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A Real-World Example of Carbon Pricing Benefits Outweighing Costs

Posted on 5 March 2011 by dana1981

NOTE: This article has also been republished on Treehugger

The key obstacle to putting a price on carbon emissions in the USA is the fairly widespread myth that it will result in ballooning energy bills and cripple the economy.  These myths perservere despite the fact that economic studies consistently find that the costs of carbon pricing proposals are very minimal, and the benefits consistently outweigh the costs several times over.

The flaw with these economic studies is that they're generally based on hypothetical legislation which has not been implemented.  So it's easy for individuals who oppose carbon pricing to claim that they contain flawed assumptions, and thus dispute their conclusions.  However, in 2008, 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 carbon dioxide (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.

All in all, through the first two years of the system, the ten states generated $789 million through the auctioning and direct sale of CO2 emissions allowances.  Each state developed its own plan for investing those funds, but overall, 52% was used for energy efficiency programs, 14% for energy bill payment assistance, including assistance to low-income ratepayers, and 11% to accelerate deployment of renewable energy technologies.  New York, New Hampshire, and New Jersey also diverted some of the funds to reduce their state budget deficits. 

Table 1: Percent of RGGI State Investments By Category

Considering that energy efficiency is by far the most cost-effective way to reduce CO2 emissions, at about 2.5 cents to save a kilowatt-hour (kWh), whereas it costs at least 6 cents per kWh to generate electricity from conventional sources, it's not surprising that the RGGI states chose to invest the majority of the carbon allocation funds on energy efficiency programs. 

The RGGI study provides us with a real-world example which busts the three main myths associated with carbon pricing; that it will (i) cripple the economy, (ii) kill jobs, and (iii) cause energy bills to skyrocket.  The study found that in reality, investing the carbon funds in energy efficiency and renewable energy programs resulted in a net benefit to the states' economies:

"Evaluations of several energy efficiency and renewable energy programs in the RGGI participating states indicate that these programs provide $3-$4 in savings for every dollar invested. When macroeconomic benefits are considered, the benefits are even greater."

Note that this analysis does not include other benefits such as averting climate change or reducing emissions of co-pollutants.  Despite this narrow focus, the carbon pricing system resulted in direct benefits exceeding costs several times over. 

The RGGI report also found that the program has created jobs.

"A 2010 analysis by Environment Northeast estimates that energy efficiency programs funded with CO2 allowance proceeds through December 2010 are projected to create nearly 18,000 job years – that is, the equivalent of 18,000 full-time jobs that last one year.  Employment benefits result from state program investments and from the reinvestment of consumer energy bill savings in the wider economy. While there has not yet been a similar analysis of RGGI-funded renewable energy programs, data from the Renewable Energy Policy Project shows every $1 million invested in renewable energy systems creates about six full-time manufacturing jobs, as well as additional jobs in construction and facility maintenance."

The myth that carbon pricing will result in much higher energy bills is based on the premise that  utilities will pass on the price of carbon emissions to consumers.  However, this assumption fails to account for the re-investment of the funds generated through carbon pricing.  For example, as discussed above, the RGGI states invested two-thirds of their carbon funds into energy efficiency and energy bill payment assistance programs.  As a result, the report found that individuals and businesses which took advantage of these programs saw their energy bills drop: 

"At the household and business level, energy efficiency investments enhance consumers’ control over their energy use, typically reducing energy bills by 15 to 30 percent."

Overall, the RGGI program has provided us with a real-world example that carbon pricing can be successfully implemented at a minimal cost, and that its benefits can exceed its costs several times over.

Unfortunately, the New Hampshire House of Representatives recently voted to withdraw the state from RGGI.  This despite the fact that New Hampshire used $3.1 million of their carbon allocation funds to reduce their state deficit, and invested another $24.4 million in energy efficency programs.  The state had used those funds to help businesses and schools become more energy efficient, weatherize low-income homes, provide energy efficiency job training for more than 170 workers, and so on.  New Hampshire Speaker William O’Brien justified the state's RGGI withdrawal:

"Eliminating RGGI sends a clear signal to the business community that we are reversing the direction that the state is taking in terms of creating a regulatory environment that is pro-business. That’s critical in terms of sending a strong message that we are open for business and ready to work with employers to help grow our economy and create good, new jobs here."

Apparently Mr. O'Brien considers it "pro-business" to eliminate a system which had created loans to help New Hampshire businesses lower energy expenses, and provided energy efficiency job training for hundreds of workers in the state.  Unfortunately, New Hampshire serves as a reminder that myths about the effects of carbon pricing tend to have more impact than reality.

This post was written by Dana Nuccitelli (dana1981) has been incorporated into the Intermediate version of the skeptic argument "CO2 limits will harm the economy". 

