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Hansen Belittles Models, Cap-and-Trade, Kyoto; Calls for Coal-destroying Carbon Tax

By -- March 2, 2009

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.”

Energy realists have made the same criticisms (see, e.g. here, here, and here), but when the doyen of climate alarmism bashes Kyoto and carbon trading, it is truly a “Man Bites Dog” story.

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.”

10 Comments


  1. Ed Reid  

    Merely stabilizing atmospheric CO2 concentrations would require reducing the global annual CO2 emissions rate to or below the annual emissions rate at which the atmospheric concentration began to increase. The information I have reviewed shows that atmospheric CO2 concentrations began to increase in about 1750, when annual CO2 emissions were approximately 1/2000th of current annual emission rates. Therefore, stabilization would require a global annual emissions rate reduction of 99.95% (+/-). That’s close enough to 100% for government work.

    It should be noted that the human and domesticated animal populations of the globe were substantially lower in 1750 than they are today. Therefore, even if fossil fuel combustion ceased, dramatic human and domesticated animal population decreases would be required to permit stabilization of the atmospheric concentration of CO2.

    IEA has estimated the investment required to reduce annual CO2 emissions by 50% by 2050 would be $45 trillion. It is reasonable to assume that the remaining 50% would be more difficult and more expensive to eliminate. That’s $100+ trillion, or approximately $2.5+ trillion per year over the period. The US share of that investment would be $700+ billion per year, assuming that we were not also expected to provide a share of the funding for the developing world.

    The massiveness of this prospective monstrosity makes me wonder why we are paying any attention at all to the relatively trivial “porculus” bill, which is supposedly a “one time thing”.

    Reply

  2. TokyoTom  

    Marlo, first, I’m afraid I don’t follow you on the science. We can’t stop our still growing GHG releases on a dime, much less the short- to medium-term feedbacks from water, methane and albedo changes, and long-term will persist for centuries, and the water cycles, the oceans’ pH and world’s biota are changing noticeably and fairly rapidly, even without significant further increases during the past decade – yet what is it, precisely, about our ability to change our influence on the system or to control responses that gives you comfort? Why do you seem to think it is “conservative” for our nation and others to do nothing in light of our remarkable and uncontrolled global climate experiment?

    BTW, surely you are aware that Hansen has earlier offered extensive information that paleoclimate records indicate that long-range climate rsponse to a CO2 doubling is on the scale of 3 degrees C. Did you miss that? Or were you more eager to say that Hansen’s reference to more recent studies about facts some how implies that Hansen is “dissing” models? What’s the point anyway, other than point-scoring – if facts appear to indicate that long-term sensitivity is relatively high, should we be ignoring that and placing our faith in models instead? Should facts not further inform models, or policy-makers?

    Second, while you note Hansen’s attack on cap & trade and his “tax and dividend” proposal “quite clever”, you fail to offer any opinion on the realative merits of these quite different proposals. Instead, you offer some sniping criticisms of tax and dividend, as if you are hoping that the consequence will be that the Obama administration, Dems and rent-seekers generally will turn away from climate policy altogether. But isn’t that nothing but wishful thinking, and shouldn’t libertarians and others who prefer to avoid the monstrosity of cap & trade be trying to encourage the efforts of those whose proposals would be much less economically damaging? Isn’t Hansen’s proposal far preferable over cap & trade, and the kind of industrial planning that Jon Adler says is inevitable from the EPA under EPA vs. Massachusetts without legislative action?

    Exxon and a host of others (as noted at the blog posts linked at my name) have come clearly down in favor of carbon taxes over cap & trade; perhaps you may at some point care to favor us with your own comparative views.

    It seems to me that Hansen’s proposal is clearly preferable; it could be easily implemented and monitored, would not involve large new bureaucracies, would be much more transparent and less susceptible to rent-seeking, would provide market signals on GHGs while having no fiscal impact, would be grounded in the principle that the atmosphere is owned by citizens and not government (or by corporations that are given or purchase rights to emit GHGs), and, by being refunded per capita to citizens would be generally progressive.

    Third, as for your criticisms of Hansen’s proposal:

    – carbon taxes will hit coal use more heavily than petroluem or natural gas, so focussing first on “pain at the pump” smacks of pandering, especially as revenue recycling may eliminate the pain completely;

    – older, dirtier coal plants are already uneconomic and generate tremendous costs to health and property that are not costed to producers or consumers; taxing carbon is a great way to end some of the nonsense incentivized by the CAA. Your speculation about power supply and electricity prices is nothing more than speculation, but oil and gas-fired plants could be brought on line relatively quickly;

    – as for the “green stimulus” effect, it is ironic that you fail to see that the fact that “There is no guarantee people will use their dividends to buy hybrid cars, energy-efficient appliances, or green energy” is in fact an argument IN FAVOR of rebated carbon taxes as opposed to cap and trade, as the first allows much greater economic freedom and is thus more conducive to wealth creation. Further, not only is dividending the tax proceeds a great way to make sure that the government doesn’t have an even larger pot to dole out mandates, subsidies and other goodies to favored industries, but the right could trade its acceptance for such a tax for elimination of existing subsidies to ethanol and solar.

    – your point about labor productivity is fair, but it ignores the social cost of carbon. Has forcing polluting industries for the ’60s on benefitted society and improved productivity as a whole the whole? Or is it simply more important to allow certain classes of producers and consumers to profit while continuing to shift costs to others?

