How to Fix Global Warming

[drplokta]

All these attempts to micro-manage carbon emissions are futile, and in fact probably counter-productive by associating environmentalism with a new puritanism. If international agreement can be reached, the fix is relatively simple.

1. Determine the actual marginal environmental cost of an extra tonne of CO₂ emissions -- current estimates are between US$10 and US$80.

2. Tax fossil fuels at this level at the point of extraction -- it's a lot easier to tax a few hundred mining and oil companies than it is to tax a few billion consumers. Also tax deforestation and other activities likely to put more CO₂ into the atmosphere. Guarantee the tax level for at least 15 years (possibly with an inflation adjustment) so that people and companies can make long term investments based on it.

3. Rebate the tax to any user of fossil fuels who can demonstrate that their use will keep the CO₂ out of the atmosphere for at least 500 years. Give a similar rebate to anyone who demonstrably removes CO₂ from the atmosphere for at least 500 years.

4. Keep 10% of the funds raised for UN programmes to help countries who are especially affected by climate change. Pay the remainder to national governments in proportion to their population as at 1 January 2009. Permanent migrants get their share transferred from their old country to their new one, so you need to recalculate the shares every ten years or so. It's up to the governments if they use the money for subsidising fuel for poor people, climate change mitigation, or fancy new presidential palaces.

5. Do nothing else -- leave it to the market to decide how much to insulate homes, what kind of light bulbs to use, how many airports to build, whether or not to use patio heaters, etc.

A one-way flight to the US from the UK produces about 1.25 tonnes of CO₂ per passenger, so the fuel for such a flight would be taxed at between US$12.50 and US$100. Air Passenger Duty for such a flight is currently £40, and will be £150 from November 2010, so it's currently about right, and the increase is not necessary.

A litre of petrol gives off about 0.0025 tonnes of CO₂ (2.5kg), and so should be taxed between 2.5 cents and 20 cents -- UK fuel duties are a lot more than this, so drivers are more than covering their climate change costs.

Comments

[vicarage.livejournal.com]

I agree with your plan, but the UK-US flights would be in band B, so a single APD fee would be £60 in economy from 2010. Nowhere costs more than £85 single.

[drplokta]

Most of the US is band C, 4000 to 6000 miles. London to Miami is 4424, London to New York is 3456 (and thus band B), and London to Los Angeles is 5582. I read the wrong column for the bands, though, it's £75 for band C economy from Nov 2010, which is just about at the high end of what's reasonable.

[andrewducker]

Your unstated axiom seems to be that the government should only involve itself in things that cost money. I'm not sure what proportion of people would agree with that.

[erikvolson.livejournal.com]

Air Passenger Duty for such a flight is currently £40, and will be £150 from November 2010, so it's currently about right, and the increase is not necessary.

Disagree. That price is already factored in. If the goal is to reduce carbon emissions in the atmosphere, this needs to be added on *top* of already existing duties.

I think tax is one of many strategies that could be use. I personally like cap-and-trade better, because it directly rewards firms that go beyond the absolute minimum, and directly limits the maximum output. It even lets those who wish to spend more to reduce carbon to do so (buy purchasing emission credits, and not using them.)

The simple fact is that to reduce carbon *will* cause some pain. To limit it to cars, either the population drives less, replaces current vehicles with ones that emit less carbon, or some combination. By definition, this is an economic harm.

I do agree that puritanism isn't the right answer unless we're dealing with an immediate catastrophe -- say, multiple meter sea level rises in 3-10 year timeframes.

[drplokta]

The goal is not to reduce carbon emissions, it's to achieve an optimal level of carbon emissions. Zero net CO₂ emission is too little. Five times current emissions is too much. We need emissions somewhere in between, but we don't know where.

The problem with cap-and-trade is that you have to work out what the optimal level is on the basis of central planning, which is impossible. I think it's an easier impossible problem to work out the marginal cost of CO₂ emissions, and let the market derive the optimal level of emissions based on that cost.

[purplecthulhu.livejournal.com]

Giving the UN tax raising powers? The US isn't going to like that very much, especially since it's the US energy companies that will be among those most taxed.

Nice idea, and I don't disagree with most of it, but the political reality is that US, Russia and China (at least!) would never let it happen.

[drplokta]

In order to allocate resources sensibly, you have to quantitatively compare the costs and benefits of different possible allocations. I assert that, flawed as it is, money is the only metric available for making such comparisons. Therefore, if we refuse to reduce everything to financial terms, we are refusing to make any sensible decisions at all about resource allocation.

If you have an alternative metric for quantitative comparisons of costs and benefit, I'm open to hearing about it.

[drplokta]

Cap-and-trade also prevents long-term investment in carbon sequestration and related technologies, because the price of a tonne of carbon may collapse at any time. With a guaranteed price for fifteen years, you can see a guaranteed return on your investment.

[andrewducker]

I assert that, flawed as it is, money is the only metric available for making such comparisons.

