Tyler Cowen has a Bloomberg piece on carbon taxes. I agree almost entirely with Tyler on this issue, but I’d like to frame things a bit differently. Consider this remark:
And one striking result from Tuesday’s election is that voters in Washington state, a Democratic stronghold, soundly rejected a proposed carbon tax by a margin of 56 to 44 percent. This raises the prospect that the carbon tax may be dead as a policy for the time being, including at the state level.
That seems reasonable, particularly given that global warming is the most “external” of all externalities. The benefits of a state level carbon tax would almost entirely accrue to the 99.9% of humans who do not live in the state of Washington. Even at the national level, carbon taxes are a hard sell.
If I wanted to play the devil’s advocate, however, I could point to another referendum conducted on Tuesday, in a state very much like Washington. Colorado voters rejected a progressive income tax by a similar margin (54.5% to 45.5%). Can we conclude that state level progressive income taxes are politically infeasible? No, many states already have them, including many “red states”.
A better argument is that it’s really hard to get voters to approve any new taxes at all. So I think Tyler’s right in that sense, but then we need to look more deeply at the implications of this problem. Here’s Tyler:
Economists should not give up our analytical arguments for a carbon tax. But maybe it’s time for a change in tactics. These new approaches might start with the notion that we can address climate change without transferring more money from voters to politicians.
One solution would be to offset the carbon tax with an equally large reduction in even less popular taxes. That’s not easy to do, and in fairness an earlier attempt along those lines (in 2016) also failed. But even there, the proponents were trying to solve too many problems at once, with some of the money going to a boost in the EITC, which doesn’t motivate the average voter.
In the past, I’ve advocated carbon taxes combined with cuts in precisely those taxes that the GOP hates the most. Democrats would not be thrilled with that option, but if they really believe global warming to be the threat that they claim it is, then they should swallow their objections and go with this sort of compromise. Even if global warming is not a problem, there are obviously much worse taxes than a carbon tax. I believe that a proposal that is strongly supported by both environmental groups and a state-level Republican Party can succeed with the voters. Unfortunately, Washington state is actually not an ideal place for this idea, as they lack the specific tax that the GOP hates the most (income taxes.)
I think that Tyler’s right in arguing that global warming won’t be addressed until the politics are more favorable. In my view that will require:
1. More actual warming—so that the severity of the problem is clearer.
2. Technological gains that make the costs of abatement lower.
3. Demographic changes—young people are more tuned into this issue.
4. Global growth that makes citizens in places like China more willing to spend money on the problem.
5. A global shift back toward neoliberalism, and away from the right wing nationalism that is currently sweeping the globe.
PS. A brief comment on Bob Murphy’s new article, linked to by David Henderson. It’s true that the Nordhaus model calls for a fairly modest carbon tax. But it’s also worth noting:
1. The model suggests the tax should grow over time, and expectations of that growth is one of the factors that would motivate investment in cleaner energy. Without that carbon tax, technological progress will be slower.
2. The optimal carbon tax in Nordhaus models has rapidly grown over time, as Bob acknowledges. That means that critics of Nordhaus’ earlier proposals, who claimed that he underestimated the seriousness of the problem, have turned out to be correct. The warming of 3.5 degrees centigrade now viewed as optimal (that’s 6.3 degrees Fahrenheit), still seems absolutely horrific to me (especially for animal life, coral, etc., but also for fragile places like Bangladesh.) I predict that future versions of the Nordhaus model will show further sharp increases in the estimated optimal carbon tax.
To summarize, there’s almost no risk of the world doing too much on climate change. Given the politics, all the risk is in the other direction.
PPS. In earlier eras, animal life could have adjusted to climate change. But humans have now “fenced off” so much of the planet that animals are basically stuck on “islands”, and find it increasingly hard to adjust to environmental stress. The same is true for humans. People in Bangladesh are no longer free to migrate to a warmer Siberia, as they could have 10,000 years ago. If you favor doing nothing about global warming, then you should also favor open borders. This doesn’t mean I agree with those who predict doom—I think they underestimate the ability of humans to cope. But we should do more. Put me down as being a moderate on this issue.
READER COMMENTS
Ray
Nov 10 2018 at 12:50pm
The main issue behind the calls for action around “global warming” (actually, it’s climate change now since there hasn’t been much warming) is that they’ve been religious and drowned out most of the serious scientific debate.