    – as for “massive” transfers, this is all “would” and “could” without any backing, and it completely ignores all of the massive wealth transfers involved in the way we presently regulate power generation and energy (and have refused to regulate GHGs). I’m happy to have more information, but let’s not forget that the whole purpose is to have a closer alignment between profits/benefits and social costs.

    Reply

  3. Hansen belittles models, carbon trading, Kyoto; calls for coal-destroying carbon tax | OpenMarket.org  

    […] I discuss here, Hansen’s beguiling proposal could decimate coal-based power in a decade or two, pushing […]

    Reply

  4. Hansen belittles models, carbon trading, Kyoto; calls for coal-destroying carbon tax | GlobalWarming.org  

    […] would be refunded to the American people via monthly deposits to their bank accounts. As I discuss here, Hansen’s beguiling proposal could decimate coal-based power in a decade or two, pushing […]

    Reply

  5. CTF  

    As usual, I’m with Tokyo Tom…A carbon tax is absolutely the better approach. Not only would it avoid the evasion and market manipulation that are inherent to a cap and trade scheme, but it would also incentivize the creation of new, climate-friendly technology. The only downside is possibly its greatest strength: it’s transparent, straightforward and called what it is: a tax.

    Reply

  6. Andrew  

    Hows about…Neither?

    Reply

  7. TokyoTom  

    Andrew, why do you take it up with Rex Tillerson, CEO/Chairman of Exxon? He`s been arguing for a carbon tax for two years now, and is investing $100 million in a climate project at Stanford. See the link at my name.

    Reply

  8. Andrew  

    I don’t particularly feel like arguing with some one with much more money to spend on squashing me than I could ever hope to muster. That he has put a lot of that money into a bad policy doesn’t make it right.

    Reply

  9. CO2 Regulation under the Clean Air Act: Economic Train Wreck, Constitutional Crisis, Legislative Thuggery — MasterResource  

    […] as noted in a previous post, NASA scientist James Hansen, the world’s leading voice of climate alarm, argues […]

    Reply

  10. Marlo Lewis  

    TokyoTom,

    You don’t “follow” me on the science, asking what it is about our limited ability to influence greenhouse gas levels that gives me “comfort.” Actually, it gives me angst. I worry that policymakers, influenced by Hansen et al., will try to do the undoable. If policymakers buy into the notion that we must reduce GHG levels to 350 ppm or civilization will perish, then in principle there can be NO LIMIT to the economic sacrifices they can demand of the American people (or, worse, people in developing countries).

    Perhaps what you meant to question was my apparent lack of angst about humanity’s “uncontrolled experiment” on the climate system. Herewith a few responses:

    (1) I acknowledge the reality of climate change risks, but alamists wildly exaggerate those risks and/or fob off airy speculations as scientifically-based predictions. The lack of warming of the past decade and the relatively low rate of warming of the past 30 years (~0.17C/decade) indicates a relatively low climate sensitivity. If I had to bet, I’d bet that 21st century warming is at the low-end of the IPCC forecast range.

    I am also persuaded by Indur Goklany (“Is a Richer-but-warmer World better than Poorer-but-cooler Worlds,” Energy & Environment Vol. 18, nos. 7 and 8, 2007), that even if the Stern Review is correct about the economic impacts of a high-end 21st century warming, people in developing countries will still be much better off in 2100 than people in developed countries are today. Al Gore’s claim that global warming “threatens the survival of civilization and the habitability of the Earth” seems to me based on ideology, not science.

    (2) Just as there are risks of climate change, there are also risks of climate change policy, and the latter are more hazardous to human health and welfare. Recall that the environmental movement’s first great crusade was against DDT. On the basis of pseudo-science (claims that DDT would cause cancer epidemics and wipe out avian life), the United States and many other nations banned DDT. The consequences were horrendous. Malaria, a disease that DDT had all but wiped out in many African countries, came back with a vengeance. Since the 1960s, some 40 million Africans have died who probably could have been saved by responsible use of DDT. A similarly large death toll could result if carbon tariffs prevent developing countries from exporting their products or investing in affordable, carbon-based energy.

    (3) As Indur Goklany explains (“What to Do about Climate Change,” Cato Institute Policy Analysis No. 609, 5 February 2008), targeted investment (“focused adaptation”) to solve underlying health and environmental problems that global warming might exacerbate and broad-based economic development could save many more lives at far less expense than would cap-and-trade or carbon taxes.

    Yes, I’m aware that Hansen has published studies estimating climate sensivity partly based on paleoclimate research. However, Hansen did not reference those studies in his testimony. He provided no specifics, nor did he attempt to explain how paleoclimate research supports his estimate of climate sensitivity. So I saw no reason to say more about this subject than Hansen did.

    As noted in my column, John Christy presented quantative evidence that the model projections Hansen used in 1988 to launch the global warming movement overshoot actual temperature trends. Hansen invoked “paleoclimate information” not to rebut Christy’s testimony, but to avoid having to discuss it. Rather than debate climate sensitivity with Christy, Hansen advised the Committee to ask the National Academy of Sciences to tell Congress what to think. This appeal to authority rather than to evidence is contrary to the spirit of science.

    Is a carbon tax preferable to cap-and-trade? In the abstract, yes, but in the real world, it all depends. A very high carbon tax would be more economically damaging than a very modest cap. To be politically sustainable, either carbon caps or taxes would require enactment of carbon tariffs, which could lead to trade wars and worse.

    If carbon taxes are high enough, they kill coal–Hansen’s avowed goal. But that would send electricity prices through the roof, with potentially devastating effects on productivity, GDP growth, and wages, easily swamping the dividends that more or less offset consumer losses from higher gasoline prices and household energy bills.

    Reply

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