emissions are still below the high water mark of 2.565 million tons set in 2007.
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