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Even A Moderate Price For Carbon Pollution Has a Big Impact On U.S. Emissions

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"Even A Moderate Price For Carbon Pollution Has a Big Impact On U.S. Emissions"

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Last week, I wrote a piece “Extending Current Energy Policies Would Keep U.S. Carbon Pollution Emissions Flat Through 2040.” It was based on the latest report from the U.S. Energy Information Administration (EIA), summed up in this chart:

But EIA has modeled other cases than just one that extends tax credits for renewables and the like.

In fact, EIA has a chart-creating website that allows you to pick different scenarios. Here’s one that compares the reference case (i.e. no new policies) with the extended policies case with a carbon dioxide price scenario:

Figure: Energy-related CO2 emissions (in green) assuming a $25 per metric ton CO2 price starting in 2013, rising 5% per year through 2040 — compared to business as usual (in purple) and extended energy policies (in blue).

This CO2 price leaves emissions in 2040 one third lower than current (2012) levels — and 40% lower than 2005 levels. It is a pretty modest price for carbon pollution. The actual social cost of carbon today (and in 2040) is probably considerably higher (see here).

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12 Responses to Even A Moderate Price For Carbon Pollution Has a Big Impact On U.S. Emissions

  1. It’s also important to note that the models used to generate graphs like the ones above invariably build in rigidities that don’t exist in the actual economy. For example, they use elasticities estimated based on historical experience to predict future energy use, but once a carbon tax is put in place, the elasticities and other parameters used to characterize the economy are no longer valid, because people and institutions change their behavior in response to the new policy, and they can make those changes very rapidly. For more details, see the following two articles and Chapter 4 in Cold Cash, Cool Climate (http://amzn.to/Av0O9O):

    Koomey, Jonathan. 2002. “From My Perspective: Avoiding “The Big Mistake” in Forecasting Technology Adoption.” Technological Forecasting and Social Change. vol. 69, no. 5. June. pp. 511-518.

    Scher, Irene, and Jonathan G. Koomey. 2011. “Is Accurate Forecasting of Economic Systems Possible?” Climatic Change. vol. 104, no. 3. February 1. pp. 473-479. [http://www.mediafire.com/file/icaktx41gt119dx/Scher_Koomey_Final042710-wproofedits.pdf]

    • Merrelyn Emery says:

      You can get around these problems by looking at what has actually happened when a price on carbon has been introduced, ME

  2. Niall says:

    You are still using an *economic ontology* to solve an *earth sciences problem*.

    This continues to fall into the trap set by those with a vested interest in “compromising” between “the environment” (as if it’s something external to us, rather than a Nature that we are part of) and the accumulation of capital, which is what got us into this mess.

    We need some creative thinking here that goes well beyond the kinds of wholly inadequate cuts shown above.

    • Mulga Mumblebrain says:

      I’m with you Niall. As long as we use the lexicon, the jargon, the implicit assumptions, the ways of thinking, the prioritising and the rationalisations of the destructocrats of neo-liberal capitalism, we are goners. We need a totally different world system based on sufficiency, radical egalitarianism, absolute limits to individual wealth and power, living in harmony with Nature (ie following her rules, not that of the Dominator Patriarchs) and prioritising human sustainability before all else. To accomplish that the current toxic global ‘elites’ empowered by capitalism and reflecting its neoplastic features in their every action, must be replaced by something better.

  3. The implication of my previous comment is that the modeling is very likely to underestimate the possibilities for change once carbon tax is put in place. That’s because of the ostensible rigidities I mentioned as well as the fact that all modeling exercises include an incomplete technology portfolio, so they tend to overestimate costs of mitigation.

    These issues are further discussed here: Laitner, John A. “Skip”, Stephen J. Decanio, Jonathan G. Koomey, and Alan H. Sanstad. 2003. “Room for Improvement: Increasing the Value of Energy Modeling for Policy Analysis.” Utilities Policy (also LBNL-50627). vol. 11, no. 2. June. pp. 87-94.

    Email me if you want copies of any of the articles above.

  4. Ken says:

    I’ve been thinking, the GOP is all about revenue-neutral tax changes. So what if we replaced the federal gasoline tax with a federal carbon tax that generated equal revenue? Based on your graph, a revenue-neutral value for a carbon tax would be only about $5/ton. But it would at least get the mechanism in place, so if we ever did decide to get serious about CO2 only the tax rate would have to be raised. And politicians could be seen to be lowering gasoline prices in the short term.

  5. SecularAnimist says:

    This needs to be viewed in context with Ryan Koronowski’s article, also just posted on this site, about the plummeting costs of solar energy, wind energy, and battery technologies.

  6. Daniel Coffey says:

    Interesting. One challenge which is not getting enough talk is the effect of raising the price of carbon dioxide on the ability to build next generation energy technology and the speed of deployment. If the price gets too high, the rate of deployment slows.

    HOw now shall we decide to deal with that? Why don’t we just stick with the RPS approach which is already working?

    • Mulga Mumblebrain says:

      Subsidise renewable energy in the same way that fossil fuels are now, through tax exemptions or direct grants. Simples.

  7. Andy Hultgren says:

    Joe, this is totally OT but I (and I imagine many others) am very curious to read your take on the NY Magazine article “Is Obama the Environmental President”. Personally I’m not so curious about whether or not he could earn the title as I am about the chances that his administration would actually implement a form of the NRDC proposal for EPA regulation of emissions from existing coal plants.

    Also curious to hear your thoughts on the timing. The NRDC analysis seemed to assume implementation in 2011.

    Finally, what about fracking and fugitive methane (not accounted for the NRDC proposal)? What level of impact do you see that having on the effectiveness of the proposal? (Dispatch shift appears to account for about 15% of there total projected reductions – eyeballing the chart – so perhaps the nat gas fugitive emissions would not be an earth-shattering issue.)

    Thanks Joe!!!!