19
Nov
2013
Ken Green Changes His Mind on a Carbon Tax
This was the 3rd presentation at IER’s Carbon Tax conference earlier this year. Here’s the original blog post, but below I reproduce my highlights:
- 2:00 – 4:00 Green explains that in 2007 he and his colleagues looked at the impact of a $15/ton carbon tax. They thought it would be a better policy than cap-and-trade, let alone more explicitly command-and-control regulations, especially if the revenues were used to offset other taxes. They weren’t “for” a carbon tax, but thought it was better than some popular alternatives.
- 4:00 – 5:00 Green said he noticed that the groups inviting him to present in favor of a carbon tax, never ever supported the other elements in his case. They didn’t want to roll back other regulations, or calibrate the carbon tax to the economically “optimal” point.
- 4:55 Green says that in 2011 he wrote a mea culpa, admitting that his “friends in the free market movement were right,” and that a carbon tax would be a step on the path of “carbon seduction.”
- 5:55 Green explains that a tax on carbon, is not really a tax on “bads,” because it applies to a major source of inputs in the economy.
- 7:15 Green says that to test the sincerity of a “market” supporter of a carbon tax, ask if the person would agree to throw out the CAFE standards once a carbon tax is in place. No environmental advocate would ever agree to this, even though in theory the carbon tax should replace all of the other regulations.
- 8:45 Green points out that if we “fix” the regressivity of a carbon tax by refunding money to poorer households, then it partially defeats the purpose: It is supposed to alter behavior by changing the relative price of carbon intensive activities.
- 10:15 Green says he has never seen a policymaker seriously propose a textbook carbon tax in the U.S. Political considerations always make the proposal deviate from the “optimal” configuration.
- 11:00 – 11:30 Green says that even the relatively sensible tax imposed in British Columbia, had only a “shelf life” of five years before environmentalists wanted to double the rate and decouple the revenues from tax neutrality. In other words, they wanted to take the money to spend on their own pet projects, which was not part of how the BC carbon tax was originally sold to citizens.
- 12:20 – 13:00 Green walked through examples of U.S. “trust funds” that have been looted for other purposes. In other words, we can see in practice that a “dedicated” environmental fund from a carbon tax would eventually be raided for general revenue purposes.
- 13:00 – 14:00 Green explains that unilateral U.S. action would not significantly affect the trajectory of global climate change, even according to the standard models.
- 14:00 – 15:00 Green warns conservatives that environmentalists do not want “efficient” pricing of carbon. In particular, he reminds us that Alberta has a carbon tax, and that certainly didn’t stop environmentalists from opposing the Keystone Pipeline in the most sweeping terms. So it is simply not true, Green emphasizes, that by going along with a carbon tax, conservative champions of the market can “take the issue off the table.”
Green says that even the relatively sensible tax imposed in British Columbia, had only a “shelf life” of five years before environmentalists wanted to double the rate and decouple the revenues from tax neutrality.
As Mr. Spock once noted, wanting and having are two very different things. Did BC environmentalists actually succeed in getting the carbon tax decoupled?
Damnit Blackadder, I’m an economist not a historian.
FTW.
I think 11:00 on contain some lessons that unfortunately many of our naive statists haven’t yet learned.
It is so shocking to learn that “progressives” seem to always want more control. Who knew?
Originally about 300 people were slated to participate in the Calgary climate change protest, but due to a snow storm only about 50 showed up.
http://www.calgarysun.com/2013/11/16/anti-pipeline-protesters-gather-in-calgary-to-decry-climate-change
So what you’re saying is a climate change induced snow storm disrupted the good work? Because snow in Calgary in November is an oddity.
I live near Ann Arbor and I notice a similar effect of climate change. On sunny warm days with a republican president the world is an awful place, and the parks are full of protesters. On rainy days or with a democrat president the world is a fine place and nary a protester can be found.
This blog is so thick with snark these days that I can’t tell who stands for what, and why. So that is why I fall back on crude Austrianism and Rothbard-botting, because I know I can always rely on consistent naivety and irrationality in my personal beliefs!
Here’s a scorecard:
Bob stands for god, and snark.
I stand for science, and snark.
Major_Freedom stands for Rothbard, and snark.
Gene stands fro rudeness, and snark.
Valueprax stand for apriorism, and snark.
Tel stands for snark, and snark.
🙂
What do I stand for?
Flexibilitty. And snark.
Can I be steak and shake?
I’m sorry, that one’s taken. I can offer Shake’n’Bake or Shake, Rattle, and Roll.
Big Joe Turner. Score!
That’s hilarious
I put my thoughts to type quite clearly, thank you very much, and the occasional perfectly polite bit of deadpan humor is helpful to see who is paying attention.
Much obliged. Is there such thing as priorism? If so, I want to adopt that as well.
Hmmm. Priorism and apriorism sound contradictory. I see you as being pretty consistent actually. But heck, Bob espouses morality and amorality with regularity, so why not?
But heck, Bob espouses morality and amorality with regularity, so why not?
Yep, just like Ken sometimes opposes Obama, sometimes says he’s the greatest president since LBJ.
