Climate policy

I think discussion about whether to use Cap and Trade or Carbon Tax system will last for a long time. What government of every country should do is to try to create higher awareness. I work in manufacturing company and I think carbon footprint thing seems to be a fad. Nobody really cares much because they don't see it themselves. If every company can do simple carbon footprint analysis like this http://www.scm-operations.com/2011/10/green-supply-chain-metrics-analysi... , thing is going to get better because seeing is believing. Manufacturing sector should do something (while waiting for good carbon pricing system).

"The biggest problem with a carbon tax is that America's government seems unable to deliver one."

Well whose fault is that?

Reducing CO2 emissions is economically feasible. Unfortunately it is not POLITICALLY feasible in the US because the global warming crowd has bungled the sales jobs for a meaningful carbon tax by relying on shyster salesmen such as algore, Obama’s crony capitalism and ill-fated CAP and Trade, Pachauri (head of the UN’s IPCC) and East Anglia University as well as conflating climate change with “social justice” and global income redistribution.

So without a meaningful carbon tax, you’re just dreaming.

There is a way to bring about a carbon tax but it requires the courage for global warmers to step outside of their ideological cave and answer the following ideological questions:

1) If the solution to too much CO2 in the air is to use less fossil fuels, why is NOT the solution to too much federal debt to use less government?

2) If the optimal amount of CO2 in the atmosphere is 350 ppm (current=389 ppm) because that is the optimal concentration of CO2 in our atmosphere that life as we know most likely can continue, why is 18% of GDP (current =25% GDP) NOT the optimal size of the federal government since that is the size that most likely yields maximum economic growth?

Think about it. Progressives and Conservatives are actually making the same apocalyptic argument albeit on different issues. They both make good arguments for action. But the public is yawningly uninterested in AGW and unwilling to make the hard choices on America’s fiscal problems. Buying off the opposition is the American way.

It’s time for progressives concerned about rising temperatures and conservatives concerned about rising federal debt to realize the obvious: they need to BUY each other off in order to effectively address their pet ideological concerns-there is no other way. This means trading, among other things, a carbon tax for a balanced budget amendment and a more limited government. This plan is outlined in the book "Let's Make A Deal: A Hail Mary Pass to Get America off the Bench and Back in the Game." by Jon Mitchell

LMAD BUYS OFF Liberals with much more than just a $600 billion carbon tax. It also adds fully-funded Healthcare for every American, a public option health insurance entity, and the implementation of tax schemes frequently advocated by Liberals such as a “sugar” tax and a value-added tax. The LMAD plan even grants overnight amnesty of 10 million illegal aliens.

LMAD buys off Conservatives with much more than a balanced budget and limited government ; it permanently ends future illegal immigration, adds tort reform and completely replaces all taxes on production, labor, saving and investment with the new carbon tax, the value-added tax and the sugar tax. The LMAD plan even removes the burden of healthcare expenses from corporate balance sheets by ending our reliance on employer-provided health insurance.

Wahla! Green tech, energy efficiency, green jobs, cleaner air WITHOUT costly government regs or Obama-instituted crony capitalism.

Plan Blog: letsmakeadeal-thebook.com

There should be a carbon tax but it will not be effective unless it is world wide. A group of world leaders such as the United Nations needs to take a stand and realize this is a huge deal. Maybe it is our job to approach it and handle it. The only thing that will push people to truly find a new energy source is if the current one is taxed because when it comes down to it all people listen to is the money coming out of their pockets.

Would an easy win be to enforce all producers to display the carbon footprint of their products/services - say on the packaging. If purchasers had no opinion on which they wanted to buy, I'm sure a lot of them would opt for the one causing less harm to our planet. I believe this would not only create a huge shift in carbon reduction, but also start to raise awareness in our own purchasing decisions, and how we can personally make a difference (and if need be let the Govt. subsidise the cost of doing it & promoting it)

The author ignores a real question. Is this a proper use of tax policy? If the goal is revenue then the answer may be yes, depending on the cost/benefit analysis. If the goal is social manipulation then the answer is no. I understand those believing in the statist model of government will disagree with the conclusion.

Second ignored question. What if those among us that disagree with man made global warming theory or its impact are correct? What is the long run effect of the policy in terms of cost benefit analysis?

From people's comments here about cars and gasoline, it seems that there's some enormous confusion here. Economist readers should know better.

This article is about a *carbon* tax. Not a gasoline tax. They're not exactly the same.

Many greedy governments have already applied hefty gasoline taxes under the pretense of saving the environment. They haven't done all that much, except net the government more money.

