‘What is a carbon cap and how will it cure our oil addiction?’
A contest to explain something that isn’t true — what a novelty. If I were running a contest, it would be, "What is a carbon cap and why should it not cover the transportation sector?" But I digress.
So I get an email from the Environmental Defense Fund asking me to direct my readers to this video/graphics competition:
Explain to America how a carbon cap will solve our oil addiction
Many scientists, economists, environmentalists and business leaders agree that a cap on carbon emissions is the best way to cure our addiction to oil. But, quickly and vividly explaining how a cap will solve our energy problems is a challenge.
We need your help conveying this concept to the American people in a clear, brief, convincing and memorable way to stick in the public’s consciousness-like the well-known shot of an egg frying that depicted "your-brain-on-drugs."
Actually, I don’t really know any scientists, economists, environmentalists, and business leaders who think a carbon cap is the best way to cure our addiction to oil. It is possible I hang out with the wrong crowd. But I think it is more likely that they all understand something I’ve written about on my blog many times — a carbon price is a lousy way to drive oil savings.
In fact, it is all but inconceivable that a carbon cap will solve our oil addiction (see "Peter Barnes’ Cap & Dividend plan is fatally incomplete"):
The key facts to remember are that: "$50 per tonne of carbon corresponds to 12.5 cents per gallon of gasoline (PDF) or 0.5 cents per kilowatthour for electricity produced from natural gas at 53% efficiency (or 1.3 cents per kilowatt-hour for coal at 34% efficiency)."
That means a price of $400 a metric ton of carbon (whether achieved through a tax or a cap & trade system) would increase the price of gasoline a mere $1 a gallon. How much efficiency would that drive? Not bloody much! How do we know? How much efficiency did going from $2 a gallon to $3 a gallon drive? [Hint: Not bloody much.] Second, I was just in England, and they’re paying over $8 a gallon — how much more efficient are their cars than ours? [Hint: As of 2002, the average fuel economy of European Union vehicles was 37 miles per gallon, just a tad more than what the new energy bill requires, and their taxes are typically some $2 a gallon above ours.]
This is so analytically obvious that the nonpartisan Congressional Budget Office just issued a report, "Climate-Change Policy and CO2 Emissions from Passenger Vehicles" to make this precise point:
Charging a price for CO2 emissions would raise the price of gasoline, but that increase–and the resulting decrease in vehicle emissions–would be relatively small. Most of the reduction in CO2 emissions would occur in other sectors.
The initial impact on vehicle emissions would be particularly small: People could drive less and at slower speeds, and some could switch to public transit, but in the short run they would have few other alternatives. Over time, consumers could respond to higher gasoline prices by buying more fuel-efficient vehicles and reducing their commuting distance when an opportunity arises. Substantial increases in gasoline prices in recent years have triggered measurable responses of both types. But a CO2 price high enough to induce sizable reductions from other sources of emissions would have only a small effect on vehicle emissions of CO2. Recent changes to the automobile fuel economy standards–greatly increasing their stringency–will result in a substantial decline in vehicle emissions whether gasoline prices increase or not.
Remember, the 2007 "Energy Independence and Security Act," requires new car fuel economy standards in 2020 to be at least 35 miles per gallon. As CBO notes,
… gasoline prices might have to rise above $6.50 per gallon–for example, from a CO2 price that added $2.00 or $2.50 per gallon to gasoline prices–for the average fuel economy of new vehicles in the United States to approach the 35 mpg that the new CAFE standards will require. But the CO2 prices contemplated in current U.S. climate legislation and in prominent international policy analyses would add much less than $2.00 to the price of gasoline. Thus, such pricing, by itself, would probably not increase average fuel economy beyond what the CAFE standards will require.
And, needless to say, 35 mpg does not bring us anywhere near curing our oil addiction. We’re going to need at least triple that.
The bottom line is that a carbon cap is utterly irrelevant to curing our oil addiction. I’ll repeat something I’ve said many times: No country has successfully introduced a mass-market alternative fuel vehicle without the help of major government incentives and mandates.
If you want to cure our oil addiction, while substantially reducing greenhouse gas emissions, you must replace the vast majority of the vehicle fleet with superefficient vehicles, plug-in hybrids, and pure electric cars while replacing essentially all of the grid with zero-carbon electricity. But the per-mile cost of driving on electricity is already one-fifth that of the per-mile cost of driving on gasoline.
So the key to ending our oil addiction in a climate-friendly way is not increasing the price of carbon through a cap. The key is much tougher fuel economy standards along with incentives and mandates for plug in hybrids and electric cars. [And, yes, pushing hard on cellulosic biofuels, especially for long-distance driving, trucking, and air travel, would also help (see "Are biofuels a core climate solution?").]
So my recommendation is that EDF cancel the contest and use the money to buy some tons on the European market and retire them.