How to Create a Big New Tax and Make Us Pay It
Let’s presume you are concerned about global warming. You welcome the intervention of the United States government on behalf of the planet. Elected officials are proposing a complicated carbon control law called “Cap and Trade”, or the Warner-Lieberman Climate Security Act, or something similar. But how much of a difference will this make and how much will it costs us?
Would you be willing to pay a few trillion dollars for a temperature reduction of 0.6 degrees Celsius over the next 50 years? Not much of a bargain, is it?
It’s not any kind of climate security act, folks. It’s a tax, pure and simple, as its more honest supporters now admit. In my research, the longest for any blog, I discovered that the legislation is a thousand pages of statute and regulation as complex as anything in the tax code, and mandating a bureaucracy that rivals the IRS. This is the way we are paying for the bank bailout, folks, and the General Motors bailout, and the Social Security bailout.
First, the costs: The Federal Government will allocate and auction about a trillion dollars of “carbon credits”. They will also set carbon emission goals for everything under the sun, from your lawnmower and barbecue to the power plant that feeds your electric car. If you can’t meet the emission goals, you can buy carbon credits from someone who has an excess. Or you will get fined, big time. The fines will have to be more expensive than the cost of carbon reduction. That will be another few trillion dollars over the years.
Every year the emissions goals will get tighter. The costs of squeezing out that last few measures of CO2 will get very much more expensive, so the fines will go way up to compensate. The carbon credits, traded like stocks in exchange markets, will go up as they become more valuable. The fines will bring another trillion dollars or so into the government coffers. Profits from the rising value of carbon credits will be taxed at the usual rates - another few trillion in revenue.
Who pays for this? We do. The new tax will fall most heavily on just those utilities and services most capable of passing on their costs to the consumer. Plastic, clothing and food will go up. Electricity costs are expected to increase at least 65% and possibly double. That electric car will no longer be a bargain, nor will the electric heat you got to save burning gas or heating oil. You’ll pay when you wash the diapers or take a shower. You’ll pay in terms of reduced income, because the tax will depress GNP by an estimated $3.3 trillion. This tax will be a garrote around the neck of every business and wage earner.
Here are the numbers. I can provide citations on request - the research is solid and the sources are impeccable.
In 2008 the USA produced about 6.6 billion metric tones of CO2, or 21 tons per capita. The goal is to bring down CO2 to the level of the year 1900, about half that number. One estimate of the value of a carbon credit is estimated at $40 per ton, rising to over $100 per ton. At the government auction rate of $40 per ton the tax will bring in $132 billion. As it rises to $100 per ton, it will generate income taxes of about $100 billion. The cost of fines and capital expenditures to meet the emissions goals will equal, roughly $332 million for each. The cost of administering the tax over 20 years will be another $100 million. The total is $996 billion. This is the conservative estimate. Others have estimated the costs at $3.3 trillion and $6.7 trillion, based on the varying assumptions about the technical difficulty of actually reducing CO2 emissions to meet the goals.
CO2 will be reduced if this plan is implemented, but no one will care. You won’t notice any difference in climate effects at all. CO2 is a tiny component of air, 0.0033%, and a tiny component of greenhouse warming.
To understand what is going on here, I’m going to explain the physics of CO2 as a greenhouse gas, the economics and finance of carbon credits, and a little perspective on global warming.
The greenhouse effect is a lot different from adding a glass top to a framework structure to create a greenhouse. Heat isn’t reflected back from CO2 like it would be from glass. Global warming, or global cooling, is the balance of heat from the sun during the day less heat radiated into space at night, averaged over many years. Most of the sun’s energy that hits the surface during the day is radiated back as infrared at night. Part of that infrared is absorbed by various gasses and shifted to lower wavelengths after a delay. That happens on specific wavelengths for specific molecules. The most important of these by far is water vapor. It absorbs and re-radiates a broad band of infrared. Next is methane. CO2 is a distant third. We can’t do anything for water vapor and not much for methane, so we are looking at CO2. However, it’s a lot like yelling at the cat when your spouse makes you angry. Most of the effect of CO2 occurs at the level we had in the year 1900. The additional effect we can achieve by controlling CO2 is tiny. The physics is called “Beer’s Law”, which shows a logarithmic relation between CO2 concentration and heat retention. We are simply well past the hump of the curve. We have always been past the hump in the curve because the planet has a natural carbon cycle, as per the illustration, that balances CO2 emissions and absorption.
