Time for carbon taxes?

PAYING FOR IT by ELIZABETH KOLBERT in the shouty New Yorker suggests that carbon taxes may be back on the (US) agenda. It would be good if they were, but I’m dubious (am I ever anything else?). There are many reasons to be dubious. One is in the article: a carbon tax makes so much sense—researchers at M.I.T. recently described it as a possible “win-win-win” response to several of the country’s most pressing problems—economists on both ends of the political spectrum have championed it which has been true for years, to no avail. And Obama doesn’t seem to be on board: We would never propose a carbon tax, and have no intention of proposing one. Brian, I know, has said this is because it has the word “tax” in it; I suppose we can hope the US grows up one day.

But another reason to be dubious is the wishful thinking in the article:

A few weeks ago, more than a hundred major corporations, including Royal Dutch Shell and Unilever, issued a joint statement calling on lawmakers around the globe to impose a “clear, transparent and unambiguous price on carbon emissions,” which, while not an explicit endorsement of a carbon tax, certainly comes close.

Well, they did indeed say that (“The Prince of Wales’s Corporate Leaders Group on Climate Change”? WTF? Well, never mind). But the logo of the IETA is a big hint that its not going to be pro-carbon-tax. Those people have got a lot – their entire business model and nice fat profits – to lose if a carbon tax replaces their trading. And the “communique” doesn’t even use the word tax. It calls for carbon pricing, but is very vague about what sort, and only mentions “cap and trade”. As you’d expect, from a carbon trading organisation (this is of course a problem with a carbon tax that I may have mentioned before: because its nobody’s boondoggle, just a good idea for everyone, there is no-one with their tongue hanging out drooling over prospective profits to lobby in its favour).

Meanwhile, the “communique” itself is, errm, being rather optimistic:

We recognise that carbon pricing can be contentious: in economic downturns businesses, consumers, and governments all worry about constraints on the economy. But experience has shown that carbon pricing as an approach can deliver greater emissions reductions at lower cost than predicted which in turn offers the opportunity for greater ambitionv.

But if you look at “v” you find stuff like The EU ETS has not resulted in significant costs to business to date and Company decision-making has taken carbon pricing on board, but climate legislation has not led to fundamental shifts in strategy and Companies have improved their monitoring and reporting of emissions and realized energy efficiency gains all of which rather suggests that the ETS has in reality had minimal impact. Carbon pricing has to have an effect on industry, and it has to cause pain somewhere, otherwise its pointless.

Via Timmy the Graun seems to have been the same idea (this can’t be coincidence. Zeitgeist? Coordinated briefing? Copying?). Their suggestion that a carbon tax could be a way of avoiding a steep rise in income tax and save cuts to Medicare, Medicaid and social security is bad: the carbon tax should be revenue neutral.

I should mention another aspect which a comment at P3 threw into relief recently: that there are equity problems with a tax, as follows: if you were to impose a no-more-emissions via a cap, then there would be no winners or losers from climate change (modulo what we’ve got already and committed; just humour me for the moment) and this would be equitable. But if you calculate the global costs a-la Stern or summat, and tax at that level, then you get change, and you get winners and losers, but there is no inbuilt mechanism for redistribution (especially since the taxes will be national but the loss/gain likely international). To which I’d reply: well, tough, you can’t solve every problem.

Refs

* Carbon tax watch
* Carbon tax now
* David Hone sort of tries to say that something else is a good idea.
* Brian wants a non-revenue-neutral carbon tax, too.

Comments

  1. #1 crandles
    2012/12/03

    Well someone has to start listing obnoxious, insulting, offensive, discourteous …

    re “am I ever anything else?”

    :o)

  2. #2 crandles
    2012/12/03

    I hope I can get away with posts like that now he doesn’t owe me any money. ;-) So I can say that really he is a very nice man who does pay up promptly after conceding bets. :-) (oops wrong thread.)

