Carbon taxes are the answer to the stalled climate negotiations

Jan 05, 2011

For global warming policy, the 2009 United Nations Climate Change Conference (Copenhagen Summit) was a major disappointment. Designed to negotiate a successor to the Kyoto Protocol, which expires in 2012, the Summit concluded without a binding agreement because of deep divisions on the distribution of emissions reductions and costs. In addition, the United States failed to take action on a carbon cap-and-trade bill in 2010. Confronting this policy vacuum, leading climate economist William Nordhaus argues in the Bulletin of Atomic Scientists, published today, that carbon taxes are the best approach to achieve significant emissions reductions.

William Nordhaus argues that the cap-and-trade approach used in the 1997 will not accomplish the goals of slowing climate change. As currently designed, it is both economically inefficient and ineffective and should be supplemented or replaced. Additionally, a carbon tax could be a useful means to cut budget deficits while meeting environmental objectives.

Emissions of are externalities - social consequences not accounted for in the market place. They are market failures because people do not pay for the current and future costs of their emissions.

"If economics provides a single bottom line for policy, it is that we need to correct this market failure by ensuring that all people, everywhere, and for the indefinite future, face a market price for the use of carbon that reflects the social costs of their activities," Nordhaus states.

He says that it is necessary to raise the price of carbon to implement carbon policies so that they will have an impact on everyday human decisions, and on decision makers at every level in every nation and sector. At present, incentives and levels of involvement vary, and where some countries have implemented strong emission control measures, they only cover a limited part of national emissions. For example, the European Trading Scheme – Europe's effort to initiate a cap-and-trade structure – covers only about half of EU emissions.

Economic evidence suggests the cost of this limited participation is high. Participation will have to involve everyone by the mid 21st century if the aim of keeping global temperature change within the 2 degrees Celsius target of the Copenhagen Accord is to be achieved.

Given a choice between a cap-and-trade system (such as is embodied in the Kyoto model), and a carbon tax system (such as is used for limiting gasoline or cigarette consumption), Nordhaus favours taxation: "Countries have used taxes for centuries," he says. "By contrast, there is no experience - as in zero - with international cap-and-trade systems."

A carbon-tax model also provides a friendly way for countries to join a climate treaty. Countries considering joining under the current Kyoto model have to weigh up concerns about the long-term impacts of climate change with heavy pressures that big countries could apply. Under the carbon-tax model, by contrast, countries would need only to guarantee that their domestic carbon price would be at least at the level of the international norm – a relatively straightforward and transparent choice.

How do we modify the Kyoto Protocol to include tax-type models? Some have suggested a hybrid approach combining both quantity and price approaches. An example of a hybrid plan would be a traditional cap-and-trade system combined with a floor carbon tax and a safety-valve price. The Kyoto treaty might also be broadened, to allow countries to fulfill their treaty obligations if they have a domestic regime with a minimum carbon price attached to all emissions.

One further impetus for climate-tax legislation comes from the need to curb the growing budget deficits in many high-income countries. A carbon tax would provide an important revenue source, and a is the closest thing to an ideal tax that can be imagined, he argues.

"The international community should move quickly to replace the current cap-and-trade structure by one in which the central economic mechanism is a tax on greenhouse-gas emissions," Nordhaus concludes.

Explore further: Hopes, fears, doubts surround Cuba's oil future

More information: The architecture of climate economics: Designing a global agreement on global warming by William D. Nordhaus is published today (6 January, 2011) in the Bulletin of the Atomic Scientists Volume 67, issue 1. The article will be free to access for a limited period from bos.sagepub.com. The Bulletin of the Atomic Scientists is published by SAGE.

Provided by SAGE Publications

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Shootist
2.7 / 5 (18) Jan 05, 2011
Carbon taxes are the answer to the stalled climate negotiations


Beware the Greens, they're really Reds in disguise. What better way to control the means of production?

Conservtatives, libertarians, tea parties. No freedom loving person will stand for this. The rest of the world can pound sand.

Freedom and access to cheap energy is the key to healthy economies.
Quantum_Conundrum
2.5 / 5 (16) Jan 05, 2011
Yeah, I wonder what the early revolutionaries would say about an air tax?