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Comments 1 to 50 out of 110:

  1. A real real-world example is the European Union, they have reduced their emissions 7% (EU15) or 11%(EU27) since 1990, mainly with their cap & trade system, and they don't seem impoverished.

    http://www.eea.europa.eu/pressroom/newsreleases/eu-greenhouse-gas-emissions-more

    http://www.eea.europa.eu/publications/eea_report_2009_9/ghg-trends-and-projections-2009-summary.pdf
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  2. Yes, the EU is another example, with a carbon cap and trade system in place since 2005. There have been some criticisms of the system though, that they started the carbon price too low so it hasn't been very effective. A good lesson for us to learn from in the USA, if we ever get a system of our own.
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  3. Not convinced there ahs been a drop in carbon emissions and European drops are false promise due to outsourcing of industry to China and the East and the resessional dip in power hungry activities.

    Carbon trading is claimed by many to be fundamentally flawed concept that will not cause CO2 to fall, read the Hartwell report http://eprints.lse.ac.uk/27939/ and watch the story of cap and trade http://www.storyofstuff.com/capandtrade/. All systems are supported by offsetting and loop holes and how can carbon honestly be accounted for considering the complexity of the fluctuations involved.

    Don't get me wrong we need to sequester billions of tonnes of CO2 and get back to 350ppm to even to be able to adapt but creating money spinning trading scheme markets and marketers to heighten the inequality gap (wait until it gets expensive to buy fuel to see who has it), and produce little or no actual CO2 savings.

    Not sure how on earth fossil fuel use will ever possibly stop but prohibition through money, tax or law won't work, like they don't with drugs and humans are totally addicted to the benefits of fossil fuels.

    How on earth are 40ppm of CO2 (20 years or emissions) going to be removed from the atmosphere especially considering the current state of the eco-systems and tendency towards CO2 release as the earth heats up?
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  4. Personally, I like the carbon tax better. It sounds simpler to execute, monitor and enforce.

    But it's great to know about these success stories with cap-and-trade schemes.

    About the export of emissions pointed out by ranyl above: AFAIK, the US (and many others) also buy loads of Chinese goods and have rising emissions all the same. The European success should not be so easily dismissed.

    Great post, Dana. It would be great to have more of these.
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  5. Thanks Alexandre. I agree, there are definite benefits to a carbon tax, especially in terms of simplicity. The benefit of cap and trade is the control that the cap gives you.

    The major problem with a carbon tax is the word "tax". It's why Republicans called US cap and trade proposals "cap and tax". Americans are deathly afraid of taxes, so a carbon tax is a non-starter here.
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  6. Given that William O'Brien was talking to Americans for Prosperity when he made these comments, it is not hard to imagine where the pressure to repeal cap and trade in his state came from. If so, then the story has another significance for Australia. If the current government manages to introduce a carbon tax scheme, some businesses will pressure any subsequent conservative government to repeal it. The conservative side is already promising to do so.
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  7. Alexandre @4, A carbon tax is simpler to enforce, but has the disadvantage that it does not allow the trade of carbon credits. That trade is essential for the efficient allocation of carbon usage between industries, and between nations. Ideally, we should be working towards a world system in which each nation is allocated a portion of the maximum acceptable global emissions based on a per capita basis fixed at some reference year. We should then allow trade in carbon credits so that those with maximum current usage can reduce carbon usage at a more gradual pace, purchasing credits to compensate for their excess production of carbon.

    ranyl @3, while a carbon price will not significantly reduce demand for energy, to which we are adicted, it will significantly change the best means of sourcing that energy. The only way this is not true is if alternative power sources are so inefficient as to by not commercially viable at any reasonable price (contrary to the claims of their advocates).
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  8. Dana #5 "Americans are deathly afraid of taxes...."

    I don't know that this is true of over half of Americans if there is good reason (and many think there is good reason in this case), but some are dead set against taxes, as are some in other countries. Australians can be as dead set as any.
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  9. New Hampshire voted this week to leave the NE coalition on carbon.
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  10. See the following link from Forbes magazine ranking the states in the USA based on several variables. Once you are on the page click the column entitled "Business Cost Rank".

    Here is the ranking of the states that were listed in this post.


    3rd delaware
    40th maryland
    41st new hampshire
    42nd rhode island
    43rd vermont
    44th maine
    45th connecticut
    46th massachusetts
    48th new jersey
    49th new york

    Note there are 50 states in the USA and delaware is ranked 3rd due mainly to its easy business incorporation laws (Many corporations in the USA are incorporated in this state although they reside elsewhere). It appears that all but one of the states you listed in this posting are among the worst states in the USA to do business in. Is there a correlation between this ranking and their use of a carbon cap and trade system? Mr. O'Brien from new hampshire isn't the only one who thinks carbon cap and trade systems are not 'pro business'.
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  11. For further clarification on my post #10, that ranking was for 2008, before the passage of many of these carbon cap and trade systems. Let's see how they rank now.

    Here is the link showing the ranking in 2010.

    and the ranking based on business cost rank is:

    12th delaware
    40th new hampshire
    41st rhode island
    42nd vermont
    43rd new york
    45th connecticut
    46th new jersey
    47th maine
    49th maryland
    50th massachusetts

    It should be noted that california is 44th - They also passed a cap and trade system since 2008.
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  12. Cam burn - maybe try reading the article you're commenting on.