  3. #3 carrot eater
    2012/12/04

    if a carbon tax were accompanied by very obvious reductions in other taxes, in the attempt to make it roughly revenue-neutral, then you might gain traction. It would take some thought on how to do it without making the overall system more regressive, but it should be doable.

    [That's the voice of reason. for the voice of wingnuttery, see comments lower down -W]

  4. #4 R.L. Schaefer
    2012/12/04

    Windmills and Solar Are Nothing More Than a Green Dream

    It would take about 3000 acres of solar panels to produce the same power as one medium sized 1000 megawatt natural gas plant. Since it can’t store energy, and can’t produce energy on cloudy days or at night it would still be necessary to have the natural gas plant and a redundant power transmission system to the main grid.

    3000 acres are destroyed for the solar plant and 30 acres for the gas plant. Each could supply about 600,000 homes.

    Windmills are far worse. It would consume 60,000 acres and require 2400 to 2800 wind turbines to equal 1,000 megawatts. Of course, these wind turbines only produce that much power when the wind is blowing just right. That only happens about 25% of the time, so you really need 4 times as many wind turbines and 4 times as much space to generate, on average, 1,000 megawatts of electricity per hour. So that’s, 240,000 acres and 9,600 to 11,200 turbines. 240,000 acres is 375 square miles of scarred, dead and hideous habitat.

    Further, these figures do not take into account the higher production and maintenance costs of solar and wind. When these are factored in along with the shorter life span of the equipment, the result is very little “net” energy for all the C02 created and money spent – hence the huge subsidies that either come from increased energy costs or out of our tax dollars.

    Finally, wind turbines, just in California, kill more birds each month than the Gulf Spill killed in 3 months. And, nothing but spiders live under solar panels. Doesn’t sound very green to me.

    Green energy is a myth and our president and his progressive acolytes are nothing more than dogmatic, green shamans.

    Brave New World – Indeed…

  5. #5 Kevin Sanders
    2012/12/04

    Why don;t we just install a breathing tax. $100 for every breath you breath?

    Let’s just let tyranny take over once and for all and maybe then the ecofascists will get dictatorships out of their minds once and for all.

    If they pass a carbon tax, I hope an asteroid hits on the very spot the very minute they sign it into law and the only survivors are the people who are against carbon taxes. Lt justice be served and let tyranny fall.

    [You're trolling -W]

  6. #6 Doug Cotton
    2012/12/04

    [This is just spam; its irrelevant to the thread, and its a wall of text. You've been asked not to do this before. Please read the comment policy -W]

  7. #7 LH
    2012/12/04

    The fossil fuel organizations pushing for a carbon tax or cap-and-trade (to the extent that they’re truly pushing for it anyway) also want it to be in exchange for eliminating all other efforts at combating global warming. A $20 tax is pretty convenient when it’s estimated that the effective cost via EPA regulation is $36.

  8. #8 LH
    2012/12/04

    Can’t edit, so another post – should be $26, not $36

  9. #9 Paul Kelly
    2012/12/04

    …carbon tax could be a way of avoiding a steep rise in income tax and save cuts to Medicare, Medicaid and social security is bad: the carbon tax should be revenue neutral.

    On the other hand, the Medicare and Social Security funding payroll tax is the one regressive national tax available in the US to neutralize the carbon tax. Revenue neutrality is a political requirement rather than an efficiency and effectiveness requirement. Its political deficiency it that revenue neutral does not mean payer neutral..

  10. #10 ElMadster
    Atlanta
    2012/12/04

    Where are all the libs whining about how R-E-G-R-E-S-S-I-V-E this is going to be and how much it is going to hurt the poor.

    There’s no way to eliminate material amounts of carbon emissions that is not regressive:

    – CAFE standards raise the price of cars – Regressive!

    – Phasing out coal plants raises the cost of electricity and puts coal miners out of work – Regressive!

    – Carbon tax (my preferred solution) raises the cost of everything – Regressive!

    – CAP and Trade – same as carbon tax – Regressive!

