Thinking my way through a carbon tax

A few months ago, I posted here about sustainability. That is, the economic and environmental idea that one should attempt to maintain a level of living without relying on growth metrics. Sustainability is a key metric in understanding whether a socio-economic or environmental decision is likely to lead society to ruin, or give it a chance to breathe a little longer. Humans are in a position where we need to begin taking very seriously the signals we are receiving from nature and act accordingly. I think that the recent drive by Energy Independent Vermont towards a statewide carbon tax is a result of them taking the signals seriously. That’s the right thing for them to do, and I agree with their intent. The question I’m left with is whether it’s the right place to start.

What I’m concerned about is whether the carbon tax system being worked out in the state is the right way to go about moving Vermont towards a more sustainable relationship with fuel and energy. Certainly, I believe that something has to be done. According to Limits to Growth, published in 2004, economically viable oil and natural gas reserves will be mostly depleted by the middle of this century. Even if you happen to be a climate change denier (which you really shouldn’t be), reserves of fossil fuels are what they are. Somewhere between 35 and 50 years from now, we could be looking at a situation where there is a real shortage of oil as opposed to one driven by economic politics. When that happens, we are going to need to be ready to transition to some kind of alternative.

To me, there are two categories of energy needs we will need to account for. The first is for buildings. The second is for travel. For buildings, we need to supply the means to heat and cool them, which is fairly straightforward. It also happens to be where most of our energy goes: generally speaking, buildings use more energy than vehicles because of the constant regulation of temperature. For vehicles, we need to find a way to make them run without incurring an insurmountable expense to their operators and without relying on fossil fuels. I want to look at buildings first, because it’s the most straightforward.

There are industrial, commercial, and residential buildings. Each are perhaps constructed differently, but all need to be able to regulate the environment within them to make sure the people who are inside are safe and happy. This requires energy. For these buildings, there need to be efforts to make them energy efficient and eliminate fossil fuels from their heating and cooling methods. There are currently incentives in place for the energy efficiency, but with a two-year waitlist for homes, more needs to be done. As far as the elimination of fossil fuels, the only two reliable alternatives at this point (for Vermont) are electric heating/cooling systems or wood-based heat (either pellets or cord wood). From a carbon perspective, electrical systems powered by renewably-generated electricity would be the best: no carbon released into the air at the building, and fossil fuels are not required for the generation or maintenance of electricity. Pellets and cord wood are probably going to be more common in homes until weatherization can be completed. So for buildings, we have a path of migration away from fossil fuels and towards relatively sustainable alternatives. Vehicles are a little more difficult.

In order to make the shift away from something, there has to be something available to shift towards. In the case of vehicles, the only currently practical option for commuters in rural communities would be electric vehicles: either personal or mass transportation. Electric vehicles are getting better, but their range leaves much to be desired. If the only affordable model gets around 80 miles per charge, then rural communities need to look at methods by which the charge can be maintained. The range of electric vehicles will improve over time, but it may not be until we are already out of fossil fuels. Right now, however, shifting to an electric vehicle might be sustainable from an environmental perspective, but not from a personal economic one. The good ones are expensive, though the relative price — related to gasoline-powered vehicles — is going down. Still, in the near term, the entrance cost of an electric vehicle is larger than the perceived benefits of shifting away from fossil fuels, and my in fact be prohibitive to certain demographics.

Remember, the goal is to not only find away to migrate away from fossil fuels, but to do so in a proactive way that is socio-economically sustainable as well as environmentally sound. Certainly, a statewide tax on the consumption of fossil fuels will create a market-based incentive to shift away from them, but only in the structure segment is there something viable to shift towards. In terms of travel and farming and logging and landscaping, the carbon tax simply increases the cost of doing business and makes things more difficult for homeowners, commuters, and those who rely on fossil fuels for work. Yes, there is a money back component, but there is such a delay between the carbon tax cost and the refund that it doesn’t help in the day-to-day, and if a balance isn’t found it could lead to the collapse of a home, a farm, or even a rural community. Granted, that is likely to happen when fossil fuels are depleted anyhow.

While this is all just a thought exercise, I believe that there is a gap between the carbon tax and the shift away from fossil fuels that needs to be looked at. Market-based economic incentives work because there are alternatives already on the market place. In the case of fossil fuels, the alternatives are not mature enough to be equivalent and are likely to cause near-term sustainability problems as consumers work to incorporate higher cost travel and maintenance figures into their living budgets. Additionally, people who have chosen to live remotely in more rural areas may be beyond the range of the available vehicles.

