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Climate Hustle

The economic impacts of carbon pricing

What the science says...

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Economic assessments of proposed policy to put a price on carbon emissions are in widespread agreement that the net economic impact will be minor. The costs over the next several decades center around $100 per average family, or about 75 cents per person per week, and a GDP reduction of less than 1%.  Moreover, the benefits outweigh the costs several times over, as real-world examples illustrate.

Climate Myth...

CO2 limits will harm the economy
"Legally mandated measures for reducing greenhouse gas emissions are likely to have significant adverse impacts on GDP growth of developing countries [...] This in turn will have serious implications for our poverty alleviation programs." (Pradipto Ghosh)

Putting a price on carbon emissions is often discussed as one of the main solutions to anthropogenic global warming.  Carbon dioxide is a pollutant and in economic theory, pollution is considered a negative externality – a negative effect on a party not directly involved in a transaction, which results in a market failure.  The Stern Review on the Economics of Climate Change concluded that climate change represents "the greatest example of market failure we have ever seen."

Despite the economic benefits of addressing this market failure, many contrarians argue that putting a price on carbon emissions will cripple the economy.  Such arguments generally focus solely on the costs associated with pricing carbon while wholly ignoring the benefits.  For example, a Heritage Foundation analysis of the Waxman-Markey climate bill proposed in the US House of Representatives in 2009 concluded that the legislation would cost the average American family $1500 per year – a figure 10 times higher than any non-partisan economic analysis (see below). 

The reason the Heritage estimate was so high is that it evaluated the costs of a carbon cap, and then ignored the distribution of those funds.  When a price is put on carbon emissions, it creates a revenue stream.  The funds which are generated from the carbon price can be distributed in any number of ways – usually through reductions in other taxes, investment in research and development of 'green' technologies, funding of energy efficiency programs, etc. 

The Heritage Foundation report effectively assumed that the generated funds would disappear into a black hole.  Their analysis was the equivalent of doing your household finances by adding up your expenditures while ignoring your income.  It sure looks bad, but tells you nothing about your overall finances.

Here we will look at a few of the climate bills proposed by the US Congress which would have put a price on carbon emissions, and examine a number of economic analyses mainly by non-partisan economic groups which evaluated both the costs and benefits of each proposal.

Carbon Pricing Proposals

Lieberman-McCain (2007)

Senators Lieberman and McCain introduced the Climate Stewardship and Innovation Act of 2007.  This bill would have capped greenhouse gas (GHG) emissions at 22% below their 1990 levels in the year 2030, and 60% below 1990 levels in 2050.  The Energy Information Administration (EIA) analyzed this bill using the National Energy Modeling System (NEMS), and the US Environmental Protection Agency (EPA) analyzed the bill as well.

Lieberman-Warner (2008)

Senators Lieberman and Warner introduced the Climate Security Act of 2008.  The bill called for a steadily-declining GHG cap, reaching 15% below 2005 levels by the year 2020 and 70% below 2005 levels by 2050.  It was analyzed by the EPA using results from two economic forecasting models: the ADAGE model developed at Research Triangle Institute (RTI) in North Carolina; and the IGEM model run by a consulting firm founded by Dale Jorgenson, a professor at Harvard.  The Massachusetts Institute of Technology (MIT) analyzed this bill using their Emissions Prediction and Policy Analysis (EPPA) model, and the EIA and Congressional Budget Office (CBO) also analyzed the bill.

Waxman-Markey (2009)

Congressmen Waxman and Markey introduced the American Clean Energy and Security Act of 2009.  This bill would have reduced greenhouse gas emissions 17% below 2005 levels by 2020 and 83% by 2050.  It was analyzed by the CBO, EPA, EIA, and Science Applications International Corporation (SAIC).

Kerry-Lieberman (2010)

Senators Kerry and Lieberman introduced the Clean Energy Jobs and American Power Act.  This bill would have reduced greenhouse gas emissions 17% below 2005 levels by 2020 and 83% by 2050.  It was analyzed by the Peterson Institute, EPA, EIA.

Generic Policy

Research groups (MIT, RTI, and the Department of Energy's Pacific Northwest National Laboratories [PNNL]) have also analyzed the economic impacts of a generic comprehensive, economy-wide climate policy to reduce GHG emissions 50-80% by the year 2050.

An analysis done by using McKinsey & Company's US Low Carbon Economics Tool evaluated the economic impact of various scenarios involving strong investment in green technologies, 'clean policy', and/or a price on carbon emissions from the power sector of $30 per ton.

Study Assumptions

These studies compare a particular climate policy scenario with a reference scenario corresponding to the model projection of business as usual (BAU) – that is, a world in which the economy continues on its current course with carbon emissions unchecked.  All assume that a climate policy would be implemented in the year 2012, and most project economic impacts through the year 2050.  The analyses evaluate the costs of reducing greenhouse gas emissions, but do not measure the resulting payoff – the benefits of averting dangerous climate change.  Nor do they consider the ancillary benefits, such as the improved local air quality and reduced ocean acidification. 

They merely model the economic impact of the climate policy to a BAU scenario where climate change does not impact the economy.  Therefore, it is important to bear in mind that these analyses overestimate the policy impact on the economy as compared to a realistic BAU scenario in which climate change impacts the economy.  These analyses should be viewed as a comparison between policy impacts and a scenario in which our understanding of the climate is wrong and the climate does not change significantly as GHG emissions continue to rise. 

Since it is difficult to predict how much climate change will impact the economy, or how much climate change will be averted as a result of these policies (particularly since they may trigger similar GHG emission reduction policies by other countries), the comparison to an unrealistic BAU scenario is the best we can do.

Impact on Gross Domestic Product (GDP)

The majority of these analyses find that the evaluated climate policies impact the US GDP by less than 1% as compared to BAU.  The main exception is the IGEM analysis, which finds a 2.15% reduction in GDP for the Lieberman-Warner by bill by 2030, and a 3.59% reduction by 2050.  The IGEM model is an outlier because it assumes when the price of energy (and other goods and services) rises, people will respond by choosing to work less than they otherwise would (EDF 2008).  This is a counter-intuitive and illogical assumption, since increasing costs generally result in people working more to increase income correspondingly.

