Weatherdem's Weblog

Bridging climate science, citizens, and policy

REMI’s Carbon Tax Report


I came across former NASA climate scientist James Hansen’s email last week supporting a carbon tax.  At the outset, I fully support this policy because it is the most economically effective way to achieve CO2 emission reductions.  An important point is this: it matters a lot how we apply the tax and what happens to the money raised because of it.  Many policy analysts think that the only way a carbon tax will ever pass is for the government to distribute the revenue via dividends to all households.  This obviously has appealing aspects, not least of which is Americans love free stuff.  That is, we love to reap the benefits of policies so long as they cost us nothing.  That attitude is obviously unsustainable – you have simply to look at the state of American infrastructure today to see the effects.

All that said, the specific carbon tax plan Hansen supported came from a Regional Economic Models, Inc. report, which the Citizens Climate Lobby commissioned.  The report found what CCL wanted it to find: deep emission cuts can result from a carbon tax.  There isn’t anything surprising with this – many other studies found the exact same result.  What matters is how we the emission cuts are achieved.  I think this study is another academic dead-end because I see little evidence how the proposed tax actually achieves the cuts.  It looks like REMI does what the IPCC does – they assume large-scale low-carbon energy technologies.  The steps of developing and deploying those technologies are not clearly demonstrated.  Does a carbon tax simply equate to low-carbon technology deployment?  I don’t think so.

First, here is an updated graphic showing REMI’s carbon emission cuts compared to other sources:

 photo EPA2014vsEIA2012vsKyotovsREMI2014_zps961bb7c7.png

The blue line with diamonds shows historical CO2 emissions.  The dark red line with squares shows EIA’s 2013 projected CO2 emissions through 2030.  EIA historically showed emissions higher than those observed.  This newest projection is much more realistic.  Next, the green triangles show the intended effect of EPA’s 2014 power plant rule.  I compare these projections against Kyoto `Low` and `High` emission cut scenarios.  An earlier post showed and discussed these comparisons.  I added the modeled result from REMI 2014 as orange dots.

Let me start by noting I have written for years now that we will not achieve even the Kyoto `Low` scenario, which called for a 20% reduction of 1990 baseline emissions.  The report did not clearly specify what baseline year they considered, so I gave them the benefit of the doubt in this analysis and chose 2015 as the baseline year.  That makes their cuts easier to achieve since 2015 emissions were 20% higher than 1990 levels.  Thus, their “33% decrease from baseline” by 2025 results in emissions between Kyoto’s `Low` and `High` scenarios.

REMI starts with a $10 carbon tax in 2015 and increases that tax by $10/year.  In 10 years, carbon costs $100/ton.  That is an incredibly aggressive taxing scheme.  This increase would have significant economic effects.  The report describes massive economic benefits.  I will note that I am not an economist and don’t have the expertise to judge the economic model they used.  I will go on to note that as a climate scientist, all models have fundamental assumptions which affect the results they generate.  The assumptions they made likely have some effect on their results.

Why won’t we achieve these cuts?  As I stated above, technologies are critical to projecting emission cuts.  What does the REMI report show for technology?

 photo REMI2014ElectricalPowerGeneration-2scenarios_zpse41c17d9.png

The left graph shows US electrical power generation without any policy intervention (baseline case).  The right graph shows generation resulting from the $10/year carbon tax policy.  Here is their models’ results: old unscrubbed coal plants go offline in 2022 while old scrubbed coal plants go offline in 2025.  Think about this: there are about 600 coal plants in the US generating the largest single share of electricity of any power source.  The carbon tax model results assumes that other sources will replace ~30% of US electricity in 10 years.  How will that be achieved?  This is the critical missing piece of their report.

Look again at the right graph.  Carbon captured natural gas replaces natural gas generation by 2040.  Is carbon capture technology ready for national-level deployment?  No, it isn’t.  How does the report handle this?  That is, who pays for the research and development first, followed by scaled deployment?  The report is silent on this issue.  Simply put, we don’t know when carbon capture technology will be ready for scaled deployment.  Given historical performance of other technologies, it is safe to assume this development would take a couple of decades once the technology is actually ready.

