It’s been a while since I did a post on CO2 emissions. In my last post, I explained how cap-and-trade (i.e. emissions trading) works. We also found that a true cap-and-trade policy is not any sort of tax. In fact, we found that it’s actually a market solution to the problem that markets are not always efficient at solving pollution problems. Even some extreme libertarians think it’s a brilliant way to reduce the need for government intervention and let the market solve it’s own problems.
Now a while back, one commenter said that he’d support laws reducing CO2 growth if there was “evidence that the net benefits of the efforts to reduce CO2 emissions exceed the net costs of doing so.”
Well, let’s start with the assumption that we’ve just waved our magic wand and we now have a world wide treaty (that no one plans to ever violate) that lays out how we can reduce CO2 growth in, say, 50 to 100 years but adds does not add additional costs to carbon, or at least none without plenty of time to prepare alternative energy sources first.
Pipedream? Not at all. Given a 50 to 100 year time frame, this is not just a dream scenario. As I explained in a past post, it is possible to come up with legislation that adds few or even no additional costs to energy in the short term, and possibly even the long term, but still puts pressure on the market to change within some (long) time frame.
Now let me just cut off one argument at the pass. Maybe, feeling skeptical (and perhaps simply feeling like you need to argue) you might claim that it couldn’t be done in 100 years because this change is so massive that you’d need longer than that. Okay, so let’s assume 200 years instead.
Maybe you reject 200 years. Okay, let’s assume 300 years. In fact, pick any length of time you wish no matter how high. Make it 2000 years if you wish.
It simply does not matter to me how many years you assume as long as you keep adding years. In fact, the more years you add, the stronger the need to act immediately. This is precisely the point I made back in my risk mitigation post. The longer the lead time you need to stop CO2 growth without hurting the economy the larger the onus to act today to start the clock ticking on that 300 years ‘lead time required to implement’.
What If You Assume No Lead Time Required?
Now in this post, Eric argued that economic disaster was likely if we tried to curb CO2. But later he seems to have changed his mind and in this comment he argued that actually a no economic impact solution would require only a short period of time.
Now obviously these two points of view are mutually exclusive. If you can, in a few years, change over to alternative energy without impacting the economy, then obviously there is no scare of economic disaster.
I am going to venture a guess that Eric missed the fact that he was responding to my concern that a solution that did not cause economic problems would require a very long time. (“I’m going to guess that it would take no less than five decades to implement a CO2 Curbing strategy without an economic collapse.”) Therefore, I will not hold Eric accountable for his argument because I think he missed the context.
However, what if someone really did believe this? What if they believed that the time required to change to alternative energy sources without impacting the economy was only a few years?
Well, obviously this changes my risk mitigation quite a bit. If the proposed solution requires, say, two years to implement and had no potential economic downside, then there really is no need to act today as I’m advocating.
But if anyone wants to claim this, I’ll hold them accountable for the other side too. There is also no objection (at least not economically) of implementing a CO2 reduction policy either. The dire warnings of economic collapse are no longer a weapon in your hands. And, in fact, given that you believe in a two year / no impact solution, there is really virtually no cost implementing the solution so we might as well do it if only to reduce our dependence on foreign oil and to win the tree hugger vote. (If you hate tree huggers so much you wish to not implement this no impact / short term solution just to hurt them, my advice is to seek counseling.)
What Does a No Cost Solution Look Like?
Some of you may wonder what a no cost solution would be like. It works like this. Mind you, these are all just fictional made up numbers.
Let’s say that our best scientific consensus tell us that we are at 400 parts per million on carbon today and that we are growing at 10% per year. Let’s also say that our best scientific consensus says we will continue to have additional heat growth until we cut back to 300 parts per million.
Using a no cost strategy, we ignore AGW entirely. We simply do not worry about cutting back to 300 parts per million. If AGW turns out to be a problem, we’ll implement our contingency plan – geo engineering – to buy us time. Plus, once some sort of massive disaster happens (if it happens) the political motivation will come in spades.
