I largely ignored Copenhagen (the conference, not the city, I hasten to add: very nice place I'm sure and I mean no disrespect) and chose instead to push for Carbon Tax Now, though I felt obliged to read a little bit of what they had to say. But now we have Cancun. What to say about that, other than rather unoriginal puns?
Nothing but the obvious really: it was a total failure and it would have been better if it had never occurred. Cancun was the triumph of the negotiator-class: the parasites encouraged by all the process: yet another waste-of-time conference designed purely to generate paper (you can get a feel for this by reading some of the stuff that the otherwise sane Ben Hale blogged. The aura of "why did I bother turn up" is palpable. Probably, someone gave him a grant). HT has quite a nice article which attempts to smile through the gloom:
Although it's not everything we need, the agreement on the table puts the UN negotiations back on track after the shambles of Copenhagen last year. Expectations were lowered in the run-up to Cancun and completing the final agreement was never a possibility... when it became obvious that a deal had been crafted, there was such a palpable feeling of relief... the Bolivian Climate Change Ambassador complained that governments had not gone far enough in agreeing emissions cuts. He is right, but for almost all the governments, the deal on the table is a good step forward, and all that could be achieved.... The emissions reduction pledges in the Copenhagen Accord were merely noted in this Cancun agreement. They fall woefully short of the level of ambition required to avoid dangerous climate change... the good news is that, for the first time in the agreement, there is recognition of the inadequacy of the pledges...
The main touted success appears to be the establishment of a $100 bn Green Climate Fund, which has a lot of people licking their lips over a nice big barrel of pork. Lots of well-paid Western Negotiating Types are going to get a pile of very well paid jobs out of it, and if there is any money left over a number of Developing Country types may get some Pork (for some odd reason Turkey gets its very own special Pork: para 142). But given the real amounts in play, and the rather slim chances that the $100 bn will ever materialise (This headline-grabbing promise, however, is not part of the UN process and is merely an aspiration of rich countries), the West gets off cheaply and is happy.
You can read Outcome of the work of the Ad Hoc Working Group on long-term Cooperative Action under the Convention, though I'd bet you probably won't. But who could fail to agree when they affirm that enhanced action on adaptation should be undertaken in accordance with the Convention; follow a country-driven, gender-sensitive, participatory and fully transparent approach, taking into consideration vulnerable groups, communities and ecosystems; and be based on and guided by the best available science and, as appropriate, traditional and indigenous knowledge; with a view to integrating adaptation into relevant social, economic and environmental policies and actions, where appropriate?
Around para 50 I started skipping heavily. Around paras 80-100 I thought I was losing the will to live, but then up came para 102:
Decides that the Green Climate Fund shall be designed by a Transitional Committee... shall have 40 members, with 15 members from developed country Parties and 25 members from developing country Parties, with: (a) Seven members from Africa;
(b) Seven members from Asia; (c) Seven members from Group of Latin American and Caribbean States; (d) Two members from small island developing States; (e) Two members from least developed countries;
No pretence that membership will be decided on merit then. Incidentally, the $100 bn is written in, as
98. Recognizes that developed country Parties commit, in the context of meaningful mitigation actions and transparency on implementation, to a goal of mobilizing jointly USD 100 billion per year by 2020 to address the needs of developing countries
But that certainly doesn't sound very binding. After that the text seemed to rather fizzle out and I found nothing worth quoting or mocking. If you find any good stuff in there, please leave a comment.
So I think it has now become perfectly clear that the entire giant international process has stopped being a way to negotiate meaningful cuts in CO2 emissions and has become - well, has been for years, I'm not sure when this first happened, it was a gradual process I suppose - subject to capture by the negotiators, as these things so often are. Far too many people now have far too much of their energy wrapped up and invested in lobbying this bloated zombie process. It needs to die.
Where to go from here?
