Thursday, June 5, 2008

When did we stop thinking about carbon taxes?

I am very much a late-comer to the big questions of climate change policy. But there seems to have been a very broad consensus for some time now in Australia and New Zealand to back Emissions Trading Schemes of some kind, with both main parties in both countries being in favour.

Now in the Kyoto environment with definite emissions targets this seems like a good way to guarantee specific emissions levels. There are also good examples of working markets like the SO2 market in the US. In fact, I believe that as residents of Los Angeles for nearly four years my lungs are beneficiaries of some of the earliest emissions trading markets, aiming to reduce the notorious smog there. On the other hand the possibilities for rorting and gaming such systems seem to have had a very negative effect on the European CO2 market, and the politics in Australia and New Zealand begin to make it look like getting a scheme with teeth is too hard even with in principle support from essentially everyone.

It's interesting that in the US there is still a lively debate on the question of whether "cap-and-trade" (Yankee for ETS) or carbon taxes are the way to go. (There is a cap-and-trade bill in the Senate at the moment though.) I found this article to be a very interesting background to this debate. (Hat-tip Andrew Sullivan).

One person quoted there is William Nordhaus, one of the main exponents of a carbon tax, who has just written a fascinating sounding book that is reviewed here by the theoretical physicist Freeman Dyson. (Hat-tip Michael Nielsen)

Why is it not much simpler to just tax greenhouse gas emissions in terms of equivalent tonnes of CO2? (Or preferably commodities like petrol whose use will result in greenhouse gas emissions). One then adjusts the tax level, either to achieve the desired reduction in emissions or as we learn more about the response of the climate to our dangerous experiment of doubling atmospheric CO2 levels. In New Zealand this would absolutely have to include a tax on cattle, which I seem to recall has been pretty unpopular, but that should keep the Greens happy! If things are structured so as not to enormously increase Government revenue Tories might not be so put out either.

I'm now going to try to find out why this has not been the preferred option in the Antipodes.


Jim Donovan said...

I've been baffled too. Everyone that I've spoken with who has some understanding tells me that a tax is a simpler more effective method. ETS emerged in the 90s as a sop to vested interests but even they seem to have changed their tune. No-one seems to have told the politicos and bureaucrats.

Tony Milne said...

In NZ the Government's initial response to Climate Change was carbon taxes. However, the major opposition meant the Gov had to go back to the drawing board. The Gov came back with the ETS - and at the time it had much broader support. But again, the vested interests are ramping up their campaign against the ETS and the political support (which was almost universal a year ago) has evaperated.

Anonymous said...

Carbon taxes are too transparent and rigid for big business to manipulate, thats why they're not accepted. Thats why the biggest polluters in NZ have managed to leave the government (taxpayer) to foot the bill for its abysmal failure to meet its Kyoto obligations. For more info on carbon trading and what an unjust ineffective non-solution it is take a look at this free PDF book by Larry Lohmann

Kevyn Miller said...

The two really big problems with any attempt to put a price on carbon are pretty basic.

1) None of like to pay for something we've been getting for free.

2) We can clearly see what we are losing but we can't clearly see what we will be gaining.

If the government had been serious about reducing carbon emissions it would have announced the the system for allocating the carbon tax first and then followed up with the announcement of the carbon taxes. If they had announced insulation subsidies and public transport concession cards for superannuatants and low income families and then dribbled out the details of the carbon taxes beginning with "big" trucks and "dirty" factories the resistance to higher energy prices would have been largely negated. Controlling the language of the debate is one of the basic rules of politics and public relations. When a government doesn't do that on a serious issue you have to wonder whether they are deliberately diverting attention from something even less attractive. Perhaps it was traded off for greater progress on some workplace legislation that big business would otherwise have opposed without their "victory" against the carbon tax.