RSS Feed MenuMy AEI colleagues Steve Hayward, Kevin Hassett and Ken Green made the classic case in 2009.
Some highlights of their brief:
The economic trade-offs inherent in enacting anything as complex as cap and trade will mean that C&T will go into effect very, very slowly.
HH&G:
Establishing allowances and accounting systems for GHG emissions across industries is going to be vastly more difficult and highly politicized. The forest products industry, for example, will reasonably want credits for creating carbon sinks in the trees it plants and harvests, but the manufacturing sector that uses these wood products as a raw material will want credit for sequestering carbon. The difference will have to be split in some arbitrary manner that will surely introduce economic distortions in the marketplace. The auto industry will want credits for GHG innovations, while industries and businesses of all kinds will lobby for credits for reducing mobile source emissions from changes to their auto and truck fleets. There are going to be winners and losers in this allocation process. Multiply this problem across sectors and industries and it becomes evident that a GHG emissions-trading system is going to be highly complex and unwieldy, and too susceptible to rent-seeking influence in Washington. The problem of politically adjusting competing interests will be compounded on the international scale. The long-running diplomatic conflicts that can be observed over purported subsidies for aircraft (i.e., Boeing versus Airbus) and the European Union’s agricultural subsidies and trade barriers are examples of the kinds of conflicts that will be endemic to any international emissions-trading scheme.
The favored solution to these problems is to over-allocate the number of initial permits both to ease the cost and to encourage the rapid start-up of a market for trades. This was the course the European Union took with its Emissions Trading System (ETS), and it has very nearly led to the collapse of the system. Because emissions permits were over-allocated, the price of emissions permits plummeted, and little–if any–emissions reductions have taken place because of the ETS. The over-allocation of initial permits merely postpones both emissions cuts and the economic pain involved.
Because emissions rights can be altered or eliminated at any time by government, private actors won’t make the conservation investments C&T advocates predict.
HH&G:
A cap-and-trade program, however, cannot provide certainty precisely because emissions allowances are not accorded real property rights by law. The government can change the rules at any time, making emissions allowances worthless. This is exactly what happened to electric utilities in Los Angeles: their allowances were terminated, and the utilities were subsequently required to install specified emissions-control technologies and to pay fines for excess emissions. In effect, some Los Angeles firms had to pay three times over for emissions reductions.
A GHG emissions-trading scheme on an international level will be even more vulnerable to these kinds of unpredictable outcomes. To the extent that a GHG emissions-trading program results in international cross-subsidization of the economies of trading partners, it is going to be politically unsustainable in the long run. An international emissions-trading program is also unlikely to survive noncompliance by some of its members.
On the other hand, if government protects those emission rights, then it will be very difficult to unravel early mistakes if later evidence shows C&T flunking a cost-benefits test.
HH&G:
It is considered bad form nowadays to express doubt or skepticism about the scientific case for rapid and dangerous global warming in the twenty-first century. If warming is either less pronounced than some current forecasts predict or if emissions reductions have limited effect in moderating future temperature rise, however, a severe global emissions-reduction policy through emissions trading (on the order of a minimum 50 percent cut by 2050) could turn out to be the costliest public policy mistake in human history, with the costs vastly exceeding the benefits.
By contrast, a carbon tax will instantly elicit spontaneous compliance.
HH&G:
Putting a price on the carbon emissions attendant on fuel use would create numerous incentives to reduce the use of carbon-intensive energy. The increased costs of energy would flow through the economy, ultimately giving consumers incentives to reduce their use of electricity, transportation fuels, home heating oil, and so forth. Consumers, motivated by the tax, would have incentives to buy more efficient appliances, to buy and drive more efficient cars, and to better insulate their homes or construct them with more attention to energy conservation. A carbon tax would also create incentives for consumers to demand lower-carbon power sources from their local utilities. A carbon tax, as its cost flowed down the chains of production into consumer products, would lead manufacturers to become more efficient and consumers to economize in consumption. At all levels in the economy, a carbon tax would create a profit niche for environmental entrepreneurs to find ways to deliver lower-carbon energy at competitive prices. Finally, a carbon tax would also serve to level (somewhat) the playing field among solar power, wind power, nuclear power, and carbon-based fuels by internalizing the cost of carbon emission into the price of the various forms of energy.
