Should We Mimic Denmark's Energy Policy?

Is it possible to reduce greenhouse gas emissions, but still have a "remarkably strong economic record and without relying on nuclear power"?:

On Carbon, Tax and Don’t Spend, by Monica Prasad, Commentary, NY Times: Everyone seems to be talking about a carbon tax. ... The idea is that polluters should pay for the environmental damage they cause. Slap a tax on carbon, the theory goes, and you will get fewer carbon emissions, more revenue for government and energy independence, all at the same time. No wonder people from both sides of the political divide have come out in support of it.

But a carbon tax isn’t a new idea. Denmark, Finland, Norway and Sweden have had carbon taxes in place since the 1990s, but the tax has not led to large declines in emissions in most of these countries — in the case of Norway, emissions have actually increased by 43 percent per capita. ...

The one country in which carbon taxes have led to a large decrease in emissions is Denmark, whose per capita carbon dioxide emissions were nearly 15 percent lower in 2005 than in 1990. And Denmark accomplished this while posting a remarkably strong economic record and without relying on nuclear power.

What did Denmark do right? There are many elements to its success, but taken together, the insight they provide is that if reducing emissions is the goal, then a carbon tax is a tax you want to impose but never collect.

This is a hard lesson to learn. The very thought of new tax revenue has a way of changing the priorities of the most hard-headed politicians... But if we want lower emissions, the goal of a carbon tax is to prompt producers to change their behavior, not to allow them to continue polluting while handing over cash to the government.

How do you get them to change? First, you prevent policy makers from turning the tax into a cash cow. Carbon tax discussions always seem to devolve into gleeful suggestions for ways to spend the revenue. ...

Denmark avoids the temptation to maximize the tax revenue by giving the proceeds back to industry, earmarking much of it to subsidize environmental innovation. Danish firms are pushed away from carbon and pulled into environmental innovation, and the country’s economy isn’t put at a competitive disadvantage. So this is lesson No. 1 from Denmark.

The second lesson is that the carbon tax worked ... because it was easy for Danish firms to switch to cleaner fuels. Danish policy makers made huge investments in renewable energy and subsidized environmental innovation. ...[T]he tax gave companies a reason to leave coal and the investments in renewable energy gave them an easy way to do so... The key was providing easy substitutes. ...

[A] carbon tax has been promoted almost as a panacea — just pop in the economic incentives and watch them work their magic. But unless steps are taken to lock the tax revenue away from policymakers and invest in substitutes, a carbon tax could lead to more revenue rather than to less pollution.

An increase in gasoline taxes ... would likewise be the wrong policy for the United States. Higher gas taxes would raise revenue but do little to curb pollution.

Instead, if we want to reduce carbon emissions, then we should follow Denmark’s example: tax the industrial emission of carbon and return the revenue to industry through subsidies for research and investment in alternative energy sources, cleaner-burning fuel, carbon-capture technologies and other environmental innovations.

I thought cap and trade - which is economically equivalent to a carbon tax if implemented correctly - was what "Everyone seems to be talking about," but I'll go with the premise. Also, I don't know much about how energy usage statistics have changed over time for these countries, or why, so I'll have to take the information given on faith (anybody disagree?).

Here's a graph I constructed awhile back to show the effects of a proposal to impose a carbon tax, then return every dime to the public. The economic consequences of these revenue neutral proposals are covered in most microeconomics principles classes, and people such as Robert Frank have made somewhat more formal proposals along these lines (and Marty Feldstein has a scheme he says "actually raises the income of a majority of households" and prevents policy makers from turning the tax into a cash cow, one of the concerns above). So the lesson that "a carbon tax is a tax you want to impose but never collect," is not such a "hard lesson to learn," it's a fairly common exercise (though economists would use different terminology to describe it).

There is no doubt that we should find out where and why under-investment in energy saving technology is occurring and fix the problem as soon as possible, and that can be accomplished in a variety of ways, a dedicated carbon tax is not the only possibility. But if we do impose a carbon tax, a priority for me would be to make sure that the households most vulnerable economically to an increase in energy prices are given the help they need, and it's fairly easy to construct proposals that they have this characteristic. If anything is left over after lower income households are compensated it can be earmarked for other purposes, one possibility is to support policies that help to get the proposal through the political process and do some good at the same time, but the main thing is to get the tax (or the equivalent cap and trade policy, or something that is effective) in place so we can begin to make headway on the global warming problem.

Comments

[Denmark]

The GDP of Denmark doubled over about 30 years, while the US GDP has quadrupled. Carbon emissions can be reduced, but not without cost.

[Tim Worstall]

She has rather missed out one thing. Denmark gets a lot of its electricity from other countries: Swedish hydro power, for example. So the first thing to note is that Denmark did it by abandoning the ridiculous idea of energy independence.

