Last week (February 25, 2009), Dr. James Hansen, the most influential scientist in the alarmist camp, testified before the House Ways & Means Committee on “Scientific Objectives for Climate Change Legislation.” In oral remarks, Hansen, who spoke as a faculty member of Columbia University’s Earth Institute rather than as an employee of NASA, said the scientific objective of climate policy should be to lower atmospheric concentrations of carbon dioxide (CO2) from 385 parts per million (ppm) to 350 ppm or less. This, as he surely knows, is an impossible goal barring radical breakthroughs not just in energy production but also in air capture of CO2.
Even if by 2050, the United States, Europe, Canada, Japan, and former Soviet Union achieve zero net emissions and developing countries reduce their carbon intensity to 62% below 2005 levels, this would only be enough to reduce CO2 concentrations to 450 ppm by century’s end (see pages 8-11 of this presentation).
Dr. John Christy of the University of Alabama Huntsville testified that datasets he and his colleagues have built contradict the climate model hypotheses and surface temperature records on which alarmism rests. Specifically, Christy said that: (1) climate models do not include the negative cloud-feedback (cooling) mechanism revealed by satellite data; (2) the observed warming trend is below the mean of model simulations of the IPCC mid-range emissions scenario; (3) IPCC surface temperature data are skewed upwards by local heat effects of urbanization and agriculture; and (4) all three model projections of global warming presented by Dr. Hansen in his now-famous 1988 congressional testimony, including the projection in which drastic CO2 cuts are assumed, overshoot observations.
Hansen did not challenge any of those four points directly. Instead, he asserted without offering specifics that his estimate of climate sensitivity is based not on models but on “paleoclimate information,” which “has improved enormously in recent years.” He also said his views are based on “what’s happening in the real world”—loss of Arctic sea ice, methane releases from tundra regions, and negative mass balance changes in ice sheets. Asserting that the science is “crystal clear,” Hansen said Congress should ask the National Academy of Sciences to produce a report and then accept its conclusions as “authoritative.”
The third witness, Dr. Brenda Ekwurzel of the Union of Concerned Scientists, picking up on Hansen’s “real world” argument, said that climate models are too “conservative” and underestimate Arctic ice loss and species migration.
Christy countered that many variables affect Arctic ice behavior, the Arctic had even less ice 5,000 years ago, and models are not good at simulating ice dynamics. One might add that if species are migrating more rapidly than forecast, it means they are more adaptable than models assume.
Hansen and Ekwurzel’s remarks are noteworthy because they reveal how alarmists are dealing with data and analysis showing that the models underpinning the whole IPCC/UNFCC/Kyoto enterprise are too sensitive and “in the process of failing,” as Patrick Michaels put it recently. No matter that Hansen launched the global warming movement with model projections that have been falsified by observations. Hansen now says his views are not based on models and the science is “crystal clear” from “paleoclimate information” and the “real world.”
Ekwurzel, for her part, effectively redefined climate sensitivity to mean climate impacts per a given increment of warming rather than temperature change per a given increment of CO2. This way she gets to claim that less warming than the IPCC warned us about leads to worse impacts than the IPCC warned us about. There has been no net warming since 2001, but we should be more worried than ever! As I observed in another place, warming or no, alarmists predictably predict that climate change is worse than predicted.
From a policy standpoint, the most novel part of the hearing was Hansen’s attack on “Cap & Trade” and advocacy of what he calls “Tax & Dividend.”
Cap & Trade is the main climate policy championed by Al Gore, the Obama Administration, the European Union, the IPCC, and just about every environmental group. It should actually be called “Tax & Trade,” said Hansen, because it places a hidden tax on carbon-based fuels and all goods and services produced with those fuels. Indeed, “Part of the reason for the pseudonym is to avoid the stigma of a tax, under the presumption that the public is too gullible to figure it out.”
He continued: “Other parties support ‘Cap & Trade’ because they hope to profit – it is a give-away to special interests, who feel, based on extensive empirical evidence, that they will be able to manipulate the program through their lobbyists. Except for its stealth approach to taxing the public, and its attraction to special interests, ‘Cap & Trade’ seems to have little merit.”
Contrary to proponents, the Clean Air Act’s Acid Rain trading program is not a model for climate policy, because “it was a program that required existing facilities to employ a relatively simple low-cost solution [scrubbers and low-sulfur coal],” whereas carbon trading would “require massive investments in new infrastructure and innovation.” A cap produces price volatility, discouraging investment in new technology. Trading programs don’t actually reduce emissions, due to special interest loopholes and creative accounting. The Kyoto Protocol has been an “abject failure.”
