And yet, for environmentalists, a sliver of hope exists in the shape of Chile, one of Latin America’s fastest-growing economies, which last month approved the first carbon tax in South America. The measure, due to take effect in 2018, was part of a broad overhaul of the tax system. ...
Chile’s tax, which targets large factories and the electricity sector, will cover about 55 percent of the nation’s carbon emissions, according to Juan-Pablo Montero, a professor of economics at the Pontifical Catholic University of Chile, who informally advised the government in favor of the tax. At $5 per metric ton of carbon dioxide emitted, Chile’s tax is lower than the $8-per-metric-ton carbon price in the European Union’s carbon-trading system, which has often been criticized as too lax. But it is higher than a carbon tax introduced in Mexico in January. ...
Chile’s approval of a carbon tax owes much to its positioning inside a broader tax package, experts said. At the same time that it passed the carbon tax, the Chilean government raised corporate taxes substantially, in a bid to increase revenues for education and other projects. As a result, the carbon tax raised less debate within Chile than it might have otherwise, though electricity companies have objected. ...
In addition to the tax on carbon, Chile is also adopting taxes on other air pollutants, including fine particles, nitrogen oxides and sulfur dioxide, as well as a tax on some light vehicles that generate diesel exhaust. Santiago, the Chilean capital, has long struggled with pollution, due partly to its location in a dry valley.
This is the least funny part of the show (but maybe the most important):
The next minute he's pitching you his idea about environmental tax reform. In addition to being a comedian and an economist, Bauman has committed his life to "using the tools of economics and the power of capitalism to protect the environment."
In fact, Bauman works with a group, Carbon Washington, that has a measure on the ballot in 2016 to implement a carbon tax in Washington state.
"If we had higher taxes on carbon and other types of pollution, we could afford to have lower taxes on things like income and investment," he says backstage. "Higher taxes on bads, lower taxes on goods. When I first saw that idea as an undergrad, I thought it was intellectually beautiful. Now, I'm spending my life working on it."
Even if you don't quite understand environmental tax reform (shame on you!), you find yourself nodding along and agreeing like it's a cheesy infomercial: I do want lower taxes on income! I don't want the Earth to burn!
I am predicting William J. Baumol, possibly with William G. Bowen, for work on the cost-disease. As you probably know, this hypothesis suggested that the costs of education and health care would continue to rise in relative terms, thereby creating significant economic problems. Not a bad prediction for 1966, and of course it has become a truly important issue. ...
... Baumol has numerous other contributions, including contestability, operations research and economics, entrepreneurship, externalities and Pigouvian taxes ...
Baumol, William J. "On the increasing role of economic research in management of resources and protection of the environment." Annu. Rev. Resour. Econ. 2, no. 1 (2010): 1-11.
Abstract: This paper follows precedent in mixing substantive matters related to resource and environmental economics with an autobiographical framework. Unavoidably, this pushes the contents toward my own contributions to the field—especially those that, in my belief, have not received the attention they merit. After following precedent and beginning with some words on my origins and my subsequent affiliations, I focus on several examples showing how economic analysis has helped to illuminate this subject that is so critical for the general welfare. I begin with the origins of our understanding of externalities and their increasing role in the literature on the subjects under discussion here. Second, I turn to the issue of effective policy measures and the political obstacles that impede their adoption. As part of this, I discuss markets in emission permits as a way to make the Pigouvian taxation approach more palatable. I show that these two are basically equivalent, but the same is not true of the carrot and the stick approaches—i.e., taxes on emissions and subsidy rewards for reducing such environmental damage. Third, I use a Leontief approach to show how the benefits of the use of substitutes for scarce resources are commonly exaggerated and can inadvertently hasten depletion of a scarce resource, despite appearing to contribute to preservation. Finally, I turn to as-yet-unpublished material, which shows that the cost disease model I have used to account for the persistent, cumulative, and rapid rise in the real cost of activities such as health care, education, and the performing arts also describes and explains the pecuniary source of much of the threat that currently besets the environment—paradoxically doing so through the decreasing real costs of other products that are an inescapable companion to the rising costs that beset other economic activities.
