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.