Finally, cap-and-trade is politically unsustainable. The public will soon learn it is a tax. They’ll see people on Wall Street making millions at their expense. And because they’ll bear all the cost and reap no dividend, “the public will revolt before the cap tax is large enough to transform society.”
Instead of Tax & Trade, Hansen proposes a carbon tax initially set equivalent to $1/gallon of gasoline, or $115 per ton of CO2, with 100% of the proceeds refunded on a per capita basis to the American people.
At the 2007 level of fossil energy consumption, this would generate about $670 billion per year, Hansen estimates. “If we give one share to each legal resident age 22 and over, one half-share to college age youth (18-21), one half-share to the parents of each child up to two children per family, that yields about 224 million shares in 2007.” Here’s how it works out:
Single share: $3000/year ($250 per month, deposited monthly in bank account)
Family with 2 children: $9000/year ($750 per month, deposited monthly in bank account)
The total tax would be returned to the people as dividends, and dividends would increase as the tax increases. The dividend component would not only make the tax acceptable to the public, Hansen argues, but would create incentives for purchases and investments that reduce emissions. The person or household with a carbon footprint less than average “would obtain more from the dividend than paid in the tax.”
This is all quite clever. However, Hansen did not address several obvious problems.
(1) Tax & Dividend would revive pain at the pump at a time of high unemployment and financial peril. The European Union taxes gasoline at $3-4/gallon. Yet, according to the European Environment Agency, EU transport sector CO2 emissions increased by 26% from 1990 to 2006. So, carbon taxes would likely have to be substantially higher than $1/gallon of gasoline to move America “beyond petroleum,” especially if petroleum prices remain at about $40 a barrel.
(2) Tax & Dividend would make coal electric generation uneconomic, jeopardizing electric supply reliability and driving up electric bills beyond the amount of the tax itself. Consider EIA’s analysis of the Lieberman-Warner Climate Security Act (S. 2191). In the reference (no cap) case, coal generation increases from 1,988 billion kWh in 2006 to 2,357 in 2020 and to 2,838 in 2030. But, under Lieberman-Warner, coal generation declines from 1,988 billion kWh in 2006 to 1,890 in 2020 (when carbon permits trade for $76 per ton) and to 703 in 2030 (when carbon permits trade for $151 per ton).
Note that EIA assesses only the impacts on coal generation of the added costs, not the impacts on investor psychology of Congress’s embrace of an aggressive anti-coal policy. Note also that Hansen expects carbon taxes to increase to $4/gallon of gasoline, or $460 per ton.
Coal is the source of half the nation’s electricity and more than half of our base-load power. Tax & Dividend could decimate coal generation in one or two decades—before other sources of electricity are ready to fill the void. This would lead to profound supply-demand imbalances and increase electricity prices significantly faster than dividends increase.
(3) The ‘green’ stimulus may be significantly less than hoped for. There is no guarantee people will use their dividends to buy hybrid cars, energy-efficient appliances, or green energy. People have always had the option to save money by reducing their energy consumption, yet even when oil was selling for $140 a barrel, there would have been virtually no market for ethanol, renewables, or hybrids without government mandates, subsidies, or tax preferences. Government rebating with one hand what it has taken away with the other could blunt the incentives that energy taxes would otherwise create.
(4) Tax & Dividend would shift capital from more productive to less productive jobs. Hansen unwittingly confirmed this, arguing that phasing out coal will lead to a net increase in jobs because “the alternative energies are more labor-intensive and require—and will produce more jobs than coal mining.” But replacing labor-intensive production with capital-intensive production is what economic progress is largely about. Coal jobs are more productive than alternative energy jobs, because they produce more electricity per man-hour. As my colleague Iain Murray points out, “’Green jobs’ are more expensive to society in general. Those 85,000 people in the wind industry contribute to the generation of just 1.3 million MegaWatt-hours of electricity, while the coal industry generates 155 million MWh, making each coal industry job seven times more productive than a wind industry job. The difference in cost is born by the rest of us.”
(5) Tax & Dividend would confer windfall profits on some and inflict windfall losses on others simply by reason of the nature of their jobs or industries or where they happen to live. John Christy brought this out in the hearing. If you’re an independent trucker in Alabama, you consume far more motor fuel than the average household. Yet your share of the carbon tax revenues is the average (per capita) share. The scheme will transfer wealth from you to your neighbor with a white-collar job, not because you waste gasoline but because you haul freight for a living. Similarly, as Iain Murray observes, a carbon tax would place lighter burdens on the “service-dominated coasts” and heavier burdens on the “industrial heartland.” The wealth transfer between regions could be “massive.”