President Obama stood in the chamber of the United Nations General Assembly last week and urged the world to follow his example and fight global warming. But a major new declaration calling for a global price on carbon — signed by 74 countries and more than 1,000 businesses and investors — is missing a key signatory: the United States.
The declaration, released by the World Bank the day before Mr. Obama’s speech at the United Nations Climate Summit, has been signed by China, Shell, Dow Chemical and Coca-Cola. It calls on all nations to enact laws forcing industries to pay for the carbon emissions that scientists say are the leading cause of global warming. ...
Although the nonbinding World Bank declaration is meant largely as a show of resolve ahead of a 2015 climate summit in Paris, it signals the broadest, most explicit effort to date of world leaders and financial institutions to push all nations to enact new taxes on old forms of energy. The declaration notes that governments can either directly tax carbon pollution or create market-based cap-and-trade systems, which force companies to buy government-issued pollution permits. ...
In order to avoid more opposition from conservatives, Mr. Obama and other top administration officials no longer call publicly for a national price on carbon. But they have nonetheless signaled their support for international and state efforts. ... The Obama administration has also enacted a policy signaling its readiness to price carbon should the politics of Congress ever shift: a metric it calls “the social cost of carbon,” designed to account for the cost of one ton of carbon dioxide pollution. Mr. Obama’s economists have determined the cost to be $37 a ton. Secretary of State John Kerry, a longtime advocate of government policy to fight climate change — and the chief author of the failed 2010 cap-and-trade bill in the Senate — last week told a meeting of the Major Economies Forum that “when it comes to climate change, we know exactly what it takes to get the job done.”
“On carbon pricing, there’s a perfect storm taking place,” said Robert N. Stavins, director of the environmental economics program at Harvard. “There is increasing recognition that approaches that have been taken in the past haven’t worked, and that the only way one can affect the hundreds of millions of decisions is through price signals.”
Why aren’t we demanding more forceful [climate] action? One reason may be the frequent incantation of a motley collection of myths, each one rooted in bad economics:
Myth 1: The enormous uncertainty of climate science argues for a wait-and-see strategy.
The claim here is that reducing greenhouse gases would be a wasted expense if climate change ends up causing only minor problems. But uncertainty cuts two ways. Things might not be as bad as expected, but they could also be much worse. ...
Myth 2: Slowing the pace of climate change would be prohibitively difficult.
Reducing CO2 emissions would actually be surprisingly easy. The most effective remedy would be a carbon tax, which would raise the after-tax price of goods in rough proportion to the size of their carbon footprint. Gasoline would become more expensive, piano lessons would not. ...
Myth 3: A carbon tax would destroy jobs.
If a carbon tax were scheduled to be gradually phased in once the economy recovered, its mere announcement would create jobs right away. As with any policy change, there would be winners and losers. ...
Myth 4: The cost of reducing CO2 emissions would be prohibitively high.
Because a steep tax on emissions would generate hundreds of billions of dollars in annual revenue, you might assume the policy would entail big costs for ordinary people. But every dollar raised by a carbon tax is a dollar by which other taxes can be reduced. ...
Myth 5: It’s pointless for Americans to reduce CO2 emissions, since unilateral action won’t solve global warming.
Although an effective solution will take global coordination, America’s inaction has been a major barrier to progress. If the United States and Europe each adopted a steep carbon tax, they could elicit broader cooperation through heavy tariffs on goods produced in countries that failed to do likewise. India and China need access to our markets, giving us enormous leverage.
Myth 6: Penalizing greenhouse gas emissions would violate people’s freedom.
As John Stuart Mill, the British political economist, argued, people should be free to do as they please, provided they don’t cause undue harm to others. ... Mill’s cost-benefit framework provides no reason for thinking that someone’s freedom to escape the small burden of CO2 taxation should trump other, vastly more important freedoms. ...