The point of a carbon tax is that *everything* that produces more carbon would get taxed. So yes, there would be a tax on gasoline and diesel. (And the one on diesel would no doubt be a little higher, since diesel actually produces about 6% more CO2 than the same volume of gasoline).

People would also have to pay more for other things that produce carbon. The biggest fish is electricity generation. In America - the country that drives more than any other - electricity generation still produces more CO2 than all transport - including air, rail, trucks and cars.

If we punished people for using their lights anywhere near as much as some governments punish them for driving, people's electricity bills would be much, much higher. People would also have to pay a lot more for the gas that they use to heat their homes and water, and they cook with.

Maybe it shouldn't be so surprising that gasoline-tax-happy governments (like Britain's) haven't instead applied a tax on electricity that is representative of the CO2 that is used to create it. They know that if electricity costs soared, it would actually change people's behavior immediately. With gasoline, there's little that people can do quickly. People who need to drive can't help but do so. Higher gas prices can get some people to drive a little less, and maybe buy a more efficient car in the future. But the dent in the overall consumption will take years. I do watch my electricity usage diligently, but I can't change my commute easily.

Finally, if countries implemented a proper carbon tax (which would be fair), surely existing gasoline taxes would have to be repealed. I mean, if people in Britain were paying an environmental penalty on gasoline *already*, that would be replaced with a flat carbon tax, right?

I was struck by the fact that seismologists are being prosecuted in Italy, essentially for the crime of pretending they know the unknowable. This is a problem when policy makers state assumptions as fact.

In the case of the carbon tax, the author accepts and assumes that carbon emissions cause something EVIL. In the second case, he assumes that reducing human carbon output will be at least part of a cure for that undefined and unquantified EVIL.

If one accepts that carbon emissins are inherently EVIL, One can think of many policy alternatives to a tax to achieve output reductions.

1. Reduce the size of government. For example, every multi-billion dollar G8, G20, and like junkets requires the respective economies to produce many multiples of multi-billion dollars of economic output to sustain these photo shoots. Have the economists that debate carbon taxes and cap and trade systems every perceived that if there is a problem, they are a big part of it.

2. Capture and reuse of the available carbon. Reforestation, urban farming, etc. all would reduce the net output of atmospheric carbon. Creating more parks and wildlife preserves, particularly in Europe, would be a useful step forward.

3. China has a strict one-child policy that is particularly imposing for the poor. It seems that it also reduces carbon output by reducing the growth of the number of economic actors.

4. The world economy suffers most from the dismal failure of regulation. Action on industrial structure to improve economic efficiencies and remove dead-weight social loss is needed urgently and would have the natural result of curbing unnecessary carbon output and provide resources for technological improvements and creating policy targets for issues that are inherent in paragraph 2 or 3.

Your note on the biggest problem America doesn't have one is "A Good Thing" because much like France this tax will be an added tax increasing revenue and not truly encouraging lesser carbon usage. Wahington DC has a hard time cutting taxes but spending and finding new ones is much easier. I am afraid this tax will not promote improving carbon emmission, like originally thought of by Grateful dead's Jerry Garcia-meant to make efficient travel cheaper like Airline tickets should be reduced dramtically. This will most likely be used as an additional tax to get more from US TAXPAYERS.

While I don't believe in the anthropogenic-carbon-driven model of climate change (I do believe our climate is changing all the time, but likely the biggest net effect of human activity is from deforestation and agriculture), I think a carbon tax is a good idea.
Such a tax is 'progressive' because it naturally encourages the cleaner and more efficient generation and use of energy. The only drawback is yet another excuse for protectionism in the form of import tariff barriers erected by 'virtuous' developed nations against 'dirty' developing economies...

Implement a tax on gasoline and guess what politicians will do with the money? They’ll build more highways so people will drive more because the price elasticity of demand for gasoline is quite low, that is, people are about as sensitive to gas prices as they are to the price of cocaine.

However, the cross price elasticity is quite high for different modes of transportation. So if the government would quite building infrastructure such as roads and bridges, or repairing existing ones, and start subsidizing rail travel, which is far more efficient in the use of fuel, then environmentalists might see some progress.

I’m not in favor of the state subsidizing anything; I’m just trying to help the carbon-phobes be a tiny bit rational.

In addition, housing is at least as big a contributor to CO2, so end the mortgage interest tax break so that people prefer smaller houses. Why should the government prefer larger homes to smaller ones?

