Greg Mankiw's blog pointed me to this development - France is preparing to enact a carbon tax. Now, I've previously written on the merits of a carbon tax over a cap-and-trade system (carbon quota), but France presents an interesting case - they have both.
Also interesting is the title of the BBC News article on the story: France Set to Impose Carbon Tax [emphasis added]. When BBC reported on the EU cap-and-trade (carbon quota) program, they did not describe it as an imposition upon the people. Of course, they may have just chose the word because two-thirds of French voters are against the tax.
Mankiw was quick to point out that the French carbon tax will be revenue neutral either by offsetting current taxes or through a tax rebate. Additionally, the carbon tax will not overlap with any industries covered under the EU carbon quota program.
I've been following the carbon abatement issue for a few years now, and in the debate between a carbon tax (tax on price) and cap-and-trade (tax on quantity), Terry Dinan, the Congressional Budget Office (CBO)'s Senior Advisor for Climate Policy, has been the clearest, most reasoned voice. This post will cover her finding in my favorite paper on the issue, available at the CBO website.
I will be speaking largely from the table below (click to enlarge):
If a cap-and-trade system (hereon more accurately referred to as a "carbon quota") were implemented in the United States, the level of emissions would be completely arbitrary. No scientist knows the level of carbon dioxide at which the atmosphere become irreversibly unstable. Without knowing the upper limit, any restriction in quantity will necessarily be made through guesswork (or, even worse, through politics - i.e. what sounds politically popular).
Having stated that, the CBO recognizes that if the government somehow managed to guess the correct carbon quota to match the actual cost of reducing the carbon, then there is zero difference between a carbon tax and a carbon quota (in terms of reduced emissions and cost). This is illustrated in the "Expected Outcomes" column on the table.
It is far more likely that the government will guess incorrectly. If the cost is higher than expected, a carbon tax will reduce less carbon than a carbon quota, but the carbon tax will provide the greater net benefit as the emission reductions were achieved at a lower total cost.
If the cost of reducing carbon is lower than expected, a carbon tax will reduce more carbon than a carbon quota and do so at a greater net benefit. This illustrates an obvious limitation of a carbon quota. Even if the price level would encourage greater reductions, a carbon quota will always reduce carbon by the same amount.
"We have just four months. Four months to secure the future of our planet."
This quote was by UN Secretary-General Ban Ki-Moon at the Global Environment Forum in Incheon, South Korea.
In a previous post on climate change, I commented on a claim that we had only ten years before it is too late to save the planet:
Really? 10 years? Where are the figures that show our current level of carbon emissions will cause a an irreversible atmospheric imbalance? No such findings exist.The UN Secretary-General, like so many others, is just using his position of influence and mock-power to scare people with unscientifically-based time frames. Additionally, choosing four months wasn't very well thought-out. No government action takes effect in less than four months. By October of this year, only 11 percent of federal Stimulus funds will have been put into the economy. If government action cannot quickly stimulate the economy, it also cannot quickly reduce carbon emissions. The Secretary-General fabricated a time frame in which nothing can be accomplished.
Instead of looking to government for a solution, let's turn our attention to the private sector. The Telegraph reported last week on a study by the Copenhagen Consensus Centre, evaluating private sector climate change solutions. "Cloud ships" were the favored project.
The project, which is being worked on by rival US and UK scientists, would see 1,900 wind-powered ships ply the oceans sucking up seawater and spraying minuscule droplets of it out through tall funnels to create large white clouds.Unmanned ships will sail by satellite to regions of the world with the best conditions for increasing cloud cover (and to avoid changing land weather patterns), thus reflecting the sun's rays and decreasing the negative effects of increased carbon dioxide in the atmosphere.
The best aspect of this project is the cost:
They would cost $9 billion (£5.3 billion) to test and launch within 25 years, compared to the $250 billion that the world’s leading nations are considering spending each year to cut CO2 emissions, and the $395 trillion it would cost to launch mirrors into space.
Oregon State University recently released a study linking carbon emissions to human reproduction. Besides providing fodder for China's population control agencies, the report contains a common economic fallacy. I previously posted on the same fallacy with regard to carbon abatement.
The study concludes:
When an individual produces a child - and that child potentially produces more descendants in the future - the effect on the environment can be many times the impact produced by a person during their lifetime.Apparently, carbon Malthusianism is the next big theory in population control. Thankfully, the study's authors state that they do not support government efforts to control population; they simply want to make people aware of (guilty for?) their actions (having sex).
Under current conditions in the United States, for instance, each child ultimately adds about 9,441 metric tons of carbon dioxide to the carbon legacy of an average parent - about 5.7 times the lifetime emissions for which, on average, a person is responsible.
However, their study fails to consider how couples will spend their extra money that would have otherwise been used to raise their children. According to MSN Money:
For 2004, the newest data available, the U.S. Department of Agriculture estimates that families making $70,200 a year or more will spend a whopping $269,520 to raise a child from birth through age 17.The report's authors failed to determine how couples will spend this quarter-million dollars and the resulting carbon emissions. Additionally, you must incorporate the future loss to the labor force. This has drastic consequences, as China will experience in coming decades.
In 2050, China's population will reach its peak, given current fertility rates. The country will begin to feel the effects of population aging. As an increasingly larger percentage of the country’s population enters old age, the available workforce declines and the medical and social costs of supporting such a demographic increase drastically.
CNN ran an article last Friday on 'Greening the Internet.' While I found the title amusing, the article raised a few issues I would like to illustrate.
1. Accountability - Who do you hold accountable for carbon dioxide emissions caused by "the Internet"? Additionally, who do you hold accountable for reducing these emissions? The end users? ISPs? data centers? Microsoft? Policy without accountability is useless at best, and harmful to competition through unjust application at worst. This further shows the inability of policymakers to understand the nature of the Internet, demonstrating their failure to grasp the libertarian moment.
2. Secondary consequences - I just finished my long-overdue reading of Henry Hazlitt's Economics in One Lesson (a MUST-read for anyone seeking a better understanding of economics, regardless of your politics), and he focuses heavily on looking beyond the immediate consequences. The author of the Internet article falls for the all-too-common fallacy of looking at one entity in isolation. In this case, she (and the researchers she cite) look only at the carbon emissions caused by the Internet but completely ignore the emissions reduced by our utilization of the Internet.
For example, due to the Internet, many people no longer subscribe to printed media such as newspapers and magazines. This eliminates emissions in producing these products, including the paper and ink used to make them. (For a popular example, check out I, Pencil by Lawrence W. Reed courtesy of the Foundation for Economic Education).
As a bigger bonus, the Internet reduces the need to cut down as many trees, which, in turn, reduces the amounts of carbon dioxide in the air. Ironically (but unsurprisingly), many policymakers want to bailout these very printed media outlets even though their contraction reduces carbon emissions.
3. Imperativeness - The article passes the following statement off as scientific fact:
"Scientists are saying to us that we have 10 years to take some serious action to avoid the most catastrophic effects of climate change so taking some sort of initiative is absolutely vital."Really? 10 years? Where are the figures that show our current level of carbon emissions will cause a an irreversible atmospheric imbalance? No such findings exist.
I agree with Keith Hennessey, in his discussion on the need for a carbon tax:
If we knew with certainty that Earth would warm 10 degrees over the next 20-30 years, I would be screaming for an immediate big carbon tax. If instead we think Earth is likely to warm one degree over the next century or two, then climate change is a trivial concern and we needn’t worry about it. The problem is that nobody knows where we are between these two extremes. This uncertainty matters a lot, and it makes the problem hard.
...And so I am willing to consider significant and effective policy actions to slow the growth of greenhouse gas emissions to reduce that risk [emphasis in original]. I do not, however, believe that risk is so great or so certain that we must immediately commit to drastic changes in our economy, or that we must ignore the costs of those policy actions [emphasis added].