[save_the_rustbelt]

Denmark is what, the size of Detroit?

Social engineering via taxes is generally a bad idea but a warm and fuzzy favorite of liberals.

By the time the lobbyists get through with this low income households will get whacked again, as both political parties owe their souls to the wealthy.

[James]

Note that in the case of Denmark it is not the carbon tax that worked, but rather the uses and policy decisions that the government made with the proceeds, which could have theoretically come from any tax source.

Given that the carbon tax worked nowhere else, and the examples which prior commenters have noted with regard to what Denmark actually did, that should put a spike into the notion of the carbon tax as providing anything but new sources of income for statists and a corrupt system.

[anne]

"The GDP of Denmark doubled over about 30 years, while the US GDP has quadrupled. Carbon emissions can be reduced, but not without cost."

Say what? Care to document this, and care to show how Denmark's energy policy has cost so much for, 30, yes, 30, years? I am all tingly waiting.

[anne]

"Social engineering via taxes is generally a bad idea but a warm and fuzzy favorite of liberals."

Notice the language. Please do explain how compassionate conservatives have been fuzzying up taxes for the sake of, well, anti-social engineering through this Administration. I am ever so interested, because I really do need to understand such things so I too can learn to be anti-social.

[Don Quijote]

Social engineering via taxes is generally a bad idea but a warm and fuzzy favorite of liberals.

If Social engineering can be done through the use of the tax code then not using the tax code to do Social engineering is a form of Social engineering.

[bakho]

Interesting that cap and trade alone don't produce good results. Not surprising. Reducing energy use is about new technology adoption and changing processes. Cap and trade is funny money that does not necessarily finance the best solutions.

Many models for energy conservation argue against CAFE and ignore the real data. Here is a graph that shows the real effect on oil consumption of CAFE standards implementation and high oil prices from the late 1970s to 1983:

http://www.eia.doe.gov/emeu/aer/pdf/pages/sec5_20.pdf

[save_the_rustbelt]

"If Social engineering can be done through the use of the tax code then not using the tax code to do Social engineering is a form of Social engineering."

Circular logic?

Actually, for me the more social engineering the better, as I can make money on the tax code, being one of the high priests who actually understands portions of the code, regs, rev procs, PLRs, court cases and etc.

However, consider the possibility the use of tax policy to solve various social problems may not always be the best course of action. Could you consider that?

Using tax policy as the first resort may not be optimal.

[ken melvin]

Far better to curse the dark.

[Denmark]

Anne..."Care to document this..."

Hello Anne, I remembered the data from an article on the front page of the April 16, 2007 edition of the Wall Street Journal. The article is mirrored at this site:

http://postcarboncities.net/node/141

[anne]

Ah, thank you; but the link threatens to crash my computer, so I will go to it when in the office; however:

GDP per capita

$44,000 (2006 Est.) United States

$37,000 (2006 Est.) Denmark

I am much interested in the Wall Street Journal article. Should you happen to have the title, I might be able to read it now. The long term growth figure has to be wrong, but how so?

[trader walt]

Anne,here is the WSJ article:

http://postcarboncities.net/node/141

[Denmark]

How Denmark Paved Way To Energy Independence

http://online.wsj.com/article/SB117649781152169507.html?mod=hps_us_pageone

[paine]

rusty

".. the use of tax policy to solve various social problems may not always be the best course of action"

i agree

its in many cases way too slow
at least operating alone

often costs can be passed thru for one thing

direct mandates with time frames and savage penalties gouged out of profits
lots and lots of circus maximus stuff
both on the ground and politically at the polls

the direct kick em in the balls approach
gets the limited liability mule's attention
in a way a slow tax bleed doesn't

[paine]

anne stick to your guns

citing the pravda
of the trans nats
for me at least
will never settle
a factual dispute

in fact my guess we might want to

do a heavy carbon tax anyway

since it provides
"new sources of income for statists and a corrupt system"

i mean think of the pelf
we lounging pointy heads
can rake in
right off the suckerish backs
of 24/7/365
toiling corporate cuff linkers

[paine]

"If Social engineering can be done through the use of the tax code then not using the tax code to do Social engineering is a form of Social engineering"

that is like saying

no hierarchy is another form of hierarchy

[paine]

help me out here
how can a cap not work

unless its a cap in name only ???

a cap that slowly plunges down
oughta work

if the cost of non compliance
is set high enough
to exceed elastic tax cost or penalty
pass thru

set too low and limited in personal liability
the system onvce imposed can be lived with
okay
so portfolio market value is hit
but the market makes a one time value adjustment
to lower earning streams eh ??

lesson diversify

on the other hand
the threat of a full plant shut down
is the best action
and holding corporate officers
personally responsible
and to the full extent of their personal wealth

[anne]

http://online.wsj.com/article/SB117649781152169507.html

"The result of these and other policies is that Denmark's energy consumption -- the amount of fuel it uses to heat its buildings, drive its cars and power its economy -- has held stable for more than 30 years, even as the country's gross domestic product has doubled, according to the International Energy Agency, a Paris group that tracks energy prices and policies. During the same period, energy consumption in the U.S. has risen 40%, while its GDP has quadrupled. The average Dane uses 6,600 kilowatt hours of electricity a year, compared with 13,300 for the average American."

Here is the passage; while per capita income in Denmark is about 16% less than in the Unite States per capita energy use is about 50% less.

[Anspen]

"The GDP of Denmark doubled over about 30 years, while the US GDP has quadrupled. Carbon emissions can be reduced, but not without cost."

It's not quite as simple as that. According to census data the population of the US rose from 226,5 milion in 1980 to some 300 million in 2007 (a 32% increase) while the Danish population increases from 5.1 million to 5.4 (a 6% increase). So per capita GDP in the US "only" tripled compared to the doubling in Denmark.

Of course even these figures aren't a fair comparison, since exchange rates, real PP etc. aren't taken into account and you can't expect to explain the difference simply by looking at the Energy policy without looking at all the other figures.

The main point about Denmark is that an energy policy can work, but that it has to be integrated, not a simple tax and forget system.

[anne]

There is no reason to believe that energy increased efficiency in Denmark has come at the expense of growth either for Denmark as such or at the expense of growth relative to the United States. The argument however against energy conservation or efficiency is always made in terms of sacrifice while long term technical advance spurred by a move to conservation can well compensate for any cost and prove growth promoting.

[hari]

Sorry to raise a side-issue on Denmark....
If you've sailed the waters separating Sweden and Denmark, the projectiles now covering the horizon as you reach the other side is mostly these God knows how tall poles with their 24/7 windmills generating electrical power....

It's the most disgusting environmental sight from a sailing boat!

[anne]

Again, per capita national income in Denmark was within 16% of that in the United States in 2006.

As for tax and social policy, simply begin by understanding that taxes always are social interferences so the question become how are they to interfere. The flattest of flat taxes would be a wild social interference. Then, how so and do we wish such an interference?

[paine]

hari

"the projectiles now covering the horizon as you reach the other side is mostly these God knows how tall poles with their 24/7 windmills generating electrical power...."

what offends one pair of eyes
often pleases another

i happen to like the huge solitary windwill
we have hulking over ocean side hull mass

if joined by many like mills
i'd feel i was watching
the war of the worlds climactic moments
as the infrenal martian machines
having laid waste to late victorian england
clamber to the cliff edges of dover

[paine]

bakho
sez it fastest

cafe olay

[lonesome moderate]

Whenever I read an article about Scandanavian economies I feel like I have entered an alternate universe, one where there is no corruption, corporations all work for the common good, politicians have the courage of the convictions, and the skies and streams are kept pure under contract with the National Purifier's Union.

If an American company got tax breaks to invest in green technology, then the budget would go to a company owned by the CEO that sold green crayons at a 10000% markup.

[paine]

lm

notice how minor scanland is
even its own home grown trans nats
can behave themselves there and still make
much much golden straw elsewhere

scanland is the exception alibi ing the rule

[reason]

I wonder why people take native GDP and think they mean exactly proportionally what they say. We can increase GDP easily by all cutting each others lawn and paying each other to do so, but has there been a gain at all? And tracking international GDPs is ever so difficult. The EUR has gone from 0.82 to over 1.50 USD since 2000. Internally that means massive changes in relative prices. Such comparisons are very hard to interpret.

[Alex Tolley]

anne:

There is no reason to believe that energy increased efficiency in Denmark has come at the expense of growth either for Denmark as such or at the expense of growth relative to the United States. The argument however against energy conservation or efficiency is always made in terms of sacrifice while long term technical advance spurred by a move to conservation can well compensate for any cost and prove growth promoting.

From the chart in the WSJ, it looks like all 3 countries, US, UK and Denmark have been achieving about the same improvement over energy efficiency over the last 30 years - about a 25% reduction in energy use per unit GDP. It is just that Denmark starts with a lower energy use and the US with a relatively high one. It would need a breakdown in where the energy is used to determine if there are efficiencies that the Danes have that the US does not. The data might simply show that the Danes drive less and don't have many high energy using industries, e.g. metal smelting.

