Friedman’s main message is to point out the simplicity and efficiency of carbon taxes relative to the complicated cap-and-trade options, which he points out that “Wall Street types” would be running.
People get that – and simplicity matters. Americans will be willing to pay a tax for their children to be less threatened, breathe cleaner air and live in a more sustainable world with a stronger America. They are much less likely to support a firm in London trading offsets from an electric bill in Boston with a derivatives firm in New York in order to help fund an aluminum smelter in Beijing, which is what cap-and-trade is all about. People won’t support what they can’t explain.
We’ve discussed carbon taxes here before, and how they’re an important start to confronting the huge problem of climate change. Hopefully Deval’s administration can pass the modest 19 cent state gas tax they’ve proposed. But a tidbit that I found particularly interesting in Friedman’s piece and the Larson’s Q&A was the how this might be implemented with regards to international trade and foreign imports, from Friedman:
The bill implements a fee on carbon-intensive imports, as well, to press China to follow suit.
While carbon taxes would clearly be effective in reducing our fossil fuel consumption, as evidenced by the well known decreases in both US gasoline use last summer and in SUV purchases, how this would play out with regards to international trade isn’t discussed much. But countries like China are becoming as culpable as we are for “borrowing” from the future by burning huge amounts of fossil fuels now. It’s easy to wonder what the American economy will actually produce in the future given our recent difficulties in the auto industry. While cheaper labor abroad is part of this equation, that’s beginning to change as wages increase in places like China, as a fascinating piece in the New Yorker wrote about recently. Many overseas jobs are also effectively being subsidized with lessened environmental protections, which are basically economic externalities that not being accounted for in the low prices we pay for those goods. These “fees on carbon-intensive imports” would begin to take into account some of these externalities. They would also begin to level the playing field in terms of differences in the costs of production between different countries. There’s some irony here, detractors often paint environment efforts as being anti-business. “Fees on carbon-intensive imports” might be one of the best things for American business we’ve seen in a long time. Yet, it also verges on being a form of protectionism, and at least at first consideration seems to lack the carbon tax’s simplicity of implementation (Who gets to decide the amount of the fees? And on what goods and countries?). It could be a powder keg for diplomacy. This is a fascinating new wrinkle in the carbon tax.
Also, there’s some useful stats from the Rep. Larson (CT) website that counters the notion that carbon taxes would hurt lower income people (especially if they are “revenue neutral”, being linked to decreases in income tax).
A carbon tax is just an energy tax and energy taxes are regressive. Wouldn’t this tax hurt lower-income individuals the most?
While the carbon tax is a regressive tax, the revenue would be used to counteract the regressive effects of the payroll tax. The Brookings World Resources Institute study mentioned above demonstrates that this is a distributionally neutral proposal. Additionally, because those at the top of the income scale have bigger houses, travel more and use more energy, they would contribute much more to this fund. In 2005, the most recent year for which data is available, the top 20% of the income scale spent an average of $3,182 on gasoline, or 3.6 times as much as the $882 spent by the poorest 20% of households. In other words, the highest-earning 20% accounted for 32% of the total, while the lowest 20% contributed just 9%.
And as a (literally) distant aside, I had a piece in Nature this week commenting on some interesting research that has just come out about a nickel famine in the oceans 2.4 billion years ago that allowed oxygen into the atmosphere. It’s behind Nature’s (non-open access) subscription wall, but there’s a number of popular articles about it. Here’s one article with a humorous title. I ended my piece with a comment on the stability of Earth’s (chemical) elemental cycles, which is related to our modern predicament with the element carbon:
One of the sobering realizations of studies such as this is that, although natural selection provides a clear, single positive feedback mechanism for the continuation of life, elemental cycles are instead influenced by an aggregate of mechanisms, including biological evolution, chemical reactions, changes in ocean circulation and geological events. If, as Konhauser et al. suggest, a single geological change can starve a major oceanic microbial community, and thereby change the trajectory of life on Earth, it suggests there is a fragility to Earth’s elemental cycles that we are only beginning to uncover.
