Carbon Tax, Or Global Crash

GOLD MAN SPEAKS:

In brief: The major plutocrat, Henry “Hank” Paulson, who presided over the 2008 financial crash as Bush’s finance minister, has come strongly in favor of a carbon tax. He compares the on-going climate catastrophe to the worst crash imaginable. After a few arguments of support of my own, I extensively quote this “suppot de Satan” (Satan’s support in Middle Age French). Facing the worst, the devils themselves can come in handy. Nothing below is new on this site, but it’s important to repeat it as a prayer, and hope.

It’s only natural that people clean the mess they make. So carbon polluters ought to pay the poisoning of the atmosphere, and the acidification of the seas. Because they are the ones causing this mess. They have to pay for the destruction they inflict. Not that people in general are innocent. Clearly some countries are living on the hog, not to say like hogs. Here are two views of the CO2 emissions per capita:

 I Pollute & Ravage, Therefore I Gloat

I Pollute & Ravage, Therefore I Gloat

CO2 list-countries-co2-per-capita

Few will argue that life is actually drastically worse in, say, France, in spite of all the carbon pinching there (France has no oil, gas, or coal; and fracking is illegal).

To tax carbon enough for the damage it causes, is the only way to price correctly the activity. Non carbon polluting energies will them be able to compete with the pirates who are attacking the biosphere… For profit.

The world emits 48% more carbon dioxide from the consumption of energy now than it did in 1992 when the first Rio summit took place, and Al Gore went down there with an immense retinue of adulators… To do nothing, but self-glorification.

First notice the astounding economic inefficiency of Anglo-Saxon countries (except for the European United Kingdom which emits less than 9 tons of CO2 per person per year).

FRANCE pollutes with 6 (six) tons of CO2 a year, per person. Germany with 9 tons (nine). The USA with 18 (eighteen) tons per person per year. Canada and Australia are even worse. The European Union, and its half a billion people, is around 7.5 tons of CO2, per year, per person.

As I have explained in the past, it’s no coincidence that the three powers that annihilated the Natives are busy now annihilating the biosphere: it’s the continuation of a mood (that the same, sort of, can be said about Russia is not reassuring, either: the main reason why Putin annexed Crimea is oil and gas in the Black Sea, just off shore).

Can we get out of that spiral from hell? Yes, with a carbon tax. Also please learn that the EU and the USA, together, control most of the world GDP. So they could impose a Carbon Tax. Unilaterally. By force. Yes, force, empire, all that brutish stuff. Evil in the service of goodness. The WTO has agreed already that such a tax-for-the-good is legal in the WTO statutes (the EU, or some of its countries, notably France, already impose carbon taxes, of sorts, in spite of strident USA-China-Russia opposition).

Much of Chinese economic activity is Western industrialized activity, translated to another place. Chinese dumping, say of solar panels could be addressed (in spite of… German(!) opposition; Germans sell luxury cars to the PRC, and in exchange mount cheap solar panels).

The question that the West would be at an economic disadvantage from imposing a carbon tax is a false argument. What is true is that some of the CO2 hogs would have to become more economically active to change radically their socio-economies: more people at work, quality work.

Paulson below says nothing I have not said before, and, often, many times. Yet it’s worth having it in his own words, thus allowing me to eschew the accusation of radical lunatic unreal leftism.

Lessons for Climate Change in the 2008 Recession

By HENRY M. PAULSON Jr. June 21, 2014

THERE is a time for weighing evidence and a time for acting. And if there’s one thing I’ve learned throughout my work in finance, government and conservation, it is to act before problems become too big to manage.

For too many years, we failed to rein in the excesses building up in the nation’s financial markets. When the credit bubble burst in 2008, the damage was devastating. Millions suffered. Many still do.

We’re making the same mistake today with climate change. We’re staring down a climate bubble that poses enormous risks to both our environment and economy. The warning signs are clear and growing more urgent as the risks go unchecked.

