Xie Tian: The left-right struggle of carbon pricing and carbon tax and the game of big countries

If an earthling goes to another planet and finds that the people there use a chemical element that is very common there, a chemical element that is very abundant, everywhere, everyone has, everyone absorbs, and everyone “emits”, as a valuable evidence, a measure of value, and even a taxation object The earthlings must think that the people of this planet must be crazy, or completely brainwashed by some smart people. In fact, if an alien came to Earth and saw the Earthlings doing the same thing, tossing and turning on the element of carbon, would they also think that the Earthlings are also crazy? In fact, we Earthlings, many, many of us, may really be a bit crazy.

As the sixth element on the periodic table, carbon is the most common, but the most expensive symbol. This is because carbon is a component of both graphite, which is extremely soft, and diamond, which is extremely hard. Incredible to say, they both have the same composition, exactly the same, both are carbon, only the structure is different. When I studied geology and geochemistry back in the day, my teacher talked about how the composition of the same carbon, in terms of Mohs hardness, graphite is almost the lowest grade 1-2, while diamond (diamond) is the highest grade 10. This makes one speculate on what Lao Tzu said in the Tao Te Ching, “The most flexible in the world, gallops the most rigid in the world,” to the softness grasping the rigidity, and the transformation of rigidity and flexibility, which may give a new understanding.

The origin of the English word carbon, the Latin word carbo, is coal, so the Chinese translation, I should say, is very apt. Artificial diamond nanocrystals are the hardest substance, and graphite is one of the softest substances, which also makes people quite emotional.

Biologists say that all living things depend on carbon. Without carbon, no living form, as humans know it, could exist! Our clothing, food, housing and transportation are all inseparable from carbon: the most critical cellulose in the cotton and hemp we wear is a plant-made carbon polymer; wool, cashmere and silk, are also carbon polymers; the food we eat has cellulose also has carbon, the wood we build houses and furniture has carbon, the natural gas we burn for heating is carbon, we travel in cars, fossil fuels are hydrocarbons. Modern society cannot do without plastic, which is also a synthetic carbon polymer, its manufacturing raw materials are processed from petroleum. Steel and iron, which are essential to people’s lives, are distinguished by their carbon content. The abundance of carbon, which is ranked 15th in the Earth’s crust, it is surprisingly ranked 4th in the whole universe as we humans know it now, just below hydrogen, helium and oxygen. Because of its extreme abundance, the variety of polymers that it can produce in the Earth’s environment is so great that it is believed that carbon is the chemical root of all living things on Earth.

So, wouldn’t it be funny and interesting if someone said that people need to buy or sell “carbon”? Now, many people, including individuals and groups and countries, have taken notice of the chemical basis of all living things on earth, the basic component of our body, and have started to tax and price it. The object is carbon dioxide, which is a combination of carbon and oxygen!

The entire Earth’s biosphere contains about 2 trillion tons of carbon; and there are 1.1 trillion tons of carbon in coal, oil, and natural gas, but there are another 500 billion tons in shale gas; and 3 trillion tons in methane hydrates at the poles and under the sea. The source of the problem is the 350 billion tons of carbon that people have burned over the past 250 years, in fossil fuels, because they were released into the atmosphere as carbon dioxide. But scientists also agree that, in fact, on Earth, it’s not very easy to make transitions between elements, and that carbon on Earth is essentially conserved. It is that there is a carbon cycle in the Earth’s environment.

When people talk about the price of carbon, they are not talking about the price of coal, oil, graphite, or diamonds, but the cost of forcing countries to reduce carbon dioxide emissions, or “carbon pollution”. This could be in the form of a “carbon tax” or a requirement to buy “emission permits”, or carbon trading, or “allowances”. allowances). People on the left and the right have played a fierce game on this issue.

But the people who came up with this “genius” idea also knew that it could not be priced by the market, so who would buy it? The British economist Arthur Pigou first proposed a hundred years ago to charge a price equal to the monetary value of the damage caused by CO2 emissions, in an attempt to calculate the “social cost” of carbon. This approach seems simple, but it is very complicated in practice, and it is a matter of the ideal and the reality. One hundred years from now, people still don’t know the exact economic cost of one ton of carbon dioxide emitted into the atmosphere.

What can we do if we don’t know how to put a price on it? The answer in economics today is not to put a price on it, but to use a carbon tax! In international climate negotiations, so-called “price commitments” are used directly as a tool for countries to negotiate. “carbon price system,” which requires national commitments to a carbon price, but not to specific policies. And, carbon taxes, caps, and hybrid programs, could all be used to meet such a commitment.

In June 2014, the Bank circulated a statement for countries and companies to sign, stipulating that countries could use emissions trading or carbon taxes to “put a price” on carbon “to slow global warming.”

In 1997, more than 2,500 economists signed the Economists’ Statement on Climate Change, arguing that “the most effective way to mitigate climate change is through market-based policies. In order for the world to achieve its climate goals at the lowest cost, cooperative approaches among countries – such as international emissions trading agreements – are needed.” The statement said the United States and other countries can most effectively implement their climate policies through “market-based mechanisms,” such as “carbon taxes or auctions of emission permits.” Artificially turning government taxes into a “market-based” policy is supposedly an invention of these economists.

