Guest Post by Willis Eschenbach [See also the follow-on post entitled “Why Revenue Neutral Isn’t”
I was pointed by a commenter on another blog to the Canadian Province of British Columbia, where they put a carbon-based energy tax scheme into effect in 2008. Before looking at either the costs or the actual results of the scheme, let me start by looking at the possible benefits of the scheme. I mean, on my planet if there are no benefits the costs are kinda beside the point. The BC carbon-based energy tax was sold on the basis that it would help in the fight against the theorized CO2-caused global warming. So how much will the actions of our northern cousins affect the world temperature?
Well, that’s hard to answer, but we could set an upper bound on the possible cooling by a thought experiment. According to the current climate paradigm, CO2 rules the global temperature, and the change in temperature is about 3°C for each doubling of CO2. That means if we know the emissions, we can calculate the resultant temperature change.
So here’s the thought experiment. Suppose British Columbia had been founded in 1850 as a separate country with the high ethical aim of achieving freedom from evil carbon based fuels. And instead of calling it “British Columbia”, the early colonists decided to call it “British Utopia”, because they were going to make the ultimate sacrifice in the fight against evil carbon dioxide. They weren’t going to use any fossil fuels ever, their country would be a true utopia. So they built a wall around British Utopia and didn’t trade with anyone, to keep out nasty carbon from trade. To avoid CO2 emissions they didn’t use any oil, either their own or from elsewhere. They didn’t make any cement, or import any, too much CO2 released in the manufacture. The Utopians didn’t use coal for heat or transportation or making steel, just wonderful organic renewable wood. Since the carbon in wood was recently taken from the atmosphere, burning it doesn’t add CO2 to the atmosphere, it just replaces what the tree removed from the atmosphere. And suppose further that they had kept true to that until today …
To me that sounds like they’d lead short lives under brutal conditions, breathing a hazy brown atmosphere from all the wood smoke. And if you run your country on wood you might well end up looking like Haiti … but we’ll let all that go for the moment and ask the important question:
If the British Utopians had made that noble sacrifice for humanity in 1850 and foresworn fossil fuels … how much cooler would the world be today?
Fortunately, given the assumptions made by the IPCC under the current paradigm, we can calculate how much cooler it would be if the British Utopians had given up emitting CO2. The CDIAC has data for both Canada and the World ms showing CO2 emissions since 1750. And since for a given country the CO2 emissions are a function of population, and we know the historical BC population as a fraction of the total, we can figure the total BC emissions, and thus, the amount of Utopian cooling. So here’s the true Canadian hockeystick, showing how much cooler, year by year, the world would be from the British Utopians’ self-sacrifice:
Figure 1. How much cooler the world would be if the British Utopians had abjured the evil carbon habit in 1850.
Now, the blue line in Figure 1. shows how much the virtuous actions of the British Utopians have cooled the planet over the last century and a half. If they had “Just Said No” to fossil fuels, the blue line shows how much cooler we’d be today. That would be about five thousandths of one degree … man, those Utopians really know how to get the most bang for their buck, huh? Give up all the modern comforts for a century and a half, live in the dark ages for decade after decade while everyone else is partying down, and what do they have to show for a hundred and fifty years of self-deprivation?
Five thousandths of a degree of cooling.
But wait, it gets worse … think of the grandchildren!
Over on the right hand side of the graph I’ve shown another fifty years of projected emissions. For a young couple just starting a family today, in fifty years their grandchildren will be in their thirties. So what might the BC carbon-based energy tax achieve for these grandchildren?
I’ve shown two possible futures. One is fifty years of the “Business As Usual” scenario in red. This continues the post-1970 trend, which has been an average of about a 1.5% annual increase in British Columbia emissions. That’s what we might pessimistically expect if there were no carbon-based energy tax of any kind. That’s worst-case.
