tag:blogger.com,1999:blog-5235419263414453422.post6547186895405836064..comments2024-02-23T01:30:06.101-08:00Comments on Early Warning: Carbon Prices are a Very Blunt ToolStuart Stanifordhttp://www.blogger.com/profile/07182839827506265860noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-5235419263414453422.post-65945805658285641702010-04-15T11:38:23.800-07:002010-04-15T11:38:23.800-07:00Most of the comments above make good points, but i...Most of the comments above make good points, but in my view the case presented by Stuart remains convincing - a carbon price much higher than Krugman indicates will be necessary to reduce emissions. What to do?<br />At some point, a steadily rising carbon tax - with the money collected rebated to the public - would have to work, no? And, there's a case to be made for good old-fashioned command and control. Make it illegal to produce electricity by burning coal, for example. In my view, rules are the only thing that worked for automobiles; mpg increased dramatically as the CAFE standards were implemented in the late 70s, and mpg will increase again with the new rules. Perhaps once America and the rest of the industrialized world works through the current spate of climate contrarian nonsense, it will be ready to impose some serious carbon emission rules.Mike Aucotthttps://www.blogger.com/profile/05692592170835103639noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-13082955191949453832010-04-15T02:25:34.628-07:002010-04-15T02:25:34.628-07:00Just a thought ... how accurate can any analysis b...Just a thought ... how accurate can any analysis be if the data that it is built upon is not accurate?<br /><br />I ask because I've read a lot about how GDP measurements have changed over the years, including changes that could be though of as subjective, which may distort the true picture of carbon efficiency. If the real GDP figure is much lower than that which governments release, then carbon intensity is much greater (assuming the level of carbon emissions is known with some accuracy).<br /><br />If we don't have the correct data, we can't tell the real story.sofistekhttps://www.blogger.com/profile/07182009148535883429noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-74227916873089344712010-04-14T14:57:42.455-07:002010-04-14T14:57:42.455-07:00you may find total emissions from the little cars ...<i>you may find total emissions from the little cars and the industrial complex building them them doesn't keep falling </i><br /><br />That should have read, "total emissions from autos and..."Datamungerhttps://www.blogger.com/profile/10697373189192242333noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-24437708105839333712010-04-14T14:27:08.379-07:002010-04-14T14:27:08.379-07:00kjm,
if the construction were carbon-intensive, t...kjm,<br /><br /><i>if the construction were carbon-intensive, then it would run smack into the wall of more expensive carbon, wouldn't it?</i><br /><br />Agreed, in a strict cap and trade scheme. But no, if there are generous tax credits being thrown around funded by hefty carbon taxes. This is because a system of carbon taxes and credits merely favours certain 'efficient' and desirable types of economic activity over others but doesn't put a bound on the quantity of the favoured activity or even on the supply of carbon used by it. <br /><br />Tax the SUV and its fuel heavily and feed the money into a rebate on subcompacts and you may find total emissions from the little cars and the industrial complex building them them doesn't keep falling and may even rise despite the price of fuel, especially if we consider the world as a whole.Datamungerhttps://www.blogger.com/profile/10697373189192242333noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-11139000006227201222010-04-14T13:11:33.037-07:002010-04-14T13:11:33.037-07:00Um, Datamunger, if the construction were carbon-in...Um, Datamunger, if the construction were carbon-intensive, then it would run smack into the wall of more expensive carbon, wouldn't it? And if we weren't meeting our target with a given level of carbon tax, if we had any sense whatsoever, the first change would indeed be to raise the tax level. Notice that if we choose the cap and trade route, all of that is neatly handled if we set the caps to achieve our goals.<br /><br />Jevon's Paradox has always struck me as a bit of a misunderstanding in the peak oil world. It assumes that the supply can increase, so that if price increases induce efficiency improvements, we can now do more with the same amount and we'll be encouraged to use more. But if the supply isn't increasing, or if the supply in this case is the carbon on which we've set limits, then the supply is actually decreasing, and Jevon's Paradox doesn't apply. The costs are constantly rising in that case, so next year, when you would be taking advantage of your new efficiency, you can't afford as much, so you're back to square one.<br /><br />Remember that Jevons was writing about coal in Britain in the 1860s. There were no real constraints to supply except price. If we're artificially constraining supply, then there are certainly other constraints, and prices will be continually rising due to those other constraints.kjmclarkhttps://www.blogger.com/profile/00490417628052004621noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-67880854428389016322010-04-14T12:13:48.877-07:002010-04-14T12:13:48.877-07:00I'm not sure I'd be so quick to endorse km...I'm not sure I'd be so quick to endorse kmj's point #3 as it could run squarely into Jevons' Paradox.<br /><br />"revenue generated would be used for tax credits for energy efficiency or for other measures to reduce our GHG emissions. "<br /><br />Note first that efficiency doesn't translate into lower emissions. eg. A building boom of carbon-neutral palaces (juiced by tax credits) could actually raise emissions, construction being very carbon intensive.<br /><br />In fact efficiency is a total red herring unless it's kept in mind that it's pointless emissions-wise unless there is a cap (lowered annually) on total emissions including those off-shored. Tax money would have to go not just to grid upgrades but mostly to pulling coal plants off-line and paying miners to close their operations.<br /><br />There is room for endless delusion on this issue.Datamungerhttps://www.blogger.com/profile/10697373189192242333noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-10613766259839650742010-04-14T10:32:22.668-07:002010-04-14T10:32:22.668-07:00Kjm:
Responding to your points in turn:
1) Expec...Kjm:<br /><br />Responding to your points in turn:<br /><br />1) Expected vs Unexpected. Who knows, right? We have no historical experience of planned price increases producing large efficiency gains, and indeed we have no experience of efficiency gains this large from any cause. Personally, I would speculate that given the extent of the average citizens information level, it's still going to come as a surprise to them if congress passes a law.<br /><br />2) Agreed the coal/oil price trends are quite different. The curve in coal usage shows very little response to the oil price shocks (the different fuels actually show surprisingly little substitutability in the data) - I'll try to post it later (I made those graphs but didn't want to weigh the piece down with them). I used EIA price data to get back to 1965.<br /><br />3) Your point about the shift in revenues overseas is a good one, and I agree that would tend to mitigate the effect on the economy (though some green investment would likely leak overseas too, absent trade barriers - China could well become the main supplier of wind/solar equipment for example).Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-43732238452007106602010-04-14T10:02:48.623-07:002010-04-14T10:02:48.623-07:00I'm agreeing with kjmclark. More to the point...I'm agreeing with kjmclark. More to the point might be to look at price/demand for coal vs. natural gas for electricity production, to get some idea how elastic the carbon trade-off could be. The low hanging fruit in the carbon game is coal - not liquid transportation fuels.Garyhttps://www.blogger.com/profile/08580497879135994296noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-34410390875537504992010-04-14T09:19:23.664-07:002010-04-14T09:19:23.664-07:00Put me down for option 1. Carbon pricing may be bl...Put me down for option 1. Carbon pricing may be blunt, but it works. The other options don't work. Thus, blunt or not, carbon pricing wins.<br /><br />There is also the example of Europe and Japan, which have higher fuel prices than we do, partly from taxation, and still have high usage, though less waste than we have. How much price pressure would it take for us to get to European levels of carbon efficiency and how far would that get us to the overall goal? That might be a good future topic to discuss.<br /><br />Thanks for your work!Burkhttps://www.blogger.com/profile/11158223475895530397noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-4507193857253813672010-04-14T09:14:27.749-07:002010-04-14T09:14:27.749-07:00I think you're missing three key points. Firs...I think you're missing three key points. First, the increase in energy prices was unexpected, second they weren't based on the fuels' carbon content, and third the increases were exogenous shocks, not a revenue-neutral tax policy. <br /><br />For the first, people react very differently when faced with an unexpected price increase as compared to an expected one. When people don't expect change, they often wait to see what will happen next. When people can anticipate the change, they are more likely to take steps to prepare for it.<br /><br />Next, my understanding is that the oil shocks of the 70s resulted in moving electricity production away from oil to coal, and small improvements in transportation efficiency. I haven't heard much about outsourcing energy-intensive production to other countries, probably since those other countries were also experiencing an oil price shock. Further, this EIA document (http://www.eia.doe.gov/cneaf/coal/page/coal_production_review.pdf) suggests that coal prices peaked in 1978, fell quickly after that, and have fallen pretty much consistently since then. The BP price data doesn't go back before 1987. So the price data for the most carbon-intense fuel is fairly different from that of oil.<br /><br />Finally, when oil prices increase, for the most part that looks like a foreign tax on oil consumers. The increase in oil revenue goes almost directly out of the country to producing nations. That's very different from what happens with a revenue-neutral tax. In that case, any revenue generated would be used for tax credits for energy efficiency or for other measures to reduce our GHG emissions. (Like funding a better electrical grid to distribute electricity from wind and solar generation.) So the money all stays in our economy instead of mostly heading overseas, as in the price history you're looking at.kjmclarkhttps://www.blogger.com/profile/00490417628052004621noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-72303730942015943582010-04-14T09:06:34.760-07:002010-04-14T09:06:34.760-07:00All of which makes me root for peak oil and greedy...All of which makes me root for peak oil and greedy Arabs.Datamungerhttps://www.blogger.com/profile/10697373189192242333noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-13117248982327357752010-04-14T08:52:21.983-07:002010-04-14T08:52:21.983-07:00Glad you mentioned the off-shoring of carbon emiss...Glad you mentioned the off-shoring of carbon emissions.<br /><br />And we have to keep in mind that in addition to "fudges built into" the emissions regulation system, large-scale cheating become more likely as the price of carbon is artificially raised. Krugman should write a companion volumn for us, The Return of Prohibition Economics.<br /><br />And additionally, as time goes on, one could expect the gains would be harder to achieve -- low hanging fruit & such.Datamungerhttps://www.blogger.com/profile/10697373189192242333noreply@blogger.com