Climate Change

Business Roundtable Endorses Pricing Carbon

Business support for sensible climate policy appears to be growing.

|The Volokh Conspiracy |

The Business Roundtable has released a new document, Assessing Climate Change: Principles and Policies, endorsing carbon pricing as a means to address the threat of climate change. The statement calls for implementing "a market-based emissions reduction strategy that includes a price on carbon where it is environmentally and economically effective and administratively feasible." The "key components" of such an approach are as follows:

Placing a price on carbon. A price on carbon would provide an effective incentive to reduce GHG emissions and mitigate climate change, including through the development and deployment of breakthrough technologies. The price-setting mechanism should be implemented in a manner that achieves desired environmental outcomes while minimizing administrative burdens and implementation costs. Establishing a clear price signal is the most important consideration for encouraging innovation, driving efficiency, and ensuring sustained environmental and economic effectiveness.

Preserving the competitiveness of U.S. businesses. Policymakers must remain alert to the prospect of economic activity and associated emissions shifting to less-regulated jurisdictions (i.e., economic and emissions "leakage") and design policy frameworks that mitigate the unique risks of leakage faced by energy-intensive, trade-exposed industries. Rebates, allowances and/or border adjustments — consistent with U.S. international obligations — could be considered as policy mechanisms to address these challenges. Policymakers must also ensure that U.S. companies are not at a disadvantage from carbon pricing policies that may be implemented abroad.

Using resulting revenues, if any, to maximize economic and environmental benefits. If any government revenues are generated by a market-based mechanism, they should primarily be used for policies that support economic growth, reduce societal impact, and provide assistance for those individuals and communities most negatively affected. This approach should be paired with at least a doubling of federal funding for research, development and demonstration (RD&D) of GHG reduction technologies.

Although the statement does not does not explicitly endorse a revenue-neutral carbon tax, such as the so-called "cap and dividend" approach, this would seem to be the most straightforward way to price carbon in a way that preserves U.S. competitiveness and fosters economic growth. It is also the best sort of climate policy Congress could adopt.

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  1. The core problem with carbon permit trading is one of enforcement, especially in an international environment. It’s a critical failure in the system.

    The permit and trading is an artificial constraint, with the pricing entirely arbitrary from the view of the organization which sets the permits. Yet, emitting CO2 (towards productive purposes) has real efficiency gains for the party that does it (IE, it’s cheaper). Because of this, “cheating” on the permit system and releasing more CO2 than “allowed” is economically advantageous. Simultaneously, there’s no international authority with the power to come down on cheaters. So the cheaters literally prosper.

    The major cheater here is mostly likely China (especially based on their past cheating with CFC treaties). Because China is likely to “cheat”, carbon and energy intensive industries will have an innate economic advantage in China. With that innate economic advantage, Chinese goods in these industries will be able to be produced more cheaply. This is turn will drive local carbon/energy intensive industries out of business in those countries that listen to the treaty, allowing China to ramp up more of the high carbon emission industries.

    One of the effects of this will be that it “appears” local countries are dropping the CO2 emissions…but in reality, they’ve outsourced them to China, which is using even more carbon emissions to produce the same goods. On top of the carbon emissions to ship them. Due to this breakdown, such carbon trading schemes will paradoxially create MORE carbon emissions than if they weren’t in place.

    The only real solution is to develop non-carbon emitting energy sources that are CHEAPER than carbon emitting energy sources. Then, the true economic advantage will lie in these energy sources.

    1. I agree and the only question is how should the US invest in new energy sources (and did we learn the lessons from Solyndra).

      Although it’s hard to fight when you have Trump pushing for v̶o̶t̶e̶s̶ coal.

  2. Whats wrong with the progress the US has made without another stupid scheme? Haven’t we done better than every other country already?

    1. Tsk tsk, do you want sensible corruption, or simple results. That kind of sorry attitude is what gave us Burn Loot Murder peaceful arsonists.

  3. As I tell my daughter in college, we are not paying tuition in order that she get an education. Rather we are paying tuition in exchange for a certificate stating that she has in fact received an education.

    The business roundtable may see this as the least objectionable (and most easily gamed) option since there’s no likelyhood that nothing more will be done.

    1. If your daughter is smart she should cut all ties with you, declare poverty, and resume her education with financial aid.

      1. Not sure I agree. I mean, an education is important, but prestige seems like it’s just as important.

        And when you’re *at* school, making and maintaining connections is just as important.

