Without the greenhouse effect, the earth would be, on average, 33 C cooler! (Britannica, 15) Just think, perhaps at the moment you are feeling nice and toasty at 30 degrees and thinking what a wonderful thing summer is; take away the greenhouse effect and most of that lovely warm sunlight will just radiate out into space, and quite soon the temperature will be down to freezing!
The greenhouse effect, therefore, is a wonderful thing, perfectly tuned to make earth habitable for life. What is the greenhouse effect? It is a phenomenon that occurs when gases such as carbon dioxide, water vapour and methane trap heat in the atmosphere rather than letting it radiate out into space (Britannica, 15). In the industrial age, however, the long stabilised concentrations of greenhouse gases, particularly carbon dioxide, have begun to change (Economist, 2010). The burning of fossil fuels releases carbon into the atmosphere (Britannica, 18), and quantities have risen from a pre-industrial level of around 280 parts per million (ppm), to a current level of about 387 ppm (Economist, 2010). The earth has warmed slightly in the last hundred years (Britannica, 12);(Wile, 40). This is probably the result of this increase in carbon, and therefore it is likely to do so more (Britannica, 13). There are various schemes and taxes that might be undertaken to efficiently deal with this problem of excess carbon emissions.
“Global Warming”
The climate change that is resulting from excess CO2 emissions has been appropriately dubbed “global warming”, because that is, in essence, what it is. Before we begin looking at carbon taxes, we should briefly examine global warming itself.
The carbon cycle is a major process. Huge amounts of carbon dioxide are emitted by natural sources, and are in turn absorbed by carbon sinks, such as forests and oceans. Humans are responsible for about 3% of all the carbon emitted (Britannica, 17);(Wile, 38). This far exceeds the capabilities of the finely balanced system (Britannica, 17). As previously mentioned, one of the primary ways in which humans release CO2 into the atmosphere is through burning of fossil fuels, such as oil, coal, and natural gas (Britannica, 18). Deforestation is another major cause, because it releases the carbon stored in forests (Britannica, 188).
Climate change is not quite as simple as two parallel graphs, one carbon, one temperature: there are many feedbacks which complicate the effect. The quantity of water vapour, for instance, the gas with the strongest greenhouse effect, is influenced by temperature. A warmer world will mean more water vapour, which will mean a yet warmer world (Britannica, 17). That is not to say that all feedbacks enhance the effect, there are both negative and positive feedbacks. The presence of so many feedbacks makes it quite difficult to predict how much of an impact increases in carbon will have.
Although we have a tendency to think of global warming as something that “will happen” some time in the (usually distant) future, warming has already, to a degree, begun. According to the Intergovernmental Panel on Climate Change (IPCC), temperatures rose 0.6 C in the 20th century, and sea levels rose 17 cm (Britannica, 12). Ice sheets in the arctic (although not the antarctic) have been melting, and this has caused the rise in sea levels (Britannica, 6).
Global warming is expected to create a tendency for more extreme weather events (Economist, 2011a). It can be risky attempting to allocate specific weather events to global warming, but very recently there have been a fair number of such occurences and it may not be wrong to contemplate. North America experienced some very warm temperatures this summer, and a record high minimum temperature of 42 C was experienced in Oman in June (Economist, 2011a). Even in Cambodia, the flooding caused by large amounts of rainfall fits in with predictions of long, dry monsoon seasons and short, intense wet seasons (Sherrel).
What sort of an impact is global warming likely to have? The IPCC predicts that temperatures will rise a further 1.8 - 4.0 C this century (Britannica, 12). Even the low end of the spectrum could be quite harmful: “Many climate scientists and other experts agree that significant economic and ecological damage will result should the global average of near-surface air temperatures rise more than 2 C” from what they were before the industrial revolution (Britannica, 12). That is a 1.4 C rise above today’s temperatures.
There are some who are skeptical about climate change, however, or at least about the impact people have on it. They claim that the 3% claim of humans on all carbon emissions is negligible (Wile, 38). Errors in IPCC calculations and even, in a couple of cases, deliberate distorting of figures have caused some to mistrust the conclusions of climate scientists (Economist, 2010). Skeptics accuse people of accepting climate change on empirical evidence, such as personal observation of recent warm weather (Wile, 39); climate scientists charge skeptics with rejecting climate change for exactly the same reasons (Economist, 2010).
Until recently, ground temperature readings were the only sources that showed warming trends (Wile, 39);(Economist, 2010). There were concerns that ground reading would be misleading due to the urban heat-island effect. Since then, many more teams have sent up satellites and errors have been found in the way some of the calculations had been carried out. Satellite evidence now shows warming (Economist, 2010).
