Carbon tax watch

carbon-tax-now Well, sort of. Via Timmy I find Will Hutton bemoaning the failure of yet another GW-type summit, Rio-20. We all knew it was going to fail: had I thought there was any question about it, I would have offered to bet heavily on its failure (in fact, so little do I care that I haven't even looked to see if it has failed. But I assume so...). But there would have been no takers. Nonetheless the pointless waste of time took place, which merely demonstrates how broken our politics is. But we knew that too.

Hutton correctly identifies at least one problem, but fails to see the obvious solution:

Climate change sceptics, most vividly in the US where it has become a basic credo of the modern Republican party, are sceptics because to accept the case is to accept the need to do something collectively and internationally that must involve government. But government is bad.

Sound entirely plausible. He continues...

It is inefficient, obstructs enterprise, inhibits freedom, regulates and taxes. Climate change activists want carbon taxes and to set targets for efficient resource use; they also want regulations to encourage environmentally friendly behaviour. This is the back door through which socialism will be reinvented...

(my bold). You can argue about the inefficient, etc. bits - though that's what the teabaggers think. But notice the bit I've bolded, all of which are first-order unnecessary, though will be pushed by the likes of Hutton and env folk. We need a Carbon Tax Now. And as a sop to the teabaggers to get that, we should make it clear that all the rest of the regulation stuff isn't needed, so that all their "gummint be evil" stuff becomes irrelevant.

[Update: David Hone, who I used to take seriously but no longer can, has a fascinating, and totally wrong, piece about ETS and appears to happily quote some utter nonsense:

The scheme was intended to deliver a significant shortage of allowances against business-as-usual emissions and thereby oblige ETS installations to pollute less.... Even those stakeholders who have argued for a return to the intended levels of scarcity have been handicapped by a dearth of analysis... The business-as-usual emissions baseline against which both the EU climate target and the ETS caps were set are totally obsolete...

You see the problem? No? OK, let me explain. What this is saying is that those in favour of the ETS see it not as a means of reducing CO2 emissions to a certain level, but as a means of forcing industry to emit less CO2 than it wants to. This is a very puritanical, sackcloth-n-ashes viewpoint, and it has nothing to do with science. Because it isn't saying that a certain level of emissions (implicitly, if they ever did their sums which I doubt, a certain atmos concentration) is OK; its saying that "a bit less than you can comfortably manage is OK". The entire point of having an ETS scheme is that Big Gummint decides how much emissions are OK, and issues/sells permits to this level. It makes no sense at all to say "oh, well, since we're all emitting less than expected we'll artifically make permits scarce". All that shows, if its correct, is that they got their calculations wrong in the first place. Which, arguably, they did; but that just shows how stupid the whole scheme is.]


* What on Earth is Sir David King talking about? - on the dangers of stepping outside your area of knowledge.
* Carbon taxes won't work. Here's what will - provides some extremely stupid arguments and poor thinking (h/t Brian).
* Some are still dumb enough to support the ETS.
* Which Is More Corrupt? Wall Street Or Congress?
* Brian is still pushing Cap-n_trade, though; and points at this for how glorious it is.
* Timmy points at The Most Sensible Tax of All in the NYT.
* Carbon Tax or Cap And Trade? Whichever Leaves Less Room For Politics And Corruption
* There will be any amount of special pleading to reserve carbon tax revenues for particular special interests. Here is one example of such pleading, that should be ignored.


More like this

TL;DR: nothing new to see here. Anyway, I was pushing my favourite theme, How to decarbonize? More free market! and to my absolute astonishment it didn't go down terribly well. A number of questions in the comments were re-hashing stuff from Carbon tax now but no-one ever re-reads old blog posts…
I've finally been provoked into writing this post. Though actually it is going to be about something slightly different, or at least I'm going to go through a long rambling diversion, inspired by Idiocy on carbon permits by Timmy. But since I'm also rather conscious that many of my posts are (when…
As regular readers will be aware, I think the ETS is stupid, and we should be imposing a carbon price via carbon taxes instead (Time for carbon taxes? and refs therein, if you're interested in the history). But David Hone isn't, he likes the ETS, and nice person that he undoubtedly is, it cannot be…
Zut alors! Ze Chef Frog, Macron, 'e iz not 'appy wiz ze prix of ze Carbon: Europe needed a significant minimum carbon price to boost investment in its energy transition, and a European carbon tax at the bloc’s borders to guarantee fair competition for its companies... Macron said Europe had to…

Do you actually think that would work though? They seem to be entirely allergic to compromise - on many other issues, even when the compromise is to accept their own prior proposals more-or-less in their entirety (e.g. healthcare), they baulk and move the goalposts. They seem completely uninterested in any actual policies (other than tax cuts) and fixated entirely on annoying anyone they perceive as a "liberal". They see attempted compromise merely as a sign of weakness, which simply encourages them to be even more obstructive. I don't think this is really a good-faith disagreement on specific policies any more.

[Not for the extreme types, I agree they are beyond reach. But it would be helpful to reach out to the non-nutters. And, ter be honest wiv yer guv, I'm for less regulation too -W]

Actually a tax is a thing that needs to be collected, requiring a government bureaucracy to do it, money changing hands, somebody making up detailed rules for how much, somebody else applying them, somebody still else making sure that they are applied fairly, lots of scope for lobbying and corruption... Only cap and trade is worse still.

Regulations on the other hand can be simple. E.g., outlawing some types of power plants generically, starting with coal. Not pleasant perhaps, but simple. All the gov't needs to supply is men with guns.

[However you do it, some government will be involved. I don't think you can prove, from first principles, which is the least intrusive. But I assert that the carbon tax is. Firstly, it is softer, and softer is better: imposing hard limits (thou shalt not build or operate coal plants) is always more intrusive and more likely to lead to exceptions (...except, of course, if they are running already... or are using CCS... or are operating in Virginia...). Giving people freedom to reduce their carbon burden however they see fit is better than mandating the means. Second, its simpler: one tax does it all. No need to discuss all the various sources. And third, there is less decision-making involved. All of these are reasons why, if you're a govt or a member of an env bureaucracy, you'll oppose carbon taxes, for there is less for sticky fingers to get involved in -W]

By Martin Vermeer (not verified) on 25 Jun 2012 #permalink

If you can calculate the required level of carbon tax perfectly, then it would be the least intrusive technique. But a. you can't; and b. from a political perspective, the initial tax will be low-balled. That's why a combination of tax and regulation would be more effective.

