# IPCC SR1.5 Carbon Tax Math

IPCC SR1.5 Carbon Tax Math

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Guest seriousness by David Middleton

Over the past few days, I’ve posted a couple of articles by Michael Bastasch of the Daily Caller on the IPCC’s demands for a \$240/gal tax on gasoline and \$122 trillion to fight the Global War on Weather. Many commentators questioned the math behind the \$240/gal gasoline tax. So, I thought I would put together a post showing the math.

This is from page 2-79 of chapter 2 of SR 1.5:

Based on data available for this special report, the price of carbon varies substantially across models and scenarios, and their value increase with mitigation efforts (see Figure 2.26) (high confidence). For instance, undiscounted values under a Higher-2˚C pathway range from 10–200 USD2010 tCO2-eq–1 in 2030, 45–960 USD2010 tCO2-eq–1 in 2050, 120–1000 USD2010 tCO2-eq–1 in 2070 and 160–2125 USD2010 tCO2-eq–1 in 2100. On the contrary, estimates for a Below-1.5˚C pathway range from 135–5500 USD2010 tCO2-eq–1 in 2030, 245– 13000 USD2010 tCO2-eq–1 in 2050, 420–17500 USD2010 tCO2-eq–1 in 2070 and 690–27000 USD2010 tCO2-eq–1 in 2100.

SR15 Chapter 2 Page 2-79

The IPCC presented fairly broad cost ranges for the 1.5˚C and 2˚C pathways… So broad, they are almost meaningless. However, whenever a government agency says a program will cost between \$690 and \$27,000 per unit, it’s a good bet that it will cost at least \$27,000. The IPCC being an intergovernmental agency cannot be expected to be better at economics than a single government agency. Mr. Bastasch and I both focused on the high-end estimates, So, here is a table of the full ranges for both pathways:

 Un-discounted 2010 US Dollars Carbon Tax per Metric Ton of CO2 2˚C Pathway Low 2˚C Pathway High 1.5˚C Pathway Low 1.5˚C Pathway High 2030 \$10 \$200 \$135 \$5,500 2050 \$45 \$960 \$245 \$13,000 2070 \$120 \$1,000 \$420 \$17,500 2100 \$160 \$2,125 \$690 \$27,000

## Is this really a tax?

Some commentators have said that this isn’t a “tax.” It’s just the price of carbon emissions as estimated by the IPCC. Whether or not it takes the forms of a direct tax, it’s a cost that the IPCC says needs to be extracted from the private sector in order to fund the Global War on Weather.

## Putting the IPCC price of carbon into context

Since it’s difficult to relate \$/ton of CO2, let’s look at it relative to common fuels used for transportation and electricity generation.

## Gasoline

The folks at Resources for the Future were kind (or naive) enough to put together a handy carbon tax calculator to demonstrate the effects on various fuels. While it only goes up to \$50/ton, it’s a good starting point for the math.

While numbers can vary depending on grades of gasoline, on average, the combustion of 1 gallon of gasoline yields 8.89 kg of CO2. How does a gallon of gasoline, which weighs less than 3 kg yield nearly 9 kg of CO2?

Molecular weight:

Chemical equation for combustion of octane:

• 2[C8H18] + 25[O2] → 16[CO2] + 18[H2O]

The C comes from gasoline, the O2 comes from the air.

Now, let’s translate a carbon tax into a gasoline tax:

 Carbon Tax per Gallon of Gasoline (8.89 kg/gal) 2˚C Pathway Low 2˚C Pathway High 1.5˚C Pathway Low 1.5˚C Pathway High 2030 \$0.09 \$1.78 \$1.20 \$48.90 2050 \$0.40 \$8.53 \$2.18 \$115.57 2070 \$1.07 \$8.89 \$3.73 \$155.58 2100 \$1.42 \$18.89 \$6.13 \$240.03

This morning, I paid \$2.70/gal at a Houston Texaco station. This price already includes \$0.184/gal in Federal and \$0.20/gal in Texas State taxes. That’s already a 17% tax at current prices.

This is how the IPCC carbon tax looks as a % of \$2.70/gal.

 Carbon Tax per Gallon of Gasoline % of \$2.70/gal 2˚C Pathway Low 2˚C Pathway High 1.5˚C Pathway Low 1.5˚C Pathway High 2030 3% 66% 44% 1811% 2050 15% 316% 81% 4280% 2070 40% 329% 138% 5762% 2100 53% 700% 227% 8890%

It’s fairly obvious that the carbon pricing for the 1.5˚C pathway and the high-end of the 2˚C pathway are ridiculous non-starters as it relates to gasoline prices.

However, when it comes to electricity generation, it’s even worse.

## Natural Gas

First, some nomenclature:

SCF – Standard Cubic Foot is one cubic foot of gas at standard temperature and pressure (60 degrees F and sea level). Since both temperature and air pressure affect the energy content of a cubic foot of natural gas, the SCF is a way of standardizing. One SCF = 1020 BTUs.

Nat-G

While the Btu content of natural gas is variable, one thousand cubic feet (Mcf) is generally equivalent to one million Btu (mmBtu).

 scf Standard cubic foot 1 scf mcf Thousand cubic feet 1,000 scf Bcf Billion feet, 1 million mcf 1,000,000,000 scf Tcf Trillion cubic feet, 1 thousand Bcf 1,000,000,000,000 scf

In terms of British thermal units (Btu):

 scf Standard cubic foot 1,020 Btu mcf Million Btu, mmBtu 1,000,000 Btu Bcf Trillion Btu 1,000,000,000,000 Btu Tcf Quadrillion Btu, 1 Quad 1,000,000,000,000,000 Btu

Natural gas is the number one fuel for electricity generation in the US (31.7%), having edged out coal a few years ago. It’s also used for heating and cooking in many US homes. This is what the IPCC carbon tax would look like in \$/Mcf of natural gas.

