Carbon Pricing – Be Careful What You Ask For – or: Why All Ways of Pricing Carbon Are Not The Same…..

FLYER low“Why do fossil fuels continue to provide most of our energy? The reason is simple. Fossil fuels are the cheapest energy.” – James Hansen, leading climate scientist and former director of NASA Goddard Institute for Space Studies.

This piece was inspired by an article by Tim Harford for the Financial Times:

A carbon tax is the nudge the world needs.”


Tim gives his thoughts on a Green New Deal, as advocated by Alexandria Ocasio-Cortez in the US, and also Ed Miliband, the UK Labour Party, and Caroline Lucas of the Green Party.

So what is a Green New Deal? “An emergency of this magnitude requires large-scale government intervention to kickstart industries, to direct investment and to boost research and development in the green technologies of the future.” (Jeremy Corbyn)Machine GNDIt’s an ambitious programme of government investment and regulation. It’s a huge centrally planned response to climate change: the government sets regulations on industry and decides who to subsidise through general taxation. The idea is to tackle everything: social justice, equity, biodiversity loss, CO2 emissions; to reinvigorate left-behind communities, create new jobs and guarantee everyone has them.

But without a clear price on carbon, signals to industry may be mixed. Do you win the lottery of government support? The government may not be the best judge of which industries to support. It may be vulnerable to corruption. Good causes may not be supported due to lack of knowledge.

A Green New Deal may have approval from the ‘left’ as action is seen to be taken, but increasing government control & spending may be unpopular on the ‘right’. Support will be split on partisan lines. And where will the money come from? There doesn’t seem to be a clear mechanism for real change in everyone’s behaviour.

And what would be an effective mechanism?

Tim Harford says: “Our modern economy reflects countless choices, made by billions of people all over the world. A broad-based carbon price influences them all. Nothing else can.”

Now – a carbon price cannot be the only measure for tackling climate change and biodiversity loss, our twin existential threats – but it could be really effective at changing all of our energy use. And it NEVER EVER gets talked about in the media or by politicians. (except for Layla Moran!)

So I thought I would have a look at different methods of carbon pricing – does the way you implement a carbon tax have an effect on its outcomes?

There are a lot of different iterations of carbon pricing, so I’ve whittled down the options to these: (and my apologies if I’ve left out your favourite…)

  1. Cap & Trade (which is the status quo right now)
  2. Carbon Tax & Government spends revenue
  3. Carbon tax & rebate through income tax
  4. Carbon Fee & Dividend

So here we go!

Status Quo: Cap & Trade

Machine C&TWhat happens here is the Government sets a limit on Carbon to be emitted – the ‘CAP’. CO2-intensive industries bid for permits, and so the CO2 price is set by the market. This is our present system in the EU Emissions Trading Scheme (ETS), with an additional UK Carbon Price Floor added. This has actually had a big effect, driving our energy mix away from coal and oil and towards gas, nuclear and renewables, which is a good thing. But there are failures in this system. One is that 58% of EU emissions come from sectors outside the EU ETS, such as transport, buildings, waste management and agriculture. So lots of industries are not included. Also not included is us, the general public – we are all fuel users, but we are unable to have any effect on this system. The price set on carbon at the moment is too low to have much meaningful effect. High fuel prices passed on to the public would be unacceptable without some sort of compensation plan.

Carbon Tax & Government spends revenue  Machine CT&RISo now, rather than setting a limit on carbon to be emitted & letting the market price the carbon, the Government puts a direct tax on carbon, setting the price. If the price is high enough it drives a change away from carbon-intensive fuels, and makes clean energy comparatively much more affordable.

So now you have a price on carbon at source. What to do with the revenue?

In this model, the government spends the revenue on green energy projects and infrastructure, and any other projects they decide will help the battle against climate change.

But this approach brings higher prices to consumers without any compensation. It also does not involve or empower the public in any clearly visible way. Will the government make the best choices? We don’t know. Looking at the Gilets Jaunes protesters in France, imposing higher prices with no compensation looks extremely unpopular.