Another thing that skeptics like to talk about is the “medieval warm period”, a time when, at least in Europe, temperatures might have been at least as warm as they are today (Wile, 38);(Economist, 2010). They claim that the warming we are experiencing today is a cycle, and not caused by human activity. Non-skeptics play down this evidence: “The possibility of more climatic variability, though, does not mean that greenhouse warming is not happening too. And if the medieval warmth were due to some external factor, such as a slightly brighter sun, that would suggest that the climate was indeed quite sensitive.” (Economist, 2010)
Personally, although there are certainly doubts as to all the ins and outs of climate change, I think that there is sufficient evidence that it is happening. If we wait for every detail to be sorted out, we could let in enough carbon into the atmosphere that the results the results are disastrous. We should begin to act immediately.
Methods of Dealing with CO2
Taxation of fossil fuel combustion, proportionate to the amount of carbon stored in them, is a potentially cost-effective way of reducing emissions. The tax gives renewable energy a more economic compatibility, because it is no longer so much more expensive than other forms of energy production. Revenue raised from such a tax could be used to compensate poor people and those who are disproportionately affected. (Wikipedia A).
Another, somewhat more interesting method of reducing emissions, is a permit trading scheme. In a system like this, a “cap” is placed on the total amount of CO2 the scheme is going to emit, and permits for that amount are distributed (Wikipedia A). Polluters may trade some or all of their permits, and the price will go up and down with the demand (wikipedia A).
While the above are the primary methods we will deal with, there are many other methods for dealing with CO2. Reforestation projects can be undertaken in order to improve the capabilities of carbon sinks. Some have proposed paying rewards to major polluters who reduce emissions (Cook). Others think that the general population should attempt to deal with this problem by their voluntary efforts.
There are some people who think that at this stage, our primary concern should not be cutting carbon emissions, but rather adaptation: growing different crops or using different methods to grow them; moving away from places that will soon be beneath sea level. We can wean ourselves from fossil fuels in due course. Some even favour methods of artificial cooling! While some of these measures are, no doubt, wise. I think that carbon reduction should indeed be a major goal, and we should start at that goal now.
Carbon Taxes
A carbon tax is a fee charged for every tonne of carbon released into the atmosphere (IPCC, 13.2.1.2). It is an indirect tax (Wikipedia A), so it can be transferred from the taxpayer onto someone else: the tax will make it more expensive to produce energy intensive goods, and this will raise prices, thus affecting the general public without taxing them directly (Wikipedia B). The result is, theoretically, that people will try to save money. Where reducing emissions will save them money, they will reduce, but if it remains cheaper in some circumstances to continue emitting carbon, they will continue to emit (IPCC, 2).
Theoretically, a carbon tax should equal the marginal cost of the damage caused by emitting one tonne of carbon (Wikipedia A);(IPCC, 13.2.1.2);(Economist, 2011 a). The marginal cost is the cost of producing one extra unit of a product. When we emit carbon, it has an impact on the climate which has an economic implications for us humans. There would be lower crop yields in places, damage caused by rising sea-levels, severe weather events etc. So the marginal cost of emitting carbon is how much it costs us to have that extra tonne of CO2 in the atmosphere. Naturally, this cost is extremely difficult to predict. “Many studies” estimate the marginal cost of carbon emissions to be between $5 and $150 US. Other studies say it would cost $1000 plus (Economist 2011 a)!
In every day life, the carbon tax works to change prices so that consumers will choose the less emissions intensive goods (Gittins). Most carbon taxes are not designed to raise revenue, they are designed to change behaviour. Revenue raised is often given back to consumers in the form of tax cuts, pension increases, etc. The tax, however, is not aimed primarily at households - saving by them will not provide the scale of reduction that the government wants: primarily the tax is aimed at the industry and power generators. The large-scale changes will occur when more CO2 efficient power generators are put in place. (Gittins).
In the past, many taxes have been implemented which have had the effect of reducing CO2 emissions, however most of these have not been levied on CO2 directly, but on energy products, such as cars. In addition, the primary purpose for most of these taxes was to raise revenue, not to make any great environmental impact. Some taxes have been levied directly on CO2, however, with observable but modest results. The latter might be explained by the nature of implementation in specific cases (IPCC 13.2.1.2).
Most of the first direct taxes put in place were in Europe. To name a few: Sweden has an impressive tax of over $100/t of carbon in “oil, coal, natural gas, liquefied petroleum gas, petrol, and aviation fuel”. Denmark has a tax of approximately $14/t for businesses and $7/t for households, with refunds for energy efficient changes. Switzerland has a tax, which companies can be exempted from if they participate in a cap-and-trade scheme. (Wikipedia A).