Seriously, beyond the fact that a carbon tax is economic suicide, this opens the pandora's box of taxation on life itself.

If they will tax carbon, what's to stop them from taxing hydrogen, oxygen, and nitrogen too?

Not only that, but governments and environmentalists helped produce this problem by hindering the development of nuclear power plants and new nuclear technologies. There is no reason the U.S. shouldn't be at 100% non-carbon footprint energy for residential and industrial use before I was even born.

So the governments and environmentalists created whatever AGW problem there remains in the first place, but then they want to blame it on everyone else and tax them.
bbd
2.3 / 5 (12) Jan 05, 2011
The carbon tax should be voluntary and only AGW acolytes should be permitted to pay it.
geokstr
1.9 / 5 (13) Jan 05, 2011
Look for the EPA to discover carbon-taxing authority oozing from the edges of the penumbras surrounding the emanations of the Commerce Clause.

Agree wholeheartedly that the envirofreaks have prevented us from developing nuclear power. They'd just as soon Chavez the entire energy industry anyway.
ODesign
2.7 / 5 (7) Jan 06, 2011
The leading scientist on the subject have said a carbon tax is the best solution even before the international cap and trade negotiations failed. Corporations don't like it because it's most likely of all the plans to hurt their profits by transfer of wealth from polluters to civil and public benefits suffering from the ill effects of carbon pollution.
Egnite
2.3 / 5 (6) Jan 06, 2011
Funny how all the agw promoters are quiet on this board, it's never been about taxation has it?
lengould100
3.7 / 5 (6) Jan 06, 2011
I've long promoted a carbon tax rather than a Cap-and-Trade scheme. C&T is simply designed by brokers and traders to allow them to collect huge profits in brokers fees on every transaction. A tax is simple, cheap to operate and easy to police, as well as being an obvious way to help reducing governments crippling deficits.

As for you TeaParty numbies in the US, one question. What part of current government budget do you propose to cut sufficiently to reduce current account debts and deficits? Its already proven by Bushco that your "reduce taxes increases govt. revenues" scam doesn't work. Your committed (in severals ways) to not reducing military expenditures. And the federal government doesn't have enough in its budget to make any difference EXCEPT FOR social security and medicare. I can hardly wait for voters to figure out that the Teabaggers are lying to them about not cutting SS and Medcare.

Turfed in record time.
lengould100
4.3 / 5 (6) Jan 06, 2011
Cap-and-Trade = "Support your local bankster's bonuses"

Tea Party = "Right wingnuts lying to the voters (again)"

Last nite a CNN interviewer tried every tactic available to nail down a Tea Party congressman on exactly what part of the Fed budget would be shaved in order to achieve the preliminary reduction of $100 billion / year (eg. 10% of annual deficit). Got to less than $50 billion and the only things left were military, Soc. Security and Medicare. He wouldn't touch any of them, just stopped talking.
ryggesogn2
2.5 / 5 (8) Jan 06, 2011
. A tax is simple, cheap to operate and easy to police, as well as being an obvious way to help reducing governments crippling deficits.

Who gets the money? What do they plan to do with it?
What will the govts do when their tax has the supposed desire affect of reducing consumption which will also reduce the tax revenue?
Govts get hooked on 'sin' taxes and when the tax revenue falls either due to consumption reduction or black markets, will the govts cut spending?
lengould100
3.7 / 5 (6) Jan 06, 2011
Answers are obvious. Just check out how a well-run economy works, eg. Canada. Very low corporate taxes, moderate progressive income taxes, and a 6% VAT. Until the "stimulus packages" nonsense required because US economy tanked, Canada had run surplus federal budgets for nearly two decades.

As far as "what will they do with it", do you realize what your Fed. deficit and debt are now? EU business channels are talking seriously in low tones about a US default on bonds, though more likely is simply a renaway inflation (see Argentina or Indonesia 1990's)
lengould100
4 / 5 (4) Jan 06, 2011
And a gasoline tax which can raise price sufficiently over $4.00 / gal. to cause a significant reduction in oil imports.
Skeptic_Heretic
2.3 / 5 (3) Jan 06, 2011
And a gasoline tax which can raise price sufficiently over $4.00 / gal. to cause a significant reduction in oil imports.
You don't even have to tax it, just stop subsidizing private transportation and fuel at the pump. Gasoline costs about 15.15 per gallon without subsidy. Let's slowly up the price to the real price and see how much we need to import then.

Guarantee all the free marketeers would be driving PHEV's if the oil market was really free of government influence.
ChiRaven
3 / 5 (2) Jan 06, 2011
"...we need to correct this market failure by ensuring that all people, everywhere, and for the indefinite future, face a market price for the use of carbon that reflects the social costs of their activities..."

THAT'S the rub. There is NO WAY to insure uniformity, when one nation can gain an advantage by NOT enacting taxes that do that while its global competitors do. Until and unless THAT problem is worked out, there will not be a solution along those lines.
bobtrain
5 / 5 (3) Jan 06, 2011
A carbon tax will only be useful if all proceeds are used to provide alternate energy and transportation resources. If the tax money is used the way it usually is, we will gain nothing but an alternate revenue source.
geokstr
1.7 / 5 (6) Jan 06, 2011
Gasoline costs about 15.15 per gallon without subsidy.

Cite to that calculation, please? You and others here on the left keep referring to all these fossil fuel subsidies that are supposedly granted to the evil energy companies without which they would never be able to compete with wind and solar and ethanol, but never link to anything that supports that.

And just to let you know in advance, it had better be pretty good. I am a CPA with thirty years of corporate accounting, financial analysis and taxation. It had better be "subsidies" unrelated to normal business expenses that are aren't granted to other industries in any way, shape or form specific to those industries as well.
ryggesogn2
1 / 5 (3) Jan 06, 2011
A carbon tax will only be useful if all proceeds are used to provide alternate energy and transportation resources.

Who will decide where the money will be spent? How will they decide?
ted208
2.7 / 5 (7) Jan 06, 2011
I had enough of these socialist elite, they never get tired of money grubbing schemes to separate citizens from their money. It is a nasty creeping abuse and control over the people they seek. How about opening up and exploring the real science behind the global warming hoax. It's time to extract some harsh justice from these doomsayers! It's not CO2, get over it!
Howhot
1.4 / 5 (9) Jan 07, 2011
@ted208. (alias; trailer-park-trash in some circles) I know kids that have a better understanding of the dangers that global warming presents to mankind that many of the commentators here. CO2 has gone from ~300ppm in 1960; to almost 400ppm now, and it's going to just continue that (exponentially) until a we over rule your kind and implement an immediate CO2 reversal plan. No it is not a Hoax. Yeah; it's time to extract some harsh justice from you polution lovers; and put Stalins boot on your throats you kitten killer.
Howhot
3.2 / 5 (9) Jan 07, 2011
Seriously though; this article has some good points. If the USA doesn't participate in any type of CO2 reduction plan (ie USA goes rouge to the rest of the world). Then what choice do other country have but to charge the USA a CO2 tax or tariff for the products shipped here and make up the USA's CO2 over production. And the they could tariff products produced from the USA for excessive CO2 use.

You can either be part of the solution, or part of the problem. Solutions are what is needed and the article certainly has a workable approach.
ormondotvos
4.3 / 5 (6) Jan 07, 2011
go to theoildrum.com and try that boast about being an accountant. They'll link you to the figures.

Externalities like the cleanup in Nigeria, the water pollution from the Bakken shale, the toxic waste from coal ash, the deaths from air pollution, etc. Oh, yeah, BP off Louisiana.
Skeptic_Heretic
2 / 5 (4) Jan 07, 2011
Gasoline costs about 15.15 per gallon without subsidy.

Cite to that calculation, please?
Delucchi, M.A. 1995. Summary of Non-monetary Externalities of Motor Vehicle Use, Report 9 in the series The Annualized Social Cost of Motor Vehicle Use in the US, Based on 1990-1991 Data: Summary of Theory, Methods, and Data. Draft prepared for the Union of Concerned Scientists. Institute of Transportation Studies, University of California, Davis.

Delucchi, M.A., and J. Murphy. 1995. Government Expenditures Related to the Use of Motor Vehicles. Report 7 in the series The Annualized Social Cost of Motor Vehicle Use in the US, Based on 1990-1991 Data: Summary of Theory, Methods, and Data. Draft prepared for the Union of Concerned Scientists. Institute of Transportation Studies, University of California, Davis.