[But how will you calculate the required level of regulation exactly, or any more exactly than a tax? I don't think you can. As to the low-balling: yes, indeed it will be. And that is fine; it won't get through otherwise. But once the mechanism is in place, turning it up is easy. And (importantly) it gives people a chance to see that when we said "but it will be revenue-neutral overall, not an extra tax" we were telling the truth -W]

I'd be happy for any action though.

[Any useful action, yes. Not if by "action" you include the EU permit system; that's just a boondoggle for traders and bureaucrats -W]

By Brian Schmidt (not verified) on 25 Jun 2012 #permalink

1) You can set an initial tax, and see what effects it has. And continuously adjust it over time, considering many factors (not just climate). A carbon tax isn't just about getting lower levels of emissions: it will have important effects upon the wider economy of any nation implementing one. It can't be set or adjusted with taking into account those considerations. Initially carbon taxes are going to be low. Set at too low a rate to do anything useful with regards to climate directly, but still creating the legal and technical framework of integrating themselves into the costs of producing goods, using well understood methods (taxation is a well understood method: creating markets for caps is not). It is easier to incorporate the effects of trade into a system based on taxes. Because there never, ever will be a world-wide carbon tax or cap system, countries with taxes are going to impose carbon tariffs on imported goods. Trade laws on how countries may impose tariffs is generally well developed.

2) That a cap is a cap is a mirage. A cap that doesn't have mechanisms to take into account what effect any particular cap will have upon the wider economy will fail. If the cap is firm and has too much effect, it will be politically rejected. If it is set too low it will do nothing for climate directly (just as much as a low tax, perhaps), but it does, admittedly, have a point: to develop an entire system, parrellel in economic fuction, to that of taxation. How these systems will incorporate the effects of trade into them is a difficulty. Why we need two systems capable of doing the same job has no good answer. It's inefficient.

3) There is lesson in the current Euro Union mess for those advocating the supposed certainties of a cap over that of taxes. In the Euro they decided, over the objections of many economists and against much well regarded economic theory, that you can have a workable joint currency without a fiscal union. Damn the economists, full speed ahead! People advocating cap-n-trade are similarly Emphasizing the Goodness of the Firm Cap and Ignoring the Economically Inconvenient when advocating for their preferred policy.


I don't think taxes are the final answer. A very important part though.

Second, its simpler: one tax does it all. No need to discuss all the various sources. And third, there is less decision-making involved.

William, you're dreaming... you should see the debate on peat here in Finland. The problem isn't just finding the optimal level of taxation; it's figuring out precisely how much C to attribute to each product or each production process, or each step of the production process -- also for imported products which of course have to be taxed at the border. And for every little decision taken, lobbyists and bribe givers and takers will line up, each with their honest and not-so-honest arguments... it's complicated :-)

[I'll still claim there is less decision-making involved, even if there isn't none. And the answer to figuring out how much is in what is to start with the major sources and work downwards -W]

By Martin Vermeer (not verified) on 25 Jun 2012 #permalink

The possibility exists that somebody might find a way of extracting CO2 from the air. Eg the carbon eating trees of Dyson. How would a carbon tax encourage this?

[Its been suggested, but for the foreseeable future its hard to imagine that carbon capture from the free air would be more efficient than carbon capture from power plant emissions, where it is far more concentrated. In the latter case, of course, the "credit" accrues to the plant operator; or rather, they don't have to pay the tax on the CO2 not emitted -W]

By Richard Hill (not verified) on 26 Jun 2012 #permalink

This is a very puritanical, sackcloth-n-ashes viewpoint, and it has nothing to do with science. Because it isn't saying that a certain level of emissions (implicitly, if they ever did their sums which I doubt, a certain atmos concentration) is OK; its saying that "a bit less than you can comfortably manage is OK".

Isn't the idea that the science is telling us the OK level of emission is zero, and "a little less than you can comfortably manage" is not really OK but just the lowest level that is politically possible? If we're shooting for zero and the politically possible level gets lower, then the limit needs to get lower.

[Science tells us what will happen for various CO2 trajectories (or rather, it would if we knew the exact answers, lets pretend we do for the moment, and assume the basic IPCC-type mid-level projections are exact). But (physical) science doesn't them tell you how to balance the gains of emission with the costs, you need the ecology-type stuff for that, and that's harder. And you need to know the discount rate. So with all of that, I think its hard to say (unless you're Hansen) that we need zero emissions. And if we do *need* zero emissions, then we're totally stuffed and may as well give up now, because we're not going to get them.

Zero isn't what we're officially aiming for either - I forget what it is, but its something like 50% less than now, by 2050.

But more importantly: if your aim is "a certain amount of CO2 and no more", then you can make an argument for ETS. If your aim is for "less CO2" then you want a carbon tax. Having some bastard ETC-like thing that is then subsequently manipulated into being something like a carbon tax is the worst possible outcome -W]

By Matthew McIrvin (not verified) on 26 Jun 2012 #permalink

What is wrong with AND instead of OR.

For example, there are very few central power plants and as such they are a regulated utility, so regulation is probably easier and more effective. Autos are sort of in between, while there are lots of cars, there are few manufacturers, so a mix of fleet mileage regulation (supply) and taxes (demand) might be the best way to go, and for the general diffuse use, a carbon tax.

[Fleet mileage regulation is a disaster, vide your CAFE stuff, which provides a perfect example of why regulation is far worse than tax. The problem with regulation (apart fro the obvious other problems, like its messy, and hard barriers are bad, and that it drives evasion) is that people think they are getting something for free; you're teaching people bad things -W]

By Eli Rabett (not verified) on 26 Jun 2012 #permalink

If you think so Eli invites you to ride about in his 1969 Chevy Malibu that got what, 8 mpg (but it was a nice red convertable). Fleet mileage regulations made a substantial improvement. The problem was that your kind got control of the government in the 1980s with the mantra of no more regulations and let us gut what we have. If you have a government dedicated to making regulations not work, well hell, they won't work so well.

With fleet mileage, the numbers have to be pushed upwards over time, and they were not in the US over decades

[Nonsense. We, and many other nations, have no such regs, but mileage improved, for all the obvious reasons. And I've never been in charge of the govt. You're just connecting two random facts and asserting cause, which is absurd -W]

By Eli Rabett (not verified) on 26 Jun 2012 #permalink

"The problem with regulation..."

Regulations, on balance, generate jobs. For instance, the worldwide crash helmet industry wouldn't even exist. Try using "standards" instead, and you'll get an idea of the net effect.

[That's another bad then, since jobs are a cost -W]

The real problem with regulations is different government departments having inconsistent and unclear guidelines about how to intepret them, so businesses can't plan with confidence. This is the number one complaint from businesses about environmental regulations. Once they implement the regs, often after hiring experts (see; more jobs created, more cashflow through the economy, capitalism is saved) turnover increases because environmentally friendly businesses do better in the marketplace.

[Some people's turnover increases; I'm still not seeing the argument for regulations -W]

How, precisely, does one collect taxes without an appropriate regulatory framework?

[Are we word-juggling? We have a Tax Dept that collects taxes -W]
Since you mention Will Hutton, I assume you're in the UK, so you know just what a big news story tax avoidance is at the moment.

[Yes, but its mostly made-up, not real -W]

You think that with a carbon tax offering ten times the opportunities that personal taxation does, all those creative accountants are just going to sit on their thumbs?

[That is an assertion only. Taxing C from coal, oil, gas is straightforward, and that is where you'd start -W]

Just yesterday this story appeared on Reuters, and it's not even about an unregulatted carbon tax, just a poorly regulated one:…

[Yes, that is broken. Under my tax scheme, you get taxed for *producing* CFC's according to their CO2-equivalent, not un-taxed for preventing someone else's emissions -W]

By Ian Kemmish (not verified) on 26 Jun 2012 #permalink

"That's another bad then, since jobs are a cost -W"

The jobs cost is A-OK if it generates revenue above payroll and associated expenditure, and amongst the employees you hire competent managers who you can delegate to. In fact, the latter allows you to expand your business instead of micromanaging every decision.

You are truly missing the boat on this. CAFE standards in the US were passed in 1975. Between 1975 and 1982 the adjusted MPG for cars went from about 13 to about 24, where, thanks to our regulation adverse friends it has stuck. It was only in the past year that the standard been raised.

[That graph is useless, because it starts in 1975. You need to do much more work if you want to try to prove that CAFE caused efficiency changes -W]

By Eli Rabett (not verified) on 26 Jun 2012 #permalink

The tax avoidance story isn't real? Don't be stupid, it is a well known adjunt to the tax evasion issue, which also should get some more airing.

[Read what I wrote, please -W]

On the other hand I agree a sensible simple tax, perhaps applied at the electricity generation stage or gas meter stage is far simpler and offers less opportunity for gaming than a made up market.
There was a story that J K Galbraith told, or that I read about in one of his books - him and other young whizz kids in WW2 america thought up this very complex tax or surplus profit removal type scheme with lots of variables to take account of every possible contingency. Only to be told off by an older or wiser economist who point out how the complexity was bad and a simple setup would work fine and people wouldn't moan anymore than before. And he was right.

Tim says you're asking for something you already have, that carbon as fuel is even now taxed at the desired $80 / ton of CO2.

[Indeed he does say that, but (a) he is terribly vague about the details, as I'm sure you've noticed. The tax we do have is very unevenly applied, and (b) it isn't really clear that $80 is the right level -W]

By Paul Kelly (not verified) on 26 Jun 2012 #permalink

Starting from pretty close to zero tells you something don't it. The curve is bounded on the bottom. Yet Eli is disappointed in your world Watts' class denialism. He would have thought better of Weasels.

Still, the google is strong and this one goes back to 1945.

[Yes, that's longer, but a touch vague on details, wouldn't you say? -W]

Next, you are going to tell Eli it was all the oil shock. Well, yes, the oil shock was the motivation for the CAFE standards and for buying smaller cars, but on the other hand, when the oil shock had passed, the curve did not return to the status quo ante, so clearly the CAFE standards had some effect. Further, we have had a recent "oil shock" when the price of oil went to a lot more than $100/barrel, and the price of gas in the US doubled without seeing a similar rise in fleet efficiency.

[Actually I hadn't thought of that, but you do indeed have a good point, there was an oil shock. All this points to your analysis "fuel efficiency went up, therefore it was all CAFE" as being far too crude to be of any use. Like I say, I'm sure fuel efficiency went up here, too, and we didn't have CAFE at all. As to it plateauing, perhaps there are some easy gains to be made, then it gets harder. I'm sure there are proper academic studies of all this, if you really want to know -W]

More interesting in this regard is that the fleet numbers went up to, but did not go much beyond the CAFE limits. The fact that mileage in other countries is well beyond the US numbers tells you that there is plenty of room at the top and that if the CAFE standards had kept on rising, so would the mileage.

The slope before and after the CAFE standard introduction are parallel, giving a hint of what a non tax, non regulation framework can do.

By Eli Rabett (not verified) on 27 Jun 2012 #permalink…

(a spinoff site from Scholars and Rogues: )

[I don't really object to their claim that Strong government is a good idea: the laws that exist should be strongly enforced, yes. And of course, as they point out, govt defines money (slightly less clearly in the Euro-zone, but never mind, these are parochial people).

Their claim that Big govt is needed is much weaker, and I don't think they make a convincing argument for it. Some of what they say is the std.garbage - that having people dump products on you is a bad thing, for example. That govt helps by negotiating trade agreements (for free trade, one must presume) is only of any use because other govts are busily erecting trade barriers. So this is a case where small govt would be good: just have free trade and no govt intervention. Some of the rest is shamelessly nationalistic in a rather unpleasant and apparently totally unselfconcious way. I don't buy their assertions (which are just assertions, not reasoned arguments) about the jobs market. And their assertion that more govt will get more "we, the people" making decisions is just naive -W]

By Hank Roberts (not verified) on 28 Jun 2012 #permalink

> I'm sure fuel efficiency went up here, too, and
> we didn't have CAFE at all.

You don't have people there buying vehicles that are built to standards set by California?

[I doubt it. Remember the world was far far less globalised in those days -W]

The manufacturers generally argue they have to build their whole fleet to meet the more stringent criteria so everyone gets the result when one large government raises the bar, like it or not, rather than build two different fleets.

Did fuel efficiency for vehicles built in the UK change correspondingly? Which would that be?

[Like I said to Eli: sorting out causes and effects in all of this, and working out just how much CAFE contributed, is tricky. Trying to do it based on hand-waving is doomed -W]

By Hank Roberts (not verified) on 28 Jun 2012 #permalink

"Jobs are a cost"

Point of view, that. If you think of jobs as something people create rather than sit and starve in the wilderness, not so much a cost as a necessity for living.

If you think of sitting on a pile of money and either just enjoying it, or making the tedious and unnecessary effort of spending it to create jobs you don't really need created since you're already doing fine, they're a cost."jobs+are+a+cost"

By Hank Roberts (not verified) on 28 Jun 2012 #permalink

Aside -- most of our economics is based on the unchallenged assumption of available free resources within a hundred miles or so, and that it's easy to claim a big chunk of those free resources and put in some effort and turn work into wealth.

[That seems an odd view. As an embedded software engineer, whose code gets turned into silicon in Taiwan, it doesn't really fit at all -W]

The whole US political system assumes that, still. The EU, having done its clearcutting and stripmining earlier, has modified its politics to deal with the consequences.

Now the free wealth is a few hundred miles away vertically rather than horizontally; the startup costs have changed.

Earth orbit is "halfway to anywhere" -- the cost of getting to Earth orbit is half the cost of escape velocity from the solar system.

A wage is a cost to the employer.

A job is more complicated. Sending jobs across national/economic boundaries changes money flows, but doesn't simply "reduce costs" -- many get externalized rather than reduced.

By Hank Roberts (not verified) on 28 Jun 2012 #permalink

You're doing a Fuller there. The oil shock was a cause of instituting the CAFE standards and something that shaped public opinion. If the oil shock was the entire story, the fleet mileage would have fallen AFTER the oil shock (oil was, in real dollars, very cheap in the later 80s and early 90s), it plateaued in 1990, well after the oil shock was over.

Further, the California standards that Hank points to were environmental standards that worked against fuel economy as did getting rid of leaded gasoline, so effectively the auto makers were able to chew gum and walk at the same time in spite of virtuous protestations

Now some, not Eli to be sure, might point out that the empty bromides here are all in [brackets], so how about bringing something real to the table.

By Eli Rabett (not verified) on 30 Jun 2012 #permalink

Well at first Eli was with the Weasel, until he remembered that Hank is always right. The only reason why we get our veggies from CA, Spain or Italy, autos from Japan and everything else from China is that transportation is cheap and transportation is cheap because we are exploiting resources a couple of miles in the other direction. The balance point, even with labor costs, is closer than you think, for example when oil hit $140/ bbl, it was essentially reached for stuff that went by air, and for heavier stuff that went by sea

["The cost of shipping a standard 40-foot container from East Asia to the US eastern seaboard has already tripled since 2000 and will double again as oil prices head towards $200 per barrel..." - that's so prescient... -W]

By Eli Rabett (not verified) on 30 Jun 2012 #permalink

Carbon Tax?!

Well, whaddya know. It's now gone midnight and where I live the dreaded carbon tax is now in force. I'm still here! The lights are on!

What a relief, the world didn't end. Atlases can still show Australia in the same place it always was.

I'm typing this quickly because I already typed a lot and then I lost it.

Jobs - yes a cost - wouldn't you rather get payed for nothing? Net cost? - depends on situation. 3 possible reasons why there might not more jobs:

1a. People are content.

1b. People with money/means are content.
2. No more available resources to work with.
(ideal efficient market is balance between 1 and 2: people work to the point that exerted effort and time are rewarded sufficiently, such as by pay (to get things they want), which requires wealth (that people would want) being produced from or with resources).
3. not content, resources there, but the system's broken.

But anyway...

Tax at power plant or gas meter? (Re guthrie)

I would apply tax at the mine/well (fossil emissions) or land user (non-fossil unbalanced CO2, non-fossil CH4: deforestation, soil management, livestock (depends on how they are fed?), etc.) Maybe tax at the level of mining company, drilling company to reduce paperwork (Exception - cement production - tax where CO2 is released?). Would taxing at the power plant be more efficient? Watch out for fossil CH4 emissions after the well.

[You need to add to that "tax at the point of import", since most countries import much of their fuel. And we're not assuming a global tax -W]

PS tax has two parts: climate tax, ocean acidification tax. Thus CO2 has higher rate relative to other emissions than GWP would suggest.

[That depends somewhat on how you're trying to set your tax level. At the point where the tax nominally balances the costs is one possibility -W]

Deliberate emission of SO2 into the stratosphere would receive credit according to climate tax, but might be charged some acidification tax and also ozone depletion tax, and a seperate climate quality tax (increase GHGs and aerosols with no net global average temperature change still alters climate system - as would regional albedo enhancements like covering parts of the ocean with white tarp, etc. - which would also have other environmental effects).
Whereas actual CO2 sequestration (in a way that doesn't acidify the ocean) would recieve a credit equal to the full CO2 tax rate, provided it is sufficiently permanent and safe, etc. ... Discount for suspected ineffectiveness/risk. If at all possible to deliberately oxidize CH4 to CO2 (coat wind turbine blades with catalyst? Pipe dream?), credit that accordingly (varies with CH4 amount in the air).

(Re Martin Vermeer)
Maybe some shenanigans could happen with establishing C content of coal, oil at particular sites/reservoirs, but I don't think this could produce large errors - coal is coal, etc, after all (ash content variation would be issue?). I can see that land use and livestock issues could be trickier, but some standard estimates of the effects of various practices under various conditions might be established and adjusted according to science.

For establishing a tax rate among nations, I wouldn't directly reward protecting natural sequestration or naturally-sequestered C; rather, I would apply a back-tax to prior emissions (fossil and non-fossil) to level the playing field, so that all nations can be taxed by the same rate fairly.