I think there may be a bit of an unaddressed assumption here, and that's the shape of the environmental damage vs CO2 emitted curve. Proponents of a carbon tax seem to mostly assume that this is roughly linear, so that emitting 10% more CO2 does 10% more damage. Given that assumption, each tonne of emissions causes a certain fixed amount of damage, so setting a carbon tax to roughly that amount accurately captures the externality and you'd then expect the free market find an efficient level of emissions. Proponents of cap and trade-like schemes use a different assumption, where the first N tonnes cause essentially no damage and the (N+1)th tonne then causes the world to end. In that model, there's no need to find an efficient level, because we already know that it's precisely N tonnes, and the problem is instead to find the correct allocation of those available tonnes to countries and industries. You're essentially assigning the right to use a particular finite resource, and using tradable permits to do so should be no more controversial than using tradable title deeds to assign the right to use a particular piece of land.

I have to admit that I don't really understand the science well enough to say which model is more accurate, but neither appears to be outright absurd. Is it that all serious economists have some extra bit of information which allows them to dismiss the threshold model completely?

(This is possibly a bit of an over-simplification of both positions; carbon taxes only really require the damage curve to be locally approximately linear over some useful range, rather than globally so, and permit trading still works reasonably well for modeling elbows in the curve even if they're not actually discontinuous.)

I thought the article provided good information. But I would like to see another article--perhaps there already is one that I don't know about--that discusses how the price of the carbon tax should be set.

I wonder if all Chinese economists believe in the carbon tax. Or the ones anyway who have the ear of the politiburo. My guess is no. The opinion of all the other economists intended by the author is just absolutely meaningless. As would be a carbon tax itself obviously. Two new coal fired power plants built there every week. What Britain, or Australia, or even the US does about a carbon tax is not going to do anything except make voters and politicians "feel good" about themselves while they're destroying their own economy.

"Then the tax will be an effective revenue raiser, much more efficient than a tax on income."

Careful here. Taxes are instituted to raise revenue, but they are also instituted to shape behaviours. A carbon tax is a net positive for the environment, but it's still a pretty regressive tax. You can't be too careful when you juxtapose carbon taxes with income taxes and make arguments about efficiency.

A carbon tax efficiently reallocates productive capacity and consumption in order to reduce carbon intensity. It's efficient in theory because it should be difficult to evade carbon use and would ideally be difficult to avoid the tax at the point of carbon usage, be it power utilities, petrol stations, or plastic bags purchases. Environmentalists that are pushing the carbon tax do so with a goal in mind: generate rate Y to keep us under X million metric tons of carbon.

An income tax less efficiently reallocates production capacity and earnings in order to reduce income. Because income may be fungible, hidden, funnelled into the informal economy, or transformed into other forms, income tax evasion is a larger problem. At the same time, there is no back-end: no source can credibly set tax rate levels of Y in accordance with some X. What people tend to do is set Y at a level to maximize collection of X and (maybe) minimize perturbations to the economy--let's call them Z.

But we live in a consumer economy. There's only so much one can consume before one is sated for the day. What if the income tax is really a tax on the economic rents that high income individuals realize when they have more money than they know what to do with? This income tax is set at Y to minimize rents of W--and just to be more transparent, it mainly has the W effect once you're above values of V, above which the marginal propensity to consume is asymptotically low.

The income tax that is progressive in this manner performs a function beyond taxing income--it promotes consumer demand by putting the money collected to direct use in the economy through the purchase of government services, which have a famously high multiplier. This helps sustain the demand-based consumer economy, whose continued vitality every capitalist should be able to see as the grail of macroeconomics.

Right now there is a large deficit, to the tune of 8% of GDP. Adding a carbon tax likely wouldn't mean a cut to other taxes, but it sure would mean they'd have to be raised less to fill that hole (along with spending cuts).

yes

Forsize, have you even ever met a socialist?

sure caliv, but the way you phrase that makes it seem like I'm paying the same amount with or without the carbon tax. which is an egregious lie, not a shock that socialists phrase things as bold lies though. there is no plan as far as I'm aware by the leftists who drool over the carbon tax to cut the rest of my taxes to makeup for the enormous amount of....how do they like to say it? ahh yes, "revenue" that is going to be "generated" from this "efficient" system.

You can't fool the American Consumer, Mr. Economist. We know there's carbon in gasoline.

We've had since 1973 to get out from under petroleum. What makes you think that anything is different now ?

So how again do we implement cap-and-trade? Do we put emissions detection equipment in all the factories? do we make you buy permits? do we allow the inevitable rent seeking for favored industries?

Or we just slap a blanket tax on fuels and adjust them as needed?