Outside of Europe, carbon taxes have been a lot slower to get started. In Canada, the Liberal Party proposed a nation-wide tax, but they lost the election, largely due to the apparent unpopularity of this proposal (Wikipedia A);(Economist 2011 B). Nevertheless, some individual states, namely Quebec, Alberta, and British Columbia, have taxes. In Quebec, the tax is on energy producers, and revenue raised goes to the development of energy efficient causes (like public transportation). In Alberta, companies that emit 100 000 or more tonnes of greenhouse gases annually must reduce their emission by 12%: if they do not comply, they must either pay a $15/t tax or “buy an offset in Alberta to apply against their total emissions” (Wikipedia A). British Columbia has a tax of $25/t which we will examine later in more detail. (Wikipedia A).
Outside of the west, there are many countries with taxes on one item or another which have the intent of reducing emissions (such as India’s tax on coal, and South Africa’s tax on cars based on emissions efficiency), but there are as yet no broad-based taxes. Taiwan was planning a tax of $62/t, to begin in 2011, but this was postponed because of the recession. (Wikipedia A).
If the United States boasted a carbon tax, it might provide incentive for many other countries, but it does not. Most American politicians would not even consider it as part of a deficit reduction package (Economist, 2010 a).
While carbon taxes can be unpopular - usually because they are a tax, and the general public does not like to have a lot of taxes - they are both cost-effective and environmentally effective (IPCC, 13.2.1.2). They apply the cost of emitting carbon directly to the source, so that people can experience the full effects of their actions.
Emissions Trading
Emissions trading is quite a reliable way of dealing with CO2 emissions, because it guarantees the total emissions of the sectors in question (Wikipedia A). A trading scheme can be designed so as to affect only some sectors of the economy, or the economy as a whole. The government sets a limit, a “cap”, on the total emissions; permits for emitting that many tonnes of carbon are accordingly issued (IPCC, 13.2.1.3). Establishments with surplus permits may sell them and those with a deficiency may purchase from others, the result being that the price of emitting carbon will go up and down with the demand (Wikipedia A)(IPCC, 13.1.2.3). For such a scheme to work, carbon emissions must be measured accurately and the penalty for emitting excess carbon must be considerably higher than the cost of permits (IPCC, 13.1.2.3).
There are a number of variations in the design of cap-and-trade schemes. Permits can be freely and evenly distributed, or they can be auctioned off (IPCC, 13.1.2.3)(Wikipedia A). Revenue raised can be used to subsidise those who are disadvantaged by the scheme (IPCC, 13.1.2.3). In addition, some plans will incorporate a price-cap, so that if the cost of permits exceeds a certain level the government will issue additional permits (IPCC, 13.1.2.3). This provides a safe-guard against a cap which is too low for where the economy is at.
The largest cap-and-trade scheme in place currently, is the European Union Emission Trading Scheme. It started on the 1st of January, 2005 and covers 11, 500 businesses across 25 member states. This covers about 45% of the EU’s total emissions. The highest price which permit prices rose to was about 30 euros in 2006 (permits are always for one tonne of carbon). Separate member-states adopt different permit allocation methods. (IPCC, 13.1.2.3).
While cap-and-trade schemes could play an important role in developed countries, they might be less appropriate in the third-world. A scheme such as this, requires a level of enforcement which would be hard to achieve in most developing countries (IPCC, 13.1.2.3).
Australia’s Situation
In recent years, Australia has seen much debate about what measures should be put in place to help the nation meet its carbon emissions reduction goals. This debate has resulted in the ousting of more than one politician (Wikipedia C), and is a matter of deep controversy throughout the country. In this section we will examine some of the schemes that have been proposed.
ETS
In 2007 the Labor Party formed government under Kevin Rudd, with a pre-election promise to introduce carbon trading (Wikipedia C). Labor’s plans would help Australia to meet its carbon reduction goals of 5% cuts on 2000 levels by 2020 and 60% by 2050 (Wikipedia C). The Emissions Trading Scheme (ETS) was to begin on the first of July 2011(Cook); the purpose was to ensure emissions reduction “at the lowest possible price” (Wikipedia C).
The ETS was meticulously planned. In the first year, the government would have sold unlimited permits (no cap) for $10 each. After that a cap would be set, gradually lowering year by year in order to meet reduction goals (Wikipedia C);(Cook). Estimates of the price of permits in 2012-13 (remember, in 2011-12 the government was to allocate unlimited permits) were about $26. There was, however, to be a safe-guard price cap - initially $40 a permit (Wikipedia C);(Cook). Only businesses with emission rates of over 25 000 tonnes annually would have to purchase permits, or about 1000 businesses, but of course this would have a flow down affect onto the price of living for consumers (Wikipedia C);(Cook). 90% of the populace would have been compensated, with lower-income households doing very well, but the rich being harder hit (Cook).