First off, recognise that it (the current process) has failed and needs to be thrown away. It was a nice try, but gets no cigar. Saying "but it is the only game in town" won't work. The reason all these long years of negotiations have failed to produce anything meaningful is because there is no real heart available from the politicians to do so - which in turn means lack of heart from the public, since politicians on the whole aren't the sort who stand up for Principle above Votes, and those who do tend to become Ex Politicians and Lessons. Trying to negotiate a global deal is just too difficult, the only way forward is more local agreement. And as far as I can see the best option is revenue-neutral carbon taxes, honestly applied (which means stuff like no dumping on nukes just cos you don't like them - or if you must, don't do it under the guise of a carbon tax. Of course, stopping subsidising the coal mining industry would be a thing to do first, if at all possible). As far as I know, this isn't a change of heart by me. If you can find me an earlier quote from me contradicting any of this, I'd be interested and you might well win a Valuable Prize of up to $100 bn.
So I shall start my Carbon Tax Now! campaign (in a token attempt to do some research I found this but didn't of course read the associated pdf). I've done the first essential step - I've made a logo. I hope you like it. Feel free to "join" me. yes, I know there are Vast Insurmountable Policital Hurdles to overcome. Fear not - I have no interest in them. I'm not a practical politician, you may have noticed. Anyway, this is but the post about Cancun - the post about Carbon Taxes vs Cap-n-Trade is still to come.
This is all The Politics, of course. It doesn't affect The Science in the least.
* France unveils carbon tax?
* mt - "You don't run a ship with six big captains, a dozen less influential captains, and a hundred and forty minor captains"
* Yes, agreed, carbon tax now!
* Nature, unable to admit the truth
* Cancun: A reason for optimism? - no, but worth reading anyway.
Revenue-neutral carbon taxes, there's a mouthful. I hope you'll lay out who will impose this tax, who will collect it, who will pay it and who will decide how to neutralize the revenues raised.
[Have you not met the idea before? It isn't a difficult one. Governments will impose it, of course -W]
Well, at least you weren't discouraged enough to put the "t" at the end.
[This is a family blog. Except for the Bonobo, of course -W]
Carbon Tax Nowt?
I have been saying for years that a carbon tax is a no-brainer. Cap-and-trade could work, but a carbon tax is better.
As for revenue-neutrality, that's a totally separate question and really quite uninteresting from a climate change point of view. I expect that politics in each individual country will ensure that any carbon tax is more-or-less revenue-neutral.
By the way, what do you think about what Chris Huhne is saying about the electricity market?
Agreed on the carbon tax although, as you will note from the book, we in the UK already have taxes at the right sort of level.
Stern says $80 a tonne. Emissions are of the 500 million tonnes a year level. Â£25 billion a year then. Add Air Passenger Duty, the effe3cts of the fuel price escalator, the renewables obligation and so on and we're already at around and about that level of carbon taxation.
We're done, we've already solved climate change.
No, not stopped it, certainly not. But engineered the system so that we get the right amount of it. The amount which maximises human welfatre and utility over time.
An international tax on aviation fuel is long overdue. Apparently this was scuppered at Cancun by US constitutional considerations. (No taxation without procrastination?)
Then there's the French. Donkeys years ago, French fishermen used to have a huge advantage when stealing^Wcatching British fish because they paid no tax on fuel for their boats. To level the killing field, the EU extended the tax exemption to all EU fleets. This too must change. Fish Tax Now!
In the meanwhile, snow falls in the UK and millions of poor people are shivering in cold homes they cannot afford to heat.
Carbon tax sound like a great idea until you realise that the vast group at the bottom is already in fuel poverty and will be brutally priced out by your tax.
[I don't think this is true. Certainly if you mean by "vast", say, >25% then I think you are certainly wrong. But as to the point: assuming we need to reduce CO2 emissions, then they have to be priced up, just like anything else. Mixing this up with notions of justice or fairness is wrong. You can do that elsewhere in your political system if you like - you can redistribute the carbon taxes to the poorer members of society if it so pleases your political system. Restricting CO2 by caps, limits or rationing is inefficient and far too prone to corruption -W]
There are not enough rich people available to pay for this(only 350k people earn over Â£150k, 2.7 mil earn over Â£50k, ie, 3% of the UK's population...), so it's inevitable that the poorest will end up paying the price for your otherwise laudable idea.
"There are not enough rich people available to pay for this"
To pay for what, exactly?
Hint: There aren't rich people available to "pay for" income tax, or corporation tax, or VAT, or council tax, either.
In the meanwhile, snow falls in the UK and millions of poor people are shivering in cold homes they cannot afford to heat.
Sounds like a good argument for heating fuel subsidies for the poor, implemented as part of making the carbon tax revenue-neutral ...