Another outlier was the SAIC analysis of Waxman-Markey, which was funded by the National Association of Manufacturers, which has strongly opposed climate legislation.  The study incorporated some unrealistically conservative and pessimistic assumptions, for example that American companies will be unable to deploy clean energy and energy efficiency technologies in a timely manner.  Nevertheless, the report concluded that by 2030, GDP would grow 95% as much under Waxman-Markey as compared to BAU.

The MIT analysis in the generic 80% GHG emissions reductions below 1990 levels below 2050 (the scenario with the largest GHG emissions decrease) found that by 2030, GDP would increase by just 0.44% as compared to BAU.

Figure 1 and Table 1: Modeled Impacts of Climate Legislation on US GDP

Legislation  GHG Reduction by 2050 GDP loss vs. BAU by 2030
 Lieberman-McCain  60% below 1990 levels  0.23%
 Lieberman-Warner  70% below 2005 levels  0.44-2.15%
 Waxman-Markey  83% below 2005 levels  0.2-0.9%
 Kerry-Lieberman  83% below 2005 levels  0.1-1.0%
 Generic 50% below 1990 levels  0.47-0.81%
 Generic  80% below 1990 levels  0.44%

The analysis found that investment in green tech and carbon pricing would actually dramatically increase GDP.  In fact, the study found that delaying significant investment in green tech by 5 years could cost the USA $2.3 to $3.2 trillion in GDP (Figure 2).

Google GDP

Figure 2: US GDP gains between 2010 and 2050 in three scenarios.  The green scenario includes a $30 per ton price on utility sector CO2 emissions and strong investment in green tech to develop "breakthroughs" (BTs).  the blue line depicts a scenario in which there is heavy investment in green tech without a carbon price.  The purple line is a 5 year delay before significant investment in green tech.  The red and orange area depicts the difference in GDP growth: $2.3 to 3.2 trillion lost in the 5 year delay scenario. Source: study

Impact on the Federal Deficit

The CBO analysis of Waxman-Markey found that the bill would reduce the federal deficit by $9 billion by the year 2019.  The CBO analysis of a similar bill proposed by Senators Kerry and Boxer found the bill would reduce the federal deficit by $21 billion by 2019 and "would not increase the deficit in any of the four 10-year periods following 2019."  And the CBO also found that Kerry-Lieberman would decrease the deficit by $19 billion by 2020.

Impact on Energy Independence

In the MIT analysis of Lieberman-Warner, the United States would spend $20 billion less on foreign oil in the year 2020, and $81 billion less in 2030.  The analysis found that US reliance on petroleum products would decrease by nearly 50% by 2050 if we invest strongly in green tech and implement a carbon pricing system.

Impact on Gasoline Prices

The EIA study of Lieberman-Warner found that the bill would add 42 cents per gallon to gas prices in 2030 as compared to BAU (a 12% increase).  Analyses of Waxman-Markey found that it would increase gas prices 22 to 35 cents per gallon by 2030 (6 to 9%).  The Peterson Institute analysis of Kerry-Lieberman found it would increase gas prices by approximately 10 cents per gallon (3%) by 2030.

Impact on Utility Bills

Analyses of Waxman-Markey found that its impacts on monthly utility bills by 2030 ranged from a $5.60 decrease to a $2.80 increase.  The Peterson Institute analysis of Kerry-Lieberman found that by 2030, monthly utility bills would range between a $0.67 decrease and a $2.62 increase.

The potential decrease in monthly electric bills is due to the energy efficiency programs established through the bill's provisions.  Though energy prices are expected to increase modestly, energy consumption is expected to counteract these increases as households take advantage of these energy efficiency programs.

The study found that through electric car breakthroughs as a result of investment in green tech and carbon pricing, household energy bills (electric plus transportation fuel) would decrease 53% by 2050, by approximately $950 per year.

Impact on Household Costs

The analyses of Waxman-Markey concluded that the bill would cost the average American household between $84 and $160 per year by 2020, which corresponds to $0.67 to $1.28 per person per week.  The majority of the increase comes through increased gasoline costs.  The studies also concluded that the costs would be lower for lower income families.  For example, the CBO analysis of Waxman-Markey concluded that families in the lowest income quintile would see a net decrease in average annual costs of about $125 in 2020 due to low-income assistance provisions (CBPP 2009).

Over the entire span of the Waxman-Markey bill (to 2050), EPA found the average annual cost would be $80 to $110 per household in current dollars (64 to 88 cents per person per week).

Cost-Benefit Analysis

Although most economic analyses of these policy proposals only estimated the costs, a study by the New York University School of Law's Institute for Policy Integrity (IPI) also evaluated the benefits of Waxman-Markey by using a range of possible values for the social cost of carbon (SCC).  SCC is effectively an estimate of the direct effects of carbon emissions on the economy, and takes into consideration such factors as net agricultural productivity loss, human health effects, property damages from sea level rise, and changes in ecosystem services. It is a difficult number to estimate, but is key to any cost-benefit analysis of climate legislation. Figure 2 from the IPI study illustrates how the direct benefits of Waxman-Markey compare to the costs for two economic models (ADAGE and IGEM) in relation to SCC in Figure 1.

Figure 3: Costs (light blue and red points) and Benefits (dark blue and purple points) vs. SCC values ($ per ton of carbon dioxide) for H.R. 2454 using two economic models (ADAGE and IGEM)

As you can see in Figure 3, for an SCC of just $9 per ton of carbon dioxide, the direct benefits of H.R. 2454 match the costs.  Estimated SCC values generally range from $19 to $68; therefore, IPI concludes that the direct benefits of Waxman-Markey outweigh the costs by a factor of 2 to 8, and would result in a net savings of at least $1 trillion by 2050.  This neglects indirect benefits such as a reduction in co-pollutants and ocean acidification, and is thus a very conservative estimate.

Economic studies have consistently shown that mitigation (such as putting a price on carbon emissions) is several times less costly than trying to adapt to climate change (Figure 4). 