However, while energy efficiency is good, we need to keep our eye on actual CO2 emissions - ie substitute non-fossil fuel energy sources. Despite Hari's disgust at the sight of wind farms, these sorts of technologies are going to be needed. Rather have wind farms than tidy little coal plants spewing invisible CO2 and warming the planet.

A key point from the article is:

carbon tax worked ... because it was easy for Danish firms to switch to cleaner fuels. Danish policy makers made huge investments in renewable energy and subsidized environmental innovation.

The US offers very few incentives to increase efficiency and almost no alternative clean fuels are offered. The simplest example is gasoline. You can raise gasoline prices all you want in California, but there are no effective alternatives to use - whether electric cars, public transport etc. All one can do is buy the most fuel efficient car, and the incentives are few, even with the current $3.50 price of gas.

[paine]

reason you bring up a good point

we need a broader measure
that includes the value of informal markets

and non market production too
as sectors II and III

then shifts between each can get captured
as not new real output

[paine]

reason's lawn cross
brings up an old chestnut

the non market output of america
estimates of the value of this and the tax free cash economy
both exist

some off set could be made
day care and restaurant eating have clear off sets
so does much else

[teme]

I have some fact checking issues with NY Times: "Denmark, Finland, Norway and Sweden have had carbon taxes in place since the 1990s, but the tax has not led to large declines in emissions in most of these countries — in the case of Norway, emissions have actually increased by 43 percent per capita."

Finland didn't have a carbon tax until EU emission trading, and I am pretty sure our Scandinavian neighbours didn't have one either. Like most European nations, we've had gasoline tax as far back as I can remember.

I don't get the bit about Norway's emissions increasing 43 percent either, they vary a lot annually depending on rainfall (they have more hydropower than they need, and oil, and gas, and excellent conditions for wind power...) Between 1999 - 2004 (CO2 ton equivalents per capita) Norway's emissions fell (I don't have more recent data handy):
Norway 11.0 10.2 10.8 13.9 9.5 7.9
Denmark 9.3 8.7 9.0 8.8 11.3 9.4
Sweden 5.3 5.4 5.5 5.8 6.3 5.8
Finland 11.5 11.1 12.2 12.5 14.0 13.2
Iceland 10.8 11.1 11.1 11.0 11.1 10.2

For comparison
Canada 15.0 16.0 15.4 16.5 18.5 17.2
Euro area 8,1 8,1 8,2 8,3 8.6
USA 20.2 20.7 20.3 20.2 20.1 19.7
China 2.2 2.2 2.4 2.7 3.2 3.7

Interestingly, China is on course to pass Sweden on per capita emissions...

[Bupa]

hari, i suggest you not sail around western Antarctica or you might be converted to the need for more windmills along other coasts.

http://ap.google.com/article/ALeqM5jnjYmtmAnaPQ4YWKA6WpWdm2X8yAD8VKKT60F

Western Antarctic Ice Chunk Collapses
By SETH BORENSTEIN – 1 hour ago

WASHINGTON (AP) — A chunk of Antarctic ice about seven times the size of Manhattan suddenly collapsed, putting an even greater portion of glacial ice at risk, scientists said Tuesday.

Satellite images show the runaway disintegration of a 160-square-mile chunk in western Antarctica, which started Feb. 28. It was the edge of the Wilkins ice shelf and has been there for hundreds, maybe 1,500 years.

This is the result of global warming, said British Antarctic Survey scientist David Vaughan.

Because scientists noticed satellite images within hours, they diverted satellite cameras and even flew an airplane over the ongoing collapse for rare pictures and video.

"It's an event we don't get to see very often," said Ted Scambos, lead scientist at the National Snow and Ice Data Center in Boulder, Colo. "The cracks fill with water and slice off and topple... That gets to be a runaway situation."

While icebergs naturally break away from the mainland, collapses like this are unusual but are happening more frequently in recent decades, Vaughan said. The collapse is similar to what happens to hardened glass when it is smashed with a hammer, he said.

The rest of the Wilkins ice shelf, which is about the size of Connecticut, is holding on by a narrow beam of thin ice. Scientists worry that it too may collapse. Larger, more dramatic ice collapses occurred in 2002 and 1995.

Vaughan had predicted the Wilkins shelf would collapse about 15 years from now.

Scientists said they are not concerned about a rise in sea level from the latest event, but say it's a sign of worsening global warming.

Such occurrences are "more indicative of a tipping point or trigger in the climate system," said Sarah Das, a scientist at the Woods Hole Oceanographic Institute.

[piglet]

Thanks teme. I suspected something fishy with that article but you did a good fact check.

As to GDP doubling vs. quadrupling, come on. You all know the basics of ecomomics who post here, right? Then you all know that GDP is totally worthless as a measure of economic success. You know this, don't you? Not only reason, all of you know it. You know that GDP reflects to a great extent economic activities that are either not beneficial, or that are required only to repair damage that has been caused by other exonomic activities.

