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September 27, 2006

To Move Mountains, Fix Markets — An Economist's Agenda for Sustainable NYC

The Mayor's new Sustainability Advisory Board has builders, advocates, energy experts — but no economist. Let's hope the Board's appetite for achievable innovation propels them past the usual fare of efficiency standards and performance thresholds. While standards have been spectacularly successful in specific sectors such as home appliances, they're not equipped for attacking energy use at a transforming scale. For that, the board needs to call for pocketbook incentives that directly reward all energy-saving actions.

Here's a starter's kit from the economist's toolbox: seven concrete market measures and tax reforms to make NYC a global leader in energy efficiency, as well as a better place to live, work and do business.

Price Peak Power — Using electricity during peak periods burns up fuel faster and strains the power grid more than other usage. Traditional flat-rate pricing thus subsidizes peak consumption, sapping incentives to conserve or shift usage to other times. Inexpensive electric meter chips can now charge for usage by time of day. The resulting load shifting and reductions will widen operating margins in power generation, transmission and distribution, helping avert blackouts like those that recently roiled northwest Queens, without the huge expense (and pollution) of building new power plants and shoring up the grid.

Unbundle Electricity — Around a tenth of electric customers in New York City — no one knows the exact share — don't pay for electricity based on usage. Instead, their Con Ed bill is bundled with their residential or commercial rent, which removes all incentive to conserve. Metering and billing these customers directly will unlock substantial electricity savings, as they find it cost-effective to adopt compact fluorescent lamps and other energy-saving measures. With mandated rent reductions to net out the bundled charges, most customers will come out ahead.

Price the Roads — This is the 800-pound gorilla in the NYC sustainability room. The city's road space is scarce and valuable. Charging little or nothing to use it is the Original Sin that creates the city's hellish, gas-guzzling traffic. Whether the first road pricing step is East River bridge tolls or London-style CBD pricing or citywide weight-distance charges is less important than taking some step, now. Drivers must be charged for the time and space they take from other New Yorkers — including other drivers. Road pricing can tame the traffic beast, and also provide a robust revenue stream to finance an expanded regional rail network and bring the transit system into good repair.

Price the Curbs — Pricing's patron saint, Nobel economist Bill Vickrey, long ago urged New York City to monetize curb space, not just in the Central Business District but in residential areas too. The optimal charge, to be determined through trial and error (and varied by location and time), would be the price at which 85% of spaces are occupied, to ensure that drivers could find spaces without endless circling. To win neighborhood support, a share of the parking revenues could be allocated to new Parking Benefit Districts for streetscape improvements, as Pasadena, CA, has done to revitalize its Old Pasadena shopping district. A potential ally: supermarket owners who are losing market share to Fresh ("It's All About the Double-Parking") Direct trucks.

Abolish Privileged Parking — It may not be New York's biggest fuel subsidy, but it has to be the most infuriating: thousands of public employees get to park their private vehicles for free on public thoroughfares, while other commuters must pay to park or use transit. Free parking is an almost irresistible inducement to drive, equivalent to getting a free tank of gas each week, which explains why these freeloaders drive at double the rate of other workers with similar commutes. Dumping this subsidy would be a particular boon to hard-pressed Chinatown, where sidewalks and intersections are cluttered with police and court officers' private cars and SUVs.

Universal Bottle and Bag Deposits — Another no-brainer is extending the nickel deposit (perhaps doubled to 10 cents) to all beverage containers. I help coach at Downtown Little League, and the trash barrels at the ballfields overflowing with Poland Spring and Gatorade bottles are reason enough to charge a deposit. If sales plummet, so be it; the manufacture of plastic bottles uses precious petroleum, as does trucking the bottles to supermarkets, and the no-deposit alternative — municipal water — is good enough, thank you. While we're at it, the City should legislate a nickel-or-more tax on plastic bags given out at cash registers. A bag tax in Ireland has revived the ecological habit of customers bringing their own bags to market. No magic, just the power of economic incentives.

