David Roberts challenges carbon tax advocates. He says GHG policy should “penalize the emission of GHGs and reward the prevention of GHG emissions. Sticks and carrots.”
As someone who thinks neither a carbon tax nor cap-and-trade can be the primary means to solve global warming, I’ll take on Roberts’ challenge just because it offers an opportunity to illustrate what is wrong with a lot of thinking on the subject.
The key to this and many other greenhouse policy questions is that carrots and sticks are not symmetrical. When you are penalizing or charging for an emission, you don’t worry whether people who avoid the charge by not emitting would have avoided it anyway. You charge a tax high enough to keep emissions below the level you want, or auction few enough permits to accomplish the same goal, and let people sort for themselves who lowers emissions and who continues to pay taxes and buy permits.
But once you get into “carrots,” rewarding people for not polluting, you have to figure out what to pay them for not emitting. Suppose, for example, we handled littering the way Roberts wants to handle carbon emissions. Instead of just fining people when they littered, we rewarded them every time they did not litter. Right now I don’t litter because I was brought up not to. It wasn’t even a matter of ecological consciousness—it was just something you didn’t do. But if you to want to pay for every piece of litter I don’t drop, 24 hours a day, seven days a week, I’ll be glad to get some of those tasty, tasty carrots.
Of course all the carrot advocates will protest that of course they don’t mean to give unlimited carrots away. But that leads to new questions you don’t have to confront with an emissions tax. You either have to wrestle with additionality, a la CDM, or you need to rely on a regulatory standard—rewarding those who exceed the standard and requiring permits from those who fall under it. And in the latter case, why not simply reinforce pricing with rule-based regulation (usually slandered as command-and-control).
Also, if you are talking about “carrots,” a lot of the best “carrots” are not market incentives, but old fashioned public investment. No amount of market incentives will produce or improve railroads. You need straightforward public investment in track and rights-of-way and freight-yards and switches and stops. Market signals won’t produce smart grids, new long-distance transmission, or large-scale storage.
Take another case, home insulation and sealing. Existing homes can have ducts and shells sealed at a very low cost with very fast paybacks. Other types of efficiency improvements with slower rates of return still can offer far better paybacks than many far riskier speculative investments. Yet most homes in the U.S. are not properly sealed, let alone properly insulated or equipped with efficient appliances or with various types of window improvements.
OK, I suppose we could try and establish an elaborate market based incentive system, paying residents per BTU or kWh saved. But there are already very successful programs in Europe that establish standards for efficiency in existing homes, and that offer subsidies for meeting those standards. (Such programs have even tougher standards in new buildings, since the incremental cost of doing it right the first time is much lower than retrofitting to correct existing mistakes.) If you want energy used efficiently in buildings, combine efficiency standards plus efficiency subsidies plus an emissions price. If you can’t get them all through, the emissions price is the least important.
I’m sure at this point someone will point out a kind of carrot we do have that has had a lot of success: the 1.9 cents a kWh renewable tax credit. Of course it is implemented in a flawed way, short periods with occasional lapses, and always with tremendous uncertainty as to renewal. Even so, the U.S. wind industry has flourished and to a lesser extent the U.S. solar industry as well.
However it is worth noticing that many other nations have surpassed the U.S. in development of their renewable industries. A lot of this is due to feed-in tariffs where utilities must buy renewable energy and pay certain minimums for them. It is also due to renewable portfolio standards where a certain percentage of utility purchases must be low-carbon. It is also due to a strong regulatory approach to acid rain control in European nations, which wind, as a coal replacement, contributed to meeting.
The bottom line is that when we talk of carrots and sticks we are not speculating in a vacuum. Various means of controlling both greenhouse and other emissions have been tested throughout the world. Old fashioned so-called “command-and-control” regulation, public investment, and straightforward pricing have all proven more successful than what Roberts describes as a “market based democracy.”
Making buildings more efficient: rationalizing retrofit markets
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David Roberts Posted 3:44 am
15 Dec 2008
Suppose, for example, we handled littering the way Roberts wants to handle carbon emissions. Instead of just fining people when they littered, we rewarded them every time they did not litter.
-- is absurd, as I assume you understand.
Also, I never argued that pricing carbon is the only or even primary form of GHG policy.
Also, there are means of rebating those who have exceeded regulatory GHG targets that don't involve calculating additionality. Sean and his dad have described at least one in some detail.
Also, I'm all for efficiency standards, but the home efficiency market is hopelessly broken. It is virtually impossible for the average homeonwer to find out how much they're paying in aggregate, where the inefficiencies are, which inefficiencies cost what, who can fix them, and how much it will cost. You can mandate higher efficiency, but you could also work to clarify market signals, remove split incentives, institute real-time pricing, etc. etc. This is an area where market forces are not working and could be helped to work.
Also, yes, many European countries are ahead of us in renewables, but at the cost of spending far more per unit of GHG reduction than they might have if they'd instituted smarter policies. It's certainly better than the U.S. nothingburger, but it hardly seems like a model to emulate.
And so on. It seems you're taking out grudges here against some imaginary interlocutor. You could probably make your points better, and more civilly, if you left the phantom guy-who-wants-to-pay-people-for-not-littering out of it.
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Gar Lipow Posted 4:09 am
15 Dec 2008
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David Roberts Posted 4:37 am
15 Dec 2008
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JMG Posted 5:31 am
15 Dec 2008
Littering just isn't that bad an analogy -- like using fossil fuels, it's a voluntary, chosen behavior.