Well, and one can think of additional ways to spend the money to reduce shivering by the poor - better windows, wall insulation, more efficient heating systems, etc which might lead to lower carbon emissions along with warmer poor people.
The idea of subsidizing heating fuel costs for the poor hasn't been raised in the UK?
A 94-year-old World War II veteran has vowed to hand back his medals over a disputed winter fuel allowance claim.
Bob McGowan, from Portsmouth, says he is being denied a Â£300 subsidy for the 2007/8 winter because he moved into his flat a day after the qualifying period.
People over 60 receive subsidies if they are in independent homes during the qualifying week every September.
Hmmm ... maybe it has, or at least for the elderly. That was 15 seconds in google, I bet if I spent a few minutes I'd find even more evidence that there are heating subsidies for poor people. If they're not sufficient, maybe it's political will and not carbon taxes that are causing them to shiver ...
But how does anyone make billions from a carbon tax?
Would the tax be on carbon or CO2 or both?
[On CO2 emitted. If you're buying coal to carve into statues then you don't have to pay -W]
I also wonder how the tax is made revenue neutral. Does it concern government net revenues or indemnifying the tax payers?
[Reduce income tax, say -W]
dhogaza, heating fuel subsidies aren't necessary. All you need is a carbon-tax that is made revenue-neutral by returning 100% of the revenues to people on a per-capita basis.
Since the wealthy consume more energy than the poor, a carbon tax implemented this way would actually increase the income of poor households. It would actually be easier for commenter Hexe's "shivering millions" to heat their homes under a revenue-neutral carbon tax where the revenue is refunded on a per-capita basis.
Consider a town with two people, Jane (rich) and Jill (poor). Jane currently spends 100 doubloons per month to heat her mansion, fill up her SUV, and fly someplace tropical on vacation. Jill, meanwhile, is struggling to scrape together the 50 doubloons she needs to heat her flat and ride the bus to work.
Now Prime Minister Stoat's government imposes a 20% carbon tax, made revenue neutral by refunding the revenue on a per-capita basis. Jane's energy costs go to 120 dbl, and Jill has to pay 60. But they both get back 15 from the Stoat's treasury. So Jill is better off than before in spite of her higher energy costs.
Meanwhile, both Jane and Jill will have an economic incentive to reduce their carbon consumption.
I can remember how down I felt when Kyoto negotiations were first announced in the early 90's I think. I knew right then that this would actually lead nowhere. I suspect if all the effort in treaty making had gone to national government abatement efforts we would be better off now.
Big international treaties are pretty nasty things these last 15 years or so. The ozone thing excepting - but that was a small isolated single issue. You could focus right on the problem and the industry wasn't too averse.
I Think you lot should crunch the numbers for proper fuel subsidisation for the poor, or paying for their homes to be better insulated.
you can't put the cart before the horse on this matter as it could increase the already higher number of cold related deaths.
Paul Kelly writes: I also wonder how the tax is made revenue neutral. Does it concern government net revenues or indemnifying the tax payers?
Lots of ways to make it revenue-neutral. I like the simple one (collect the tax, divide the results by the population, and give everyone a check).
Alternatively, you could use it to offset some existing tax. For example, if the carbon tax brings in $X per month, reduce payroll taxes the same amount. That example would remove a disincentive to employment (good) while also adding a disincentive to fuel consumption (also good).
If you're asking about whether the cost of collecting and refunding the tax would be subtracted from the refund, that doesn't really matter. Set it up whichever way you prefer.
"I don't think this is true. Certainly if you mean by "vast", say, >25% then I think you are certainly wrong. "
Fine, I'm too lazy to dig up the stats too, let's say for arguments' sake, 'vast' means 25%, or even only 20%.
I think that it's safe to say that if we cannot keep 1/5th of our population reasonably warm, then this is a national emergency not that different to a famine.
Even if we only inflict carbon tax and the resulting fuel poverty on 10% of our people, that is still 5 million people who end up paying the price.
Btw, did you catch that bit that said that only 2.7 mill Brits earn > 50k? Check out how many people in this 'rich' country live in fact hand-to-mouth without assets or savings... so many things look good on paper, until you break the spreadsheet out and look at the entire situation.