Yes, there’s been warming. Much of it from natural causes, and some of it by man. No, it hasn’t led to increased natural disasters and no, none of the predictions around the polar ice caps disappearing have come anywhere close to fruition. Scientists (much less politicians) can’t even say what the “ideal” temperature for the world is so it’s unclear to what level we’re trying to hold at.
If readers can remove their passion and look at the data, we can all approach this debate far more rationally:
https://www.cato.org/publications/commentary/when-will-climate-scientists-say-they-were-wrong
https://vimeo.com/160012786
TH
Nov 11 2018 at 3:18pm
Ray who has not studied this but def knows to trust the opinion of a guy funded by the fossil fuel industry:
https://www.sourcewatch.org/index.php/Patrick_J._Michaels
Bob Murphy
Nov 13 2018 at 9:49pm
TH wrote: “Ray who has not studied this but def knows to trust the opinion of a guy funded by the fossil fuel industry…”
Your own link shows that Pat Michaels was an Expert Reviewer for the AR4. If the UN’s Intergovernmental Panel on Climate Change trusts him, I think Ray can be forgiven for citing his as well.
John Alcorn
Nov 10 2018 at 4:57pm
Thomas Schelling, author of a landmark article in Foreign Affairs (1997), emphasized conflict of interest between developing economies and advanced economies:
Economists have advocated diverse policies to address climate change; for example, investment in adaptation (Schelling), a substantial add-on gasoline tax (Mankiw & The Pigou Club, here), a modest-but-comprehensive revenue-neutral carbon tax with a carbon dividend and elimination of all energy subsidies (Becker, here), and a ban on coal-burning (Krugman).
A recent article in Nature Climate Change projects that stringent global policies to prevent or to mitigate climate change would adversely impact food security:
At long last, economists are heeding Schelling’s emphasis on adaptation. A recent overview of research explains:
Prosperous countries have vastly greater resources for local adaptation. For example, presently, the Netherlands, but not Bangladesh, can create comprehensive infrastructure against rising sea levels.
In a world of mostly closed borders, vast nations with wide range in climate—and perhaps the European Union—have the advantage of great scope for internal migration:
Therefore, open international migration is essential to allow people from poor countries to adapt to climate change. In a regime of closed borders, the world’s poorest suffer disproportionate harm from climate change. Think Bangladesh. Moreover, as I noted above, current research predicts that the world’s poorest would suffer harm from stringent global climate mitigation, which would exacerbate food insecurity in their regions. Climate change and general climate mitigation are twin dangers to the world’s poorest. Open borders are the surest, swiftest global adaptation policy.
John Alcorn
Nov 10 2018 at 8:29pm
In my previous comment, the emphasis was on adaptation. Here I place an emphasis on prevention (or mitigation). A carbon tax generally takes center stage in policy discussions by economists. A complementary policy is to compensate Brazil and Indonesia to protect the Rain Forests.
Deforestation in Amazonia and in Indonesia causes massive habitat destruction, extinction of species, and reduction of CO2 capture from the atmosphere. These are clear and present dangers.
Decimation of Rain Forest now occurs by human economic activity (logging, ranching, farming, and so on), but would become a self-propagating process—a critical transition from forest to savannah—if a tipping point is reached. Sergio Franklin and Robert Pindyck explain (here):
Other scholars adduce evidence that policy can substantially reduce deforestation, even in remote hinterlands:
Policies to conserve Rain Forests are a further precaution against model risk—the risk that climate models underestimate temperature increase or ice-cap melt. Prosperous nations have begun to compensate Brazil and Indonesia in various ways to conserve Rain Forests, and should do so more systematically. Although “the reach of the State” in Brazil and in Indonesia presently is a question mark, bootstrapping to achieve advantageous agreements (‘Coasean bargains’) nonetheless might be more feasible around the clear and present danger of regional Rain Forest destruction than around global CO2 emissions. Compensation treaties to protect Rain Forests would involve fewer countries (and would therefore have lower transactions costs) and would be easier to monitor (for example, by satellite) than would elusive global treaties to tax or cap CO2 emissions.
Benjamin Cole
Nov 10 2018 at 8:35pm
Pollution taxes are a great idea. Income taxes are a bad idea and are becoming uncollectible anyway.