A carbon tax is radically more difficult to game than C&T.
HH&G:
Without the profit potential of amassing tradable carbon permits, industry groups would have less incentive to try to get credits for their favored but non-competitive energy sources. That is not to say that tax-based approaches are immune from corruption, for they certainly are not. If set too far down the chain of production or set unevenly among energy sources, carbon taxes could well lead to rent-seeking, political favoritism, economic distortions, and so on. Foreign governments might have an incentive to undermine a trading scheme by offering incentives to allow their manufacturers to avoid the cost of carbon trading. A tax on fuels proportionate to their carbon content, levied at the point of first sale, should be less susceptible to corruption, and by delivering revenue to the government rather than to private entities, should create incentives more aligned with the government’s objective.
A carbon tax can be easily increased or decreased as later scientific information cannot. C&T cannot so easily respond to new information.
HH&G:
A carbon tax, if found to be too stringent, could be relaxed relatively easily over a timeframe, allowing for markets to react with certainty. If found too low to produce results, a carbon tax could easily be increased. In either event, such changes could be phased in over time, creating predictability and allowing an ongoing reassessment of effectiveness via observations about changes in the consumption of various forms of energy. A cap-and-trade system, by contrast, is more difficult to adjust because permits, whether one is the seller or the buyer, reflect significant monetary value. Permit traders would demand–and rightly so–compensation if what they purchased in good faith has been devalued by a governmental deflation of the new “carbon currency.”
A carbon tax could offset other taxes. C&T theoretically could do so too, but won’t because Congress will give away the allocations for free to rent seekers. (As the House bill already does.)
HH&G:
A $15 per ton CO2 tax raises enough revenue to reduce the corporate income tax by over one-quarter and income or payroll taxes by roughly 10 percent. In a policy brief for the Brookings Institution and the World Resources Institute, economist Gilbert Metcalf estimated that a rebate of the employer and employee payroll tax contribution on the first $3,660 of earnings per worker in 2003 would be sufficient to make the carbon tax both revenue- and distributionally neutral.
LFC // Dec 8, 2009 at 1:34 pm
Sinz, thanks for the info. I found it fascinating that a scientist predicted the impact of carbon dioxide that far back.
That’s actually not what I asked Chekote for, though. I said that scientists predicted CO2 would warm the earth. I was thinking it started closer to the late 70’s or early 80’s, but you shoved my timeline back significantly. And I also said that it would be a huge coincidence if they made these predication, they all came true, but it was by some cause other than man produced CO2.
What I asked Chekote for was a list of scientists who predicted that we would have global warming from natural causes, and what would those causes be. I don’t know of any, so I don’t see an equivalent prediction on the non-CO2 side. It appears that there are just a few people who are desperately thrashing to explain global warming using any other cause than man made CO2. “It’s a natural cycle.” “It’s sunspots.” “It’s undersea volcanic activity.” Blah, blah, blah. The instant one hypothesis is crushed, another springs to take its place. The only one still standing is CO2 as produced by man.
Thanks again for the links.
MI-GOPer // Dec 8, 2009 at 1:38 pm
I know for some here a simple truth is difficult to grasp.
But the simple truth here is that in order for the fed govt to “invest” or inject dollars into the economy (for job growth, to stem global warming, to end 3rd world debt, to socialize health care) it must first take those dollars out of the private sector, out of the economy –taxed out or borrowed out.
Under Bush, the fed govt forced America to invest in ethanol production… it hasn’t had produced the benefits we were told it would by pro-green groups It’s raised corn prices; it’s diverted farmland production; it’s consumed more energy than the “green scientists” told us it would… imagine that? And yet, state after state is waged in an mini-economic stimulus spree to lure, court and seduce green companies and technologies to their states for little appreciable benefit… in Michigan, that’s been a lot of companies involved in ethanol and corn-research. It’s diverted scarce resources away from things like K-12 education, mental health care, social service and rebuilding our cities… just so some yuppie can feel all green seeing 1-2 windmills on a hilltop and Al Gore can jet to the next Celebrity Weigh In contest.
Chekote // Dec 8, 2009 at 1:58 pm
Please cite only whose hypotheses were published in peer reviewed journals.
