27 Oct 2016

Washington State Carbon Tax Ballot Proposal Shows Why Right Should Reject a “Deal”

Climate Change, Shameless Self-Promotion 5 Comments

In my latest IER column, I quote from a very revealing Vox article. It is crystal clear that progressive Leftists–whether we’re talking the nerdy wonks or the activist boots on the ground–want nothing to do with a revenue-neutral carbon tax.

I also try a different analogy to get people to see why these state-level carbon taxes are window dressing, and that it’s misleading to calibrate their tax rates to the “social cost of carbon”:

The analysis underlying the “social cost of carbon” implicitly assumes that the associated tax is levied globally. If instead only some jurisdictions levy the carbon tax, then we have to worry about “leakage”—when businesses and individuals transfer their emissions to outside, untaxed jurisdictions.

It should be clear that Washington State itself levying a carbon tax, even a draconian one, will not significantly affect global greenhouse gas emissions, particularly over the course of decades. As such, the “optimal” carbon tax when a state like Washington acts unilaterally is much lower than what the concept of the “social cost of carbon” implies….(The Vox article itself shows a chart indicating that the state of Texas alone has about nine times the carbon dioxide emissions as Washington State.)

For an analogy, suppose someone saw people dropping litter on a beach, and wanted to levy a fine to discourage this behavior. Now people could argue about the appropriate size of the fine; make it too little, like 10 cents per infraction, and it wouldn’t solve the litter problem. But make it too big, like $10,000 per infraction, and tourists might stop going to the beach altogether for fear of accidentally losing a napkin in the wind and having to pay a huge penalty.

Yet we can all agree that whatever the “right” level of the fine would be, it would be nonsense to apply that same dollar fee to only a small section of the beach that covered, say, one-one thousandth of the total surface area of the sand. It is clear that such a policy would be idiotic, because people would simply make sure not to set up their blankets on that tiny fraction of the beach, and would otherwise continue with their normal behavior.

This is analogous to Yoram Bauman’s proposal. His carbon tax would apply to Washington State, which has about 0.3 percent of the total habitable land surface area of planet Earth….Advocates are mixing in hopes that they will achieve copy-cat policies all over the globe in order for their suggestion to make any sense, even taking their own climate models as given.


5 Responses to “Washington State Carbon Tax Ballot Proposal Shows Why Right Should Reject a “Deal””

  1. DZ says:

    Nice analogy.

    I have a not really related question. Are you aware of scale economies when it comes to carbon emissions? In other words, if developed countries decided to erect trade barriers against undeveloped countries who have little or no pollution regulation with the intention of bringing certain polluting production back to developed countries so that it can be regulated and made more green, is it possible that the aggregate carbon emissions emitted by the greener companies in developed countries could actually exceed the incremental reduction of emissions from less green companies in the undeveloped countries.

    • DZ says:

      This assumes I guess that post-trade barriers there would be more abundant, smaller producers in developed countries cannibalizing larger, concentrated producers in undeveloped countries.

  2. Silas Barta says:

    Wow, that’s a really good point!

    A real solution to this would be some kind of “international accord” to get each territory to agree to restrict carbon within that territory. May I suggest somewhere in Japan as a place to hammer it out?

  3. Tel says:

    The same argument applies to values and morality. Let’s suppose we see it as socially valuable for people to respect private property and refrain from stealing each other’s car. Now if everyone in my neighbourhood is following this code of conduct and no one steals each other’s car we get a nice neighbourhood. The guy who doesn’t own a car has to walk or catch a bus of course.

    But suppose we don’t live in a nice neighbourhood; suppose we live in the type of neighbourhood where stealing private property is just normal and no one thinks twice about it. No such code of conduct exists where people would even consider it stealing, they just take what they see when it suits them.

    It would be nonsense to apply a new code of conduct to only a small section of the neighbourhood that covered just three or four houses. Sure those few families would refrain from stealing cars, but when everyone else is stealing cars it’s not going to make a difference, and anyway the guy who chooses NOT to steal is now much worse off.

    Advocates are mixing in hopes that they will achieve copy-cat behaviour all over the neighbourhood in order for their suggestion to make any sense, even taking their right to own property as a given.

  4. The Original CC says:

    I’m glad you wrote all this about leakage. I’ve always wondered why these free market guys who run around saying “the optimal policy to just to set a carbon tax in the US equal to the social cost…” never realized that they’re really just asking the US to “export” its carbon-intensive industries. And if they want to make the tax global, then we’re well on our way to global government. Now you could claim that that’s the real goal of the greens, but it’s certainly not the goal of free-market economists! I can’t believe so many of them are falling for this.

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