Articles by Gar Lipow

The major differences between carbon pricing plans are political

Putting a price on carbon is probably an unavoidable part of phasing out fossil fuels to fight global warming and air pollution. For years, Peter Barnes has advocated a brilliant means of mitigating many of the harmful economic side effects: take the revenue from carbon taxes or auctions and rebate it back to the people, dividing it equally among each citizen.

Barnes advocates doing this via an auctioned permit system. However,the same thing could be done with a carbon tax. Instead of auctioning permits, simply tax those same embedded emissions and rebate that revenue to consumers. Raise the tax periodically to lower emissions.

Inevitably, with either a tax or auctioned permits, the price charged for carbon will be passed down the supply chain to consumers. By rebating the revenue back to consumers, you minimize the impact of those price increases. They have to pay more, but they have more money to pay with. You get the price signals to affect behavior, without lowering consumer net income.

Some numerical comparisons

My last post argued that based on the figures Scientific American projected for a slow, partial phaseout of fossil fuels, we could do a full, fast, near-total elimination for between 170 and 240 billion dollars a year -- somewhere less than a third, possibly even less than a quarter, of our military budget.

I'd like to offer some other comparisons to put those numbers into perspective: We spent $840 billion buying fossil fuels in 2004, according to page 72 of the 2006 Annual Energy Review (10 Meg PDF). So a 95% reduction in U.S. fossil fuel use will pay back a $170 billion annual investment by a nearly 5 to 1 ratio, and a $240 billion a year investment by well over a 3 to 1 ratio. Yes, the time value of money reduces this a great deal -- but you still end up with a return exceeding that of the stock market during the bubble.

Another comparison: we sometimes talk about needing a commitment equal to what it took to win WWII. U.S. war spending grew from less than 2% of our national GDP just before Pearl Harbor, to around 5% immediately after, to around 37% at the peak of WWII defense spending. Yet in the scenarios under discussion, we advocate spending between 1% and 2% of the 13.3 trillion dollar U.S. GDP to fight global warming. So we are not talking about anything like a WWII-level commitment economically. And we don't have to shoot anybody, or get shot by anybody, or drop any bombs.

It's about green jobs, clean air, and a cure for our fossil fuel addiction. I think the politics are doable. If the public backs this strongly enough, they can walk right over any of the fat cats who try to get in the way.

A third of our military budget could cure our carbon addiction

Scientific American's grand plan to provide a bit over a third of U.S. energy from solar sources provides insight into what it would cost to phase out all or most U.S. greenhouse emissions. Bottom line: a lot less than current military spending.

The total cost of the SciAm plan: $420 billion over the course of that 40 years, or slightly over ten billion dollars per year -- less than current fossil fuel subsidies, less than the new subsidies "clean coal" would require.

The authors suggest phasing out fossil-fuel powered electricity over the course of forty years, using a solar dominated electricity grid. They suggest Compressed Air Electricity Storage (CAES) and thermal storage to compensate for the intermittent nature of solar electricity, and High Voltage Direct Current (HVDC) transmission lines to move solar electricity from where it is generated to where it is needed.

However, we can't wait 40 years, and we especially can't wait 40 years for a 35% reduction in emissions. So suppose we tripled the investment, and spent over the course of 20 years. That would be about $1.26 trillion, or $63 billion a year over twenty years -- a rounding error in the Pentagon budget.

Unfortunately, it is not that simple. The "Grand Plan" saves a lot of money via slow implementation, giving the technology time to develop. Implementing it more quickly, with less mature technology, would cost more, probably requiring more solar thermal and less photovoltaic power (unless PV prices drop a lot faster than SciAm projects). So we can double to ~$2.5 trillion, or $126 billion per year. This is still a fraction of our military budget.

Climate change mitigation in fewer than seven words

In response to David's challenge, I decided to summarize not only the problem of global warming, but the solution, in fewer than seven words. I cheated, of course -- each word is an acronym (one stolen from David), with a phrase behind it and an accompanying elevator speech.

• XTRA-COOL: (XTRA Carbon Out Of Our Lives)
• URGE2 (Use Renewably Generated Electricity Efficiently)
• RAPID RESPONSE (Regulation And Public Investment Develops Renewable Energy, Supplies Power to Our Nation & Supports Efficiency)
• CARE (Cap & Auction, Rebate Everything)
• GROUPHUG (Greens Reach Out, Unity with Progressives Helps Us Grow)

The elevator speeches follow:

XTRA-COOL: (XTRA Carbon Out Of Our Lives)

Fossil fuels, logging, and industrial agriculture all emit carbon and other greenhouse gases, and turn the atmosphere into a garbage dump for those emissions. It turns out that we have filled up all that dump space we can use safely; the overflow is already causing disasters, and continued emissions will lead to catastrophes, including famine, flooding, diseases, and mass deaths from climate extremes. To prevent as much of this as possible, we need to stop the extra carbon emissions by phasing out the use of fossil fuels, and switching to more sustainable forestry and agriculture.