Carbon tax & rebate through income taxMachine CT&RHere we have the same instrument to collect revenue – a fee on carbon at source. But now the revenue is returned to the public via the income tax system through tax rebates. (Some ideas are for a mix of this and the government allocating some of the revenue to clean energy projects, but to keep things simple I’m going to say all the revenue is being returned.) So our tax is revenue neutral, and people can see a benefit on their decreased tax bills.

But there’s a fairness problem here: as far as I can tell, this form of compensation is regressive – higher earners get proportionally more tax compensation, so the poorest have higher fuel prices, less compensation, and are worse off. And what happens to those who don’t earn enough to pay tax or have fallen off the edges of the system? Also – how motivating is it to have less income tax? It seems to be less of a bad thing, rather than a positive symbol of climate action.

Carbon Fee & DividendMachine CF&D

(Ok this could be called Carbon Tax & Lump Sum, but to make it sound more upbeat we’re calling it a fee rather than a tax.)

Again, the government sets a price on carbon at source. This price rises over time at a rate set by an independent body. The revenue is returned equally to the public through a weekly/monthly/annual lump sum, ie a ‘DIVIDEND’.

So what’s different here?

The lump sum system is progressive: it really benefits lower earners most. The richest (and largest users of CO2-intensive energy) benefit least. Anders Fremstad of Colorado State University and Mark Paul of Duke University calculate that taxing a tonne of CO2 at $49 would leave 59% of Americans worse off, including 75% of the bottom half, if the revenue were used to lower personal-income taxes. By contrast, recycling the receipts as lump-sum payments (Dividends) would leave 89% of the bottom half with an average net gain of $788.

Here’s a graph adapted from The Future of Carbon Pricing by Policy Exchange.dividend diagram Dividend to each income group is in green. Increased fuel costs are in red. You can see the 6 lowest income groups all break even or are better off, with the poorest getting the biggest benefits. The wealthiest, highest fuel users, are the worst off.

Compared to tax rebates, it’s demonstrably fair as all get an equal dividend.

It’s also possible to get dividends to the poorest most marginalised sections of society, by…. “Investigating inventive ways of paying the dividend to ensure that the most vulnerable receive it. Linking the dividend to national insurance numbers would be one a way to pay the dividend, but this may mean that the most vulnerable miss out. The Government should investigate whether new technology can be used to pay the dividend securely through a mobile app to ensure as many eligible people as possible receive it.” policyexchange.org.uk | 15Carbon Pricing

Through their dividend the public can support renewables in their choice of what energy to buy. The dividend is a visible sign of your purchasing power, and the public is trusted to choose how to spend it; wise choices bring a win-win virtuous spiral of energy choices. The dividend also gives voters an immediate interest in the fight against climate change –a lump sum arriving in your bank account is a very interesting event. All green energy sources benefit by becoming comparatively cheaper.

But another fantastic effect is that the Dividend, once people are used to it, is hard to withdraw by future governments (see what’s happened with UK Winter Fuel Payments) – and so acts as a pledge to industry that the carbon price will endure.

The equal dividend appeals to sense of fairness. Middle and lower earners break even or are better off.

To just measure up again these different ways of pricing Carbon, here’s is my Over-Elaborate & Subjective Table of Questions, to compare all the taxes. I’ve traffic-light colour-coded it: Green is what I see as GOOD outcomes, Yellow is maybe/unsure, Orange is POOR Outcomes (but remember, this is very subjective).TABLE of Speculation

In the words of Tim Harford again: “We’re all involved….Our modern economy reflects countless choices, made by billions of people all over the world. A broad-based carbon price influences them all. Nothing else can.”

I’ve tried to look here at the different ways of implementing a broad-based carbon price. To me it looks like all ways of Carbon Pricing are not the same. Carbon is infused in all our lives and all our choices. We need to tackle climate change with a way that involves and empowers everybody, is fair and acceptable and progressive, and that also is able to set a high enough price for carbon to bring about change, in a way industry can see will not be overturned by a change of government. I think there is one clear policy winner here, one that does all those things.

What do you think?FLYER low

32a KidsLit4Climate01s32 Space for natureROW02

What to do if you lose your favourite toy

Blue Bear

LOST WHALE storyYou’d think it would be tricky to lose a blue whale, wouldn’t you? But my son Herbie and I managed it.

The whale had been a favourite Christmas present from Herbie’s Auntie Mavis, who had found him at the Natural History Museum Shop in London.  He was furry, blue with whitish spots, had kind eyes, and was a good simple shape to hold. He was called Whaley, and as Herbie was only four and usually needed daily backup at school with a cuddly toy from home, Whaley often did support duties. However, one day in January, we arrived home from school and the whale was gone from the bag he’d been resting in. We retraced our steps back to school, sure we’d find Whaley stranded on the roadside somewhere along the way. But not a whisker. We retraced again back home, squinting under cars, behind garden walls, increasingly desperate. Still no sign of a furry cetacean.

But a whale can’t just disappear. Someone must have retrieved our whale. Maybe some small child had picked him up.  But they’d need to know who to return him to, so we made posters. They looked like this:

LOST WHALE smallWe put our posters up on the streets and in the school, quite hopeful that boy and whale would soon be reunited. But a week went by, and no whales came out of the woodwork. The trail was going cold. We had to start giving up hope.

Then, two weeks after Whaley’s disappearance, there was a muffled whump on the front door.

Whaleys on DoorstepTwo whales, wearing scarves, with a suitcase! In the suitcase were a few pictures. Here they are:

Whales in entrance hallWhales at MuseumWhales at CafeRiding on BusTwo whales at the Natural History Museum. Two whales leaving the museum . . . having some refreshments . . . and riding on the bus back to Oxford.

We had to piece together what must have happened: Whaley, growing a bit restless and needing more whale company, must have travelled back to London, to the Museum where he’d come from. There he’d found a sperm whale friend, wandered round the museum, had the odd snack, and then found the bus back to Oxford with his new chum.

 

The Sperm Whale was named Sperm Whaley. (Herbie was going through a state-the-obvious phase when inventing names.) And since then, Whaley has been roaming no more…

..that we know about.

P.S.: If you are ever unfortunate/careless enough to lose your whale, it may be helpful to know that the Natural History Museum Shop in London has an extremely efficient online delivery service. . . .

Here are some toys at large in a Natural History Museum at night….

ReptiliabluePS If you like hearing about lost toys, you may like this:

TOYSSome useful advice:

WHAT TO DO IF YOU LOSE YOUR FAVOURITE TOY

Hoctopize1. Don’t panic.

2. Go back and check all the places you may have left it—e.g., (a) the garden,  (b) the bus,  (c) the moon,  (d) Jupiter.

3. Don’t panic.

4. Put up posters in prominent places. Remember to include identifying features, like number of eyes, legs, and tentacles, like this:
LOST Cuddles5. DON’T PANIC.

6. Abduct all the toys you can find and see if they’re yours. NO! NO! NO! Don’t you know that stealing toys is WRONG?

7. Panic?

8.  No, don’t panic. It will be in the last place you look. Things always are.

Toys32

 

 

 

The Global Marshmallow Test

(Or: Can you eat your planet and have it too?…)

Global Marshmallow newHere’s a delicious planet, perfectly formed and heaving with life. We’ve had three billion years of pretty good weather, give or take an ice age and the odd mass extinction. But big changes have been happening in the last 10 000 years. The graph of wild animal numbers has gone into free fall. There’s been a huge change in land use to grow food for humans, and the Earth’s settings have been adjusted to new and experimental levels due to extra carbon dioxide in the atmospheric mix. Carbon dioxide is a Good Thing – we’d be too cold for life without it. But a little too much has a big effect on climate. The Earth is a huge old system and the more you find out about past climates the more you wonder what long wild ride is being unleashed right now.


We know we have to do something about this. But the Something we have to do has to be quite a big thing, to really make an impact. Maybe it means treating CO2 as if it is an amazingly expensive and rare resource, to be used very sparingly, as if we’re completely running out of the stuff. And maybe it involves setting some limits: setting aside some sea to be no fishing zones, setting aside our forest to stay forest, and realising that as a species we are the only one that can try to regulate our population to a level that our planet can accommodate. But all these things are givey-uppy things: someone has to not fish, someone has to find another living, someone has to decide to have less children than they might like. Nature is really messy and inconvenient and eats our crops and probably us too if we let it. We might decide to make carbon really expensive so we use it more carefully – but then someone has to find life is more expensive. Like you. And me.

