Truth & Consequences: When Carbon Emission Has A Cost


Thankfully, Climate War I, the one having to do with science, is over. Society has not entertained a post-war Nuremberg Trial-like phase, which is probably a good thing. We don't need the distraction.

Climate War II is on, however. One Think Tanks says a carbon tax would be 'good for the economy', another says 'it will bankrupt us for generations'. While Congress-critters do their pre-election poll dances, Presidential candidates promise carbon cap and trade, with, or without, public auctions. Seems as if they all forgot to mention what their favored prescriptions, respectively, would do for life on earth - in the short run.

Luckily, a group of researchers at Carnegie Mellon Electricity Industry Center have done some modeling with both views in mind (long term technology transformation and short term carbon emission reduction).To give their econometric modeling some context, the authors, Newcomer, et. al., point out that earlier studies "have generally found that costs of between $35 and $50 per metric ton (tonne) of CO2 will be required to induce private firms to invest in low carbon technologies such as coal with carbon capture and sequestration."

The significant lowering of carbon emissions from the technological shift could take several decades. Some would argue that this would be a good thing: slowing the acceleration of Darwinian pressures on carbon intensive industries. But, really, why drag it out? Of course there have to be winners and losers in the carbon pricing game. Truth and consequences time is nigh.

As for how life on earth wins from a cap and trade, long before the "new and improved" technologies ever so slowly achieve market penetration:

We estimate that the instantaneous imposition of a price of $35 per metric ton on CO2 emissions would lead to a 10% reduction in CO2 emissions...

First, consumers would react to increased price by buying less, described by their price elasticity of demand. Second, a price on CO2 emissions would change the order in which existing generators are economically dispatched, depending on their carbon dioxide emissions and marginal fuel prices. Both the price increase and dispatch changes depend on the mix of generation technologies and fuels in the region available for dispatch, although the consumer response to higher prices is the dominant effect.

Yes we know. Consumer price increases will carry the first wave of C02 reductions forward. Poor people suffer the most. Yah diddy yah.

It does not have to be all pain for consumers and long term gain for corporations. The mitigating factor can be the return of carbon auction returns to individual citizens. Think about it.

Via::Carnegie Mellon, CEIC-08-02 - "Short Run Effects of a Price on Carbon Dioxide Emissions from U.S. Electric Generators" - Adam Newcomer, Seth A. Blumsack, Jay Apt, Lester B. Lave, and M. Granger Morgan Image credit::ABC News, "Reserve Bank board member calls for carbon tax"

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