Customer Reviews

Carbonomics: How to Fix the Climate and Charge It to OPEC

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Stoft takes on what he calls the "twin challenges:" energy security and climate stability. And I give him a lot of credit for writing the only book I've seen that takes both of these seriously and offers solutions that can work for both at once. His proposals make so much sense that the book makes me feel a little better—maybe we can actually kick our oil habit and save the planet from overheating.

Stoft is an energy economist, and he's backed by some energy experts, including physicist Art Rosenfeld, "the father of energy efficiency," and several economists, like Nobel economist George Akerloff. He's balanced in criticizing pundits of various stripes. He takes on global warming alarmists as well as deniers, "peak oil" pessimists as well as technological optimists, and others. He presents economic concepts clearly and presents historical evidence and common-sense explanations to support his critiques and proposals. Even though most of the ideas have been floating around for a while, the book is very useful for collecting a lot of great ideas and presenting them in an easy-to-understand package. Some of his major points are ...

• Done right, an effective energy policy is not free, but certainly affordable. The cost might be about 2% of national income by 2050—that is, less than a one-year delay in economic growth.

• Yes, there are uncertainties in global warming predictions, but uncertainty is the problem. The risks are real; with so much at risk it makes sense to buy some insurance.

• Oil may "peak," and production decline, but our economy can and will cope with that.

• OPEC tested the effect of high oil prices once before, with the "oil crisis" of 1973 through 1985. High oil prices worked to reduce energy use—and, by the way, cut CO2 emissions—so well that OPEC collapsed in 1985. But we grew complacent in the following two decades, and now look where we are.

• We can learn from what OPEC did. We can cut oil imports and CO2 emissions without the extreme pain of sending trillions of dollars to petro-dictators. Stoft recommends an "untax"—a tax on fossil fuels (CO2 emissions), with 100% of the revenues refunded directly to consumers, just as Alaska sends its citizens a check every year from its oil revenues. (Yes, this would work, and the book explains why.)

• Stoft points out that any climate treaty works nicely as a "consumers' cartel" that can counter the power of the OPEC cartel. This will reduce the price we pay OPEC (and Exxon) and will reduce oil imports. I think he's right when he says that the "climate camp" and the "energy-independence camp" should join forces to make progress. Their goals dovetail: we can fix the climate, beat OPEC and save enough money to pay for switching to new energy sources.

Being an economist, Stoft puts a lot of faith in energy prices as the principal driver for the changes and innovation we need. Not everyone agrees, but as I said, he makes his case with historical evidence. And he admits "the market" doesn't always work. For example, he says car buyers are not rational and proposes interesting incentives to increase mileage, and he backs subsidies for advanced energy research.

He takes good ideas from wherever he finds them, citing both Bush's economic advisor and James Hansen (Gore's science advisor), although he adjusts the ideas as needed. The book maintains a friendly, conversational tone, which makes for easy reading, and includes quite a few interesting tidbits. Sidebars with technical details are available for those interested.

Basically, I feel better after reading this book; we can achieve energy security and climate stability. Now let's get the powers-that-be to pay attention!

This book really shows you the big picture. And if we are going to turn around the world's use of fossil fuel, that's the picture you better be watching. Here's part of it. The one "energy policy" that really made a difference was the 1973-85 OPEC crisis. That policy cut US oil imports drastically, flattened carbon emissions for 12 years and permanently reduced US energy use.

This book shows we could do it again and keep the money ourselves instead of paying OPEC. And like last time, this would be the strongest climate policy ever. These are not crack-pot ideas. They come from top economists and government policies that have been blocked by politics and Big Oil. Read this book. It will completely change how you look at our energy future.

Both serious energy policy thinkers and those of us who just want to understand if it is possible to save the world, will find Stoft's book useful, challenging and pleasant to read. It is not watered down information, but it is presented so it can be understood by non-economists. It also provides sensible policy views that will help the ordinary reader judge the value of proposed energy policies, making it easier to know when to write your senator saying "Please vote for..." and when to scream "Don't do it!"

