carbon tariff

Today’s excerpt from CEI’s film, Policy Peril: Why Global Warming Policies Are More Dangerous Than Global Warming Itself, offers a free-market perspective on Al Gore’s proclamation, at the end of An Inconvenient Truth, that global warming is “a moral issue.”

Considered in the abstract, apart from its context in movie, this is a completely unremarkable statement. Just about all public policy issues can be described as moral issues, because they directly or implicitly ask us to decide whether a proposed course of action is fair or unfair, honorable or dishonorable, good or bad.

However, when Gore says global warming is a “moral issue,” he means something more. He means that combatting global warming is the overriding moral imperative of our time. He implies that if you are decent, self-respecting person, you have no moral choice but to follow his lead and  heed his call. He is trying to play a rhetorical trump card.

Gore is clever. In An Inconvenient Truth, he presents himself as an a-political Mr. Science – and then exploits the moral authority so contrived to bash the Bush Administration and other political opponents. Similarly, he presents as a moral imperative a policy agenda that — just by sheer coincidence, we’re supposed to believe – would empower him and his political allies to control the global economy. It’s all a little too convenient.

More importantly, what if the alleged imperative to decarbonize U.S. and global economy conflicts with other, arguably better-established imperatives, such as eradicating poverty? If Gore were a moral leader rather than a moralizing partisan, wouldn’t he at least acknowledge that his ”solutions” might have harmful side-effects? 

To watch today’s film excerpt, click here. To watch Policy Peril from start to finish, click here. The text of today’s film clip follows. The footnotes are to additional commentary and supporting information.

Narrator: Now let’s look at the international side of climate policy. Al Gore and the European Union advocate a 50% cut in global emissions by 2050. [1]  But most of the growth in global emissions between now and then will come from developing countries. [2] So those countries, too, will have to stop building coal plants. They, too, will have to limit their use of fossil fuel. [3] It would be a humanitarian disaster.

Globally, about 1.6 billion people lack access to electricity. About 2.4 billion still rely on traditional biomass–wood, crop waste, even dung–for cooking and heating. [4]

Tom Tanton (Pacific Research Institute): Look at developing countries. The thing they need most of all is commercial energy and electricity. People in developing countries spend most of their day collecting fuel. They don’t have time to go to school and get an education. It gets dark at night so there’s no studying at night, because there’s no electricity. Electricity is the essential commodity for any kind of growth and improvement in lifestyle. [5]

Narrator: A coal-fired power plant would improve the lives of those villagers in many ways. Women would be freed from backbreaking toil. People would be healthier because indoor air quality would improve. Refrigeration would make food preparation easier and safer. Electric lighting would allow people to read and study at night. The forests and the species dependent on them would be spared. [6]

Myron Ebell (Competitive Enterprise Institute): I agree with former Vice President Gore that global warming is a moral issue. I think it is preeminently a moral issue because we have a billion and a half people in the world who don’t have access to electricity, for example. The world is not energy rich, it’s energy poor. And if we’re going to put energy rationing policies on the backs of the world’s poorest people, they will have very little hope of ever achieving even a fraction of the well-being, the lifestyle that we have.

Narrator: India is an emerging industrial powerhouse. Yet even in India, energy poverty kills. India has the largest incidence of snake bites in the world. About 50,000 Indians die from snake bites each year. Doctors there have developed an anti-venom antidote. So why is the death toll so high?

Barun Mitra (Liberty Institute): The primary reason is that most Indian health centers, primarily in rural areas where the snakebites are more prevalent, have no electricity, no refrigeration, no way to store the anti-venom. The technology is there. We know how to generate electricity. The technology is there. We know how to make the anti-venom. Yet, 95% of Indians, or thereabouts, do not have access to it, because they stay in areas which cannot store anti-venom in a refrigerated environment.

Narrator: Let me state the obvious. Poverty is the number one cause of premature death and preventable disease in the world. [7] Global restrictions on fossil energy use would trap millions of people in poverty.

Al Gore and others don’t say exactly how they would stop poor countries from using coal. But some U.S. and European politicians want to impose carbon tariffs on goods from China and other developing countries that refuse to limit emissions. [8]

Iain Murray (Competitive Enterprise Institute; author The Really Inconvenient Truths): I think the question to ask here is: Can any of the potential effects of climate change be so great as to justify keeping the developing world in poverty. I think to ask that question is to answer it.