There was, of course, some criticism from various people. Some said that the ETS was not a good enough attempt by the Australian government at reducing carbon emissions. They felt that the goals should be much stricter than the minimal 5% cuts by 2020 (Wikipedia C). Alternately, there were people saying that the ETS would be too risky and could cause economic damage (Wikipedia C). As far as the design of the bill was concerned, there was the worry that voluntary measures by households would make little difference: if households purchased less energy intensive goods, it would reduce the demand for emissions, therefore making it cheaper to manufacture them (Cook). The scheme did incorporate a system for tightening the cap based on voluntary actions by households, but there would be a five-year delay between the fall-through in demand and the tightening of the cap (Cook).
All in all, however, there was no more criticism of the scheme than one would expect for a radical new bill, and there was plenty of support.
None of this succeeded, however. The Prime Minister, Kevin Rudd, and the opposition leader, Malcolm Turnbull, reached an agreement, but Malcolm Turnbull was ousted as opposition leader due to dissent from his own party (Wikipedia C). In December 2009 the senate failed to pass the emissions trading scheme. This gave Rudd grounds for calling a double dissolution election (Wikipedia C), a “procedure permitted under the Australian Constitution to resolve deadlocks between the House of Representatives and the Senate” (Wikipedia D). Rudd instead delayed the ETS (Wikipedia C) and largely due to that, he too was ousted by his party and deputy prime minister Julia Gillard took the reigns.
Carbon Tax
For a while it remained inconclusive as to what would happen with Australia’s carbon pollution reduction policy; but in February 2011, the government announced that it was going to introduce a carbon tax on the 1st of July 2012 (Wikipedia A). This tax will be $23/t on the 500 largest emitters in the country, for 3 - 5 years before switching to a trading scheme (Wikipedia A);(Thompson). The general public will not be taxed directly but will be affected by a rise in the prices of emissions-intensive goods.
The carbon tax has been described as a “money-go-round” by opposition leader Tony Abbott (Gittins), and, in a sense, that is what it is. The big polluters are taxed for the CO2 emissions and the revenue raised is used to compensate households who are affected by rising prices (Gittins);(Thompson). 90% of households will be compensated (Thompson), by tax cuts, pension increases etc (Gittins). In general, households will end up about the same as without the tax. Poorer households will generally be slightly overcompensated, to ensure that none of them is under-compensated, and richer ones will be slightly worse off (Gittins);(Thompson). How will this endless cycle of money come to anything? Because it is not about raising revenue, it is about changing behaviour (Gittins). The government wants to stop people emitting excess carbon but without making them worse off. With carbon-intensive goods and electricity more expensive, people will try to save money by cutting down on them and they will still do this even if they are compensated for rising prices (Gittins).
The carbon tax is primarily directed at energy producers. It means that new power generators will be more CO2 efficient - and it will make renewable energy more competent (Gittins);(Thompson). Currently about 90% of Australia’s energy comes from coal, and only 10% from renewable sources (Cubby). The government aims to increase renewable energy to 20% of the nation’s total by 2020. Until there is a change in the proportion of energy from various sources, we will not achieve major cuts in carbon emissions.
Wind power is a type of renewable energy that is on the increase in Australia, and has room for a fair bit of growth. Currently, 187 megawatts of electricity in New South Wales comes from wind, and windmills capable of generating a further 138 megawatts are being built. Over Australia as a whole, about 700 000 households can be powered by electricity from wind. This compares with about 1 900 000 from hydro, 350 000 from bio energy and 65 000 from solar. The most severe impediment to the growth of wind power is its price: in this regard, the carbon tax will help. There is, however, some opposition to wind power: campaigns against this form of electricity generation have formed in all six of the designated “wind corridors” in New South Wales. A state government survey of rural homes found 80% approval of wind power and 13 % disapproval. Many of those who disapproved were seniors. (Cubby). The primary reason that some people disapprove of wind-turbines, is the disturbing continuous, low whirring sound they create (Gray).
Another renewable energy form for which Australia is well suited, is solar power. Australia’s vast hot deserts with very low cloud cover are almost ideal for generating electricity in this manner. The one major impediment to solar power in deserts is that most solar electricity is generated by heating water, which creates steam, which turns a turbine. This is not ideal, because obviously water is required; but heating air, instead of water, may be an option in the near future. Again with solar power, the carbon tax will help to make it more economically compatible. (Phillips).