[This begins to sound far too idealistic. Remember, there is no inter-nation redistribution in the plan, so what is the point of a back-tax? Who exactly are you going to back-tax? -W]

The back tax would be discounted in a time dependent way because the past can't be changed and (except for adapting to climate change itself) it generally makes sense to accept that already-built infrastructure and land usage is where it is at this time - and because the awareness of the consequences drops off. The responsibility would be farther divided so that larger portions of more recent emissions would be assigned to where they occured, while larger portions of older emissions would be distributed according to accumulated wealth - this may need to be tweaked according to political histories of various regions (revolutions, foreign control). Anyway, this amount, along with future tax revenue, would be owed to nations according to population and their climate change costs/injuries. The amount of money actually exchanged (for the back-tax, over some number of years or decades) would just be the difference between what is owed by and what is owed to a country.

Otherwise, have a tariff-subsidy system proportional to differences among nations' policies (tax rates, emissions trading market prices) - would it be necessary to have a formal agreement among nations to supercede prior trade agreements and prevent trade wars? A tariff would be proportional to the un(der)taxed portion of embodied emissions (takes into account tariffs and policies applied farther upstream). I wouldn't expect a negative tariff to be applied, so a subsidy on exports would be similarly assigned, except maybe not according to the ((domestically?) 'overtaxed' portion of) embodied emissions of individual items (why reward your own polluters) - instead perhaps according to the embodied emissions of the whole of exports (distributed proportional to prices?)?

Could a higher tax in one country incentive higher taxes in other countries (in general, or perhaps because other countries have suspicions about the way their trade partner has estimated embodied emissions, and a smaller difference in tax rates would reduce the effect)?

If a country taxed at the coal mine and another taxed at the power plant, then the first country could then subsidize its coal exports to the other country so that the coal is only taxed once. Etc.

By Patrick 027 (not verified) on 30 Jun 2012 #permalink

I skimmed
"Carbon taxes won't work. Here's what will." I didn't like some of it, and in particular, I was puzzled by this:

"It is hard to imagine the Pigou Club, most of whose members support free trade, uniting around the import/export tariffs needed to make a U.S. carbon tax work."
Is that true, because why wouldn't you support managing externalities internationally if you do domestically?

[It depends on how carefully you want to account for things. If you're deeply opposed to a carbon tax for whatever reason, then you insist that goods imported from a non-taxing country must have their C emissions terribly carefully accounted for; the aim of this is to produce such complexity that people walk away from the idea. The solution is, don't bother -W]

On the other hand:
"(Addendum: And you know what the U.S. can't tax? Cheap-carbon Chinese-made products replacing expensive-carbon U.S.-made products in global markets.)"
seems like a good point. But perhaps we needn't give it a lot of weight (what are the other trading partners doing, and could we subsidize our exports according to lack of tariffs in other countries ... well that be an attack other other's domestic production so ...)

[I doubt its a good point. Can you think of any examples of these hypothetical goods? -W]

"How about Europe and Japan and Russia and Canada? Well, they agreed to carbon restrictions at Kyoto, and then promptly broke their quotas and went right on increasing their emissions." - Good argument for taxes - if you emit more, you pay more. Also, quotas might make sense in an otherwise stable situation, but with populations growing and economies developing at different rates in different countries, establishing a fair emission trajectory from a base year seems tricky.

"I cited this reason first because it's the weakest; political infeasibility should not stop economists and other intellectuals from recommending the right policy." Thanks for that! (But why rank it as an enumerated reason at all, then?)

Consider this:
"And I think the previous 4 reasons are sufficient to show that a U.S. carbon tax would only reduce global emissions by a little."

In light of support for Government R&D and subsidies (which could be formally jusitified by the absence of the tax, but even with a tax, by the lost time and by prospects for mass market advantage not yet gained by emerging industries), and this in particular:

Research is a public good. The day that solar becomes cheaper than coal will be the day that China and India start mothballing their coal mines and throwing up solar factories. Yes, this means that the U.S. will be subsidizing the rest of the world. Yes, it means that cheap Chinese and Indian competition will put a lot of our own solar companies out of business (as it is doing already). But it is worth it. Since there exists no global government, the only hope of stopping global warming is for one national government to kill the problem all by itself. Saving the climate (and reducing energy costs in the process!) will be worth a whole lot of Solyndras.

YEAH! But even if our exports to China's other trade partners are hampered by our domestic policies, a tax would incentive the kind of technological development that would lead to China and India, etc, going (more) to clean energy. Granted, such an incentive could leak via trade to another nation, so the U.S. wouldn't necessarily become the supplier (although why wouldn't it?). On the other hand, at least we could stop importing so much from some other countries. And subsidies and R&D, as well as climate change (and acidification) costs, have to be payed anyway - domestically, and a willingness to compensate internationally will presumably be good for our relations and security. And why would a tax on emissions hurt our chances of becoming a supplier of clean energy more than another tax (only if EROEI values were too low, which the tax would discourage at least during the transition, and which economics would discourage in general).

By Patrick 027 (not verified) on 30 Jun 2012 #permalink

'our' - Oops! Sorry for writing as if all of you live where I do.

By Patrick 027 (not verified) on 30 Jun 2012 #permalink

Re "You need to add to that "tax at the point of import", since most countries import much of their fuel. And we're not assuming a global tax -WI>" Definitely, thanks!

Re"This begins to sound far too idealistic. Remember, there is no inter-nation redistribution in the plan, so what is the point of a back-tax? Who exactly are you going to back-tax? -W"
If there were just one nation than there would be just the global tax. With multiple nations, if each had the same policy, then in one scenario their domestic taxes for ongoing emissions would be pooled globally and redistributed according to climate change costs or prizes for R&D successes, subsidies for clean energy and efficiency, or a global equal per capita payback, or some mix of that - something like that - maybe(?). The backtax would just be applied to nations and would encourage poorer undeveloped nations to join in. The total money flow need only be the difference between what is to be payed and what is to be given for each nation.

[Redistribution isn't going to happen, and shouldn't be mentioned, in order not to scare the horses -W]

This could start as a small group of nations which other nations may want to join. Some won't. Those least likely to join, I'd guess, would be those who emit the most, those who would owe the most back taxes or who would (expect to) suffer the least from climate change.

