August 12, 2009. For thirteen years, OPEC's high carbon tax on oil kept U.S. CO2 emissions from increasing. During this period GDP increased more than it did in the previous 13 years. So the CO2 effect was due to carbon pricing—not to a recession.
Some claim the CO2 effect was due to the coincidental start of the nuclear power industry during this period. But this graph is unique because it counts nuclear plants as if they were emitting CO2 like coal plants. Even so CO2 declines a bit, and in reality it declined much more. This proves it really was carbon pricing that held CO2 emissions in check for 13 year.
Note that the CO2 trend went from a 2 billion ton increase to flat. By 1986, carbon pricing was saving 2 billion tons a year. In fact those high prices started trends that are still holding down carbon emission, probably by about 2 billion tons a year. The total savings from the OPEC carbon-pricing experiment is now around 70 billion tons—just in the U.S. No other policy as come close.
Of course OPEC's policy was about the worst possible carbon-pricing policy. We could do far better. For a start, we could tax ourselves and keep the revenues instead of letting OPEC tax us. Come to think of it, that's what the Waxman-Markey bill does in a very small way, except for the offsets. Those send about half our carbon taxes off to pay for iffy carbon projects in China and India. Well, that's better than OPEC.
Or is it? The big problem with the offset money is that India and China love getting it, and if they adopt their own carbon pricing policy or cap, they won't get it any more. Our offset money is actually bribing them not to cooperate with us in Copenhagen. Somebody on our team needs to start thinking. Perhaps we should learn from the Chinese and Indians. Their strategies are quite well thought out. We haven't even figured out we need a strategy.