According to the EPA, burning a gallon of gas releases 2421 grams of CO_2 (source)… 5.33739137 pounds.
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p>At $15/metric ton, that’s 3.6 cents per gallon in added tax.
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p>What about electricity?
For coal, 1.341 pounds of CO_2 per kilowatthour (source), which means your electric bill will go up by about $4.50 per month (500 kWh usage). That’s if you use just coal though. We use about 20% non-carbon, and another chunk in nat-gas, so figure closer to $3.00 per month (500 kWh usage).
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p>Heating oil? For a first order approximation, figure 4 cents per gallon.
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p>Reduce payroll taxes? Sure, maybe. Here’s an idea though: how about using some of this money to fund infrastructure that allows less carbon emissions? I’m thinking about things like subsidizing renewable energy, mass transit, state and local government building efficiency improvements. I’m thinking about bike lanes and sidewalk improvements, weatherizing low income housing, and improving the national rail system for mo’better’faster transit of people and consumer goods. I’m thinking about flat-out bribing communities to revise their zoning to reduce sprawl.
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p>The tax stops increasing when we hit our target. If we invest some of that tax revenue in making it easier for everyday people to reduce their carbon footprint, we hit that target sooner while simultaneously helping to reduce the negative impact of the tax increase by helping those folks save that energy in the first place.
not much of an incentive to conserve is it…
that’s the first $15/ton. The idea is to ratchet it up to make it just high enough to get the job done. Besides… it does start to have an impact when you’re in charge of a fleet of vehicles, a set of buildings, that sort of thing.
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p>It’s a tricky thing… you want it to be enough to make a difference, but not so much that it’s oppressive.
Isn’t a whole lot of teeth. That’s 30+ years to have the first $1 increase. Market effects kicked in last year at around $3-$4 right.
Well, 3.6 cents price increase per gallon of gas per year, but I feel you. It’s not a lot of teeth. But it’s more teeth than we’ve got now, and the sooner we start the better.
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p>I’d like to see it go up a little more quickly, but if it moves too quickly there’ll be too much resistance both initially and every year when it goes up.
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p>Personally, I’d like to see it implemented to have increases every half year on April 1 and October 1. The idea is to not “split” the summer driving season or the winter heating system, and keep each specific increase in tax lower to help reduce the sticker shock and avoid New Englanders demanding that their home heating oil be topped up the last week in December every year.
Hi Stomv,
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p>It’s 10$ a year after the first 15$ year one, which comes to 2.376 by your calculations. But I think the estimate is on the carbon content of the original fuel, not the tailpipe emissions, from Larson’s website (second link in post):
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p>What does that come to?
on the $10/yr after the first year. Adjust my math accordingly (which makes it look like yours, of course).
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p>The math I did doesn’t have to do with auto engines; I just used the carbon content of a gallon of refined gasoline. Now, I have no idea if that’s where they’d sample and assess the carbon tax, as opposed to where the barrel of oil enters the refinery. It matters a little because a barrel of oil becomes many things — some gasoline, some diesel, some heating oil (No 2, 6, etc), some plastics, some industrial waste, and so on and so on. Clearly it’s easier to measure the oil on the way in than on the way out. The flip side is that oil that becomes plastic doesn’t have the same CO_2 impact on our atmosphere as oil that will be burned in the near time. Since so little of the oil becomes plastic it might not matter to a first order approximation; I’m not sure.
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p>I’m not sure if I’ve answered your “what does that come to?” question since I’m not really sure what you’re asking…
A tax to keep elites being elites. Not one windmill, not one solar array just a tax to keep the lowly even lower still.
Overusing elite was so mid-2000s. You remember, John Kerry, windsurfing, that sort of thing? As for not understanding economics, that never gets old with the folks who love to throw the word elite out there…
and their knowledge used for benevolent purposes. I do however have a problem with elites de-populating America for fun and profit.
http://video.google.com/videop…