Thaomas
Nov 11 2018 at 6:38am
@ Cole: Agree. We need to move to progressive consumption taxes.
John Alcorn
Nov 10 2018 at 8:56pm
It might seem that markets should be the last place to look for climate-policy wisdom. After all, some crucial markets, such as the market for fossil fuels, don’t internalize the social costs of pollution—and the point of climate policy is to correct these market failures. But it happens that market-oriented policies can help in different ways, by virtue of competition and openness. Here I outline two of them.
1) Eliminate energy subsidies
Although consensus for Gary Becker’s revenue-neutral carbon tax remains elusive, one would be hard pressed to find any distinguished social scientists who support carbon subsidies. Yet carbon subsidies are massive. For example:
And, of course, there are many other major carbon subsidies besides road-sector fuels.
Market-oriented policies eschew subsidies for activities that have major negative externalities; for example, pollution or depletion.
2) YIMBI: Deregulate housing construction in cities.
Edward Glaeser, the doyen in urban economics research, explains that excessively restrictive regulation of housing construction in cities drives up housing prices and pushes people to migrate to more carbon-intensive suburban regions, where housing is more affordable:
Glaeser makes the case that smart deregulation of housing construction in cities—greater openness in a crucial market—would reduce carbon emissions substantially. This is an instance where open markets have positive climate externalities.
Philo
Nov 10 2018 at 11:14pm
Thanks for your comments on adaptation–championing, inter alia, open borders–and prevention/mitigation–not just carbon taxation but eliminating carbon subsidization, preserving rain forests, and deregulating housing construction (at least in American cities). You don’t mention two other ideas I have heard put forward: reducing herds of meat animals, who, allegedly, put greenhouse gases into the air by farting, and seeding the upper atmosphere with particles that would reflect sunlight (or in some other way increasing cloud cover). Do you find any merit in these ideas? And how widespread is the NIMBY problem of housing regulation—you mention the United States, but how about other countries?
John Alcorn
Nov 11 2018 at 9:11am
@ Philo:
a) Methane emissions are a negative externality from livestock. Although the livestock industry is a major part of New Zealand’s economy, the Ministry for the Environment there has proposed a Zero Carbon Bill. The sponsors of the Bill expect to achieve methane reduction in the livestock industry through a technological breakthrough: new biochemical supplements in animal husbandry, to prevent livestock from producing methane emissions.
b) NIMBY regulation of housing construction in cities is a massive problem in the UK. A recent report by the Institute of Economic Affairs (London) concludes: “The reason for the government’s failure in tackling the housing crisis is its unwillingness to confront organized ‘Nimbyism’.”
Mark Bahner
Nov 10 2018 at 10:12pm
It’s much, much worse than that. If every single source of CO2 dropped to *zero* emissions tomorrow, the temperature effect would not be discernible for a decade or even decades. The world would keep warming even if all CO2 emissions went to zero tomorrow, because there is excess thermal energy in the system.
Contrast that to what would happen to criteria air pollutants such as particulate matter, sulfur dioxide, and nitrogen oxides: shutting down even a single large coal-fired power plant creates immediate, measurable reductions in particulate matter, sulfur dioxide, and nitrogen oxides downwind of the plant.
Philo
Nov 10 2018 at 11:18pm
Sumner writes that “there’s almost no risk of the world doing too much on climate change.” But I think that when he talks of action by *the world*, he means action by *governments*, and no situation is so bad that governments can’t make it worse. “Doing something on climate change” is a likely pretext for all sorts of harmful measures.
BC
Nov 11 2018 at 2:08am
Pierre Lemieux reminded us a few days ago on this blog that externalities are symmetric [https://www.econlib.org/competition-between-the-obese-and-the-thin/]. Nearly everyone talks about global warming as an externality imposed on warm and coastal regions (like Bangladesh) by fossil fuel regions. However, one can equivalently think of the issue as Bangladesh’s desire for more coastland imposing an externality by reducing the value of other peoples’ mineral rights. Regardless of who starts out with the coastland/mineral rights, Coasean bargaining will lead to the rights being sold to those who most highly value them. The only difference is in wealth distribution. (Obviously, it is better to start with the property rights since they are valuable.)