Here is the latest on the actual effect of this tax on climate. These excerpts are from “Science Notes” by T.J. Nelson, October 27, 2008 (http://brneurosci.org/co2.html):
“What is the contribution of anthropogenic carbon dioxide to global warming? This question has been the subject of many heated arguments, and a great deal of hysteria. In this article, we will consider a simple estimate based on well-accepted facts, that shows that the expected global temperature increase caused by doubling atmospheric carbon dioxide levels is bounded by an upper limit of 1.76±0.27 degrees Celsius
The arithmetic of absorption of infrared radiation also works to decrease the linearity. Absorption of light follows a logarithmic curve (Figure 1) as the amount of absorbing substance increases. It is generally accepted that the concentration of carbon dioxide in the atmosphere is already high enough to absorb almost all the infrared radiation in the main carbon dioxide absorption bands over a distance of only a few km. Thus, even if the atmosphere were heavily laden with carbon dioxide, it would still only cause an incremental increase in the amount of infrared absorption over current levels. This means that a situation like Venus could not happen here.
Fitting the [observed data and the zero CO2 data point] data to this equation, as shown in the brown curve in the figure above, gives the much lower value of 287.62±0.07 K (±1 SD), or 0.46±0.08 °C increase above the 1980-2000 mean for a doubling of CO2 from current values.
Most people would have great difficulty feeling an increase of 0.6 degrees Celsius. Any effects of such a small change would be slow and subtle. In general, if you are able to see or feel some change, that means it is almost certainly not caused by CO2-induced global warming.
Although carbon dioxide is capable of raising the Earth's overall temperature, the IPCC's predictions of catastrophic temperature increases produced by carbon dioxide have been challenged by many scientists. In particular, the importance of water vapor is frequently overlooked by environmental activists and by the media. The above discussion shows that the large temperature increases predicted by many computer models are unphysical and inconsistent with results obtained by basic measurements. Skepticism is warranted when considering computer-generated projections of global warming that cannot even predict existing observations.”
So why are we going to such enormous costs to reduce a marginal effect? It’s a way to sell an onerous tax, plain and simple. First, the Government will set total CO2 emissions at present levels, then gradually lower them to the level of 1900. Except that there is no such data base for industry emissions, and we don’t really know how much they emitted in 1900, so all that will be quite arbitrary. However, by setting the standards the government effectively dictates which industries will remain competitive and which will become unprofitable.
In theory, if a business spends enough to measure it’s CO2 emissions and then finds a way to reduce them faster than the cap is reduced, it can sell the savings as “carbon credits”. The value of a carbon credit equals the economic cost of reducing emissions plus the cost of the fines the government will impose for not meeting the cap. A carbon credit for 1 ton of CO2 per month icould be worth as much as $1000. Carbon credits are being traded in Europe right now for about $40, only after the European Union got scared of the economic effects and issued credits wholesale, inflating their value. They are traded like commodity contracts and on similar markets.
Every year, the cap will decrease. It will be more and more expensive to wring that last bit of CO2 emission out of your business. You will need to buy more and more carbon credits, but they will be increasingly rare and much more expensive. Carbon credits, bought and sold in a dictated market where the price can only go up will become a second form of currency, one that is destined for a high rate of inflation. Speculation will occur on these contracts, just as it does in any commodity, and a new trillion dollar market will arise. The government has effectively forced companies to buy and sell a completely artificial piece of paper in a manipulated market, and stands to collect revenue on the result.
What happens to the revenue from carbon credits? In the current proposal, revenues from the government’s initial sale of carbon credits will be applied to “alternative energy projects”. On the short list of such projects are ethanol from corn, diesel from coal, hydro-electric power and wind power. Large carbon credits will be allocated to wind power, but wind power never produced CO2 and cannot contribute to any reduction. That’s politics.
On a list of carbon-efficient fuels, ethanol from corn ranks on the bottom. I’ve heard people say that ethanol is carbon-neutral. Nothing could be farther from the truth. While 100 tons of corn takes up about 10 tons of carbon, some comes from the air and some from the ground. Of that 100 tons of corn, only about 1 ton of ethanol can be produced, and it takes 2 tons of carbon-based fuel to make it. Burning the ethanol and allowing the corn husks and debris to return to the environment releases all the carbon that was taken up by the corn in the first place, except for the fuel it took to prepare the mash and distill the ethanol. The tilling, planting, harvesting and heating steps produce excess CO2 from the process.
Likewise, diesel from coal and biodiesel are far from carbon neutral. Yet they will be allocated carbon credits under the plan.
In fact, the government is not very good at carbon accounting. Most of the alternative energy plans will have negative, or no effect on total carbon emissions. Isn’t that what you would expect if it really was a tax, not a solution?
In fact, many good and far less expensive solutions to global warming have been proposed, under the heading of “geo-engineering”. Is it reasonable that the best solutions get tried first? Not if you are a congressman who never got very far in science classes.
Computer models are the basis for climate predictions, and they don’t agree. To quote Michael Crichton, “Weathermen can’t give us a reliable ten day forecast. What fool bets a trillion dollars on a prediction 50 years out?”