Storms of My Grandchildren (32 page)

However, the growth rate of energy use is an important aspect of the problem, and we can gain further insight from the U.S. energy consumption curve (figure 2). The U.S. population has increased 50 percent since 1975, but energy use per person has not increased. The United States actually could have achieved much greater energy efficiency over this period, but there has been little economic incentive to do so since energy costs have been declining in real terms, or as a fraction of a person’s budget. People are happy to drive gas-guzzlers when gasoline is cheap. Vehicle fuel-efficiency requirements were increased in 2009 in the U.S. by about 30 percent, to 35.5 miles per gallon, the only increase since the late 1970s, when the efficiency was nearly doubled to about 24 miles per gallon. Except in California, utility companies make more money when they sell more energy, so they have no incentive to conserve. Improved efficiency standards for appliances caused household energy use to decline in the U.S., until the proliferation of electronic devices that consume energy even in standby mode and a marked growth in the size of homes offset these improvements. Building-efficiency standards could have averted increased energy use, but even the existing weak standards have been difficult to enforce. High energy costs provide the most effective enforcement, because continual inspections are impractical.

Again, the solution to the climate problem requires the phasing out of carbon emissions from fossil fuels. But figure 2 shows this is not happening, because carbon capture is not being used with any of these fossil fuels. Contrary to Lovins’s projection, “soft” renewable energies remain imperceptibly small. The largest carbon-free energy source is nuclear, which Lovins would eliminate. The main renewable energy source currently in use is hydroelectric, provided by large hydropower projects built in the middle of the twentieth century, which Lovins also would eliminate. The second-largest renewable energy source is biomass burning, whose “softness” is questionable. Coal, oil, and gas provide most U.S. energy. I have discussed figure 2 with Lovins, suggesting that a phasedown of fossil fuels requires a carbon tax. Lovins says that a tax is not needed.

It is no wonder that Lovins is hugely popular on the rubber-chicken circuit. But it is dangerous to listen to a siren without checking real-world data. Figure 2 shows that progress toward the all-soft-energies track has been teeny-tiny compared with what is needed. Kidding ourselves that the world will suddenly move onto the soft-energy path would sentence our grandchildren to an unhappy, deadly future.

Why do fossil fuels continue to provide most of our energy? The reason is simple. Fossil fuels are the cheapest energy. This is in part due to their marvelous energy density and the intricate energy-use infrastructure that has grown up around fossil fuels. But there is another reason: Fossil fuels are cheapest because we do not take into account their true cost to society. Effects of air and water pollution on human health are borne by the public. Damages from climate change are also falling on the public, but they will be borne especially by our children and grandchildren.

How can we fix the problem? The solution necessarily will increase the price of fossil fuel energy. We must admit that. In the end, energy efficiency and carbon-free energy can surely be made less expensive than fossil fuels, if fossil fuels’ cost to society is included. The difficult part is that we must make the transition with extraordinary speed if we are to avert climate disaster.

Rather than immediately defining a proposed framework for a solution, which may appear to be arbitrary without further information, we need to first explore the problem and its practical difficulties. Two alternative legislative actions have been proposed in the United States: “fee-and-dividend” and “cap-and-trade.” Let’s begin by looking at the simpler approach, fee-and-dividend. In this method, a fee is collected at the mine or port of entry for each fossil fuel (coal, oil, and gas), i.e., at its first sale in the country. The fee is uniform, a single number, in dollars per ton of carbon dioxide in the fuel. The public does not directly pay any fee or tax, but the price of the goods they buy increases in proportion to how much fossil fuel is used in their production. Fuels such as gasoline or heating oil, along with electricity made from coal, oil, or gas, are affected directly by the carbon fee, which is set to increase over time. The carbon fee will rise gradually so that the public will have time to adjust their lifestyle, choice of vehicle, home insulation, etc., so as to minimize their carbon footprint.

