Hey, kids, get your cocoa and find a comfy seat, because I'm gonna talk carbon pricing now.
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2. So, some things I've been mulling over.
First, carbon pricing is a weird and mutable idea.
In usage, it can mean everything from abstract emissions quotas to a literal carbon dioxide tax.
First, carbon pricing is a weird and mutable idea.
In usage, it can mean everything from abstract emissions quotas to a literal carbon dioxide tax.
3. Second, that mutability grows when we start to consider "internal prices" on carbon.
That's where folks consider the impact on their organization of future carbon prices, and test their strategies against a world in which they have to pay those prices.
That's where folks consider the impact on their organization of future carbon prices, and test their strategies against a world in which they have to pay those prices.
4. One of the key concepts there is that the carbon price (say, $10/tonne of CO2) is not a precision prediction, but a stand-in for a range of possible pressures on the use of fossil fuels, and other climate-endangering activities.
5. (There's some excellent work on all this from groups like @CDP @CarbonBubble @NewClimateEcon @WorldResources @SEIresearch and others... I'm giving the most cursory overview here...)
6. That stand-in price function, though—that ability to model impacts of many kinds through simply assuming emissions will have costs—is really valuable, conceptually.
It can serve as a shorthand for the impacts of climate action in general on a specific institution's operations
It can serve as a shorthand for the impacts of climate action in general on a specific institution's operations
7. Some companies and analysts have begun running higher (stand-in virtual/internal) carbon prices as a way to see what could happen with more aggressive climate policies. I have a whole thing I'm working on about this idea, so stay tuned.
8. What I find most interesting, though, is the work showing that even fairly low national/global carbon prices exert enough pressure on a lot high-carbon economic activities to make them unprofitable.
9. While very high prices—say, $200/tonne carbon taxes—might be needed to achieve deep decarbonization through economic incentives alone, fairly low prices (say, $30 a tonne) are disruptive to a fair number of dirty companies/practices.
10. The consensus seems to be developing that it may be that the imposition of literal prices may not be entirely necessary in order for climate action to have the kinds of impacts companies model for with internal prices.
11. One example is fossil fuel extraction and use subsidies, which represent a reverse carbon tax. When we pay those subsidies, we're in effect paying people to release CO2.
Eliminating dirty economy subsidies is like enacting a carbon tax, without the tax itself.
Eliminating dirty economy subsidies is like enacting a carbon tax, without the tax itself.
13. Here's the kicker though: It may be that we can think of any climate action that raises the costs/lowers the profits of doing dirty business in this same way.
14. If activists block a pipeline, if a government sues an oil company, if EVs really take off—these all may all be able to be modeled (at least well enough for foresight purposes) by treating them effectively as incrementally higher carbon prices.
15. Remember, fossil fuel assets are a bubble—in order to avoid completely catastrophic climate chaos, we must not burn most known reserves, and therefore, those reserves are worth far less than their current valuations.
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16. That means rising costs/ falling profits are a threat to fossil fuel interests beyond their immediate impacts on the bottom line: They also threaten to destroy investor confidence in the future of these companies, creating the conditions for the collapse of the carbon bubble.
17. That's why when you hear predictions from fossil fuel interests and their allies that business-as-usual will continue for a long time, your first response should be total skepticism.
18. Because the lesson carbon price modeling has to teach us is this: There are hundreds of strategic paths for climate action that put real economic pressure on fossil fuel interests, and many of them do not demand national government participation to work.
19. Personally, I am fairly certain that if the American Republic exists in three years, we are going to see a major snap forward in Federal climate policies.
The Trump gang can do some real damage, but they've also served to make it politically safe demand bold climate action.
The Trump gang can do some real damage, but they've also served to make it politically safe demand bold climate action.
20. Even in the complete absence of U.S. Federal action, the combined impacts of many different players working many different strategies can add up—in the very near term—to truly disruptive pressures on the economy.
21. In climate foresight terms, it looks possible to credibly test future outcomes with high carbon prices by treating those prices as stand-ins for the accreting financial impacts of a large, diverse climate movement.
22. Doing that kind of foresight/modeling well enough to bank on its accuracy is a complex and gnarly challenge, for sure.
But most of us do not need that precision. We just need to be able to suss out the possible direction of events, to inform our plans and hopes.
But most of us do not need that precision. We just need to be able to suss out the possible direction of events, to inform our plans and hopes.
23. For those fuzzier purposes, this way of looking at things is a powerful tool.
It also helps us get what I see as the most likely path to successful action: A sort of swarming of efforts that add up to an effective price of carbon high enough to set free the clean economy.
It also helps us get what I see as the most likely path to successful action: A sort of swarming of efforts that add up to an effective price of carbon high enough to set free the clean economy.