[No, this is a disastrously bad idea. The aim of this is not Great Justice, but to get our CO2 emissions under control - or at least, heading that way, and costed for. Arranging the scheme so that the US, or China, or Russia, doesn't join because it owes the others back taxes is Wrong thinking -W]

I'm wondering now where these factors add or cancel... Perhaps partially joining by having a reduced tax could be done with a proportionate reduction in any benifits (so this international system might be able to emerge from individual nations' domestic policies?). Would this reduce the need/want for corrective tariffs/subsidies? - maybe between rich nations taxing CO2 and poor nations that would suffer most from climate change, but tarriffs/subsidies among richer nations might still be desired, especially if one is in some place where the climate change effects are smaller.

Re "I doubt its a good point. Can you think of any examples of these hypothetical goods? -W"
Well, China exports to other countries besides the U.S. I guess what I hadn't thought of is - Would the U.S. still be exporting a similar set of products/services to those same other countries or not? If not then it's not important. Otherwise, if neither China nor those other countries tax emissions, then the U.S. could still compete in the other countries by subsidizing it's exports accordingly, just as it would with China ...

... although it should be pointed out that while such subsidies attempt to maintain an efficient market as if China, etc, were taxing at the same rate, I'm not sure if it necessarily protects the U.S. economy from China's lack of tax, because the efficient market response given other countries policies would be different, and the U.S. government could spend that money on something else (perhaps something that would reduce emissions more than U.S. low-CO2 products displacing Chinese high-CO2 products internationally?) ...

... aside from that, another situation would be if China and the U.S. are both selling (or both could sell) similar products to a third country that is also taxing CO2 but not applying the related tariffs (except on fuel imports, of course!). The subsidy would make as much sense in this case, unless the third country is also producing similar products, in which case... if those similar products can compete with the imports from China than I guess it's not so much of a problem for the U.S. exports to compete on a level playing field with the third country's domestic production without being swamped by Chinese exports.

I should add that I do understand there comes a point where an approximation to an ideal policy with some error must be accepted because the costs of reducing the error become larger than the cost of the error. I'm just not always bothering to guess where that point is.

By Patrick 027 (not verified) on 01 Jul 2012 #permalink

My mostly but not entirely disagreeing post here, FWIW:…

[Thanks for letting me know. I don't see anything there to change my mind, though. You're still caliming, without evidence, that CAFE is something other than a disaster, for example.

But the main problem you're not addressing is the illusion that regulation is free, but taxes cost. Both halves of that are wrong; and you don't cure wrongness by pandering to it -W]

By Brian Schmidt (not verified) on 02 Jul 2012 #permalink

Re "in order not to scare the horses -W" - not that my own ideas would be "the right policy", but interestingly this potentially disagrees with "political infeasibility should not stop economists and other intellectuals from recommending the right policy.", which was Noah Smith's response to his own reason 1 in

“Carbon taxes won’t work. Here’s what will.”


Re "[No, this is a disastrously bad idea. The aim of this is not Great Justice, but to get our CO2 emissions under control - or at least, heading that way, and costed for. Arranging the scheme so that the US, or China, or Russia, doesn't join because it owes the others back taxes is Wrong thinking -W]"


That (unwillingness to cooperate/join) was a potential weakness of the idea, not the purpose.

It might be counteracted by the potential for greater cooperation
with developing nations lacking a history of such emissions - that they would be willing to tax their own emissions, or some equivalent action.

In fact that may have been in part what gave me the idea in the first place...

...along with concern about such ideas as paying for reforestation when other countries haven't yet deforested so much, and how to balance that with payments for merely not deforesting, etc. Actually that may have been the origin. I was thinking that a tax could be fairly applied to any future deforestation (directly anthropogenic, not indirectly by climate change, as that would be others' fault) and credited to reforestation (distinguish between intentional and not? Might get tricky - maybe I'll come back to it later) if a backtax were applied to past deforestation; etc. for land use changes in general. But then it occured to me - why just for land use emissions and not fossil fuel / cement production emissions?

Also, the justification for a tax is the externality, and so it would make sense to distribute the revenue according to where that externality is realized. There are some complexities in that, as much cost would be realized in the future and so the revenue would have to be invested in some way now for later payback, if not used for proactive adaptation (which itself could be considered a form of investment with future payback).

BEGIN long paranthetical statement:

That investment wouldn't necessarily be climate related, but merely financial, although given the potentially long service lives of some clean energy infrastructure (PV panels), that could be the investment (financial and climate related). Subsidies for clean energy and efficiency, which might be construed to include R&D - or not - might be an option for that purpose. (Internationally, this could be similar (in a general way) to the CDM under Kyoto.)

Additional such subsidies could be justified by a reduced emissions tax, where that plus the subsidy would be equal to the externality cost (the subsidy could be reduced as the tax is raised over time) - although that isn't fair in the sense that it would distort the market by treating the energy sector differently from other emissions sources and thus the market response might be farther from optimal - unless something corrective is done (etc. for trade?).

Other additional such justifications for public funding include the general justification of public R&D funding (great investment, may be outside what private R&D can be expected to do?) as well as the mass market advantage and learning curve issues (a potentially economical industry may struggle at first and if in the public interest, subsidies (incl. R&D, also demonstration projects, complimentary infrastructure (accelerated siting evaluations for power plants and transmission, etc.), whatever works) may make sense - perhaps especially given the matter of lost time (the tax was not in place when it should have been). It might make sense to combine revenue from externality taxes and other taxes to put to these purposes as the justification may include more than the externality?

And then there's job training for out-of-work coal miners (perhaps an example of how to win support without watering down the policy), etc.

END long paranthetical statement.

See also my comments here:… - then apply internationally if possible. Note this is not about keeping people going in areas that they really ought to evacuate or in activities they really ought to give up. Note also: compensation for climate change migration follows climate change refugees; it either compensates countries who take them in or goes to the refugees directly; why would it go to the countries they are coming from? I didn't mean to forget (domestically or otherwise) protection of ecosystems/their services (would that include planting more forests of any given type in the direction that, if given time, they would naturally migrate?).

It isn't necessary to combine mitigation policy with adaptation policy, but the justification for one is tightly bound to the justification of the other, and when considering how to do one internationally, it made sense to me to consider the other.