Under fee-and-dividend, 100 percent of the money collected from the fossil fuel companies at the mine or well is distributed uniformly to the public. Thus those who do better than average in reducing their carbon footprint will receive more in the dividend than they will pay in the added costs of the products they buy.

The fee-and-dividend approach is straightforward. It does not require a large bureaucracy. The total amount collected each month is divided equally among all legal adult residents of the country, with half shares for children, up to two children per family. This dividend is sent electronically to bank accounts, or for people without a bank account, to their debit card.

As an example, consider the point in time at which the fee will reach the level of $115 per ton of carbon dioxide. A fee of that level will increase the cost of gasoline by $1 per gallon and the average cost of electricity by around 8 cents per kilowatt-hour. Given the amount of oil, gas, and coal sold in the United States in 2007, $115 per ton will yield $670 billion. The resulting dividend will be close to $3,000 per year, or $250 per month, for each legal adult resident; a family with two or more children will receive in the range of $8,000 to 9,000 per year.

Fee-and-dividend is a progressive tax. For example, my friend Al Gore (I hope he is still my friend after this book is published) will pay a heck of a lot more than $9,000 in added costs because he owns large houses and flies around the world a lot. Given the current distribution of wealth and lifestyles, about 40 percent of people will pay more in added costs than they will get back in their dividend. For the most part, it will be those with high incomes who pay more, but not always. A poor guy who commutes a hundred miles to work every day in a clunker may pay more than he gets in his dividend (although perhaps not, if he lives in a modest-size house, doesn’t do a lot of recreational motoring, and rarely takes airplane trips). Sorry, poor guy, but it is those kinds of practices that will be changed, in the long run, by a rising carbon fee. The cost will encourage the poor guy to figure out more efficient transportation or live closer to his work.

By the way, Al Gore agrees that fee-and-dividend is the best way to reduce carbon emissions, but his proposal is to reduce payroll taxes rather than give dividends to the public. I prefer the dividend because I don’t trust the government to make the tax reduction balance out the fee. Also, not everybody is on a payroll. A dividend is just simpler.

Few activities would be unaffected by a carbon fee-and-dividend. Today we often import food from halfway around the world, rather than from a nearby farm, in part because there is no tax on aviation fuel. Why? Lobbying. A deal was made in the 1940s to encourage the budding aviation industry—and lobbying makes it hard to get rid of sweet deals. All sweet deals will be wiped off the books by a uniform carbon fee at the source, which will affect all fossil fuel uses.

I’m asked, “If people get a dividend, won’t they just go out and spend that money on their gas-guzzler or whatever fossil fuels they have been using?” Maybe they will at first, but in the long run they will tend to adjust their decisions on vehicle choice and other matters as the carbon price gradually continues to rise.

A rising carbon price does not eliminate the need for efficiency regulations, but it makes them work much better. Building codes, for example, usually have energy efficiency requirements, but every city finds that they are impossible to enforce well. The builder changes things after inspection, or the building operation is simply inefficient. The best enforcement is carbon price—as the fuel price rises, people pay attention to waste.

Economists are almost unanimous that a uniform rising carbon fee is the least costly way to phase out fossil fuels. This allows proper competition between energy efficiency and alternative carbon-free energy sources such as solar energy, wind, and nuclear power. It also “internalizes” the incentive to reduce the use of carbon fuels, especially coal, in literally billions of decisions ranging from commuting behavior to the design of vehicles, aircraft, cities, and so forth.

“Wait a minute,” you may be saying. “This carbon fee doesn’t sound like the deal I have been hearing about.” You are right. Most of the talk is about cap-and-trade, the basis of proposed legislation being considered by Congress, specifically Representatives Henry Waxman and Ed Markey’s American Clean Energy and Security Act. Cap-and-trade is what governments and the people in alligator shoes (the lobbyists for special interests) are trying to foist on you.

