NewEnergyNews: CARBON TAX: WHERE IT WORKS, WHERE IT DOESN’T

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    Thursday, June 28, 2007

    CARBON TAX: WHERE IT WORKS, WHERE IT DOESN’T

    Not only did Sperling stir up worthwhile debate with this opinion piece, but he accurately predicted the California Air Resource Board's action.

    A new carbon standard; Taxes on CO2 emissions alone won’t get us wherewe need to go
    Daniel Sperling, June 21, 2007 (LA Times)

    WHO
    Former Federal Reserve Chairman Alan Greenspan, the Los Angeles Times' editorial board, liberal and conservative economists
    a complicated graph depicting Sperling's point: tax works in some cases, in some cases not (click to enlarge)

    WHAT
    Sperling stimulated much debate by asserting a tax on greenhouse gas (GHG) emissions is not in all cases the best way to cut them:

    WHEN
    Sperling’s opinion piece coincided with a California Air Resources Board (CARB) June 21 vote on new standards applying to emissions.
    The Decision -- 3 new rules: (1) Fuel w/10% reduced GHG emissions by 2020 (as proposed here by Sperling) (2) Improved vehicle ari conditioning systems (3) Requirements for reduced landfill methane emissions.

    WHERE
    The CARB vote was in Los Angeles. Sperling’s comments applied to California specifically and the US in general.

    WHY
    - A “carbon tax” is a surcharge for consuming energy that emits GHGs when used.
    Sperling’s basic assertions are that the carbon tax does not work well for the transportation sector but does for the electricity generation sector.
    - The tax’s effectiveness is due to a choice in electricity generation from dirty coal to cleaner gas to clean nuclear and renewables. A tax on dirty energies could incentivize the use of clean ones. Sperling proposes a $25/ton of CO2 tax.
    - There is little choice in transportation. Petroleum is 96% of the sector. A moderate tax would not incentivize change and a large one would penalize the wrong consumers. Sperling adds that it is also not presently possible to mandate a specific alternative to petroleum.
    - He advocates mandating a low-carbon fuel standard. He proposed a 10% lower GHG emissions by 2020 standard (which CARB mandated, see above).
    how it works, when it works (click to enlarge)

    QUOTES
    - Sperling: “Specifically, they do not work in the transportation sector, the source of a whopping 40% of California's greenhouse gas emissions (and a third of U.S. emissions).”
    - Sperling: “The one sector where carbon taxes will work well is electricity generation, which accounts for 20% of California emissions (and 40% of U.S. emissions).”
    - Sperling: “A recent study at the UC Davis Institute of Transportation Studies found that the "price elasticity" of demand for gasoline has shrunk; a price increase of 10% induces less than a 1% reduction in gasoline consumption.”
    - Sperling: “The low-carbon fuel standard picks neither winners nor losers. Instead, it sends a fuels-neutral signal that alternatives are welcome in California's $50-billion-a-year transportation fuels marketplace…Real solutions to global warming are needed…”

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