Commentary

[1] The goal of cutting global CO2 emissions 50%-85% by 2050 has become canonical for the global warming movement. Proponents of this viewpoint include the IPCC, the European Union, the G-8 (U.S., UK, France, Italy, Canada, Germany, Japan, Canada), and just about every environmental group. Supposedly, a 50%-85% cut would likely limit 21st century global warming to 2ºC (3.6ºF), which in turn would likely “avoid some of the worst effects” of climate change. All of this assumes that the climate is moderately-to-highly sensitive to increases in CO2 concentrations. Recent research contradicts that assumption.

[2] 80-90% of the increase in greenhouse gas emissions between now and 2050 is expected to come from developing countries, chiefly India, China, and SE Asia.  

Figure source: James Connaughton, Chairman,  White House Council on Environmental Quality (CEQ), Energy and Climate Policy, December 2007.

Figure source: Stephen Eule, U.S. Chamber of Commerce Institute for 21st Century Energy, Scale & Scope of the Challenge of Reducing Greenhouse Gas Emissions, February 2009

[3] Global CO2 emissions are projected to increase from 24 gigatons a year in 2000 to 50.6 gigatons a year in 2050. Thus, to achieve a 50% reduction, global emissions in 2050 will have decline to 12.3 gigatons — 76% below the baseline projection.

Figure source: Stephen Eule, Scale & Scope of the Challenge, Feb. 2009

This means that even if developed countries miraculously reduce their CO2 emissions to zero, global emissions cannot be cut by 50% unless developing countries cut their emissions 62% below baseline. Their per capita CO2 emissions will have to decline to 1.7 metric tons per year — less than current per-capita CO2 emissions in Central and South America.   

If developed countries reduce their emissions by “only” 84% — approximately the Waxman-Markey target for 2050 — then developing countries will have to reduce their emissions 71% below baseline. They’ll have to hold their emissions almost flat between now and 2050. Their per-capita emissions will have to decline to 1.3 metric tons per year. That’s about what per-capita emissions are today in Africa, the most energy-starved continent on the planet.

Figure source: Stephen Eule, Scope & Scale of the Challenge, February 2009

Absent spectacular breakthroughs in the cost and performance of zero-emission energy, the minimal EU/UN/Al Gore goal of a 50% reduction in global CO2 emissions by 2050 cannot be achieved without dramatically limiting developing countries’ energy consumption and economic growth.

[4] 1.6 billion people have never flipped a light switch and 2.4 billion people depend on primitive biomass for heat and light — these figures come from chapter 13 (“Energy and Poverty”) of the International Energy Agency’s World Energy Outlook 2002. 

[5] That electrification is a prerequisite for continual improvement in the human condition is obvious. Nonetheless, some scholars attempt via statistical techniques to demonstrate the importance of electricity to the physical quality of life. An October 2000 study by Alan Pasternak of the Lawrence Livermore Laboratory finds a strong association between per capita electricity consumption and the United Nation’s Human Development Index (HDI), a composite measure of human welfare taking into account GDP, life expectancy, and educational attainment.

Figure source: Alan Pasternak, Global Energy Futures and Human Development: A Framework of Analysis, Lawrence Livermore Laboratory, October 2000.

Although in 1997 four countries (South Korea, Russia, Saudi Arabia, and South Africa) with per capita annual electricity consumption somewhat above 4,000 kWh had an HDI below 0.9, no country with per capita annual electricity consumption below 4,000 kWh had an HDI of 0.9 or higher. Pasternak concludes that there is a “compelling need for increased energy and electricity supplies in the developing countries,” and that, “Neither the Human Development Index nor the Gross Domestic Product of developing countries will increase without an increase in electricity use.” 

[6] For this formulation, I am indebted to University of Alabama-in-Huntsville atmospheric scientist John Christy. A former African missionary, Christy has seen first-hand the hardship and perils of life in an energy-poor country. When Christy testifies before Congress, he often includes a plea not to demonize energy, because “life without energy is brutal and short.”

[7] “A large proportion of illnesses in low-income countries are entirely avoidable or treatable with existing medicines or interventions,” observes Philip Stevens, Health Director for the International Policy Network (see p. 4 of this report). Such illnesses include tuberculosis, malaria, HIV/AIDS, childhood diseases (polio, measles, tetanus), diarrhoeal diseases from poor sanitation, respiratory infections from indoor air pollution, and malnutrition such as vitamin A deficiency. These eminently preventable and treatable illnesses kill millions people — a high proportion of them children — in developing countries each year. Although vaccines or treatments are inexpensive, poor countries lack the infrastructure to make them widely available.