[But as to the point: assuming we need to reduce CO2 emissions, then they have to be priced up, just like anything else.]
It's easily possible to price people out of life and your tool of a carbon tax does just that, because it works like a tide(as energy is a core item in our economy), everything moves with it. And at the bottom, there is no fat to cut. For those people Â£10 has the same value as Â£1000 to us.
[Mixing this up with notions of justice or fairness is wrong. ]
Even if it was fair or just, I would not want anyone to freeze in my cause. It's simply inhumane and immoral. I don't think you'd want them to freeze either, but the end result of the carbon tax will be just that :(
[You can do that elsewhere in your political system if you like - you can redistribute the carbon taxes to the poorer members of society if it so pleases your political system. ]
The west is reaching the end of it's redistribution capacity... the UK is broke, the cornucopia is empty. The 'rich' you think we have in droves actually are buried in mortgage and credit debts.
And if it's 20% of people who will need an alm in order to pay the carbon tax, that is going to be a lot of distribution too.
[Restricting CO2 by caps, limits or rationing is inefficient and far too prone to corruption -W]
Restricting C02 means (ahem) restricting it, no matter how you do it, there will be less energy to go round, which in cold Northern Europe means that people will end up freezing.
That's the price that is to be paid, and it won't be paid by those who can easily afford it, but by those who will be priced out.
"To pay for what, exactly?
The Carbon Tax that will inflate prices for heating, food, transport and everything else?
"Hint: There aren't rich people available to "pay for" income tax, or corporation tax, or VAT, or council tax, either."
So, we add some more payments to make, since everyone is broke already, alternatively Merv will simply print some new crisp Â£ notes...
"Restricting C02 means (ahem) restricting it, no matter how you do it, there will be less energy to go round, which in cold Northern Europe means that people will end up freezing."
While the collect/divide carbon tax is an elegant way to redistribute income, there is nothing in it that necessitates alternative deployment. It would be an enormous clerical undertaking.
Paul, if there's one thing that advanced societies have got down pat, it's collecting taxes and distributing payments. It's actually another good reason why the tax and refund system is a good idea - there are no novel bureaucratic procedures involved. Whereas the cap & trade system is uncommon and clumsy - and thereby easy to muck around with or muck up competely.
Hexe states "The west is reaching the end of it's redistribution capacity".
I assume you mean redistribution TO the wealthy. The GINI index of overall income inequality in the UK is at it's highest value in 30 years.
There are several other metrics on this page that are also well worth a look.
Arguing against a carbon tax on the grounds that it is not feasible to compensate the poor is nonsense.
The argument against a carbon tax is that it will not achieve its stated goal. There is no other argument needed. That a tax is less corruptible than cap & trade doesn't mean either is a good idea.
The argument for a carbon tax is that it will achieve its stated goal. There is no other argument needed.
There. Every bit as supported and authoritative as Paul Kelly's post.
Let's put off the necessary discussion of political feasibility and whether the tax should be revenue neutral to focus on effectiveness. Is carbon pricing an effective way of reducing CO2 emissions?
Carbon pricing comes from the desire to make non carbon energy cost competitive.
[No. I'm surprised you say this, because the real answer is well known: carbon pricing is to correct the "externality" problem -W]
The result is as likely to make both alternatives and carbon less affordable. The effective avenue is lowering the price of alternatives. Carbon pricing is a disincentive to lowering in the same way tariffs prop up domestic prices.
Is carbon pricing an effective way of reducing CO2 emissions?
Carbon pricing comes from the desire to make non carbon energy cost competitive. The result is as likely to make both alternatives and carbon less affordable.
If the goal is simply to reduce CO2 emissions, it's sufficient to make carbon less affordable.
We've got the double whammy attack here - making carbon less affordable won't lower consumption while at the same time it will cause people to shiver because they'll be forced to lower consumption ...
Y'all wanna make up your minds?
Oh, and Paul ...
First you say:
The argument against a carbon tax is that it will not achieve its stated goal.
Then you say:
Let's put off the necessary discussion of political feasibility
Your first sentence assumes that it is political feasible, otherwise one would say "the two arguments against a carbon tax are that it's not politically feasible and wouldn't work even if it were".
I don't think carbon taxes are politically feasible, a view strongly promoted by Progressives, but if it can be shown that they are ineffective ("wouldn't work even if it were"), the feasibility discussion would be moot.