    Garythompson - your argument strikes me as similar to claiming that Japanese people live relatively long because they eat a lot of rice. States that were ranked low by Foerbes prior to cap and trade are still ranked low by Forbes. Shocking! By the way, in California we haven't implemented cap and trade yet.
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  13. So lets see then-New Hampshire, Rhode Island, Vermont, New Jersey & New York all *improved* in rank; Maine, Maryland, Massachusetts & Delaware have all declined in rank-whilst Connecticut has remained unchanged. Which tells me that cap-and-trade has had *no net impact* on cost of business in the United States. I know it wasn't your intention, but thanks for effectively proving our point-namely that Cap & trade will not have any net negative impact on the cost of doing business-certainly no more than any other regulatory factor-yet it *will* have a positive impact on the environment. Talk about an *epic fail* there Gary. Time to go back & haunt WUWT where you clearly belong.
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  14. Also, why only focus on the cost of business aspect? Why not growth potential, or economic climate? The cost of business has a lot of factors associated with it-not least the kind of business & who they need to work there. A business with a predominantly blue collar workforce, which has little or no overheads, will have less costs than one with a white collar workforce with lots of overheads. Its no surprise that the States with the best rankings come from States known for businesses that don't require a highly skilled or educated workforce...again, epic *fail* Gary. Your point relies on a false correlation-& a correlation which doesn't even seem to exist to boot. They must love you over at WUWT, where opinion masquerading as fact is de riguer.
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  15. Marcus - you can spin this any way you want but the purpose of this post was to show how carbon cap and trade improved business. the bottom 10 in 2008 remained in the bottom 10 in 2010 2 years after passing the cap and trade systems. that is what i call an *epic fail*. if you call that a success then that is your opinion but i do not call that a success. the good news is that the northeastern states in the US will reduce their carbon footprint because businesses will be leaving those areas due to the high taxes associated with those policies.

    blue collar workforces have white collar employees (engineers, scientists, HR, managers, etc.) to support the manufacturing process so your argument reveals that you have no manufacturing/business experience.

    i don't know what WUWT has anything to do with my comments but if you need a villian to rally against i guess that is who you choose to represent your straw man.

    i choose to come to SkC because i view this as the premier site for debating the science related to climate change.
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  16. Hey Gary, the only one attempting spin here is *you*-I was just telling it like it is. You chose to focus on cost of business, yet the "evidence" you presented *failed* to do prove your point-indeed, given that the majority of States you mentioned *improved* in their ranking, it actually hurt your point. The idea that States with high business costs pre-Cap & Trade will become areas with very low costs virtually overnight is the worst kind of straw-man argument, but one that I've come to expect of the hard-core denialist brigade (of which you're clearly a member). Seriously, when you can provide solid *evidence* that Cap-&-Trade has significantly increased the cost of doing business in those 10 States, then I might listen, but right now you haven't even got circumstantial evidence to back your assertion. I do find it funny that people like you are so "skeptical" of AGW, in spite of overwhelming evidence to the contrary, yet expect us to swallow your rubbish claims on the basis of incredibly *weak* "evidence". Given that this is a frequent "Modus Operandi" of yours, I just figured you'd be better off on Watt's site-where such an MO is not only tolerated-its endorsed.
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  17. "blue collar workforces have white collar employees (engineers, scientists, HR, managers, etc.) to support the manufacturing process"

    That might be true, but a factory employing 1,000 people is going to have the majority of that workforce be blue-collar (probably around 80-90%), whereas a financial planning or R&D business employing the same number of people-for example-is going to have close to 100% of that workforce be white-collar. So the only one showing his ignorance here is *you*.
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  18. So to summarize Gary-you tried to spin the Forbes data to insinuate that Cap & Trade had directly led to an increase in business costs in the States where it was implemented. Yet even a cursory reading of the figures you present don't even come close to proving your point-both because the majority of the States you mentioned either improved or remained unchanged & because you cannot actually prove that any increases in business costs can be directly associated with Cap-&-Trade (& Forbes, at least, is wise enough to to make such an unfounded assertion). Interestingly, many of the 10 States in that Forbes piece are ranked quite high on the Economic Climate & Growth Potential categories-which further undermines your already massively weak case. Like I said, I define that as an *epic fail*.
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  19. "the bottom 10 in 2008 remained in the bottom 10 in 2010 2 years after passing the cap and trade systems. that is what i call an *epic fail*."

    How can it be considered "epic fail"? No one ever said that Cap & Trade was going to reduce the cost of doing business in those States-only that it would not significantly *increase* business costs-whilst still generating additional income for the State Economy-a fact that appears to be borne out by the Forbes piece that you cited. I certainly don't expect Cap & Trade to miraculously reduce business costs in the space of little more than 2 years-especially not compared to the relatively low income States like those in the South. That you do-or seem to-just suggests that you're setting up a Straw-man. A tactic I've come to expect from the pro-fossil fuel brigade.
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  20. I still don't understand why single states or countries are imposing cap and trade systems. The last time I checked the "problem" that is being addressed is called "global" warming, not United States warming or Delaware warming or New Hampshire warming. Whether one thinks humans contribute to climate change in any significance or not, myself being in the latter group, it's a waste of money and time to pass cap and trade systems when the entire global community isn't on board - the US can reduce emissions while China, India, and other growing economies go unchecked. Moreover, I think that a study similar to this one should be done during a period of economic growth, not economic decline. Then we can truly find out if these cap and trade systems work.

    Marcus, I've read your comments on this website for quite some time. It seems that anyone who disagrees with you or anyone else in the pro-global warming crowd is from the "pro-fossil fuel brigade." Why is that? There's a reason why we use coal and oil as our primary sources of energy: it's cheap and efficient. Moreover, your comments seem to suggest that you believe the oil companies are fighting, or trying to prove global warming wrong because it affects their bottom line. If you stopped with the ad hominem attacks and thought about it, you'd know that, if there is any company that could possibly benefit from a new energy source - whether it be solar, wind, or whatever - it'd be those evil guys from the "fossil fuel brigade."
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  21. Also, I'd argue that this study is done only after 2 - 3 the program was implemented. I think a long-term study would be more convincing.
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  22. "There's a reason why we use coal and oil as our primary sources of energy: it's cheap and efficient. Moreover, your comments seem to suggest that you believe the oil companies are fighting, or trying to prove global warming wrong because it affects their bottom line. If you stopped with the ad hominem attacks and thought about it, you'd know that, if there is any company that could possibly benefit from a new energy source - whether it be solar, wind, or whatever - it'd be those evil guys from the "fossil fuel brigade."

    Wow, just how much bunkum can you squeeze into a single post? I make those accusations of people who use any kind of straw-man argument to attack attempts to reduce our continued over-consumption of carbon-rich energy sources. As to your claims of about how "cheap & efficient" it is-total rubbish. (1) The limitations of physics means that coal power stations will *never* be more than 35% thermally efficient. (2) Almost all coal power stations have to produce the same amount of electricity 24-hours a day, & often have to push that electricity out over a distance of 20 kilometers or more. This means that, at night, large amounts of electricity are being generated that isn't getting used, & over long distances as much as 15% of the electricity being generated never reaches its destination (due to transmission & distribution losses)-so much for "efficient". As to being cheap-well it is *now*, but only after *trillions* of dollars of government support over the space of more than 100 years. Renewable energy has become cost-effective in a shorter space of time, & with much less government intervention. Even today, though, many of the costs of coal mining & combustion (the externalities) are covered by the tax-payer, not the coal industry.
    As to your final point, until every last ounce of oil & coal is depleted, the fossil fuel brigade will remain deeply opposed to renewable energy & energy efficiency-because every megawatt of energy not generated from fossil fuels is another dollar that isn't being earned by them. Still, nice to see you & Gary trying to double-team me on behalf of your beloved industry.
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  23. Blessthefall - "The last time I checked the "problem" that is being addressed is called "global" warming, not United States warming or Delaware warming or New Hampshire warming"

    True, but The US is the major polluter, both historically and presently. Seems like a lame excuse to do nothing.

    "There's a reason why we use coal and oil as our primary sources of energy: it's cheap and efficient"

    But it's not really cheap at all. Remove government subsidies and factor in the environmental cost (whoa!, that would be a biggie!) then they are in fact incredibly expensive. Depends how you choose to define it eh?.

    "if there is any company that could possibly benefit from a new energy source - whether it be solar, wind, or whatever - it'd be those evil guys from the "fossil fuel brigade."

    Dude (or dudette) that doesn't make any sense. The fossil fuel industry has an infrastucture worth trillions of dollars. Why would they be happy in that being rendered obsolete?.

    And now that global warming is causing world food shortages we are seeing societal upheaval in poor countries, like those in the Middle East. Have you even been down to your local gas station recently?. The price of oil is skyrocketing and oil companies will be making record profits. Why the heck would renewable energy interest them?.
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  24. "Also, I'd argue that this study is done only after 2 - 3 the program was implemented. I think a long-term study would be more convincing."

    Gee, didn't stop your mate Gary from falsely trying to derive some kind of negative spin from the Forbes article-but I didn't notice you criticizing him (well, why would you, you're both on the same team). The fact is that this is a very good indicator of the potential benefits of such schemes. If you want more long term data to convince you-look at some of the beneficial outcomes in Mainland Europe. As to your criticism regarding the regional nature of this scheme-the whole idea is to provide a test-bed which other States-& Countries-can follow, & it does make a contribution to overall CO2 reduction-or would you rather we continue to adopt the "head-in-the-sand" approach that your mates in the industry keep pushing?
    Also, every tonne of coal or oil that remains unconsumed not only represents a reduction in CO2 emissions, it also represents a reduction in the emissions of benzene, particulate emissions, cadmium, radon, mercury & a host of other toxic chemicals that can lead to environmental damage on a local/regional level. It will also reduce the mount of environmental damage caused in both the pursuit of coal/oil & in the dumping of the millions of tonnes of waste generated from burning coal.
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  25. "It seems that anyone who disagrees with you or anyone else in the pro-global warming crowd is from the "pro-fossil fuel brigade."

    Actually, that's patently untrue. I save that label only for people who (a) use extremely lame arguments to "disprove" the anthropogenic link to global warming, (b) try & use equally lame arguments to "prove" we shouldn't take any action to reduce CO2 emissions or (c) refuse to engage in a proper debate on the issues. So you, Gary & Poptech will most certainly get labeled with that epithet-as I rightly think you deserve. Although I disagree with many other people at this site, I most certainly don't necessarily accuse them all of being pro-fossil fuel industry.
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  26. garythompson, on the Forbes list, the mean of the rankings of the 10 states has improved from 31 from 33.6 in 2009. If we are to use your fallacy that any change in costs must be due to the introduction of a carbon price, then we must assume that the net effect of such an introduction is favourable to business.

    Of course, that assumption is invalid. Consequently simply pointing to a ranking of business costs in the various states is uninformative about the net effect of the carbon price, even if the rankings in all states had declined. It is not clear that the actual situation, in which 50% of the states improved their ranking, while 40% declined (as pointed out by Marcus), albeit with a 1.4 decline in mean ranking overall, would support your case even if the carbon price was the only factor that changed. A decline in ranking, after all, can come with decreasing business costs because business costs have decreased further in another state. As other factors are undoubtedly involved, the rankings leave us almost completely in the dark.
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  27. I think there is a confusion between two meanings of "reducing" CO2 emissions. Does it mean reducing the carbon intensity (the amount of fossil burnt for a given good or service), or the fossil fuel annual consumption (which is the former multiplied by the total consumption of goods ?). If the first one is easily defendable,the second one is much less obvious : for a given energy intensity, doesn't it mean that we would just prevent poor people of getting richer ?

    and there is even a third question : even if we reduce annual emissions, would it mean that we will reduce the total amount of extracted fossil fuels? if you spare say half of the fossil fuels, it means that after some period, you will be left with half of your initial amount, at at time when everything would have been exhausted if you hadn't made these conservation improvements. Does it mean that you stop extracting the remaining reserves just at this moment ? no of course. First because you don't know exactly what would have happened in a different world, and second because there is no reason to do it. So the TOTAL amount of fossil fuels is just driven by geological availability - unless we find a way to replace totally the use of fossil fuels by something else, they would just become "totally useless", but this seems to be very unlikely just now.
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  28. Gilles, the atmosphere does not give a hoot about our Carbon intensity. Carbon intensity is not a physical cause of anything. Carbon dioxide emitted to the atmosphere, on the other hand, is a cause of global warming. So, I don't care a hoot what you do with your "carbon intensity" if it does not reduce total carbon emissions. On the other hand, reducing carbon emissions while preserving economic growth will inevitably reduce carbon intensity (seeing you like reductions in abstract quantities so much).

    Further, probable consequences of Business As Usual include the loss of the Amazon rain forest, and the loss of the Great Barrier reef. These are costs always left out of economic assessments of the proper value of carbon reductions, and for good reason. If they were left in, it becomes self evident that the cost of not reducing carbon emissions is too great.
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  29. As ranyl has pointed out, emissions in some cases have been exported from the EU to China/India. This is a well known issue. It is definitely the case in the UK where manufacturing has shrunk enormously and where cargo containers coming to the UK are 100% full, whilst those that leave are 50% empty.
    Offloading manufacturing to other nations doesn't reduce emissions, the chase for cheaper labour, fuel etc increases emissions.
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  30. Gilles:"for a given energy intensity, doesn't it mean that we would just prevent poor people of getting richer ?"

    Being poor is a political/social issue that is separate from policies legislating for carbon. If you are worried about the poor, then you are dealing with an age old issue that exists throughout history. Why would you think you are going to solve it with cheap fossil fuels?

    So by all means tackle it in the context of 'traditional' (aka 20th century left/right arguments). But don't pretend that a global issue that has an impact on poor and rich and different species, can be drawn into this age old and failed discussion about the 'poor'.
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  31. Tom#28 : I do fully agree with you. But I'm just saying that all "energy policies" reduce actually energy intensity - they do not control the whole emission rate, especially at a world wide scale. How can you prevent Chindia from using the oil spared by american hybrids vehicles?

    The Ville : actually hundreds of millions of chinese people went out of poverty in the last decade through an increase of their fossil fuel consumption. I think they would be happy if you show them how they could have made it in another way.
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  32. The Ville - I think it's a *very* low bow to draw to blame the decline of manufacturing in western nations (including both the EU and the US) on efforts to fight global warming. It's got a whole lot more to do with the cost of labour - the 'outsourcing' of manufacturing to nations with extremely cheap labour has been going on ever since Walmart imported the first container loads of cheap Japanese goods... (and probably a heck of a lot longer!)

