The most well-respected methods for reducing carbon emissions seem to be carbon taxes and carbon price mechanisms. I have written before about how I think they will not work to achieve a zero carbon state, based on lessons from the field of public health. Here I want to explore in a little more detail just what we might expect in the long-term from a carbon taxation system.
An illustrative example: Effects of carbon taxes on fishing
Fish are a staple food in Japan, and fishing is a carbon intensive practice because fishing fleets use diesel oil. We can get a rough estimate of how much carbon is required to produce a single piece of fish, and use this to estimate how price would change under a carbon tax. First, consider the total carbon emitted in catching fish: this website puts it at between 1750 and 3300 kg for a ton of fish, with the highest carbon emission amongst farmed fish. The analysis suggests that 1kg of wild-caught frozen salmon will be associated with 1kg of CO2; a carbon footprint of up to 6Kg can be expected for fish that is caught in say Chile, and shipped to the US. Taking 5kg as a conservative estimate of the carbon footprint of a kg of fish, we can see that for a carbon tax of $X per ton, $X/200 is added per kg of fish sold in the super market. So for a price of $250 per ton, we get $1.25 per kilogram; for $2500 per ton, we get $12.50 per kilogram.
The Coles website tells me that salmon fillets are currently $30 per kg. A carbon price of $2500 a ton will increase their cost by approximately 30%.
We can calculate the cost for fresh fish in a supply chain directly, so let’s try this for a typical fresh Tokyo fish, Mackerel. The Seafish.org website has a carbon footprint profiler which indicates that you need to take into account “landed to live weight” and “final processed form to landed weight,” which we can estimate fairly conservatively (though I don’t know the details). This ancient paper (pdf) gives an efficiency of about 3% for shrimp fishing, while this FAO document gives landed weights of between 3 and 84%. Working with Mackerel from that document, let’s assume that only 3% of caught fish is actually edible, and make that the “landed to live weight” ratio. The FAO provides a handy guide to “conversion factors” for converting landed fish to actual final processed form, as an annex (pdf) to this guide. Taking the mackerel factor, let’s assume that only 50% of the final fish is eaten, in the form of a fillet. The site then asks us to show how much the fish traveled before and after processing, and by what means. Let’s assume it is landed fresh in Tokyo after a 5 day fishing trip, and that it traveled 40km by truck to the processing plant, then 40 km by van to the shops, and was eaten within a day (pretty standard in Tokyo). Using “Trawling for Herring in the NW Atlantic” as our model fishing method, we get 7.4 tons of CO2 for every ton of final product. So we would need to add X/133 to the per kg price of the fish. For a carbon price of $250, that’s $1.90; for $2500, a $19.00 impost. This site tells me that Mackerel in Japan costs between 600 and 8000 Yen per kilogram ($6-80), so a $2500/ton carbon tax would change this price range to $25-100 per kg. The Coles website tells me Australians already pay $20/kg for tinned mackerel – is it very likely that Japanese will baulk at paying $25 for fresh mackerel? Furthermore, this is for the most inefficient live catch and processing values I can find. If the live catch efficiency goes up to 10%, for example, the impost for those carbon taxes drops to $0.60 – $6.
No one on earth is currently considering a $2500 ton carbon tax. Even $250 a ton is considered radical, but $250 a ton will increase the final price of mackerel by $0.60 – $1.90 per kg. Does anyone seriously believe that this impost will be sufficient to force the fishing fleet to go carbon-neutral?
What are the long-term impacts of carbon taxes?
I chose fishing as an example because it differs from electricity generation in one simple way: short of returning to sailboats, there is no viable low-carbon alternative to fossil fuels for fishing boats at present. So the fishing industry will have little choice but to absorb the price of a carbon tax, pass it on to consumers, or disappear, unless and until an alternative energy source becomes available. If our goal is to get to a carbon zero economy and still be able to eat fish, a carbon tax is surely not going to work. But there are other aspects of the economy that are entirely vulnerable to a carbon tax, most especially electricity generation and public transport. So how well are carbon taxes predicted to work in these industries?
