Gas pain needed to meet emission targets, Harvard study says

by Marlo Lewis on March 19, 2010 · 21 comments

in Global Warming

A new Harvard University study (Analysis of Policies to Reduce Oil Consumption and Greenhouse-Gas Emissions from the U.S. Transportation Sector) offers a sobering assessment of what it will take to meet the emission reduction targets proposed by President Obama and the Waxman-Markey cap-and-trade bill.

Saruman’s rebuke to Gandalf — “You have elected the way of pain!” – nicely captures the key policy implication of this study (although the researchers, of course, do not put it that way).

Congressional proponents of cap-and-trade policies typically favor cost-control measures (price collars, safety values, offsets) designed to keep emission permit prices from exceeding $30/ton of CO2 in 2010 and $60/t of CO2 in 2030. Although an economy-wide permit price of $30-$60/t CO2 would significantly reduce GHG emissions from the electric power sector, it would have only a “marginal impact” on transport-sector emissions, which account for about one-third of all U.S. GHG emissions.

As a consequence, by 2020, total annual GHG emissions under Waxman-Markey would be only 7% below 2005 levels — far short of both the Waxman-Markey target (15.4% below 2005 levels) and President Obama’s somewhat less aggressive target (14% below 2005 levels).

To reduce transportation GHG emissions 14% below 2005 levels by 2025 would require gasoline prices “in the range of $7-9/gal,” the researchers estimate. They acknowledge that such prices are ”considerably higher than the American public has been historically willing to tolerate.” Yep, $7-9 a gallon would set a new record for pain at the pump!

By itself, the $30-$60/t CO2 carbon price would increase motor fuel prices by “only” $0.24-0.46/gallon. Not enough pain! To make driving hurt enough to save the planet (okay, hurt enough to produce undetectable effects on global temperatures), policymakers would also have to adopt a $0.50/gal motor fuel tax in 2010 that increases 10% a year until it reaches $3.36/gal in 2030. Even then, it won’t hurt enough unless crude oil prices increase to $124/barrel (in real dollars) by 2030. Crude oil prices as high as $198/barrel would work even better, the researchers opine.

Exactly how would “the way of pain”  produce these transport-sector emission reductions? Some of the reductions would come from consumers buying higher mpg vehicles, and some from technological innovation spurred by market demand for such vehicles. Most of it however, comes from people driving less — i.e., pain avoidance behavior!

A by-the-numbers explanation: In the base case (no carbon price, no new transportation taxes), vehicle-miles traveled (VMT) is projected to grow 39% by 2030. The economy-wide carbon price would reduce VMT by only 1% compared to the base case, and maybe not even that much due to the “rebound effect” of fuel-economy regulation (when the average vehicle gets more miles to the gallon, the average motorist travels more miles). But, add a generous serving of pain at the pump, and Voila – instead of growing 39%, VMT grows 25%. We’re saved!   

A few other tidbits from the Harvard study: 

  • Economy-wide CO2 prices must be more than twice as high (250%) as oil price increases to result in the same increase in the price of gasoline. For example, a $50/barrel increase in the price of oil is comparable to a CO2 price of $130/t.
  • Tax credits for advanced vehicles (diesels, hybrids), ranging from $3000 to $8000 per vehicle, require excessive government expenditures ($22-38 billion per year, on a par with the 2008 U.S. auto bailout).
  • Such subsidies are also counter-productive, because they blunt automakers’ incentive to increase the fuel economy of conventional vehicles, which occupy a larger share of the market.
  • If Congress is unwilling to elect the way of pain (impose transportation taxes and steeper CO2 prices), covered entities will increasingly purchase offsets rather than reduce emissions to comply with the Waxman-Markey cap. Specifically, they will purchase an estimated 730-860 tons of CO2-equivalent offsets in 2020 and more than 2 billion tons in 2027 — breaching the proposed statutory limit.
  • A $30-$60/t CO2 carbon price combined with $7-$9/gallon gasoline would reduce GDP only 1% in 2030. However, this conclusion depends on the assumption that Congress adopts a textbook perfect revenue-neutral carbon tax, in which all emission permits are auctioned, and all revenues are retured to taxpayers. 
  • The actual GDP losses would be higher: ”Given the politics surrounding the debate in Washington, D.C., revenue neutrality is likely to be an elusive goal and thus our analysis may understate the economic impacts, since only a small number of the permits are likely to be auctioned.”

The Harvard study makes even more obvious what should no longer be controversial. Congress has not yet adopted tough controls on GHG emissions not because a “well-funded denial machine” is “confusing the public,” but because Members of Congress seek above all else to get re-elected, and inflicting pain on voters is not a smart way to win their support!

