06 Sep 2017

Amplifying Oren Cass on a Carbon Tax, Part 1 of 2

Climate Change, Energy, Shameless Self-Promotion 7 Comments

My latest post at IER amplifies some of the points Oren Cass made in a fantastic essay he wrote (two years ago) on the case for a US carbon tax. (I just came across the essay recently.) Here’s an excerpt:

Let me paraphrase Cass’s remarks to make sure the reader appreciates them. Cass was studying a very scholarly tome put out jointly by several organizations that support a carbon tax.

In order to demonstrate its potency, the book argued that a carbon tax had the power to reduce U.S. emissions in half by the year 2050. But in order to achieve that drastic result, the authors assumed a carbon tax that hit $163 per ton in the year 2050.

In the next chapter of the book, the authors sought to reassure the reader that the “Macroeconomic Effects of Carbon Taxes” wouldn’t be so awful. Yet the figures showing the impacts on the economy assumed a carbon tax that maxed out in 2050 at less than $90 per ton.

As Cass wryly observes, these are not the same carbon tax—it was much more aggressive in Chapter 4 when the authors wanted to showcase its ability to tackle climate change, but it became much weaker in Chapter 5 when the authors wanted to illustrate its benignity.

7 Responses to “Amplifying Oren Cass on a Carbon Tax, Part 1 of 2”

  1. Harold says:

    ” then—in all three of those alternative scenarios—the carbon tax, even though it was “revenue neutral” by design, would make economic output smaller than it otherwise would be”

    As you showed in your TIE effect articles, we are not discussing these things in a vacuum. The fact is that currently restrictions are introduced by back-door methods, such as fuel economy standards and many other complex regulations.

    Do you agree that the revenue neutral carbon tax would reduce the economic output much less than this sackful of regulations for the same carbon reduction?

    So, as we may argue that in the presence of other taxes a carbon tax will not be beneficial, we can also argue that in the presence of other regulations a carbon tax could be beneficial.

    This does not depend at all on whether cutting carbon is a good thing or not.

    • Bob Murphy says:

      Harold,

      If you’re asking, “Would it mitigate the impact of a revenue-neutral carbon tax if the gov’t also got rid of CAFE regulations and the Clean Power Plan?” then yes. But things would be even better (according to the criteria we’re discussing) if the gov’t just got rid of CAFE regulations and the CPP, without imposing a carbon tax.

      By the same token, if Trump said, “What if I enact a new 10% tariff but bring troops back home from the Middle East?” then I would like that, but it doesn’t mean all of a sudden tariffs are good policy.

      • Harold says:

        You imply the two are unconnected. Many of the calls for a tax are as a replacement for regulations. I don’t think anyone has called for a carbon tax as a replacement for troops in the middle east.

        The carbon tax and the regulations are intended to achieve the same goal – lower carbon emissions. It is therefore reasonable to consider them together.

        “If you’re asking, “Would it mitigate the impact of a revenue-neutral carbon tax if the gov’t also got rid of CAFE regulations and the Clean Power Plan?” ”

        So, no I am not asking that. I am asking, IF we plan to reduce carbon emissions by a certain amount (for whatever reason), is it better to have a carbon tax and get rid of the regulations?

  2. Tim says:

    For a clarification, the carbon tax is meaning a tax on any carbon dioxide emissions. This is ridiculous. We all breath out carbon dioxide. There have been some liberal economists talking of taxing the cows for their emissions. Any combustion that takes places emits carbon dioxide. It is time to look at it as ludicrous as it is as only a new tax. Forget the carbon part. All taxes lower efficiency. What! We need another tax. Think about it. We pay income tax, healthcare tax (obamacare), gasoline taxes, excise taxes, import duties, soda taxes, sales taxes, unemployment taxes, property taxes, and on and on. This is a radical idea to redistribute wealth. We shouldn’t even be talking about it because the biggest polluter in the world (China) will pay no parts of it. Forget it.

    • Harold says:

      Tim: ” This is ridiculous. We all breath out carbon dioxide.”
      No, the tax is only on fossil carbon, not on carbon that has recently been removed from the atmosphere by plants, which is what we breath out.

      “All taxes lower efficiency.” But so do externalities.

  3. Tim says:

    This is the first time I have heard the clarification of only taxing the fossil fuels for the carbon dioxide emissions. So then trash to steam plants pay no taxes. Also large businesses and homes that heat with wood are free. Do you think it is a wealth redistribution plan? It has been adopted in some Canadian provinces. The governments need to spend the money in ways to help the environment, right? Who determines where the money goes? It still seems like government banditry. The countries that are not part of the plan are free to pollute and undercut international competition.

  4. Harold says:

    “The countries that are not part of the plan are free to pollute and undercut international competition.”
    This is a genuine concern and applies to all “tragedy of the commons” type situations. The best way round it is to reach international agreements.

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