By Peter Galuszka
With the 2012 election decided, there seems to be some movement towards considering establishing a carbon tax to cut greenhouse gases and mitigate climate change.
Despite the Kyoto Protocols of 1997, which the U.S. did not sign, and a slew of renewable energy projects in places such as Europe, there has been zero progress on actually reducing carbon dioxide. The goal way back in the 1990s was to reduce CO2 to about five percent of what they were in 1990 by this year.
According to Oxford professor Dieter Helm, writing in an op-ed piece in the New York Times, any progress in CO2 reduction has been overwhelmed by new emissions in places such as China, which gobbles up coal and plans many more coal-fired electricity plants to meet its enormous energy appetite.
Congress abandoned a cap and trade system for carbon in 2010 although several states, such as Illinois and California have some version of it. A system of cap and trade was useful for in 1990 program that has helped reduce sulfur dioxide emissions. Some regard setting carbon limits and then selling rights to pollute under that was the most economical and efficient way to go even though anti-coal experts such as James Hansen oppose it.
Now, there are balloons being set aloft to see how a carbon tax might work. A Washington Post editorial thought a tax on carbon would be a good idea and not just to stave off climate change. The Post quotes Resources for the Future, a think tank, as projecting that a tax on emitters of a ton of carbon of $25 could raise $125 billion a year in new revenue — more tax money than would be provided by eliminating the deduction on home mortgages.
The idea is that big utilities would be forced to shift from high carbon fuels such as coal to less-carbon ones such as gas or wind. Coal prices have been badly undercut by cheaper gas at the moment and coal’s percentage of the U.S. electricity mix has gone from about 45 percent to somewhere in the mid-30s, depending one whose estimate it is.
This is not cast in concrete, however. Coal markets are notoriously cyclical and volatile and coal could just as quickly regain its cost advantages over competing natural gas. Some coal firms are already beginning to see their income statements become somewhat less ugly than before. A partial recovery is already predicted next year as gas prices start to rise. (In Europe, for other reasons, gas is already three times as costly as in the U.S.).
Now that the election is over and Obama has won, Big Coal and its allies don’t have the momentum they did to paint him as an out-of-control regulator. Nor does Obama have carte blanche in Congress to push one idea or another.
There are problems with a carbon tax, to be sure. Lower income electricity consumers will need some kind of subsidy so they don’t pay an unfair price for power. And if Europe establishes a carbon tax, and China does not, then China gets an automatic and unfair export subsidy, Helm says. Any carbon tax would have to be part of a global agreement, including one on energy imports.
The plus side includes new ways to drum up revenue. Another is that if utilities are forced and have a legal excuse to reduce carbon, they may be more inclined to develop and install carbon capture technologies that may involve burning coal, although the general trend would be away from it.
The simple truth, however, is that the U.S. needs to start doing something about carbon dioxide or face more superstorms like Sandy. Blaming China can’t serve as an excuse much longer.