THE ROADS AREN'T FREE: ESTIMATING THE FULL SOCIAL COSTS OF DRIVING AND THE EFFECTS OF ACCURATE PRICING Clifford W. Cobb

Those good enough? Have 100 more.
Skeptic_Heretic
2 / 5 (4) Jan 07, 2011
On a side note:
It had better be "subsidies" unrelated to normal business expenses that are aren't granted to other industries in any way, shape or form specific to those industries as well.
Why should the US be paying for any companies' costs of doing business? Would you like to explain that to us Mr. CPA?
geokstr
1 / 5 (1) Jan 07, 2011
On a side note:
It had better be "subsidies" unrelated to normal business expenses that are aren't granted to other industries in any way, shape or form specific to those industries as well.
Why should the US be paying for any companies' costs of doing business? Would you like to explain that to us Mr. CPA?

I was speaking of things like deductibility of research and advertising costs for instance, and amortization and depreciation of equipment, etc.
geokstr
2.8 / 5 (8) Jan 07, 2011
Those good enough? Have 100 more.

What the hell is this? The costs of the road systems are subsidies to fossil fuels?

I figured your $15.15 per gallon was bogus, but I thought it would at least be somewhat fictionally reasonable. This is calling government infrastructure maintenance a subsidy to oil.

What exactly will electric powered cars ride on but those same "roads" that were built to please Exxon? Oh, I forgot, you believe in government providing subsidies to mass transit instead.

Then, once we have most of the Southwest killing most of the birds with windmills and most of the desert wildlife paved over with solar panels providing energy at ten times the current cost, we won't be "subsidizing" the evil oil industry anymore, we'll be basking in "free" renewables.

It's easy to find 100 pieces of politically motivated tripe like that.
lengould100
3.6 / 5 (5) Jan 07, 2011
Then, once we have most of the Southwest killing most of the birds with windmills and most of the desert wildlife paved over with solar panels providing energy at ten times the current cost,
That's totally bogus scare-mongering. Not even CLOSE to reality.
rwinners
3.4 / 5 (5) Jan 07, 2011
And a gasoline tax which can raise price sufficiently over $4.00 / gal. to cause a significant reduction in oil imports.
You don't even have to tax it, just stop subsidizing private transportation and fuel at the pump. Gasoline costs about 15.15 per gallon without subsidy. Let's slowly up the price to the real price and see how much we need to import then.

Guarantee all the free marketeers would be driving PHEV's if the oil market was really free of government influence.


Care to back that $15 "real cost of gasoline" with some data?
apex01
3 / 5 (6) Jan 09, 2011
Carbon taxes are the answer to the stalled climate negotiations

Beware the Greens, they're really Reds in disguise. What better way to control the means of production?


Well said. Communism is second nature to them but they wear an iron curtain to disguise it. They don't call it Cap and Tax, they call it Cap and Trade.
geokstr
1.8 / 5 (5) Jan 09, 2011
Care to back that $15 "real cost of gasoline" with some data?

I looked at some of the ideological garbage referred to me by SH that passes for "objective" analysis and it was worse than I thought.

- 56 TRILLION added for "climate chaos" costs
- tax deductions for depletion costs, same as every industry with depletable assets gets
- tax deductions for drilling dry holes and other unproductive exploration cost, as if they shouldn't get to deduct that
- use of "last in first out" inventory methods, perfectly appropriate under GAAP accounting and available to all industries
- claims that the sales and income taxes on gasoline are lower, without including the huge "value-added taxes" buried in the pump price, where the feds make 8 times the profit per gallon than the oil companies
- building and maintaining roads, bridges, because apparently the utopian electric cars will not need to use them, or the greens have now developed Trekkie "transporter" technology

(continued)
geokstr
1 / 5 (3) Jan 09, 2011
- adding in the lost productivity of every health issue that could possibly be even remotely tied to pollution, as if it was all caused by the greedy oil companies
- lots of other extraneous junk

How about we add to the "cost" of ethanol, the green manna, the increase in price of food worldwide due to using all that corn for fuel, plus any deaths caused by starvation in third world toilets because of this wonderful substitute.