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Sean Casten Posted 6:40 am
15 Dec 2008
Every ounce of CO2 that gets released is released in the course of producing something that some other member of society wants - including all of those on this email thread - from electricity to steel to cement to a hot shower. Or, as David aptly points out, to facilitate our own selfish respiratory needs. Could those products be made with less CO2? Of course. Could we contemplate a world that used less CO2-intensive materials? Sure. But we are all partially culpable for the current state of affairs.
By comparison, I am in no way culpable for the guy in the car ahead of me who throws his beer can out on the highway. He is simply making my world worse because he's lazy. In that instance, a punitive stick is all that is needed, and if it were a good analogy to CO2 then that's all we'd need in this case as well. But it's not. We may all wish that our electricity was cleaner, but if you are reading this email, you are consciously making a choice to make do with the electricity you've got to satisfy your own desire to blog. (You selfish bastard!) Your personal standard of living goes up every time that guy in the El Camino ahead throws another MGD bottle out of his car. Penalizing him for tossing it also penalizes you, unless you can find a way for him to give you the same benefit without the litter. That is what a good carrot does - and it is precisely what is absent from most of the carbon policy conversation.
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Gar Lipow Posted 7:04 am
15 Dec 2008
Their are two problems with regulatory based standards. One is that if set the regulation at the wrong level, you send a lot of "carrots" to people doing stuff they would do anyway. The other is that the regulation is of a means rather than an end. For example, under the example of Sean's proposal a lot of co-gen would be developed in the paper industry. However we have a lot of potential to reduce paper use, which reduces emissions in ways Sean's regulatory thing won't capture. (I'll leave it to Sean or someone to post the links to Sean's proposals.) That doesn't mean there is not room for regulations along the line Sean proposes. But instead of trying force stuff into price signals that does not really fit, the better way is to have a price on carbon, and then have a command & control regulations in area where you know what needs to be done. Again public investment + regulation +price combined is the way to solve. Trying to fit "carrots" into the price part of the equation won't work. Why did Komanoff get so mad? Its something that has been examined in detail. The theory is well known. The empirical data is well known.
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2wheeler Posted 7:30 am
15 Dec 2008
I don't know about the "1.9 cents a kWh renewable tax credit", but I don't think it exists for households in my state (Ohio), maybe it's only for utilities to take advantage of here?
I view Carrots and sticks as two complementary means of persuasion, the flip sides of a coin that ideally should be played together with some more increasing energy efficiency code rule standards (to move the minimum baseline behavior forward). To me it seems arbitrary to favor just a carrot, over a stick or vice versa. The psychology of various market players (individuals or corporations) may be predisposed to react more responsively to either a carrot, or a stick.
From a market perspective, I do like Hansen's proposed "fossil fuel carbon tax and equal per-capita rebate" approach. I believe it would effectively reduce emissions with a minimum of political bias toward existing (fossil based or other non-green) powers that be. Make the tax (and rebates) high enough and the learning, innovation, internalized decisionmaking-- and consumer behavior changes-- will follow. It's the most likely approach that doesn't involve making inefficiently biased winners and losers from existing market players (as I fear doling out carbon credits would do). It also doesn't presume to predict or limit innovation as some particular technology forcing solution would do.
For the second example of energy conservation retrofitting-- I do tend to agree there's a huge lack of skilled green workers to accurately assess/audit existing buildings and advise/perform the necessary conservation retrofits prioritized in terms of payback time. There's a readily available free or subsidized service for low-income housing retrofitting which may or may not follow these exact criteria-- but a dearth of affordable consultation and qualified assistance for the rest of us.
I'm speaking as the resident of a large midwest city whose grid is 90 percent coal fired and 10 percent nuclear. I've been shopping for energy audit technical assistance for my church building for the past year with nearly zero success... I find vendors touting their low-e windows, or their insulation... but nobody separate from the sale to accurately assess and advise in a quantitative way for my particular building's energy savings... Nobody with a thermal imaging capability or blower door for anything other than the single family residence, and those are mostly targeting low income (grant funded projects). DOE's DIY energy auditing tools also don't fit the type of institutional use, they are all geared toward businesses with other types of buildings and uses. [end rant]
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Colin Wright Posted 8:27 am
15 Dec 2008
The pollution anology for carbon dioxide is well established.Tim Flannery uses it as a core element of his "Weathermakers". And that gives him hope, oddly enough. He claims humans innately like to tidy up after themselves. Thus remote villages he visited were spotless, possibly because refuse brings rodents, which humans instinctively know.
He gives examples like early nineteenth century London, which was facing a cholera crisis. When it was recognized that the problem was raw sewage filling up people's cellars, the society mobilized to build a massive sewage system. Notably, the rich provided the money, though they could easily have had their water bottled in.
Similarly with ozone depletion which brought us to the brink of ecocide. The rich countries provided subsidies to the developing world to phase out CFC's.
There is certainly an existential dilemma in viewing carbon dioxide as a pollutant. (But surely life itself is existential?) In any case, there is surely a tension that builds up in each of us when we pollute. And that pushes us to act to fight for collective solutions.
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Jon Rynn Posted 8:55 am
15 Dec 2008
As Gar tried to explain in the original post, the "carrot" is the public investments. If people want public investments to solve their problems, they elect officials who want to do the same, they use tax money (or print the money at a national level if appropriate), and then they make the nice shiny things that people could get excited about -- like rail.
Then the investors/entrepreneurs make nice shiny trains to try to get government contracts, which they make a profit from. Or to use the CHP example, the government says that all coal plants that don't have CHP will be shut down by a certain year, and then all the nice CHP people have a market, onaccounta they are attracted by the carrot of profit. But putting carrots into GHG market-based cap-and-trade or carbon taxes (into taxes?!) doesn't make sense.
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