A critique of carbon taxes

If published, this paper by Robert Murphy would be the first peer-reviewed work to criticise “the basic premise” of carbon pricing:

Economists have almost uniformly treated anthropogenic greenhouse gas emissions as a market failure, requiring government measures to counterbalance the negative externality. William Nordhaus, a pioneer and leader in the field, uses the latest calibration of his DICE model to determine the “optimal” time-indexed carbon tax, starting at $42 per ton (of carbon, not ton of CO2) in 2015 and rising to $217 per ton in the year 2105. In the present paper, I document several weaknesses in Nordhaus’ standard case for a carbon tax, including his unduly pessimistic estimates and the dangers of a poorly implemented policy. I conclude that economists should reexamine several key issues before rushing to judgment on the need for government measures to combat global warming.

10 thoughts on “A critique of carbon taxes

  1. Honestly, I believe that as it stands the free market will not save the environment. Yes, I’m begging the questions of “is it being wrecked?”, “is it our fault?”, and “can we do anything at all?” – let’s leave this out of this discussion for now?

    I suggest we do some “free market researching” before we jump straight into a government mandated tax – ie, a dollar value on environmental destruction, which is never going to be accurate or a good idea. How about for products in the “X” ranges (say cars, electronics, prepackaged foods) the government mandates – and for a sunset claused period of time – a universal labeling scheme?

    “This car produced 2500kg of atmospheric carbon to manufacture, and will produce 200grams per kilometre”

    “This TV produced 15kg of atmospheric carbon to manufacture, and 11grams an hour”

    And perhaps when you get your energy bills (gas / electric) you get the following:

    “You used X litres / kilowatt hours at $Y each. You’re personally responsible for 14kg of atmospheric carbon. In the last 3 month period. Have a nice day.”

    Some guidelines for the reasoning behind my philosophy:

    Government taxing sin, adding permanent new laws and generally meddling == Bad.

    Government mandating factual information be given to consumers == Good.

  2. I think ultimately labeling won’t work unless you can somehow make it trendy. The overall environmental impact of a Toyota Prius is greater than a small diesel, but Prius’s look cuter, are quieter and don’t have a petrochemical smell. Hence they’re the Greenie’s choice. Making decisions based on facts aren’t the environmentalist’s strong point.

    I agree that environmental problems may be a legitimate justification for government intervention, which is why it’s the free person’s nightmare. We need to work extra hard to shoot down the stupid arguments governments will try to sell, and ensure that the althernatives eg technological solutions or market based solutions are considered on at least an equal footing with the big stick approach.

  3. There is no need for a carbon tax because industrial-CO2 is good for the biosphere.

    Simple is that and the rest of you have to stop lying about this.

  4. As for the Biosphere- I saw ‘Animal Pharma’ on ABC1, Tuesday night (more next week), and there they showed us some featherless chickens. These were NOT produced by scientists, but by one farmer using selective breeding. If the Earth DOES heat up, these chickens will thrive, and be all the rage! Aside from living featherless chickens looking odd to us, they had nothing wrong with them.

  5. Nordaus’s paper was brilliant. It showed that the “gore” or “stern” model was by far the worst options and clearly worse than doing nothing.

    Economists shouldn’t get involved in the science debate in their academic papers. They should be writing “if… then…” papers.

  6. nicholas – I though the chicken had it’s feather making gene removed. It was that cow that looked like a wrestler that was selective breeding. Looking forward to part two tonight.

  7. Always the first step in this debate comes from the fact that we are in a brutal and pulverising ice age.

    If that wasn’t the Nordhaus starting point then the Nordhaus study was obviously crap. If the Nordhaus study came to the point of view that cost imposition could produce a net benefit in this case then obviously the Nordhaus study was crap.

    And by the way the Nordhaus/Samuelson book is shot through with typical bogus mainstream economics nonsense.

    Now how can you expect to get the economics right if you are too stupid to get the science right?

    The economics is the easy bit. Or you would think so anyway.

    Its like the economists in this country are possessed by the stupid demon.

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