It seems more than plausible to me, and maybe even likely, that Bangladesh will not want, or is unable to afford, to buy up significant portions of the world’s fossil fuel reserves to prevent their use, thereby preserving its coastland. Indeed, I am unaware of any such effort by people living in warm climates and low lying coastal regions. Might that mean that Bangladesh values its coastland less than the rest of the world values its energy reserves? If that were true, then wouldn’t the utilitarian thing to do be for the world to continue burning fossil fuels rather than forcing Bangladesh to buy out the world’s energy?
Now, some might insist on deontological grounds that Bangladeshis have a much stronger natural right to their coastland than the rest of the world has to its energy reserves. Hence, the rest of the world should have to buy out Bangladesh’s coastland if it wants to use its energy reserves. However, Scott doesn’t believe in natural rights and finds utilitarian arguments more persuasive than deontological ones. From a utilitarian perspective all that matters is which is valued more highly, energy reserves or coastland. Whether Bangladesh is paid for its coastland or instead saves lots of money by not having to pay to buy out the world’s energy is immaterial. After all, not having to pay money is equivalent to receiving money. At least, that’s what progressives tell us whenever the topic is tax breaks or tax cuts.
Hazel Meade
Nov 13 2018 at 5:25pm
Coase doesn’t have a lot to say about which solution is just though. Is it fair for people who currently own coastland to have to pay off fossil fuel users in order to retain their property? Or would it be more fair for people who use fossil fuels to pay off (compensate) the people who own coastland? Arguably a carbon tax could accomplish the latter.
Thaomas
Nov 11 2018 at 6:30am
Much as I love to be a SS contrarian, this hits the nail so precisely on the head that I can find nothing to object to. 🙂
I would go on to add that while we optimistically “do nothing” the risk increases that when the eventual “do something” moment arrives that it will be something a lot less effective and more costly for growth than a carbon tax.
Weir
Nov 11 2018 at 7:52am
For one thing, the water flows downhill into Bangladesh. But even so, the smart thing for people in low-lying countries is to follow the example of the Netherlands, don’t you think?
Imagine if the Dutch, hundreds of years ago, had tried to simply tax their way to preventing a low-lying country from flooding. Not a direct approach, is it?
Politicians in America could slap a tariff on every purchase of fuel or electricity. Some guy earning minimum wage could be made to pay artificially high prices for fuel or electricity, and we can all pretend that this is saving the planet.
Politicians in Germany pretended that the cost of renewable energy was no more than a scoop of ice cream. Or there was Al Gore on PBS a month ago: “The language that the IPCC used in presenting it was torqued up a little bit, appropriately. How do they get the attention of policy-makers around the world?”
One of the problems with lying is that the hypocrisy isn’t subtle or hard to spot. If we weren’t just playing pretend, we’d build nuclear power plants. We wouldn’t fly from one climate conference to another, spewing out more CO2 at the airport than that guy earning minimum wage emits in a year.
Young people were terrified by the scaremongers hyping the overpopulation emergency in the 60s. I think the timeline goes like this: Overpopulation. Then global cooling. Then acid rain. Then the ozone hole. Then global warming. Then Y2K, and various kinds of flu, but mostly global warming. And there will always be more young people to frighten.
The risk that politicians would waste a lot of money on subsidies for biofuels is more than a risk. It’s the reality. It happened. And one of the other problems with that is the destruction of a lot of forests for the sake of these biofuels. Another one of the problems is hunger. And also, lying is wrong.
Torquing up the threat for year after year, telling people they have five years or three years to save the planet, then postponing the apocalypse, over and over again, year after year? How much credibility do the politicians think they have in reserve? Do they think the voters are stupid? Well yes, they do think that. But are the voters as stupid as the politicians?
Hazel Meade
Nov 13 2018 at 5:28pm
Yes. Nuclear power is the climate skepticism of the left. By which I mean, that the anti-nuke position on the left holds the same sacred-cow position that climate-skepticism does for the right. In both cases it’s an unscientific position that is blocking them from sensibly addressing a legitimate issue, but which neither side is willing to address.
Hazel Meade
Nov 14 2018 at 10:51am
Well, that’s not true. People aren’t strictly rational. Lots of people want to believe things because it’s convenient. Ignoring evidence because it doesn’t fit your preconceptions is a common well-understood phenomenon. That doesn’t mean that overhyping things is a good way to change people’s minds, but just pointing out the scientific method isn’t going to work either. Or if it works, it may take a very long time. More time than you have. I was merely pointing out that the opposition to nuclear energy on the left, and the unwillingness of leftist intellectuals to confront it, is just as irrational as the climate change denial popular on the right. Maybe more so considering that it’s blocking one of the most viable technological mechanisms to address climate change.
Scott Sumner
Nov 11 2018 at 12:10pm
Ray, I’m afraid you are not familiar with the “science”. It’s not correct that predictions of polar ice caps melting have not come true. We won’t know that for decades. Nor is it true that much of the warming is “natural”.
Philo, In a technical sense the world could easily do too much. Doing what Al Gore prefers might be doing too much. My observation was political—it’s very unlikely that will happen.
Mark Z
Nov 11 2018 at 1:36pm
Well, paraphrasing Paul Krugman, isn’t ‘technical’ the best kind of correct?
In any case, I think there definitely is risk of doing ‘too much.’ There are specific environmental policies that would cause more harm than good that wold likely be realized the next time Democrats are in a position of power. Policy isn’t a linear spectrum from 0 to infinity, and we’re just sitting to the left of the ‘just right’ point on the line, and therefore any policy that ‘does something’ to mitigate the problem is a marginal improvement. Doing not enough and doing too much are not mutually exclusive.
Mark Z
Nov 11 2018 at 2:01pm
On the topic of ‘doing too much,’ I think it’s actually arguable whatever we do policy-wise, short of very extreme measures, is pretty unimportant in the grand scheme of things. Developed countries – including the US – have been experiencing noted declines in carbon emissions for some time, despite very different environmental policy regimes. Improved fuel efficiency, re-urbanization, increased substitution of natural gas, and increased efficiency in agricultural land use have likely been important factors in this. Demographic, economic, and technological changes will likely dwarf the effects of policy one way or the other, and even fairly draconian carbon taxes in the developed world will likely have basically a negligible effect on temperature.
For a carbon tax to amount to more than a drop in the bucket in effect, it would probably have to be global in nature, and hit developing countries pretty hard; which means that, contrary to what some seem to think, its cost would not merely be in wealthy people having to forgo some luxuries, but also in human lives. And as long the most ardent climate change activists are almost invariably unwilling to countenance things like gentrification, fracking, the growth of big Ag companies at the expense of small farming, that help reduce carbon emissions, but that they don’t like for other reasons, others will tend to see the sense of urgency as disingenuous and be similarly unwilling to tax themselves for the climate’s sake.
Todd Kreider
Nov 11 2018 at 3:42pm
First, I don’t see where the “3.5 degrees centigrade is now viewed as optimal” from. Second, the use of Bangladesh as an example of a country that will suffer greatly from a temperature rise always assumes Bangladesh will not become richer despite having grown at an average GDP per capita rate of almost 5% a year since 2000 — growing from $1,600 in 2000 to $5,000 in 2017. At 5% growth, Bangladesh will be at $27,000 in 2040 and using 2040 technology. But there is no sea level rise risk to Bangladesh in 2040 – you need to go out to at least 2070.
Say from 2040, growth slows to just 2%, then the GDP per capita of Bangladesh will be $80,000 to $90,000. One can play with different growth rates but Bangladesh will not be a poor country in 2040 or 2070.
copans
Nov 11 2018 at 5:09pm
The 3.5 C is from Nordhaus in 2016, apparently.
https://www.econlib.org/library/Columns/y2018/MurphyNordhaus.html
I assume because that so much of the land mass of the earth is in the north, this might be optimal temperature if there weren’t already inhabitants of the equatorial regions. But there are.
Todd Kreider
Nov 11 2018 at 8:48pm
Thanks.
Most climate scientists seem to think climate sensitivity is 2.5 C to 3.5 C so why assume the high end? That is also 100 years away when CO2 sequestering already looks possible at a much lower cost than even just five to ten years ago. Why would anyone assume that various technologies that will mitigate a temperature rise won’t significantly improve by 2035, 2070 or 2100? Humanity overcame the 1987 brick size cell phone problem, right?
liberalarts
Nov 11 2018 at 3:43pm
I thought that most hated tax for the GOP is the estate tax. Imagine a proposal to increase any tax (carbon, sales, income, you name it) in a revenue-neutral way to fully eliminate the estate tax!