You mean the same peer review journals that CRU actively worked to keep contrarian views out? Look, yes there has been global warming. However, the evidence points that this is due to natural causes and not man’s activity. The only evidence used to back up the claim that global warming is due to human activity is the CRU computer models. CO2 accounts for .03% of the atmosphere. The idea that .03% can be responsible for the current warming just isn’t based in science. It is based on computer models. Playstation science.
Further, there seems to be no correlation (thus, no causation) between CO2 levels and global temperatures. CO2 emissions were low during the global warming from 1850 to 1880 and continued to slowly rise during the deep global cooling from 1880 to about 1915. CO2 Emissions were constant during the strong global warming from 1915 to 1945. Emissions soared during from 1945 to 1977. Yet the global climate cooled instead of warming as one would expect if the CO2 emissions are responsible for the recent warming. In 1977 temperatures abruptly began to rise. This is referred to as the “Great Climate Shift”. This period peaked in 1998 and it is also the only period in the past century when global warming and atmospheric CO2 have risen together. The AGW proponents have used this period to support their contention that global warming is driven by human activity while ignoring all the data in the past that shows there is no correlation between CO2 and warming. Sorry. The science just isn’t there. And now everything that has come out of the CRU needs to be reviewed and validated by other scientists who don’t have an agenda.
Chekote // Dec 8, 2009 at 2:05 pm
Sinz
CO2 accounts for .03% of the atmosphere. Do you seriously think that .03% of anything makes a difference? Look, I am not saying that we should not be good stewarts of the environment or seek energy independence. But the AGW movement has been highjacked by the redistribution of wealth cabal. Africa will demand $100 millions from the industrialized nations as damages for our contribution to AGW. It is a racket.
Chekote // Dec 8, 2009 at 2:21 pm
What I asked Chekote for was a list of scientists who predicted that we would have global warming from natural causes, and what would those causes be.
It is irrelevant. We know by looking at climate data that the world has warmed and cooled long before man even appeared on the earth. Lots of natural phenomena account for changes in global temperatures; solar flares, volcanos, earth oscillations. It is up to the people who claim that .03% accounts for the changes in temperature to prove their case which is prima facie absurd.
LFC // Dec 8, 2009 at 2:47 pm
You mean the same peer review journals that CRU actively worked to keep contrarian views out?
And the conspiracy theories begin. Maybe, just maybe, there have been some articles that were rejected because they had huge gaping flaws, and the review process effectively filtered them out as bad science?
Further, there seems to be no correlation (thus, no causation) between CO2 levels and global temperatures.
They don’t? A look at this graph sure makes it look like they do. Now I’m not saying that nothing else can impact temperature. I’m saying that the correlation of CO2 to the recent rise in temperature is so massively strong, one has to work very hard to ignore it.
Again, a few bumps, even multi-year bumps, don’t change the trend line. You really seem to have trouble understanding that.
Do you seriously think that .03% of anything makes a difference?
Absolutely. That’s the approximate level of H2S that will kill you.
As for 0.03%, well that’s one metric. Another is that since 1880, there’s been about a 30% increase in CO2. To flip your question, do you seriously think that a 30% increase in something never makes a difference?
We know by looking at climate data that the world has warmed and cooled long before man even appeared on the earth.
We also know that the atmosphere was such that the earth was uninhabitable by man for large parts of its history.
Chekote // Dec 8, 2009 at 4:09 pm
And the conspiracy theories begin. Maybe, just maybe, there have been some articles that were rejected because they had huge gaping flaws, and the review process effectively filtered them out as bad science?
No conspiracy. Just facts. Scientists were reduced to filing Freedom of Information requests in an attempt to obtain the data used by the CRU group. Normally, scientists want their peers to scrutinized their work. The CRU group seemed more concerned with obtaining grants than with sound scientific practices.
They don’t? A look at this graph sure makes it look like they do.
The graph you provided again shows no correlation. If you look at it closely, sometimes CO2 level are above the temperature line. Sometimes the CO2 level is below the temperature line. A correlation would have the same trend across the data field. Sorry. That dog don’t hunt.
As for 0.03%, well that’s one metric. Another is that since 1880, there’s been about a 30% increase in CO2.
You are mixing apples and oranges. The CO2 accounts for about .03% of the atmosphere even after a 30% increase. The exact numbers are that after the 30% increase CO2 accounts for .038% of the atmosphere. So you want me to believe that .008% increase of anything is driving global warming. Simply absurd.