  4. You can slap the term “market based” on something but that doesn’t make in market based…it’s rather like saying vegan sausage is sausage. Rather, the proposal is an “incentive based system” that kinda sorta maybe if you don’t look to close mimics the supply/demand and profit/loss system that exists in an actual market based system for something like say, toothpaste or shoes.

    1. I see carbon taxes as about as realistic and practical as a static socialist society, which has been static and ideal for so long, with perfect weather, no births or deaths, no illnesses, no innovations, nothing to upset the status quo, that central planning can fine tune the parameters so well that it is meaningful to talk of 7.625 hour work days, 13.7 eggs per chicken-fortnight, and measuring steel by the gram.

  5. The “carbon” tax is predicated on two things:
    1. Carbon dioxide is the single driver of global warming
    2. The funds raised will be used for climate mitigation

    The cigarette tax raised huge amounts of money, did little to reduce smoking and virtually none of the tax went to helping those injured by cigarettes. Why would anyone expect a carbon tax to be either effective in reducing carbon dioxide levels or provide relief to anyone other than politicians? Will people drive less, forego heating and cooling their homes, or will they just buy less of everything else?

    There is no way to estimate the damage caused by global warming and when damages cannot be ascertained, no compensation is possible. Alleged experts cannot agree on whether increased crop yields can offset sea level rises or even if the reduced number of cold weather induced deaths can offset an increase in the number of warm weather induced deaths.

    However, for the true believers, there are no trade-offs. Carbon dioxide must be reduced by any means necessary. You cannot balance virtues and sins in a religious war.

    1. Why would anyone expect a carbon tax to be either effective in reducing carbon dioxide levels …?

      Because when you raise the price of a commodity people tend to consume less of it?

      Will people drive less, forego heating and cooling their homes, or will they just buy less of everything else?

      They will drive less, and change their heating and cooling practices. They may also buy less of other stuff. This is not an either/or proposition.

      1. Experience has shown otherwise, Bernard.
        1: Basic human needs are not flexible products. You will pay for heat no matter what it costs simply because you don’t want to freeze. Minor adjustments are done for cost reasons, but you are talking minimal changes (~10%). Maybe driving will be affected more in the long run, due to choosing more fuel efficient vehicles. However, this comes smack into item two.
        2: Energy costs are not significant enough to have a meaningful deterrent except to the very poor. For a stable, working class person, energy costs just aren’t a significant amount of their monthly budget compared to rent, food, and other bills. It’s even less important for the middle and upper classes. You’d have to make a massive increase, doubling or more, to make a meaningful change. Changes that would even make the middle and upper classes blink are politically unfeasible and would be absolutely devastating for the poor.

        1. Nobody is going to freeze because they don’t want to pay more for heat, but some people will be more careful about it. Maybe they’ll lower the thermostat a bit, pay more attention to conservation, etc.

          Driving will be affected too, as you say, both long and short-term. That depends on how much driving individuals do, how they choose to commute, etc.

          As for your second point, don’t overlook manufacturing processes and commercial buildings. There are choices.

          The main thing to bear in mind is that changes occur at the margin. I don’t think people are going to go without heat, or give up driving. I do think a lot of people are going to make changes, small, mid-size, or large, in how they use fossil fuels, and these things add up. I also think businesses will do the same, perhaps more aggressively, because they will be more inclined to look for even relatively small savings.

          1. You’re thinking on the wrong scale, Bernard, small changes are useless. If you genuinely think we need to reduce Teratons of carbon dioxide over the coming decades, we need to start with gigatons, not grams.

            The idea that “people will do things slightly more wisely” is the ~10% I mentioned. However, the rhetoric is that we need to stop climate change, the claimed solution needs to be on that same order of magnitude. 90% reduction. Small, marginal changes won’t work AT ALL. You need fundamental changes to the way power is generated to make any meaningful change.

            I don’t think it’s a wise or necessary thing to stop CO2 changes. The cost is too high. Pretending that we can make any gains with minor half-measures is the worst of both worlds. You lose the efficiency of the market and delay global warming by mere seconds.

            1. I don’t think it’s a wise or necessary thing to stop CO2 changes. The cost is too high.

              Compared to what? Surely you don’t imagine there aren’t going to be huge costs in not stopping them.

              It’s not a Chinese hoax, after all.

              1. Did I ever say that it was a hoax?

                Look past the rhetoric into what’s actually predicted. Real data supported by research, not flowery claims that a hundredth of a pH change will cause mass extinctions in the ocean (I really read that at one point. Peer review ain’t what it used to be).