There does not seem to be a lot of available modeling on the long-term impact of carbon taxes, but those reports that have been published are not promising. For example, this report by the Citizens’ Climate Lobby describes a carbon tax starting at $10/tonne and increasing to $250/tonne at $10/year. They use four different established models to identify total, and industry- and region-wide effects of the carbon tax. Their final estimate of the effect of the carbon tax is a 50% reduction in emissions by 2035 (page 30). After that the gains decline. This report, from the carbon tax center, proposes a system of tax and credits that appears to correspond with a $113/tonne tax, and would lead to 25% reductions in emissions by 2024 on a 2012 baseline.
350.org says we need to get to 350ppm by the end of the century to avoid catastrophe; we’re currently on 400ppm and increasing at 2ppm per year. If we halve global emissions by 2035, we’ll be above 420ppm, and still increasing.
As another example, my July electricity bill was $66 for 214kwh of electricity. In Tokyo at the moment this is mostly gas, and would (according to Wikipedia) have released a total of 107 kg of CO2, based on median emissions. At $250/ton that’s going to increase my electricity bill by about $25/month. How much electricity use will that discourage? $25 is a cheap meal out with a few drinks. At $2500/ton it’s $250/month – two cheap meals out and two trips to a love hotel. Am I willing to give up two dates a month in order to keep my electricity use unchanged?
I don’t believe that even a $250/ton carbon tax will be sufficient to force carbon neutrality in electricity generation, and $2500/ton, while it will make solar and wind competitive and force a fairly rapid switch to renewables, may not lead to much change in other behavior, especially in industries like shipping and trucking where alternatives are expensive and still barely off the drawing board. The Citizens’ Climate Lobby report tells us that in the USA each $1/ton of carbon tax is a $.009/gallon increase in petrol prices; $2500 a ton will increase petrol prices by $22.5/gallon. Currently in Tokyo gasoline is sold at probably $2/gallon. Will people completely stop using cars at $25/gallon? Given that a single journey in Japan can cost $5 in parking, and a car can travel 35 mpg, i.e. two trips per parking cost, the total cost of those two trips will go from $14 to $35 in Tokyo. Is that sufficient to stop recreational use of cars?
These reports make clear that even sizeable taxes of up to $250/ton are not enough to get where we need to go. The first report, suggesting $10/year increases in the tax, shows the obvious problem – as the tax grows, the incremental benefit of further increases declines, so going to higher taxes will have smaller and smaller effects. By the time we’re at $300/ton, a further $10/year increase will be less than the effect of inflation on prices in many countries. People will stop responding to those taxes by that time. And as I showed in the case of fishing, there will be many industries where this cost can be passed onto consumers with a negligible effect. I routinely buy fish fillets in Tokyo for $2/fillet, am I seriously going to reduce my carbon footprint if the price of such cheap food doubles?
What we need to bear in mind here is that we don’t want to reduce recreational use of cars by 50% over the next 30 years, or by 90%; realistically, any CO2 emitting form of transport needs to be cut by 99%. These taxes alone are not going to do that.
What do we need to do to achieve carbon zero?
Carbon neutrality will not be achieved by taxes alone. We need additional government interventions to make it happen. Carbon taxes with appropriate transfers to ensure that poor people are compensated for the change are a good start, but they are only a start. We need to go a lot further if we want to achieve these goals. Some policy interventions should include:
- Complete electrification of freight rail: Australia’s rail freight system (indeed all inter-city lines) is still diesel-powered; it should be electrified immediately, so that it can be shifted to a renewable energy source as the taxes bite
- Expansion of passenger and freight rail: Most Australian cities are heavily dependent on road transport, which for the foreseeable future is immune to carbon abatement policies. As much as possible, the transport network needs to be shifted to rail, that can be electrified
- Electrification of all buses: all public buses should be immediately electrified
- Implementation of tollways: all major interstate highways should be shifted to a toll system, with tolls based on both distance travelled and journey speed, and tolls manipulated to ensure long distance travel is always cheaper by train and bus than by car
- Construction of high speed rail: this is never going to be profitable in Australia, so it should be subsidized by government, using carbon tax proceeds, and prices fixed in such a way that it is always competitive with air travel and private road travel
- Minimum price for air travel: Air travel will never be carbon neutral, so it needs to be discouraged or people need to find ways to use their journeys more efficiently (i.e. travel less often and stay longer). A minimum price will encourage this, and should be designed so that electric high speed rail is always cheaper
- Nuclearization of all large ocean-going vessels: if it’s large enough to have a nuclear power source, it should. No freight should be carried on a CO2-emitting ship.
