The Dubious Basis for a Carbon Tax

Rep Curbelo of Florida has introduced a carbon tax bill even though the House of Representatives have voted 229-180 to oppose any carbon tax legislation.  It is clear that no legislation is going to be passed and most likely that Rep Curbelo is simply using his proposalto bolster his campaign for re-election in November.

He has proposed a $24 per ton tax—the social cost of carbon– beginning in 2020 with the proceeds replacing the federal gasoline tax.  How did he pick $24 when the estimates often cited range from $15-$150 per ton?  It really doesn’t make any difference since the choice is driven by the climate orthodoxy, model estimates and judgments and assumptions by climate advocates.  In reality, the social cost of carbon which is reflected in any proposed carbon tax is nothing more than an intellectual exercise that has very little basis in science or empirical facts.

There are two fundamental pieces of information that are needed to make a more accurate calculation of the social cost of carbon.  First, it is necessary to know how the climate responds to emissions of CO2. That is how much global temperatures will increase from doubling of CO2– climate sensitivity.   The most recent estimate by the IPCC is between 1 and 4.5 degrees C.  That is a wide range of uncertainty and underscores how little is really known about the effects of CO2.

The second piece of information is how much of past temperature increases are due to natural variability and how much are due to human activities?  Climate advocates assert that humans are primarily responsible for temperature increases over the past 60 or so years. But the results of model runs based on this assumption significantly over-prediction actual temperature increase.  Roy Spencer has pointed out that the “pause has caused them a real problem.  “They are now coming up with reasons why there has been a “pause” …and spinning it as if it is bad news …. But when they assume that natural climate variations can cause a cooling influence, they are also admitting there can be natural sources of warming”. In other words, the climate establishment is masking its ignorance with more assumptions.  But, assumptions are not facts and neither are computer model results.

In addition to these problems, carbon tax proposals attempt to address a very long-time horizon which makes it impossible to know the effects of policies, how they will change over time, advances in technology and most important the extent of any future warming or change.  There is also the factthat atmospheric CO2 produces benefits in plant, crop, and forest growth as has been documented by the CO2 Coalition.

Rep Curbelo should abandon election year stunts and look at facts and think seriously about policy.  First, he should learn that the US is doing much better in reducing emissions than other countries without subjecting itself to too many overly stringent regulations or energy taxes .  Over the past decade for example, the US has reduced emission by almost 12% while Germany one of the greenest and most aggressively environmental counties.  Instead of prescribing a carbon tax, the right approach to climate policy is to first become familiar with the actual scientific facts and then adopt incremental policies based on changes in our state of knowledge. That is the proven approach to effective planning when uncertainty dominates.



Market Manipulation is Not Market Choice

Florida Congressman Carlos Curbelo plans to introduce a carbon tax bill to reduce carbon emissions, create incentives for clean energy, and use the proceeds to replace the gasoline tax. Although he refers to his legislation as market choice, it is just another example of market manipulation and energy suppression…

All of the carbon tax proposals that have been pushed in recent years are promoted as a cost-effective means to mitigate catastrophic damage from human caused climate change by reducing carbon dioxide emissions. The alleged damages are a collection of environmental hobgoblins–rapidly rising temperatures, rising sea levels, and increased hurricanes, tornados, and droughts.

It has been 30 years since climate change—aka global warming—became the number one environmental apocalypse. Over this three decades the asserted climate damages have been unsupported by empirical evidence. Temperatures have only risen a few tenths of a degree. Hurricanes have not gotten stronger, tornados have been declining, and sea level rise has not been accelerating. None the less, advocates continue to market an artifact of computer models and ignore what is taking place in the real world.

The problems with a carbon tax are much greater than just the lack of empirical evidence. To begin with, the so-called damage function that would be mitigated by the tax lacks precision because the estimate of climate sensitivity—how much temperatures increase from doubling of CO2—vary by a factor of 3. In addition, concern about atmospheric concentrations is global while the proposed Market Choice act only applies to the US. Dr. Ben Zycher of the American Enterprise Institute did an analysis of a carbon tax that was larger than the one being proposed by Rep. Curbelo–$30 versus $23. He concluded that the carbon tax effect in 2100 would be twenty-five one-thousandths of a degree. On a chart, that would be less that the width of a line drawn with a number 2 pencil and given the inherent uncertainties of models is essentially zero.

A carbon tax may be intellectually elegant to many economists and very appealing to free spending members of Congress because it is like an ATM machine without limits—small changes in the tax generate large sums of money.

