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Back in November 2007, in a long post on the relative merits of a carbon tax and a cap-and-trade system, I said that one big advantage of cap-and-trade was that it was "a dynamic hedge of fat-tail CO2 risk". The tail we were all thinking about back then, of course, was a large and continued rise in carbon emissions which proved impervious to a set carbon tax. But of course there are two tails to any distribution, and right now we're at the other end: both carbon emissions and carbon prices are falling quite fast. Hellasious at Sudden Debt sees this as an argument against cap-and-trade alone:
... ContinueAs prices for CO2 permits drop - recently from 30 euro/ton to 8.85 euro/ton - industry can simply put off becoming greener until economic conditions improve. This regime, therefore, does not drive continuous greening but does so only on a marginal basis: pressure to change varies with economic activity, since most activity is still "black".
The answer to the tax or trade question is quite simple: both.
If I were ever to have a nice little place in the Hudson valley (a chap can dream), I'd need a car to keep at the train station while I was in the city and to run me into the nearest town when I was in the country. As a good environmentalist, what car should I buy?
I'm pretty sure the answer is an old gas-guzzling pickup truck or, something along those lines, rather than a sexy new Prius or Smart. So long as the old gas guzzler is going to be driven by someone, it should be driven by ultra-low-mileage me, rather than someone who will burn up loads of gasoline driving it.
In general, from an environmental point of view, the best place to keep things like Porsche Boxsters and Land Rovers is in a garage, unused, rather than on the road, belching carbon. Paul Wilmott explains, at the expense of Iain Banks:
... ContinueRichard Sandor, the chairman of the Chicago Climate Exchange, is an old-school Chicago trader who doesn't often self-censor. But in this case, he most definitely should have:
... ContinueThe debate over whether or not a polluter would have cut its greenhouse-gas emissions without the financial incentive of credit sales is "quite interesting, but that's not my business," Mr. Sandor says. "I'm running a for-profit company."
Did you know that September 29 saw the largest carbon auction the world has ever seen? OK, it was pretty small on an absolute level -- it raised just $39 million, and the price per ton of carbon emitted was very low, at $3.07. But it's a good start, especially because of where the auction took place: right here in the US.
... ContinueI spent the morning at a meeting in midtown on the subject of the nascent carbon markets in Brazil. They're tiny at the moment, and they're likely to remain tiny -- unless and until the US implements a cap-and-trade system with two key features: international offsets, and the acceptance of deforestation avoidance as a genuine reduction of carbon emissions.
... ContinueFree Exchange has it right, I think, and Tyler Cowen is being needlessly self-abnegating. Drilling for US oil might well make sense as a matter of fiscal policy, especially for Alaska; it gets us nowhere fast as a an "energy independence strategy".
What Tyler's saying, basically, is that the fiscal gains from drilling are so large that they outweigh the environmental costs. On the other hand, you could combine fiscal gains with environmental benefits if you just implemented a carbon tax -- and that really would help move the country towards energy independence.
.Freeman Dyson waxes imaginative in the NYRB:
... ContinueOver a 24-hour period, a single cargo ship sitting at Long Beach with its engines running throws off more emissions than all the passenger car traffic in the Los Angeles metro area.
I'm sure that most cargo ships at Long Beach don't keep their engines running for 24 hours at a stretch -- not nowadays, anyway. But on the other hand, I'm sure that there are quite a lot of cargo ships sitting at Long Beach at any given time. Net it all out, and is it fair to say that the port of Long Beach is responsible for more CO2 emissions than all the cars in LA?
Update: Never mind. Barbara clarifies in the comments to her post that she's talking mainly about SOx emissions, and that statistic isn't surprising at all, since SOx emissions from cars are de minimis. This is what happens when you draft a blog entry offline, from an RSS entry, and don't read the web page before posting. Lesson learned.
.I never thought I'd say this, but America has become too obsessed with gas mileage. Prius owners use their real-time mileage readout to try and get the absolute maximum number of miles out of every tank; politicians talk dreamily of cars getting 100 miles to the gallon; and even seasoned Detroit auto journalists have started going mileage crazy. Here's David Kiley, reviewing the Smart Fortwo:
... ContinueThe Fortwo has the best fuel economy of any gasoline-powered car that's not a hybrid, but its EPA ratings of 33 miles per gallon in the city and 41 mpg on the highway are far worse than I would expect for such a small package...
Call me a dreamer, but for a car as small and expensive as the Fortwo, I'm looking for 45 mpg/city and 52 mpg/highway, at least.