And in green, I’ve shown what would be the absolute best-case result from the carbon-based energy tax. This is the total fantasy outcome, where the BC emissions remain at their 2008 value (the date of the BC tax), and they don’t increase at all for fifty years. Of course atmospheric CO2 levels would continue to rise because of the constant annual addition of the same amount of CO2 emitted in 2008, but not so much as in the “Business As Usual” scenario.
Now, the difference between those two possible scenarios, the worst-case and best-case scenarios, is the theoretical maximum possible cooling that might result from the carbon-based energy tax. That is shown by the black line in the lower right corner … and that cooling is three thousandths of a degree.
So there you have it. All of the pain that the folks of BC are going through, all of the miles of paperwork, all of the sacrifice, all of the damage done to the poor, all the taxes collected and bureaucrats coddled, for all of that, what the good Canadian folks have achieved for their grandchildren is three thousandths of a degree of cooling.
…
…
About all I can say is, I certainly hope than the grandchildren show a proper appreciation for that fantastic inter-generational gift, and that they send the old geezers a nice thank-you card like Miss Manners recommends. After all, it’s the thought that counts, and it’s not often you get a present that’s that significant …
Seriously, folks, the anti-carbon zealots must have hypnotized the masses. I know no other way to explain such idiocy. Here’s the thing:
Suppose someone came up to you and said “I can guarantee you that I can cool the planet by three thousandths of a degree over the next fifty years.” And suppose you checked them out, and found that they were telling the truth, in fact they could guarantee the three thousandths of a degree of cooling in fifty years.
How much would you personally pay for that?
Would you pay a thousand dollars to be guaranteed that amount of cooling, 0.003°C, and not today but in fifty years?
I wouldn’t. Not worth it. Too much money for too little benefit.
But the collective madness of the BC citizens has reached the point where they’re willing to establish an economy-slowing tax accompanied by a whole bureaucracy, with enforcement officers and piles of paperwork, and spend millions and millions of dollars in the mad pursuit of a best-case benefit of three thousandths of a degree cooling, not now, but in fifty years.
All I can do is shake my head in astonishment, and wonder at the madness of crowds. A plan is proposed, someone does a cost-benefit analysis, the benefits are too small to have a hope of being measured and don’t occur for decades … and in response people say “Great plan, let’s implement it immediately”???
Ah, well … I’m an optimist, I figure at some point our Canadian neighbors will wake up and go “Wha?” …
Best to all,
w.
PS—As I mentioned above, I wanted to take a look at the benefits, the costs, and the effects of the BC carbon-based energy tax. I’ve only discussed the (lack of) benefits in this post, so as you might expect, there will be a couple of additional posts to cover the effects and the costs. In fact they’re mostly written, because this started as one post and got unbearably long … so I’ll cover the costs and the effects of the BC tax in future posts.
PPS—Please don’t tell me that this is just the first step. The BC taxpayers have already spent half a billion dollars on this farce and that’s not the half of it. If your wonderful first step costs a billion dollars for a cooling of 0.003°C, I am not interested in your second step whatever it may be.
NOTE: This is one of a four-part series on the BC carbon-based energy tax. The parts are:
British Columbia, British Utopia
Fuel on the Highway in British Pre-Columbia
Why Revenue Neutral Isn’t, and Other Costs of the BC Tax
garymount (July 12, 2013 at 12:48 am) wrote:
“[…] whether or not to get rid of the carbon tax […] they decided that they could not get rid of it because they had come to rely on it to help offset the other tax reductions. So let that be a lesson to any other jurisdictions considering a revenue neutral tax, you might not be able to get rid of the tax later.”
Sensible advice — particularly for those who value balanced budgets.
—
ferd berple (July 12, 2013 at 6:40 am) wrote:
“BC has two political parties. One is run by crooks, the other by incompetents.”
I always look at it as a choice between deception & naivety …so Low voter turnout = hardly surprising.
Overall the public currently appears more comfortable enduring deception than risking naivety.
When will there be a decisively sea-changing event? And when there is one, to whose advantage will it play?…
Willis, you miscalculated. The premature deaths of all the humans and animals that would have occurred from all that wood smoke would have decreased their CO2 contribution to the atmosphere thereby lowering it another .0000001 deg. C.
