To Punish Saudi Regime for Killing Jamal Khashoggi, Institute a Carbon Tax in U.S.

Slain Saudi dissident Jamal Khashoggi. Photo: 
Project on Middle East Democracy
Slain Saudi dissident Jamal Khashoggi. Photo: Project on Middle East Democracy

This story was originally published by the Carbon Tax Center. It is reprinted here with permission.

It’s often said that a carbon tax is first and foremost a tax on coal. I’ve probably said it myself, and David Roberts wrote as much the other day in his useful post for Vox, “The 5 most important questions about carbon taxes, answered.”

Coal is first up in carbon taxing’s crosshairs for two reasons: its energy value comes almost exclusively from oxidizing carbon, whereas oil and gas burning also derives considerable heat from oxidizing hydrogen into harmless water vapor; and in the U.S. coal is used almost exclusively to generate electricity, which can be made from other sources as well.

But oil would hardly be immune. A carbon tax — not a token, Exxon-style one but a robust fee on fossil fuels’ carbon content that ramped up steadily — would, before long, put a sizable dent in petroleum use. Ditto, natural gas, as the carbon tax level rises still higher.

A vigorous carbon tax in the United States would squeeze every owner of oil wells, petroleum infrastructure and hydrocarbon reserves: shareholders of Exxon, Shell, BP et al.; the Koch Brothers; and, most of all, Saudi Arabia’s national petroleum and natural gas company, Aramco — the world’s #1 oil extractor and largest holder of oil reserves.

The list of ways that a carbon tax would lessen oil use is nearly limitless. If driving cost more, people would  do it less often. Fuel-efficient cars that stretch each gallon — higher-mpg vehicles and electrics — would gain market share. Freight movement by truck would start to be switched to rail and water, while supply chains became more local. Air travel would get pricier even as new aircraft engines were designed for greater fuel efficiency. In millions of economic decisions, proximity would be favored over distance and sprawl. Transit, cycling and higher-density development would gain.

These changes wouldn’t happen everywhere or immediately, of course, but they would gather strength as the carbon tax ramped up and society’s defaults got reset. And while we can’t micro-model every behavioral and structural change from carbon taxes (there are literally billions), the rich academic literature of price-elasticity makes it possible to rough-estimate the aggregate impacts of raising the prices of petroleum products for households and businesses.

A decade after startup, a robust U.S. carbon tax would eliminate one-fifth of petroleum usage. Photo: Carbon Tax Center
A decade after startup, a robust U.S. carbon tax would eliminate one-fifth of petroleum usage. Photo: Carbon Tax Center

In our modeling at the Carbon Tax Center, we estimate that a carbon tax that started modestly at $15 per ton of CO2 but increased each year thereafter by $10 per ton would, by its 10th year, shrink U.S. oil usage by 3.3 million barrels a day, cutting usage by one-fifth.

That shrinkage amounts to more than 3 percent of current world oil consumption. A drop of that magnitude — even ignoring that many other countries would follow suit — would deliver a powerful one-two punch to Saudi pockets: lesser sales and a lower price.

With less money to throw around Washington and the Middle East, the corruptive power of the Saudi regime would begin to diminish. Its ability to wage war in Yemen, silence dissident journalists like Jamal Khashoggi, punish Canada simply for expressing “grave concern” about arrests of activists in Saudi Arabia, and so on would be diminished. It would also have less cash to immunize itself for its efforts to present a kind face at U.S. universities, think tanks and artistic institutions

All of which makes another reminder that the benefits of taxing fossil fuels according to their carbon content go beyond even helping arrest climate damage. Human rights activists — indeed, everyone who wishes to see justice done for the brutal murder of Jamal Khashoggi — should join the movement to tax carbon emissions.

  • Larry Littlefield

    “All of which makes another reminder that the benefits of taxing fossil fuels according to their carbon content go beyond even helping arrest climate damage.”

    Climate damage is number three on the list, behind economic damage and national security damage. What do the climate change denyers have to say about the first two?

    https://larrylittlefield.wordpress.com/2018/01/28/imported-oil-it-seems-the-donald-is-yet-another-gutless-president/

    Better to suffer all three than pay extra for gasoline, has been the Generation Greed policy ever since they voted Jimmy Carter out of office. “Moral equivalent of war?” How many wars have we had since?

    Some folks started riding bikes in the 1970s, but far more switched to SUVs in the 1980s and we’ve been paying the price since.

  • Joe R.

    Once we get the cost of batteries low enough so that electric cars sell for less than their gas counterparts they will quickly take over the market. The model is probably assuming the status quo of gas cars. Nearly everyone in the know says we’re poised on the cusp of an EV revolution. Government mandates can help push that along.

    I’m not saying we shouldn’t have a carbon tax, but rather that we’ll get more bang for the buck via a combination of EV incentives and mandates, combined with R&D to continue to drop the cost of batteries.

  • Dave

    Why has the alternative transportation/bike/walk community never jumped on this with both feet? “Take the bus because the only good Saudi is a poor Saudi.” “Remember the USS Cole–Bike to Work.” I propose that the United States declare September 11 to be national car-free day!

  • Joe R.

    Let’s take it a step further and declare September national car-free month.

  • Larry Littlefield

    The problem with oil as an economic base is most Saudis still end up poor Saudi’s or Saudis dependent on vassalage to the royal family. They own the oil, foreign workers do the work.

    At least importing solar panels from China requires actual jobs in China that help build their middle class.

    So you don’t have to be tribalist to want to use less oil. Hurts us a lot more than it helps them.

  • carl jacobs

    Just out of curiosity, what taxing agency is going to impose the world wide tax?

  • Adrian Horczak

    Not only as a political statement, but also in the name of safety

  • Dave

    I’m looking at a tribalist appeal to get the attention of some groups of Americans who would hear it over other reasons to take transit or ride a bike–“green rednecks,” if you will.

  • Joe R.

    Can’t the UN do that?

  • Larry Littlefield

    That sort of thing could backfire. When Michael Moore went right up to the line of race baiting Arabs in Fahrenheit 9/11 to turn those same sort of people against the Republicans, I didn’t watch another one of his movies for more than a decade.

    The economic and national security damage to us is bad enough, and as mentioned, doesn’t do as much for ordinary people over there.

    https://larrylittlefield.wordpress.com/2016/05/31/americas-debts-this-is-really-really-really-nauseating/

    They can sell their oil to China and India.

  • Rex Rocket

    FIFA.

  • carl jacobs

    No, it can’t. It doesn’t have the authority. It doesn’t have the will. It doesn’t have the ability to enforce. And even though there might be Internationalists out there who imagine the UN as some kind of proto-global government, the nations do not. The UN is not a sovereign entity and so it’s not going to receive the powers of a sovereign entity.

  • carl jacobs

    You are hanging your whole program on graft and corruption and bribery?

  • Joe R.

    The UN can impose all sorts of sanctions on the nations that refuse to go along with any proposed global tax. I’d personally rather have a global tax on wealth than on carbon. It could raise a lot more money while also being very popular (as it wouldn’t affect 99.999% of the population). I’m thinking something like this:

    10% of net worth between $10 million and $100 million
    50% of net worth between $100 million and $1 billion
    100% of any net worth over $1 billion

    That could probably raise trillions in the first year.

  • carl jacobs

    Sanctions are only as effective as the ability and the willingness of the nations to enforce them. Besides which, the UN can’t sanction the permanent members. They simply won’t allow themselves to be sanctioned.

    You haven’t a snowball’s chance in hell of getting this program through the Security Council. Even If you could get a resolution, the powerful states would ignore it. In the US, Congress (and especially the Senate) would see this as a huge abrogation of American sovereignty and kill the idea dead. And that is before they considered the economic devastation this plan would visit on the US economy. So then what happens to your tax scheme? Are you going to impose it on everyone but the major powers? Never going to happen. You have a better chance of walking to Mars than you do of passing any kind of tax like this.

    And a tax on wealth? Yes, do find a political party willing to advance that idea in an election. Now you have a better chance of walking to Mars without benefit of a space suit.

  • Joe R.

    You’re inadvertently making the case for just having one world government, instead of a bunch of sovereign nations with wildly differing objectives. And this probably what should have happened after WWII. In the case here of Saudi Arabia, it wouldn’t be “their” oil to sell and make the royal family richer. It would be the world’s oil and would be used where needed the most. The same with any other natural resources.