We also know that the atmosphere was such that the earth was uninhabitable by man for large parts of its history.
You are changing the subject. Whether the earth was or is inhabitable is irrelevant. The question at hand is whether human activity is the main driver behind global warming. The scientific evidence indicates that climate is primarily driven by natural phenomena.
balconesfault // Dec 8, 2009 at 5:34 pm
So you want me to believe that .008% increase of anything is driving global warming.
And by corollary, it was patently absurd to believe that something (ozone) that made up 0.00006% of the atmosphere (ok – perhaps more relevant, 0.0015% of the atmosphere at an altitude of 32 km above the earth’s surface) could have any tangible effect on the amount of harmful radiation which reaches the earth’s surface.
Perhaps even MORE absurd that CFCs, at a mere 3 ppbv of the earth’s atmosphere, could have been responsible for initiating the decline in ozone that was raising the radiation concerns.
3 ppbv, if you want to play this out, is 0.0000003% of our atmosphere, by the way.
sinz54 // Dec 9, 2009 at 11:06 am
Chekote: Do you seriously think that .03% of anything makes a difference?
It can, if the effect is amplified. That’s how your radio works–the signal is amplified by electronics.
A rise in the earth’s temperature caused by excess CO2 will cause the warmed atmosphere to absorb more water vapor. (We all know how the air feels drier in the winter than in the summer.)
And water vapor causes MORE global warming than CO2 does; it’s actually the most important greenhouse gas. So excess water vapor acts to amplify the warming effect of the excess CO2.
But at any given temperature, the atmosphere’s ability to absorb water vapor is limited. More than that, and it falls out of the atmosphere as precipitation. Unfortunately, there is no such limit on CO2; the atmosphere will take all we can put in it.
sinz54 // Dec 9, 2009 at 12:18 pm
balconesfault: As for nuclear, pretty much every proposal out there for signficantly increasing the number of nuclear power facilities in America involves heavy subsidization from taxpayers.
Add that all studies show our nuclear plants can’t handle a direct hit from a 737 without a major release, that we don’t have an agreed upon place to put waste
France reprocesses its spent nuclear waste, reducing its mass by over 90%.
Solar energy companies are getting heavily subsidized by the Federal Government. Everybody knows they can’t succeed at market prices–not yet, anyway.
Have you done any back-of-the-envelope calculations on how many tens of thousands of square miles of Western desert ecosystem are going to have to be paved over with solar panels, in order to supply enough electricity to power the cities, industries and vehicles of the United States? What happens when environmentalists start opposing putting thousands of square miles of solar panels there?
And all this time we’ve been hearing from you liberals that terrorism is no longer a big threat to America and we can safely concentrate on domestic issues. Yet here you are raising the fear of a terrorist attack on a nuke plant. Aren’t you “fear-mongering” terrorism as you accused the Bushies of doing?
LFC // Dec 9, 2009 at 2:49 pm
Chekote said… The graph you provided again shows no correlation. If you look at it closely, sometimes CO2 level are above the temperature line. Sometimes the CO2 level is below the temperature line. A correlation would have the same trend across the data field. Sorry. That dog don’t hunt.
Wow. That’s so perfectly illustrates the ignorance of a trend that I wouldn’t even know where to start explaining it to you. I guess I’ll start with the fact that correlation of trends DOES NOT mean the same thing as data point by data point matching. Still, since it’s obvious you don’t even understand this most basic of concepts, further comment would be futile.
Chekote // Dec 9, 2009 at 5:04 pm
LFC
The CO2 levels have continued to rise during periods of cooling. Check out the datat since 1850. If there was causation, as you claim, you would expect that higher CO2 levels would be consistently matched by increasing temperatures. That’s not what the climate record shows. You graph does not show any correlation much less causation. Besides, much of the data used by the AGW alarmists have been produced by the CRU. Their graphs don’t reflect raw data but adjusted data. Why are you so opposed to having other scientists look at the CRU graphs and determine whether they are legit? What are you so afraid of? The world is not going to end tomorrow.
sinz54 // Dec 10, 2009 at 10:01 am
Chekote: If there was causation, as you claim, you would expect that higher CO2 levels would be consistently matched by increasing temperatures.