[8] Cap-and-trade and protectionism are joined at the hip. You might not think so, judging from the oft-repeated assurances that Kyoto-style policies will spur innovation, efficiency, and “green job” creation, making us more competitive in the “economy of the future.” Yet European politicians warn (see here, here, and here) that they will impose border taxes (carbon tariffs) on goods from countries — chiefly China but also the United States — that refuse to limit emissions.

Most “trade-exposed, energy-intensive” firms call for additional free emission allowances to “level the playing field” rather than for carbon tariffs (see here, here, and here). However, the Sierra Club argues that carbon border taxes may be needed as a “backstop,” particularly as emission caps tighten and the supply of free allowances shrinks. It is telling that some experts are making the case that carbon tariffs are legal under WTO trade rules. (Other experts, however, warn that unilateral imposition of border taxes or counterveiling duties on carbon-intensive imports would violate WTO rules, engendering a long period of trade friction and uncertainty.)

Both free allowances and carbon tariffs are also touted as a cure for “carbon leakage” — the flight of capital, jobs, and emissions to developing countries in order to escape the high energy costs stemming from carbon controls in developed countries.

But beyond concerns about unfair competition and carbon leakage, there are more basic reasons why cap-and-trade depends on protectionism. First, how do you enforce a treaty like Kyoto over the long term?  It’s a typical collective action problem. Even if one assumes it is in the common interest of all nations to mitigate global warming, it is in the individual interest of each nation to bear less than its negotiated share of the burden — to reap the climate benefits (if any) of other nations’ sacrifices and employ creative accounting on behalf of one’s own industries to give them a competitive edge. If cheating isn’t credibly punished, the number of “free riders” will grow, and the system will collapse.

How will the world’s nations punish cheaters? If military force is not an option, then trade penalties — carbon tariffs — are pretty much the only  remedy.

Furthermore, how do you persuade major developing countries to get on board? They repeatedly refuse to accept binding limits on their emissions. Yet, as explained above, developing countries must make heroic efforts to decarbonize their economies if the world is to cut emissions 50%-85% by 2050, as demanded by Vice President Gore, the EU, and the UN.

One option is to bribe them with massive wealth and technology transfers. But building hundreds of new nuclear power plants or hundreds of futuristic zero-emission coal power plants in China, India, Brazil, and other developing countries would cost trillions of dollars. In the midst of a global financial crisis and high unemployment, it is unlikely that U.S. and EU taxpayers will agree export more jobs to China.

If carrots are out as an inducement to decarbonize, then sticks are what’s left. It would need to be a big stick — for example, a coordinated campaign of trade sanctions by the United States, the EU, Canada, Russia, and Japan.

More than likely, though, such a campaign would fail because developing countries would retaliate with trade sanctions of their own. We would get trade war, not compliance.

Nonetheless, if the major-emitting developing countries — China, India, Brazil, and Indonesia — continue to reject binding emission limits, advocates of CO2 controls will be continually tempted to rattle the trade sabers and demand carbon tariffs. Indeed, earlier this month, 10 Democratic U.S. Senators, in a letter to President Obama, indicated they would not support a cap-and-trade bill lacking a “border adjustment mechanism” (a.k.a. carbon tariff) to create a level playing field and pressure nations like China into adopting carbon controls.

Conclusion

Yes, global warming is a moral issue, but not for the reasons Al Gore supposes. As John Christy reminds us, human life without energy is brutal and short. Yet Gore would suppress the 85% of the world’s energy that comes from fossil fuels.

But there’s more to it than that. In a recent video commentary on CO2Science.Org, Christy offers both a personal insight and an analyst’s perspective on why abundant, affordable energy is one of the great blessings of modern civilization. I’ll conclude this blog post — the last in my series of posts on Policy Peril – with the text of Christy’s remarks.

John Christy: When people talk about the moral issue of controlling carbon dioxide emissions, I say yes, that’s right, it is a moral issue. In 1900, the energy technology of the day supported 56 billion human life years. Okay. That’s 1.6 billion people times 35 years’ life expectancy. 56 billion human life years. The average person lived to 35. Now, the energy technology supports about 450 billion human life years. That is an eight-fold increase in the experience of human life, and that is a spectacular achievement.

I am a grandfather now. And when my little grandson runs up and hugs me around the knees, I am experiencing something in human life that, a hundred years ago, the average person could not, at all. So this experience of human life that’s been granted to us by energy technology is tremendous and wonderful.

Therefore, the moral issue here is that we should provide people, who do not have it, energy, so that they can experience life that is safer, that is healthier, and that is longer. That’s the moral issue. 

To read previous posts in this series, click on the links below: