Taxing carbon to help the poor

by Chris Bertram on December 12, 2004

Further to “my post”:https://www.crookedtimber.org/archives/002982.html on Lomborg below, here’s an idea. Maybe it isn’t new, but I’d still be grateful for critical comment. Lomborg says that it would be better to direct our resources to helping the world’s poor, rather than trying to implement Kyoto. Well, one thing first-world governments could do would be to introduce taxes on carbon emissions (many already have these) and to hypothecate those taxes (or some fixed proportion of them) to foreign-development aid.[1]

fn1. I take it that those who think that foreign aid is always a waste of money or counterproductive would not, themselves, put the Lomborg argument in good faith (whatever their opinions on CO2 and global warming). No need for them to comment below then.

{ 20 comments }

1

antirealist 12.12.04 at 7:17 pm

Ok, I’m genuinely confused. In what sense would these proposed taxes be hypothecated, rather than just given?

2

Nancy 12.12.04 at 7:18 pm

Why is it so hard for people to do the research that has been published by the scientific community over the past twenty years on “global warming”. It is real. Please read Media Matters – “Saving the Earth from world’s end”; by Bill Moyers, Sacramento Bee, Forum Section, Sunday December 12, 2004. That ought to sum up what we are in for in the next four years. Enjoy the ride!

3

Chris Bertram 12.12.04 at 7:26 pm

Nancy, that it is real is common ground here. No-one is arguing about that.

Antirealist: “hypothecated” is a Britishism just meaning that a particular tax is linked to a particular type of expenditure. But, yes, I’m suggesting that some or all of the taxes raised on carbon emissions be dedicated or given to 3rd-world development. Surely Lomborg wouldn’t object to that?

4

John Quiggin 12.12.04 at 7:59 pm

“Surely Lomborg wouldn’t object to that?”

Yes, he would. The transfers Chris is proposing would arise automatically if a global emissions trading system, with appropriate allocations of rights to poor countries, were introduced. The result would be a big transfer to poor countries as emitters in rich countries sought to buy rights. This is also the most cost-effective approach to Kyoto and mitigation more generally.

On p305 of his book, The Sceptical Environmentalist, Lomborg dismisses emissions trading as politically infeasible precisely because it would require transfers of billions of dollars from rich to poor countries.

5

abb1 12.12.04 at 8:00 pm

These kinds of things could’ve easily been done under a strong world government; as well as many other good projects: enforcing nuclear non-proliferation, universal labor and environmental standards, dismantling terrorist networks, fighting money laundering, etc. Maybe some day…

6

Giles 12.12.04 at 8:03 pm

It’s a superficially sensible and saleable idea but – if the taxes are effective in reducing supply, aid then falls. So there’s then a time inconsistency problem in that the consequences in any model of global warming are likely to follow many years after a reduction. The aid is therefore not timed to coincide with need it is meant to compensate for. So sentimentally the hypothecation makes sense, but practically it s wouldn’t.

At a theoretical level payment into a fund would make sense – since the faster developed countries reduced levels the less they’d have to pay in and if they reduced levels faster then theoretically needs would be less as well. But again I think that given the time scale, using a fund approach isn’t going to be sensible either.

7

Phil 12.12.04 at 8:11 pm

Wouldn’t something like a Tobin tax do all of this much better and more?

8

Andrew Boucher 12.12.04 at 8:54 pm

phil: A Tobin tax, being on currency transactions, would not encourage a reduction in the use of hydrocarbons and thus not help reduce pollution, unlike a tax on the stuff directly.

9

Xavier 12.12.04 at 9:46 pm

Moving from fossil fuels to some other less efficient energy source would force Western economies to incur large economic costs. Transferring resources to the third world would be an additional and basically unrelated cost. The goal of an efficient tax is to raise revenue without influencing the economic decisions of taxpayers. Of course the goal of a tax on carbon emissions is to encourage taxpayers to use other fuel sources. That is an entirely separate cost borne by taxpayers.

I think your analysis assumes that the money collected by the tax reflects the full economic cost of the tax. That’s very inaccurate. Even if Western nations kept all of the tax revenues, they would still incur a large economic cost from instituting the tax because many carbon emitters would switch to more expensive fuels. Western nations would be economically better off if they raised an equal amount of money through some other method and used it to fund aid to the third world.

10

Walt Pohl 12.12.04 at 10:35 pm

Xavier: Arguably (and I think this assumption is implicit in Chris’ question), the current system is distorted because rich countries are not bearing the cost of the externalities they are imposing on poor countries. The carbon tax could (in theory) remove an existing distortion rather than introducing a new one.

11

Brett Bellmore 12.12.04 at 11:16 pm

“These kinds of things could’ve easily been done under a strong world government; as well as many other good projects: enforcing nuclear non-proliferation, universal labor and environmental standards, dismantling terrorist networks, fighting money laundering, etc. Maybe some day…”

As well as many other BAD projects. Remember, in a world with one government, there would be no refugees… because there would be no refuge.

That the world is warming, yes, that’s pretty well established. The extent to which it’s due to human activities rather than natural causes such as solar variablity, how much it’s going to warm, whether the net consequences are bad or good, these are still open questions. As for the sincerity of advocates of the Kyoto treaty, I note that it prohibits credits gained by using the one proven source of power that produces no greenhouse gases, AND can be scaled up to support a world-wide industrial civiliation for many thousands of years: Nuclear.

Funny thing to to if the climate activists really thought this was a big freaking emergency…

12

Xavier 12.13.04 at 12:11 am

Walt: Maybe so, but the West would still be bearing the full cost of reducing carbon emissions and, as an entirely separate cost, sending some money to the third world. We could get a nearly identical effect by reducing carbon consumption through regulation and then raising money through an income tax to send to third world.

Chris’s plan creates some vague connection between carbon reduction and foreign aid, but they are still two distinct costs being borne by the West. I don’t see how it is responsive to Lomborg’s argument.

Lomborg is saying that if the West wants to impose some economic cost on itself for the sake of the rest of the world, it would be better to impose the cost of foreign aid than carbon reduction. Chris is saying that we could impose on ourselves the economic cost of carbon reduction and then impose an additional cost for foreign aid. He muddles the issue by making it look like a single cost.

13

Jim Harrison 12.13.04 at 12:55 am

I wish people would acknowledge that we’re going to end up dealing with global warming. The only question is how we deal with it and, crucially, when we begin to deal with it. The folks I work with who project coal and energy prices already factor in the heavy cost of carbon dioxide recovery into their estimates becaue they think that even the most know-nothing rightists will eventually have to go acknowledge the problem. What worries me is that recapturing the CO2 from power plants requires technology that has yet to be developed. I expect that the lack of early investment in the development of such technologies is a serious error, far worse than blocking international treaties on greenhouse gases.

14

Brett Bellmore 12.13.04 at 1:43 am

Actually, Los Alamos is doing some very promising research on techniques for extracting CO2 efficiently from air, rather than power plant exaust; The chief advantage of which is that it can deal with mobile sources of CO2.

But it only makes sense to put off doing something; We’re talking about a relatively slow process here, while technology is improving all the time. The longer we wait before doing something, the better tools we’ll have available to do it.

And, I repeat, we don’t even yet know that we WANT to do something, since we haven’t established yet the net effect on mankind of higher temperatures.

15

John Quiggin 12.13.04 at 3:55 am

Brett, you’re overstating the limitations on nuclear power in Kyoto. Signatory countries can use nuclear power to meet their own targets, though there are limits on trade.

More generally, while some climate activists may absolutely rule out nuclear power, that’s not the case around here. The costs and benefits of nuclear fission energy have been canvassed on this and other blogs

16

frankis 12.13.04 at 4:37 am

Lomborg misrepresents the opinions of the economists he quotes. The ones who sat on his “Copenhagen Consensus” panel really said:

“The panel recognised that global warming must be addressed, but agreed that approaches based on too abrupt a shift toward lower emissions of carbon are needlessly expensive. The experts expressed an interest in an alternative, proposed in one of the opponent papers, that envisaged a carbon tax much lower in the first years of implementation than the figures called for in the challenge paper, rising gradually in later years. Such a proposal however was not examined in detail in the presentations put to the panel, and so was not ranked. The panel urged increased funding for research into more affordable carbon-abatement technologies.”

Lomborg writes in the Telegraph as though options beyond Kyoto, such as a carbon tax, were put to and considered by the panel (he writes “In fact, the panel called these ventures – including Kyoto – “bad projects”) when in reality the panel regretted that it could not look at other greenhouse mitigation ventures, and clearly believed that consideration of a carbon tax was the opposite of a “bad” idea.

Lomborg is in political science, not economics or environmental science, and I’d call “dishonest” his abuse of the findings of a panel of economists put together by himself.

17

Matthew2 12.13.04 at 1:30 pm

But taxes are anti-freedom! Do you want to be a freedom-hating terrorist, or stop little children from realising their full potential?

18

Antoni Jaume 12.13.04 at 3:54 pm

Xavier, alternate sources of energy are not less efficient than present sources. In fact it is rather the contrary. Fuel cells are much more efficient than internal combustion engines, what they are is harder to develop, and since that imply high present costs, not taxing “carbon” is an economically ecologically energetically inefficient course.

DSW

19

Sebastian Holsclaw 12.14.04 at 7:00 am

“Fuel cells are much more efficient than internal combustion engines, what they are is harder to develop, and since that imply high present costs, not taxing “carbon” is an economically ecologically energetically inefficient course.”

So you are saying they are more efficient in some energy sense that you don’t define, but less efficient in an overall economic sense?

20

Antoni Jaume 12.14.04 at 7:53 pm

Fuel cells allow to recover over 90% of the fuel energy content, internal combustion engines are limited to 40% in the best cases, 30% is more common, so yes, they are more efficient in some energy sense. As for the overall economy sense, that is a contingency of how technology has evolved. Or do you believe that people would all ditch their cars to get a new car that works on methanol fuel cell overnight?

DSW

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