Do economists all favour a carbon tax?
http://www.economist.com/blogs/freee...climate-policyLAST week, a Twitter conversation broke out among a few economists concerning whether any serious economists opposed a carbon tax. No, concluded the tweeters, but Tyler Cowen begged to differ. Mr Cowen writes that he personally favours a carbon tax but can imagine a number of principled reasons other economists might not.
Why would we expect economists to support a carbon tax? It's very close to the economic ideal. Global warming is a phenomenon associated with emissions of greenhouse gases over and above natural cycles—largely those resulting from the burning of carbon fuels humans have dug up out of the ground. We expect normal economic activity to maximise social good because each individual balances costs and benefits when making economic decisions. Carbon emissions represent a negative externality. When an individual takes an economic action with some fossil-fuel energy content—whether running a petrol-powered lawnmower, turning on a light, or buying bunch of grapes—that person balances their personal benefits against the costs of the action. The cost to them of the climate change resulting from the carbon content of that decisions, however, is effectively zero and is rationally ignored. The decision to ignore carbon content, when aggregated over the whole of humanity, generates huge carbon dioxide emissions and rising global temperatures.
The economic solution is to tax the externality so that the social cost of carbon is reflected in the individual consumer's decision. The carbon tax is an elegant solution to a complicated problem, which allows the everyday business of consumer decision making to do the work of emission reduction. It's by no means the only economically sensible policy response to the threat of climate change, but it is the one we'd expect economists to embrace.
Mr Cowen argues for caution on this point for several reasons. A carbon tax will be less effective if it's not universally applied, potentially leading to carbon leakage to countries with looser environmental rules. He worries that where carbon fees have been applied innovation has not been quick to respond. He fears that good subs utes for carbon fuels don't exist, especially in the transport sector, and worries that higher fuel prices might harm the economy. He suggests that a "green-energy subsidies first" policy might make more sense, and he talks about distributional and rent-seeking costs of the policy.
I think the weakness of these arguments is telling, and it's not surprising that Mr Cowen continues to support a carbon tax. What if a carbon price doesn't immediately drive emission reductions? Then the tax will be an effective revenue raiser, much more efficient than a tax on income. Either way you win. The worry about carbon leakage is a real one, but this dynamic also implies that each new country that prices carbon increases the benefit of existing carbon-price policies in other countries.
Subs ution in the transport sector is somewhat problematic, but a viable carbon price would not have much effect on petrol costs at the outset. A carbon tax of $30 per tonne of CO2 would only increase petrol costs by about 9 cents per gallon. This is dwarfed by moves in the market price of petrol. The vulnerability of the American economy to oil shocks argues for an increased tax on petrol, but that's a different policy debate. Mr Cowen seems to ignore the fact that oil is just one small part of the American economy's fossil-fuel use.
A carbon tax would attract rent-seeking, but arguably less than alternative policies, like subsidies or a cap-and-trade system. Importantly, money spent on adaptation or post hoc climate-disaster relief is also subject to rent-seeking and corruption issues. Given that many poor countries with weak ins utions are likely to feel the brunt of the impact of global warming first and are likely to be poor spenders of the aid money that will invariably flow, a carbon tax looks like one of the policy solutions best suited to the minimisation of these ills.
Mr Cowen doesn't mention what I see as one of the most important roles of a carbon tax: as a check on other ill-advised programmes. A carbon tax would have quickly made the net dirtiness of corn-based ethanol obvious (by helping to offset subsidies and making corn-based ethanol more expensive). It would be more difficult to roll out and sustain such misguided programmes with a carbon tax, and the ones that went ahead anyway would do less damage. A carbon tax is also the easiest way to capture whatever low-hanging emission-reduction fruit is out there. Right now, consumers are generally indifferent between similarly-priced goods with wildly different carbon profiles. A carbon tax encourages consumers to realise the easy carbon gains available from switching to good low-carbon subs utes wherever they exist.
The biggest problem with a carbon tax is that America's government seems unable to deliver one. At udes may change, however, and near-uniform economist support for the policy (probably) doesn't hurt its odds of eventual passage.
The weakest point in climate change skeptics arguments is that taking steps to reduce GHG emissions will be catastrophic to the economy.
The overall consensus of economists is that taking moderate steps such as a fairly small carbon tax would have benefits that would outweigh the costs.
I would argue, and have, that even were the causes of the current warming trends turn out to not have any manmade push at all, these kinds of solutions would benefit our economy greatly in the long run.
and what are they going to use the carbon tax revenue on?? seems like another tax policy dump on the citizens to raise taxes for failed funding policys...
australia and nz currently has the tax, dunno why, but they dont emit much carbon to justify having this stupid tax.....its the big economies and industrulized manufactuers that should be paying the tax...aka china, india, the west...
another stupid tax that will be passed onto the consumer...nothing to see here...
We need something like 92 square miles to power the entire country with solar panels. That of course could be supplemented with wind and energy storage with air pressure as done in some places already in the south.