Figure 4:  Approximate costs of climate action (green) and inaction (red) in 2100 and 2200. Sources: German Institute for Economic Research and Watkiss et al. 2005

In short, relative to the alternative (inaction and trying to adapt to the damaging consequnces of climate change), CO2 limits will help the economy.  This is why there is a consensus among economists with expertise in climate that we should put a price on carbon emissions (Figure 5).

NYU Fig 9 

Figure 5: 2015 New York University survey results of economists with climate expertise when asked under what circumstances the USA should reduce its emissions

William Nordhaus is one of the foremost experts on climate economics.  His research has frequently been misrepresented by climate "skeptics" (i.e. see here and here) to argue that CO2 limits will harm the economy.  In February 2012, Nordhaus sought to set the record straight that the climate economics literature clearly indicates that CO2 limits will save money.

"My research shows that there are indeed substantial net benefits from acting now rather than waiting fifty years. A look at Table 5-1 in my study A Question of Balance (2008) shows that the cost of waiting fifty years to begin reducing CO2 emissions is $2.3 trillion in 2005 prices. If we bring that number to today’s economy and prices, the loss from waiting is $4.1 trillion. Wars have been started over smaller sums.

My study is just one of many economic studies showing that economic efficiency would point to the need to reduce CO2 and other greenhouse gas emissions right now, and not to wait for a half-century. Waiting is not only economically costly, but will also make the transition much more costly when it eventually takes place. Current economic studies also suggest that the most efficient policy is to raise the cost of CO2 emissions substantially, either through cap-and-trade or carbon taxes, to provide appropriate incentives for businesses and households to move to low-carbon activities."


"The claim that cap-and-trade legislation or carbon taxes would be ruinous or disastrous to our societies does not stand up to serious economic analysis. We need to approach the issues with a cool head and a warm heart. And with respect for sound logic and good science."

Real-World Example

Ten northeastern states in the USA (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont) implemented a carbon cap and trade system which will reduce their CO2 emissions from the power sector by 10% by 2018 in the Regional Greenhouse Gas Initiative (RGGI).  The RGGI recently commissioned a study to examine the impacts of the system, and the results give us a real-world example which is broadly consistent with the economic study predictions of benefits outweighing costs.

The study found that by investing carbon funds in energy efficiency and renewable energy programs, the states achieved $3–4 savings for every dollar invested.  The program also created thousands of jobs (18,000 job years – that is, the equivalent of 18,000 full-time jobs that last one year), and individuals and businesses who took advantage of the energy efficiency programs funded by the carbon pricing system actually saw their energy bills drop. 

A subsequent study found that the RGGI carbon cap pricing system added $1.6 billion in value to the economies of participating states, set the stage for $1.1 billion in ratepayer savings, and created 16,000 jobs in its first three years of implementation.  RGGI provides us with a real-world example of carbon pricing benefits exceeding the costs several times over.

True Cost of Coal

A number of economic studies have also shown that the lack of adequate limits on air pollution (including CO2) results in what are known as "externalities" - costs which are paid indirectly (i.e. higher health care costs due to air pollution), but are not reflected in the market price of the product creating those external costs.  Economists view this as a failing of the free market which should be rectified through an emissions pricing system.  Two studies, Epstein et al. 2011 and Muller, Mendelsohn, and Norhaus 2011 (MMN11) estimated the external costs of coal power compared to its market price, and found that its emissions are under-regulated, and the US economy would benefit from an emissions pricing system (Figure 4).

coal costs

Figure 6: Average US coal electricity price vs. MMN11 and Epstein 2001 best estimate coal external costs.

Bottom Line - Carbon Pricing is Relatively Cheap

To summarize, most of these economic analyses agree that a carbon pricing policy will reduce US GDP by less than 1% over the next 10–40 years as compared to an unrealistically optimistic BAU scenario in which climate change does not impact the economy.  The analyses also concluded that the evaluated policies would reduce the federal deficit.  Gas prices would rise somewhere between 3% and 12% over the next 20 years compared to BAU.  Although energy prices would rise modestly, energy costs would be offset through increased efficiency.  Total household costs would rise somewhere in the ballpark of 75 cents per person per week.  Studies which conclude costs will be significantly higher either make unrealistic assumptions or only consider half of the picture.

In addition, energy independence and air quality would be improved.  The reduction in GHG emissions would be a major step toward addressing both climate change and ocean acidification, although these beneficial impacts were not included in these economic analyses.

In short, even when compared to the perfect world where climate change has no impact on the economy, carbon pricing would have a very minimal economic impact, and would have several ancillary benefits.  Compared to the real world in which unchecked increasing GHG emissions will certainly lead to numerous adverse economic impacts, putting a price on carbon emissions to reduce those impacts will almost certainly prove to be a net economic benefit.  A cost-benefit analysis concludes that direct benefits of carbon pricing would outweigh the costs by a factor of at least 2, and would result in a net savings of at last $1 trillion by 2050.

Last updated on 16 October 2016 by dana1981. View Archives

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Further reading

Only tangentially relevant but a nifty java animation at the Quaker Economist projects the world's future energy production and when it's expected to peak.


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Comments 1 to 50 out of 109:

  1. Do these analysis consider the global industry transfer- it may destroy the last bit of heavy industry in the US and send it somewhere they have no problem polluting
    much more- let alone other effects of that ? How about the cost the massive new bureacracy for this tax- I admit less than that for a carbon trading scheme? Even more disasterous for somewhere like Australia and no net benefit on carbon dioxide output.
  2. Not much of a problem. Massive new bureaucracy? I don't think so. Taxes are one thing modern governments have lots of experience with - income taxes, goods & services, excise, import duties - all well established, ho-hum, routine procedures. Hand over the legislation and the public servants will just do the same as they've always done.

    Heavy industry, light industry, any industry? All you have to do is organise import duties to match homegrown production taxes so that it won't matter where the stuff is produced, the same imposts will go on.
  3. Would Cap-and-trade be an effectual way of significantly reducing greenhouse gase emissions? Or do we need a much more aggressive bill to make large differences in greenhouse gas emmisions
  4. Cap-and-trade offers no incentives for reducing emissions beyond the set limits. To me, it looks like a shell game, CO2 emissions aren't reduced and the carbon credit brokers are the only ones to make money.