 Carbon Tax per Thousand Standard Cubic Feet of Natural Gas (53.12 kg/1,000 scf) 2˚C Pathway Low 2˚C Pathway High 1.5˚C Pathway Low 1.5˚C Pathway High 2030 \$0.53 \$10.62 \$7.17 \$292.16 2050 \$2.39 \$51.00 \$13.01 \$690.56 2070 \$6.37 \$53.12 \$22.31 \$929.60 2100 \$8.50 \$112.88 \$36.65 \$1,434.24

The average residential price for natural gas in the US in 2017 was \$10.91/Mcf (about 3X the wellhead price). This is what the IPCC carbon tax looks like as a % of \$10.91/Mcf:

 Carbon Tax per 1,000 scf of Natural Gas % of \$10.91/1,000 scf 2˚C Pathway Low 2˚C Pathway High 1.5˚C Pathway Low 1.5˚C Pathway High 2030 5% 97% 66% 2678% 2050 22% 467% 119% 6330% 2070 58% 487% 204% 8521% 2100 78% 1035% 336% 13146%

## Coal

Coal is the second most prevalent fuel for electricity generation in the US (30.1%). Coal comes in a lot of “flavors”: Anthracite, bituminous, sub-bituminous and lignite… and sometimes coke. For simplicity and due to its dominance in US coal production, I limited my analysis to Powder River Basin sub-bituminous coal. The low-end of the IPCC carbon tax for a 2˚C pathway would immediately more than double the price of Powder River Basin coal:

 Carbon Tax per Short Ton of Powder River Basin Sub-Bituminous Coal (1,686 kg/short ton) 2˚C Pathway Low 2˚C Pathway High 1.5˚C Pathway Low 1.5˚C Pathway High 2030 \$16.86 \$337.20 \$227.61 \$9,273.00 2050 \$75.87 \$1,618.56 \$413.07 \$21,918.00 2070 \$202.32 \$1,686.00 \$708.12 \$29,505.00 2100 \$269.76 \$3,582.75 \$1,163.34 \$45,522.00

The average price for Powder River Basin coal in September 2017 was \$12.10/short ton. This is how the IPCC carbon tax looks as a percentage of that price:

 Carbon Tax per Short Ton of Powder River Basin Sub-Bituminous Coal % of \$12.10/short ton 2˚C Pathway Low 2˚C Pathway High 1.5˚C Pathway Low 1.5˚C Pathway High 2030 139% 2787% 1881% 76636% 2050 627% 13377% 3414% 181140% 2070 1672% 13934% 5852% 243843% 2100 2229% 29610% 9614% 376215%

While claims of the “death of coal” have all proven premature, the IPCC carbon pricing scheme would almost immediately kill the world’s second most prevalent energy source:

## Oh… But the carbon tax will be rebated!

At least that’s the claim of some nominally Republican snake oil salesmen.

## THE FOUR PILLARS OF OUR CARBON DIVIDENDS PLAN

### I. A GRADUALLY INCREASING CARBON FEE

The first pillar of a carbon dividends plan is a gradually rising fee on carbon dioxide emissions, to be implemented at the refinery or the first point where fossil fuels enter the economy, meaning the mine, well or port. Economists are nearly unanimous in their belief that a carbon fee is the most efficient and effective way to reduce carbon emissions. A sensible carbon fee should begin at \$40 a ton and increase steadily over time, sending a powerful signal to businesses and consumers, while generating revenue to reward Americans for decreasing their carbon footprint.

### II. CARBON DIVIDENDS FOR ALL AMERICANS

All the proceeds from this carbon fee would be returned to the American people on an equal and monthly basis via dividend checks, direct deposits or contributions to their individual retirement accounts. In the example above of a \$40/ton carbon fee, a family of four would receive nearly \$2,000 in carbon dividend payments in the first year. This amount would grow over time as the carbon fee rate increases, creating a positive feedback loop: the more the climate is protected, the greater the individual dividend payments to all Americans. The Social Security Administration should administer this program, with eligibility for dividends based on a valid social security number.

Border adjustments for the carbon content of both imports and exports would protect American competitiveness and punish free-riding by other nations, encouraging them to adopt carbon pricing of their own. Exports to countries without comparable carbon pricing systems would receive rebates for carbon fees paid, while imports from such countries would face fees on the carbon content of their products. Proceeds from such fees would benefit the American people in the form of larger carbon dividends or could be used for transitional assistance for industries or regions hurt by the carbon fee. Other trade remedies could also be used to encourage our trading partners to adopt comparable carbon pricing.

### IV. REGULATORY SIMPLIFICATION

The final pillar is the elimination of regulations that are no longer necessary upon the enactment of a rising carbon fee whose longevity is secured by the popularity of dividends. Many, though not all, of the Obama-era carbon dioxide regulations could be safely phased out, including an outright repeal of the Clean Power Plan. Robust carbon fees would also make possible liability rationalization for emitters. To build and sustain a bipartisan consensus for a regulatory rollback of this magnitude, however, the initial carbon fee rate should be set to significantly exceed the emissions reductions of all Obama-era climate regulations, and the carbon fee should increase from year to year.