And just like he is against forced transfer of wealth among the citizenry, but for forced transfer of wealth between citizens and overlords.
It’s possible Ken B believes consistency derives from being consistently inconsistent, 🙂
8:45 Green points out that if we “fix” the regressivity of a carbon tax by refunding money to poorer households, then it partially defeats the purpose: It is supposed to alter behavior by changing the relative price of carbon intensive activities.
Only if you refund it in proportion to the amount spent on the carbon tax. If you just give people a fixed amount of money to compensate for the income effects, the carbon tax still preserves the incentives to cut any “inefficient” use of carbon by the poor.
Green explains that a tax on carbon, is not really a tax on “bads,” because it applies to a major source of inputs in the economy.
It can’t be a bad if it “applies to a major source of inputs to the economy”? So it wouldn’t be a tax on bads if you taxed dumping sewage into drinking water, because that would apply to (the byproducts of) every economic agent?
I think he’s equating “stuff that emits carbon is good on net” with “carbon emission is itself good”.
Are there companies out there who make money just by creating a bunch of carbon dioxide and pumping it into the atmosphere for no reason?
Can you provide an example of large-scale carbon emission that is not being used as a means to accomplish a good end?
Could you do the same for defecation?
Silas,
As far as the rebating, I don’t know exactly what Green had in mind; you’re right, if it’s just a lump sum check that isn’t tied to current behavior, then the carbon tax still “works.”
But for real, I have seen cap and trade proposals that appeared to give free allowances based on current usage. E.g. if a utility completely switched to emission-free production, I think their allocation of allowances would drop because now they were no longer “having to” buy the auctioned allowances. I’m not 100% sure, but I do know that I reviewed some proposals and it wasn’t obvious to me that they were designed properly, in this dimension.
As far as the “taxing bads,” I imagine you and I could both make a compelling case that we’re right, based on interpretation of the word. But consider this: The economically optimal amount of carbon emissions is positive, not zero. So that’s one quite legitimate sense in which carbon emissions are not a “bad.”
That would be eviscerating the meaning of a bad. By that interpretation, nothing (that we would ever bother trying to prevent) is a bad, because a) *someone* wants to do it, and b) at some point, efforts to reduce it further are more destructive than the reduction in bad.
Nevertheless, you have to distinguish between “this is bad in isolation” and “this is bad on net”. Economic “bads” always refer to the former, not the latter.
Even with perfect rule by philosopher kings/private defense associations/whatever, there would still be crimes and torts. That does make crimes and torts “not bads”.
I have to think about it more, Silas, but I think there is an important distinction between producing electricity with coal versus robbing a bank. Note, I’m not being Oprah here–“OMG Silas is cool with robbery!!”–but I’m saying I think there really is an important distinction.
But, I admit I should think about it before trying to say what the precise distinction is, which at the very least means this is a very subtle issue.
Thanks for being open about your opinions on the complexity here.
What I think is going on is that you’re being inconsistently value-free, or at least, person-neutral. I remember a while ago you (I think) quoted an economist who said that a serious economic analysis needs to consider the benefits of the crime to the criminal, not just its costs to others.
That forces us to say things like, “bank robbing is a bad for the bank and a good for the bank robber”, with the (usually unstated and irrelevant) implication that “If we could have be bank robbery but erase its impact on the bank and its customers, it would be Pareto-optimal”.
Likewise, if we could keep the electricity generation and change *only* the emission of the pollution, we would agree that is an improvement. That is why the pollution counts as a bad. The fact that the generated electricity (more than) makes up for it does not make it “not a bad”.
Didn’t Bob already address this though by pointing out that the optimal level of carbon output by human industry is likely to be greater than zero?
So bank robberies would be a poor comparison, because it’s not as if a certain level of bank robberies are beneficial to the bank but we run the risk of too many bank robberies triggering a tipping point and causing unmitigated disaster.
Maybe I’m misreading some of Bob’s earlier posts, but I believe his stance is that SOME small amount of carbon emissions are likely good and provide benefits *in and of themselves* in addition to the fact that they are side-effects of power generation or what have you.
So bank robberies would be a poor comparison, because it’s not as if a certain level of bank robberies are beneficial to the bank but we run the risk of too many bank robberies triggering a tipping point and causing unmitigated disaster.
There’s an optimal level of bank robbery in the sense that “the value of the goods used to further lower the rate would be more than the value destroyed by the prevented robberies”.
Likewise for carbon-emitting activities: there is an optimal level in the sense that reducing the rate would be more expensive than the damage of the avoided emissions.
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Carbon tax is essential and is much better than cap and trade see post 7 on Neilwilhees.blogsot.ca We have to strive for a global arrangement so we can tax our exports without losing business to other countries. It is senseless to send tax free oil to China who is developing green energy. That cheap oil will delay their efforts, see post 1 on neilwilhees.blogspot.ca I have written 3 E mails to Mr Harper about many problems created by the absence of carbon tax and poor records of oil transport, I have been assured that all points have been carefully considered but apparently it still did not sink in