Skeptic, in Oz I get 13 dollars per fortnight on my pension for clean energy allowance, and being all electric an electric fire costs $2 a hour to run. The State gives me $50 rebate on my electricity account but charges $47.00 GST? New Start recipients get $5.20 a fortnight. No bulk payment either. So in cold areas we freeze or don jackets most of the time. We are hanging out for a new election. I don’t think people who burn wood should be too worried, but in a valley environment the wood smoke does linger if there is mist or fog around. In other Canadian States they generally burn gas for heating I was told, but they reckon wood has less greenhouse gas emissions. At least the BC’s still have the Union Jack on their State flag like Hawaii. How about the wind turbines in Canada, they came under some criticism too a few years ago.
Gail Combs says:
July 12, 2013 at 4:29 am
Mario Lento says:
July 11, 2013 at 10:47 pm
…. In other words, now is not stasis, but whatever the temperatures are going to be, they’d be 3/1000 cooler if BC stopped increasing emissions?
>>>>>>>>>>>>>>>>>
It depends on whether or not you invoke the The Logarithmic Effect of Carbon Dioxide and ‘Feedbacks’
+++++++++++++
I just want to be clear that I was trying to paraphrase what I thought Willis was saying in his example, which for the sake of argument, assumes that the IPPC’s claim is true… I do not think Willis subscribes to 3C rise would result in said doubling of CO2.
There is very good evidence that the effect of CO2 on temperature follows the log’ effect… It seems also that the “Feedbacks” cannot be trained (in the real world) to behave as either positive or negative on the net of it. That the IPCC can claim that water would have mostly positive effect on temperature is intellectual dishonesty at best.
Willis,
Someone else may have also mentioned this, but your change in the temperature is likely an overestimate unless you include the “lifetime” of CO2 in the atmosphere. The additional CO2 added into the atmosphere by fossil-fuel consumption is partially offset by an increase in vegetative/oceanic consumption of CO2. Thus, today for instance, the increase in CO2 concentration is only about half of what is put into the atmosphere from combustion…the other half is consumed. Consequently, quite a bit of the emissions saved through the Draconian measures will be be “unsaved” through natural processes. Two ways to estimate this would be to put in a half-life function for the CO2 emissions or to just assume that only half of the emissions actually stay in the atmosphere. The half-life metric would likely give a better result.
Doing the above and including a more realistic metric than 3 C/doubling for the transient response would likely get you down to 1-2 thousandths of a degree, LOL.
I know you were try to put an upper limit on the effect, but taking the above into account makes it all the more laughable.
-Scott
Gary Hladik says (July 12, 2013 at 2:40 pm): ‘He just wins more if other “prisoners” defect, and even more if all others defect.’
And of course I stepped in it again. What I should have written was
He just wins more if other “prisoners” cooperate, and even more if all others cooperate. [where “cooperate” means the prisoner/state/country passes a carbon tax]
I simply must take my meds more regularly…
Scott says (July 12, 2013 at 8:18 pm): “”Someone else may have also mentioned this, but your change in the temperature is likely an overestimate unless you include the “lifetime” of CO2 in the atmosphere.”
He did.
Jan Kjetil Andersen says:
July 12, 2013 at 4:12 am
Sounds like you don’t understand me, then. What I say is that the sacrifice made by the BC citizens for 0.003°warming is far too large. You seem to want everyone to make that same sacrifice. How noble of you.
Jan, your position is the same as saying that the problem with the world is that we use too much energy. Go talk to someone living on $2 per day, and let them know that you think they should follow the good burgers of BC and cut their energy use …
I’ll meet you at the hospital and you can tell me how that went.
w.
Eli Rabett says:
July 12, 2013 at 6:22 am
Half the world lives on less than $2 per day. I’ll let you tell them you think that they are “free riders” and that they need them to cut down their energy use …
Meanwhile, BC exports huge amounts of natural gas, almost their entire production … so they can drive over to the US and enjoy our prices on goods made using BC natural gas.