Our economy has costs to maintain. Oil is the best we can do at present. Lefties would have you think that somehow we can get rid of it without crashing our economy and causing a lot of impoverishment and death as a result.

The left lives in the fantasy world of St Karl of Marx.
ForFreeMinds
4 / 5 (4) Jan 09, 2011
The answer is for government to keep its fingers out of the economy and environment. If someone's land/water is polluted by another, then let that land owner sue the polluter - property rights can handle this. Politicians want to get between buyers and sellers of energy so they can extract a toll, fatten their wallets and increase their control of others. This would be considered a crime if government wasn't doing it.
GSwift7
2.3 / 5 (3) Jan 13, 2011
I agree that a tax is better than cap and trade. At least a tax keeps the money inside the system in stead of making investment bankers rich. If they do want to do a tax aimed at curbing the use of fossile fuels, then don't tax the end users. In stead, tax the transactions on the trading markets. That way there should be less trading, leading to more stable prices, and the cost will be born by foreign traders as much as domestic ones. An end user tax just cuts our own throat. At least a trading tax would somewhat spread the pain to people outside our borders. We essentially are already beginning the end user taxes though, with the EPA carbon permit system that went into effect in its first phase on January 2nd. Whatever route you choose though, if it involves money then we need to make sure most of that money ends up being spent to help the biggest polluters reduce their pollution. I don't want to see the money get spent on a new museum for some stupid thing nobody has every heard of.
GSwift7
2.3 / 5 (3) Jan 13, 2011
If the USA doesn't participate in any type of CO2 reduction plan (ie USA goes rouge to the rest of the world). Then what choice do other country have


We are already regulating CO2 emissions through the EPA. The new reg's went online 2 Jan, and phase 2 begins in June, with further expansion to follow. The regulation starts out small and increases in scope and strength over time. There's really no need for cap and trade, since we're going to get the same end result without the added expense of a carbon trading market. The companies who own coal power plants are already talking about accelerating their plans to decomission the oldest and dirtiest plants in response to the new regulations.
GSwift7
2.3 / 5 (3) Jan 13, 2011
I recently listened to a power company executive on NPR radio. He was doing an interview in regard to the new regulations. He said that the worst of the plants are actually nearing the end of their planned lifespans anyway, and that the new regulations will just speed up the conversion to the new hybrid gas powered turbine power plants and other cleaner more efficient (and more profitable) types of plant. They really do want to eliminate the old plants, but they just can't justify closing them early in regard to the investors who own shares of the plants. The new fines and permits (taxes by another name) help to make the numbers play out sooner, so it's a good thing all around.
GSwift7
1 / 5 (1) Jan 13, 2011
If someone's land/water is polluted by another, then let that land owner sue the polluter - property rights can handle this.


Just a few years ago, when I lived in Kansas City, Kansas, there was a new power plant constructed near residential areas. The plant is a new style 'clean' natural gas plant. Residents were given the customary period of time before the construction was approved so that they could have blocked the project at City Council. They approved the project because it lowered their property taxes to almost nothing. When the plant opened they found out that gas turbines are very noisy. They tried to sue the company and get the plant closed just a few months after it opened. They failed because the company had gone through due process to open the plant. The home owners have no choice about it now. The same thing goes for the landfill west of Kansas City. It sounded like a good idea at the time, but now they are stuck with it until their contract obligations expire
ryggesogn2
1 / 5 (3) Jan 13, 2011

Just a few years ago, when I lived in Kansas City, Kansas, there was a new power plant constructed near residential areas. The plant is a new style 'clean' natural gas plant. Residents were given the customary period of time before the construction was approved so that they could have blocked the project at City Council. They approved the project because it lowered their property taxes to almost nothing. When the plant opened they found out that gas turbines are very noisy. They tried to sue the company and get the plant closed just a few months after it opened. They failed because the company had gone through due process to open the plant. The home owners have no choice about it now.

That's why these companies like regulations. The local govts give them cover after the fact.
Skeptic_Heretic
3 / 5 (4) Jan 13, 2011
That's why these companies like regulations. The local govts give them cover after the fact.
No, that's why companies love contracts, and love ignorant people even more.