Whoops. As an objective scientist I should delete such personal opinions, or at least flag them. But I am sixty-eight years old, and I am fed up with the way things are working in Washington. Foolishly, I imagined that we might really get “change” in the way things worked there. As I said, I was among those who had moist eyes on Election Day in November 2008, when President-elect Obama gave his speech in Chicago. But things are still done in the same way in Washington. No doubt I was naïve to think that it might be otherwise, and, unfortunately, so were millions of young people.

I am not blaming President Obama. On the contrary, he is still our best hope. But he must actually look into this matter, not rely on watered-down advice from his sources of information and advisers. The leaders Obama appointed in science and energy are the most knowledgeable people in the field, but there are many others in his inner circle of advisers. The stakes in the policy adopted for energy and climate are too great to be based on aggregate advice or a sum of political compromises. The present situation is analogous to that faced by Lincoln with slavery and Churchill with Nazism—the time for compromises and appeasement is over.

It is hard to blame anybody in Obama’s circle of advisers, even though I detest the tactics that have infested American politics. It seems to be believed that if you don’t have tough guys around you, guys who can deliver tit for tat, counterblows to attacks from the other side, maybe with similar tactics, you will soon be on the outside, looking in at somebody else governing. I don’t know, maybe that is true. But I also believe that the public can appreciate a principled stand, even one that takes political hits, if it is properly explained.

The reason it is hard for me to blame Obama’s advisers is that I see where they are getting their information. It is from good people, our friends, the people who are believed to be the most supportive of the environment, including climate preservation. I refer to some members of Congress who are among those with the strongest environmental voting records, such as Waxman and Markey, and I refer especially to organizations such as the Environmental Defense Fund, the Natural Resources Defense Council, and the Pew Foundation.

People tell me, “You must be wrong, because the polluters are opposed to cap-and-trade, so cap-and-trade must be good.” Sure, those in the fossil fuel industry would prefer no regulations at all, so that is their first choice—they stall any action as long as possible. But they know that something is coming down the pike. And they are spending enormous amounts of money to be sure that cap-and-trade is doctored to allow as much business-as-usual emissions to continue as long as possible.

Let’s discuss cap-and-trade explicitly first. Then I will provide a bottom-line proof that it cannot work. Because I have already made up my mind about the uselessness of cap-and-trade, my commentary may be slanted, but you have been warned, so you should be able to make up your own mind.

In cap-and-trade, the amount of a fossil fuel for sale is supposedly “capped.” A nominal cap is defined by selling a limited number of certificates that allow a business or speculator to buy the fuel. So the fuel costs more because you must pay for the certificate and the fuel. Congress thinks this will reduce the amount of fuel you buy—which may be true, because it will cost you more. Congress likes cap-and-trade because it thinks the public will not figure out that a cap is a tax.

How does the “trade” part factor in? Well, you don’t have to use the certificate; you can trade it or sell it to somebody else. There will be markets for these certificates on Wall Street and such places. And markets for derivatives. The biggest player is expected to be Goldman Sachs. Thousands of people will be employed in this trading business—the big boys, not guys working for five dollars an hour. Are you wondering who will provide their income? Three guesses and the first two don’t count. Yes, it’s you—sorry about that. Their profits are also added to the fuel price.

What is the advantage of cap-and-trade over fee-and-dividend, with the fee distributed to the public in equal shares? There is an advantage to cap-and-trade only for energy companies with strong lobbyists and for Congress, which would get to dole out the money collected in certificate selling, or just give away some certificates to special interests. Don’t hurry to write a letter to your congressional representative asking for a certificate to pollute—that’s not how things work in Washington. Your paragraph requesting a certificate is not likely to be included in the Waxman-Markey bill, even though at last count 1,400 pages had been added. Again, think lobbyists. Think revolving doors. People in alligator shoes write the paragraphs that actually get added. If you think I am kidding, ask yourself this: Do you believe that your representatives in Congress can write 1,400 pages themselves? It is still a free country, so you can hire your own lobbyist, but the price is kind of high. A coal company can afford someone like Dick Gephardt—can you?