A UN-backed conference on climate change ended with a call to end capitalism. The conference, organised by the Venezuelan government, saw 130 green activist groups meet to discuss their demands.
Green website Respond to Climate Change says that at the end of the conference, the groups issued what is being called the 'Margarita Declaration', which says: "The structural causes of climate change are linked to the current capitalist hegemonic system. To combat climate change it is necessary to change the system."
This declaration will be handed to environment ministers when they meet in the UN’s talks in Lima later this year.
Participants at the meeting included the World Wildlife Fund (WWF), Climate Action Network International, Third World Network and Christian Aid.
The declaration also condemned the idea of having a so-called "Green Economy", saying this was nowhere near radical enough, and only the end of the capitalist system would solve the problem of climate change.
Look, I get the point. Markets set prices. Prices ration goods. Because environmental goods and services are severely underpriced by markets (in many cases that price is zero), environmental goods and services are overconsumed, underproduced, overexploited, crapped on, however you want to say it. Environmentalists are rightly concerned.
Because environmental goods and services are mispriced in a market based system, market based systems must be to blame for environmental degradation and (here's where the logic breaks down) therefore, we must abandon market based systems for allocating goods and services.
But to paraphrase Winston Churchill, capitalism is the worst system for allocating environmental goods and services, except for the rest. I'm always stunned by the misunderstanding and misrepresentation of market systems by environmentalists. Markets ration scarce goods. They do so through prices. The problem with environmental degradation is not that markets lead to overexploitation of environmental goods and services, but rather market conditions fail to allow markets to establish the proper price for environmental goods and services. If the price is right, people will (usually) make rational decisions.
So, the solution to environmental issues is not to abandon markets and dictate to people the choices they should make, but rather the solution is to establish the correct set of prices that capture the full scarcity value of all goods and services, including environmental goods and services. In some cases this might happen through the establishment of markets for environmental goods and services (for example, cap and trade) or it might happen through direct pricing of environmental goods and services (for example, emissions taxes), or it might happen through restrictions on use (for example, endangered species laws).
Abandoning markets will not solve environmental problems, because the environment will still be viewed as free. Prices, or some other representation of value, are still needed, and there is simply no better way to establish prices than through markets.
Poorly functioning markets might lead to environmental problems, but well-functioning markets are the best solution.
Gov. Rick Perry of Texas and Senator James M. Inhofe of Oklahoma are among the most vocal Republican skeptics of the science that burning fossil fuels contributes to global warming, but a new study to be released Thursday found that their states would be among the biggest economic winners under a regulation proposed by President Obama to fight climate change.
The study, conducted by the Center for Strategic and International Studies and the Rhodium Group, both research organizations, concluded that the regulation would cut demand for electricity from coal — the nation’s largest source of carbon pollution — but create robust new demand for natural gas, which has just half the carbon footprint of coal. It found that the demand for natural gas would, in turn, drive job creation, corporate revenue and government royalties in states that produce it, which, in addition to Oklahoma and Texas, include Arkansas and Louisiana.
The report concluded that the rule would hurt states where coal production is a central part of the economy — chiefly Wyoming, the nation’s largest coal producer. States that produce both coal and natural gas, such as Pennsylvania, would experience an economic trade-off as diminished coal production was replaced by new natural gas production. ...
The study took into account the economic costs imposed by the regulation and concluded that it would raise electricity rates by up to 10 percent in some parts of the country and eventually freeze coal production. But even taking those costs into account, Arkansas, Louisiana, Oklahoma and Texas together would experience an annual net economic benefit of up to about $16 billion, according to the study.
“The irony is that some of the states that have been the loudest in opposing E.P.A. climate regulations have the most to gain in terms of actual economic interest,” said Trevor Houser, an analyst at the Rhodium Group and a co-author of the study.
Australia was also the first country to invent the grain stripper. Which isn't nearly as fun as the name seems to imply.
The Senate voted 39 to 32 on Thursday to repeal the so-called carbon tax after Prime Minister Tony Abbott’s conservative government secured the support of a number of independent senators.
Only 71 senators? I'll bet out 100 senators could kick their 71 senators' collective butts!
The House of Representatives had voted earlier in the week to repeal the unpopular measure, which has been a highly contentious issue in Australian politics for seven years.
The tax was devised to penalize hundreds of Australia’s biggest producers of carbon emissions, setting a price of 23 Australian dollars, or $21.50, per metric ton of carbon dioxide when it was put into effect in 2012 under then-Prime Minister Julia Gillard of the Labor Party, which is now in the opposition. The price rose to 25 Australian dollars this month.
'Penalize' seems a bit of a harsh term, especially for a country once used as a penal colony. Let's try this instead: "The tax was devised to properly price carbon emissions for those companies that choose to use the environment as the equivalent of pooping in their neighbors yard."
Mr. Abbott, of the conservative Liberal Party, who took office in September, made repealing the tax a central pledge of his election campaign, arguing that ending it would reduce electricity prices and enhance economic growth. But he struggled twice to get the measure through the Senate before the vote Thursday.
If at first you don't succeed...
The government now plans to introduce a range of measures that it says will encourage business to reduce pollution, rather than penalizing polluters.
Every time you go poopy in your own toilet instead of my yard, you get a lollipop.
After the vote Thursday, Mr. Abbott characterized the tax as a “useless, destructive tax, which damaged jobs, which hurt families’ cost of living and which didn’t actually help the environment.” He called it a “9 percent impost on power prices, a $9 billion handbrake on our economy,” and said the repeal would save the average household 550 dollars a year.
And what would it cost them?
Australia is among the world’s biggest producers of carbon emissions on a per capita basis. The government is committed to reducing emissions to 5 percent below levels recorded in 2000 by 2020.
And I am committed to stop drinking.
Politicians from Labor and the smaller Greens party said the repeal would undermine Australia’s efforts to address climate change. The Labor leader, Bill Shorten, described Mr. Abbott as an “environmental vandal.”
Mr. Abbot is "a member of a Germanic people that ravaged Gaul, Spain, and North Africa in the 4th–5th centuries and sacked Rome in AD 455?"
“Today, Tony Abbott has made Australia the first country in the world to reverse action on climate change,” Mr. Shorten said. Christine Milne, a senator from Tasmania and leader of the Greens party, said, “History will judge Tony Abbott harshly for his denial of global warming and his undermining of Australia’s effort to address it.”
John Connor, chief executive of the Climate Institute, a Sydney-based advocacy group, said that some governments had pulled back from carbon reduction targets, including Japan after the Fukushima nuclear reactor disaster in 2011, but that “no one else in the world has repealed a working, functioning carbon pricing mechanism.”
But in Australia's defense, very few places in the world have actually implemented a working, functioning carbon pricing mechanism, so there really haven;t been that many opportunities for countries to repeal them.
“We are taking a monumentally reckless backward leap even as other countries are stepping up to climate action,” Mr. Connor said in an interview. He said that Australia is the highest per capita emitter of carbon in the Organization for Economic Cooperation and Development, the group of developed countries, and that it ranks in the top 20 globally, emitting around 25 metric tons of carbon dioxide per person every year. “Australia’s economy is much more carbon-intensive than the U.S. economy,”...
U-S-A! U-S-A! (sorry, watched too much soccer last month).
...Mr. Connor said. Mr. Abbott has said that the repeal will lead to lower energy costs for consumers.
Mr. Abbott (2 b's, 2 t's) understands supply and demand.
But Mr. Connor said that while Australian electricity prices have indeed risen, that was due in part to power companies investing in infrastructure. “The government effectively used the carbon tax as the scapegoat for higher energy costs,” he said.
