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CARBON PRICING AND DRIVING.
The Congressional Budget Office has an interesting analysis showing that a carbon pricing plan like cap-and-trade would not primarily exert pressure by dissuading people from taking a drive. Which is largely to be expected. Folks tend to wildly overestimate how much of our fossil fuels problem is a result of driving. In part, that's a simple availability bias: The main place where we consciously interface with fossil fuels is at the gas pump, and so we assume that that activity, being carried out countless times a day by endless numbers of people, is responsible for the problem. But it's really not:
Now, that chart slightly understates the role of transportation in carbon emissions, as it also tracks gases like methane which aren't emitted by SUVs, but nevertheless. And of these various emission sources, vehicles are among the least sensitive to carbon pricing. "CBO has estimated that a price of $28 per metric ton of CO2 in 2012 would lead to a reduction of about 10 percent in total U.S. emissions compared with a no-action scenario. Vehicle emissions, though, would remain relatively constant in the short run, and even over time they would decline only by around 2.5 percent — much less than the 10 percent reduction in overall emissions."
Indeed, even as carbon pricing is mildly raising the relative price of gas, CAFE standards and consumer choices are going to be pushing towards cars whose increased fuel efficiency is enough to basically wipe out the price hike at the pump. Add in that driving has a heavy cultural and geographical and historical elements, and can only really be lessened with a large increase in alternative transportation infrastructure, and it's hard to see how it cuts down in the near future (Ryan Avent disagrees with this, but the CBO is evaluating a limited universe of legislation here, and so the possible impacts of stringent congestion pricing -- which has not seen much political success -- isn't really part of their analysis).
But that doesn't mean cap-and-trade won't be effective. Rather, carbon pricing will force sharp efficiencies in more price-sensitive sectors: Electricity, and construction, and industrial processes and so forth. Efficiencies, in other words, that will be much less obvious, and painful, for consumers than rising gas prices would be.
COMMENTS (13)
Two related points:
One, your chart is about world emissions, not US emissions. In the US, we do a lot more driving then the rest of the world and we do a lot less burning of forests. Consequently, transportation (Airline, Commercial, and Consumer) account for about 29% of our emissions. This is about 10% air travel and 90% ground travel. So, while your point is important (that the slight increase in cost from a cap-and-trade scheme isn't likely to drastically reduce consumption), it is a little less true for the US.
Of course the implication of your point, then, is that including transport fuels in a carbon-tax/cap-and-trade scheme may do less substantive good than the political harm which comes from oil lobbyists and the GOP screaming about higher gas prices (we may not like them, but we ignore them at our political peril). A lower cap, as a % of emissions, focused on industrial and electricity generation, coupled with aggressive measures to increase the efficiency of the US vehicle fleet and eventually transition to electric vehicles may be a political winner without a marked substantive impact. But good luck convincing the environmental community of that.
Posted by: Anon | October 8, 2008 11:56 AM
You have to consider the other side, I think that $28/ton biochar might be economical.
Posted by: floccina | October 8, 2008 12:16 PM
It's curious that use of renewables for electricity generation is being pushed as a way to reduce imports of oil. Using wind or solar to generate power won't have any impact on oil consumption, unless we change the whole transportation infrastructure to electric. It will, by displacing coal, have an even greater effect on climate change.
Posted by: TL | October 8, 2008 12:18 PM
Here is a link:
http://www.carboncommentary.com/2007/11/11/52
Posted by: floccina | October 8, 2008 12:22 PM
One more link:
http://en.wikipedia.org/wiki/Biochar
“Biochar sequestration does not require a fundamental scientific advance and the underlying production technology is robust and simple, making it appropriate for many regions of the world.”[12] Johannes Lehmann, of Cornell University, estimates that pyrolysis will be cost feasible when the cost of a CO2 ton reaches $37,[13] (as of the end of June 2008, CO2 is trading at $45/ton on the ECX) – so using pyrolysis for bioenergy production is feasible, even though it may be more expensive than fossil fuels at the moment.
Posted by: floccina | October 8, 2008 12:28 PM
Here (at ES-16) is EPA’s 2006 US inventory of CO2-equivalent gases to show which industries and activities would need to be most dramatically affected if substantial reductions are to occur.
Electricity generation (mostly coal) 34%
Transportation (mostly oil) 28%
Industrial 19%
Agriculture 8%
Commercial 6%
Residential 5%
CO2 reduction targets cannot be achieved without major reductions in transportation (of which highway fuels are by far the largest part). And what’s the evidence that carbon pricing in ranges you consider acceptable will achieve emission reduction goals in the other sectors?
Posted by: Roger Chittum | October 8, 2008 12:52 PM
Link didn't work. Here's the URL: http://www.epa.gov/climatechange/emissions/downloads/08_ES.pdf
Posted by: Roger Chittum | October 8, 2008 12:55 PM
At a start of a severe recession do you really want to make it more expensive to employ people and conduct business.
If energy prices go up, the quickest way to cut use will be to lay people off.
Posted by: superdestroyer | October 8, 2008 1:03 PM
Roger, I think the more important point is that you won't make meaningful CO2 cuts by focusing on oil alone. Taking the EPA numbers at face value, even if you cut transportation emissions to zero (not gonna happen), you would still have left between 2/3 and 3/4 of the problem untouched.
Posted by: TL | October 8, 2008 1:09 PM
To add to "superdestroyer"'s (?) comment, I haven't seen anyone address the affect of carbon caps on what is left of U.S. industry. It seems to me that the natural response to increased electricity costs in the U.S. is to move the factory to somewhere less concerned about the environment - Chine springs to mind.
Aren't import tariffs a necessary part of a cap and trade scheme?
Posted by: AJ | October 8, 2008 2:03 PM
Canadians seem less afraid of nuclear than Americans, I have long though that we may buy electricy from Canada.
The CANDU reactor was designed by Atomic Energy Canada Limited (AECL) as an alternative to other reactor designs which use slightly enriched uranium (2-5% U-235). The CANDU allows more local input in nations that do not have the capability to cast a pressure vessel. The CANDU fuel contains pellets of uranium dioxide with natural uranium (0.7% U-235). As a result, the CANDU is cheaper to fuel, and can theoretically give higher lifetime capacity factors. Details on why the CANDU design was developed and engineering specifics can be found at Dr. Jeremy Whitlock's The Canadian Nuclear FAQ site
Posted by: floccina | October 8, 2008 5:25 PM
Floc,
Prevention is always less expensive than the cure. Working to reduce and then eliminate carbon emissions is easiest at the input not the output.
I don't understand why we should subsidize "clean coal" or any other technology that still relies on mining dirty resources and hoping to manage the output. Coal, oil and all other dirty sources of power should live and die by the market and investment should go towards truly emission free technologies.
By the way the shortest estimates for the first "clean coal" plant is 8-10 years out. A major wind farm takes 2-4 years to build and solar panels on residential and commercial rooftops takes a matter of weeks. There is simply no reason to subsidize energy companies who have been getting rich on dirty power to clean up their act.
Posted by: JFV411 | October 8, 2008 6:35 PM
Superdestroyer said, "At a start of a severe recession do you really want to make it more expensive to employ people and conduct business."
As always it depends on the business. Right now I think it should be more expensive to employ foreclosure agents and conduct payday loan business.
"If energy prices go up, the quickest way to cut use will be to lay people off."
No, the quickest way to cut use will be to... wait for it. CUT USE!!!
First we need to understand that we have built an economy based on a finite resource. That was dumb. Now we have to try and restructure our economy to operate on clean, abundant, cheap power (aka Solar, wind, etc).
We simply need to change the way we prioritize and make decisions. We must relearn the value of working within a few miles of our home, eating food grown in our region and freshly picked. Basically we need to restructure our local economies, diversify them, and make regions self-sustainable. The value is ten-fold, stronger communities, more stable economies, regional independence of food and energy. It will always take lots more energy to work against nature than with it.
The biggest problem is not cap-and-trade but challenging the mega corporations who have centralized the economies functions around the world.
Posted by: jfv411 | October 8, 2008 6:54 PM