Larry
Nov 11 2018 at 6:05pm
The no-brainer move on climate is to flood the funding pipeline for energy research. Cheap clean (probably nuclear) energy is the only thing that will allow Asia and Africa the mobility and AC that the north already enjoys. Time’s a-wasting. Without that no remotely feasible carbon reductions will stabilize the climate. A $50/ton tax isn’t even a good start, not that anyplace in the world will even go that far. Many countries subsidize gas prices…
ChrisA
Nov 11 2018 at 11:18pm
Scott, All
You should not worry about Bangladesh. It is a river delta and they are very resistant to sea rise. The sea has risen over 100 metres since the end of the last ice age and the Bangladesh river delta has remained there. The mechanism is that as the sea level rises, the river flow speed drops (because there is less pressure difference), the slower river causes more silt to drop out, which raises the river bed and the speed then increases again. So over time the river bed or the delta height increases until the silt drop out is keeping the delta level with the sea rise.
South Pacific Coral Atolls also have a similar protective mechanism – the coral basically grows until it is at the surface of the sea, so as sea rises the coral surface rises. The current rate of sea rise is definitely not beyond the growth rate of coral.
The most vulnerable areas to sea rise increases is probably places like Florida – which is basically built on porous limestone. As a giant river delta, if the natural processes were in place, as the sea level rose, vegetation and silt in the delta would also rise, keeping the land constant with the sea. But these natural processes have been severely interrupted by all the building going on there.
Myself I think the tests inadvertently set by Paul Krugman are good – he was using these as an example of why skeptics could never been convinced, but actually I think they are a pretty good guide;
We have to be sure the world is actually warming (I think this is pretty settled now).
We have to be sure that the recent warming is actually caused by CO2 rises (this is still debatable I think – we have seen warming at similar rates in the past historical record. Modelling the response of highly complex systems like climate to perturbations is not easy)
We have to capable of organizing international action to lower CO2 emissions (not very clear to me that we can do this).
We have to ensure that the international action doesn’t result in even worse unintended consequences (we don’t want some wars)
We have to be sure that any cost is worthwhile and it doesn’t just get given to rent seekers (I think this one is tough given the cost of abatement is small and many countries, say India and Russia would not be significantly affected compared to the benefits they get from fossil fuels.)
We have to be sure the money we spent should not be spent on other things that would have higher utility (the Bjorn Lomberg argument).
Until these questions are settled, I think we have to be patient. Myself I would rather we focused on the final question – 6. I think AI security is the most important existential issue the human race faces. Global warming is definitely not an existential issue so it should not be so prioritized.
Having said all this – I would vote for a carbon tax if it were revenue neutral. Taxing energy use is a fairly progressive way to tax and not obviously worse to me than taxing say houses. In addition CO2 emissions are correlated with local pollution, so you can get a benefit there. Note however in Europe that the taxes on fuels like gasoline are much higher and I don’t see lots of people using electric cars there compared with in the US, so it probably won’t have a very significant effect in advancing this transition.
S D
Nov 12 2018 at 2:59am
“People in Bangladesh are no longer free to migrate to a warmer Siberia, as they could have 10,000 years ago. ”
This is fallacious.
Humans in that era were limited by the speed of their own feet and were far more likely to fall victim to neighbouring tribes, particularly while trying to migrate!
Today, it is quite possible for a motivated person in a poor country to migrate to a rich one.
RPLong
Nov 12 2018 at 8:42am
This is great! I’m not sure whether I support a carbon tax, but if this proposal were made, it might push me over the edge in favor of the carbon tax.
michael pettengill
Nov 12 2018 at 8:45am
Yet again, economists fail to understand economics.
And effective carbon tax generates zero tax revenue.
As a physicist and scientist, I use dx/dt instead of “in the long run”
In the long run, consumers will dodge taxes by substituting untaxed alternatives.
A given tax will cost more in the long run as economies of scale drive down costs of substitutes, increasing substitution.
Hawaii is already at parity for substitutes for fossil fuel due to the transportation “carbon tax”, but dx/dt sets the year it happens based on the production of installed solar, batteries, wind on the islands, which are functions of today expanding lithium mining, lion cell lines, battery manufacturing, planning and installation worker skill.