You all know that! So why do you keep on repeating that the earth is flat?

[anne]

Finland has had a cabon tax since 1990, Norway and Sweden since 1991, Denmark since 1992. I wonder about Iceland.

[anne]

http://www.nytimes.com/2008/03/22/world/europe/22norway.html

March 22, 2008

Lofty Pledge to Cut Emissions Comes With Caveat in Norway
By ELISABETH ROSENTHAL

OSLO — Last year, as United Nations scientists were warning of the perils of man-made climate change, this small country of fjords and factories reacted with an extraordinary pledge: by 2050 Norway would be "carbon neutral," generating no net greenhouse gases into the air.

Norway's bold promise raised the bar for other nations, which were mostly still struggling to figure out how to reduce emissions, by even a fraction. Then, in January, the Norwegian government went a step further: Norway would be carbon neutral by 2030, it said.

But as the details of the plan have emerged, environmental groups and politicians — who applaud Norway's impulse — say the feat relies too heavily on sleight-of-hand accounting and huge donations to environmental projects abroad, rather than meaningful emissions reductions.

That criticism has not only set off anguished soul-searching here, but may also come as a cold slap to the many countries, companies, cities and universities that have lined up to replicate Norway's example of becoming carbon neutral — with an environmental balance sheet showing that they absorb as much carbon dioxide as they emit.

Many signed on not only to set an example of their own but also for a kind of public relations boon, or to pre-empt or get out ahead of government regulations they feel are probably inevitable. In the past year, the Vatican announced that it was carbon neutral, and companies like Wal-Mart say they are aiming for that goal.

But their claims — like Norway's — all require asterisks, like home-run records buoyed by steroids. And as the Norwegian plan shows, achieving a carbon-neutral state, for now, often depends as much on how you make the calculation and how much money you spend, as it does on hard work, sacrifice or even innovation.

"We're a nice little selfish country of petroholics, and that has made us lazy," said Frederic Hauge, president of Bellona, Norway's largest nongovernmental environmental organization. "The move from 2050 to 2030 is a sign of good intentions, but unless I see action, I've heard it all before."

Despite its pledges, seen from the perspective of its smoke-spewing rigs producing billions of barrels of oil a year — Norway is the third largest exporter in the world — industrial Norway does not look like a poster child for environmental friendliness.

In the short term, the country is poised to become carbon neutral by financing environmental projects abroad, as allowed under the United Nations environmental accounting policy. That means that emissions at home can be "canceled out" by things like planting trees or cleaning up a polluting factory in a country far away.

But Norway's actual plan for reducing its own emissions is much less clear. Like all the environmentally conscious Scandinavian countries, Norway made the easy changes decades ago. Any further cuts in emissions — the essential thing scientists agree is needed to stem the momentum of global warming — are likely to be painful.

If anything, its early experience shows that cutting carbon dioxide emissions will require real sacrifice closer to home, like driving less, flying less and putting restrictions on businesses. Instead, so far it is relying in large part on developing unproved technology.

The Norwegian model, critics say, may not be a path to the future of carbon neutrality and may not be sustainable, because it requires deep coffers and, anyway, there are not enough environmental projects in poor countries to cancel out all the emissions of the developed world....

[anne]

http://www.nytimes.com/2008/03/22/world/europe/22norway.html

Cars and fuel in Norway are already heavily taxed, and gas-guzzling cars have long been taxed more than small, economical models. A sport utility vehicle in Norway costs four times as much as one in the United States.

Other countries can close highly polluting coal-fire electricity plants as an easy first step toward reducing emissions. But Norway barely uses any coal at all. More than 95 percent of the country's electricity is from waterfalls — eco-friendly, renewable hydropower.

The main polluter in Norway is heavy industry — oil, gas, metal refining. They are, of course, the industries that have made Norway rich. Their revenues ensure high pay and good benefits here, and they help pay for reducing deforestation in Africa....

GDP per capita (2006)

$46,300 Norway
$44,000 United States
$37,000 Denmark

[anne]

http://www.nytimes.com/2008/03/25/opinion/25prasad.html

"Denmark, Finland, Norway and Sweden have had carbon taxes in place since the 1990s, but the tax has not led to large declines in emissions in most of these countries — in the case of Norway, emissions have actually increased by 43 percent per capita. An economist might say this is fine; as long as the cost of the environmental damage is being internalized, the tax is working — and emissions might have been even higher without the tax. But what environmentalist would be happy with a 43 percent increase in emissions?

