May 23, 2012 | 14
By Melissa C. Lott and Scott McNally
According to Dr. James Hansen, developing Canada’s tar sands would mean “game over for the climate.” And, the current Director of NASA’s Goddard Institute for Space Studies is disappointed with President Obama for not taking action to stop Canada from causing a climate change-induced apocalypse. But, what Dr. Hansen fails to acknowledge in his May 9th NY Times Op-Ed is that demand drives supply. The tar sands are not the climate endgame – we are.
Hansen’s two main arguments, as presented in his NY Times article, are as follows:
Assuming that you agree with 97% of climate scientists, Hansen is absolutely correct when he says that we “need to start reducing [greenhouse gas] emissions significantly.” And yes, developing Canada’s tar sands would lead to the release of large amounts of these gases. But, this is not the crux of the climate issue.
Stopping Canada from producing tar sands will not curb the world’s oil demand, reduce fossil fuel consumption, or significantly reduce our total greenhouse gas footprint. In truth, if President Obama were to convince Canada to stop producing their own resources, as Hansen suggests, this would not discourage Americans from driving their SUVs to the mall.
If we want to reduce fossil fuel consumption, we have to reduce demand.
In his article, Hansen does suggest an approach for reducing carbon emissions. In his article, he advocates for a modified carbon tax, where all of the proceeds would be redistributed back to the American people (a.k.a. oil consumers). In his own words:
“We should impose a gradually rising carbon fee, collected from fossil fuel companies, then distribute 100 percent of the collections to all Americans on a per-capita basis every month.”
But, taxing oil producers, and then distributing those tax revenues to oil consumers makes little sense in the context of our nation’s energy markets. Here’s why:
If you impose a tax on an energy company, instead of becoming less profitable by absorbing the tax, the energy companies will pass on the expense to the consumer. (Not because they are evil, because it is basic finance. If the cost to produce a product increases, the sales price must increase, otherwise you will go out of business.) So ultimately, energy will be more expensive, and the consumer will pay more. From an environmental perspective, this is good, because incentivizing consumers to use less can lead to demand reductions. But, giving those taxes back to the consumer nullifies the incentive and, in the process, creates a system that must be managed (and can be manipulated).
If we want to reduce the carbon footprint of our transportation fuels, we should focus on reducing demand, and a tax that would punish producers and reward consumers is not going to help.
About the authors:
Melissa C. Lott is an engineer and 2011 Presidential Management Fellow. She holds two master’s degrees – in Mechanical Engineering and Public Affairs – from The University of Texas at Austin. You can reach Melissa at melissalott at gmail dot com. [Full bio here]
Scott McNally has a B.S. in Chemical Engineering from the University of Texas. He has worked as an Environmental Engineer for Valero Energy Corporation, a Project Engineer for Shell Oil Company, and an energy and climate research intern for the White House Council on Environmental Quality. Scott is a frequent guest blogger at Plugged In. You can reach Scott via e-mail at scottmcnally at gmail dot com.
Photo via David Wogan’s post