"So what CO2 price will we need for 450 ppm? Nordhaus & Breakthrough Inst. weigh in, sort of"
This is, I think, an extremely important question to examine. Anyone who is interested in avoiding catastrophic climate outcomes should formulate a rough answer in his or her head, if for no other reason than to figure out if and/or when 450 ppm might become politically achievable — since it surely isn’t right now (see here). [This post will also allow me to once again debunk the myth that a plausible price for CO2 would mainly drive efficiency and conservation.]
This question arose in the comments section of Tuesday’s post, “Bear with me, readers — it does matter why Pielke, his Nature article, and the Breakthrough Institute are wrong.” It shows that all the back-and-forth is at least focusing on key issues and making my differences with them clearer, sort of.
Ted Nordhaus (here) seemed to question my statement that, among many other things, we need a major price change (to have CO2 prices match their economic damages) in order to stabilize atmospheric concentrations of CO2 at 450 ppm (as I wrote here)
Then Ted wrote (here), “We strongly support carbon regulation that establishes a modest, sustainable, and consistent price for carbon.”
So I naturally wondered (here):
TED– WHAT’S YOUR CO2 Price?
You say I sound like environmentalist because I think we need a “major price change.” Then you say, you support a “modest, sustainable, and consistent price for carbon.”
Can you ballpark that price for me? Apparently you don’t want the market to set it on the basis of whatever is needed to achieve 450 ppm, as I do, which will certainly be a major price, which I would define as a price roughly equal to or greater than the current European price — $23 Euros a ton of CO2.
So you would set a “modest” price and hope that works? I can’t go with you there, sorry!
At 1:25 today, Ted posted (here)
Joe, For a guy so ready to take a 2X4 to the head of anybody who you believe has misused or misunderstands technical terminology, you are awfully sloppy yourself. The current EU carbon price is $23E per ton of carbon, not CO2. If you meant to write per ton of carbon, then we are largely in agreement as to what a modest price for carbon would be, if not what it’s [sic] effects on carbon emissions and prospects for achieving 450 ppm will likely be.
If you actually meant $23E per ton of CO2, a price almost four times the current EU price for carbon then we disagree, both as to the price point and it’s likely efficacy.
A classic unverified comment blurted out — a lesson for all who blog/comment, me included, to always verify on Google that which is easily verified! Ted is, of course, quite wrong. I use Point Carbon (here) for the latest price of European Union Allowances (EUAs), which is 23.5 euros as of now. EUAs are “Tradable emission credits from the EU Emissions Trading Scheme. Each allowance carries the right to emit one tonne of carbon dioxide” (see here).
[I am not one to say "I told you so" ... okay, I am, I mean, I did after all just write a post titled "The biggest source of mistakes: C vs. CO2".]
Anyway, I was in the middle of lunch so I didn’t reply right away. And I did want to see if anybody else would catch the mistake.
At 2:10, Ted corrected himself (here)
Correction. I believe I confused the standard generally used in the EU, carbon not CO2, with the pricing of EUA in the EU ETS which appears to be CO2. Joe’s statement of the carbon price in the EU appears to be correct. One which I believe will primarily drive efficiency and conventional fuel switching, not rapid adoption of alternative technologies.
Well, it’s good to know my statement “appears to be correct” [Note to Ted: For a guy who just accused me incorrectly of sloppiness, would it kill you to just say "Joe's statement was correct"? I withdraw the question.]
Note: Google currently claims “1 Euro = 1.571 U.S. dollars.”
PRICE CONFUSION ABOUNDS AT B.I.
So my apologies if I’m now a tad confused. A couple hours ago, Ted dismissed $23E (= $36/tCO2) but embraced $23E per ton of carbon (= $36/tC) as the kind of modest price he endorsed, albeit without suggesting what its effects might be.
One hour later, Ted said that $23E (= $36/tCO2 = $132/tC) will “primarily drive efficiency and conventional fuel switching, not rapid adoption of alternative technologies.”
So my questions to Ted and B.I. are
- Is $36/tC the modest price you are looking for?
- $132/tC a major price that you think is way too high?
- What price of C or CO2 do you think we will need to stabilize at 450 ppm if we adopted your $30 billion annual federal investment to “develop, demonstrate, and stimulate the commercialization of a range of [clean energy] technologies”?
There is one more point that faithful readers of this blog probably may be expecting me to make — one that I am graciously repeating before B.I. answers my question:
Ted is quite wrong about what the price of $132/tC will or won’t do. It will most certainly NOT stimulate much efficiency. I have written about this many, many times (see here). As I first learned when I was overseeing “Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy-Efficient and Low-Carbon Technologies by 2010 and Beyond,” [yes, I have been in the efficiency and decarbonization with technologies business a long time] by five national laboratories, otherwise known as the 5-Lab study:
$50 per tonne of carbon corresponds to 12.5 cents per gallon of gasoline or 0.5 cents per kilowatthour for electricity produced from natural gas at 53% efficiency (or 1.3 cents per kilowatt-hour for coal at 34% efficiency).
So $132t/C gets you 33 cents a gallon added to the price of gasoline. Not gonna drive bloody much fuel efficiency.
It adds 1.3 cents to the price of gas electricity and 3.4 cents to the price of coal. That might would raise overall U.S. electricity prices by a third. It would drive a little energy efficiency, but not much.
Of course, in the end, you can’t decide what is an acceptable price and constrain prices — that is the safety valve trap. You need to let the market figure it out, I think.