"The one country in which carbon taxes have led to a large decrease in emissions is Denmark, whose per capita carbon dioxide emissions were nearly 15 percent lower in 2005 than in 1990. And Denmark accomplished this while posting a remarkably strong economic record and without relying on nuclear power."

Norway is a leading exporter of oil, which along with relying on heavy industry counts for the significant increase in per capita emissions since 1990.

[anne]

Denmark carbon tax 1991
Norway carbon tax 1991
Sweden carbon tax 1991
Finland carbon tax 1990
Netherlands carbon tax 1990

I had not realized a carbon tax was considered and adopted this early in these European countries. If there was an adverse growth effect from the tax adoption in these countries since 1990, I do not find it.

[piglet]

I have tried to check out the Norwegian 43% "increase" in CO2 emissions and came (via wikipedia) to the site of the UN Milennium goals. When you go on http://mdgs.un.org/unsd/mdg/Data.aspx, expand target 7a, there you find two different statistics on per capita CO2 emissions between 1990 and 2004 (you can view them for any countries you chose). One of the data series is from CDIAC, the other from UNFCCC. Both data sets differ slightly, up to around 10%, but correlate well. However, for some mysterious reason, the first of these series fluctuates heavily in the case of Norway. The per capita data almost double from 10 to 18 between 2000 and 2003. The other data set stays almost constant, always below 10. I conclude there must be something wrong with the CDIAC data for Norway, unless somebody could point out an explanation for the sudden and dramatic "increase".

It should be noted that these statistics are very tricky to collect and there are some hard to resolve problems, like how to treat methane and other gases, and there are a number of slightly different figures that are quoted by different sources (where did you get yours, teme?). I haven't looked at the details to see what methodological differences there are. However the 43% increase for Norway cited by NYT remains mysterious (they can't have used either data set). And neither is the 15% decrease cited for Denmark consistent with either data set.

If we trust the UNFCCC data, Norway's per capita emissions have increased 17% in 15 years, Finland's 16%, while Denmark's and Sweden's decreased 3% and 6%. These countries are all below 50% of the US level except for Finland, and Sweden is even at 30% of the US level. Frankly, I don't see the point of this article. You can't expect those who are already among the most energy efficient to make the big improvmeents needed to prevent Climate Change.

[anne]

Agreed, Piglet;

I cannot make sense of the 43% increase in per capita emissions increase figure for Norway since 1990, and was about to post the 17% figure as well (leaving it as less than 20%). We may be making a mistake, but I think not so far. The Nordic countries are simply wildly more energy efficient, no matter the relative environmental circumstances.

[anne]

Looking further, and thinking even about the public bicycles everywhere in lovely Stockholm, we should be terribly well impressed by the attention paid to energy efficiency an conservation through the Nordic countries. Similarly the Netherlands, and reading the European press I gather the model is taking all through Europe.

Thanks, Teme.

[save_the_rustbelt]

Could this become like the cigarette tax?

Ostensibly the tax is to correct behavior, and also to make up for smoking induced healthcare costs, but methinks the government becomes addicted to the revenue, and really hopes that at least a base number of people continue to smoke.

Sort of a tail chasing exercise?

[piglet]

That, str, depends on how the revenue is used. Mark discusses that question in his remarks above.

[teme]

Piglet, I tend to use Statistics Finland web site for quick reference, in this case Energy and environment at http://www.tilastokeskus.fi/tup/maanum/taulukot_en.html
I think it is the UNDCCC data set they are using, sources given for the emissions are UN publications.

Heating is the low hanging fruit when it comes to energy efficiency, easy to improve and usually a pretty good investment. Something of a natural priority for Nordic nations, and I believe the chief source of energy efficiency. Stockholm, Helsinki, etc. have district heating systems and co-generation of heat and electricity, which basically cuts fuel usage in half.

[BJ Feng]

Any revenue must be segregated and used only for green energy subsidies with the understanding that such revenue and subsidies are likely to decrease over time (that's what we want). Unfortunately, once a program gets going, it's hard to end. Eventually some politician will come up with some great idea on how to expand the program or to extend the reach beyond what it was initially intended to do. The goalposts will be moved and subsidies shifted to favored special interests (like ethanol currently) without regard for merit or scientific basis. How do we prevent this?

Secondly, the United States is the world's largest economy and user of energy (I believe). I don't think we can compare our energy generation abilities with that of small Nordic countries. There are a limited amount of renewable energy sources here in the United States given our massive energy needs. Rivers are dammed twice, sometimes three times to generate power. There aren't an unlimited number of locations for wind power (has to be windy almost all the time) or solar (has to be sunny almost all the time) or geothermal.