Saint March 19, 2010 at 11:14 am

Marlo: Getting steep emissions reductions from transportation sector is a much more expensive proposition than getting reductions from the power sector. The IPCC mitigation report, for example, shows that at $100 per ton of carbon dioxide, reductions in the transport sector aren’t all that much greater than when the price is $20 per ton. The power and industrial sectors show much greater sensitivity to changes in the carbon price.

So how big a carbon price would be needed to reduce emissions significantly from this sector? We already have a pretty good idea from real world experience. Remember the political hue and cry when gasoline prices jumped from roughly $2 per gallon in 2004 to $4 and more in 2008. That was enough of an increase to push gasoline demand about 6% lower. If that $2 jump in price were translated into a carbon tax, it would amount to over $225 per ton of CO2. Yikes!

Bryan Leyland March 20, 2010 at 11:03 am

A technology to reduce emissions from coal fired stations by 30% is available.

It is called "Atomized Refined Coal" which uses hydrogen fluoride to remove the ash from coal. the refined coal can be ground to a fine powder and burned in a conventional combined cycle station. The technology was demonstrated in a pilot plant in 1985 but was abandoned when the oil price collapsed.

The people who own the IP now need venture capital. It's main problem is that it sounds "too good to be true." I have looked at it carefully and I am satisfied that there is a >90% probability that it could change the energy geopolitics of the world. It makes carbon capture and storage (an impossible dream) and Integrated gasification combined cycle (expensive and inefficient) obsolete.

jlori March 19, 2010 at 12:29 pm

This is just another example of how mindless the entire global warming issue has become. As a country, do we really plan to destroy our economy on the the false claim of the AGW cult? And just who are these people?

The AGW cult is comprised of two groups. The first group (the followers) includes the uninformed, the gullible, the well intentioned but naive, the sincere but mislead, many journalists and researchers, and yes, the just plain stupid. I would think it safe to say that these people all believe that most of the recent global warming must have been or was caused by human activity – primarily CO2 emissions and that wind farms fix the problem. These people are not evil, they are just wrong. How anyone could rationally think that the IPCC fairytales prove their position is beyond hope and not worthy of debate.

The second group (the leaders) includes primary, government funded researchers, left leaning political leaders, activist and environmentalist leadership, and, of course, the Hansens, Gores, Manns, Briffas, Pachauri, and the rest of the extremists with which we are burdened. To the surprise of those in the first group, but not at all to the rest of us, these people do not necessarily believe or, for the most part, even care if global warming is anthropogenic. And, unlike the first group, these people are not only evil and wrong but also dangerous. They are not out to save the world but to gain political power and financial control over individuals, businesses and countries.

There are legitimate environmental issues. Surly we must continue to fight for and to find a way to protect our environment, reduce stress on fisheries, manage water, land and forest resources, protect endangered species if possible and were practical, and a myriad other environmental issues and crises we face. The real tragedy of the AGW shibboleth is that it will destroy the credibility of legitimate environmental movements, divert needed funding away from them, and make the efforts of those movements even more difficult. And this is why the people of the first group, if and when they ever figure it out, should forever condemn those of the second.

The rest of us already have.

bill-tb March 19, 2010 at 1:37 pm

It reads like someone pooped it up. So can we see the science please, it appears to be so full of holes life and fabrication it's hard to keep up.

I note one thing of interest. I was doing some research in the archives and find that when it warmed, back in the 20s and 30s we were all going to raost, in the 60s and 70s it was the ice age is coming, and now it swings back warm and we are all going to roast again. I would like someone to explain the climate forcing in the hysteria index.

And yes, back in the 20s and 30s, it was CO2 that was going to destroy us, in the 60s and 70s it was the shortage of CO2 that was going to destroy us … So this hoax has been up and down the road a few times before.

I wonder what the nuts will do when the next glaciation period starts to destroy us?

InMD March 19, 2010 at 5:03 pm

Doesn’t really bother me, I will just telecommute 5 days a week instead of one.

It won't bother the environmentalists or the vast majority of Democrats either since most are unemployed!!

Bruahhhhaaaaaaaaaa!!!!!!!

cedarthill March 20, 2010 at 12:47 am

When Greenland grows tomatoes again as it did during the Viking era and elephants can cross the Alps as they did during the Roman era, then all anyone should do about CO2 is simply plant your favorite tomato.

Bruce March 20, 2010 at 4:54 am

Dear Sir,

When I read the title, I fully expected that the article would be handling some stated need from authority to contain our personal methane emmisions (thus "gas pain"). Perhaps we should thank our merciful AGW proponents in that only 7 USD/gallon petrol is required (it is already near this price due to tax in Europe of course, this is just another excuse to make equal the Federal take on the other side of the pond).

BMW Albert, Ph.D., PDRA

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