Tax Carbon, not Commerce — Sooner or later, and preferably sooner, the United States will have to tax the carbon content of coal, oil and gas. It's the only way to create an incentive for reducing use of fossil fuels in every sector of economic activity and at every level — from 50-year business decisions on locating new factories and stores, to everyone's minute-to-minute decisions on heating, lighting, and driving. While New York City lacks the authority to tax carbon on its own, it must become a vociferous advocate of state or federal carbon taxing. The City could also advance the discussion by showing how carbon tax-shifting — using carbon tax revenues to phase out state sales taxes, for example, or just cutting every New Yorker an annual check from the "carbon fund" — would make most poor and middle-class households better off while spurring investment in compact cities like ours, instead of in the fuel-intensive hinterlands.

Let's believe this list will entice the City's new Office of Long-Term Planning and Sustainability to think outside the Green Building box. Nothing wrong with green buildings, but they're only one part of a much bigger picture. To move mountains, let's fix markets.

Komanoff, an economist and environmental activist in New York City, authored "Power Plant Cost Escalation," "The Bicycle Blueprint" and "Killed By Automobile." For more, see

September 26, 2006

The Hibernating Giant

Here's a timely overview of carbon trading initiatives in the US. Get the pdf.

September 25, 2006

What's New for Renewable Energy?

The US gets just six percent of its energy from renewable sources, but a new study argues that technology and economics are ready to make renwables markets jump. Read on.

September 22, 2006

Thinking Economically

Even if you skipped Economics 101 at school, you'll want to know why "the possibility of climate change involves two distinct 'market failures'". CBO Report

Beyond Incandescence

Incandescent light bulbs were a 19th century invention. LED's appeared in the mid 20th century, and maybe now they will light up our lives. Look into it.

September 21, 2006

Isn't Carbon Taxing!

This letter was published in the New York Review of Books, September 21, 2006 in response to The Threat to the Planet (July 13, 2006) an article written by Jim Hansen.

Dear Editor,

I want to compliment Dr. James Hansen for another lucid presentation of the science documenting the human-induced global warming problem. In fact, Dr. Hansen's article in the July 13, 2006 issue covers a critical topic that Al Gore's movie omits, namely it gives the reader a good sense of how soon cuts in carbon emissions would have to begin in order to limit warming to 2 degrees Fahrenheit, i.e. through the presentation of his "alternative" scenario. Here Dr. Hansen clearly indicates that humanity has less than a decade to begin reducing the emissions rate of carbon in order to achieve the "benefits" of this alternative scenario when compared to "business-as-usual". In addition, Dr. Hansen makes the claim that economists would generally recommend that a carbon tax be implemented on all carbon emissions in order to achieve this goal of declining emissions within a decade.

Unfortunately, here is where I believe Dr. Hansen's recommendations fall somewhat short of what is necessary to achieve his own scenario, and will only likely to leave the reader of his article with the false impression that a modest carbon tax can easily get humanity off the hook without much fuss and bother by reducing carbon emissions to "acceptable" levels. He even claims that this carbon tax should be phased in gradually, a recommendation that clearly conflicts with achieving carbon emissions decreases within a decade.

What Dr. Hansen fails to discuss is how large this carbon tax might have to be in order to achieve the magnitude of the effect he correctly wants. Given how locked in all economies are to high energy-using equipment including vehicles, it is well known that the price of energy would have to be many times the current price in order to induce the desired levels in reduction of energy use through price effects alone. For example, if gasoline is currently about $3.00 per gallon, the price including Hansen's proposed carbon tax would have to be several times this level, at least, to have any significant impact on total energy consumption within a decade. (Remember gasoline in Europe already costs almost $6.00 per gallon, and Europe also uses far too much gasoline.) Much higher energy prices would be needed because people's response to higher energy prices alone can only be very limited until all the energy-using equipment in the world can change over to vastly more efficient equipment. This takes decades, and a lot of new investment. Thus, to induce less energy consumption, and less carbon emissions within a decade, the carbon tax that Dr. Hansen advocates might have to be vastly higher than the $10-20 per ton of CO2 that economists often discuss as appropriate today; perhaps $100 per ton of CO2, or more. This level of a carbon tax would probably throw most national economies, particularly that of the US, into disarray.

In addition, Dr. Hansen fails to point out that Al Gore's own chart, which he reproduces in his article, shows that the US uses about 5.5 times the world average of carbon per capita. Thus, if by 2050, or so, the world average carbon-emissions rate had to fall by 50% from current levels, which seems consistent with Dr. Hansen's alternative scenario, then if equity were to be imposed on the US on a per capita basis, the US would have to cut back carbon emissions by a factor of 11 (1/2 times 1/5.5). This is a 91 percent reduction! This level of reduction would truly revolutionize the US energy system, and the overall economy, as well. I claim that this level of reduction would not be achievable without major changes in American values and, to some extent, the American way of life, in addition to major changes in energy-using technologies.