Tell the people making $2 per day that you expect natural gas exports from them as well …
w.
Willis, third world countries with most of the population either in low income bracket (peasants) or very very rich, and in India people are so poor they reap off the burning coal surface fires. Look at China, with their extravagant rich classes and then all the millions of very poor people. It’s those burning surface coal fires that contribute to pollution. China is the biggest, India and Indonesia next. And in a hot climate you only need fuel to cook mainly, no electricity etc. Such luxuries like electricity are not an option to the billions of the world’s poor.
Well, I think that to introduce a carbon tax doesn’t need to be a sacrifice at all. The discussion of increasing or decreasing the total tax level is another topic. To focus on the topic at hand I think we shall discuss carbon tax as an alternative tax which is compensated by a cut in other taxes by the same amount.
My point is that by shifting the taxation to carbon emission, which we want less of, and away from the stuff we want more off, like creating jobs, we use the market mechanism to cut emissions and to encourage other initiatives.
No big sacrifice there.
old engineer says:
July 12, 2013 at 12:53 pm
Putting aside the fact that taxing CO2 destroys jobs
It’s an old Keynesian rule of thumbs that in the short run a tax rise is followed by a fall in employment and vice versa. But I am not talking about a tax increase; only a shift towards taxing carbon instead of other taxes and that may create jobs rather than destroy them.
Jan Kjetil Andersen says:
July 12, 2013 at 11:31 pm
Thanks, Jan. Taxing energy is NOT like other taxes. Taxing energy discourages production. It’s much better to tax something after it is produced than to tax what goes into producing it, duh. And energy goes into producing everything.
As a result, you’re proposing taxing the wrong end of the production line. Don’t tax it at the start, that prevents production. Tax it at the end, once the object is produced.
Let me recommend to you my post called “Firing Up The Economy, Literally“, which discusses this issue in depth.
In addition, taxing energy hits the housewife and the farmer. Remember, they were the original reason for cheap energy, and it’s still true. You propose putting extra weight on them … why?
w.
Gary, so what you are saying is that we are all doomed? You may not think CO2 is such a big problem,or even a problem at all, but we are going to encounter more and more of these kind of global problems as the economy grows, and if as you say it’s impossible to solve them because anyone who tries is a sucker, then we’re basically screwed. I hope the Montreal treaty proves things aren’t quite that bleak.
I agree that low energy prices are a benefit for industrialization, especially for some heavy industries like metal smelting. But cheap energy is not the most important factor underlying a modern economy. Far more important are, just to mention a few: transparent legal framework and stable institutions to govern them, good transport infrastructure and a good education system to create a well-educated working force.
More important than low energy prices are also stable energy prices so the investors can make business cases without too much uncertainty. I think your interesting example from the fish market on the Solomon Island in 2008 when the fisher did not afford petrol to go out and fish is more telling to the destructiveness of sudden price rises than stable high prices.
Since it seems to be little we can do to stabilize the oil prices, the best we can do is to rely less on oil and more of sources with a more stable price structure. Although some sorts of renewable sources fluctuate on the short timescale, it should be fairly stable from year to year. Nuclear is also a stable source.
By the way, I agree that a price structure of electricity which can climb to nearly a USD/ KWH as Anthony described here some months ago, is horrendous and highly damaging for the economy.
Sorry, but can you expand a little?
Do you support my comments or not?
IN SEARCH OF A BETTER UNDERSTANDING OF THE PHENOMINA EXAMINED BY THIS GUEST POST and acknowledging the strength of many different perspectives which gather ehere. I offer this thought for improvement.
Our governments ( citizens) appear to have declared war on them selves. They appear to have lost the compass necessary to process whether a decision is in their own long term best interest or not. One only has to look at Willis’s air photo of the Haitian border to see the illustrative effect of shockingly poor government policies. A horrific centuries long experiment in the consequences of poor government economic policies!