    I personally support a carbon tax that replaces the income tax but I have to tell you watching you guys square this circle is going to be fun.

  11. #11 carrot eater
    2012/12/04

    there’s payroll tax. that’s the big regressive bit you could imagine swapping out. or, you could just go with the ‘rebate’ method – give everybody an income tax credit.

    double bonus on the latter – it would push up the percentage of households who don’t pay net income tax. so the next GOP presidential candidate can again put out that factoid, and again completely mischaracterize what it means.

  12. #12 David B. Benson
    2012/12/04

    Way past time for a carbon tax.

    Before complaining about ‘regressive’ consider the effect on heavy industry.

  13. #13 Hank Roberts
    why I'm right here
    2012/12/05

    The US isn’t impressed by the fossil fuel reserves being 5x the amount that, if burned, makes us toast.

    The US had, what, 100x overkill capacity in ICBMs (I remember one of the under-the-mountain officers quoted as saying something along the lines of “our missiles don’t target population centers — we target time zones”)

    A mere 5x carbon is laughable.

  14. #14 Luke Silburn
    London
    2012/12/05

    “Where are all the libs whining about how R-E-G-R-E-S-S-I-V-E this is going to be and how much it is going to hurt the poor.”

    They aren’t whining about the regressivity because they have thought about the problem for more than the time it takes to cut and paste wingnut talking points and are advocating for ‘tax and rebate’ instead. Increased prices aren’t such a problem for the poor if they are getting more than made good by a ‘carbon dividend’ they get every month.

    Unfortunately the proposal has ‘tax’ in the name – so it is politically toxic to anyone who flinches at the mention of Grover Norquist.

  15. #15 J
    2012/12/06

    Sorry, but if there’s one thing the New Yorker is not, it’s “shouty”.

  16. #16 Doug Cotton
    Sydney
    2012/12/06

    So why exactly do we need carbon dioxide taxes?

    Well if you spend a few minutes reading my paper and at least the abstract of the paper published by the American Institute of Physics (cited in reference (8) in my reference [13]) you might understand what happens in the atmospheric physics of both Earth and Venus.

    I’m still waiting for a satisfactory alternative explanation from anyone in the world regarding the Venus surface temperature.

    Pressure does not maintain high temperatures all by itself, anywhere, not even on Venus. So forget that “explanation.”

    My paper is up for PROM (Peer Review in Open Media) for a month, so feel free to publish a rebuttal or debate it with some of these members of PSI. Such a review system far outstrips the “peer-review” system used for typical pro-AGW publications.

    Doug Cotton

    [Well done. You’ve provided a link to your paper elsewhere. Somewhat to my surprise, I bothered to skim it. It contains no equations, nor text equivalent to equations, so is worthless as a contribution to understanding planetary energy imbalance. I could write that in a review, if you liked.

    PSI seems something of a single-issue party.

    The “PROM” process is potentially interesting, but how it might work is rather obscure. I assume it is somewhat like the pre-existing EGU journal “open review” system (I’m sure you’re familiar with that system, since you’re claiming yours is superior to others, that naturally implies familiarity with other systems). So perhaps you can point me to some of the reviews on previous PSI papers?

    I guess you and PSI must be fairly frustrated, though: even AW thinks your stuff is too nutty to touch (http://principia-scientific.org/supportnews/latest-news/76-to-anthony-watts-and-wuwt-please-stop-your-greenhouse-gas-censorship.html) and he’ll publish almost anything.

  17. #17 Nathan
    Perth Australia
    2012/12/08

    Do you like the Australian model? Fixed price Carbon permits for a few years, then onto an Carbon Trading scheme?

    [I haven't looked too closely. It sounded good to start with, but seems to have decayed into a confusing mess. But anything that turns into a carbon trading scheme can't be good -W]

  18. #18 Brian Schmidt
    United States
    2012/12/08

    Al Gore suggested replacing payroll taxes with carbon taxes about a decade ago. There are a thousand ways to skin this cat to keep it from being regressive generally, because poor people tend to use less energy than the 1%.