This is a crisis we can’t afford to ignore. I feel as if I’m watching as we fly in slow motion on a collision course toward a giant mountain. We can see the crash coming, and yet we’re sitting on our hands rather than altering course

The solution can be a fundamentally conservative one that will empower the marketplace to find the most efficient response. We can do this by putting a price on emissions of carbon dioxide — a CARBON TAX. Few in the United States now pay to emit this potent greenhouse gas into the atmosphere we all share. Putting a price on emissions will create incentives to develop new, cleaner energy technologies...

I was secretary of the Treasury when the credit bubble burst, so I think it’s fair to say that I know a little bit about risk, assessing outcomes and problem-solving. Looking back at the dark days of the financial crisis in 2008, it is easy to see the similarities between the financial crisis and the climate challenge we now face.

We are building up excesses (debt in 2008, greenhouse gas emissions that are trapping heat now). Our government policies are flawed (incentivizing us to borrow too much to finance homes then, and encouraging the overuse of carbon-based fuels now). Our experts (financial experts then, climate scientists now) try to understand what they see and to model possible futures. And the outsize risks have the potential to be tremendously damaging (to a globalized economy then, and the global climate now).

Back then, we narrowly avoided an economic catastrophe at the last minute by rescuing a collapsing financial system through government action. But climate change is a more intractable problem. The carbon dioxide we’re sending into the atmosphere remains there for centuries, heating up the planet.”

[PA’s warning: It’s worse than that: At least a third goes into the sea, turning it into an acid soda.] Paulson again:

“That means the decisions we’re making today — to continue along a path that’s almost entirely carbon-dependent — are locking us in for long-term consequences that we will not be able change but only adapt to, at enormous cost. To protect New York City from rising seas and storm surges is expected to cost at least $20 billion initially, and eventually far more. And that’s just one coastal city…

When I worry about risks, I worry about the biggest ones, particularly those that are difficult to predict — the ones I call small but deep holes. While odds are you will avoid them, if you do fall in one, it’s a long way down and nearly impossible to claw your way out.

Scientists have identified a number of these holes — potential thresholds that, once crossed, could cause sweeping, irreversible changes. They don’t know exactly when we would reach them. But they know we should do everything we can to avoid them.

Already, observations are catching up with years of scientific models, and the trends are not in our favor.

Fewer than 10 years ago, the best analysis projected that melting Arctic sea ice would mean nearly ice-free summers by the end of the 21st century. Now the ice is melting so rapidly that virtually ice-free Arctic summers could be here in the next decade or two. The lack of reflective ice will mean that more of the sun’s heat will be absorbed by the oceans, accelerating warming of both the oceans and the atmosphere, and ultimately raising sea levels.

Even worse, in May, two separate studies discovered that one of the biggest thresholds has already been reached. The West Antarctic ice sheet has begun to melt… Now that this process has begun, there is nothing we can do to undo the underlying dynamics, which scientists say are “baked in.” … those who claim the science is unsettled or action is too costly are simply trying to ignore the problem. We must see the bigger picture.

…waiting for more information before acting — is actually taking a very radical risk. We’ll never know enough to resolve all of the uncertainties. But we know enough to recognize that we must act now…

We need to craft national policy that uses market forces to provide incentives for the technological advances required to address climate change. As I’ve said, we can do this by placing a tax on carbon dioxide emissions. Many respected economists, of all ideological persuasions, support this approach. We can debate the appropriate pricing and policy design and how to use the money generated. But a price on carbon would change the behavior of both individuals and businesses.

At the same time, all fossil fuel — and renewable energy — subsidies should be phased out. Renewable energy can outcompete dirty fuels once pollution costs are accounted for.

… our failure to act on the underlying problem is deeply misguided, financially and logically.

In a future with more severe storms, deeper droughts, longer fire seasons and rising seas that imperil coastal cities, public funding to pay for adaptations and disaster relief will add significantly to our fiscal deficit and threaten our long-term economic security. So it is perverse that those who want limited government and rail against bailouts would put the economy at risk by ignoring climate change.

This is short-termism. There is a tendency, particularly in government and politics, to avoid focusing on difficult problems until they balloon into crisis. We would be fools to wait for that to happen to our climate…..

When it comes to developing new technologies, no country can innovate like America. And no country can test new technologies and roll them out at scale quicker than China.