Advocates of a carbon tax attempt to portray it as being simple. Has anyone known of a tax that was truly simple? In the case of a carbon tax, building political support would require provisions that benefit supporters—environmental groups, rent seeking corporations, affected populations like the poor and politically powerful users of energy, and groups dependent on government largesse. There is virtually zero probability of a carbon tax being a simple straight forward $X per ton of carbon emitted. Instead, a coalition of Baptists—those whose support is based on moral fervor and Bootleggers whose support is driven by profit and rent seeking.

Finally, Rep Curbelo’s proposal is predicated on shifting US energy use from fossil fuels to “clean energy” which continue to exist in the market place only because of subsidies and government mandates. Our economy needs energy to grow and prosper but that energy needs to be abundant and affordable. Rep. Curbelo wants to make it scarce and expensive. The example of Germany proves that point. Germany’s emissions reduction crusade has produced the highest electricity price in Europe, a prices three times greater than the average US electricity price.

30 Years of Manufactured News

We have just observed the 30th anniversary of Jim Hansen’s explosive and infamous testimony before a Senate committee claiming that climate change was taking place, humans were causing it, and that an environmental catastrophe would occur in the near term unless prompt action was taken.

How this came about and the accuracy of Hansen’s predictions are a case study in “manufacturing” news. Anyone who objectively looks at claims about a climate catastrophe and the evidence that supports them would have to conclude that the climate agenda disguises a political agenda, which it does.

The background to Hansen’s testimony is illuminating. Al Gore and Tim Wirth, Senator from Colorado and committee chair, orchestrated the hearing to gain maximum publicity and push the US to join European greens in the battle against climate change which was called global warming back then. Gore and Wirth had become true believers in the sustainable development movement under the leadership of Maurice Strong who was the founding director of the UN’s environmental program. Strong was a tireless advocate for global governance, believing that national sovereignty must yield to the “imperatives of global environmental cooperation.”

According to the book, The Real Global Warming Disaster by Christopher Booker, Wirth has bragged about how he had committee staff call the Weather Bureau to find out what was likely to be the hottest day that summer. Armed with that information, Wirth scheduled his hearing and to make sure that it had the desired effect, he had all of the windows in the committee room opened and made sure the air conditioning would not be working. Under those steamy conditions, Hansen’s testimony received national attention and provided Gore, Wirth, and their environmental allies the ammunition to make global warming the number one environmental issue.

While Hansen continues to be a prophet of doom his credibility has taken a hit as his predictions of a climate apocalypse have become like the horizon, receding as it is approached. While he has become embittered and ever more shrill, his puppet master, grifter Al Gore, has become a multi-millionaire.

Around the 30th anniversary of Hansen’s testimony, Pat Michaels, former Virginia state climatologist and a senior scientist with the CATO Institute did a look back on Hansen’s predictions that was published in the Wall Street Journal. He pointed out that based on 30 years of data, Hansen missed the mark on his three warming scenarios. His first based on business as usual was that temperatures would increase 1degree C by 2018. His second, based on emissions rising at the same rate today as in 1988, was that temperatures would rise about 0.7 degrees C while his third was constant emissions beginning in 2000 that would result in temperature rising a few tenths of a degree C. The outcome of his third scenario proved correct but not for the reasons he cited.

Hansen’s other predictions also missed their mark as pointed out by Michaels. There was no spike in temperatures in the southeast and mid-west in the 80s and 90s. Hansen also predicted that Greenland’s ice would melt raising sea levels 100 feet by 2107. Wrong again, just as he turned out to be wrong about hurricanes getting stronger. And, tornadoes have declined, not increased.

Models are useful analytical tools for gaining insights and testing hypotheses. When they are used to confirm preconceived outcomes and ideology, they are no different that the sorcerer’s bag of tricks.

It’s economics and Trustworthiness Mr. President

At the opening of the NATO meeting, boorish Donald Trump was on full display as he lectured NATO’s Secretary General about Germany’s purchase of natural gas from Russia. Even he should know that is the type of discussion that is best had in private.

When you don’t take time to become familiar with issues, don’t understand history, or have a strategic perspective, it is easy to do dumb things. The President’s ignorance was evident from his lecture about Germany’s buying Russian gas and the Nord Stream pipeline. Germany isn’t buying US LNG for a very simple reason. In an article, Just Business, Sputnik News wrote, “Russian natural gas will remain significantly cheaper in the long run than shipments across the Atlantic. With the Nord Stream 2 pipeline, Germany wants to ensure a technologically secure basis for supplies from Russia,” –sputniknews. Does this carry risks and make Germany vulnerable to political manipulation by Russia? Of course, but the same is true for Western Europe which relies on Russian for about 30% of its gas demand.

