Calvin Frost05.30.17
President Sean Decatur of Kenyon College joined the American College and University President’s Climate Commitment (i.e., the Paris Accord for colleges and universities) because he wanted his college to “work toward achieving a net zero carbon footprint. He said:
“Climate change is really the issue of our lifetimes and of the next generation’s as well. Educational institutions have a particularly important role to take the lead in this as a model and an example of what can be done.”
This was part of an article in the winter edition of the Kenyon Alumni Bulletin. It was the lead into an article that told the story of an independent study project that examined how Kenyon could become a leader in sustainability. It’s also a good lead into this issue’s column on “carbon tax.”
First, what is carbon tax? It’s a fee imposed on the burning of carbon based fuels such as coal, oil and gas. But it’s really an instrument that is used to incentivize users of carbon-based fuels to reduce their consumption, thereby reducing the effect that CO2 has on climate. Carbon tax is probably the only way to force carbon fuel users to pay for the damage caused by releasing carbon dioxide into the atmosphere. To quote the Carbon Tax Center: “It becomes a powerful monetary disincentive that motivates switches to clean energy, simply by making it more economically rewarding to move to non-carbon fuels and energy efficiency.” Just a bit more from the Carbon Tax Center:
The energy essence of every fossil fuel is its carbon and hydrogen atoms. Oxidizing (combusting) those atoms releases their heat energy but also converts carbon to carbon dioxide. Natural gas, with a high ratio of hydrogen to carbon, is the least carbon-intensive fuel, while coal is the most. The CO2 released from burning these fuels rises into the upper atmosphere and remains resident there – typically for around a century – trapping heat re-radiated from Earth’s surface and causing global warming and other harmful climate changes.
The carbon content of every fossil fuel, from anthracite or lignite coal to heating oil and natural gas, is precisely known. A carbon tax obeys these proportions, taxing coal more heavily than petroleum products, and much more than natural gas. This makes a carbon tax simple to document and measure.
The concept of carbon tax utilizes current tax collection schemes, so there are no additional costs. It is paid “upstream” at the point where oil or gas or coal is extracted from the earth. Obviously, the tax is passed along to the entity buying the fuel: e.g., a coal company would be taxed and pass the cost of the tax to the utility who in turn would pass it on to the consumer. The point is the additional cost gives the consumer or producer an incentive to reduce their choice of carbon emitting energy by switching to clean energy such as wind or solar or geothermal. It is also a tool that folks like President Decatur of Kenyon and his project team will need to utilize to achieve zero carbon footprint.
Interestingly, it can be argued that carbon tax, which drives us toward clean energy, supports a growing economy. Let me explain. Green House Gas (GHG) mitigation can boost efficiency, productivity and innovation. Since 2008, the US has experienced the first sustained period of GHG emissions reduction along with the greatest economic growth in our history. “Specifically, CO2 emissions from the energy sector fell by 9.5% from 2008 to 2015, while the economy grew by 10%. In this same period, the amount of energy consumed per dollar of real gross domestic product (GDP) fell by almost 11%, and the amount of CO2 emitted per unit of energy consumed declined by 8%, and CO2 emitted per dollar of GDP declined by 18%.” This is a quote from the Council of Economic Advisors in the Economic Report to the President, 2017. It’s a mouthful, but if you’ll reread it, it supports the concept that clean energy creates a growing economy.
Carbon tax to clean energy boosts bottom line profits for businesses. This means reduced costs for consumers and higher returns for shareholders. The government (and I trust that our current administration will use prudence as they consider change) has put fuel economy standards that cut “more than eight billion tons of carbon pollution over the lifetime of a new vehicle that is sold between 2012 and 2029. In addition, 44 appliance standards and new building codes are projected to cut 2.4 billion tons of carbon pollution and save $550 billion for consumers by 2030. So, investments in clean energy are being made to cut energy waste in order to save money and allow for investment in other areas of a business. Look at what Alcoa and General Motors are doing:
Alcoa has set a goal of reducing its GHG intensity 30% by 2020 from its 2005 baseline, and General Motors is working to reduce its energy intensity from facilities by 20% from its 2011 baseline over the same timeframe. Investments like these are contributing to what we are seeing take place across the economy: Total energy consumption in 2015 was 2.5% lower than it was in 2008, whereas the economy was 10% higher. (I might add that Alcoa’s goal is herculean because aluminum manufacturing is incredibly energy intensive).
And the neat part of a carbon tax is that it can be instrumental for others who have been reluctant to make clean energy commitments.