Steve Stoft has done a magnificent job explaining complex economic analysis in simple, easy-to-understand, English. Unlike many books that dumb down the subject matter to make it appealing to a broader audience, Stoft has managed to deliver key insights in "plain English." This book is appropriate for anybody who wants to undertand the range of policy options that can be used to reduce GHG emissions. It is appropriate for the lay person as well as energy industry professionals. I have worked in the energy industry for 18 years and found insights in this book that I would not have discovered on my own. Finally, Stoft calls it as he sees it. He takes on the left as well as the right, letting the facts guide his decisions rather than hubris or dogma.

We can only wish that everyone involved with crafting effective policy to address climate change and energy security would read this book. If they did, they might think consider the unintended consequences of tradeable permits. As the author shows, US adoption of tradeable carbon permits decreases the incentive for China and India to do the same. Dr. Stoft's explanations are clear, persuasive and accessible -- a demonstration of the economic way of thinking at its best.

What he proposes seems pretty common sense to me. Put a floor price on burning fuels that contribute to global warming. Return the difference between the floor and the actual price to the people. Simple economics suggests that higher fuel prices will reduce demand, which will reduce the actual price, meaning less money to OPEC and more to us. There are other benefits as well: Less driving means less pollution, fewer auto accidents and less congestion when you do drive. More walking will contribute to better health and friendlier neighborhoods. Higher fuel prices will naturally make alternate energy sources such as wind and solar more viable without subsidies from governments. This book is not particularly well written, it seems to go around and around, saying essentially the same thing in different ways. The same points could probably be made in much shorter form, but on the balance it's a good book and I hope more people, in particular congresspersons and their staffers will read this and get to it.

Steven Stoft describes an energy policy that can achieve effective carbon dioxide emissions control while promoting energy security by weaning the US of oil. The heart of the plan is a carbon tax supplemented by an oil tax both of which are fully rebated back to consumers on a per capita basis. Those who "consume" less carbon or oil than average, typically the poor, receive a larger rebate than the tax they pay. Gluttons pay the bill because they are taxed more than their rebate.

People are thus encouraged to consume less carbon and oil. He recounts how OPEC's oil price increases led to massive efficiency gains and argues that price will be as powerful in reducing carbon dioxide emissions. He is not a market ideologue; he argues some technological standards (vehicle miles per gallon minimums, appliance efficiency standards) can be effective and improve efficiency. But the scope for beneficial government programs that pick winners and losers is very limited. As examples Stoft explains how international oil markets ensure ethanol and synfuels can do little to secure energy security, but both increase emissions.

This is an important contribution to the public debate over how best to achieve carbon dioxide emissions control while furthering energy security.

Stoft has swept away the clutter and revealed the nuts and bolts of the energy problem.

Stoft first correctly identifies that the energy problem has two interconnected components: energy security and climate change. Rather than aiming to solve one or the other, he instead aims to solve both. He shows that the energy crises in the 1970s and 1980s unwittingly reduced U.S. emissions via high oil prices. When OPEC raised prices, the resulting drop in demand (and consequently oil price) reduced both energy consumption and emissions. OPEC's accidental experiment was perhaps the most effective policy against the energy problem in recent history, by Stoft's reasoning. He uses these actual events as his basis.

His idea is compelling. He admits that it is not new, but he is perhaps the first to call it an untax.

Stoft's model is different than the existing tax proposals that already exist. A "carbon tax" flatly applied to carbon sources is eventually passed all the way down to the consumer and though it will reduce demand for hydrocarbons, it will increase prices on everything. A tax on oil will increase the price of gasoline and plastics, and a tax on coal will increase the cost of electricity and cement. A "cap and trade" approach appears to pass the costs to polluters at first glance, but again Stoft shows the mechanism by which the cost of permits are calculated into the cost of energy, which is then paid by consumers. This process is best described by this quote: "Refinery operators will, of course, complain about being taxed and forget to mention they are passing the tax on to gas stations. Gas station owners will complain and forget to mention they are passing the tax on to consumers. So when you hear their complaints, remember who really pays the carbon charge - it is you and I, the final consumers, and no one else."