Nuclear power generation also grows a little bit, as does geothermal and biopower.  This latter technology is interesting to note since it represents the majority of the percentage increase of US renewable power generation in the past 15 years (based on EIA data) – something not captured by their model.

The increase in wind generation is astounding.  It grows from a few hundred Terawatt hours to over 1500 TWh in 20 years time.  This source is the obvious beneficiary to a carbon tax.  But I eschew hard to understand units.  What does it mean to replace the majority of coal plants with wind plants?  Let’s step back from academic exercises that replace power generation wholesale and get into practical considerations.  It means deploying more than 34,000 2.5MW wind turbines operating at 30% efficiency per year every year.  (There are other metrics by which to convey the scale, but they deal with numbers few people intuitively understand.)  According to the AWEA, there were 46,100 utility-scale wind turbines installed in the US at the end of 2012.  How many years have utilities installed wind turbines?  Think of the resources required to install almost as many wind turbines in just one year as already exist in the US.  Just to point out one problem with this installation plan: where do the required rare earth metals come from?  Another: are wind turbine supply chains up to the task of manufacturing 34,000 wind turbines per year?  Another: are wind turbine manufacturing plants equipped to handle this level of work?  Another: are there enough trained workers to supply, make, transport, install, and maintain this many wind turbines?  Another: how is wind energy stored and transmitted from source to use regions (thousands of miles in many cases).

Practical questions abound.  This report is valuable as an academic exercise, but  I don’t see how wind replaces coal in 20 years time.  I want it to, but putting in a revenue-neutral carbon tax probably won’t get it done.  I don’t see carbon capture and sequestration ready for scale deployment in 10 years time.  I would love to be surprised by such a development but does a revenue-neutral carbon tax generate enough demand for low-risk seeking private industry to perform the requisite R&D?  At best, I’m unconvinced it will.

After doing a little checking, a check reminded me that British Columbia implemented a carbon tax in 2008; currently it is $40 (Canadian).  Given that, you might think it serves as a good example of what the US could do with a similar tax.  If you dig a little deeper, you find British Columbia gets 86% of its electricity from hydropower and only 6% from natural gas, making it a poor test-bed to evaluate how a carbon tax effects electricity generation in a large, modern economy.


2 thoughts on “REMI’s Carbon Tax Report

  1. Phnenmeoal breakdown of the topic, you should write for me too!

  2. This is an intriguing critique by “weatherdem” of the REMI study, which helps to outline some of the practical follow-on issues. I’ve only skimmed the REMI study, but I get the impression that practical implementation considerations like these are in no way addressed in any detail in the REMI report.

    Thinking about how the replacement of fossil fuel power plants with non-carbon power plants will proceed suggests that it going to be “nuggetized”, with course granularity, as individual power plants are decommissioned and new ones built. This means that it will be a step-like process, not a smooth process, as seemingly implied in the REMI model results write-up. Does that effect in anyway the conclusions?

    Another consideration is limitations of installing new power plants. Siting new power stations is not straightforward. For example, wind power and solar power both require large tracts of land, while coal and nuclear plants require much less land to generate the same electric power. What happens when all the good wind sites are occupied by wind plants? I don’t know how or whether the REMI study addresses this little constraint.

    Another limitation for implementation of intermittent wind and solar power plants is the need for maintenance of power grid base load even as coal power plants are being replaced.

    To what extent does energy conservation and greater industrial efficiency play in the REMI projections. Maybe I need to read the report in detail, but that is not clear to me.

    I’d like to see more emphasis on the assumptions made in running these REMI models.

    Personally I think modern nuclear plants have to play a prominent role in getting the world off fossil fuels, but we know deploying sufficient nuclear power plants to completely offset the decommissioned fossil-fuel plants will be a tall order indeed. The business-as-usual scenario shows proportion of nuclear power decreasing, and the carbon-fee-and-dividend version has it increasing. It will be unfortunate is that increase in nuclear power is the largest we can get over the next 25 years, because it is likely not sufficient.

    “All models are wrong, but some are useful.” Let’s keep modeling, because modeling is a way to gain insight into problems – the insight is more important that specific results or claims.

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