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Does a struggle have to happen – can Now-Us take a hit for Future-Us?

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So that’s the Global Marshmallow Test facing us; do we have the power to imagine how extremely grateful future beings will be to us if we leave the wondrous carboniferous fossil fuels buried for now. (They might even need them in a few hundred years time if there’s an unexpected ice age.) And how grateful they might be to us for having put up with the inconvenience of animals and their habitats so they could inherit some of the bizarre treasure of the extraordinary beings that evolution has produced that share the world with us.

PS: Here’s the proper fabulous picture of the Plumb-Pudding in Danger by Gillray in case you were missing it:pudding-smallPPS: How? Here’s James Hansen on the idea of a Carbon Fee and Dividend (payable to all taxpayers) (on page 5)

Here’s Hansen’s Ted Talk.

PPPS: Here’s a brilliant lecture by Dr Scott Wing about how the climate of 55 million years ago can tell us a lot about now.

The Marshmallow Test

marshmallowHere’s a yummy marshmallow. You know you want it. Of course you want it. But if you can resist its charms for 20 minutes, I will give you double marshmallow. Or something even more delicious that you actually like. Can you wait?

This was the Marshmallow Test, an experiment administered to 4 year old children by Walter Mischel. Many gave in almost immediately, the lure of the mallow was too strong. But some prevailed. They did things like not looking at the mallow, or giving themselves quiet peptalks, or distracting themselves from thoughts of the mallow by singing or making funny faces. And they got through. They followed the tested children’s progress for 40 years, and it seemed that children who were more successful at the Marshmallow Test were more sucessful in later life.

Whatever the validity of the research, the Marshmallow Test highlights the inner struggle we all have to face between the interests of our present selves and the happiness of our future self. Now-Me wants a triple gin and tonic, but Future-Me tomorrow is going to wish Now-Me hadn’t had it. How can the faint calls of Future-Me from tomorrow win against Now-Me’s intense desire for gin? The same goes with late night cheese eating, pensions, and procrastination. How can Future-Me reach into the past, grab Now-Me by the shoulders, and convince Now-Me that going to bed before 1.30am will make everyone happier all round? (And put down that Gruyère, Now-Me!)

Either Future-Me needs a top-notch time machine, or Now-Me needs a more conscientious imagination to make poor Future-Me more tangible.

But we’ll leave Now-Me and Future-Me locked in their eternal struggle and turn instead to The Global Marshmallow Test.

To Be Continued: coming next: The Global Marshmallow Test – watch out for it, Future-You!

The Wild Verges Award

You’re perambulating along, by foot or bike or car (or whatever your preference), and you see a particularly lovely patch of roadside wilderness that has been allowed to grow untrimmed, and now it’s waving gently in the breeze. You may want to say “Well done!” And now you can, with the Sketching Weakly Wild Verges Award. Simply cut out & nominate the stretch of road where your lovely verge was, and send to your local county council strimming department.

Cut out & keepPersonally I’d nominate the top of the A4144 where it meets the A423 in Oxford.

And this bit of Regent’s Park for nice Cow Parsley:

Regents park

Turd Alert

Our street tends to be often perilously bedeckled with dog poo. Usually right outside our own doorstep, where there is a lamp post. To help stop occasions of dismay at inadvertently stepping in an offering, Sketching Weakly brings you the Cut-Out & Keep Turd Alert Flags.Turd Aler Flags smallAll you need to make them is: scissors, Pritt stick, cocktail sticks, a small amount of cardboard box, and a print out of this pdf (see link below):

Turd alert

Now you can draw attention to a hazardous dropping, and also try & match the poo with its possible creator.

Make sure you don’t step in the same turd twice.

Strange sightings on Port Meadow

Once upon a time, not so long ago, Port Meadow in Oxford looked like this:

Port Meadow 01

Now it looks like this:Port Meadow 04

Maybe, with a bit of effort, it could have been worse…

worseToday Oxford University’s Congregation decides what should be done about this; quite a lot of people favour taking a floor off.

Sketching Weakly wonders whether slightly more radical action could be needed.

on port meadow