Having been in many countries of varying economic persuasion and examining the situations it appears to me that there exists a solid anchoring principle which in its simplicity should be the basic filter to examine economically significant proposals.
I offer that:
The responsibility of a government that wishes to be successful is to institute policies to make it economically strong: to unleash the creation of “wealth” in any persuasion and thereby the source of the governments ability to fund itself.
To illustrate:
Charles the Hammer would simply create an army and raid the next kingdom’s treasury. The US had enough wealth accumulated to win WWI and II. Russia simply ran out of money in it’s attempt to match the Wests economic engine. In the Book “The World is Flat” Friedman examined as an illustration India’s solution it it’s pending bankruptcy. The failure of governments to create the wealth has many obvious consequences which are not good for the government or it’s population. The lesson of Russia’s bankruptcy was not lost on China.
While I concede that the wealth could be used to fund the the military industrial complex that Eisenhower warned against, it can also be used for great good and tapped aggressively in the face of a disaster such as what happened in Haiti.
Like any simple principle the application becomes complex but if it becomes the anchor concept then one has an attachment point and a place to retreat to when decisions appear to need grounding in reality.
The process I suggest illustrates the difference between having a destination and exploring. When you are exploring you never have to admit you are lost. Every where I look we seem to have injected (from my anchor perspective) a political filter and perspective which is counter productive and thus abandoned to politics the principles that guide decisions such that results are optimal. I am not inclined to redefine failure in result as success.
Truly the difference between a condition and a problem is that there is a possible solution that could be implemented. I am loth to accept the “foolishness” as a condition with no solution. Thanks
Jan Kjetil Andersen says:
July 13, 2013 at 2:17 am
We have had strong economies, like the British, when the “transport infrastructure” was nothing more than wooden sailing ships. We’ve had strong economies, such as Mao’s China, when the legal framework was so opaque as to be non-existent. We’ve had strong economies, like Venezuela’s, when there is no “stable institution” in sight.
But what we haven’t had is a strong economy built on expensive energy.
You are free to think that … but since you haven’t given a scrap of evidence or anything but your assertion to support it, it’s not clear what you are basing that on. Because if the price had stayed at that height, the boats might still be sitting on shore.
You seem to have a fantasy that people can adjust to high prices, by saving fuel and adopting more economical practices. But if it takes ten gallons of fuel to get to the fishing grounds and back, if a fisherman can’t afford ten gallons of fuel he’s out of the fishing business no matter how conservation-minded he might be.
Oh, please. On the basis of some claimed price instability, your solution is to wave your hand and utter the magic phrase “renewables”?
Have you ever actually been in business, Jan? Because your claims certainly make it sound like you have very little experience in actually creating wealth …
w.
Well, I live in a country where the fuel prices for automobiles has usually been three times as high as in the US and our economy is quite good. I live in Norway, and yes I know we can thank our oil production for our public wealth, but the point is that we do not give our industry or inhabitants subsidized oil. On the contrary it is very highly taxed.
When you mention Mao’s China and Venezuela as strong economies I’ll remind you that neither of these countries has succeeded in bringing their countries to the top level economies in the world. They may have some successful years based on an economical structure very different from ours, but their per capita income is nothing compared to Western Europe or the US.
In support for other factors important to economic development I’ll use Forbes magazine which make a list of countries after how good they are for business. See:
http://www.forbes.com/best-countries-for-business/list/ important factors are stuff like property rights, corruption, investor protection and tax burden. Energy prices are not on the chart.
You may say that Forbes doesn’t have a clue or that good for business is not necessarily good for the nation, but I object to that. I think Forbes has a clue and I think that being good for business also is good for the national economy.
Willis Eschenbach says:
July 13, 2013 at 9:24 am
Jan Kjetil Andersen says:
July 13, 2013 at 11:47 am
Gotta tell you, Jan, that I have little time for people who don’t answer questions that are directly and clearly put to them …
In any case, the issue was whether taxing energy is the same as taxing other things. Since nothing in your last comment touched on that, nor did you respond to any of the substantive points I made, well, I’ll give it a pass.
w.