About 'Great Justice' - I'm not entirely sure what's meant there. One could say that a climate change mitigation effort itself is a pursuit of justice, although it is also about making things better than they otherwise could be (utilitarian?). But it makes sense to try to design policies in a fair way whatever their purpose; here this means fairly allocating responsibility for emissions

[Fairness is a better idea than Great Justice (by which I meant, the idea that the carbon tax, or equivalent, should be used to make industrialised nations "pay back their debt" to the rest of the world, etc etc). That idea is completely doomed, so shouldn't be seriously discussed. The carbon tax is just an economically efficient way to internalise externalities -W]

(note: the expectation is that the cost of the tax is distributed, via the market, among the benificiaries of the emitting activity. PS I'm sure you (W) know that, but I'm writing this for whoever reads it too. Some people would complain that this passing on of the tax to consumers is a bad consequence

[That would be a mad argument. Passing on the costs to the consumers is a good not a bad consequence -W]

(ignoring the benifit of changes in consumer behavior), while perhaps others might ignore it and complain that it is unfair to target emitters when so many benifit from the activity.) and fairly compensating those affected by it. One without the other may be better than neither. However, if people who are aware they've been harmed by others are not compensated for it, that's not exactly a recipe for peace (horses scared yet?); it's more than a moral/ethical compass which drives a desire for fairness. On the other hand, having compensation be exactly fair may not be necessary (optimum level of error) and it can be pragmatic/[?]...

[The idea, in carbon tax terms, is that the harm / damage suffered is so diffuse that it makes no sense to speak of any particular person or group being harmed (so no, those dwelling by the sea shore will not get compensation for rising sea levels). Thus the "compensation" aspect of the tax is only that the money is used to displace other sources of tax revenue -W]

(word that means something like only concerned with the pursuit of the 'bottom line', begins with 'e', I think it has 'or' in it, it's not economical or efficient or effective but something like that; online thesaurus is no help - it may come to me eventually but I don't want to wait to finish this), ...

for example, in the case of the aforementioned backtax, an agreement for some discount of backtax could be negotiated in exchange for some participation in mitigation. And aside from that, countries might spend most of their own tax revenue on themselves directly at least in the near term to more rapidly transition to clean economies and protect themselves from climate change, the benifits of which may help in compensating others later?

It might be argued that any such backtax would be unnecessary because the wealth (including medical knowledge) generated/supported by fossil fuels, etc, has at least trickled down to everyone in some way, but that has a level of Limbaugh-ian illogic (search Limbaugh, Native Americans, smallpox and its vaccine). It's hard to say who actually benifited how much from past emitting actions, but (I think) a good approximating attempt would be to follow the extant wealth (excluding natural wealth?), hence the prior description of how responsibility might be destributed - of course, some exceptions might be noted (countries with a prior history of clean energy). Even in the more recent past, simply looking at where fuels were oxidized might not be enough - petroleum exporters and consumers of imports have surely benifited; it perhaps might be easier to track down wealth than combustion anyway?.

The backtax is not about placing blame on people who couldn't be expected to know the consequences of their actions, and is not an attempt to undo the past in the sense of redistributing wealth to where it might have gone if everyone had burned fossil fuels equally or benifited from that burning equally - it is not in particular about taking the infrastructure of wealthy U.S, European, and Japanese, etc, cities and transporting much of them to Bangladesh, Gabon, and Niger. Because the past can't be changed, we must try to adapt to its consequences optimally (but that needn't preclude recognition of what has happened, although that's not necessarily what the backtax is for either).

This is not charity. It is not eliminating poverty; it's not 'an i-pod in every pocket and a chocolate treat in every mouth (and a cure for chocolate allergy)'. It is also not eliminating racism, sexism, and violence, overthrowing evil dictators, or stopping child witchcraft trials, or teaching people what it means and does not mean to be red-headed (not witches) or albino (body parts are not good luck charms), or ending other such things that I don't even want to mention. I don't think it's 'Great Justice'.


Note that fairness (in a sense) in mitigation would lead to optimizing the combination of mitigation and economics/well-being (not same thing, depending on how 'economy' is defined) (which itself is better via mitigation, so it's really the economics/well-being that is being optimized (unless there is some additional aesthetic/preservationist/? justification for mitigation independent of ecotourism/joy/natual science/art/etc), given an ideal efficient market - not that I believe that real markets work that way even without externalities (and then again, some externalities can be desired), but some of those issues can be somewhat managed (bubble-bust) and the non-ideal market responses (or lack-thereof) to an externality tax would be the justification for additional policies (including regulations) (such as subsizing emerging industries (see above) and use of building codes to 'skip' some of the learning curve for efficiency and such things as passive solar design and solar roofs (because it's generally more expensive and a pain to remodel a house after building it once, and cheaper to incorporate solar panels and water heaters into the roof design than to add them on later (any mandating of that would be flexible (like CAFE standards for the 'fleet'?) and avoid forcing people to put solar panels, especially expensive ones, under the shade of a tree or at higher latitudes in cloudy places, etc. - the idea is just to jumpstart what would become optimal behavior).

PS when taxing fossil fuel extraction, a credit would go toward fossil C products not intended for oxidation (plastics, etc.) - to the extent that it can be expected to remain sequestered for a sufficient time (discount for probability of being in a fire, etc.)

[I wouldn't do that. Firstly, because it introduces impossible complexity (you don't know how much of a given oil stream goes where). If you really wanted to do that, you'd have to apply a credit for the plastic makers. But also, nowadays and increasingly, little plastic is going to be landfilled, because that's stupid: its going to be burnt, eventually -W]

PS buffering ocean pH without removing CO2 would recieve a credit equal to just the acidification tax. Also, I'm not a fan of the stratospheric sulfate aerosol geoengineering plan - I just gave it as an example of how the application of seperate taxes and credits could work.

PS on making tariffs simpler - what about a nation's emissions/GDP ratio as a basis from which to start, with exported fuels taxed at a different rate and any certified/etc. small footprint products taxed less?

I hope the infrequency of my comments historically makes up for their ungodly length. (Perhaps I am oversharing in a sort of non-personal way.)