Possible remedies to this include the following:

  1. Ensure people have access to public transportation options that fit their employment needs and are cost-effective: provide funding for mass transit (rail, bus) on regular schedules to and from major employment centers
  2. Ensure the costs of more carbon-friendly vehicles/transport options are not prohibitive: tax breaks, refunds, deductions for purchasing vehicles; statutory pricing models; subsidized trade-in deals;
  3. Provide additional kick-backs or wage increases (above just income-based) to people whose employment relies on fuel and who have no other option (loggers, truck drivers, rural commuters, etc)
  4. Invest in infrastructure (fiber optic, roads, bridges) and economic incentives to ensure that there are jobs were people live; companies who allow people to work from home get more back from the carbon tax, perhaps; free Internet access for all VT citizens; remote office centers for larger employers (the state, insurance companies, etc)

Whatever we end up doing, we have to find a way to transition from fossil fuels to other energy sources for our buildings and our travel needs. It’s just a necessity at this point and there’s no arguing it. The method we choose to attempt that transition is what will make this successful or not, what will allow us to be ahead of the fossil depletion or fall victim to it. What we choose for a method should be able to meet our needs for the next decade, but also still be viable through the next 30 years.

System thinking series: What is sustainability?

I had an encounter on Twitter the other day that woke me up to my use of words in conversation that some would consider jargon. I’m new to doing the tweets, and the 140 character limit strangles me somewhat. In this case, he was talking about the austerity in Greece. I commented that his solution for the problem in Greece — e.g. trickle-down economics spawned through tax breaks to lure the wealthy back to the country — was not sustainable. I talked about economic cycles and I talked about feedback loops and oscillations and he called me a clown, essentially, and muted me.

While I feel very strongly that my opinion of his solution is correct, I do feel kind of bad that I got jargony with him without ever taking the chance to explain what I meant by “sustainable,” and “feedback loops,” and “oscillations.” So, to rectify that, I’m going to take a few chunks of vertical pixel space to define these terms as I use them, because — let’s face it — I’m going to use them again.

To that end, today’s entry will be about sustainability.

Sustainability

It’s a simple word, to be honest, for which most people understand the meaning, but it’s the way in which it is used in reference to economics when it becomes new or unfamiliar. It does not show up in the lexicon of typical economic discussions regarding minimum wage, inflation, free-market, etc. Where it does show up is when systems-thinkers talk about the economy. Systems-thinking gives a perspective that takes into account not just cause and effect to, but that looks at causal loops, accounts for mitigating issues, and models a system to try and determine where to best apply a solution — e.g. find “Leverage” — that has the best possible outcome.

This definition of a sustainable society is the one I’m thinking of when I speak of sustainability: “A sustainable society is one that ‘meets the needs of the present without compromising the ability of future generations to meet their own needs.'” (2012, Meadows). In other words, if a decision we make about the economy compromises future generations’ needs, it’s not a sustainable decision. If building more factories requires more resources that will deplete those same resources for the future, should we build? If drilling for oil in the arctic could further deplete oil reserves and cause pollution, should we drill?

System thinking says that the questions of whether to build or whether to drill are not adequately answered by looking at immediate needs, but by looking at the impact of the decisions on the future. This is the idea that you think seven generations ahead when you make decisions like this. In this way, economics from a systems perspective looks different than from a more standard perspective.

Most pointedly, standard economics systems all deal with a central issue of prosperity. Either prosperity for the individual, or prosperity for the state. Prosperity is either achieved through unlimited growth and earnings potential (capitalism, et al) or security of needs provided by the state (communism et al). None of those systems asks the necessary questions about what will happen in the future. If we spend resources now on a quest for unlimited growth and earnings, what will be left in 100 years, 200 years? If we spend resources now to ensure all members of society are taken care of now, will we have enough to take care of future members of society? These are questions about sustainability.

In 2002, Donella Meadows, Dennis Meadows, and Jorgen Randers revisited their 1972 book Limits to Growth to see if any progress had been made. The results were, as you may have guessed, disappointing. However, in the penultimate chapter, the authors present a scenario that they ran through their computer model (WORLD3) that achieves sustainability. What it calls for will not be easy to come by.

The scenario requires an effort to curb population growth through birth control and greater equality in rights among men and women of all nations, an increase in land yield, and the protection of agricultural land from industrialization and over-farming. This scenario caps the world population at a steady 8 billion with sustainability achieved on or about the year 2020.

LtG_scenario-9
2002, Meadows et al. Output of a chart generated by the WORLD3 computer model showing sustainability achieved by the year 2020.

While this was encouraging news in 2002, we have probably already missed our deadline and now must work hard to achieve an economic plan that we can maintain in perpetuity, one that will leave resources available for future generations while also meeting our current humanitarian needs in this generation.

On a global scale, we must adopt a way of thinking that leaves behind the need for growth, competition, and unlimited prosperity and replace that thinking with ideas that lead to sustainability, equitability, and stability.

 

References

  1. Meadows, Donella H. (2012). Limits to Growth: The 30-Year Update. Chelsea Green Publishing. Kindle Edition.
  2. The Long Now Foundation (http://longnow.org)
  3. The Next Systems Project (http://thenextsystem.org)
  4. Donella Meadows Institute (http://www.donellameadows.org)