E.P.A. to Seek 30 Percent Cut in Carbon Emissions

As for the issue with Wall Street: it would be good to create a market and get Wall Street involved. The politics surrounding Wall Street's involvement in say oil is classic populist dreck: they hate paying more for gas, so they blame "oil speculators" rather than acknowledging the oil traders are just helping the market price-in the fact we're in an era where new oil discoveries come in a firm that's expensive to exploit.

You can look at the EU carbon market's total failure as an example. It's a cap system, where the price collapsed almost immediately, and so to date it has had zero effect of any sort [0]. The cap right now is way above what the market actually wants. It's useless.

The opposite -- price overshoots because of a too tight cap + demand inelasticity -- could also be a really bad thing. Both directly from the pain it causes, and indirectly from the predictable political backlash, which would screw up something else in a new & more creative way.

[0] http://www.economist.com/node/21548962

One is that a cap-and-trade program acknowledges the status quo. There are a lot of businesses that are currently emitting CO2, and saying, "Surprise! Big tax for you!" will generate enormous political resistance. If I understand cap-and-trade programs rightly, we'd start out by giving those businesses the right to keep emitting, but let them sell the right if they aren't using it. Suddenly they have choices, turning the response from, "Rawr! Tax bad!" to "Hm, can I get a competitive advantage from this?"

The second is that in cap-and-trade, the right price for carbon flows not from government fiat, but from market outcomes. What's the right level for a carbon tax to drive the right amount of reduction 15 years out? Hard to say. Cap and trade lets us fix what we care about, the reductions, and then lets market mechanisms work out how to do that most economically.

The third comes from the combination of the first two. The US right is fervently anti-tax, and has been for decades. They are, however, pro-market, at least nominally. Plus, Wall Street loves anything market-like, as it gives them an opportunity to make a buck. A carbon tax will be fought hard by the people facing it before, during, and after. But markets mean winners and losers, and the opportunity for a lot of capitalist reindeer games.

It will be pleasant to have less of these types of plants in operation:

http://en.wikipedia.org/wiki/Plant_Scherer

And this country will be just a little bit greener knowing, we don't need to have trains crossing the country 24/7 from Wyoming just to keep the boilers running.

http://www.nexteraenergyresources.com/pdf_redesign/Full%20Co...

Interestingly, most of the external costs they estimate aren't CO2 emissions. Table 4 on page 92. In the "median" case, it's 9.3 c/kWh air pollutants, 4.4 c/kWh public health burden from Appalachian mining, and then 3.1 c/kWh from climate effects. In the "high" case climate goes up to 10.2 c/kWh, still less than half of the 26.9 c/kWh total.

If coal power costs $0.1/kWh, and solar/wind/whatever costs $0.15/kWh, then you would only need a $0.05/kWh equivalent carbon tax to shift investment in research and infrastructure. Or really even just the promise of such a tax in five years. And it is fine for the tax to gradually approach $0.2/kWh equivalent, because by that point the only applications using coal would be specialized and could afford it without wrecking the economy.

Quite separate from CO2, there are NOX wet/dry scrubbers and flue gas desulfurization units (removal of SO2). While having a very helpful large reduction in fine particulate (PM2.5) and ozone downwind health impacts (SO2 and NOX form PM2.5 and O3 downwind), it unfortunately does not remove CO2 emissions.

In talking to power companies, my guess is that natural gas is being switched out for coal for many reasons, some more subtle. In part due to new PM2.5 and ozone regulations, in part because in some years it has been cheaper than coal due to new extraction techniques (fracking), and in part because it is easier to dispatch natural gas plants (ramp up and down) to meet electricity demand or high variance renewable energy generation like solar and wind (large spikes in generation).

[1] http://sequestration.mit.edu/tools/projects/index_capture.ht...

1. Your intuition about emissions being higher now is wrong. For NOx and SOx: http://www.eia.gov/todayinenergy/detail.cfm?id=15611 CO2: http://www.epa.gov/climatechange/ghgemissions/gases/co2.html

2. The recession messed with a lot of energy and consumption so that the years from 2008-2012 or so are something of anomalies.

3. There have been significant rollbacks and cuts to getting datasets complete. It used to be we were only a year or two behind in lots of the published federal data. I've found it to be far more scattershot today, and sometimes just cross my fingers and hope they have managed to stay up to date. That said, the EIA has mostly managed to stay on top of their annual publications.

4. Natural gas prices bottomed out a couple years ago, and we'll have a glut of it for a while, keeping prices much lower than they were in the early 2000s.

5. Coal plants are getting replaced with natural gas combined cycle because of the fuel costs, and also because of new regulations on the new MATS stuff (also in the link above).

6. "Clean" coal has mostly been a bust. Duke Indiana's been trying to get their gasification plant to full capacity for a while, and cost ovverruns has resulted in them asking for rate increases. Also, carbon capture still isn't up to snuff, and underground gasification never took off.

I suspect that at that point, since many countries will be experiencing the effects of climate change full-force (especially the Chinese), there will be economic treaties which will tax according to emissions per capita or a similar metric.