If we look at the US electric power industry, utilities, we quickly realize that it is the largest source of GHG emissions in our economy. It, too, is changing. Since 2008, natural gas to electricity has increased from 21% to 33%, all at the expense of coal. Because of new technology, gas will continue to grow and utilities will be hard pressed to install coal-fired power plants. Carbon tax schemes would increase this transition even more quickly. Most of us have seen wind farms and these, along with solar, have increased dramatically. The result is a dramatic decrease in renewable electricity costs between 2007 and 2015. The cost of electricity fell 41% for wind, 54% for rooftop solar photovoltaic (PV) installations, and 64% for utility-scale PV. In fact, Bloomberg New Energy Finance said that 2015 was a record year for clean energy investment with renewable attracting twice as much capital as fossil fuel.
The drive to change our dependence on carbon based fuels has finally attracted the “pitch guys” in Washington. A group of elder Republican statesmen, calling themselves the Climate Leadership Council, is trying to convince the current Trump administration that a carbon tax is the way to combat global warming. (Of course, Mr. Trump doesn’t believe in global warming, so this could be an uphill battle). The group includes some notables such as James Baker and George Shultz, both former Secretaries of State, and Henry Paulson, a former Secretary of the Treasury. Their plan creates a carbon tax on fossil fuels where, as mentioned earlier, those fuels enter the economy such as the mine, well, or port. This carbon tax, they believe, would be a powerful incentive to reduce carbon emissions. They add that a carbon tax is much simpler and less intrusive than the Obama Clean Power Plan, which is very complex and full of regulations. President Trump is trying to repeal this plan. However, the part I particularly like is that clean energy sources, renewables, would become more competitive with oil and coal and natural gas. Frankly, as long as the fossil energy producers use the atmosphere as a free dumping ground the less viable, economically, renewables will be. This is shades of my mentor, Lester Brown’s concept: pay the entire cost for what you have caused and will cause in the future, not just for the immediate installation.
To be sure, carbon tax, net zero carbon footprint, are not easy to understand, much less obtain. Carbon tax, and the concept thereof, becomes a political football. Is it sufficient to change the direction we’re going? Should we do it now? Can our political parties come together for the benefit of our country, for the world? How do we convince tax-adverse Republicans and this administration that is loaded with climate change skeptics? Maybe the fact that the Climate Leadership Council is comprised chiefly of Republicans is a sign that, finally, we collectively accept that man, that human activity, is the primary culprit that has caused global warming. And trust me, this includes the materials that we use in our industry.
Another Letter from the Earth.
Calvin Frost is chairman of Channeled Resources Group, headquartered in Chicago, the parent company of Maratech International and GMC Coating. His email address is cfrost@channeledresources.com.
“Climate change is really the issue of our lifetimes and of the next generation’s as well. Educational institutions have a particularly important role to take the lead in this as a model and an example of what can be done.”
This was part of an article in the winter edition of the Kenyon Alumni Bulletin. It was the lead into an article that told the story of an independent study project that examined how Kenyon could become a leader in sustainability. It’s also a good lead into this issue’s column on “carbon tax.”
First, what is carbon tax? It’s a fee imposed on the burning of carbon based fuels such as coal, oil and gas. But it’s really an instrument that is used to incentivize users of carbon-based fuels to reduce their consumption, thereby reducing the effect that CO2 has on climate. Carbon tax is probably the only way to force carbon fuel users to pay for the damage caused by releasing carbon dioxide into the atmosphere. To quote the Carbon Tax Center: “It becomes a powerful monetary disincentive that motivates switches to clean energy, simply by making it more economically rewarding to move to non-carbon fuels and energy efficiency.” Just a bit more from the Carbon Tax Center:
The energy essence of every fossil fuel is its carbon and hydrogen atoms. Oxidizing (combusting) those atoms releases their heat energy but also converts carbon to carbon dioxide. Natural gas, with a high ratio of hydrogen to carbon, is the least carbon-intensive fuel, while coal is the most. The CO2 released from burning these fuels rises into the upper atmosphere and remains resident there – typically for around a century – trapping heat re-radiated from Earth’s surface and causing global warming and other harmful climate changes.
The carbon content of every fossil fuel, from anthracite or lignite coal to heating oil and natural gas, is precisely known. A carbon tax obeys these proportions, taxing coal more heavily than petroleum products, and much more than natural gas. This makes a carbon tax simple to document and measure.
The concept of carbon tax utilizes current tax collection schemes, so there are no additional costs. It is paid “upstream” at the point where oil or gas or coal is extracted from the earth. Obviously, the tax is passed along to the entity buying the fuel: e.g., a coal company would be taxed and pass the cost of the tax to the utility who in turn would pass it on to the consumer. The point is the additional cost gives the consumer or producer an incentive to reduce their choice of carbon emitting energy by switching to clean energy such as wind or solar or geothermal. It is also a tool that folks like President Decatur of Kenyon and his project team will need to utilize to achieve zero carbon footprint.