By Patrick 027 (not verified) on 02 Jul 2012 #permalink

The U.S. is cutting emissions very nicely without any additional carbon taxes. The reductions are significant and due mostly to the abundance of economical natural gas. Coal has gone from generating 53% of electricity to 32%. While we wait for the magic hand of the Pigou tax to induce CO2 cuts, the market is making them and at a profit.

[You can call it the market if you like but I'd call it science and technology -W]

By Paul Kelly (not verified) on 03 Jul 2012 #permalink

Fracking bull

By Eli Rabett (not verified) on 07 Jul 2012 #permalink

So how exactly was CAFE a disaster??

[I was thinking of SUVs -W]

By Eli Rabett (not verified) on 07 Jul 2012 #permalink

SUVs - I thought that's a part of why auto companies didn't want to improve CAFE standards. It's ironic because they tried to argue that greater fuel efficiency reduces safety (true, a greater mass of car that you're in may help protect you (by increasing the deformation/displacement to/of an obstacle, if my understanding is correct), although the mass of another car...), but the SUVs had a roll-over problem (initially, anyway)...
(see old episode of ... "Frontline"? - well I'll have to get back to you on that - I remember getting the impression from it that auto companies were campaigning against fuel efficiency increases wth the safety argument when SUVs weren't really a big thing yet in terms of market share, but I'm not sure).

By Patrick 027 (not verified) on 08 Jul 2012 #permalink

"You need to add to that "tax at the point of import", since most countries import much of their fuel. And we're not assuming a global tax -W]"

Then you're not talking about the correct solution, which is a global RISING carbon tax. (Using gasoline as an example, a carbon tax which would raise gasoline prices 50 cents or a dollar PER YEAR over 20 years would take us where we want to go, which is perhaps $15-25 a gallon 20 years from now. Everyone MUST know what the tax will be in 5 or 10 or 20 years in order to make good decisions about infrastructure (cars, houses, power plants) that all last over a decade.

[I disagree strongly. Asking for it to be global is asking for the same gridlock we have now. Countries should introduce their own (revenue neutral) carbon taxes without waiting for others -W]

And jobs are NOT a cost, but a social contract to produce goods. Abusing your logic, owners are a parasitic cost to be minimized, allowing for the real earners, the workers, to collect their rightful output. Sure, 1 or 2% should go to the owners, but any more is an unnecessary cost. See? It all depends on who you value, which is often determined by your situation.

[Jobs are certainly a cost, looked at from the profit-and-loss account of a business. Of course, there are many other ways of looking at them too. But asserting that they cannot be reasonably looked at as a cost is wrong. "owners are a parasitic cost to be minimized" - errm, but they are the owners, so they are the people in charge of the minimising. You are perhaps arguing that society as a whole should minimise the profits to owners. I disagree, but that's a different argument -W]

By Jim Larsen (not verified) on 10 Oct 2012 #permalink

Patrick, nowadays vehicle safety is determined by the difference in mass of the two+ vehicles involved. I've always said the Hummer motto should be, "Accidents happen, so you might as well make it fatal for the other guy."

So it ends up as an arms race, with purchasers desiring heavier and heavier vehicles with higher and higher bumpers to ensure the other guy bears as much of the cost of an accident as possible. Hummers kill, but it's the innocent who die, thus vindicating the Hummer purchaser's decision.

In a sane world, we'd all want near-equal mass vehicles with equal height bumpers, so we'd all be safe. As if...

By Jim Larsen (not verified) on 10 Oct 2012 #permalink

Patrick, I'm a great fan of compartmentalization. Yep, planting trees is grand while clear cutting vast areas is bad, but linking that to carbon emissions is a fool's errand. Giving ANY (as in the slightest bit) credit for such actions with regard to a carbon tax/limit/whatever is a guaranteed way to ensure that the carbon tax/limit/whatever will be gamed to the max. Plant a few million trees in a way that will ensure their death will coast in under the radar and provide serious returns on "investment", but we, those who pay for the yachts bought by the players, well, we get screwed.

Land use and other stuff MUST be completely separate from carbon taxes.

By Jim Larsen (not verified) on 10 Oct 2012 #permalink

" You are perhaps arguing that society as a whole should minimise the profits to owners. I disagree, but that's a different argument -W"

No, that's the entire argument. A business is created mostly by customers, workers, and resources. There is NO doubt that if facebook had never been created, a different social network would have arisen, which means facebook's inherent value is the difference between that alternative "winner" and Facebook. My guess is the difference would have been about zero, meaning the owners of Facebook provided near-zero benefit to society, so their compensation should be similarly minimal.

To call workers a cost but owners not BECAUSE your point of view is restricted to that of owners.... well, I hate to say this, but it's dumb. Owners are a COST. Workers are a COST. If you're talking about COST, you MUST include the cost of owners AND workers, or neither.

By Jim Larsen (not verified) on 10 Oct 2012 #permalink

" but they are the owners, so they are the people in charge of the minimising. "

Do you see how warped that statement is? It's circular - owners decide, so owners' desires trump all, and considering workers as human is wrong from a gain-for-owner standpoint (note I didn't use the word "profit", which has unjustly assumed godly status). If it doesn't provide more gain for the ownership class, it's completely removed from the agenda, as gain for the ownership class is the sole reason for humanity's existence, according to your view that businesses should only make decisions based on gain to the ownership class. (Or did I misinterpret your stance?)

Put foxes in charge of the hen house. Legislate that the accounting should show fox-eating-hen as the sole benefit, while hen-laying-egg is irrelevant. You get a "slightly" different result than someone desiring eggs for breakfast.

[No, it isn't circular at all. Its entirely unidirectional. On this model, the owners are in charge, because they are the owners, this is the definition of being in charge, so they get to decide. They have to negotiate with the workers, of course. Your objection is "this argument produces a result I don't like"; you should not abuse language by attaching one of the labels intended for a logically invalid argument to it.

"gain for the ownership class is the sole reason for humanity's existence, according to your view" - well, we're not going to get very far if you so badly misinterpret what I say. Gain for the owners (I think "ownership class" are your words, not mine) is presumed to be the objective of the owners (some may also have social objectives, and so on, but in general "gain" is presumed to be the main intent in a capitalist system). That doesn't make it the sole objective of humanity, obviously. Presumably the workers intend to maximise their gain, too -W]

By Jim Larsen (not verified) on 10 Oct 2012 #permalink