Meager environmental benefits of a hefty carbon tax in Norway

Norway adopted in about 1990 carbon taxes that range from $16 to $65 per ton, and gasoline costs $9-10 per gallon (including a carbon tax of about $0.60). The $65 tax did induce natural gas producers to inject produced CO2 under the seabed instead of venting it to the atmosphere, but the lower tax rate on paper mills did not substantially affect how they operate. Significant reductions in the metals industry were achieved by "voluntary" agreements, not taxes. Despite these efforts, CO2 emissions have risen substantially in Norway, according to this Wall Street Journal blog post and the linked WSJ article. (The article does not make clear whether the tax rates are per ton or tonne or for C or CO2.)

So, how much will CO2 emissions have to cost in order to save the planet? I'm guessing the number is considerably higher than the carbon taxers and the cap-and-traders think reasonable and politically tolerable.

Update on Monday, October 6, 2008 at 10:15PM by Skeptic

And the CBO agrees that carbon emissions charges of up to $191 per ton would not significantly reduce US gasoline consumption, in the short term or the long term, in a report released today. 

That comparison suggests that gasoline prices might have to rise above $6.50 per gallon--for example, from a CO2 price that added $2.00 or $2.50 per gallon to gasoline prices--for the average fuel economy of new vehicles in the United States to approach the 35 mpg that the new CAFE standards will require.  But the CO2 prices contemplated in current U.S. climate legislation and in prominent international policy analyses would add much less than $2.00 to the price of gasoline.  Thus, such pricing, by itself, would probably not increase average fuel economy beyond what the CAFE standards will require.

CBO has estimated that under S. 2191, the America’s Climate Security Act of 2007, the price of a CO2 emissions permit would rise from about $23 per metric ton in 2009 to about $44 in 2018 as the stringency of the bill’s cap on greenhouse-gas emissions was gradually increased. Such permit prices would raise gasoline prices by about 20 cents per gallon in 2009 and 40 cents per gallon in 2018. A recent report by the Intergovernmental Panel on Climate Change (IPCC) suggests that a permit price of as much as $80 per ton of CO2 might be necessary by 2030 to reduce emissions enough to achieve a stabilized climate by 2100. That pricing policy would add about 70 cents per gallon to the price of gasoline in 2030. Even the much greater and much earlier reductions called for in the Stern Review on the Economics of Climate Change (requiring a current estimated permit price of $95 per ton of CO2, rising to $191 per ton by 2050 and higher after that) would not cause gasoline prices in the United States to be as high as they already are in Europe. The permit prices in the Stern report would add roughly $0.85 to $1.70 per gallon to gasoline prices over the next four decades.

Thanks to Mark Thoma's blog for bringing this to my attention.