These people were ignorant to the fact that gas turbines are damn loud. So they signed and now they're screwed.
GSwift7
3 / 5 (2) Jan 14, 2011
The fault in my KC example wasn't with the power company. The problem was apathy. The noise of the turbines was well published in the EPA environmental impact study. It was even featured on the front page of the Kansas City Star newspaper and talked about on radio talk shows. People just walk around like blind zombies when it comes to being educated and informed. Groups of people can be counted on to regularly make bad decisions when the decision is based on group concensus. The vote to allow that power plant was on the ballot as a public referendum issue. Less than 10% of the people in that community turned out to vote on that local election cycle. Then they whine about it later, and act like something was done to them unfairly. The power company fully disclosed the impacts of the plant ahead of time. It was well known by anyone who was listening to local news. It's a good thing the company has a contract to protect it from lazy idiots, because that's what they are.
GSwift7
3 / 5 (2) Jan 14, 2011
Besides, the decrease in their property values is more than offset by the decrease in their property taxes due to the plant being in their school district. They are really coming out ahead monetarilly by a large margin, especially when you factor in the collapse of the housing bubble. Those people would have lost home value anyway, but at least now they still get the benefits of low taxes and well-funded schools.
Skeptic_Heretic
3 / 5 (4) Jan 14, 2011
Besides, the decrease in their property values is more than offset by the decrease in their property taxes due to the plant being in their school district. They are really coming out ahead monetarilly by a large margin, especially when you factor in the collapse of the housing bubble. Those people would have lost home value anyway, but at least now they still get the benefits of low taxes and well-funded schools.

That would be what the internet calls unintentional epic win.

Question is, what are the other potential rammifications of a gas turbine driven power plant in close proximity.
ryggesogn2
1 / 5 (1) Jan 14, 2011
The power company fully disclosed the impacts of the plant ahead of time. It was well known by anyone who was listening to local news. It's a good thing the company has a contract to protect it from lazy idiots, because that's what they are.

Why should they need a contract?
Company buys property, builds power plant, neighbors don't like, sue for damages, plant shuts down or pays to sound proof neighbors houses or....
And if such lawsuits are well publicized ( no out of court settlement), power plant operators will need to factor those costs into the next plant.
But with govt zoning, neighbors have little recourse.
GSwift7
3 / 5 (2) Jan 14, 2011
I actually used the word 'contract' loosely. What they actually have is a collection of operating permits from various agencies including local, state and federal government agencies. When I used the term 'contract' I was refering to the concept of a written agreement that certified them to do business before they began construction.

Sound barriers were built into the original design of the plant and the property surrounding the plant. They incorporated land scape design as well as architectual design to minimize the enviromental impacts. They HAVE to do these things to pass EPA muster. The problem is that even when you block most of the direct sound, on a cold cloudy night you might get a lot the noise reflected back down from cloud bottoms anyway. Even if you try to sue over the noise, the court is going to see that the power plant is doing everything they can and that they aren't negligent, so no damages are awarded. I know that, because that's what happened when these guys sued.
GSwift7
3 / 5 (2) Jan 14, 2011
But with govt zoning, neighbors have little recourse


If they had gone to city council meetings and voted at their local election they could have easily blocked this before it started. There was an alternate site being considered. In fact, the potential sites were actually fighting to get this plant to come to them. The residents totally supported this plant before it was actually completed and running. Then they changed their minds.
GSwift7
3 / 5 (2) Jan 14, 2011
That would be what the internet calls unintentional epic win.


I didn't even mention the fact that the company paid for numerous infrastructure improvements in the area; roads, water, sewage, power, telephone among them. Some of those were directly needed by the plant, but not all of them. I should also mention the +100 high paying permanent jobs.
ryggesogn2
1 / 5 (2) Jan 14, 2011
When I used the term 'contract' I was refering to the concept of a written agreement that certified them to do business before they began construction.

Same thing.
Jimee
not rated yet Jan 18, 2011
We all have a right to opinion, but endangering the lives of others and their children to save a few pennies (or to keep contributing to vast fortunes) seems unnecessarily unjust and smells of hubris. In my opinion.

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