If we are going to try and reduce carbon output, the Denmark method of taxing pollution and subsidizing "green" energy from the taxes are the way to go. But we should all keep in mind the sheer size of the United States and understand we are limited in how much "green" power is achievable in the near future. We will probably always be behind smaller countries which have the luxury of small energy demands.

[piglet]

"I don't think we can compare our energy generation abilities with that of small Nordic countries."

The US generates twice the emissions *per capita*.

"There aren't an unlimited number of locations for wind power (has to be windy almost all the time) or solar (has to be sunny almost all the time) or geothermal."

I bet there are more in the US than in Europe. After all, it's a big country with a huge wealth in natural resources.

[Size Matters]

"Heating is the low hanging fruit when it comes to energy efficiency..."

Yes, and Europeans generally have much smaller homes, which require less energy to heat. US zoning regulations work against energy efficiency by mandating much larger homes than most people need. Want to help save the planet? Get rid of non safety zoning regulations.

[teme]

Now I get it, what NYT means by carbon tax is commonly referred to as fuel tax over here. It wasn't primary a carbon tax at inception, there is a long history of taxing fossil fuels originally for protectionist reasons. Yes, $8 a gallon does wonders for fuel efficent vehicle sales and other fuels are taxed too.

I just don't think lock-box approach makes much sense in Nordic or European context, and here is why: Contrary to popular belief, Nordic nations do not have that high income taxes and property taxes are fairly low. That extra tax revenue which pushes the total tax rate up is gathered by taxing consumption, about third of revenue in Finland. Some products and services have lower or zerp tax rate, newspapers, media in general, labor intensive services like hair dressers, and food come to mind. And some like fuel, alcohol and tobacco have higher rates even if these are not technically all VAT.

Primary motivation for taxing consumption is not Pigovian but simply tax gathering, and I don't really see the problem with that. How this burden is spread between different kinds of consumption includes environmental and other considerations.

[piglet]

Size Matters: That oversized houses are forced on US consumers by zoning regulation is new to me. I thought this was mainly a status thing. But you are right that size matters, and big American houses often are impossible to properly heat. They also tend to lack proper insulation and the quality of windows even in posh, expensive houses is often ridiculous. There is enormous potential for improvement, if you want to look at it from a positive angle.

teme: "Now I get it, what NYT means by carbon tax is commonly referred to as fuel tax over here." I suspected the same but I am trying to find out more. Check here: http://www.carbontax.org/progress/where-carbon-is-taxed/

[lonesome moderate]

piglet: That oversized houses are forced on US consumers by zoning regulation is new to me.

It was news to me too, but Patricia Shannon (who seems to be busy with other things at the moment) has written about it several times here. From what Patricia says, it is apparently a particular problem in the Atlanta area, mostly due to NIMBYism.

[piglet]

Economic Instruments in Practice 1: Carbon Tax in Sweden
Bengt Johansson, Swedish Environmental Protection Agency

http://www.oecd.org/dataoecd/25/0/2108273.pdf

In 1991 a carbon tax was introduced in Sweden as a complement to the existing system of energy taxes, which simultaneously were reduced by 50%. Since then the system has changed several times but a common feature is lower taxes for industry and electricity production than for other sectors. Currently, industrial consumers pay no energy tax and only 50% of the general carbon tax. Neither energy nor carbon tax are applied on electricty production. Today the general carbon tax level is 36.5 öre/kg CO2 approximately $ 150/tonne C). The most obvious effect of the carbon tax has been an increased use of biomass in the Swedish district heating system. Biofuels peat etc. currently contribute about 50% of the energy supply to the Swedish district heating systems. The demand for biomass has encouraged the development of new methods for utilising wood fuels which in turn has led to price reductions on these fuels. The impact of the carbon tax on the energy and resource efficiency of the Swedish industry has probably been rather limited for three reasons: 1) the carbon tax on industry is only 50% of the general level and, 2) only a relatively small fraction (30%) of the energy supply to industry was fossil fuel-based when the tax was introduced and 3) for most industrial companies the energy cost is a relatively small fraction of the total cost and has therefore low riority.
(Emphasis added)

[piglet]

A Review of Carbon and Energy Taxes in EU

In countries where carbon/energy taxes have been implemented, several issues are generally considered in the course of developing overall tax policies. Often, carbon/energy taxes:

* are only one instrument in a package of measures aimed at reducing emissions.
* are often part of a general fiscal reform; replacing other taxes on energy and reducing the distortionary impacts of traditional taxes (e.g. on labour and capital).
* are usually gradually phased-in and adjusted over time to account for inflation.
* include exemptions and exceptions have been granted to energy-intensive industries or to industries facing international competition.

Taxes on energy products and the derived ‘implicit’ carbon taxes vary significantly between countries (see table on energy taxes on page 8), and thus the average price of a ton of carbon is relatively different from country to country. This is one of the main problems to implement internationally coordinated carbon taxes.

