carbon taxes




Governments just don’t seem to get it:

Green taxes to fund economic growth

Environmental taxation plans feature prominently in the Government’s growth strategy 

By Richard Tyler 6:04PM GMT 29 Nov 2010

The Government will set out in the New Year plans to raise environmental taxes to fund the country’s transformation to a low carbon economy, it has said.

The plans formed part of a joint Treasury and Business Department “growth review” launched yesterday that set out how Whitehall will “facilitate” long term economic growth.

You simply cannot tax your way to growth.

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 Sometimes all the grand talk is just grand talk.

President Obama claims that his “new energy economy” will jump start growth and jobs. The EPA endangerment rule repudiates that claim once and for all. If the green future is going to be so bright, why does the White House want to exempt so many businesses from its glories?

Andrew Sullivan in the Daily Dish has a great piece on the complexities of pricing carbon.

… Oil, coal, nuclear, windmills, solar power and all other alternative energy sources have social costs and benefits, and if I get cancer from water pollutants created in the production process for a solar cell, I’m just as dead as if I am killed by AGW-caused floods.  And it is not simply energy alternatives.  How do we justify placing a tax (or subsidy) on the use of various kinds of energy, while not doing it for making television ads, gardening tools and software, never mind watching television, gardening and doing Google searches? 

In order to achieve the “fairness and social optimality” that we started with when discussing the AGW effects of carbon, we are logically led to demanding that the government measure the social value of almost every economically significant action, and then set up incentives to manage the population so as to achieve social goals.  Because this is an impossible analytical task, in practice this means the purely political management of society based on relative power.  What is this but unadulterated  socialism in a green dress?

Invoking Hayek, he concludes:

I yield to few men in my admiration for Hayek and his ideas.  His prediction that the welfare state would lead to serfdom, however, has (thus far) not been correct.  I don’t think that a carbon tax will be the one event that will push the free world into socialist slavery.  But it does seem clear that the same dynamics he described decades ago have re-emerged, simply with a different theoretical justification.  The same problems with planning that he highlighted will also be present now.

Taxing carbon to reflect its social costs seems like a common sense idea.  Unfortunately, it simply provides another excuse to politicians to raise taxes and exert more power over us.

The Wall Street Journal Environmental Capital Blog alerts us to a story on James Hansen:

James Hansen, climate scientist and scourge of our carbon-intensive lifestyle, is the subject of a 5,000-word profile in the current issue of the New Yorker magazine.

In it, he rails against the Waxman-Markey cap-and-trade bill as watery slop and is critical of environmental-organizations-turned-Washington-insiders. Here’s Mr. Hansen on environmental groups supporting the Waxman-Markey bill: “This is just stupidity…the fact that some of these organizations have become part of the Washington ‘go along, get along’ establishment is very unfortunate.”

The climate-industrial complex at work.

David Friedman discusses the theoretical and practical differences between cap-and-trade and carbon taxes in dealing with greenhouse gas emissions.

Which brings us to current proposals for cap and trade of carbon dioxide as a solution to problems of global warming. In a system run by philosopher kings, the only important difference between that and a carbon tax is the information required to set the level of emissions or amount of tax. In the real world, cap and trade has the (political) advantage of getting large parts of the regulated industry in favor of the regulation and thus eliminating a lot of potential opposition. The cost, possibly more than a hundred percent of it, is shifted to the customers, which is to say the general public—a dispersed and politically impotent interest group. And if the government retains considerable flexibility in just how emission permits get allocated, it can use some of them to buy political support from other groups or to reward them for past support.

Cap and trade has a political disadvantage as well, of course; a carbon tax would bring in lots of money. But that money would show up in the budget, get labelled taxation, and so make it harder for the administration to deny that it is raising taxes to pay for its programs. And much of it might end up spent to get the carbon tax passed by buying off organized interest groups that were potential opponents.

Think of the cap and trade version as eliminating the middle man.