Is Carbon Tax the Answer to Climate Change?

Despite over two decades of time and energy on an international level given to the Kyoto Protocol, carbon emissions are rising quickly.  In 1990 levels were going up by about 1.5 parts per million each year, but now it is increasing at a rate of 2 parts per million.

The critical 400 ppm global threshold will soon be crossed, and there is no evidence that this upward trend will change any time soon.  This naturally leads to questioning of how so much effort, political capital and economic cost lead to such little results.  What new direction needs to be taken in order to make a change in the climate?

Evaluating the causes

Evaluating the causes of these emissions is the starting point.  Coal is meeting the growth in electricity generation and increased from 25% to 30%.

Much of that extra demand has come from China, but before blaming them, the reason for their increase needs to be evaluated.  China’s usage growth is linked to their exports and energy-intensive goods.  These exports primarily are brought to the U.S. and Europe.

The Kyoto Protocol

Kyoto Protocol Stone @ Stadsparken

Kyoto Protocol Stone @ Stadsparken (Photo credit: bjaglin)

Carbon consumption measures the carbon footprint and holds the responsibility, not the actual production in particular geographical areas. The Kyoto Protocol does not take consumption into account, but focuses on production, primarily in Europe.

If you look at the UK’s production between 1990 and 2005, it fell by more than 15% but if you take imported carbon into account, consumption went to more than 19%.   Under the Kyoto targets, their numbers fall into line while global carbon emissions continue to increase.

The Kyoto-style approach is riddled with free rider problems also.  Some nations reduce emissions while others do nothing.  Countries that really matter are not even targeted.  During the December 2011 Durban climate conference all that was agreed upon was that parties would try to agree by 2015 on what might happen after 2020.

During this time, new coal power plants will be built and atmospheric concentrations of CO2 will be above 400ppm threshold.  Nothing groundbreaking is expected from the upcoming summit in Doha, Qatar.  Talking is usually a good idea, but the Kyoto Protocol is not going to be a leader in climate change.

Therefore a new approach needs to be taken.  Without people paying a price for their pollution, they are not inspired to do anything about it.  Pollution is best measured by carbon consumption, not production.  A price or tax on carbon consumption on imports of carbon intensive goods from countries without a carbon price would be treated the same as domestic production.

Carbon tax

Politicians are against carbon taxes.  However if we are not willing to pay for our pollution, we don’t really want to address climate change.  The carbon price is cheaper than the alternatives.

These include:  setting specific pollution controls on large industrial installations, picking “winners” among technologies, setting quotas, and targeting subsidies to influence investment decisions.  There is not a more reasonable suggestion other than to face critics of carbon pricing.

Two parts would make up a carbon consumption tax.  First a domestic tax on carbon, and second a tax on carbon imports. When dealing with domestic taxes there are several possibilities including upstream taxes at the point of extraction or downstream taxes on enterprises or consumers.

For imports a starting point would be from bottom-up steel, aluminum, petrochemicals, and fertilizers, and gradually expand.   To avoid the free rider problem, countries can do this ahead of an international agreement,

The supply and demand sides of the market are both met giving a long-term signal to the market.  However, the immediate effect will be making coal proportionately more expensive

The coal problem is a priority.  Coal is an element that is dirty, kills miners, leaks methane; pollutes the water table and uses lots of energy to extract.  It then not only emits carbon but other major pollutants.

Gas has half the carbon footprint of coal and few of the other pollutants. Shale gas has dropped emissions in the U.S.  However, In parts of Europe shale gas has been banned on the basis that it might leak methane and water table contamination.  These are problems to be evaluated but if they are grounds for banning shale gas then coal mining should be banned as well.

Renewable energy

Unless there is massive success in capturing carbon, gas is only a temporary fix that will need to be replaced.  None of the world’s current renewable energies are capable of decarbonization. The land and water resources are not available for wind, solar power, and biofuels to become a solution.  At this time, effort and money is going to these renewables.

Not only are countries that are dedicating their resources to these losing their competitiveness but reducing the money they will be able to spend on future renewables.  This includes advances in solar, geothermal and nuclear powers.

There are really only two options since current renewables do not meet the goals, climate change or new technologies.  So in the meantime, carbon pricing can be introduced based on carbon consumption.  This would reduce coal use in hopes that the 500 ppm threshold will not be crossed by 2050. Hoping that Kyoto will solve the problem is wishful thinking.

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