In case you wanted another reason to eat kangaroo rather than beef: they emit just 0.003 tonnes of greenhouse gases per animal per year, compared to 1.67 tonnes per cow per year. And they don't just save in terms of methane emissions, either:
... ContinueFuel-economy standards are a good idea because they prevent automobile manufacturers from gaming the system. If everybody is forced to make fuel-efficient cars, there's a level playing field; if it's left up to market forces, then everybody tends to wait for everybody else to move first, because there's good money to be made being the last manufacturer of cheap and inefficient autos.
Today, when it's clear that better fuel economy is the only way for the auto industry to survive, one would think that opposition to fuel-economy standards would have abated. But, of course, no. Detroit's latest bright idea is that fuel economy is all well and good, so long as you don't intend to tow anything:
... ContinueWill Wilkinson is optimistic about energy. Don't worry about peak oil, he says: as oil prices rise, alternative energy sources will become more attractive, and eventually innovation and competition in the alternative-energy space will drive alternative-energy prices down below the "historical trend" of oil prices. That's how we get to environmental nirvana: it's a natural consequence of fossil-fuel scarcity.
But the problem is that fossil fuels aren't scarce, and they are cheap -- coal, especially. There's still enormous amounts of coal left in the ground, and there's no sign that any alternative will be cheaper than coal for the foreseeable future. And even if we have reached peak oil, there's still a hell of a lot of oil left -- especially if you start including tar sands in Canada and Venezuela.
... ContinueThe insurance industry is fighting back against the kind of articles which accuse it of price-gouging, especially when it comes to natural disasters in general and hurricanes in particular. Yesterday Munich Re held a webinar for journalists, and wheeled out a lot of statistics relating to natural disasters in the first half of 2008. And they're pretty compelling when it comes to the hypothesis that natural disasters are getting more frequent and more damaging.
... ContinueDaniel Hall unwraps a rarely-heard yet very powerful argument in favor of cap-and-trade over carbon taxes. Essentially, coporate pork in a cap-and-trade system (free emissions allowances) is much less harmful than corporate pork in a carbon-tax system (lower taxes, or tax exemptions). Why?
... ContinueBecause one system (cap-and-trade with free allowances) equalizes the marginal cost of emissions, while the other (carbon taxes with exemptions) does not.
I missed this, last week:
... ContinueExxon Mobil has amassed a large pile of common stock held in treasury. At the end of 2007, the company had 2.367 billion shares held in treasury, for which it paid $113 billion over the last 10 years, according to a regulatory filing. If that stock were valued at the current market price of $90 a share, it would be worth $237 billion, or $124 billion more than what Exxon Mobil originally paid for it.
Brad DeLong reckons that the relative merits of carbon taxes and cap-and-trade "roughly offset each other". "To first order cap-and-trade and carbon taxes are the same," he says, but there are second- and third-order differences. Among the second-order differences are these, and you can see how he ends up with the "roughly offset" conclusion:
... ContinueCap-and-trade runs the risk that the cap will be set at the wrong place and so the price will go damagingly above its social optimum value.
Carbon taxes run the risk that the tax will be set too low and so the quantity emitted will go damagingly above its social optimum value.
Kit Roane doesn't belabor the irony, but I can't resist:
.Tanya Mastoloni went a step further, buying a 49cc scooter to replace her Audi Allroad Wagon. "It goes about 150 miles on one gallon of gas," she says, noting that the scooter has given her an added benefit: "I cut my commute in half because now I can take the back roads."
This is one of the silliest arguments I've yet seen against cap-and-trade:
... ContinueAlthough the transportation sector represents around 35 percent of the nation's carbon emissions, oil companies and refiners -- which fuel that sector -- would be granted just 4 percent of total allowances. That would force them to buy carbon credits, which would drive up the price of gasoline and diesel fuels.
At a time of sharply rising prices, oil executives say this is not the best way to reduce carbon emissions. Better, they argue, to raise fuel efficiency requirements directly or set up a low-carbon fuel standard.
Peter Zimonjic makes an important point today: that a carbon tax, in itself, and over the short-to-medium term, will have very little effect on gasoline consumption.
... ContinueGeorge Bush, who wants to slow down the growth of US carbon emissions, got great news today: oil's over $115 a barrel! I look forward to the White House statement embracing the fact that market mechanisms are sure to reduce carbon emissions, and looking forward to oil prices rising even higher.
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