    The one exception is the rural poor in developed countries who tend to use more energy – they would need specially targeted programs.

  19. #19 Russell
    2012/12/08

    Of all the new carbon footprints to be stomped on the face of the American polity, by far the most onerous and superfluous is The Department of Homeland security’s.

    The trillion dollars so far swallowed by this bureaucratic abomination is regurgitated as 1.6 million tons of CO2 a year

    Abolishing it would simultaneously reduce climate forcing, the national debt, and the aggrivation of encountering idiocy every time we fly.

  20. #20 Howard
    2012/12/08

    The nation will see how it works out here in California. If it’s a stunning success, then other states will adopt it. Contrariwise, if it falls flat, it will be dead until Manhattan is submerged.

  21. #21 Ed Reid
    US
    2012/12/09

    “You’ve got to be careful, if you don’t know where you’re going, because you might end up someplace else.”, Yogi Berra, American philosopher

    What is the goal? (Ultimate % reduction in global annual carbon emissions? Unique numerical answer required.)
    What is the time frame in which the reduction must occur? (Unique year required.)
    What is the plan to achieve the goal within the time frame?

    Once the answers to the above questions are available,

    What is the level of carbon tax which would achieve the required reduction within the required time frame. (NOTE: This question is unanswerable with any accuracy.)

    Conclusion: A carbon tax is a totally inadequate way to achieve a specific emissions reduction objective. However, a declining cap could achieve a specific objective.

    Question: Which is more important: revenue generation, progressiveness, or emissions reductions?

    “Enquiring minds want to know.”

    [The goal, if you're an economist, is to internalise the externalities. Emitting CO2 is "unfair" or "not properly accounted for" if it harms others, and you the emitter don't pay for that harm (you'll need to follow the trail of posts back for why its "pay for" rather than "are forbidden to do"). So the goal is not to prevent CO2 emissions, or provide some % reduction: its simply to make "the polluter pay" and allow the market to decide how that comes about: either through reduction of emissions, or paying the taxes.

    I'd recommend you to read http://scienceblogs.com/stoat/2011/06/06/carbon-tax-now-1/ -W]

  22. #22 crandles
    2012/12/09

    Ed Reid,

    Why frame it with those questions which you assert are not known/knowable. Why not apply:

    Are we doing enough to prevent dangerous climate change? If yes, great carbon taxes don’t have to rise any more. If no, then raise the carbon tax a bit more and repeat process.

    We know emissions are rising too much too fast now so the question isn’t difficult at the moment. When emissions are falling it might be a slightly harder question to know whether they are falling fast enough but we will have more knowledge of what is going on by then.

    No doubt it will cause much wrangling but trying to portray it as an impossible task when it clearly isn’t doesn’t seem like it does you any good.

  23. #23 Ed Reid
    2012/12/09

    W,

    And here I thought the goal was to reduce or eliminate CO2 emissions to avoid CAGW.

    crandles,

    Incrementalism could be an extremely expensive approach to emissions reductions. The investments required to actually reduce emissions are mostly 20-60 year investments. Much investment made early could become economic dead loss if emissions had to be further reduced. For example, replacing coal with natural gas for power generation reduces CO2 emissions by 50-75%. Is that enough reduction over the ~50 year life of the plant?

    The task is hardly impossible, but it is not trivial either.

  24. #24 Ed Reid
    US
    2012/12/09

    W,

    I have now read the post you linked in your response above. I am appalled that, as an economist, you take such a cavalier attitude regarding the value/cost of the carbon externalities. You even ignore the possibility that the externalities, over the next 40-50 years might actually be positive.

