The Lifetime Emission Surcharge: A Serious Price on Carbon Emissions by ericwstrid

The first question with such a large surcharge has been how would we ever gather political support for $200 per ton, when there is so little traction at $10 per ton? The answer is that LES is a downhill battle after comparable cost-performance is available on zero-emission products in the market.

The largest force decarbonizing our society is cheaper clean-energy options. Without bigger, better wind turbines, ever-cheaper solar panels, and dramatic developments in batteries, we would simply cook the planet and die before enough of us changed our ways. The clean-energy revolution is the one theme that has worked and has the most potential to turn around emissions (both climate and toxic), create energy independence, add jobs, dramatically increase resilience, and make energy cheaper. Solar, wind, batteries, and other renewable energy generation and storage technologies keep getting cheaper and better as we learn better designs, usage of raw materials, manufacturing efficiencies, deployment processes, and integration strategies. Even major oil companies are now planning for peak oil demand. (Nuclear energy continues to demonstrate a negative learning curve—the more we use, the more expensive it is to operate.)

Techno-skeptics can advocate bicycles or horses and buggies or whatever, but their appeal is obviously quite limited. Yes, we must account for factors like embodied emissions, but we must pragmatically plan a transition path to zero emissions.

Public policy should target accelerating the deployment of clean-energy options. Policy that was crafted independent of technological realities has had little effect--if we had a $0.50/gallon tax on gasoline emissions, no one would change anything unless low-emission vehicle options were economically available. Successful policies have emphasized accelerating clean tech deployments, whether by mandates (ala RPS or incandescent bulbs), subsidies (should be phased out over time, ala federal wind and solar policy now, or by volume produced, ala the $7500 federal EV tax credit), clean energy credits, or whatever policies. Accelerating deployments naturally accelerate cost reductions in the supply chains, since we learn more as we produce more. Accelerating cost reductions will kill incumbent industries just like digital cameras killed film cameras, or smart phones have displaced dozens of other devices (including digital cameras).

How can Lifetime Emission Surcharges accelerate deployments? LEDs are a recent case of clean-energy transition. LED bulbs are now so cheap that consumers consider 2-3 years of operating cost and just buy them. Incandescent lights get so hot and CFLs are dim when they first turn on; LEDs last for 20,000 hours… OK, that sounds good so I’ll buy LEDs. Few buyers would care if the cost of incandescents doubled or tripled now with an Lifetime Emission Surcharge, because longer-life bulbs with lower operating costs are highly competitive. But many consumers still buy incandescents because it’s what they’re accustomed to—there is wisdom in continuing to do what works. Except when the long-term economic effects are counter to their own interests and so destructive to ecosystems.

Few consumers are aware that induction cooktops are as fast as gas cooktops and far safer; that heat-pump water heaters are 3X as efficient as conventional electric water heaters; or that EVs will last >500,000 miles with far less maintenance than a 150,000-mile ICE vehicle. Consumers generally don’t want to try new products because they’ve all been burned by new things they’ve tried. So they stick to the tried and true products and processes that they know.

EVs are crossing the chasm now. New-technology products must “cross the chasm”, the gap between the expensive R&D phase and early market adoption that drives revenues. Automakers are moaning under the costs of electrifying their fleets. No company is making money on EVs yet, but they all know that battery costs are falling and that they have to electrify if they are to survive the transition. Automakers are lobbying for EV incentives to bias consumers to buy more EVs. Incentives work, and the European experience referenced in this proposal provides empirical adoption data.

LES is more for EV or building incentives. Creating a high enough price to switch is critical to accelerating deployments. $1.50 a gallon has been demonstrated to be too low. An economy-wide price on GHG emissions that is high enough would be massively disruptive economically and infeasible politically. But closing the door on old technologies after clean-energy options are cost-competitive would accelerate deployments by charging the real social costs of the old technology.

By adopting sector-specific surcharges only where zero- or low-emission options are available, LES policies can provide economic optimization of emission reduction because the deployment rate is increased while costs are not. LES is a strong and deliberate incentive to discourage polluting infrastructure, instead of the “invisible hand” that is supposed to solve everything.

Clean-tech executives and entrepreneurs are dismissive of typical carbon pricing policies because they see the price as ineffective. By comparison, a policy of closing the door on old technologies with LES would be a huge incentive for clean-tech companies to level the playing field and reduce their chasm-crossing risks.

Feb. 2019 update:

Anyone studying EV adoption rates will notice that Norway finished 2018 at nearly 50% of new sales, and the Netherlands was 38%. That compares with about 2% worldwide and in the US. Norways' share is primarily due to their tax on lifetime emissions. The fee to register a large BMW is ~$30,000. Which will steer purchases, $30,000 vs. 20 cents per gallon? See details and more links in this report: http://cgcan.org/wp-content/uploads/2019/02/SER-Feb-2019-190205-final.pdf 

"James Tate said the UK government could do more to drive the growth of electric cars. 'My view is that the UK should do much more to steer the market away from the most polluting and inefficient cars, ie SUVs/4x4 which are continuing to grow in sales,' he said. 'These large, heavy vehicles burden us and the climate with unnecessary CO2 and air pollutants. A taxation policy that rises with fuel consumption rates, such as in the Netherlands and Norway is overdue.'”from https://www.theguardian.com/environment/2019/feb/12/electric-cars-already-cheaper-own-run-study?CMP=share_btn_link 

Anyone who has been through Quality 101 remembers the need to find the root cause of a problem and shut down that hatchery. What we have in our vehicle fleets is an emission hatchery in each new gas or diesel vehicle--driving a new 50 mpg vehicle off the lot locks in 30 MTCO2e over a 150,000 mile lifetime. 

Now is the ideal time to be steering purchases to EVs--Bloomberg has added up 300 EV model announcements by 2020.

As for political acceptance, Washington's failed i1631 ballot initiative last year demonstrated the unpopularity of a small gas tax. Why do we want to punish everyone for fueling the only clunkers they can afford, instead of forcing affluent folks who buy new cars to pay for the pollution they lock in? Those who are affluent enough to buy new vehicles and indignant enough to complain about paying for their pollution are a much smaller subset than the people who must buy vehicle fuels. 

When will carbon pricing debates begin to consider the evidence of efficacy?

Here's a recent report on how to implement lifetime emission fees, stealing good ideas from Norway: 

http://cgcan.org/wp-content/uploads/2019/11/SER-Nov-2019-Final-191111.pdf