It’s time* for environmentalists (and everyone else) to give up on a myriad of second-best regulatory policies and push for a simple emissions price (i.e. a carbon tax). The latest reason: green subsidies are unraveling under adverse energy market conditions. There are many others:
- It’s hard to design an emissions market that works well on a large scale, resisting volatility, in pursuit of elusive environmental certainty.
- Performance standards don’t permit enough tradeoffs.
- Portfolio standards can have perverse and volatile outcomes and tend to develop strange internal convolutions.
- Subsidies and credits send the wrong price signal for conservation, have poor equity effects, and because they cost money, tend to self-extinguish when they simply get too successful.
- R&D subsidies won’t get the job done on their own.
- Rebates get discounted or wasted.
- Green labeling presents a weak and confusing signal.
All of the above have some role to play, but without prices as a keystone economic signal, they’re fighting the tide. Moreover, together they have a large cost in administrative complexity, which gives opponents a legitimate reason to whine about bureaucracy and promotes regulatory capture.
If all the effort that’s now expended in fragmented venues to create these policies were focused on one measure, would it be enough to pass a significant emissions price with fair revenue recycling and a border adjustment? I don’t know for sure, but I’d like to see us try.
* Actually, I think it was time for a carbon tax at least 20 years ago.
2 thoughts on “Tax time”
Another nice concise summary Tom. It’s hard to explain why all the half measures are nowhere near enough and that a carbon tax is not only more complete but also more simple. Unfortunately the stigma of the word tax has become so politicized that it’s become a very difficult sell.
I think the real challenge is helping people understand that it’s all a shell game anyway. One way or another we (or our children/grandchildren) will end up paying a “tax” for all the costs of action or inaction. What people need to understand is how we are being duped across the board from the carbon industry to government.
If we can unmask all the hidden costs and show a better way to align the true cost of all industry and government policies with the problems they are solving, I think people might finally get it.
Below is link to a decent and timely summary by Bill McKibben supporting your argument. You’ve probably seen the 350.org movie that it is based on, but if not, it’s also fairly succinct. One issue I have though is their second number for the amount of CO2 we can “safely” dump into the atmosphere.
I know it’s more compelling especially compared to the final number for CO2 in reserves, but it’s the rate that’s more important. As I’ve mentioned before, we don’t have to kill the carbon industry completely. In fact we can extend its longevity from just a few hundred years to a thousand or more. Carbon products will likely still be convenient and import part of the economy in perpetuity, just as long as the RATE is within a sustainable equilibrium.
If the CEOs of carbon companies truly care about the longevity of their industry then this kind of message will have far more resonance than an adversarial “you are the enemy” message. Just some more food for thought.
The summary interview with Bill
The whole movie: