The American Spectator

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But won't the bills' carbon penalties make deep emission reductions achievable by spurring technological change? Don't bet on it.

European countries have been taxing gasoline for decades at rates that translate into carbon penalties of $200 to $300 per ton of CO2. (A $1.00 a gallon gasoline tax roughly translates into a $100 per ton CO2 penalty, and Europe taxes gasoline at rates of $2.00 to $3.00 (PDF) a gallon or more.) Where in Europe is the miracle fuel to replace petroleum? Where are all the zero emission vehicles? Europe is not one mile closer than we are to achieving a "beyond petroleum" transport system. On the contrary, European Union transport sector CO2 emissions in 2004 were 26 percent higher than in 1990.

The EIA analyzed the market impacts of the relatively modest -- $7 per ton -- CO2 emission cap in "discussion draft" legislation sponsored by Sens. Jeff Bingaman (D-NM) and Arlen Specter (R-PA). The bill's proposed cap would cut projected investment in coal generation by more than half (PDF). However, it does not make carbon capture and storage (CCS) economical. Would a bigger regulatory hammer do the trick? No, it would just drive more investment out of coal generation.

An MIT study (PDF) finds that it will take billions of dollars over a decade to find out whether CCS is economical under a $30-per-ton CO2 penalty. Note that even if CCS is determined to be "economical," the MIT study estimates that coal generation over the next five decades grows by less than 20 percent of what it would in the absence of a carbon penalty.

Regulatory climate strategies put the policy cart before the technology horse. Not until markets are capable of producing vast quantities of affordable energy without emissions would it be reasonable for Congress to consider mandatory emission cuts.

Policy makers concerned about global warming should do three things. First, as Danish statistician Bjorn Lomborg recommends (PDF), encourage worldwide R&D investment in non-carbon-emitting energy technologies. This -- not tougher CO2 controls -- should be the focus of post-Kyoto diplomacy.

Second, eliminate tax and other political barriers to innovation and capital stock. A recent study (PDF) by the American Council for Capital Formation shows that the United States lags behind many of our trading partners in capital cost recovery for investment in electric power generation, transmission lines, pollution control equipment, and petroleum refining capacity.

Third, as economist Indur Goklany recommends (PDF), for a fraction of Kyoto's cost, target international assistance on those threats to human health and welfare where we know how to do a lot of good for each dollar invested. This would not only save millions of lives today, it would also help developing countries become wealthier and less vulnerable to climate-related risk.

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Taxes, Environment, Global Warming, Books, Law, European Union, Energy, Oil