But energy costs should be higher if carbon is priced at its marginal external cost.
THAT"S THE FREAKING POINT!
But representatives of major industries, including agriculture and mining, said that the costs passed along to other businesses because of the emissions penalty were high.
and again...THAT"S THE FREAKING POINT!
While the agriculture sector was exempt from directly paying the tax, its costs “hit Australian farmers every time they paid for essential electricity, fertilizer, chemicals and fuel supplies,” Brent Finlay, president of the National Farmers’ Federation, said in a statement.
Brendan Pearson, head of the Minerals Council of Australia, said in a statement that the removal of “the world’s biggest carbon tax is an important step towards regaining the competitive edge that Australia lost over the last decade.” The council estimated that the tax cost the mining industry 1.2 billion dollars per year.
And saved the rest of society 1.2 billion dollars per year.
A representative of independent grocers also applauded the repeal, saying that the cost of electricity and refrigerant gases had skyrocketed since the carbon tax was introduced. “A small, corner store operator will save about 17,000 Australian dollars a year,” said Jos de Bruin of Master Grocers Australia, which represents about 2,400 independent supermarkets.
I know it's uncomfortable, but if carbon is properly priced, electricity, food, fertilizer, chemicals, fuel supplies, cars, trucks, motorcycles, go karts, pens, pencils, paper,...should all be more expensive.
Over the weekend a prominent Republican, former Treasury Secretary Henry Paulson, came out for a more-comprehensive attack on global warming than anything the Environmental Protection Agency has proposed: In a New York Times essay, he called for a tax on carbon. Economist and Times columnist Paul Krugman quickly challenged Paulson: A carbon tax won’t happen because of politics, so will Paulson support “second-best” solutions?
Economists agree that regulating carbon-dioxide emissions like other pollutants doesn’t work. Carbon is everywhere: producing energy, driving cars, making cement. "We’re talking about hundreds of millions of sources," says Robert Stavins, an environmental economist at Harvard, "so the whole notion of trying to reduce those emissions with source-by-source regulations is simply infeasible."
A carbon tax is a tax on carbon sources, proportionate to how much carbon each source emits. "It provides incentives for everyone" to use less carbon, says Stavins, "from the electical generator, to the cement company, to myself, in terms of running the dishwasher."
So a carbon tax is like a bug bomb. Everything else -- the world of second-best solutions -- is running around your apartment with a flyswatter.
MIT economist Michael Greenstone proposes a different metaphor for second-best solutions. "I like to think of all of these policies as kind of a bank shot in the game of billiards," he says. "You’re shooting the ball to one side of the table, although the pocket is on the other." So it’s harder to make your shot -- and you may hit something you don’t mean to.
Similarly, because the EPA’s new power-plant regulations aim at carbon-intensity, not carbon emissions, they produce some unintended effects, says University of Colorado economist Daniel Kaffine. Because gas is less carbon-intensive than coal, the strategy "sort of acts like a tax on coal and a subsidy to gas," he says. "But what we really want is a tax on both coal and gas."
Meanwhile, evaluating the tradeoffs creates work for economists. "You know, given this menu of second-best policies," says Kaffine, "how do they compare against the reference point of doing nothing?"
"This blog aims to look at more of the microeconomic ideas that can be used toward environmental ends. Bringing to bear a large quantity of external sources and articles, this blog presents a clear vision of what economic environmentalism can be."
Don't believe what they're saying
And allow me a quick moment to gush: ... The env-econ.net blog was more or less a lifeline in that period of my life, as it was one of the few ways I stayed plugged into the env. econ scene. -- Anonymous
... the Environmental Economics blog ... is now the default homepage on my browser (but then again, I guess I am a wonk -- a word I learned on the E.E. blog). That is a very nice service to the profession. -- Anonymous
"... I try and read the blog everyday and have pointed it out to other faculty who have their students read it for class. It is truly one of the best things in the blogosphere." -- Anonymous