The most fascinating thing is the so-called “emissions trading”. How does emissions trading work? It first requires the government to set an “emissions cap” of, say, no more than 1,000 tons per year. The government then prints 1,000 permits, and each permit holder can emit 1 ton. Such permits can be granted by the government or auctioned off to the highest bidder. And, such licensable permits can then be traded privately. Some European Union countries, Japan, and parts of Canada and the United States have already implemented total controls and carbon trading. A survey by the World Bank shows that countries and regions that have introduced carbon trading or carbon tax mechanisms cover 20% of the world’s greenhouse gas emissions by 2021, with related fees and taxes reaching $53 billion.

The World Bank’s carbon pricing points out that to achieve the goal proposed in the Paris Agreement to limit the rise in the earth’s temperature to less than 2 degrees, the carbon price in each country needs to be set at $40 to $80 per ton of CO2. The EU’s December 2020 greenhouse gas reduction target of 55% by 2030 compared to 1990 has led to an increase in the price of emissions trading, which is now close to $45. What about China, how much more attention will the government sustain with a troubled economy and the possibility of the Communist regime collapsing at any moment, or will it fudge and just try to get Western technology from it and then backfire on Western markets? The world does not yet know.

The International Energy Agency (IEA) offers a very optimistic outlook, proposing a roadmap aimed at achieving net zero global greenhouse gas emissions by 2050. At its core, it is about universal access to renewable energy and reducing fossil fuel consumption. The IEA is very optimistic, believing that in terms of the future structure of energy supply and demand, electricity will come essentially entirely from renewable sources, and most modes of transportation will also switch to electricity and hydrogen. The IEA’s forecast sees global oil supply, currently at 90 million barrels per day, remaining at 24 million barrels per day by 2050. It will be difficult to electrify aircraft and ships; the petrochemical industry, such as plastics, will also have to continue using fossil fuels. But one point the IEA makes, which is still very realistic, is that the international community will face greater dependence on the Middle East because oil will be discontinued from areas where production costs are high. And the energy crisis is leading to economic, political, and even military conflicts, as the evidence shows.

As the U.S. government continues to push environmental issues, there is a growing demand for environmentally friendly technologies. The Chinese Communist Party appears to have begun targeting U.S. technologies related to the environment, and the United States has begun to take new precautions. But in the game of great powers, Japan seems to be one step ahead. Japan’s “Carbon Recycle” technology is already moving toward practical implementation.

Japan uses the technology of American startups to produce plastic raw materials from the waste gas generated during the disposal of garbage. This is a true transformation of decay into magic, turning garbage into “urban oil fields” without the need to incinerate it and emit carbon dioxide. Japan has also made progress in its initiative to directly recycle and reuse carbon dioxide, and may even be able to compete with cheaper products derived from oil.

Both Japan and Europe and the United States have set the goal of achieving net zero greenhouse gas emissions by 2050. But Japanese companies have taken this international climate initiative and carved out new business opportunities. Japan attaches importance to the promotion of the carbon cycle, and the concrete developed in Japan that can absorb carbon dioxide has reached a practical level, and the following only needs to reduce costs. In terms of global patents for decarbonization, Japan’s Toyota ranks 2nd in overall strength after Korea’s Samsung.

Agriculture and livestock contribute about 10% of the world’s total greenhouse gas emissions. When it comes to climate issues, it is often a laughing matter that cattle exhaust causes a rise in greenhouse gases. But the Japanese apparently do not find this laughable. It is said that the main gas emitted by livestock is not yet carbon dioxide, but methane and nitrous oxide. Methane is formed when feed is fermented in the stomachs of cattle; nitrous oxide is produced during the disposal of manure and urine. In Japan’s livestock industry, efforts are being made to develop technologies that can cut emissions from livestock farmers and others by 20%, in an effort to simultaneously improve production efficiency of meat and other products and reduce greenhouse gas emissions.

As of May 2021, 37 countries and 27 regions/cities are promoting the implementation of carbon pricing, either through “emissions trading” or “carbon taxes. Carbon pricing, as promoted by the left, assumes that global warming, or climate change, is caused by human activity, and they further assume that carbon emissions have certain impacts on society and the public, ranging from crop failures and droughts to rising sea levels and increased health costs. What if neither of these assumptions holds true? What if neither of these inferences ends up being confirmed? But the negative effects of the left’s radicalism, big government policies, and high taxes are already very difficult to undo and prevent.

China is currently launching a CO2 emission allowance exchange in Shanghai as part of its plan to join the international environment. China is trying to put a price on CO2 emissions with carbon pricing, charging and taxing fossil fuel emissions and pushing for emissions reductions. The possible approaches that the Chinese government could use, like internationally, are a carbon tax based on emissions and emissions trading, which sets a cap on emissions for each company. But will the Chinese government really implement, really reduce carbon, and really “contribute” to the global environment? The author is highly skeptical. It is hard to imagine that a country that cannot even control environmental pollution and make its rivers and mountains clean and clear, and its air fresh, will really care about the environment of the earth.

The Nihon Keizai Shimbun has compiled a ranking of decarbonization technology papers by country using data from Elsevier, a large Dutch academic publisher. Among the research topics such as storage batteries and photovoltaic cells, Chinese topics accounted for 90%. However, in terms of the number of citations and other indicators of paper quality, the U.S. is superior. Recognizing the lack of technology in this field, the Chinese Communist Party is trying to catch up, so the field of decarbonization is destined to become a new battleground in the battle for technological dominance between the United States and China. In other words, carbon pricing and carbon taxation, which are triggered by a hasty and aggressive policy on the substance that constitutes the essence of human life, will continue to be the focus of the battle between the left and the right, and will become the new frontier of the great power game.