Inter-temporal investment appraisal of the Sanders/Boxer carbon tax bill
by Christopher Monckton of Brenchley
Standard climatological and economic techniques, combined in an investment appraisal of the proposed Sanders/Boxer carbon dioxide tax (U.S. Senate, 2013), show that even at a zero inter-temporal discount rate the cost of the Bill’s proposed CO2 mitigation if applied worldwide over ten years is 15 times greater than the benefit in the cost of warming-related damage avoided by the intended cut in CO2 emissions, which is here assumed to be – but is in reality unlikely to be – achievable at the stated cost.
Fraction of global CO2 emissions abated: By 2023, on business as usual, U.S. CO2 emissions will be 5589 Tg CO2, 8.5% down (EIA, 2013) on the 6108 Tg CO2 (EPA, 2012) emitted in 2005. En route to Sanders/Boxer’s proposed 2025 cut of 20% compared with 2005, the cut in 2023 will be 18.5% against 2005, or an additional 10% or 611 Tg CO2, representing a cut of 10.9% in 2023 against business as usual. Since U.S. CO2 emissions represent 17% of world emissions (derived from Boden & Marland, 2010 and Boden, 2010), even if the tax succeeds as intended it will abate just 10.9% of 17%, or a mere 1.9%, of global CO2 emissions.
CO2 concentration abated: Without the carbon dioxide tax, CO2 concentration in 2023 would be 422 μatm (IPCC, 2007, Table 10.26) against 397 μatm in 2013 (updated from Conway & Tans, 2011). If the tax worked as intended, CO2 concentration in 2023 would be 422 minus 1.9% of (422 – 397), or 421.522 μatm.
CO2 forcing abated (IPCC, 2007; Myhre, 1998), would be 5.35 ln(422/421.522), or 0.006 W m–2.
A suitable climate sensitivity parameter is multiplied by the CO2 forcing to determine warming over the ten-year term. Garnaut (2008) is one of many who recommend keeping greenhouse-gas rises to 450 ppmv CO2-equivalent above the 280 ppmv prevalent in 1750, to hold 21st-century warming since then to below 2 K. So the implicit climate sensitivity parameter is 2 K / {5.35 ln[(280 + 450)/280] W m–2}, or 0.39 K W–1 m2.
Global warming abated by the tax from 2014-2023 would be 0.39(0.006) = 0.00237 K.
Projected warming over the term: CO2 forcing represents 70% of all manmade forcing (IPCC, 2001, 2007). Thus, warming officially projected for the ten-year term is 0.39[5.35 ln(422/397)] / 0.7 = 0.182 K.
The percentage of projected global warming abated over the ten-year term is 0.00237/0.182 = 1.3%.
The cost of abating global warming via the U.S. carbon tax over ten years is given as $1.2 trillion.
The mitigation cost-effectiveness of the tax, i.e. the cost of abating 1 K global warming by worldwide measures as cost-effective as the tax, is $1.2 trillion / 0.00237, or $507 trillion per Kelvin abated. The cost of abating the 3 K warming predicted by the IPCC to 2100 would exceed $1.5 quadrillion.
Global abatement cost: The cash cost of abating this projected 0.182 K warming over the term, again by measures as cost-effective as the tax, is 0.182 x $507 trillion, or $92 trillion, which, divided by the global population of 7 billion, is $13,200 per head, or, divided by $803 trillion global GDP over the ten-year term (from World Bank, 2011 assuming 3% annual GDP growth from $66 trillion in 2013), 11.5% of global GDP.
Benefit in averted warming-related damage cost: Stern (2006, p. vi), estimates that the cost of abating the 3 K 21st-century global warming expected by the IPCC will be 1.5[0, 3]% of 21st-century global GDP.
The cost-benefit ratio is 11.5/1.5 = 7.7. Accordingly, based on the optimistic assumption that $1.2 trillion will buy as much CO2 mitigation in the U.S. as Sanders/Boxer assume, and taking a zero discount rate, which maximally favors future generations, it is almost 8 times costlier to mitigate CO2 emissions by typical abatement measures such as the Sanders/Boxer carbon tax than to take no action at all and to endure the later cost of climate-related damage arising from the resultant warming.
The bottom line is that if global warming of 0.14 K/decade in the 22 years since 1990 (the least-squares trend on the monthly temperature anomalies in HadCRUt3gl, 2011) continues at half of the 3 Cº central estimate in IPCC (1990), so that only half the benefit in damage costs averted is achievable, CO2 mitigation today will be at least 15 times costlier than adaptation the day after tomorrow.
Conclusion: More complex analysis would be unlikely to change the outcome sufficiently to render the U.S. carbon tax, or any policy to mitigate CO2 emissions, at all cost-effective. Removal of some of the simplifying assumptions would tend to worsen the cost-benefit ratio still further, for most of them lead to understatement of it. Results from other case studies broadly confirm the outcome in the Sanders/Boxer case. Therefore, future adaptation where needed is sensible, but present-day mitigation is unjustifiable. Congress should reject the Bill, which would reduce the current $2 trillion U.S. annual deficit by only $30 billion, or just 1.5%.
References
Boden and Marland, 2010a. Global CO2 Emissions from Fossil-Fuel Burning, Cement Manufacture, and Gas Flaring, 1751-2007. Carbon Dioxide Information and Analysis Center, Oak Ridge, Tennessee, USA. Boden et al., 2010b. Ranking of the world's countries by 2007 total CO2 emissions from fossil-fuel burning, cement production, and gas flaring. Carbon Dioxide Information and Analysis Center, Oak Ridge, Tennessee, USA.
Conway, T., & P. Tans, 2011, Recent trends in globally-averaged CO2 concentration, NOAA/ESRL, http://www.esrl.noaa.gov/gmd/ccgg/trends/global.html#global.
Energy Information Administration (EIA), 2013, Annual Energy Outlook 2013, from Annual Energy Outlooks 2009-2013. Environment Protection Agency (EPA), 2012, Inventory of U.S. Greenhouse Gas Emissions and Sinks, 1990-2010 (Washington, DC, 2012 April).
Garnaut, 2008. The Garnaut Climate Change Review: Final Report. Cambridge University Press, Port Melbourne, Australia, 680 pp, ISBN 9780521744447.
HadCRUt3gl, 2011. Monthly global mean surface temperature anomalies, 1850-2011. http://www.cru.uea.ac.uk/cru/data/temperature/hadcrut3gl.txt.
IPCC, 2001. Climate Change 2001: The Scientific Basis: Contribution of Working Group I to the Third Assessment Report of the Intergovernmental Panel on Climate Change [Houghton, J.T., Y. Ding, D.J. Griggs, M. Noguer, P.J. van der Linden, X. Dai, K. Maskell and C.A. Johnson (eds.)]. Cambridge University Press, Cambridge, United Kingdom, and New York, NY, USA.
IPCC, 2007. Climate Change 2007: the Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, 2007 [Solomon, S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Avery, M. Tignor and H.L. Miller (eds.)]. Cambridge University Press, Cambridge, United Kingdom, and New York, NY, USA.
Murphy, 2008. Some Simple Economics of Climate Changes. Paper presented to the MPS General Meeting, Tokyo, September 8.
Myhre et al., 1998. New estimates of radiative forcing due to well mixed greenhouse gases. Geophysical Research Letters 25:14, 2715–2718, doi:10.1029/98GL01908.
Stern, N., 2006, The Economics of Climate Change: The Stern Review. Cambridge University Press, Cambridge, United Kingdom, and New York, NY, USA.
U.S. Senate, 2013, Sanders/Boxer Climate Legislation, www.sanders.senate.gov/imo/media/doc/021413-2pager.pdf.
World Bank, 2011. Gross Domestic Product 2009, World Development Indicators. http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf.
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These guys are crazy. It’s almost like they hate humans.
I don’t think we are humans to them. We are a revenue stream. This whole scam was always about getting more tax money out of the public. Surprisingly or not, many people believe it. I ask them to turn off their main breaker then. And they don’t do it. They want to be forced into it.
From the surprisingly cool Bahamas, 64 F and no heat.
The Australian carbon tax has raised virtually nothing, and the government responsible is now plumbing new depths of unpopularity. Perhaps that may act as a warning to others…
Isn’t the tax revenue around $2 1/2 trillion?…..and they haven’t been able to stop one thing global warming is supposed to make worse, not one earthquake, volcano eruption, tsunami, meteor, or comet….
Dream Debate:
Lord Monckton vs. Algore. What a slaughter that would be.
We’re going to have to just keep plugging away, getting the truth before more and more people until there are enough numbers to rage against every nuance of Green – not just those in power, but every leaflet they produce, every bullying message telling us to sacrifice our way of life to “save the planet”, every poster torn down, every light bulb changed back, every windmill destroyed. It’s rage that’s going to do it. People are angry and fed up and if these green terrorists don’t get pulled back into line, demoted and their funding stripped from them, that rage is going to vent.
This graph from the EIA easily tells the true story of future emissions of co2 until 2035.
http://www.eia.gov/forecasts/ieo/emissions.cfm
The OECD will nearly flatline while the non OECD ( China India etc will soar) The USA has been heading south towards 1990 emissions because of cheaper gas.
Anything the US or OECD does will not make a jot of difference to the climate or temp by 2035 or by 2100.
That includes a difference to tornadoes, bushfires, hurricanes/ cyclones, SLR etc. Although Lomborg claims a postponment of 4 years by 2100 if every country were to sign up to Kyoto.
So do ZIP and you have the same temp and climate by 2100 instead of 2096. At a cost of endless trillions of $ for a zero return on our investment.
The problem is they don’t CARE if the tax is more expensive.
They want to be absolved of their sins, not actually accomplish anything….
The old quote, Ah, all is not gold that glitters.
No but all who participate in the foolishness of global warming will get the gold. That is except the people of no consequence. US!
The bottom line is that the cost-benefit ratio is 8 or 15. For a project to be worth doing the c-b ratio should be less than 1.
The cost-benefit ratio will rise if :-
1. The costs of a given amount of warming are overstated. That is, if the climate does not become as extreme as Stern assumed, or if people adapt to the changing conditions.
2. That the likelihood of extreme catastrophic global warming is over-stated. (For risk-neutral people, a 10% loss of $100 is treated the same as a the certain loss of of $10. For risk-averse people they might be willing to pay a premium more than the average expected losses, but never more than the maximum loss.)
3. The policy is not as effective in reducing emissions as proclaimed. This could be through:-
(i) Over-stating the theoretical capabilities of the carbon tax (stuff like elasticities incorrectly estimated and opportunity costs not being recognized)
(ii) The policies effectiveness being watered down and costs increased through the horse-trading that is required to get a Bill through both Houses of Congress.
(iii) The tax is not being optimally adjusted for CO2 reductions (rather than tax revenue maximization) – with adjustments made as conditions change.
(iv) That when the tax really becomes effective, with people can no longer affording to heat their homes properly, or have to use their cars less, that the politicians will not do a U-turn.
In summary, the cost-benefit ratios that Lord Monckton calculates are too low (making the policy justification appear better than it is) if catastrophic consequences of global warming are over-hyped, the economic theory is over-hyped and politicians are less than perfect at delivering exactly what they promised. For economic theorists, the cost-benefit trade-off can expressed graphically, the elements of GW costs listed, and the policy issues are analyzed here.
It might be 15 times costlier than doing nothing, but going along with this will grant monopoly to the leftist ideology national and globally?
This analysis assumes that the IPCC are completely correct with regard to every detail of the science and as many here have pointed out, that is a massive assumption. What is interesting is that even with this handicap; allowing the alarmists their every conceit and letting them push every number beyond the limits of plausibility; the economic case for a carbon tax remains completely ridiculous.
This argument by Christopher Monckton is the economic equivalent of winning at wrestling with both arms tied behind your back while wearing a tight kimono. Imagine how strong the argument would be if he were to take the kimono off!
I maintain the increase in CO2 is highly beneficial, leading to higher crop yields and making more land suitable for farming since photosysthesis needs less water with increased CO2. In the temperate region it also increases the growing season by a few days.
davidmhoffer: Thank you for your kind reply that is completely in accordance to the politeness requirement of this website.
Any tax is going to hit real people, of course. The income tax does, sales taxes do, import tariffs do. But the government isn’t then just burning the money; it’s building bridges and roads, invading far-away countries, providing health care to the elderly, etc. We can talk all day about the cost-benefit of those activities; it seems rather off-topic for this website.
So now we have a proposal for a different kind of tax, one expected to raise $1.2 trillion over ten years. Lord Monckton is, as is quite reasonable, trying to evaluate it.
Unfortunately, his analysis is too simplistic: it ignores that the $1.2 trillion is going to be used to pay for things the government is doing.
The main point of a carbon tax (or a cap-and-trade system) is to make it so that the private sector figures out how to reduce carbon emissions for as little cost as possible: a company might spend up to $20/ton to reduce its emissions, but if it can spend $1/ton, it will. The direct cost to society at large then is not directly the revenue the government expects (that’s just a transfer), but the money companies will spend on reducing emissions.
A more involved analysis should also compute further effects: for example the effect of some less efficient manufacturing lines in say Michigan closing, firing all their workers, and perhaps being replaced by a modern plant in South Carolina that employs half as many people. It’s a tax, so it changes where the money is, and some things will become too expensive to continue doing. Yes, that has deleterious consequences; let’s count them up.
numerobis,
There are no credible arguments for a “carbon” tax, for the simple reason that CO2 is harmless. In fact, more is better for the biosphere. There is no downside to the rise in CO2. Therefore, a carbon tax is simply a money grab promoted by scientific illiterates.
Yes, a carbon tax will cause companies to do what they can to avoid the new tax. And the primary way to avoid it is to send manufacturing overseas. So a carbon tax would not only raise unemployment, it would cause CO2 to be produced in areas which do not have nearly the pollution controls of the U.S.
Lose-lose.
First, in the 1960s and 1970s came the meme that mankind is a disease due to industrialization caused by capitalism.
Then came the past 25+ years of IPCC supporting research which was intentionally biased to toward showing alarming AGW by CO2. Without that research and the IPCC’s favoritism toward it then there would be no proposed Sanders/Boxer carbon tax.
Now Christopher Monckton’s economic case study on the cost-benefit of the proposed Sanders/Boxer carbon tax bill clearly shows it is cost-ineffective thus yielding a reasinable conclusion that the “future adaptation where needed is sensible, but present-day mitigation is unjustifiable”. Ny take is The carbon tax cannot work to mitigate carbon.
The sales pitch for the tax requires alarming carbon scenarios from the biased IPCC thus appeasing some radical fundamentalist environmentalists, but the proposed carbon tax usefullness itself is not primarily carbon reduction but it it provides a more urgent purpose of the welfare state to keep its present welfare programs above water and fund welfare expansion.
So I sort of partially agree with Paul Homewood’s comment on February 17, 2013 at 7:47 am. But only in the context I gave.
John
@numerobis says:
>Any tax is going to hit real people, of course. The income tax does, sales taxes do, import tariffs do. But the government isn’t then just burning the money; it’s building bridges and roads, invading far-away countries, providing health care to the elderly, etc.
Are there taxes that hit unreal people? You have provided a good analogy, numerobis. It really is like burning money! It is taking sums of money that now perform the useful work of providing energy for the manufactuer of products and the operation of the economy, and raises its absolute costs while providing no additional goods or services.
100% of that tax money comes from customers. No company is going to ‘find’ trillions of $$ in their back pocket to hand over. They will be forced to charge more for their products, raising the cost of absolutely everything by exactly the amount of the carbon tax, plus the additional (and totally unproductive) fees paid to banks and the carbon traders to monitor outrageous ‘offset’ programs.
The taxes will not save or improve anything at all in the way you hint. It will be used to pay for subsidised boondoggle wave generators, windmills and 8-hour-per-day solar installations built by companies that have their snouts buried deeply and permanently in the public feeding trough. It is no different from a Command Economy of the Soviet Union, where conceptually, at least, jobs and wealth can be created out of thin air.