    I was pleased to discover some time ago that James Hansen and others had reached the conclusion before I did, that a revenue-neutral, phased-in carbon tax was the most sensible way to reduce emissions.

    I hope this site is on the level

    It appears to be, but sometimes it's hard to tell.
  5. Chris G, it looks legit, the owner of the domain is Thomas Stokes who seems to be reputable.

    Having just read Hansen's writings more carefully here I agree with the tax and dividend approach. If it were proposed with a decent phase-in period (since I also believe there is no urgency), I would support it over cap and trade because cap and trade is much harder to measure and enforce.
  6. Berényi - Benefits look to outweigh costs by a factor of 2 to 8, neglecting benefits such as decreased air pollution, ocean acidification, and overall climate change. Your cost argument does not hold up.
  7. #6 KR at 06:14 AM on 19 February, 2011
    Berényi - Benefits look to outweigh costs by a factor of 2 to 8, neglecting benefits such as decreased air pollution, ocean acidification, and overall climate change. Your cost argument does not hold up.

    Come on. Have you actually read Policy Brief No. 4 from Institute for Policy Integrity (which is not a peer reviewed paper so I wonder how is it allowed at this site at all)?

    Anyway, it all depends on discount rate, about which the authors say

    The interagency review process acknowledged that "[t]he choice of a discount rate, especially over long periods of time, raises highly contested and exceedingly difficult questions of science, economics, philosophy, and law."

    The benefits Holland & Schwartz are talking about are clearly not economic benefits, as they depend on such things as science, philosophy and law, but never on supply and demand, so they do not constitute a true income. Therefore they are not comparable to costs. End of story.
  8. Berényi - I looked at a number of the analyses. Cost estimates per US household were estimated at $80-160/year, or ~$20-50/person/year, not too much, with lower prices for lower income families. Economic benefits include deficit reduction, $$ for investment in renewables/energy efficiency/lower polluting tech, and a reduction in greenhouse gas accumulation, hence a reduction in warming speed and mitigation of global warming consequences and their associated costs.

    And that's completely without considering the "Other Side of the Coin" paper, which uses a range of societal carbon costs estimates established by fairly detailed Department of Energy estimates. If you don't like that paper, take the estimates and do the calculations yourself.

    Sounds like an good economic trade to me. Avoiding some of those considerable upcoming costs is income, if you can look at and plan for the future - rather than being short-sighted about immediate rewards.
  9. Berényi - As an example of climate change costs: the Central Valley (around Sacramento) in California, USA, is a major 'bread-basket' region, producing 8% of the USA agricultural output.

    That agriculture is fed by year-round Sierra mountain snowcap runoff, which is shrinking due to global warming and reduced snow accumulation. Rice crops will be among the first to suffer, but all agriculture needs water - 20-50% less over the next century. Walnuts, cherries, prunes and peaches, on the other hand, require lower winter temperatures to produce, and are declining as well; by 2100 about half the $9B annual fruit and nut crop will not be able to survive there.

    Minimizing these sorts of changes is the economically wise thing to do; I fail to see how you think otherwise.
  10. Berenyi:
    What is the value of preserving the land in Bangladesh? With only 2 meters of sea level rise 100,000,000 people will be refugees from that part of the world alone. Not to mention all the other major cities around the world that will be inundated. What is the benefit of maintaining those cities versus the cost of building new cities further inland? These are clear economic benefits that have not even been added to most of the analysis cited above, the recent sea level estimates were not available. The infrastructure alone is worth trillions of dollars in the USA.
  11. Energy cannot be creatd or destroyed, except in the minds of those who advocate alternative energies.

    If something produces less energy than something else, it's going to cost more money to use it. It's not rocket science, and rockets will not get to the moon using wind energy.
  12. Thingadonta, far more solar energy reaches the earth every year than can be used by our civilization. Therefore talking about conservation of energy is irrelevant.

    The cost of energy is important, and the direct cost of alternative energy is currently greater than the direct cost energy from fossil fuels. However, the indirect costs of fossil fuels are very large. Our society does not seem to care, because those costs will be paid for primarily by future generations rather than by us. Ignoring those direct costs will not cause future generations to thank us.
  13. BP #7 - as discussed in Monckton Myth #11, we have examined studies using discount rates ranging from 1.4% to 5%. In every case the benefits of carbon pricing exceed the costs several times over.
  14. I have a question. Some developed countries like Iceland or Japan are almost devoid of fossil resources (mainly volcanic countries whose ground is too young to contain sedimentary rocks). Obviously, barring any CO2 effect, this would be very interesting for them to develop without using FF. there is no interest in using them if they can make it without them, they're expensive to import : and actually they did it when they could ! Iceland has a lot of renewable electricity (hydraulic and geothermal) and is also mainly heated by geothermal sources. BUT..but... they still use plenty of FF for the rest and they produce as much (or more ) CO2 per capita than comparable countries.

    So if it were so easy to suppress the use of FF, why didn't they do it a long time ago ? maybe the brilliant engineers of MIT should explain them how dumb they are and give them access to their marvelous solutions ?
  15. Everyone of those taxes produced a massive bucreacracy- Government would have to assess every single carbon dioxide emitter- Your IRS will need employ new people to assess a whole group of tax payers in a totally different way than they have ever done before. Every tax written is a mess of exceptions, special rules. Put in a transfer tax (involves only few extra line of code on financial institions' computing) and abolish all your other taxes. Either fire the IRS or set them to analyse the mass of new information to catch terrorists, organised crime, and general fraud.
  16. cloa513 - good points. But please suggest a better way to reduce carbon emissions that is compatible with your political philosophy. "Skepticism" about climate science because you don't like proposed solutions is illogical.
  17. Gilles has argued that it cannot be both easy and difficult to give up fossil fuels at the same time. As dana has pointed out, that is a strawman argument. It has not been argued that it is easy to give up fossil fuels, but rather that it is technically feasible, and beneficial to do so.

    By technically feasible, we mean that there is no impediment from physics to doing so - so I guess at a stretch, we could say it is "physically easy", so in this sense, and understood only in this way, it is "easy" to give up fossil fuels. But, this does not even mean that it is technically easy. Going from physics to a usable technology is not always a straight forward path.