    [But I'm not an economist. As for the externalities, suggesting that they are generally negative is commonplace. If they weren't, who would care about GW? If you want to argue otherwise you have a hard task ahead of you -W]

    Also, at my advanced age, I have long since ceased believing in Santa Claus, the Easter Bunny, the Tooth Fairy, the Great Pumpkin and “fully refundable taxes”. Our congresscritters are far too invested in income and wealth redistribution and vote buying to fully refund any tax. They apparently share that investment in redistribution with the “worthies” of the UNFCCC, though the two groups differ regarding the intended beneficiaries.

    [You're to blame for your congresscritters, not me -W]

  25. #25 Ed Reid
    US
    2012/12/09

    W,

    http://scienceandpublicpolicy.org/other/benefits_of_co2.html

    [CON beat me to it, but SPPI are a joke. You're not dumb enough to believe their "Sea Level is Not Rising" (are you?) so why do believe anything else from them?

    There is room for rational skepticism in this debate - you can argue about how fast sea level is rising, and exactly how we reconcile tide gauges and satellites. But there is no room for credulous denialism, like Morner's, and there is no point bothering to read people who push his junk -W]

  26. #26 Chris O'Neill
    2012/12/10

    http://scienceandpublicpolicy.org/other/benefits_of_co2.html

    Credibility rather trashed by the first statement:

    Sea Level is Not Rising

    (by Professor Nils-Axel Mörner, no less)

  27. [...] 2012/12/03: Stoat: Time for carbon taxes? [...]

  28. #28 outeast
    2012/12/13

    Is there a reason other than political expediency that profits from a carbon tax could not be ringfenced for investment in household energy efficiency schemes, subsidies for low-carbon energy tech conversion, etc.?

    [I'm sure there would be any number of interests fighting for the new income stream. My own inclination would be that this is complexity we don't need. If you want to do those things, fund them from general taxation -W]

  29. #29 Straight out of the box
    2012/12/20

    “ringfenced” like the Social Security Trust Fund? Any substantial money would quickly be stolen to cover deficits and replaced with worthless IOUs. Any producer overhead is simply passed on to customers, or if that doesn’t work, taxpayer subsidies are secured by their captured minions in government.

    “allow the market to decide how that comes about: either through reduction of emissions, or paying the taxes.” What market ? The TBTF banks and the Fed have already manipulated existing markets to pure HFT fantasy. Carbon trading would very quickly follow (that’s why the major corporations are “for” carbon taxes. They can smell another fortune to be plundered from taxpayers). Just look at the pitiful fines handed out to the likes of HSBC for laundering drug money; they aren’t punitive nor a deterrent, merely another cost of doing business.

    A hard cap is the only realistic means for CO2 reduction. Anything else is just inflating another bubble, like tech stocks, housing, and now student loans.

  30. [...] all in favour of Carbon Taxes as you know, against cap-n-trade, and not keen on efficiency [...]

  31. [...] all in favour of Carbon Taxes as you know, against cap-n-trade, and not keen on efficiency [...]

  32. [...] 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 [...]

  33. #33 Victor Venema
    http://variable-variability.blogspot.com/
    2013/04/13

    William, you seem to have some environmental and development NGO at your side:
    http://scrap-the-euets.makenoise.org/english/

    I am undecided on whether a carbon tax or an ETS would be better at a national level, where you would have the (imperfect) possibility of fighting negative side effects: Global warming is not the only problem and some ways to fix it may do more harm in other respects (such as making fuel from food).

    [I think another good aspect of the carbon tax is that it *can* be done at the national level. It doesn't require anyone else to agree. Biofuels are stupid too: see http://scienceblogs.com/stoat/2012/08/10/un-urges-us-to-cut-ethanol-production/ for example -W]

    The Kyoto system does not seem to be working, however. If only because of all the loop holes by allowing for virtual reductions in countries not under the cap.

    [Yup, But its also so huge and cumbersome its hard to change, and so delicate that no-one dares try to change it - all those loopholes were put into to buy someone into accepting it. So it became worthless, or rather of negative value -W]

  34. #34 David B. Benson
    2013/04/15

    Should coal burners pay a health tax?

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