Welcome to the Carbon Tax Ticker
At the top of the agenda to begin 2020 is the proposed Transportation and Climate Initiative (TCI), a regional scheme targeting states in the Northeast and Mid-Atlantic. TCI is billed as a “cap-and-invest” program and is akin to a carbon tax in many respects. Below you’ll find IER’s policy brief on the proposal, IER’s quick-hitting TCI 101 document, and a piece of analysis from the Yankee Institute. The Yankee Institute, based in Connecticut, is one of a dozen state-based think tanks working to halt TCI in its tracks.
Next up, you’ll find a research article from Kevin D. Dayaratna, Ross McKitrick, and Patrick J. Michaels on the so-called social cost of carbon.
Lastly, a request: IER’s sister organization, the American Energy Alliance, intends to construct a statement of principles in opposition to the carbon tax that unites the free-market movement. What you’ll find below is a preliminary version of what will become a standing statement. Your feedback, with an eye toward establishing a firm stance with broad appeal, would be appreciated. Respond directly to this email if you’d like to engage with me on the project.
T.C.I. = Transportation Cost Increase
Institute for Energy Research, 31 January 2020, Policy Brief:
The Transportation and Climate Initiative (TCI) is a proposed cap-and-trade system. It would set a limit on carbon dioxide emissions from the transportation sector in Northeastern and Mid-Atlantic states and auction off allowances to the fuel companies operating in the region. The price of the allowances would increase expenses for fuel companies and lead to a price hike at the pump. TCI is designed to make driving cars and trucks more expensive. In short, the Transportation and Climate Initiative is a transportation cost increase. All aspects of the regional economy that rely on transportation, including the millions of products delivered by truck each day, would be jeopardized by TCI.
To help the public understand the initiative, IER has released this policy brief explaining TCI’s key terms. A PDF of the policy brief is available for download here.
Also available is an even more direct TCI 101 document, which you can download here.
Yankee Institute, 20 January 2020, Analysis:
Up to thirteen states on the eastern seaboard – including Connecticut — signed on to the initiative that could raise gasoline prices by 17 cents per gallon starting in 2022, with more price increases in the future as the emissions cap is lowered.
But the overall effect on the climate is too small to be measurable, according to climate modeling conducted by Brent Bennett Ph.D. of Life:Powered – the energy policy division of the Texas Public Policy Foundation. Texas is not part of the TCI compact.
Bennett conducted the analysis using the MAGICC modeling system, the same climate modeling system used by the United Nations and the International Panel on Climate Change to measure the impact of policy changes on global temperatures.
The implementation of TCI would result in a temperature change of less than a thousandth of a degree – too small to be measurable.
Check your premises
Environmental Economics and Policy Studies, 18 January 2020, Research Article:
We explore the implications of recent empirical findings about CO2 fertilization and climate sensitivity on the social cost of carbon (SCC) in the FUND model. New compilations of satellite and experimental evidence suggest larger agricultural productivity gains due to CO2 growth are being experienced than are reflected in FUND parameterization. We also discuss recent studies applying empirical constraints to the probability distribution of equilibrium climate sensitivity and we argue that previous Monte Carlo analyses in IAMs have not adequately reflected the findings of this literature. Updating the distributions of these parameters under varying discount rates is influential on SCC estimates. The lower bound of the social cost of carbon is likely negative and the upper bound is much lower than previously claimed, at least through the mid-twenty-first century. Also the choice of discount rate becomes much less important under the updated parameter distributions.
IER’s Take
As the esteemed Dayaratna, McKitrick, and Michaels demonstrate here, any assertion of a canonical social cost of carbon (SCC) is unscientific conjecture. All SCC estimates depend on a variety of parameter selections that reflect the evaluations of the modeler. This paper specifically focuses on the inclusion or exclusion of the fertilization effect of CO2. At the very least, this line of inquiry shows just how far from legitimacy are claims that a carbon tax will accurately account for the alleged negative externalities of emissions.
Building a principled coalition
American Energy Alliance, Statement of Principles:
I. Affordable, reliable energy is a vital aspect of human wellbeing, providing electricity for our factories, hospitals, and schools, heat and light for our homes, and locomotion for the cars, trucks, trains, and ships that move people and goods about the planet. In concert, these energy uses create the modern standard of wealth and health we have come to enjoy.
II. Energy derived from carbon-based fuels fits the affordable, reliable profile necessary for human wellbeing. Carbon-based fuels—given their density, abundance, portability, and dispatchability—are key resources, both here in America and across the globe, where as many as a billion people still lack electricity.
III. Political schemes designed with the explicit intention of increasing the cost of the carbon-based fuels deprive people of affordable, reliable energy. A tax on carbon dioxide emissions, commonly called a carbon tax, is one such scheme. A carbon tax would hinder access to affordable, reliable energy and therefore harm our quality of life.
IV. Private decisions made on a free market best reflect people’s interests. Central planners, despite claiming the mantle of the public good, act only to limit our choices. Energy freedom—the liberty to produce and use affordable, reliable energy—enables people to manage life’s challenges as they see fit, including those that may be heightened by carbon dioxide emissions.
V. The American principles of individual liberty and decentralized governance endorse energy freedom. Implementing a carbon tax in order to satisfy computer models is contrary to those principles. Energy freedom ensures affordable, reliable energy will continue to promote human wellbeing, here in America and abroad.
IER’s Take
This is a work in progress over at AEA and if you would care to weigh in, please do not hesitate to contact me with your thoughts by responding directly to this email.
Thank you,
Jordan McGillis