His "untax" approach applies a premium to hydrocarbons, but instead averages the revenue and refunds the money directly back to the consumer. Every person gets the same sized check. He or she can manage energy costs in their own annual budget. Those that conserve will benefit from the refund. Those that do not conserve will have high energy costs. His example case is something that everyone can relate to: the price of oil. Given the price of oil was near $140/barrel in late 2008, and in 2009 it has hovered near $40/barrel, one can see the economics in action. The price went so high that it squelched demand, and now price and usage are low. This also provides an idea of what the untax might be. If the price of oil were capped at $100/barrel regardless of the actual price, demand would be kept low and the untax check would be distributed yearly for all to enjoy. Deciding on the cap price, executing the price, and managing the untax refund would be a monumental task, but that doesn't rule it out for discussion. The price of oil is just one example; the untax can be applied to other energy sources as well.

Stoft addresses many other economic scenarios in this book, such as the price-dependence of biofuels on the price of oil, and how biofuels are not a true source of energy independence. He also explains in simple terms how subsidized "green projects" do little to affect national emissions or energy consumption when compared to a tax scenario.

Stoft does not appear to be a traditional free market proponent, nor is he socialist in his approach. It appears as if he desires a fair and ethical treatment of the consumer while still making a significant dent in demand for hydrocarbons using market mechanisms. By using Economics 101 principles, Stoft believes that we can conserve, establish energy independence, and shift investment toward renewables by simply making hydrocarbons too expensive.

I am eager to hear the word "untax" on television, if for no other reason to put it up for debate. It is a novel idea that deserves consideration, if we can only trust that the voice of the consumer will be heard. This is where Stoft's plan will have its greatest challenge. There are illogical social forces working against this idea already. Anything with the word "tax" is scorned, even though Stoft hopes to overcome this by putting the prefix "un-" in front of it. In addition, there is a possibility that cap & trade permits produce short term profits for utilities which only delays the solution to the environmental problem. If an untax is to be used, that money will have to be kept in a barrel at least temporarily, there is no guarantee that special interests won't scoop some off the top as it passes between the market and the consumer. And finally, in order for this to work, it would have to be globally coordinated, especially with regard to oil, so that overall demand is diminished. Stoft proposes ways to address these issues. In the end this reasonable plan relies on trust between many parties - something that is hard to come by in this era.

To be sure, there will be critics of this model on principle - it is new and counter to many existing models. For example, there may be criticism that this policy would induce inflation, but Stoft explains that it is within the noise of most money printing activity.

If you have interest in this topic, I would venture to say that Stoft has written THE book on economic energy policy because it presents a multi-faceted picture of the energy problem, addressing the big economic, policy, and technology issues. It is a readable and well intentioned book written by a credible author, and the reader will walk away from it with plenty of information to dig deeper if he or she wishes.

No one searching for solutions to our economic challenges can afford to ignore this book. Unlike what we've been reading in the popular press, Stoft presents stragegies based on science, not emotion. This is must reading for anyone interested in addressing the economic and environmental issues of our day.

We had an opportunity to constructively address these issues on the 1970's. Mr. Stoft offers a strategy for correcting the mistakes that were made then, one of which was our failure to connect energy and environmental challenges.

Stoft takes a comprehensive and open-minded approach to energy policy in this book. He's an economist, but he also knows science. After analyzing all kinds of viewpoints, he synthesizes the best from all sides into a set of proposed policies. I respect his willingness to both criticize and learn from those on the left and on the right and everywhere in between.

Stoft obviously poured a tremendous amount of experience, research, and insight into this book, but it's also an accessible read. I think it will be useful not only for policy makers, but for any citizen who wants to get a big-picture look at energy policy today.

Like another reviewer, I came away more optimistic after reading this book. Stoft's suggestions have the potential to bring together people concerned about global warming and those concerned about energy security. His proposals could even help nations work together more effectively. I hope the pertinent members of Obama's team read this book!