We already have the best 2 electric vehicle companies in the world, Tesla and GM.
A lot of people would lose a lot of money, especially in the UK. We have to get around that issue.
I' pretty sure Australia emits more carbon on a per capita basis than any other country.
pretty sure that carbon levels are already at a historically low level. don't believe everything al gore tells you.
I don't like the idea of us implementing a carbon tax at all. It would be a great solution if it could be done worldwide, but I don't see it making any sense here. China and India now put more CO2 in the air than we do, and their emissions are going to start dwarfing ours as they're experiencing rapid growth. Our best hope is to lead the charge on things like solar to make them economical so that China and India will want to adopt them. Obviously China doesn't give a about the rest of the world when you see how they treat their own, so the pocketbook is the only way to lead them. It would suck to basically to subsidize their asses under this plan, but we're going to run into some pretty major diminishing returns with a carbon tax that extends though only our own borders.
Just keep an eye on the economy of California because they have already decided to "save the planet" with their own legislation.
Agreed. A unilateral carbon tax would be economic suicide.
Hmm, let's start with the factual error. India puts out less then half the co2 that the US did in 2008.
Let's go with the "subsidszing" of other countries. A carbon tax in this country would not meet the definition of a subsidy. It would reduce our demand for fossil fuels overall, and in that regard make it cheaper for those two countries to use fossil fuels, given supply/demand. It would also make them more dependent on those fuels, which, given depletion factors, would harm them in the long run, just as they would anyone else who made their economy vulnerable to declines in supply.
Lastly, a carbon tax would make forms of solar/wind in this country more economically compe ive. Simple economies of scale would do the rest, leading to a shift from oil/gas/coal to those renewables, with all the R & D that goes with it, to improve efficiency/output per unit of cost.
If you want to encourage that, then the people who study this stuff say that a carbon tax, even if just within the US, would go a long way towards making that happen.
It would indeed. But as noted in the OP the effects would not be all that severe.
The benefits, in terms of mitigating the risks of AGW, and the side benefit of encouraging innovation in renewables, make that worth the cost, IMO.
I meant subsidizing the development of solar and other cleaner sources (perhaps Hydrogen?) so that it can be cost-efficiently used by developing nations (otherwise they won't use it). I didn't mean India on it's own was putting out more CO2 than the US: I meant India and China together (I should have been more clear on that).
Too much ice tied up in the caps. Too much land covered by ice to support a human population that will exceed 12 Billion at the turn of the next century. Biggest problems we're going to have then? Not some Beach front condos, or even Manhattan underwater - the problems gonna be food and water.
I'm not going to argue about weather global warming happening or not, or whether we're causing it. I don't care. I don't think heating things up is a bad idea. Where do people live? SoCal or Alaska? If we cold make Alaska more like SoCal, why the wouldn't we?
Against the tax.
China actually puts out more than the US by itself, according to the data I looked at.
No need to directly subsidize solar/wind/renewables, when you make their alternatives more expensive.
Although taking the tax money and using it on R & D and technology incubator areas would probably help too.
I don't think that R&D money should come from a highly regressive tax on energy; not in this country with its lousy public transportation infrastructure.
Best estimates are that world population will top at about 10bn.
Food and water will be fine, we will simply have to eat far less cows and other meat.
Even with some warming, land covered by ice is minimal compared to overall land masses. Humans dont' take up that much space anyway.
Heating things up by itslef isn't bad, it is the changes in weather patterns and the potential for the loss of a lot of real estate in coastal cities that should concern anyone.
Just ask the farmers/ranchers in Texas whether it was the heat or the lack of water that is putting them out of business. The latter is more likely to be given as the cause.
There is only a finite amount of gas/coal/oil and a lot of the easy to get to stuff is gone. The sooner we face the facts that the sources of energy we currently rely on are going to get less and less efficient, the better, IMO.
Meh.
I like meat.
Against the tax. Gonna buy a bunch of property a couple of miles inland; beach front in a few decades. I'll make a mint.
The last thing is that the warming we are talking about would never make Alaska like SoCal, even at the largest estimates.
Honestly, probably not a bad bet, depending on where you buy. IMO.
I'm not quite sure there's any mitigation to be had when the extra cost can, and will be, passed directly onto the consumer.
If we want to tax for R&D, it would be much more straightforward to do just that rather than saddle a tax onto the bucking bronc of AGW.
Any of you who want to pay a carbon tax can always write a check to the IRS.
everybody here and on the planet just continue on the same trajectory,
eyes closed,
full speed ahead,
100% comfort zone,
everything's gonna be alright.
You think the extra costs of droughts, floods, and other disruption won't be passed on to the consumer?
You did read the OP, yes?
Of course I did. That doesn't change the fact that a miniscule tax, in the bigger scheme of things, will do just about zippo to address AGW. The intertia will simply be passed right on down to the consumer....not to a solution set for carbon consumption. Pretty thoughts tho. Not believable for a moment.
Um, what?
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