There is, of course, opposition to the carbon tax, especially by the Leader of the Opposition, Tony Abbott. Most of this is due to effects the tax could have on the economy. There have also been many complaints because the Prime Minister, Julia Gillard, said pre-election, that there would be “no carbon tax in the government I lead” (Wikipedia A). The Liberal New South Wales government, said that the mining and aluminium industries will be hard hit; it also predicted the loss of 31 000 NSW jobs (Patty). Gregg Combet, the Federal Minister for Climate Change said that they had left out many factors in their calculations; he said the analysis was “O’Farrel jumping on board Tony Abbott’s unprincipled scare campaign” (Patty). The federal government’s modelling shows no growth in unemployment.
To evaluate how well-founded fears of economic damage caused by the tax might be, the similar tax in the Canadian state of British Columbia might be taken as an example. British Columbia’s tax is similar in design to Australia’s. It began in 2008 at $10/t and has increased annually by $5. It will reach its final price, $30/t, in 2012 (Economist, 2011 a);(Pascoe). The economy continues to grow as fast or faster than the rest of Canada, with the employment rate average to high (Economist, 2011 a). The tax is supported by roughly half of the population (54%) (Economist, 2011 a). If the Australian tax works out that well, a lot of people will be surprised - yet there seems to me little reason why it shouldn’t.
The Emissions Reduction Fund
The Liberal-National party coalition, currently in opposition, holds the same goal as the federal government: a 5% cut in carbon emissions from 2000 levels by 2020, but it doesn’t propose a carbon tax or a trading scheme. How do they plan to reduce the nation’s emissions? 60% of the CO2 they plan to save will not be by reducing emissions, but by improving sinks. They plan to improve the carbon storing capabilities of agricultural soil by a change in farming techniques. This includes measures such as leaving the roots of plants in the ground during harvest, which allows the soil to absorb carbon taken in by crops. Farmers would be paid $10 for every tonne of carbon stored. It is undetermined what the effect on production or profits would be. (Cook).
The other 40% of the total cuts would indeed be made by emissions reductions, but the Coalition takes rather a different tack. Rather than taxing those who emit, it would reward those who stop. Rewards somewhere between $10 and $30 a tonne would be granted to major polluters who reduce emissions. There would also be penalties for increases in emissions beyond reasonable levels. (Cook)
The ERF has been criticised for not making emissions a cost. It has also been said that while the scheme might cope with a minimal 5% cut, were the nation to attempt a more ambitious goal, it would struggle (Cook). Nevertheless, some of its plans for reducing atmospheric carbon by improvement of carbon sinks are probably good sense.
Final Thoughts
So what is the best method of reducing atmospheric carbon? Should we hurry to reduce emissions? Should we spend money on big plans before we fully understand global warming?
Those are hard questions, but in answer to the last two, I think yes, we should make plans to reduce emissions, even before we know what precisely their full impact on the climate will be: “The doubters are right that uncertainties are rife in climate science. They are wrong when they present that as a reason for inaction.” (Economist, 2010). If we wait until we accurately predict the influence of a certain rise in atmospheric carbon on the environment, then we will probably wait until we have pumped enough carbon into the atmosphere that much destruction will result.
Adaptation – planting different crops, breeding more climate-resistant crops, moving away from low-lying areas – is good, and it may be necessary, but we should attempt to solve the problem itself.
Reforestation, improving farming practices, etc in an effort to improve carbon absorption, is wonderful, but we need to also get to the root of the problem. We need to wean ourselves from our unhealthy reliance on fossil-fuels.
Looking at efficient means of reducing carbon emissions, I think that permit trading, and regular taxation of emissions, are the best. Carbon taxes provide assurance of the price of emissions, while trading schemes ensure the quantity (Wikipedia A). It is hard to say which of the two is better (Wikipedia A).
A recent opinion poll in the Sydney Morning Herald asked readers which method they preferred: Rudd’s trading scheme, or Gillard’s tax. 41% of voters preferred the trading scheme and 39% preferred the tax; 20% said they didn’t know which was better. Of course in reality, the proportion of people who “don’t know” is probably much higher - only people who choose to vote will vote, and most people who don’t have an opinion don’t choose to vote. So in essence, the poll showed that it is hard to know which scheme is better.
Personally I would put greater emphasis on the ability to control the total amount of emissions (trading scheme) and I would lean toward this method. Trading schemes of course have the downside of negating the effects of voluntary actions (which I support), but overall I prefer the market-based approach. But in my opinion, any action is better than no action and I hope that soon many countries will implement some sort of plan for reducing emissions to a safe level. We should act before the effects of our carbon emissions become disastrous!
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