- Reorientation of commercial fishing fleets around batteries and nuclear tankers: I don’t know if this is possible, but fishing needs to be redesigned so it is carbon neutral. If it isn’t yet possible to design battery powered ships, research funds should be dumped into this
- A timetable for the banning of internal combustion engines: Some time in the future, internal combustion engines need to be banned. This timetable should be implemented now. By e.g. 2020, gasoline-using cars should be illegal, so people have 6 years to buy a battery car or convert to CNG; by 2025 or 2030, CNG cars should be illegal. That gives a 15 year time frame to completely electrify the personal transport industry
- Immediate conversion of cars to compressed natural gas: This should be a brief boom industry, as all old cars are converted.
- Lower all speed limits: so that cars travel more efficiently and private travel is less time-efficient than public transport
- Ban all new coal-extraction licenses: No new coal mines should be built anywhere in Australia, and furthermore no new development should be allowed in connection with existing mines. Existing infrastructure bottlenecks to efficient extraction should be seen as a good thing.
- Divestment laws: Investment funds should be required to divest all holdings in carbon-intensive industries on a reasonable but definitive timetable
- Scale-up of electric charging points: Cars should be rechargable anywhere
- Mandatory roof-top solar: for all businesses
- Mandatory grid integration: no power company should be able to refuse a reasonable request to sell power into the grid.
- Mandatory storage in new buildings, and subsidies to convert existing buildings: apartment blocks are not efficient solar collectors, but they could still be built with sufficient storage that they can store some solar power for release onto the grid at night
- Ban all rice and cotton production in the Murray-Darling watershed: water needs to be returned to the river for greening of the river course, because restoring natural wetlands and green areas is essential to improving carbon sequestration
- Huge rewilding and reforestation programs: Carbon sequestration through forestry management is essential, and this project needs to be undertaken immediately, so that it forms a key part of future carbon reduction strategies. It can be conducted in such a way as to support and restore biodiversity
- Huge research grants on storage and renewable energy: We need to get to the point where electric trucks and ocean-going boats are a possibility within 20 years. This will need research. We should be doing it
And finally, I think that climate change denial should be illegal outside of scientific journals – if people want to claim it’s not happening they should be required to present peer-reviewed scientific evidence. Funding climate change denial should be a criminal act. The government should further refuse to offer contracts to organizations that have hosted denialists or funded denialists in e.g. the last 10 years. These people need to be driven out of public life and should have no influence on public debate. It is absolutely ludicrous that after three of the hottest months on record (April, May and June), the government’s business advisor is publicly claiming that a period of major global cooling is imminent. That dude should be unemployable, and preferably in stocks.
A lot of these programs will require major government subsidies, transfers and loans, and huge government intervention across a range of marketplaces. We need to stop acting as if the worst consequence of responding to the climate crisis is government intervention in markets, and start recognizing that it is the minimum requirement to stave off a civilization-level disaster. It’s huge government intervention now, or civilization collapse later.
So go looking back through history and ask yourself – has any civilization collapse ever been preventable through a small tax that raised the price of fish by 10%? I think you’ll find the answer is no. The emergency is coming, and we need to act as if it’s an emergency, not a minor market failure.
fn1: For farmed fish, this number should be near 100%, obviously.
fn2: This is clearly a rhetorical point