But we’re hoping that the AGW crowd really is wrong in the short term. If we believed they were right, or that there was a pretty good (say greater than 5%) chance they were right, the only morally acceptable alternative would be a massive geo-engineering and carbon emissions reduction program ASAP. But we’re assuming there is no short term (less than 30 years say) impact to worry about.
Instead, we’ll concentrate on initially just holding the growth to 10%. We’ll setup a emissions reduction policy and we’ll set the cap above our current carbon output. (In our example, we might set the cap at 500 parts per million to give us room to grow.) Will there still be a so-called “carbon tax?” Not at all.
But even having the emissions reduction policy in place will start to cause the market to recognize that if alternative energy sources are not found soon, and a switch over does not start, that eventually that non-existent “carbon tax” will become very expensive. While there is none today the market will see that we’ll have one in the future if we don’t start switching to alternatives.
How far into the future? That entirely depends on how we set it up. If we put the emissions cap way out there, it might be a long while. If we want to try to affect a quicker change, we might start with a really high emissions cap, but legislate that it shrinks every 3 to 5 years.
Carbon Market Visibility
With a policy like this in place, the market will now ‘see’ carbon as having a future cost, even if it has no cost today. As future plans are made, there will be economic pressure to start developing alternatives. 
In a worst case scenario, if we want to create some level of squeeze, we can imagine a slowly dropping emissions cap that people slowly adjust to, but eventually comes under control and then evaporates once the switch to alternative energy sources are complete.
Think this wouldn’t happen? Actually, it’s already started. Just the mere threat of a “carbon tax” has already led to market visibility to CO2. Geoff tells me that often the oil companies are the very ones funding AGW research? Why? Probably because they are already putting money into alternative energy sources due to the threat of a future “carbon tax”. It’s natural for them to want to see a emission reduction programs passed if they think they are in a better competitive position then their competitors. That’s the power of market visibility.
Still, my guess is that making the market slowly aware of carbon will take a very long time. Eric suggested that people change cars often enough that it might happen faster. If so, it’s all good. But my guess is that this is more of an infrastructure problem then he realizes. Would you buy a non-gasoline car if there were no ‘fuel stations’ in which to fuel up? How long will it take to have natural gas or electric stations at every street corner? Probably not just a decade or two.
Another advantage of my proposed solution (which as it turns out is also a disadvantage) is that once we have such legislation in place, it’s easier to change it. In other words, if support for AGW grows (for the sake of argument, let’s say legitimately) and we feel we need to crank up the carbon tax to reduce CO2 emissions faster, we already have the correct pieces in place.
Return on Investment
With this proposal now on the table – and admitting that I’m glossing over the considerable political problems that would still exist in trying to get a world wide treaty together even on something as innocuous as this – I ask you to now evaluate the ROI based on what is essentially a minimal to no economic impact. Only administrative costs need to be considered and that is it.
I know this doesn’t address the fear that government screws everything up and we should keep it local. I’ll address that in a future post.
 I feel criminal at how much I gloss over here. For example, you’d have to be sure you never add to the amount of carbon without really obvious reasons or else the legislation loses it’s teeth immediately because no one believes the bar won’t just keep growing forever. Still, I’ve had so many AGW Skeptics tell me that CO2 growth is going to drop off on it’s own that I feel like glosses like this are justified to this audience. If the AGW Skeptics are right, these laws I’m proposing will literally never come into play. The natural drop off they’ve hung their hopes on will come prior to my engineered one and all will be happy. So I can’t see how the skeptics can have issues with my proposal.
And if I’m wrong, and we end up with more CO2 growth than anticipated, and therefore a larger carbon tax then anticipated, it’s arguably not a bad thing since that proves we really aren’t in control of our CO2 growth as much as the Skeptics claimed. We may have to then face that economic disaster the conservatives fear.