Sky Trust Carbon Cap
October 3rd, 2007
Opinion, global warming
Now that the debate about the science of climate change is effectively over, the next debate is about what to do about it. The problem is, there’s no broad consensus on what policies will actually work. Hundreds of proposals are floating about, and many of them aren’t very good.
This introduction by Peter Barnes’ to his lecture at Middlebury College’s McCardle Hall Tuesday evening (October 2nd) can also be found on the “StepItUp2007.org website; the core essence of his presentation is also to be found there. The central tenet of “Carbon Capping: Let’s Do it Right” is a cap-and-recycle paradigm which, again to quote: In cap-and-recycle, permits are also sold, not given away free. However, the revenue doesn’t go to the government — it goes to all of us, one person, one share.
With a persuasive list of credentials, Middlebury College Professor (of Environmental Economics) Jon Isham introduced Peter Barnes to well over one hundred attendees, most being students, with a dozen or so seasoned local residents, a journalist, and one or two academic notables who would participate in the panel discussion and lunch the following day. It was standing room only (I felt guilty being there!) The enthusiasm for the topic was both surprising and refreshing – and its content was nicely presented but, despite well intentioned objectives, both the lecture and Q&A lacked a serious intellectual rigor.
First, to suggest that “the debate about the science of climate change is effectively over…” is socially dishonest. While there is seemingly a consensus opinion on the “anthropogenic global warming” topic, an effective (if only slightly less rigorous) counter argument to that idea is the following opinion poll graph from the Pew Research Center:.
Seventy-one percent of us felt waging war against Iraq was the right decision; not so now (with the benefit of hindsight). Peter Barnes correctly points out “Let’s Do it Right”. But to begin a proposal dismissing any debate out of hand raises a red flag. An opinion, even if held by a majority, is still just one opinion.
To be fair, my perspective is not that of a “global warming denier” (though if you have just haphazardly read snippets of this blog, that may be hard to discern) but rather a Decartesian thinker… The climate is changing, average surface temperatures are rising globally (we’re loosing ice in the Arctic) and, atmospheric carbon dioxide has significantly increased in the last century coincident with modern industrialization supported by prodigious fossil fuel combustion. Coincident correlation, but causation has not been established and there is no smoking gun to point to (and even if there was, is it the right gun? or the only one we can see?) But even if anthropogenic carbon forcing is solely responsible, there’s even less evidence that removing that causative agent would in any way ameliorate or mitigate the climate forcing effects we may be correlating as well as those we are experiencing. Assuming we are resource limited, our choices are critical (“Let’s Do it Right”). The Sky Trust Carbon Cap intrinsically has tremendous social and economic costs, resource reallocation (that were not addressed), and would limit options were its desired effect found inadequate.
There are a few fatal flaws with the Sky Trust Carbon Cap (STCC) plan: One was alluded to by a perceptive student asking a crucial question regarding the demand schedule metrics for the STCC plan; if the rebated carbon tax increases the real market price disproportionately, how is that reallocated? or is it? (does big oil get to keep those “profits?) The STCC as presented had no answer. What was subtly overlooked in this Q&A was the implicit lack of decreasing marginal utility (vs. price) when the “demand controlling price hike” (or carbon permit cost) is rebated to the consumer. Price controls (artificially hiking the price for carbon emissions – which simply translates to “fossil fuel” energy) that are repaid to the consumer would not do anything to demand; any rebates would be applied to the price for purchasing the carbon. A poorly thought out Ponzi scheme. There is - in the net - no overall incentive to reduce consumption and thus carbon emissions. The consumer sees through the higher cost as a windfall rebate (would the rebates be taxed?) and simply applies that to their price sensitivity in their consumption (marginal utility) decision.
Attempting to reduce demand by increasing prices (with a tax) works but is very regressive. To rebate the price “differential” offset does not impose a price constrained demand schedule. One is left to wonder if the STCC plan incorporates explicit carbon caps? If so, this is simply imposing a supply curve shift (rationing) and all bets are off on where the market price settles in. Price controls? And how one can determine the underlying price basis for the carbon is even more of a mystery. This becomes nothing more than rationing- and how a limited supply would be allocated is not a trivial problem.
And consider the market for these carbon permit “futures”. If I can own THAT exchange, I’m in!
More interesting though was the emphasis on how the STCC would theoretically motivate markets to aggressively develop energy alternatives, including ethanol and biomass. Is there an implicit differentiation between biofuels and fossil fuels here? If so, it shows a blatant ignorance of basic chemistry. One student asked if wood would (sorry…) be subjected to this STCC plan. Again, no rigorous reply, although the carbon content of wood was acknowledged.
(Wood is even more egregious in the carbon balance equation actually. Chopping a tree down removes a carbon sink that takes years to replace; its combustion adds carbon dioxide to the atmosphere immediately.)
With respect to atmospheric carbon dioxide, the resulting emissions of carbon combustion makes no difference. It is still carbon dioxide. The very same we exhale as we consider these problems.
In giving consideration to the STCC plan – and others – it seems that there is a tendency to relegate the energy side of the carbon equation to a simple commodity (fossil fuels) that produces a negative economic consequence. In doing so, it underscores a socio-ecological disconnect between economics and classical physics. We’ll explore this in a future post. If only to amuse ourself.
[…] Can’t Be Stopped” gives an interesting follow-up perspective to an earlier post : Sky Trust Carbon Cap. And one that is hard to argue with, though most will. From the authors’ point of view, the […]