Harmonious Taxes

Emitting carbon dioxide has a social cost, as we saw in the previous module, so any actions to reduce emissions give some benefit. But, making a measurably significant difference in the future of global climate will require major reductions in CO₂ emissions across large parts of the whole world’s economy, and really solving the problem will involve almost all of us. International cooperation thus is almost surely required to address global warming seriously.

Treaties

One possible approach is to use treaties or other agreements to limit the quantity of CO₂ that can be emitted. The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) takes this approach, setting limits on allowable emissions from many, primarily industrialized countries. The UNFCCC commits signatories (essentially the whole world) to “…stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system” (Article 2), and Kyoto attempted to start a strategy to achieve that objective (United Nations Framework Convention on Climate Change, Background on the UNFCCC.)

Kyoto can claim some successes among countries in reducing greenhouse-gas emissions. Overall, however, emissions have risen since the protocol was enacted. One could argue that the task is so difficult that we should not expect immediate success, but one could also argue that this approach is not working as well as it should.

Internationally Harmonized Carbon Taxes

Another possible approach is through internationally harmonized carbon taxes. (Again, we are leaning on the work of W. Nordhaus, among many others.) As this was being written, carbon taxes were functioning in many places including British Columbia and several European countries, and discussions were ongoing in additional countries including China. Suppose that the international community broadened this participation by negotiating use of a carbon tax in all countries. The tax rate might be targeted at the economically efficient level, possibly with variations in when it became fully active based on the status of economic development or other issues. Monitoring and enforcement would involve some discussions, as would issues of what in detail to include. For example, deforestation does contribute to global warming, so are trees included? Where Dr. Alley lives, in Pennsylvania in the USA, trees were cut down in previous centuries, and many trees have been growing back—is it right for Pennsylvania to get credit for regrowing trees when other countries are penalized for cutting down their trees?

Aerial view of autumn leaves in bright orange

The simplest carbon tax would charge fossil fuels where they are extracted from the ground or cross a border from a country that does not tax its own carbon. Consideration of carbon in soils and vegetation may be more difficult. Some countries are regrowing trees that were cut decades ago, while other countries are wondering whether to preserve or cut their trees. Here is an autumn shot of a region in central Pennsylvania that was deforested a century ago: Mount Nittany.

Photo Credit: Richard Alley

But, start with the simplest possible model: a tax on the extraction of fossil fuels, set at an initially small level for everyone and then raised at a rate such as 2% per year. Suppose that more than half of the world’s economy initially agreed to this. They could then, perhaps through the UN, offer a deal to countries not yet participating—participate, tax your own carbon, and keep the money for any purpose except stimulating fossil-fuel use; or, refuse to participate, and the participating countries will keep the funds raised from tariffs they will levy on all trade into and out of the nonparticipating countries, and set at a level equal to that for harmonized carbon taxes. (This probably would require changes to international trade rules, but changing such rules is not impossible.) Such an arrangement might turn out to be much simpler than extending the Kyoto Protocol to greatly reduce fossil-fuel emissions of CO₂. Many people will have many questions about such a plan, but it is an interesting alternative that is receiving serious if cautious support.

Problems with Treaties and International Carbon Taxes

Any international treaty runs into the issue of verification—how can a nation tell whether other nations are cheating? The US National Research Council looked into that question in 2010 (Verifying Greenhouse Gas Emissions: Methods to Support International Climate Agreements), and found that verification of compliance is practicable. This would include a combination of national inventories (econometric data; who is buying what), and geophysical techniques (satellite, airborne and surface-based monitoring of atmospheric concentrations and isotopic ratios). The small variations in concentration of CO₂ around the planet reveal sources and sinks of the gas, and the isotopic composition can separate biological (higher carbon-12 to carbon-13 ratio; either recently living plants or long-dead fossil fuels) from abiological (volcanic, for example) carbon, and modern-biosphere (lower carbon-12 to carbon-14 ratio) from fossil-fuel carbon. Combining the geophysical and economic data can provide a clearer picture than is available from either source by itself.

A carbon tax rising by 2% or 4% per year cannot be a solution for government funding forever because as decades become centuries, the cost per gallon would pass the cost of the car and continue onto huge values. Clearly, policies are reexamined before decades become centuries. The goal of ultimately reaching a sustainable energy system means that taxing fossil fuels cannot continue forever. But, for decades at least, harmonized carbon taxes could supply much government revenue while reducing global warming, having little direct effect on the economy, and improving the economy if the value of avoiding the global warming is considered.

Activate Your Learning

Video: CO₂ Map (1:52)

Click here for a video transcript of "CO₂ Map".

PRESENTER: This figure from NASA-- from the AIRS team-- shows the concentration of CO₂ in the atmosphere in May of 2013. This is after a winter of lots of fossil fuel burning in the north and lots of decaying plants and just before the plants really start growing in the spring and taking out CO₂ from the air. What you see in this broad band up here is a relatively high CO₂ from the fossil fuel burning and the plant decay. Whereas down here, where plants have been growing really rapidly, the CO₂ is a little on the low side.

If you were to come back a few months later, these would have reversed a little bit. Now these variations are very small. 402 was the highest, 391 is the lowest. It's barely more than plus or minus 1% about the mean because there's a lot of mixing around the planet.

CO₂ goes up and down with winter and summer, and CO₂ goes up and with fossil fuel burning. What's useful here is that these images, plus measurements that are made on the ground, plus economic data, tell us who is burning fossil fuels and adding it to the atmosphere, as well as what's going on naturally. If we were to have a treaty that limited fossil fuel burning, it could be verified by using available data. You can't cheat on fossil fuel burning and releasing the CO₂ because the CO₂ is measurable in the air.

NASA AIRS satellite data from May 2013.

Source: Global Patterns of Carbon Dioxide, posted September 27, 2013, data acquired May 1 - 31, 2013 NASA Earth Observatory image by Rob Simmon and Jesse Allen with data courtesy the AIRS science team.

Explain how the data shown in the figure above would allow us to determine if countries are obeying emissions regulations.

Click for answer.

ANSWER: We have the technical ability to identify sources and sinks of CO₂, from nature and humans. The image above shows slightly elevated CO₂ concentrations in the air over the northern mid-latitudes compared to other regions, from fossil-fuel burning and wintertime plant decay. A similar pattern occurs each year, and reverses during the northern summer as plant growth in the northern hemisphere removes CO₂ from the air faster than fossil-fuel burning adds CO₂ there. But, each year, the pattern occurs with a higher average value, because plant growth and decay over summers and winters remove and add and remove and add CO₂, while fossil-fuel burning adds and adds and adds and adds…. The differences in concentration between different places and seasons are small, in part because winds rapidly mix CO₂ around the planet. The ability to detect sources and sinks of CO₂ by monitoring atmospheric concentrations would help in verifying any treaties to reduce CO₂ emissions.

Harmonious Taxes