The two nations must come together on climate. The Paulson Institute at the University of Chicago, a “think-and-do tank” I founded to help strengthen the economic and environmental relationship between these two countries, is focused on bridging this gap.

We already have a head start on the technologies we need. The costs of the policies necessary to make the transition to an economy powered by clean energy are real, but modest relative to the risks.

A tax on carbon emissions will unleash a wave of innovation to develop technologies, lower the costs of clean energy and create jobs as we and other nations develop new energy products and infrastructure. This would strengthen national security by reducing the world’s dependence on governments like Russia and Iran.

Climate change is the challenge of our time. Each of us must recognize that the risks are personal. We’ve seen and felt the costs of underestimating the financial bubble. Let’s not ignore the climate bubble.

Henry M. Paulson Jr., an ex-football player, is the chairman of the Paulson Institute at the University of Chicago, was CEO of Golman-Sachs,  and secretary of the Treasury from July 2006 to January 2009. When Satan himself is melting, the heat is on.

Patrice Aymé

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33 Responses to “Carbon Tax, Or Global Crash”

  1. EugenR Says:

    Dear Patrice, let me cite from my book the same ideas as Paulson’s about the subject;

    https://rodeneugen.wordpress.com/2013/04/10/1801/

    ……So what are the long-term economic problems that could endanger the market economic system? The most obvious long-term economic problem that springs to mind is depletion of major economic resources. Which are the most important resources in apparent danger of depletion? Probably you would say energy or maybe some basic raw material.

    A shortage of energy or other important material might well be solved technologically. And even if there is no immediate technological solution, the market economic system has tools to cope with this kind of problem, as was evident in the middle of the first decade of the new millennium. In 2006-2007 a year before the world economy collapsed, raw material prices jumped two- or three-fold. Many will remember the jump in the fuel price, but the same was true of other commodities such as most metal ores, and basic food crops. Was this the first sign of the collapse of the market economic system?

    Definitely not. Even though this hike in the price of basic raw materials and energy sources may well have been one of the triggers of the 2008 economic crisis and near breakdown of the whole financial system, it was followed by an immediate squeeze on the world economy, and consequently raw commodity prices collapsed and stabilized at a new, sustainable level. To me this is the best proof that the system of market economics did not collapse with the near implosion of the world economy, as happened less than two decades before to the centrally managed system, but on the contrary demonstrated its capacity to stabilize the world economy. Taking the crude oil barrel price as indicative, if in 2000 its price was around 20 US Dollars per barrel, before the crisis it rose to almost 140 US Dollars per barrel, but then collapsed with the crisis to 30 US Dollars per barrel. Now five years after the outbreak of the crisis it is around 100 US Dollars per barrel, which shows an upward trend but is still a sustainable price level. Not surprisingly all the other raw materials have followed the same pattern.

    As regards the foreseeable future, new technologies likely to be introduced in the coming decades will provide solutions to the problem of creating supplementary sources for basic raw materials and energy. The solution may not always be “just in time”, and so from time to time the economy will have to cope with exaggeratedly high resource prices, but these price increases will probably just accelerate initiatives to find alternative solutions.

    All the same, there is still one major economic resource for which science and technology appears unable to find a solution without the cooperation of politically motivated governments. This resource is the environmental sustainability of the global eco-system.

    Here we come to the primary long-term problem of the world economy: world environmental stability. If we believe that the depletion of the world’s resources is an inevitable process (and this is a question of faith and not conclusively based on evidence), we must believe that the world environment as a major resource is also limited. Yet any policy of creating ecological sustainability demands substantial revolutionary sacrifices of the “modern human life style”, and the liberal democratic political system does not appear to have the tools for the introduction of such a policy.

    • Patrice Ayme Says:

      Dear Eugen: You say:
      “The most obvious long-term economic problem that springs to mind is depletion of major economic resources. Which are the most important resources in apparent danger of depletion? Probably you would say energy or maybe some basic raw material.

      A shortage of energy or other important material might well be solved technologically.”

      I would suggest the following long term economic problems, in this order:
      1) Seas going so acidic food chain collapse, oxygen production falters…
      2) Climate zones moving faster than biosphere can adjust, bringing collapse of land food chains.
      3) Seas going up 70 meters

      Also the problem is not lack of energy. Quite the opposite. There is all too much coal.
      PA

  2. gmax Says:

    Patrice has been saying all what Paulson said, for more than a decade

    • Patrice Ayme Says:

      Yes, exactly, GMax. I don’t think that Paulson said one thing I did not say for years.
      BTW, Sweden introduced a carbon tax in the early 1990s…
      High taxes on energy in Europe are actually carbon taxes…
      PA

  3. Ian Miller Says:

    First, I agree completely that we have a huge problem coming up as a consequence of CO2 emissions, however I disagree that a carbon tax is the solution. The reason is, it does not change anything. The reason is that the two biggest sources of CO2 are electricity generation and transport, and we cannot simply change the infrastructure overnight. Even worse, the easiest option to make a significant change is nuclear power, but only too many countries are turning that off. Similarly, with transport, petroleum products are required for the foreseeable future to keep things moving. Yes, we always here platitudes, like use public transport, but it is not that easy to increase it, and in any case, it still uses diesel or electricity.

    I am currently preparing an ebook on biofuels (these have been part of my professional life for almost 40 years, on and off) and the overall conclusion is, they cannot make a substitution inside 40 years, if we make a crash program starting now, and that is based on the construction of infrastructure, and it is highly probable that we cannot anyway without very significant further research and development (because, like it or not, from area considerations alone, the oceans have to provide the great bulk of it).

    So, with no serious replacements, a carbon tax merely increases the price of what we cannot do without. It also punishes the poor.

    • Patrice Ayme Says:

      Dear Ian: If not a carbon tax, then what? As I hinted, call it carbon COMPENSATION. It’s the equivalent of : if a guy burns a forest, make him plant the trees back, and irrigate.

      There are ways around all this. France and Sweden, the world’s most progressive countries, and many EU countries have de facto carbon taxes. Each hike is accompanied with measures to compensate for the poor and business.

      I know about the new energy turn around times, and mentioned them long ago. However here we HAVE to go way faster. Germany has been driven hard (although its coal use is so far spiking, that’s supposed to be only a transition, and France is following the general idea, with nuclear as base energy).

      The tech advances: Airbus will sell (they say!) an electric plane in 2017. A small one. Then they will make a hybrid version, and they are actively working of a full blown electric 100 seat aircraft. They have to invent new power electronics.

      Serious replacement (PV-hydrogen) may be around the corner. It’s studied for deployment, in Corsica, or LA.
      PA

      • Ian Miller Says:

        Patrice, Germany is my argument. Of course we have to reduce fossil carbon burning, but my argument is, raising the tax will not actually reduce the carbon emissions. The problem is, we have to find alternatives, and fast. The second point is, of course, that our current CO2 levels are enough to raise sea levels by some unknown number of metres, but greater than ten. We currently add 9 Gt/a. Minor adjustments, which is all a tax will do, will not suffice.

    • Patrice Ayme Says:

      The USA, Canada and Australia, let alone China just have to imitate FRANCE. How hard could that be? Just eat cheese and surrender! Be a monkey, too! ;-)!
      PA

    • EugenR Says:

      Dear Ian, if you look at the graph above you can see in Europe with gdp similar to US they produce less CO2 than US. Why is it, because of carbontax of more than 100%. But I agree with you probably it will not be enough. We are in emergency situation because 40 years since the problem was identified nothing was done except of some cocktail parties. So we have to attack the problem from many sides. We have to tax meat and fish production, close the cities to private cars, etc. The problem with environmental in balance is the butterfly phenomena. No one can predict when and if we reach the tip point, from where the slide toward uninhabitable planet is inevitable.

      • gmax Says:

        Europe, and especially France, did a lot. It’s just a question to imitate FRANCE, at this point.

        • Ian Miller Says:

          France has lower carbon emissions because it generates a lot of electricity through nuclear power. The problem is that you cannot just scrap existing power stations overnight and replace them with alternative technology. The cost of the existing infrastructure is just too high.

          • Patrice Ayme Says:

            Dear Ian: One should not confuse electric energy and all of primary energy.

            Oil represents approximately one-third of France’s total primary energy consumption and that share has been falling over the past 10 years. According to the Oil & Gas Journal, France has a crude refining capacity of around 1.5 million barrels per day, the fifth highest in Eurasia.

            To have such a large country consume only 1.5 million barrels a day is testimony to incredible efficiency. France is the second producer of biofuels in Europe, and uses a lot of liquefied natural gas in transportation. Renewable energy has been used there industrially, since ROMAN times.

            However, they don’t have nuclear cars. It’s all about efficiency, due to a massive carbon tax. One entire city, though, uses geothermal energy (only such city in the world). Also the Rance tidal plant is the only one in the world (it dates from the 1960s).

            There are small scale PV-hydrogen prototypes, and this sort of things ought to pick pace, as the government has decided to engage in a program as massive as Germany (but WITHOUT COAL… Although France has used it for 73,000 years).
            PA

            • Ian Miller Says:

              Dear Patrice, The daily production of oil world-wide is, according to the figures I found for my biofulels ebook, 85 million barrels per day, so I am not quite so convinced that 1.5 million barrels per day is exceptionally low. However, I accept that France has a far superior public transport system to most. The Parisian Metro is a delight to use (compared with some, anyway) and the high speed trains are quite remarkable (especially when going through villages). However, they still require electricity. Also, LPG is a fossil fuel. I also admire the tidal plant – I have heard of it, but did not see it.

              On the other hand I must point out (national pride!) that the Wairakei geothermal power station was commissioned in 1958, so it has been going for a while, and generates 430 MW. Rotorua also uses a lot of geothermal heating.

              I hope I am not confusing energy contributions. The point I was trying to make is that countries such as Australia that have chosen a long time ago to make electricity from coal don’t have a lot of choice in the short term.

  4. gmax Says:

    Krugman wrote an idiotic editorial saying carbon tax will not happen, Paulson is all BS. Care to comment?

    • EugenR Says:

      I read Krugman’s assay and to my opinion he did not wrote that carbon tax should not be but that the political reality in Washington makes it unrealistic to expect such a tax. Unfortunately he is probably right. This is why i claim that the existing democratic political process is not capable to cope with the most important long term issues.

      • Patrice Ayme Says:

        Krugman: “[a carbon tax] isn’t going to happen in the foreseeable future. A carbon tax may be the best thing we could do, but we won’t actually do it.”

        BS

        This is Krugman, he starts his rant that way, and it’s Tea Party talk. That’s what he does: Tea Party propaganda. He claims that’s out of realism.
        PA

  5. Patrice Ayme Says:

    [Sent to NYT, June 22.]

    Dear Paul Krugman: You are doing it again. You did it in health care, you did it for the stimulus, and now you do it for the carbon burning disaster. Instead of pushing for the best solution, you make yourself the advocate of the extreme right, and, Obama like, present “solutions” that only the extreme right, according to you, will accept.

    So, instead of trying to persuade, the extreme right, as Paulson is courageously doing, you basically tell them they are right, a carbon tax will never pass, and Obama-like, you say nothing but what they would be pleased by, will be proposed.

    Paulson said nothing about the present palliative, solutions or the EPA approach, the “second bests”. Except that whatever we were doing was ineffective.

    He just declared subsidies would have to be removed after a carbon tax has made sustainable energies cheaper that carbon. He also say, courageously that carbon burning ought to be completely outlawed in the long run.

    The Gold Man has spoken, and very well (Paulson used to be CEO of Goldman-Sachs). Although he has to go further, on the present solutions, his radicalism, the sort of radicalism that I have supported for more than a decade, is the only reasonable solution.

    The clarion call that “[a carbon tax] isn’t going to happen in the foreseeable future. A carbon tax may be the best thing we could do, but we won’t actually do it,” is Tea Party talk. A carbon tax is not just reasonable, it’s the only way. The alternative is, simply, death.

  6. Roger Henry Says:

    I’m sorry, The cynic in me, when I hear the name Henry Paulson immediately grabs for my wallet to protect it.
    As your article above about cultural attitudes points out,those attitudes are difficult to change. Or to put it in crass terms, skunks don’t change their stripes.
    The cash flow from a carbon tax would be mammoth. With the current relationship of Wall Street and the federal government where do you suppose that flow of money would go? That Goldman Sacs is now suddenly “Green” is difficult to comprehend.