    In the case of fossil fuels as fuels, their use in transport is particularly difficult to find a technically equivalent alternative to using fossil fuels, although there are already many technically adequate alternatives. Transport ships, for example, could use a combination of wind power (sail) and solar power with battery storage to make any trip they currently make - but would take significantly longer to do so (though not more than three times longer). That is a technically adequate solution. Our civilization could operate on that basis, and probably at an advantage economically when the additional shipping cost implied is defrayed against the reduced cost of not needing to ship a torrent of fossil fuels.

    Business and political communication needs can be adequately substituted for by a combination of high speed internet connections for very fast virtual meetings using Skype equivalents, and solar powered Zeppelins for air transport. Again the transport times will significantly increase, but economic and political costs need not do so in tandem if we adjust behaviour to match what is now technically feasible.

    Of course, what is not technically feasible at the moment is eliminating fossil fuels while retaining our SUV driving, one person per car, traffic jam loving culture. A switch away from fossil fuels in the short term is going to require significant cultural changes. Not changes in those core parts of western culture that has made our civilization great, of course, but in some of those aspects of our culture which have grown up since the 1950's based on the assumption of an endless supply of cheap fossil fuels.

    So, this means that while fossil fuels are physically easy (in the strict sense defined above) to replace, they are culturally difficult to replace in the short term.

    You can easily extend the pairing of easy/difficult juxtapositions:

    It is physically easy, but psychologically difficult;

    It is physically easy, but institutionally difficult;

    It is physically easy, but economically difficult (in one of several possible meanings of that term).

    In fact, this easy/difficult juxtaposition is very easy to extend, but while rhetorically gratifying in showing that Giles knows so little about what he talks - that he is big on factoids but low on wisdom - it is not profitable.

    Now, I am perfectly happy to get into the nitty-gritty of this subject with Giles - but only on the condition that he restrict the discussion exclusively to this appropriate thread. If he discusses it anywhere else, except by a simple link back to this thread in other partially appropriate threads (and only in such partially appropriate threads), then I will withdraw from the discussion here as well. I will adopt the principle of not feeding the troll, unless he shows he is not a troll by not trolling other threads.

    I strongly recommend that other commentators follow the same strategy.

    I also strongly recommend that the moderators cease telling us to not feed the troll. If you need to tell us that, the troll is trolling and their trolling comments (and any replies) should simply be snipped with a link the appropriate thread for discussion provided. The current moderation policy is simply asking for denier talking points to remain continually unanswered on every thread that is generated - which is unacceptable.

    So, now it is over to Gilles (and the moderators). I look forward to the discussion.
  18. Now for the *real* impacts of carbon pricing :

    = recession, unbearable debts, economic crisis. That's the real world.
    Response: [DB] Please demonstrate the relevance of a link by providing some context showing why its relevant to the thread at hand. Otherwise, you're merely vomiting forth newspaper links (in this case) with no demonstration that you've actually read the post you're commenting on. Future posts lacking such context will receive moderation. FYI: as in the real world of astrophysics, peer-reviewed science publications carry the most weight, don't they?
  19. I think Gilles should try reading the post he's commenting on here, as it refutes every claim he made. Just as one example, try reading the Impact on Gasoline Prices section.
  20. "... a GDP reduction of less than 1%..."

    Can I presume that GDP is conventionally calculated?

    In that case electricity, petrol, diesel, coal not sold because of reduced sales (through reduced demand by negawatts or distributed generation investments) will indicate a reduction or "loss" of production - which is exactly what we want in the first place.

    This would be a bit like saying the country's families are starving - because they started buying packets of seed to grow their own instead of buying fruit and vegetables grown by others.
  21. Giles @18:

    From his first link:

    "Oil prices, which surged above $126 a barrel on Friday -- their highest level in 32 months -- retreated on Monday as the African Union signaled progress in Libyan peace talks."

    Reality check: Each barrel of oil used as fuel releases 0.45 tonnes of CO2 into the atmosphere (highest of three estimates found on the web). Introductory carbon prices are expected to be around thirty dollars per barrel, so that represents a price increase of 13.5 dollars, or just over 10%. Given the volatility of oil prices, that is not an earth shattering rise and would certainly not be, by itself, enough to drive a nation into recession. Indeed, with crude oil representing just 0.04%, the direct inflationary impact of such a carbon price driven price rise would only by a 0.004% blip in inflation.

    The second link discusses the EU bailout of Greece, and so far as I can tell contains no relevant discussion to this topic.

    The third link is a discussion of Standard & Poor's downgrading of the outlook on the US financial position. Ironically, that downgrade is likely to have a greater direct adverse impact on the US economy than a carbon tax would, but as it is, it is irrelevant to the topic of this thread.

    So Gilles's apparent argument to date is that: 1) The real world contains inflationary risks that can potentially lead to recessions; and

    2) A carbon tax's contribution of an estimated 0.004% to inflation is so large that it significantly raises those risks.

    Oddly, I am not convinced by his logic.
  22. Tom, I don't know how it might work in other countries, but Australia's proposal for carbon tax on petrol should have no, nil, zilch effect on retail prices.

    All they're proposing is that any carbon tax will be offset by matching reductions in excise. No change in the amount going to the government, but it will be paid from the oil companies' pockets instead of the user's.
  23. Gilles#18: "That's the real world. "

    Here's the rest of the so-called real world, in which the so-called free market is left to itself: Crude Oil Advances as Speculation on ECB Rate Increase Weakens Dollar

    Oil increased for the fourth time in five days as speculation that the European Central Bank will further raise interest rates strengthened the euro against the dollar, boosting commodities’ appeal as an alternate investment.
  24. I am new to this site and am yet to get my head around a lot of what I am reading.

    I do want to protect the environment, I would love to see more effort being put into renewable resources.

    Taxing carbon might be the best way on paper. The part that makes it so scary for me is the ongoing greed of big business. I fear that the cost of living will increase dramatically due to their greed, not based on the logically put predictions made by those proposing the solution.
  25. 212, Tom Curtis, (from another thread here),
    I also find it utterly risible that people claim that public transport is inefficient because it requires subsidies to operate, while completely ignoring that users of private transport never pay the full cost of the roads they use.