It's amusing to see libertarians argue that price doesn't affect consumption, and similarly that it won't do any good to increase the price difference between fossil fuels and alternatives unless it's done by dripping the price of the alternatives. Let's see some cites to the economic literature to back up these amazing insights.
William, I have yet to read it over, but some new work by the Grattan Institute in Oz sounds like it might be a more-serious-than-usual attempt to deal with decarbonization policy. They like a tax, it seems.
I take it all back: They like c+t, but with a carbon tax to create a price floor, which they say is needed to avoid market collapses that result when government sets the system up too pessimistically. I couldn't find a discussion of why they don't like a pure tax, although I didn't spend much time looking. I assume BB and JQ will weigh in on this soon, if they haven't already.
For a self education in economics read anything by a post WWII University of Chicago professor. Focus on market forces.
Another very good criticism of carbon pricing is that it can not start today. The better, bottom up approach can. Both those who favor carbon taxes and those who don't can agree that high initial cost vs time to break even is the number one impediment to emission cutting technologies.
It is up to the proponents of a tax to present a detailed description of the tax and how it will achieve its goal. I hope that is the post W is preparing. It is up those who favor a free market approach to demonstrate how that would work.
The Chicago School, eh, PK? They're a little discredited these days, FYI. Something about a massive market failure. Try the neo-Keynesians.
"The better, bottom up approach can." Really? In that case it should already be happening at the needed scale. You need to explain why it isn't and what will need to change for it to make enough of a difference.
A market consists of a product, buyers, sellers and a medium of exchange. In this market the product is a piece of energy transformation. The buyers are those who desire to replace fossil fuels. The sellers are non profits with buildings. The medium of exchange is membership in the energy club.
I reject the notion that the bottom up approach is not already happening. It is happening and, as the futility of seeking a top down approach grows more apparent, so too will the bottom up approach grow.
Whatever this "bottom up" approach is and whatever may be happening at the "bottom", what most definitely is NOT happening is the build out of infrastructure that can achieve the scale of emissions reductions necessary to avert dangerous climate change. This is indisputable fact.
The nation building the largest amount of low emission generation capacity is China and a principal driver for that is central planning.
Not only is an effective price on carbon needed, but so are other state interventions including most importantly national energy policies and such things as loan guarantees for nuclear power.
Proponents of a carbon tax must be specific about how much the tax is, how it is imposed and collected, and who ultimately pays it. Until then, it's just smoke.
[I certainly agree that the details need to be worked out. How much is easy, though: initially a small amount - perhaps $10 / tonne, but with the clear intent to increase over time. That helps shape peoples investment decisions. The best way to pay it would be at point of digging up of coal (contrary to what I said before, doing anything with coal other than burning it is fairly uncommon so such would need a waiver) or coal (ditto? Needs a bit of thought - most waste lubricant, say, ends up burnt too. Oil used for plastics? Might be able to say that ends up burnt too. Gas: yes). Eventually I think you could push it high enough to start displacing other taxes, like income tax -W]
William, interesting, you advocate the Nordhaus approach rather than the Stern.
Exactly as I do in my book. And for very much the same reasons.
As to revenue neutral taxation, we've already done this with the Landfill Tax. The amount that business was calculated as being liable to pay was then knocked off the employers national insurance (the employers part of SS for you Yanks).
We have thus taxed what the government of the time considered to be an environmental bad (the use of landfills) and reduced taxation on employment at the same time.
It's not rocket science this stuff you know?
[Indeed not. I sense that I'm going to start disagreeing with you, though, because I'm going to suggest ramping up the carbon tax above the externalities costs, in exchange for reducing income tax (or NI; they are essentially the same thing anyway). What is the obvious argument against that? -W]
Proponents of a carbon tax must be specific about how much the tax is, how it is imposed and collected, and who ultimately pays it.
But ... Paul ... since it won't work anyway, the details are irrelevant!
The $10 a tonne carbon tax is interesting because $10 is also the price of one unit of energy transformation. And, unlike the carbon tax which at best won't be around for years, units of energy transformation are available and on sale now.
Certainly among those who are willing - even eager - to be taxed, there are sufficient numbers to accomplish the goal through independent, voluntary, individual action.