US exports of LNG are increasing and could become an important source of energy diversification from over dependence on Russia. Achieving that goal takes time and demonstrating that the US is a reliable trading partner. The president’s behavior on trade, NATO, our European allies and his cozying up to Vladimir Putin all go in the opposite direction.

The New York Real Estate model worked from him in real estate dealings but is proving to be counterproductive in international relations. And, bullying eventually ends when those on the other end decide enough is enough and stand up.

Elon Musk: P T Barnum Flim Flam ?



The end of the quarter marked the achievement of Tesla’s production goal for its Model-3.  By all reports, it represented a herculean effort That involved setting up a tent and makeshift assembly line.  Given the level of effort to achieve the 5000 per week production goal, it is reasonable to ask whether it can sustain that level of output and whether Tesla can finally make a profit and lower its large debt load?  Most financial analysts still rate it in bubble territory.

Elon Musk has demonstrated that the Tesla roadster is an exciting and fun to drive.  That along with generous subsidies and mandates has breathed life into the future of electric vehicles.  Forecasts going out as far as 2040 show EVs capturing a growing percentage of the light duty market globally.  Bloomberg New Energy Finance projects that EVs will represent over 50% of new light duty vehicle sales in 2040.  Such long range forecasts are based on a lot of assumptions, many of which may be questionable.

These forecasts are driven primarily by two factors—the constantly repeated dread of climate change and a belief that EV costs can be reduced to be competitive with internal combustion vehicles.

While assertions of a climate apocalypse continue to be made, it continues to be always moved to decades in the future.  Last week, Pat Michaels of the CATO Institute did a 30 year look back on Jim Hansen’s dramatic predictions of doom at a Senate hearing in 1988—a very hot summer—in a hearing room with the air conditioning turned off and the windows raised. Pat Michaels reminded readers that Hansen’s testimony described three scenarios—business as usual, emissions continue to rise at the same rate as 1988, and constant emissions beginning in 2000. These scenarios led him to predict that by 2018 the world would warm between 1degree C on the high side to a few tenths of a degree on the low side.  As Michaels points out, Hansen’s third scenario result of a few tenths of a degree C proved correct but not because we achieved constant emissions beginning in 2000.

With rapidly rising temperatures and increased hurricanes, droughts, and tornados being illusions and not actual happenings, it is fair to ask how long the world will continue to act as if the illusions are the reality? The answer is not another 30 years. EU nations that were the foundation of agreements starting with Kyoto are gradually backing away from their commitments as the pain of their cost increases.

The second driver is the ability of EV costs to be truly competitive with internal combustion engine vehicles.  That depends on achieving still lower battery costs and greater range between recharging.  Currently, the price difference between a Chevy Bolt or Nissan Leaf and the gasoline vehicle of equivalent size is about $10,000.  While the Tesla Model 3 is advertised at around $30,000, the cost with features most of us want run the cost up to $50,000.  In addition, there is the range penalty from temperature extremes.  It helps to explain why almost 52% of EV sales last year took place in California.

Overcoming the cost and range limits of the current generation lithium-ion batteries is not on the immediate horizon.  Toyota and several other auto manufacturers are working on solid state battery technology but assessments indicate that developers have not mastered how to mass produce them to last as long as buyers expect. Gong from the lab to the market can take 5 to 10 years and Menahem Anderman, the president of Total Battery Consulting recently said, “Solid-state batteries for automotive technology are still in the research stage with no timeline for commercialization.”

When the Elon Musk Tesla hype wears thin will Tesla be a viable manufacturer or will it go the way of DeLorean Motors?  One analyst was quite pointed on this, “Tesla’s persistent cash burn has been a major investor controversy … In fact, Tesla may be the largest public company in history to have never generated either positive annual cash flow or positive annual profit,” As other manufacturers get deeper into the California market, Tesla’s ability to generate and sell zero emission credits—a major source of revenue—will decline.  The same is true if the Trump Administration lowers CAFÉ mileage standards as appears likely.

Over the next few years, Tesla has over $1 billion in debt coming due while also having to contend with interest payments on the junk bonds it issued last year.  In this time frame, we are likely to learn whether Elon Musk is the visionary who changed the future for light duty vehicles or just another huckster who managed to create a bubble like the great tulip bubble of 1637.