    The interesting (& rather sad) thing as that many of the same people responsible for that shift are now screaming that a carbon price will adversely affect manufacturing in western nations...
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  33. Bern:
    "I think it's a *very* low bow to draw to blame the decline of manufacturing in western nations (including both the EU and the US) on efforts to fight global warming."


    That isn't what I wrote.
    The fact is companies have exported emissions to China in the race to reduce costs and compete.
    I didn't say it was a result of current efforts to cut emissions. However, if you include emissions produced by China for goods that would have been produced in the EU in the past, then, EU emissions haven't gone down much.
    In fact I think there was a UK report out last year that showed UK emissions had gone up or remained static once emissions exports had been taken into account.

    Ultimately individuals have to cut consumption, you can't do that just by moving things around. You either have to have a cultural change, or increasing prices, or rationing.
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  34. 2010: UKs chief environmental scientist points out UK emissions have gone up, once exported emissions are taken into account:

    http://www.bbc.co.uk/news/science-environment-11172239
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  35. Here's the thing Gilles. My current annual fossil fuel consumption is less than *half* what it was 10 years ago-yet far from being *poorer*, I'm now *richer*-because my energy bills are lower. This has not come at any cost to my standard of living-as my house still has access to all the mod-cons as before-just using the most energy efficient technology available. So I guess my point is that reducing fossil fuel consumption does *not* have to mean entrenching poverty-its about ensuring that development is achieved in the most CO2-neutral manner possible. I do find it odd, though, is that those who speak most loudly about the poverty which CO2 abatement will cause weren't too loud in speaking out against the poverty caused by corporations paying the people of these poor countries next to nothing for their labour & resources.
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  36. garythompson #15:
    "the purpose of this post was to show how carbon cap and trade improved business.
    No, it wasn't. I thought I pretty clearly outlined the purpose of the post - to debunk three myths related to carbon pricing.

    1) That it will cripple the economy.
    2) That it will kill jobs.
    3) That it will make energy bills skyrocket.

    Cap and trade being pro-business didn't even make the list, let alone being the purpose of the post! As an added discussion, I noted that the New Hampshire House leader had claimed that killing cap and trade is pro-business, which is clearly not the case.
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  37. #33: "Ultimately individuals have to cut consumption, you can't do that just by moving things around. You either have to have a cultural change, or increasing prices, or rationing."

    It's much more complex.
    First, the simplest, way to cut consumption, in general, is using longer-lived goods. Building better things.
    Second, using mostly recycleable materials.
    Third, emissions per produced entity are by no means a well-defined quantity. Moving production around may be a very good idea, to have optimal locations. Producing Aluminium where there is a surplus of renewable energy, for instance. It depends on the rules of the game.
    Fourth, changing consumption patterns may be much more important than, generally, cutting consumption. Using fossile products only as industry raw materials and for special purposes, for instance. Substituting bio-products for fossile products may, by several criteria, actually increase consumption. But as long as it is sustainable, it may be the right thing to do.
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  38. Marcus and rob:

    Just a note to Marcus, this is the last time I'll acknowledge you. If you want to have a civil debate about something I suggest not speaking to someone like they're a 5 year old. Continually associating my or anyone else's beliefs with the fossil fuel industry gets people no where and quite frankly, it's frustrating: I am all for renewable energy just as long as it's just as efficient and cheap as oil or coal or nuclear. I have some articles/books that you can read which shows that the fossil fuel industry is involved with you and your ilk. That's right, they're actually pro-global warming because they can make money. When you decide to grow up, let me know and I'll be happy to provide the books.

    On to my response: My point is that if there's any industry that can profit from renewable energy, if there is any industry that can possible produce renewable energy on a large scale, it'd be the fossil fuel industry. Why? They have a massive amount of resources. Whether they decide to invest that into renewable energy or buy the renewable energy companies, they win either way.

    Rob, I don't see how one country reducing emissions will do anything if the rest of the world goes unchecked. It doesn't make any sense. Some say it's a "good place to start," but what good is it doing when China and India's emissions continue to rise?

    As far as the cost of energy, the actual production and shipping of the energy is what I'm factoring in. If you want to talk environmental costs, that's something completely different.

    Also, you bring up the rising cost of food... farmers are paid to underproduce. The United States alone could feed the entire world. Blaming global warming for food shortages is a non-sequitur.
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  39. SNRatio:
    "It's much more complex. First, the simplest, way to cut consumption, in general, is using longer-lived goods."

    ---or increasing prices---

    Quality = higher prices.
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  40. Rob:
    If you think food prices are rising now, enact a co2 tax and you will see reallllll rises in food prices.
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  41. Suggestion for a future post: fossil fuel subsidies.
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  42. Blessthefall @ 38 - Rob, I don't see how one country reducing emissions will do anything if the rest of the world goes unchecked. It doesn't make any sense.

