February 13, 2021

TAX WHAT YOU DON'T WANT, NOT WHAT YOU DO:

THE REAL POINT ABOUT CLIMATE CHANGE IS HOW CHEAP THE SOLUTION IS (Tim Worstall, 2/13/21, Adam Smith Institute)

We're obviously in favour of such Smithian solutions, even as we'd note that it's really Arthur C Pigou under discussion.  Stick the one crowbar into the price system and we're done. As to what the price should be:

The Stern-Stiglitz High-Level Commission on Carbon Prices three years ago opted for a range of $40 to $80, rising to $50 to $100 by 2030. That is the global gold standard. But facts on the ground have already run ahead. 

"We think $50 will do the job," said Kingsmill Bond from Carbon Tracker. "Large numbers are a pipedream that makes it less likely to happen. All you need is a realistic signal and markets will come forward with technologies nobody has even thought of."

Quite so. Bill Nordhaus got the Nobel for suggesting one variant of this, Nick Stern his peerage for another. The revenue neutral carbon tax is the solution to the problem as described.

The thing to really note though is how cheap this is. UK emissions are around the 500 million tonnes a year level. $50 a tonne means $25 billion, or between friends, let us call that £20 billion. Or about 3 or 4% of our current total tax take.

Note that we do not need to charge that much more in tax - revenue neutral is the point here. Instead we just need to shift what we tax.

Posted by at February 13, 2021 8:02 AM

  

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