                We are looking at mild increases in temperature and rainfall planetwide. The temperature increase will be strongest near the poles (2F to 3C depending on which model you believe, but the lower predictions closer align to the 20th century, and gas absorption is logarithmic, so every increase in temperature requires more and more CO2). There will be some disruption in weather patterns, but there’s no data to support the devastation people talk up. In fact, given that we will have a worldwide increase in plant growth and rainfall, it will be a net boon to a substantial part of the population.

                There will be negatives. However, these must be compared to the known damage that effective action would take. You saw the Green New Deal a few years ago. That was the first proposal I ever saw that was even close to the level we would need, and it was roundly laughed at as an absurd proposal, when it was still low-balling things incredibly by overstating the effectiveness of the solutions and being incredibly optimistic on costs of the proposals.

                As I said, ineffective action gives the worst of both worlds. However, people have ludicrously exaggerated the costs of climate change and ludicrously understated the cost of mitigation actions, to the point where “clear and obvious” solutions are two orders of magnitude off the mark.

                And JJ, do you think corporations aren’t trying to save energy just for the current cause of saving money? They have the exact same problem that people do. The first few percent is easy. Much beyond that is impossible. Make operating here too expensive and they’ll just move to China, like they’ve been doing for years.

            2. The purpose of a carbon tax isn’t to get people to turn down the thermostat 2 degrees in the winter. It’s to provide the large corporations responsible for the overwhelming share of CO2 emissions with a profit incentive to reduce emissions.

    2. Cigarette taxes have had an enormous effect on cigarette consumption.

      Also where on earth do you get the idea that the revenue would used to offset the effects of climate change? Because carbon taxes would increase the price of literally everything—even the price wind power would go up (albeit by a negligible about) due to the carbon released during the fabrication of turbines—most proposals I’m familiar with would pay revenues back as dividends issued to all Americans.

  6. And how many carbon credits do we get for burning one of these schmucks at the stake?

  7. This assumes:

    (1) Human-generated carbon is a significant driver of climate change
    (2) Climate change is bad

    There’s no evidence of the former (modeling has proven spectacularly wrong, and feedback effects from carbon are greatly overstated), and for the latter quite a bit of evidence that a bit of warming would result in numerous benefits.

    We don’t need a carbon tax at all.

    1. The evidence for both is overwhelming.

  8. Business support for sensible climate policy appears to be growing.

    We now know that Jonathan’s dictionary defines “sensible” as “agrees with Jonathan H. Adler”.

    And that one data point is enough to show something is “growing”.

    1. Most people define “sensible” as “agrees with me.”

  9. If they want it so badly nobody’s stopping them from forking over the money right now. What are they waiting for? Their mommy’s permission?

    1. AmosArch, as with workplace safety regulations, it has to be done by regulation, to assure that all competitors play by the same rules. To achieve that, the Business Roundtable, at least, seems to be asking to be regulated.

      What seems significant here is that one industry player now concedes carbon regulation has become inevitable. Given mounting and overwhelming evidence for the destructiveness of unconstrained carbon emissions that is not surprising. The Business Roundtable may be trying to get out in front of the regulatory process to keep it from getting out of control.

      What constitutes, “out of control,” however, may have a lot more to do with public perceptions derived from ongoing storm events, and fire storm events. With the northeastern part of the nation currently under unprecedented smoke-darkened skies from west coast fires—not to mention the region-wide smoke catastrophe throughout the West itself—while the Gulf Coast gets hit with its second apocalyptic flood event in 3 years—even the most determined climate change minimizers ought to recognize that change is literally in the wind.

      1. The business roundtable doesn’t care about costs, which will all be passed onto the consumer. The west coast fires are caused by mismanagement — notice how there aren’t any in Canada or Mexico.

        It was Bill Clinton’s ban on logging and logging roads that caused this.

        And it was a history of apocalyptic floods that created the Gulf Coast in the first place.

        1. The business roundtable doesn’t care about costs, which will all be passed onto the consumer. The west coast fires are caused by mismanagement — notice how there aren’t any in Canada or Mexico.

          It was Bill Clinton’s ban on logging and logging roads that caused this.?

          It wasn’t Bill Clinton, the problem predates him (Literally, the problem was created before he was born). California & the Department of the Interior have been mismanaging their forests for 100 years now. It started with the Smoky the Bear campaign where they stopped the natural forrest fire process which removed the fuel. Well, a century later and all that fuel has accumulated to the point where it’s all major fires. California needs to Burn in order to get rid of the fuel.