    As for the wealth tax, read this:

    https://www.businessinsider.com/france-wealth-tax-2011-4

    A wealth tax rewards using assets productively by penalizing hoarding them instead of investing them. Income or capital gains taxes penalize productivity. So long as you keep the base before the tax starts fairly high (I chose a very generous $10 million, which is really way more than anybody needs to live very well), very few people will be affected by a wealth tax. It would certainly have popular support, especially if it was coupled with the elimination of the income tax. And you would get a one-time windfall the first year by taxing multibillionaires to the point they would be worth well under one billion.

    Sales taxes on non-essential goods are a good idea also but they only tax the rich when they spend their money.

  • Joe R.

    In my ideal world everyone would be off oil. Let the Saudis take baths in it. Wouldn’t be good for much else.

  • Joe R.

    Don’t underestimate it. Trump was elected partially on that kind of sentiment. Hilter came within a few steps of ruling the planet based on that kind of tribalism. Being an “ends justify the means” kind of person, I’m not seeing that it’s a horrible idea to appeal to people’s baser instincts if it helps get them on your side. Indeed, some of your posts do exactly that by appealing to the fact that one generation screwed over the ones that follow. Even though that’s not true for everyone in that particular generation, it’s a (justifiable) exaggeration which gets people onboard.

    I might phrase it differently:

    “Take the bus because the only good oil executive is a poor oil executive.”

    “Remember 9/11. People just going to work died while the rich got richer selling oil.”

    “Tired of seeing your loved ones dying from cancer? (Insert a few graphic pictures of cancer victims) Then help us get off fossil fuels for good.

  • Komanoff

    Sorry, I neglected to specify that my post is about a *U.S.* carbon tax. Period. I’ll ask the editor to fix my omission.

  • Joe R.

    Here’s a calculator for the amount a carbon tax would affect the prices of various fossil fuels:

    http://www.rff.org/blog/2017/calculating-various-fuel-prices-under-carbon-tax

    Even in the tenth year, the carbon tax proposed here would only increase the cost of gasoline by about $1 per gallon. Assuming electric cars never catch on, we’ll need much more robust increases to more or less get our transportation sector off oil.

  • kevd

    not how the UN works….

  • ocschwar

    Not going to happen. Lithium, lanthanum, neodymiumare only going to go up in price.

  • Joe R.

    https://www.iflscience.com/technology/new-dual-carbon-battery-charges-20x-faster-lithium-ion/

    There are all sorts of materials you can make batteries from besides lithium.

  • bolwerk

    The UN has very little leverage even for its core mission of encouraging peace and protecting human rights. It’s almost impotent on economic matters.

    A closer analogy to that kind of power could be seen in the WTO, World Bank, or IMF. However, the second two draw their power from being creditors or currency police, giving them leverage over financially distressed countries. The WTO might be your best bet, with its ability to sanction countries that don’t follow agreed-upon trade rules.

    The EU perhaps has that kind of power over its own members, and some of what Boris Johnson would call its vassals. 😉

  • BubbaJoe123

    “Trump and any other billionaires would see their net worth drop to not much over $500 million the first year the tax was implemented. And then they would have to invest it in enterprises generating at least a 50% just to keep from getting poorer in subsequent years. That’s actually the point of a wealth tax. Instead of hoarding wealth in overseas accounts it needs to be invested in productive enterprises.”

    Um, where do you think billionaires’ wealth is invested? It’s not like Jeff Bezos has a massive storage locker full of $100 bills, like a hugely-scaled-up Walter White.

  • Dave

    Larry-boy, stick your nose in the air all you fucking want–there are more rednecks to convert than there are precious little snowflakes to offend!

  • Joe R.

    Honestly, I have no idea what billionaires have their wealth invested in. I have heard a lot about offshore bank accounts. Or I often think of billionaires being like Scrooge, with stacks of gold coins. Anything invested in a real business shouldn’t count as net wealth. By “real” I mean something that actually produces goods or services people need, not a business that profits from trading stuff other people make.

    Back when we had high incremental tax rates on the higher end of the income scale, it made more sense for people owning large companies to just reinvest most profits in the company, instead of taking them out as salary or dividends. That accomplishes pretty much the same thing as a wealth tax.

  • Larry Littlefield

    Those red necks and snobs have an infinite capacity for rationalization. You might manage a few “stop imported oil” bumper stickers on the backs of SUVs.

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