Interestingly, it can be argued that carbon tax, which drives us toward clean energy, supports a growing economy. Let me explain. Green House Gas (GHG) mitigation can boost efficiency, productivity and innovation. Since 2008, the US has experienced the first sustained period of GHG emissions reduction along with the greatest economic growth in our history. “Specifically, CO2 emissions from the energy sector fell by 9.5% from 2008 to 2015, while the economy grew by 10%. In this same period, the amount of energy consumed per dollar of real gross domestic product (GDP) fell by almost 11%, and the amount of CO2 emitted per unit of energy consumed declined by 8%, and CO2 emitted per dollar of GDP declined by 18%.” This is a quote from the Council of Economic Advisors in the Economic Report to the President, 2017. It’s a mouthful, but if you’ll reread it, it supports the concept that clean energy creates a growing economy.
Carbon tax to clean energy boosts bottom line profits for businesses. This means reduced costs for consumers and higher returns for shareholders. The government (and I trust that our current administration will use prudence as they consider change) has put fuel economy standards that cut “more than eight billion tons of carbon pollution over the lifetime of a new vehicle that is sold between 2012 and 2029. In addition, 44 appliance standards and new building codes are projected to cut 2.4 billion tons of carbon pollution and save $550 billion for consumers by 2030. So, investments in clean energy are being made to cut energy waste in order to save money and allow for investment in other areas of a business. Look at what Alcoa and General Motors are doing:
Alcoa has set a goal of reducing its GHG intensity 30% by 2020 from its 2005 baseline, and General Motors is working to reduce its energy intensity from facilities by 20% from its 2011 baseline over the same timeframe. Investments like these are contributing to what we are seeing take place across the economy: Total energy consumption in 2015 was 2.5% lower than it was in 2008, whereas the economy was 10% higher. (I might add that Alcoa’s goal is herculean because aluminum manufacturing is incredibly energy intensive).
And the neat part of a carbon tax is that it can be instrumental for others who have been reluctant to make clean energy commitments.
If we look at the US electric power industry, utilities, we quickly realize that it is the largest source of GHG emissions in our economy. It, too, is changing. Since 2008, natural gas to electricity has increased from 21% to 33%, all at the expense of coal. Because of new technology, gas will continue to grow and utilities will be hard pressed to install coal-fired power plants. Carbon tax schemes would increase this transition even more quickly. Most of us have seen wind farms and these, along with solar, have increased dramatically. The result is a dramatic decrease in renewable electricity costs between 2007 and 2015. The cost of electricity fell 41% for wind, 54% for rooftop solar photovoltaic (PV) installations, and 64% for utility-scale PV. In fact, Bloomberg New Energy Finance said that 2015 was a record year for clean energy investment with renewable attracting twice as much capital as fossil fuel.
The drive to change our dependence on carbon based fuels has finally attracted the “pitch guys” in Washington. A group of elder Republican statesmen, calling themselves the Climate Leadership Council, is trying to convince the current Trump administration that a carbon tax is the way to combat global warming. (Of course, Mr. Trump doesn’t believe in global warming, so this could be an uphill battle). The group includes some notables such as James Baker and George Shultz, both former Secretaries of State, and Henry Paulson, a former Secretary of the Treasury. Their plan creates a carbon tax on fossil fuels where, as mentioned earlier, those fuels enter the economy such as the mine, well, or port. This carbon tax, they believe, would be a powerful incentive to reduce carbon emissions. They add that a carbon tax is much simpler and less intrusive than the Obama Clean Power Plan, which is very complex and full of regulations. President Trump is trying to repeal this plan. However, the part I particularly like is that clean energy sources, renewables, would become more competitive with oil and coal and natural gas. Frankly, as long as the fossil energy producers use the atmosphere as a free dumping ground the less viable, economically, renewables will be. This is shades of my mentor, Lester Brown’s concept: pay the entire cost for what you have caused and will cause in the future, not just for the immediate installation.
To be sure, carbon tax, net zero carbon footprint, are not easy to understand, much less obtain. Carbon tax, and the concept thereof, becomes a political football. Is it sufficient to change the direction we’re going? Should we do it now? Can our political parties come together for the benefit of our country, for the world? How do we convince tax-adverse Republicans and this administration that is loaded with climate change skeptics? Maybe the fact that the Climate Leadership Council is comprised chiefly of Republicans is a sign that, finally, we collectively accept that man, that human activity, is the primary culprit that has caused global warming. And trust me, this includes the materials that we use in our industry.
Another Letter from the Earth.
Calvin Frost is chairman of Channeled Resources Group, headquartered in Chicago, the parent company of Maratech International and GMC Coating. His email address is cfrost@channeledresources.com.