Thomas says (July 13, 2013 at 12:58 am): “Gary, so what you are saying is that we are all doomed?”
Eh??? What could I possibly have written that suggests I think we’re “doomed”???
“With regard to You may not think CO2 is such a big problem,or even a problem at all…”
Bingo.
“…but we are going to encounter more and more of these kind of global problems as the economy grows…”
We have always had problems. Guess what? We’ve also found solutions. Funny how that works out.
“…and if as you say it’s impossible to solve them because anyone who tries is a sucker…”
Whoa there! What I actually wrote is that any state/country that applies an economically harmful non-solution to a non-problem is a sucker, especially when there are other states/countries willing & able to take advantage. A primo example is Alberta/US making money selling cheaper gas to British Columbians.
“…then we’re basically screwed.”
A good treatment for werescrewed-itis is The Rational Optimist. 🙂
I prefer to discuss cases rather than person, but since you insist.
Sorry for not commenting on it previously anyway
I have been 16 years in the Telecom industry and 7 years in the Finance where I still am.
In the telecom I started as a research scientist and ended in business development. In finance I am responsible for the It architecture and It security.
I know from my own experience how to make, defend and implement a business case and I have learned from my contacts how the investors think.
Thanks, Jan. Now, could you please tell me the essence of your objection to what I wrote? Re-reading your words it sounds like you think I was attacking Norway or something.
My objection to the BC energy tax is that a) the chances of the BC residents being able to not increase their total emissions for the next fifty years is zero (given honest accounting), b) the possible benefits (less than three thousands of a degree of cooling) are in no sense commensurate with the sacrifices in time, hassle, and money, and c) taxing energy is taxing the wrong end of the wealth-creation process.
As a person with some acquaintance with finance, you must know that there are basically three ways to create wealth: mine it, manufacture it, or grow it.
Everything else is service businesses, hair cutting and the like.
Now, all of those ways to create wealth depend on energy. As I showed in “James Hansen’s Policies Are Shafting The Poor” and other posts such as here, energy use IS development. Development doesn’t happen without energy use. It takes energy to mine iron ore and transport it and turn it into steel.
As a resort, taxing energy is box-of-hammers-dumb. Industrial strength dumb. Tax what energy does, after energy has done it. If you tax inputs to wealth creation, the multiplier effect guarantees that the final product will cost more than if you tax the outputs. Businesses have to make a profit on money invested at the start of the process, so when you tax energy you increase the cost of the product for the same tax revenue you’d get with no cost increase if you tax the finished product.
Sure, if you’ve got a North Sea full of oil to suck on, you can grow fat even if you tax it. But it’s still a foolish and costly move.
But for a struggling economy like say the Solomon Islands, such rises in energy costs delay their development, extend their poverty, and damage the environment.
So be clear that when you argue for taxing energy and making it more expensive for any reason, you, the richest 1% of the planet, are screwing the poorest of the poor of the planet.
Perhaps you could comment about how it feels to argue, like James Hansen, in favor of shafting the poor. While you’re at it, you could parade out a few justifications for doing it, that’s always fun …
w.
Thomas says:
July 13, 2013 at 12:58 am
“… You may not think CO2 is such a big problem,or even a problem at all, but we are going to encounter more and more of these kind of global problems as the economy grows,…”
+++++++
This statement should strike fear in all rational people. Thomas, you somehow seem to imply here that CO2 is a problem and if we do not do something, we will all be in some kind of trouble.
It’s this emotional and irrational thinking that has motivated people into the whole costly AGW mess we are in now. People who talk like you scare me because there are enough ignorant people out there that will buy into the hysteria –but with someone else’s money.
wouldn’t it be interesting to see the security tapes from gas stations in the US near the border, to see how many BC tagged cars filled up. This would provide hard data to replace the hearsay and assumptions, and could be the kernel of some useful study.