    • Patrice Ayme Says:

      Gold Man is green, because that’s where the money is.

      I make a point to welcome the right ideas, wherever they come from. Example. Even Eichmann’s ideas qualify, if correct. Eichmann claimed that Kant made him do it. That’s an idea with partial merit, indeed… And goes a long way to explain why dozens of millions of Germans became enraged mass murdering sheep.

      Reciprocally, if the idea is bad, even if it’s my friend Barack, I crack down.
      PA

      • EugenR Says:

        Sorry I don’t see the connection.

        • Patrice Ayme Says:

          The connection is that acts, facts, moods and ideas, if oriented towards progress, ought to be considered on their own merits. Most people, especially intellectuals, make it into a principle to reject on the ground of what is the generalized racist principle of origination.

          But you know this yourself, as witnessed by your pilgrimage to Compostella (among other things).
          PA

        • Patrice Ayme Says:

          The whole idea is to help each other to see facts and connections.

    • EugenR Says:

      Even if Paulson came from Goldman-Sachs let’s not forget he more than anybody else saved the world economy from total collapse at 2008, when as treasury secretary persuaded the Republican president (Bush Junior) to spend $700 billion to bailout the financial system.

      This act is not an obvious one when you follow the politicians in the US Congress and mainly the Republicans. So let’s salute him for his doings as treasury secretary in 2008, and for his honest words about the economic consequences of the CO2 emissions. Someone has to bring change in mind in Capitol Hill, and who else can do it if not one from them.

      • Patrice Ayme Says:

        Indeed. Paulson saved the system courageously. The fact he had to kneel in front of democrat Nancy Pelosi, Congress’ boss since 2006, is pretty telling.
        If Krugman had been in charge, he would have, as usual proposed nothing that did not go down well with the Tea Party: he is still at it.
        PA

      • Patrice Ayme Says:

        Just as I take and approve great ideas, or even good ones, wherever they come from, same for acts. Even Himmler saved thousands of Jews in April 1945 (!!!!!!!), risking execution (Hitler did not falter in his hatred of Jews, even though he reverted his opinion of Slavs…). That’s better than Ben Gurion and the Brits did with Eichmann…
        PA

  7. Paul Handover Says:

    I don’t know what the answer is. My fear is that when the answer is clear to all but the most blind in society, it will be too late; far too late.

    We must rebuild the importance of community. Twenty-first century versions of community. My sense is that there is little time left. Fewer than five years would be my guess.

    • Patrice Ayme Says:

      “My fear is that when the answer is clear to all but the most blind in society, it will be too late; far too late.” Astute point, indeed, Paul.
      A good way to build a community is through the… INTERNET. Thus ideas will be improved and made ready to rule (instead, of, say, bra size!)
      To go with that, systematic direct voting, a sort of Internet version of the recent Swiss system.
      PA

      • Paul Handover Says:

        Very fair point. Possibly, my 21st C. brand of community would be a local, as in physically, group informed via the internet and making close connections with other like-minded groups all over the world. The number of friends that I have acquired as a result of Learning from Dogs is truly wonderful; your own dear self included, of course!

        • Patrice Ayme Says:

          Entirely true, Paul! We would not have met except through the Internet, and now we share the most important thing, namely a community of ideas that differ significantly from those held by the Commons. People can fake good will, when in person, but faking ideas goes only that far. There is a sincerity in massive idea production and presentation that is hard, not to say nearly impossible, to obtain in the flesh.
          PA

    • EugenR Says:

      The only way is to educate people, so they have capacity to recognize the difference between evidence and mythology (or in modern version conspiracy theories). Unfortunately education is a very long process and in the USA they even did started. In many other places education is the privilege of the wealthy. Yet the hope dies the last.

      • Patrice Ayme Says:

        The very concept of “conspiracy theory” is attached to a pejorative aura. In the USA. However human history is articulated by conspiracies theories. But those who don’t know history are condemned to be conspired against.

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