I disagree. It's certainly a major one, but (for instance) - we don't place a value on human life and decide that the fine for murder must be greater than that amount in order to dissuade people. People litter - and the cost of the fine is set high enough to encourage them not to, not the cost of tidying up after them. Sometimes we merely decide that we want to achieve a certain goal for reasons other than the financial - and once we've done so finding the cheapest way to do so is a perfectly reasonable aim, but deciding on the goal in the first place is not done in a numerical/mechanical manner.

[drplokta]

We do place a value on human life, we just don't talk about it much. If we took the view that it was worth preventing murders at all costs, then a quarter of the adult population would be police officers.

The Department of Transport certainly puts a quantified value on human life when assessing cost/benefit ratios for road safety measures.

[bohemiancoast.livejournal.com]

I suspect that climate change policy experts would have roughly the same reaction to this idea as I did to Andrew Ducker's solution to unemployment yesterday.

[andrewducker]

One would hope they'd be louder at pointing out the problems :->

[andrewducker]

It's not the only thing they base their decisions on, however - and nor should it be. One can have a moral opinion on something without having to justify it in cost terms, or indeed, it costing anyone anything.

[erikvolson.livejournal.com]

What if the market decided that the optimal level is 6x current emissions?

You've more faith in the rationality of the markets than I do.

[erikvolson.livejournal.com]

That's an easy fix -- you can adjust the cap by either having the issuer(s) allowed to force repurchase, or you reduce the amount issued in the next release of the securities (depending on if you're selling per-time or pure amount securities.)

[drplokta]

Unless we've mispriced the environmental cost of the extra emissions, then in those circumstances 6x current emissions would indeed be the best solution. There would be a lot of environmental problems, but a vast amount of money that could be used to tackle those problems (six times current emissions would be about 150 billion tons, which at $50 per ton would generate US$750 billion per year, over 1% of total world GDP).

[drplokta]

If you're changing the "cap" to keep the price constant, then it's not a cap at all, it's a more complicated way of setting a fixed price per ton.

[voidampersand.livejournal.com]

I agree that taxing carbon is the simplest and most effective way to go. But if we're going to do it, we need to get over the conservative ideological opposition to any and all taxation. That's made a carbon tax a non-starter in the US. There's also the reality that the next best solution, cap and trade, can be structured so it's a vast subsidy for all sorts of industries that succeed in lobbying to get themselves classified as non-polluting. It's going to be hard to get people to look past such a splendid opportunity for corruption and do what is right. I'm actually a bit more hopeful now because of the huge volatility we're experiencing in energy prices. The proposed carbon tax is very modest compared to the factor of four increase we had in the price of oil. And now that the economy has crashed and the price of oil has gone down with it, taxing carbon would be taxing something that has become very cheap again and that we're not using much of.

[vicarage.livejournal.com]

it is done ccountrywide, based on distance to capial, DC

[drplokta]

That's interesting, and I didn't know it. Any country that wants to get British tourists should clearly declare its embassy in London to be its capital, distance from Heathrow around fifteen miles.

[drplokta]

No, cap-and-trade is a bad way to do it, because we have no good way to determine what the optimal cap should be, and because it doesn't give business enough certainty about the long-term carbon price to facilitate investment decisions. We need a fixed price and floating emission levels, not fixed emissions and a floating price.

[voidampersand.livejournal.com]

Agreed, but you're looking at it from a narrow and technical point of view. Cap and trade is an inefficient way to reduce greenhouse gas emissions. But it is a wonderful way to convert political influence into taxpayer subsidized speculative profits.

[watervole.livejournal.com]

I'm with you on a lot of that, but the tax revenues need to be spent in a way that reduces the cause/effect of climate change, otherwise, it's simply revenue generation with a greenwash. As the money is not spent that way at present, drivers are not actually covering their climate change costs.

You should also tax at source activities that release methane, such as pig farming, peat extraction, etc.

It makes far more sense to charge for CO2/methane emissions than it does to tinker with endless systems to try and make people use different light bulbs, patio heaters, etc.

[drplokta]

Methane only lasts 10 to 20 years in the atmosphere, a much shorter time than CO₂, so it's correspondingly less worth worrying about if we're taking the long-term view.

The tax revenues don't necessarily need to be spent on climate change remediation; we may have other social priorities that are even more pressing. As long as the money is available for our collective betterment, it's up to us to make sure that we have governments that will spend it appropriately.

[watervole.livejournal.com]

I disagree with you about the revenues. First off, I doubt that the governments of the countries causing the pollution will give an apropriate sum of money to those in poorer countries who are also affected by it.

Secondly, we're going to be hitting positive feedback mechanisms on the climate - if we don't do something about them, then the long-term prospect is very bleak indeed.

I believe climate change is a social problem and the most pressing one we face. We ignore it at our peril (certainly our children's peril).

In the long term, climate change has the potential to dwarf our other problems - or rather to make the existing problems massively worse.

Just to pick one at random - rising sea temperatures are causing coral bleaching. Millions of third-world people depend on coral reefs for their livelihood. Do we just throw endless food aid at them when the fish run out? Or do we find a way to preserve the reefs and let them feed themselves.

[coth.livejournal.com]

How do you tax the methane clathrates?

[drplokta]

You count the risk of catastrophic clathrate release when you're assessing the marginal cost per tonne of CO₂ emissions.