Stepping back from the current tension between the US and Russia, it is useful to consider that the two nations can not only fight global warming, but also adapt and profit from it. Harm reduction and adaptation are linked in interesting ways.
On the one hand, global warming will increase arctic shipping. For harm reduction, on the other hand, we need a global carbon tax. But such a tax will make natural gas — and the arctic ocean beneath which it sits — much more valuable. Let’s consider how these forces play out.
First, global warming will increase arctic shipping. Between the Atlantic and Pacific, arctic routes are 30 percent to 40 percent shorter than a trip through Panama or Suez. By mid-century, much of that traffic will be passing through the Bering Strait. The two nations on either side either get along, or global trade gets choked.
This is even more in Russia’s interest than in ours. The enormous coastline of Russia is largely frozen – and actually has less container traffic than Spain. A warmer arctic will mean more Russian ports, tying it more securely to the world.
Second, a carbon emissions tax is needed to limit climate change. This is now accepted by leading Republican economists, electric utilities, even oil companies. Estimates by Shell Oil show that even a moderate carbon tax will slow oil drilling, stop most coal mining and create a boom in natural gas. Oil releases 50 percent more carbon than gas, while coal burns off twice as much.
Compared to North America, Russia and its neighbors hold a comparable amount of the world’s coal (21 percent vs. 28 percent), half as much of its oil (7.5 percent vs. 14 percent), and six times as much of its natural gas (38 percent vs. 6 percent). Russia has more to gain than lose from a carbon tax.
Most Russian gas lies in the arctic, but so does much of Canada’s and America’s. Most arctic gas is not economically recoverable without advanced (western) technology. BP, Exxon-Mobil, and Shell were pushing arctic exploration until 2014 — when hit by anti-Russian sanctions and fracking’s new oil and gas supplies.
The search for better arctic technologies will intensify as shipping costs fall, the tax on carbon rises, as it must, and the value of natural gas grows. This benefits all the arctic countries, but especially Russia.
Carbon taxes will also boost US sustainable technologies. Natural gas can complement sustainable energy with its low cost, quick power-up and light carbon footprint.
Shell Oil has been aggressive on carbon tax. It also, not coincidentally, owns the world’s largest private gas reserves (after Gazprom, the Russian state giant). Exxon-Mobil, by contrast, differs from most of Big Oil in not discounting its holdings for likely carbon taxes. The Security and Exchange Commission is investigating charges that this means overstating its assets. Could Rex Tillerson, former Exxon CEO and our new Secretary of State, support a carbon tax subtracting billions from his old company?
Is a global carbon tax even realistic? Yale economist William Nordhaus has a good answer, one recently adopted by well-known Republican economists. Most rich countries tax, cap-and-trade or regulate carbon. They can keep others from ‘free-riding’ on these efforts by adopting a common domestic carbon tax and then imposing carbon tariffs on any country not applying such a tax. Nordhaus calls this a ‘climate club’ of nations.
Yes, a carbon tax will hurt big oil and probably finish off coal. People in those industries must be helped. But on the plus side, the US can lead the world on climate, incentivize Russia to a better foreign policy, boost our gas industry, and supercharge renewable technology.
The much-discussed roll-back of western sanctions on Ukraine is not required here: more arctic shipping and higher gas prices are already very much in Russia’s interest. Trump’s new approach to Russia should not be by way of its south, but rather its north.
• Jim Stodder is an economist who teaches accounting and finance at Quinnipiac University, in Connecticut.