That’s ridiculous.
Here’s an analogy: Even in a strong bull stock market, there are corrections where stock prices decline. (In 1987, the stock market crashed 25%–but since the long-term conditions were bullish, the market recovered within about 7 months and then just kept on rising from there.)
The reason why there are cooling periods within a long-term warming trend is that the Earth has shorter climate cycles and random fluctuations, which cause temperatures to rise and fall above the long-term trend line. The most famous of these is El Nino, the Southern Oscillation, which occurs every 5 to 7 years. 1998 is frequently cited by critics as a warmer year than the years that followed it. But that was due to a strong El Nino that year.
Volcanoes can also affect temperature. When Krakatoa blew up, it put so much fallout into the atmosphere that global temperatures fell for years afterward.
Chekote // Dec 10, 2009 at 11:41 am
Sinz
Whether you realize it or not, you are making my case that natural phenomena have greater impact on global temperatures than human activity. If CO2 was the main force behind global warming, then the tempertures would have continued to rise at maybe a smaller pace. But that’s not what the record shows. So we are asked to tax ourselves into poverty. Give our earned money to thugs in poor countries and tomorrow a series of volcanos could explode and affect the climate in ways that we can’t even comprehend. That’s really smart Sinz.
LFC // Dec 10, 2009 at 12:07 pm
If CO2 was the main force behind global warming, then the tempertures would have continued to rise at maybe a smaller pace. But that’s not what the record shows.
And if CO2 isn’t, then what is? Where is the predictive model that shows the undeniable correlation between the measured and factual warming of the planet, and some cause other than CO2? Guess what. It doesn’t exist. Game over.
Chekote // Dec 10, 2009 at 12:20 pm
Guess what. It doesn’t exist. Game over.
Since the AGW models also failed to predict the current temperature drop, I guess it is game over for them too. Here is a little something you need to read:
http://icecap.us/images/uploads/GEOLOGICEVIDENCEOFTHECAUSEOFCLIMATECHANGE.pdf
That is if you are interested in science and not just politics.
LFC // Dec 10, 2009 at 6:15 pm
The current temperature drop? What drop?
“The global annual temperature for combined land and ocean surfaces in 2006 was +0.54°C (+0.97°F) above average, ranking 5th warmest in the period of record.” –NOAA
“The year 2007 tied for second warmest in the period of instrumental data, behind the record warmth of 2005″ –NASA
“2008 was the coolest year since 2000 but still ranks in the top ten warmest years since record-keeping began in 1880″ — NASA
“Global surface temperatures for 2009 will be well above the long-term average, while the annual temperature for the contiguous United States will likely be above the long-term average” — NOAA
But for a different view…
“Using these data as a basis, the coming century should experience a cooler climate from ~2006 to ~2035,” — Chekote’s source
When Dr. Easterbrook’s predictions actually come true, as the AGW proponents’ predictions have, then he’ll be worth quoting.
Chekote // Dec 10, 2009 at 9:26 pm
LFC
The models have failed to predict the cooling we have been experiencing in the past dozen years. In fact 2008, is the coolest year since 2000. This according to NASA:
Calendar year 2008 was the coolest year since 2000, according to the Goddard Institute for Space Studies analysis [see ref. 1] of surface air temperature measurements.
Source
Among the e-mails released there is one that specifically addresses the FACT that the models failed to predict the current cooling:
From: Kevin Trenberth
To: Michael Mann
Subject: Re: BBC U-turn on climate
Date: Mon, 12 Oct 2009 08:57:xxx xxxx xxxx
Hi all
Well I have my own article on where the heck is global warming? We are asking that here in
Boulder where we have broken records the past two days for the coldest days on record. We
had 4 inches of snow. The high the last 2 days was below 30F and the normal is 69F, and it
smashed the previous records for these days by 10F. The low was about 18F and also a
record low, well below the previous record low. This is January weather (see the Rockies
baseball playoff game was canceled on saturday and then played last night in below freezing
weather).
The fact is that we can’t account for the lack of warming at the moment and it is a
travesty that we can’t. The CERES data published in the August BAMS 09 supplement on 2008
shows there should be even more warming: but the data are surely wrong. Our observing
system is inadequate.
So please stop saying that the AGW models were correct. There were not. Again, are you interested in science? I am.