Returning, then, to the issue of the magnitude of a carbon tax that would be needed to achieve such a large reduction in US carbon emissions, a very high carbon tax would have to be combined with complementary carbon tax rebate programs for two main reasons. First, the rebates would have to target the tax payments to exactly the kinds of new more energy efficient technologies that would be needed. Examples would be super-insulated homes, very efficient appliances and vehicles, and, probably, investments for solar and wind facilities and new electric transmission lines needed to bring renewable power to the sections of the US that have poor supplies. Secondly, the rebates would have to be allocated in ways so that the poor and middle class would not be throw into poverty by the high carbon tax imposed on all their carbon use, while renewable energy had a chance to become the dominate type of energy supply over the next few decades. I am afraid that Dr. Hansen's concept of a revenue-neutral carbon tax would not sufficiently incentivize new technologies quickly enough, if most (higher income) people did not feel some net financial pain due to the new carbon tax.

The "bottom-line" is that much more will need to be done by the US government (and governments, in general) in the way of planning new energy efficiency programs and a vast new renewable energy infrastructure than Dr. Hansen lets on to by his narrow focus on the single policy instrument of a carbon tax. Again, this criticism does not subtract from the excellent aspects of most of his review.


Richard A. Rosen, Ph.D.
Executive Vice-President
Tellus Institute
Boston, MA

September 20, 2006

Don't Be in Denial

As a world class consulting firm found back in 2004 "Concerns about greenhouse gases and global warming are no longer limited to environmentalists". What should business exectives and financial strategists do now? Here's some free advice.

September 19, 2006

Clinton Sees $100 Billion Annual Investment in Clean Energy

Bill Clinton's Global Initiative conference in NYC focused on worldwide investment trends in renewable energy and low carbon technology. It saw both rapid growth and bottlenecks to future development and envisioned ten areas where new action is needed to keep the money flowing and renewables growing. Read all about it.

September 18, 2006

$31 Trillion Backs Corporate Carbon Disclosure

Today, investors are learning to actively manage risks and opportunities related to climate change, but is carbon awareness translating into all-out management activity to meet the challenge? Read the 2006 edition of the Carbon Project Report. Click here to access pdf.

September 14, 2006

Now That's Big!

China's just released it's first evern green Gross Domestic Product report. Pollution cost the world's most populous nation $64 billion in 2004. Dig deeper

Mind the Data Gap

If we celebrate the construction of high performance buildings, can we be celebrating their actutal energy efficiency and overall green performance? Do we have a data gap?

September 13, 2006

Shop for Carbon and Save the Planet

Here's a report that digs deep into the popular idea of buying and selling carbon credits as a critical way of reducing carbon emissions to a level that will have a real impact on global warming. Put on your thinking cap. Download full report.

How Green is Your Campus

Are students and faculty tilting at windmills or installing them? Alma Matters is hopeful

Can a Warming World Bank on the World Bank?

As the Earth heats up, developing countries and the planet's poorest people will face the gravest risks. Now, the World Bank is proposing to integrate climate risk management into its planning, programs and projects. Read the Bank's Report

Can a Warming World Bank on the World Bank?

As the Earth heats up, developing countries and the planet's poorest people will face the gravest risks. Now, the World Bank is proposing to integrate climate risk management into its planning, programs and projects. Read the Bank's Report

September 08, 2006

Marines Call for Renewable Power in Iraq

Now that getting fuel to Iraqi battlefields can cost up to $300 a gallon, a Marine Corps Major General is calling for a "self-sustainable energy solution". Eyes forward.

September 07, 2006

Why Not Build Them Green

With an announcement that world-famous architects have designed three new skyscrapers, rebuilding at the World Trade Center site has advanced. But not a word about building them as high performance buildings to showcase the Big Apple's role as a sustainable city. Here's what we know so far.

September 01, 2006

Greenhouse Gases on the Rise

According to figures gathered from around the world by the United Nations, 2004 was not a good year. Why?