    That's an excellent point, even as it relates to the redistribution of wealth issue. The beneficiaries of publicly funded interstate highway and rail systems are inevitably the very wealthy. While we may not enjoy the selection as much, people could very, very easily live a good life style using more locally produced goods, which require less roads and rail infrastructure.

    Certainly, our current society depends on those two, but by far, the beneficiaries are the extremely wealthy who then accumulate more wealth than they otherwise could.

    So a "fair" tax on roads and rail really should be on a per-use basis (in which case the small, local businessman would be far more competitive, and the consumers would have a better choice, and free market forces would include that hidden expense of long-distance-transportation infrastructure... but the wealthy would never stand for such a thing).
  26. Sphaerica @25, I doubt that this is really on topic here, or anywhere else on Skeptical Science, so I will make a few short observations and leave it at that.

    First, while there is a hidden subsidy of private transport, the subsidy is one in which all, or almost all members of society are substantial beneficiaries. In the simplest terms we know the standard of living of people dependant primarily on local distribution networks, and it is not high. Indeed, it struggles to match that of even pensioners in our society. Typical examples can be found in any Indian or African village.

    With modern technology, that standard can be lifted to a very comfortable level, but the ready availability of that modern technology depends on the existence of mass markets and cheap transport. Consequently a modern village life style can only be a utopian dream for a wealthy (at least in world terms) few. Further, such a life style cannot sustain anything like our current world population.

    You probably did not have in mind anything like the level of localisation I am describing, but the point is a general one. Consequently I am certainly not opposed to the hidden subsidy on private transport. I just do not think the need to subsidise public transport is not a reason to invest in it. What is at issue is which is the most efficient subsidy, and that will depend on the particular situation. In general, public transport will yield greater efficiency, but only because as a result of the very visible nature of the subsidy, investment in public transport tends to lag investment in private transport.
  27. 26, Tom,

    Pretty much agreed.

    My position was probably presented in too extreme a fashion. Certainly, everyone benefits hugely from the vast transportation infrastructure that has grown in the last 150 years, and you are right, modern societies and populations would not be sustainable without it.

    But, I would also argue that while all benefit from it, the wealthy benefit disproportionately more, and pay disproportionately less. A transportation tax of any sort (on roads, or on fuels/energy) will ultimately be passed on to the consumer, making all products more expensive. But this will ultimately result in a new, more appropriate balance between more-expensive-to-produce-but-cheaper-to-transport local goods, versus the opposite (which is almost all we have in today's society). It moves some of the easy ability to accumulate wealth out of the hands of a national and international very few, and into more, more local hands. Not a lot, just some.

    It would also result in the development of cheaper and more sustainable energy sources and transportation systems.

    So, in the end, my argument is that future fossil fuel taxes and their effect on the economy are really simply righting an injustice that is already inherent in the current system, i.e. that large corporations and a wealthy few benefit disproportionately from a massive, fossil-fuel based infrastructure that is not, in and of itself, as currently fashioned, in the best interests of either society or most people in society.

    It is already a redistribution of wealth, from the poor and average person to the wealthy.

    Will prices go up some? Yes. Would a wholesale destruction of the current system badly damage society, and individual wealth at all levels? Obviously, and absolutely.

    Are either of these valid arguments for leaving the current system in place? Not remotely close.
  28. Sphaerica @27, a case can certainly be made that the rich benefit more in absolute monetary terms. I, however, would argue that the correct terms of analysis are in terms of utility gains (where "utility" is the technical term used in economics and ethical theory). As absolute income increases, utility gain per dollar increase in income declines, and quite sharply above a certain point. Just one example, in 2000 dollar terms, the difference between an annual income of $5000 and $10000 is the difference between a life expectancy of about 50 and about 75 (from memory). The difference between an annual income of $10000 and $50000 in contrast is only a difference of a life expectancy of around 75 to less than 85. So, in utility terms the gains of the poorer members of society from the transport system are massive. So also are those of the wealthier members of society. But it would take very careful analysis to decide who gained most in relative utility terms.
  29. Sphaerica,Tom Curtis @ 25 26 27 other thread 212

    Public transportation is inefficient regardless of the subsidy. The US light rail inefficiency arise from the constant power consumption. Whether it running full speed, half speed, idling or breaking, nearly the same power is consumed. The large cages, usually atop a the trains, contain a huge resistor grids. The grids act a giant rheostat to offset actual use to mitigate dynamic loading of catenary and/or third rail. Worse yet, being a government entity they operate on the 'use it or loose it" budgeting criteria. Budgeted money not spent is retracted and counts negatively (less funds) the following cycle...thus system manager leave surplus trains idling to burn electricity. Why you ask, well being a wholesale consumer of electricity, overages in negotiated electrical rates cost little, and show a need for bigger budget (tax money), and if overages are substantial enough a better negotiated rate. Under use will do just the opposite.

    Whats' the result, the CO2 ton/rider ratio is abysmal, while the cost/rider is exorbitant. As I said inefficient. Inefficiency to a level unheard of within the private sector.

    If I had my druthers all roads would fall to big oil for construction and maintenance. Who has more interest keeping the roads operating at top performance.

    Maybe OT but private schools out preform public. Private schools out preform at a lower cost/pupil. You need only look at the charter schools in the major cities as evidence. Yes this is a hybrid, public money private schools. However, these school cost less and perform better and highly sought by those trapped in fail, expensive public schools.
  30. Sphaerica @ 206 other tread

    You are completely and utterly wrong about SS. It was never intended to be a retirement program. It was intended to be a insurance program for those living in excess of life expectancy. SS is constructed as a ponzi scheme, current retires are dependent on the still working. The "Lock Box" Gore talked about is filled with IOUs. With true unemployment approaching 20% there will soon not be enough coming in to secure the increasing elderly population. So to the contrary, SS and all entitlements will be this countries undoing.