    If one of the main polluters, like the US, decides to curb greenhouse gas emissions, others will follow suit. If the US proves it can be done without crippling their economy why wouldn't others do the same?. Mind you this is highly hypothetical, your political system seems to be in the thrall of the Sith.

    What doesn't make any sense is continuing to rely on a limited and severely polluting energy resource. Peak oil occurred around 5 years ago, so there's only one way the price of oil is headed and that is up,up,up. Not making the transition to renewables, is going to be one of the defining blunders of the 21st century.

    If you want to talk environmental costs, that's something completely different.

    Different in that the true cost doesn't have to be borne by those damaging the environment. Passing the buck to future generations will not be appreciated by said future generations. Or even current generations, when you factor in that the extra 4% of global water vapor and the extra heat that fossil fuel combustion has bought about. To pay their fair share, fossil fuel companies would have to cover a proportion of all damaging weather events around the globe. See what I mean about expensive?. Economists simply ignore this stuff and give it a fancy name "externalizing".

    Blaming global warming for food shortages is a non-sequitur.

    No, actually it's fact. Don't you remember the Russian heatwave last year?. You know where they banned exports of grain after huge losses from the heatwave?. And that's just one major event. I've argued for a long time on other blogs that the first consequence of global warming will be expensive food prices from weather extremes (principally drought). Joe Romm over at Climate Progress has been hammering home that point for a while now. And after experiencing the warmest wettest year on record (2010) global food prices are at an all-time high.



    You should keep an eye on the FAO index, sure there will be ups and downs, but long-term that is going to skyrocket too.
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  43. "ranyl @3, while a carbon price will not significantly reduce demand for energy, to which we are adicted, it will significantly change the best means of sourcing that energy. The only way this is not true is if alternative power sources are so inefficient as to by not commercially viable at any reasonable price (contrary to the claims of their advocates)."

    Hi Tom,

    But as oil prices have jumped since 2006, and fossil fuel use hardly blinked an eye, what evidence is there that a higher price unless much higher will make any difference to use really?

    Strikes me whatever the evidence CO2 emissions aren't stopping any time soon unless some miracle happens so all these discussions really are academic.

    Suspect it is probably prudent to start planning adaptation, with clear goals of carbon sequestration (this would a miracle or an enigma size effort), rapid transformation to a low energy use none fossil fuel society.

    Not sure renewables are the all saving grace, wind farms do heat and dry the land as well several other things, solar panels are associated with tri-nitro_floride release and rare metal mining, large dams casue huge CO2 releases from ecological effects and so on.

    Not using energy is in a real challenge but surely not worth taking the risk of CO2 levels over 400ppm for?
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  44. ranyl@43 "But as oil prices have jumped since 2006, and fossil fuel use hardly blinked an eye...."

    Oil and total fossil fuel are not the same thing. Oil use is mainly related to transport and to rising living standards allowing more people to use cars rather than other transport. Fossil fuel used for power generation rises with increases in industrial activity and, with luck, associated improvements in domestic living standards.

    The balance of these factors is pretty well settled for advanced economies. But in developing economies, the increases in power generation precede the improvements in living standards (at least those that involve more use of oil based fuels.)
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  45. Blessthefall @ 38 said... "Rob, I don't see how one country reducing emissions will do anything if the rest of the world goes unchecked. It doesn't make any sense. Some say it's a "good place to start," but what good is it doing when China and India's emissions continue to rise?"

    I know this was for another Rob, but you might take note that China is putting huge amounts of money into renewable sources. Vastly more than we are. They want to develop those technologies so that they can sell them to us. We need to be doing the same in order to sell them the technologies they need. That's what we're good at but we're rapidly slipping in that area.

    Look, this is all a no-brainer. In coming decades the entire world will be involved in pricing carbon. Pricing it enables us to develop technologies for the future. By avoiding this we are risking our future standing as the leader of the modern economic world.
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  46. ranyl @43, the increased price of oil is driven primarily the increased demand from India, and especially China. The increased prices will put a dent in that demand, but won't eliminate the factors that are driving it. However, if you think that it does not effect car purchases, consider this graph:

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  47. @BTF. If you will keep repeating the same fallacies-in multiple threads-over & over again, like an obstinate 5-year old, then that's exactly how I'm going to speak to you. That said, I didn't speak to you that way when I tried-very calmly-to explain why your claims are fallacious. You keep telling us that Coal, Oil & Nuclear are "cheap & efficient", yet at the end of the day all 3 energy sources consume a relatively expensive, non-renewable resource in a extremely thermally inefficient manner in order to generate energy. Given that the fuel sources also involve expensive & highly destructive extraction techniques-not to mention the extremely toxic by-products that their consumption generates-it becomes easy to see how your claims of "cheapness & efficiency" simply don't stack up. If they are so "efficient", then why is the majority of the fuel consumed without producing anything useful? (The most efficient Coal power stations only convert 35% of the energy released from the coal into electricity-the rest being lost as waste heat. The most efficient Nuclear Power stations (highly experimental gas-cooled varieties) only convert 50 % of the energy released into usable electricity. The most efficient Internal Combustion Engines only convert 20% of the energy released from petrol into forward momentum-the rest being lost as waste heat). If they're so cheap, then why do all 3 industries still demand massive subsidies from tax-payers-60-150 years after the technologies were first introduced? Modern Renewable Energy technologies have been around for as little as 30 years yet-with only a small fraction of the Government Support enjoyed by your "cheap & efficient" technologies-they've managed to achieve massive strides in efficiency, reliability & cost per kw-h. Now its true that some Oil companies might publicly promote a "belief" in AGW, or support for renewable energy technologies-but this is purely for PR purposes. Behind the scenes, the oil & coal industries are the biggest financial backers of those organizations most vociferously promoting "skepticism" about both AGW & the usefulness of renewable energy & energy efficiency measures-because whatever they might say publicly, they'll all do whatever it takes to protect their massive profit margins.
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  48. Blessthefall,
    "what good is it doing when China and India's emissions continue to rise?"

    US emissions are still 4x China and 10x India on a per capita basis.

    We have short memories. Fifty years ago the western US had terrible air pollution problems; thirty years ago it was eastern block Europe's Black Triangle. Both have cleaned up through tough emissions standards. If China et al admit that their Brown Clouds are a problem they can get started cleaning up, it will make the US even more unpopular.
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  49. Dana:

    Thanks for an interesting article. However, it is difficult to determine how successful it has been in its primary purpose – reducing CO2 emissions – since the article does not tell us what emitters are subject to the RGGI. Does it include all industrial emitters and transport?

    Is RGGI applied uniformly by all participants? Which, if any direct CO2 emitters are excluded from the scheme? What adverse effects has the cap and trade scheme had and how have these been dealt with?

    Without this info, it is difficult to evaluate its success in terms of its effects on energy bills, employment and other effects on the economy, particularly any movement of businesses out of participating states (carbon leakage), which is not reported on.

    What is clear is that CO2 emissions are being reduced, revenue is being earned and applied to employment in new businesses, notably those which increase the efficiency with which energy is used by consumers.

    It should come as no surprise that cap and trade has been introduced by RGGI participants without bringing about the economic damage which critics of pricing carbon so loudly warn us of – usually without substantiating their claims. For the last 6 years, the European Union has shown that introduction of properly designed and administered mechanisms for pricing carbon does reduce CO2 emissions without damaging their economies.

    There is of course a difference between introduction of cap and trade in a state of the Union and in a country, such as Australia, Canada or the USA as a whole. Countries may find it necessary to include in the design of a cap and trade scheme, introduction of a “carbon tariff”, to protect domestic industry from unfair competition of imports produced in countries which do not effectively abate CO2 emissions.

    Although European countries have not felt a need to introduce a carbon tariff (yet), my prediction is that it will be introduced by those countries which are effectively reducing CO2 emissions as a protective measure against countries which are not. Such a tariff has the added benefit of persuading errant countries to curb their CO2 emissions, while protecting complying countries from carbon leakage.
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  50. Alexandre @ 4

    In some ways, a carbon tax (CT) may be preferable to cap and trade (ETS) but a CT is less cost efficient and effective in reducing CO2 emissions, which is the primary purpose of pricing carbon.

    1. With a CT, the price of carbon is set by government (bureaucrats) rather than by the market. Why is market pricing more important? Because as the level of CO2 reduction increases and becomes more difficult to achieve, the carbon price fluctuates and increases. This continuing change in the price of carbon is best determined by an informed market than by government.

    2. By itself, a CT does no more than “encourage” CO2 emitters and energy users to reduce emissions, except a desire to avoid paying a CT. There is no “compulsion” for them to do so, nor is government required to set a reduction target and act to achieve that target.

    An ETS is just the opposite. It does require government to publicly state annual and longer term emission reduction targets and it does require emitters to reduce their emissions or bear the cost of purchasing market-priced emission licenses to cover any shortfall in meeting the annual target.

    3. An ETS gives certainty that CO2 emissions will be reduced, by how much, how fast and over what period - and it forces government and emitters to plan and set targets With a CT there is no such certainty, indeed the only certainty is the level of tax – and even that can be changed by a new government.

    4. A CT can be made just as opaque as a poorly designed ETS scheme by being selectively applied, by paying off-setting subsidies to emitters, allowing tax rebates and other discriminatory practices. Some of these measures are applied with ingenuity and it was their proposed use which contributed to the defeat of Australian government proposals to price carbon in 2009/10.

    5. Finally, is a Carbon Tax really a tax given that it is only levied on and paid by those directly responsible for CO2 emissions? It is not paid by any others earning a taxable income, though its effects in terms of higher energy bills may be paid by everyone. However, those least able to afford higher bills can be (and usually are) assisted by government.

    Perhaps a Carbon Tax would more accurately be described as a Carbon Levy or an Emissions Fee?
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