Data in the table also shows that there are large differences between the taxation levied on different energy products. Some fuels, like petrol and diesel, are heavily taxed. The main reason is that those energy products possess low demand elasticities, and thus taxing them is an easy way to collect fiscal revenues. With respect to the carbon content of energy products, it should also be noted that, in almost all countries (except Sweden and Denmark), coal has a particularly low implicit carbon tax. In fact, coal is even still heavily subsidised in countries like Germany and Spain. More in general, fossil fuels with higher carbon content often have lower implicit carbon taxes than those with lower carbon content. Therefore, with respect to the objective of reducing carbon emissions, a reform of the energy tax structure should accompany the eventual introduction of carbon taxes.

Empirical studies evaluating the environmental effectiveness of implemented carbon taxes are rather limited so far. The lack of appropriate studies can be ascribed to the fact that there are several methodological difficulties and complexities in doing such evaluation studies. The few evaluation studies demonstrate that carbon taxes are an effective instrument in reducing CO2 emissions.

An evaluation study of the Swedish CO2 tax carried out by the Swedish Environmental Protection Agency (SEPA) concludes that the CO2 tax "… has helped to reduce emissions of carbon dioxide in line with Swedish environmental policy" (SEPA 1997, p.52). The Danish Ministry of Finance estimated the effect of the carbon/energy tax regime a 4.7% reduction in CO2 emissions from 1988 levels in the year 2000.

[Asymptototic]

Original article uses statistics rather selectively. Why does she choose the year 2005 as a reference for co2 emissions? Could it be that in that way she does not have to reveal that danish per capita co2 emissions actually increased 16% on 2006 wiping out the 15% reductions from 1990 she mentions? Danish co2 emissions have not really increased since the beginning of 80s (this is great), but neither has there been a clear reduction. During the 80s several countries saw much more dramatic co2 emission reductions than Denmarks "statistical scatter" reductions. For example, in France about 20% reductions and in Sweden more than 30% reductions. And keep in mind that this was in 10 years and correlates very clearly with the buildup of nuclear capacity in thise countries.

[piglet]

Asymptotic, please give references for your numbers. Are you saying that Denmark's emissions increased 16% in 2006 or are you making a hypothetical? The continuous data sets I have cited above go from 1990 to 2004 and they don't agree with the data from the NYT piece (neither with your data). So it all looks a bit mysterious. If anybody can point to *continuous* data that go further than 1990-2004, please do.

Concerning Norway, I have asked CDIAC about it and they confirmed that their Norway data are unreliable: "We aware that there is a problem with our data series on Norway and are working right now to resolve the problem. The problem is in the basic energy data that we use to estimate CO2 emissions. You have succeeded in finding the only country for which we currently have known, unresolved problems. We apologize if this has created problems for you."

Concerning the NYT article, I got the following comment from CDIAC: "I can tell you that I read the NYTimes piece yesterday after it was sent to me by a similarly concerned reader. Basically that NYT article was apparently based on CO2 emissions data from the US Department of Energy/Energy Information Administration - and it looked to me like they too were having trouble with the data from Norway. It sounds to me like you are familiar with the national reports to the UNFCCC, and that is the data set that I would go to for Norway. I am not sure that I trust their data on emissions from gas flaring, but the emissions from fuel use should be good. We use energy data from the UN Statistics Office in New York and our data problem is somewhere back in the transfer of energy data from Norway to the UN

...I do know that there are a lot of interesting issues about the interconnections and trade within the Scandinavian countries that make the kinds of conclusions from the NYT piece challenging. Norway gets lots of electricity from hydropower and in wet years exports more electricity to Denmark. Carbon taxes and the European Trading System are having some effect on the production and trade of electricity in Scandinavia and there are some analyses of this that are published."

I am left with the frustrating feeling that currently, everybody makes up their own data to prove what they want to prove.

[Asymptototic]

Sorry for the long delay. I have been traveling.
For the Danish Co2 emissions see, for example.
http://www.ens.dk/graphics/Publikationer/Statistik_UK/energy_in_dk_2006/html/kap06.htm
I am not sure what the "adjusted" curve means. If I were to make a fit to that data set, my fit would take into account that huge peak around 1996.

For reference, here you can find the finnish co2 emissions from 1990-2006 http://www.stat.fi/til/ekul/2006/ekul_2006_2007-12-12_kuv_012.html
Finland has very little wind capacity and the ups and downs
are mostly due to weather conditions. Was it a cold winter or nor? How much capacity Norway and Sweden had to generate electricity with water? I am quite convinced that recent fluctuations in the danish emissions are due to similar reasons.