    BTW, I agree defense needs to be drastically cut but consider two things. National defense is a Constitutional mandate, though wars must be declared by congress, not presidential decree. Entitlement account for the largest portion of the national budget.
  31. Tom Curtis @ 210 other thread

    I did not say taxation was theft, I said "Redistributive taxes (money) is most certainly theft." It's the taking of ones property and GIVING that property (money) to others; be it individual, corporation, organization or country. Altruism is not a government function it is an individual choice.
  32. Ganesha @ 215

    Your (See Page F-59) link is broken.
  33. jigoro kano @29, public transport is inefficient where it is inefficient, only because of a lack of passengers relative to the service. If there is an over investment in private transport, the consequence will be apparently inefficient public transport because potential passengers will be drawn away by the hidden subsidy.
  34. Jigaro, as a matter of interest what do you think is the most effective way to limit CO2 emissions within your political values?
  35. jigoro kano @31, thoroughly of topic, but property can only exist because of "redistributive taxation". In the absence of assigned property rights, any person can make use of any space or resource as they feel fit. In declaring that some piece of land is the property of a particular person, the government (as agent of society) takes away the rights all other people had with regard to that piece of land, and assigns those rights exclusively to the new land holder. That is a redistribution. So, if there is a blanket ban on redistribution, the government cannot sell land to any person, nor can it defend the "rights" of any person to any particular property they may claim.

    Further, when assigning rights to land, the government (as agent of society) retains certain rights over the land and requires compliance with certain conditions for the land holder to retain the land. Those conditions include the paying of taxes. The obligation of the landholder includes paying the taxes but that obligation does not carry with it any right to restrain the governments use of the taxes. Suggesting that it does is as absurd as suggesting that because you bought something of me, that gives you the right to limit who I can give my money to.

    (As a side note, taxes are a condition of certain services provided for us by society, primarily through its agent, the government. Any person should be entitled to refuse to pay those taxes, but only on condition that they no longer accept the services. Those services include citizenship and residence rights. So while it is probably wrong to jail anybody for tax evasion, it is doubtful anyone would prefer the truly just punishment for tax evasion of being stripped of their citizenship, and exiled.)

    Finally, I have yet to meet a person consistent enough to argue both against redistributive taxes and against other legislative methods of redistributing wealth, in particular, the existence of corporations, the existence of limited liability, and the existence of a constant slightly inflationary economy. Can you be the exception? Can there really be just one person on Earth for whom right wing economic theory is a principled position rather than just another self serving ideology? I doubt it.
  36. Jigaro - sorry I missed you post on tax - however, this would effect emissions how?
  37. Tom Curtis @ 33

    Sorry Tom, you need only look at MTA to prove you demonstrably wrong. High population density, high ridership, yet high inefficiencies. If NY can't make work no area of the country can overcome this problem. Mass transit is costly, dirty, non-green, a non-solution dream of the left.
  38. 'Mass transit is costly, dirty, non-green, a non-solution dream of the left.'??

    So how do you explain Europe?
  39. Oh boy Jiguro...the MTA is more a necessity than anything else. In NYC it is taken for granted -- few in Manhattan own a car because of it. I wouldn't visit the city a quarter as much if it didn't exist. It's really really hard to imagine how NYC would be better off without it. I never used to fly through before they built a train to it. Too expensive otherwise.

    How are you calculating it's "inefficiencies." Inefficient with respect to what?

    And if you think it is easy to run mass transit system in NYC with its molding infrastructure, you're crazy.
  40. Jigoro,

    You've made a lot of assertions without providing a single concrete number backed with references. I'll help you out, and will even use a CATO Institute report as reference.

    Take a close look at Table 1. Light rail on average accounts for 0.36 pounds of CO2 emissions per passenger mile, while automobiles account for 0.61. This is of course dependent on the local methods of electricity production as the report points out. Combined with a move towards greener energy production, that number can come down further. Also note that the energy intensity in BTU's for light rail is entirely comparable to automobiles.

    Now of course, light rail is no silver bullet and there are other factors to consider. However, your claims that "the CO2 ton/rider ratio is abysmal" and "Inefficiency to a level unheard of within the private sector", are completely without merit, even when using sources subscribing to your point of view. This leaves your analysis unimpressive to say the least.
  41. I meant "fly through JFK airport..."

    Having been to Europe, I echo adelady's point.
  42. Jigoro Kano @37:

    1) The average cost per passenger mile on the Subway in New York is 33 cents. That cost is inclusive of the cost of rolling stock, energy, and maintenance of tracks (calculated from figures in this report;

    2) The cheapest urban driving cost per passenger mile in the US is estimated by the AAA as being 35 cents per mile. That cost does not include costs for building or maintaining roads;

    3) So, even excluding the hidden subsidies, road passenger transport is more expensive than subway transport. If you include the subsidies that is very obviously so. This is true despite the (as you point out) massive organizational inefficiencies of some public transport operators, which if eliminated would improve the comparison;

    4) This also does not include other costs, such as air pollution from the massive fleet of cars that would be needed if private transport was substituted for public transport; the relative mortality rates, with fatalities per mile being 6.5 times higher for car transport than for subway transport, or the very large cost of parking, a necessary addendum for private transport (in Brisbane, daily parking fees exceed daily rail transport fees for even the longest commutes, ie, from adjacent cities); and finally

    5) It does not consider the real cost of replacing public transport with private transport in New York, with the shut down of the subway likely to result in 6.5 million additional car journeys (if not taken up by other public transport) on already notoriously congested roads.

    All of this uses New York as your chosen comparison. I will pass over the jingoism present in the automatic assumption that the way it is done in the US automatically represents worlds best practise.
  43. Tom Curtis @ 42

    Nice work finding this gem. After reading it, I need to make a non-pertinent correction to my 29. The NYC subway and others listed within CBC are considered Heavy Rail not Light Rail as I posted. I should say it makes a small difference when readings e @ 40 post.

    If not publicly owned, not publicly subsidized the NYC system would be much more efficient and profitable. Being public makes it's a bastion of corruption, but that story is more OT then we are now. I do not object to mass transit, I do object being forced to pay for it.

    Taken at face value, you'll notice NYC has more riders then all other municipalities combined. With the highest US population density, obviously the best suited for a mass transit system. The calculation as listed CBC-NYC however, are a bit curious.

    1)For example, look at the Daily Passenger Trips: 6,461,133. For a population of 8.3 million the ridership seems a bit unrealistic. Assuming this count includes a rider from A to B and also that same rider from B to A so although it is two trips but one rider. So halving the ridership for comparison to overall population yields a ~40% ridership, still unlikely.
    But lets work with it.