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  11. Carbon tax is just another excuse for governments to tax us even more. What is next? Taxing our exhaled breath and farts?

  12. So, this just appears to be the Business Roundtable being woke. There are already markets for offsets, which means there is already pricing. There are some practical impedances in the markets, including being largely regional and the fact that U.S. emissions have dropped back to late eighties level (a good thing), and Armchair Lawyer covered many of the other issues.

    A tax is a whole other issue – where does that end? Larger families being taxed for emitting more CO2? Ranchers being taxed for GHGs emitted by cattle. As I mentioned above, the U.S. emission have already been going down dramatically, with or without the Paris accord. Taxing for CO2 would be another morally bankrupt effort that solves no issues.

  13. No tax increases until there’s a balanced budget amendment. Congress lives in a state of perpetually spending everything it gets, and borrowing 10% more. And that’s in good times. The only time it balanced a budget was the unexpected internet boom windfall, and Congress took that as an insult and started borrowing again in less than two years.

    And we won’t even get into that when they did this previously, China said give us a ridiculous amount of free carbon chips, or we’re ignoring the whole thing.

  14. “[W]here it is environmentally and economically effective and administratively feasible” is just a spectacular hedge, as is the commitment that the funds generated should “primarily be used for policies that support economic growth, reduce societal impact, and provide assistance for those individuals and communities most negatively affected.” So the nature and scope of the program is completely flexible and the funds generated can be spent on practically anything. In the spirit of this important policy declaration, I hereby call for tax cuts where “environmentally and economically effective and administratively feasible,” enhancement of all government services where “environmentally and economically effective and administratively feasible,” and a program to restore unicorn populations where “environmentally and economically effective and administratively feasible.”

    Oh, but they do have one unqualified policy proposal – doubling R&D spending. And page 2 of the report reveals that “Business Roundtable members invest nearly $147 billion in research and development.” So the headline here really should be “Business Group Wants Government to Double Subsidies Benefiting Its Members.” Inspiring stuff.

  15. Why does this have to be a national program? Start small, say with the state of Vermont. Require all businesses operating within the state to calculate their carbon footprint, set a fixed tax rate per unit of carbon, allow tax credits for certain activities, and see how it plays out.

  16. Carbon pricing has the problem that it’s too easy to game.

    Let’s compare it to a successful cap and trade program. Sulfur.
    Sulfur is difficult and expensive to remove from fuels, but it’s doable. To claim credit for a reduction you have to reduce actual, measured emissions from your stack. When it was implemented, the sulfur standards of fuels were tightened so it only affected refineries, coal power plants, and similar large companies. There’s no cheating. The only way to get ahead is to actually reduce your emissions by converting the sulfur into solid (yellow sulfur) or liquid (sulfuric acid) form that is used as products.

    On the other hand, the combustion of Carbon into CO2 IS the process. It’s not a byproduct. If you don’t make CO2, you didn’t get the heat from your fuel. You can’t add a recovery unit to remove the CO2 (well, you can, but sequestration takes almost as much energy as you get from burning the fuel initially). So, carbon credits are issued for doing other things that reduce CO2 emissions, say not cutting down a forest or building a windmill. However, these aren’t reductions from actual measured totals. They are reductions from a possible future in which you did something else. Not only are these always very optimistic calculations, but the total emissions don’t actually go down. As there are minimum thresholds for reporting, it’s also relatively easy to game the system to minimize or avoid reporting entirely.

    Europe has had a near complete failure in their cap and trade program for nearly 20 years. Despite absurd investment, their numbers have not gone down meaningfully since inefficient Soviet industry was replaced. The only things that have been very successful are the French nuclear program and Scandanavian hydro power. The German Energiewinde program was actually cancelled due to the enormous price and poor results.

    Why would we emulate a failed policy?

  17. To even suggest that a carbon tax is needed means that you have swallowed the climate change Kool-Aid.

    The best carbon tax policy is no carbon tax at all.

  18. More extremely regressive taxation.

    1. A carbon tax would be extremely regressive, which is why most proposals call for the revenue to be refunded as a per capita dividend. Since carbon emissions are pretty strongly correlated with income, the net effect would be progressive.

      1. If you truly believe that, I have some oceanfront property outside of Tuscon that you might be interested in.

  19. Great. Another “market” where we can pay people to enforce and comply with rules that they get to create. It worked so well with tax policy that we will now expand it to energy policy.

  20. They’re trying to buy off the watermelons. If the watermelons weren’t red on the inside, it might even have a hope of working. As it is, it just gives them another foot in the door.

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