Carbon
Taxes First
Charles Komanoff
& Dan Rosenblum
Carbon Tax Center
www.carbontax.org
April 24, 2007


Global Warming Is …


Triggering a climate crisis that threatens
massive and irreversible damage to our
global environment, public health, world
peace, national security and economic wellbeing.



No longer seriously contested by anybody
other than vested interests, their hired
“experts” and indebted politicians.



See An Inconvenient Truth and IPCC Fourth
Assessment.


Warmer Winters: 4.3ºF, 1971-2002
Boston is the new

Philly; NYC is the
new D.C. (winter
temps.)

43

Boston

o

Latitude ( N)

42

New York

41

Philadelphia

40

Washington, DC

39

38
29

30


31

32

33

34

35
o

Winter (Dec-Jan-Feb) Mean Temp (ºF)

36

37

Cameron


More Extreme Weather
Extreme Precipitation Events,
% Increase 1949-2002

Cameron Wake, UNH


The Problem:
Unsustainable CO2

Emissions Worldwide






World must reduce emissions ~80% by
2050, with big cuts starting now.
Americans are emitting many times our
share of CO2 (next slide).
Americans must reduce by >80%.


Americans Emit in a Day
What Others Emit in a Workweek


What about China?
“In an alliance of
denial, China and
the United States
are using each
other’s inaction as
an excuse to do
nothing.” – New
York Times
editorial, 4-20-07

China

X
U.S.


Chemistry → Responsibility
Because CO2 stays
“resident” in the
atmosphere for at
least a century, one
hundred years of
fossil-fuel use drive
climate responsibility. U.S. still has
a 40-50-year lead.

X

U.S.

China


No More Free Dumping
“Since the dawn of the industrial revolution,
the atmosphere has served as a free dumping
ground for carbon gases. If people and
industries are made to pay heavily for the
privilege, they will inevitably be driven to
develop cleaner fuels, cars and factories.”
— Avoiding Calamity on the Cheap, Nov. 3, 2006
New York Times editorial



Putting a Price on CO2 Emissions
High taxes on carbon emissions from
coal, oil and natural gas will:




Reduce fossil fuel use and CO2 emissions


Substitution of clean fuels and technology



More efficient use of energy

Provide a revenue stream to enable


Progressive tax-shifting, or



Rebate to all U.S. residents


Additional Benefits
of a Carbon Tax



Carbon tax receipts may also be used to finance


Energy efficiency, further reducing use of fossil
fuels and related emissions.



Energy R&D.



Will also reduce dependence on foreign oil,
with major national security benefits.



Economically, will keep dollars in USA instead
of flowing overseas.


Rely on “Market Forces”?
Here Come Synfuels
Only a carbon
tax can subject
CO2-intensive
oil sands,
oil shale,

coal-into-oil, etc.
to a climateappropriate
market test.


Clean-Energy Subsidies:
A Limited Answer


Selecting the next best energy technology by
fiat has largely benefited lobbyists + special
interests


Oil shale, nuclear power, synfuels, ethanol, etc.



Many new sources also emit CO2



Renewable Portfolio Standards: helpful – but
not enough


Efficiency Standards:
Vital, but Not Enough



Too slow





Corporate gaming






Corporate resistance
Inherently reactive
(e.g., “CAFE” loophole that enabled SUV’s)

Scattershot – impossible to regulate the
hundreds of important energy-usage sectors
1-dimensional


(e.g., CAFE doesn’t affect miles driven)


More than Half of U.S. Oil Use
Is Not Gasoline for Cars

Freight
Heat, Power

Other

Cars
Air

RV’s Paving


Example - Gas Use Decisions
CAFE impacts:
 Mfg’er mpg decisions


What car to buy

Gas Tax-Shift
impacts:
 How high CAFE is set


Mfg’er mpg decisions



What car to buy



Which car to drive




How to drive



VMT (miles traveled)






Share (carpool)
Chain trips
Transit
Walk/Bike
Proximity


Dynamic Capitalism & CO2: I
“ … specially equipped,
privately owned jumbo
jets – the kind that
normally carry 300-400
passengers … reconfigured … for the
enjoyment of, at most,
a couple of dozen.”
New York Times, 17-Oct-2006: For the SuperRich, It’s Time to Upgrade the Old Jumbo Jet



Dynamic Capitalism & CO2: II
Backyard Blizzards:
“Snowmaking, since the
mid-1960s the provenance
of ski resorts and, more
recently, some party
planners, has gone
domestic,” with 2-kW
plug-in snowmakers that
run ’round-the-clock.
New York Times (Home Section) 15-Feb-2007:
Not Enough Snow For You? Talk to Your Father


Example - Electricity


Utilities and other generators will


Respond to price signal by substituting
lower-carbon fuels
Renewables
 Natural Gas







Invest in efficiency on demand- and
supply-side

Consumers will



Respond by using less
Substituting low- or non-carbon energy


Carbon Tax Proportions
Fuels are
taxed by
their
carbon
content
per btu


A “Starter” Carbon Tax-Shift


$37 / ton of carbon =



10¢ / gallon of gasoline, jet fuel, etc. =




0.72 ¢ / kWh (U.S. retail average)



Reduces U.S. CO2 emissions ~ 4%



Repeat 10 X (while standards and incentives
also cut emissions)


Energy Use: Not Inelastic


Gasoline usage grew only 3.5% from 2003 to
2006, while the economy grew 11%.



Pump prices have risen < 50% since 2003
(adjusted for inflation) – not the doubling
commonly believed.



The modest growth in demand points to a “shortterm price elasticity” of around 0.1, and 0.4 in the
long term.




Finding: Demand for gasoline (and other fuels) is
at least somewhat price-sensitive.


Elasticity (long-run) Assumptions



Gasoline: - 0.4
Electricity







Residential (37%) - 0.5
Commercial / Industrial
(63%) - 1.0
Fuel-switching
Leverage: 1.2 x

“Other” – midway
bet. Gasoline/Elect.

U.S. CO2


Reductions


Starter Tax – Why Ramp Up?


Win broad consensus



Implement ASAP



Help people and businesses adapt



Empirical validation of efficacy



Mid-course corrections



Establish long-term price trajectory




Complement w/ investment in EE and renewables


USA After “Starter Tax x 10”






CO2 emissions down by a third
Oil use down by ~5 million barrels/day
Energy
 Coal-fired generation reduced
 Wind and other renewable generation increased
 Incandescents / halogens out, CFL’s + LED’s in
Transportation and Land-Use
 SUVs out, sedans in
 Costlier air and highway travel creates market
pull for 300-mph intercity rail
 Urban trips by bicycle up 10x, to 10%
 Urban revitalization