Engineers are trained to get the maximum benefit for the minimum cost in materials and money. They are trained in multiple sciences to be able to accomplish this ever-more effectively. And they are good at it. The tax proposed merely takes us back several generations in terms of productivity and output, as viewed from an engineering perspective. That an entire Western and modernised country stands on the brink of economic self-immolation as measured by all the common terms of the Industrial Revolution is surely one of the most awful, breathtaking and stupid things ever countenanced by any civilisation in history. The ultimate cost of goods is the cost of energy. Increasing the cost by 8-fold is nothing other than reducing the producivity of the whole population. All those thousands of trillions of Dollars will ultimately have to be borrowed, or printed.
>We can talk all day about the cost-benefit of those activities; it seems rather off-topic for this website.
Clearly you not aware of the core purpose of this website which is science education.
There are no benefits whatsoever to deciding to terminate your own economic and manufacturing system – not for the citizens, at least. I have no idea how dumb Americans are, but I think we in the rest of the world are about to find out. If the US population cannot learn enough about its own economy to save itself from the fraud that is CAGW fear-mongering, I fear the US will get what it asks for. The collapse of the American empire will be faster and more complete than that of the Romans, driven into the ground by a societal disinterest to learn enough about climate and economics to know when they are being handed a cup of Jonestown Climate KoolAid. The odd part is we know who the culprits are, and they receive praise for it! This is astonishing.
Cannon to right of them,
Cannon to left of them,
Cannon behind them
Volley’d and thunder’d;
Storm’d at with shot and shell,
While horse and hero fell,
They that had fought so well
Came thro’ the jaws of Death,
Back from the mouth of Hell,
All that was left of them,
Left of six hundred.
“C’est magnifique, mais ce n’est pas la guerre. C’est de la folie.” (It is magnificent, but it is not war. It is madness.)
– French Marshal Pierre Bosquet
Forget the carbon tax, just tax Hollywood 50% of gross on everything … those liberals there are so full of good advice to the rest of us that it would be a definitive indication on their behalf that they actually are acting in the interests of humanity. Electric cars don’t count for anything.
Sadly, this flawed analysis did not include the discount rates and inflation projections from the future. Nor did it include the James Brown Sustainability Multiplier (I feel good, I knew that I would). Those could have been simulated with constrained random numbers and thousands of runs to create a multi model mean which is what real scientists pay attention to.
/sarc
Many CAGW alarmists state that the world would be better off with a lower level of CO2 somewhere between 330 & 350ppm. Have there been any studies to test the effect of a lower level of ambient atmospheric CO2 on crop yields? I know that enriched levels increase yields and so decreased levels should have the opposite effect. Perhaps several studies are needed to determine the loss of crop production given both a lower level of ambient CO2 and the shortened growing season of the then proposed lower global temperature and the affect it would have on the global food supply.
Lord Monckton is still convinced that CO2 has some input into global warming. I am afraid he is wrong because it cannot. CO2 cannot violate the laws of thermodynamics by heating the surface by back radiation. CO2 can reduce heat reaching the surface from the sun but not the reverse. If the GHG theory was true then deserts would be colder than rainforests. The reverse is true!
crosspatch says:
February 17, 2013 at 10:26 am
////////////////////////////
Absolutely.
And to the extent that it succeeds in reducing CO2 levels on a global level. not to forget that we may be depriving ourselves of the benefits of what even more CO2 would have provided for food production and the like.
Crispin in Waterloo says:
February 17, 2013 at 7:54 pm
//////////////////////////////////
Couldn’t agree more. The citated poetry is apt. Madness, sheer madness – but that is politicians for you.
@richard v
I lived for many years in Africa and one of the things that always amazed me about the brutal and repressive regimes that pop up here and there is how there is never a shortage of people willing to collaborate and serve as henchmen for the leaders. Politicians are always the butt of harsh comments but they could not implement their hare-brained schemes without a coterie of willing hench-people, content with their relative security, confident of their impunity, serving the classic role of ‘useful idiots’. I have read a great deal on the subject of Climate Change and the number of useful-idiot-hench-people serving to propagate evident lies exceeds my wildest expectation.
Crispin: I don’t think you understood what I wrote at all. Otherwise, you’re arguing that government-built bridges have precisely zero value. And you’re arguing that discussing the cost-benefit of medicare has something to do with science education. Neither argument makes any sense.