    2)By dividing Daily Passenger Miles by Daily Passenger
    Trips a 4.23 mile average trip per rider is calculated. Completely feasible.

    3)Accepting the given $.33/per passenger mile and multiplying the 2) results (4.23 miles) a $1.40/trip average is found. Confirmed table 3.

    4)Multiplying 3) by the Daily Passenger Trips; MTA spends nearly $9.02 million a day...or $3.39 billion a year in expenses. Not far off from that given.

    5)The fee per subway ride, according to MTA is $2.50, so MTA receipts are $16.1 million/day or $5.8 billion/year...WOW!

    6) Are you suggesting MTA nets $2.58 billion/year? Or could it be the given stats are...curious?

    I never suggest NYC was the world capital for mass transit efficiency. In fact quite the contrary. The US transit system are wrought with bad practices and outdated designs. Europe, Shanghai, Taipei...etc have all modernized their trains. The US, however will never take such steps do to the intrenched interest. Tom there is a lot of money to be made in these government approved entities; unlikely to change.

    Tom, I still owe you a response to 35. There is much in that post I need to consider.
  44. Jigoro Kano @43, the fares for the New York Subway are actually 2.25 per trip or 2.50 if you buy a traditional ticket. Further, children accompanying an adult ride free, and the elderly and disabled can ride for $1.10 per trip. I do not have the information to turn that into an overall revenue for the Subway. I do know the MTA has an estimated fair revenue across all services of 4.5 billion dollars for 2010. That indicates that free and discount trips (possibly along with fare evasion) eats substantially into their revenue.

    I will say that NY public transport fees are absurdly cheap when compared to those of, for example, Brisbane.

    As to the direct issue of public or private ownership, it makes no difference to the train driver of conductor whether their salary comes from a corporation of a government. Therefore it is not the case that public enterprises are inefficient, while private ones are efficient. In fact, having worked for large public and private enterprises, the most inefficient, bureaucratic and corrupt enterprise was the private corporation.

    What is very important is the system of management, and public enterprises often fall into bad systems of management. That is not an argument against public enterprise, but for efficiency driven, accountable management in public enterprises.
  45. Jigoro - is few % drop in CO2 from engine efficiency (which also requires worldwide car ownership to be static) the best you can do for emission control consistent with your polical values? Come on please, I asked for effective emission reduction. My issue here is that if you can't come up with an effective scheme within your values, then I can only conclude that your "skepticism" is rationalization for doing nothing.
  46. Just a note on NYC trips per day - I lived in Brooklyn and owned a car. And I drove the car every day (it was required as the rules mandated leaving opposite sides of the street car free each day).

    Other than moving it to meet the requirements - I used the subway for everything. It was a 2 block walk to the subway. So I could make 2 or 3 trips per day (4-6 "rides").

    If you have never lived in NYC it seems a little strange. But the subway takes you where you want to go. No parking, no traffic. Clever New Yorkers don't even own a car. Rent as needed. The societal savings of the NYC subway are jaw dropping (time, pollution, wasted capital in vehicles, fuel, land dedicated to parking, CO2 emissions). Any one of which would justify the expense.

    I wish all private industry was as "inefficient" as the NYC subway!

    "stan clee doe" - the NYC subway driver's version of "please stand clear of the closing doors" - I will never forget it, and it still brings a smile.
  47. e @ 40

    Your link, concluding statement:


    There may be places in the world where rail
    transit works. There may be reasons to build it
    somewhere in the United States. But saving
    energy and reducing greenhouse gas emissions
    are not among those reasons. Regions
    and states that want to be green should find
    cost-effective alternatives such as the ones
    described here.
  48. actually thoughtfull @ 46

    You said;
    "I wish all private industry was as "inefficient" as the NYC subway!"

    In case you missed it:

    US public transportation is inefficient regardless of the subsidy. The US light rail rail transit inefficiency arise from the constant power consumption. Whether it running full speed, half speed, idling or breaking, nearly the same power is consumed. The large cages, usually atop a the trains, contain a huge resistor grids. The grids act a giant rheostat to offset actual use to mitigate dynamic loading of catenary and/or third rail. Worse yet, being a government entity they operate on the 'use it or loose it" budgeting criteria. Budgeted money not spent is retracted and counts negatively (less funds) the following cycle...thus system manager leave surplus trains idling to burn electricity. Why you ask, well being a wholesale consumer of electricity, overages in negotiated electrical rates cost little, and show a need for bigger budget (tax money), and if overages are substantial enough a better negotiated rate. Under use will do just the opposite.

    Whats' the result, the CO2 ton/rider ratio is abysmal, while the cost/rider is exorbitant. As I said inefficient. Inefficiency to a level unheard of within the private sector. US rail transit is horribly inefficient

    Bolstered by e link, I stand by my position. And as I also said, NYC is the only area in the US which could possibly make the numbers work.

    Don't deny the facts.
  49. I have a question about the economy-energy link. If this story
    then essentially China is reducing their fossil fuel use by capping the price of electricity while fossil fuel prices rise. One of the effects is shortages of electricity but presumably that will result in shortages in China's supply chain and eventually higher prices for U.S. and other consumers.

    Is this an acceptable way to pass the cost of limiting fossil fuel use along to U.S. consumers? If not, would a tariff on our end work better and why? Another question (presuming the story is accurate), does China have the option to make up for the economic loss with a green economy and if they do, why aren't they doing it?

  50. Jigoro @ 48 >"CO2 ton/rider ratio is abysmal, while the cost/rider is exorbitant. As I said inefficient. Inefficiency to a level unheard of within the private sector. US rail transit is horribly inefficient"

    Again with this claim, are you serious? According to the CATO report I already provided, heavy rail generates 0.25 pounds of CO2 per passenger mile, commuter rail 0.29, and light rail 0.36. Meanwhile automobiles generate 0.61. Your claims are therefore demonstrably and inescapably false.

    Or are you seriously trying to argue that the 0.25 is greater than 0.61? If so, you have reached a level of denial so stunning that it is unheard of even on this website.

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