Sorry to be late to the party on this one. Good idea to price the externality of course. Taxes will reduce the amount of carbon produced by purely domestic activities like transportation and heating. But other things like manufacturing will simply be exported. And, of course, all of this will put a drag on the economy and therefore has a politically acceptable limit which is vastly below what is needed to get to an 80% reduction. But some amount probably can't hurt.
"[Indeed not. I sense that I'm going to start disagreeing with you, though, because I'm going to suggest ramping up the carbon tax above the externalities costs, in exchange for reducing income tax (or NI; they are essentially the same thing anyway). What is the obvious argument against that? -W]"
In one sense the argument against is nothing. Let's tax bads like pollution not goods like employment or income.
On another though there is a reason against: economic efficiency. The very reason that we want to tax carbon is that there is an externality which should be accounted for. We should therefore tax that externality so that market prices reflect it.
However, just as under taxing such externalities decreases efficiency (which is why we want to tax them) so does over taxing them. And note that economic efficiency really means the greatest amount of human utility possible given the resources and technologies we have to hand.
[Yes, That is the obvious argument. However, you have a problem with that: how do you decide at what level to set general income taxation? If you're taxing that based on externalities, the rate would be zero (no?). I assume the argument is pragmatic - the state has to raise income somehow. Well, I'm just suggesting it chooses to do so differently -W]
But to me the strongest reason is political. We all know of those who would insist that the tax should be $200, $300, $500 a tonne because we've got to save Gaia, this rainforest or that island. And if we let go of the point that Pigou taxation is an argument for an optimal level of tax rather than just a higher level of atax, who is to stop them?
[If the principle is enforced that it should replace general taxation - probably difficult, but if it was built in from the start, maybe possible - that would help -W]
"... Adaptation will require redistribution, too. Some people and communities are too poor to adapt on their own; and if emissions caused by the consumption of the rich imposes adaptation costs on the poor, justice demands recompense...."
WC - there is another and complementary approach. You could write your own G20 accord for the France session (perhaps together with mt on global finance)and send it to either Mr S in Paris or Madame Lagarde the FinMin who will be running the show.
One of the things worth bearing in mind is that the people representing us are just ordinary lads and lasses, in most cases trying to do a good job. They need help with global heating and fixing the banks just as much as we do.
It is a collaborative effort.
Contributions from non-dozey sources would I am certain be most welcome.
Incidentally I didnt know that you are a Green. Does that mean that you are in bed with Danny the Red (who is now a football commentator on TV), M. Hulot (famous for getting the last Presidential candidtes to sign up for mitigating global heating and a France version of David Attenborough), M. Jove (famous for demolishing Macs in the SW of France), and Mesdames Joly (of ELF and Iceland fame) and Voynet?
[I don't know Danny or most of the others. Is Jove, Bove? Anyway - as to the idea of writing my own - certainly the blog post will be around soon -W]
I have little doubt that the Greens will do their own version of G20 but in case they dont then you might consider doing it yourself.
The advantage of you doing something next year is that Mr S is looking for a spectacular success to save his candidature for the next Presidentials and Madame Lagarde can be relied upon to mediate expertly whilst concentrating on the big issues : they will both therefore try hard to do their best and to be successful.
You could help them.
Danny the Red is Cohn-Bendit who was a notorious soixante-huitard who eventually over the course of time turned into a cuddly establishment figure, and yes you are correct about BosÃ© JovÃ©.
I look forward to seeing your piece in due course.
On carbon taxes. Sensible people like me have been advocating these since chucking muck into the atmosphere looked to me to be serious stuff. I blame you WC for pointing me in an educational direction via the IPCC 6 or 7 years ago now.
A carbon tax is probably the easiest tax to implement in Europe because you can graft it onto TVA very easily.
Yes local efforts are the way to do it. Kyoto never had a chance of succeeding for many reasons but the EU can quite easily take the lead on this and the rest will surely follow.
And it wont cost anything, contrary to Mr Stern's report.
And no the way to do it is not to make it revenue neutral.
Yes cap and trade is a complete waste of time and inefficient too.
For the rest you will have to wait for my G20 draft with associated back-up papers that I hope WC will read before I send them out to ensure the accuracy of my climate science points. Your advice, which I dub honest scepticism, WC has always been welcome in the past.