The solar roofs production exceeds allowed demand due to scarcity of battery supply, with prices set low at long term cost to drive long term demand instead of high to clear the market, and generate profit, and bad will as prices rapidly fall.
Tesla is not the only firm building gigafactories just to make batteries, just the one building capacity fastest.
And Tesla is generating so many CAFE credits that the price to big gas guzzler automakers is going down, which hurts their slow EV ramp up. Still the rapidly growing production means more revenue at lower prices, for now. The price will crash in five years or less.
Note, EV vehicles are better, and grid and home electric battery storage are better than gas peaker plants driving demand even at slightly higher prices.
And in less than a year, Tesla cars will get no buyer tax credit because it’s above 200,000 sold.
The various tax credits being reverse carbon taxes, arbitrarily priced.
Half the investment is planned without tax credit, then the credits get sold as a gift of profit. Ie, Tesla buyers decide before knowing price, and utilities have mandates to meet with all cost going to customers and Congress is unreliable , so the “carbon tax” is unpredictable.
Bryan Willman
Nov 12 2018 at 11:52am
“Without that carbon tax, technological progress will be slower.”
Actually, I doubt this. Or rather, I doubt that adding more money will make progress any faster.
Real progress on things like energy seems to require running down long dependency chains – meaning that spending an extra $1B today may have literally zero effect on the state of technology in 10 years.
Dallas
Nov 12 2018 at 1:32pm
Your assumption of: “if they really believe global warming to be the threat that they claim it is” doesn’t appear to be true for activist organizations like the Sierra Club and other ENGO’s who very actively opposed the first Carbon tax proposal in Washington that didn’t give the activist a new source of power and influence.
The growth, survival, and fundraising of their institutions were far more important than solving global warming. With a significant increasing carbon tax, without the exceptions for the politically connected and government that the latest Washington proposal contained, the problem of excessive CO2 emissions would on the way to a solution, which would harm the ENGO’s interests.
Scott Sumner
Nov 12 2018 at 3:38pm
ChrisA, Interesting comment. You said:
“South Pacific Coral Atolls also have a similar protective mechanism – the coral basically grows until it is at the surface of the sea, so as sea rises the coral surface rises.”
But isn’t global warming expected to destroy most of the planet’s coral?
ChrisA
Nov 13 2018 at 12:12am
Scott – “But isn’t global warming expected to destroy most of the planet’s coral?”
I am certainly no expert but I do not think this is the position of most experts on the subject. The first point to make in any modelling of a perturbation is that coral is an organism and can adapt. So there is not a simple chemical response to higher temperatures or high CO2 concentrations. To illustrate this point coral has been around for hundreds of millions of years during which time there has been huge climate change from much hotter to much colder than it is projected to change due to anthropogenic effects. Coral adapted to these changes thanks to evolutionary effects, which are very hard for anyone to model in a simple numerical way. Coral is also widespread in the world, with areas of coral even in very high water temperature areas such as the Arabian gulf, so there is no reason why coral can’t work in lower temperature areas like the South Pacific. Like everything in this subject, there was a publication bias to the initial speculation about the effects of warming and higher CO2 causing acidification which ignored the adaptation effect and was also based on limited understanding of how coral grows. Simply put people who more alarming speculations were more widely reported than those who made more sober ones which is why you thought that coral would disappear. But most of these speculations were made without any significant research. Now people are doing some proper research into coral growth they have discovered some interesting things, such as that coral are deliberately lowering the Ph locally to quite acid conditions to dissolve carbonates so they can access the CO2 (CO2 in alkaline waters becomes a carbonate which coral algae symbiotes can’t use – they work on photosynthesis which needs the CO2 molecule). Increasing the availability of CO2 in shallow waters may therefore actually increase coral growth rates. I don’t want to claim that the effects are entirely benign, I don’t really know but I do think that we will find they are much less significant than the original very alarmist speculations.
aaron
Nov 13 2018 at 11:23am
No, corals do quite well in warm water.
Acidity breaks down dead and unhealthy coral faster, but frees up resources for and feeds healthy corals.
Corals evolved during warmer climates than current.
Mark Bahner
Nov 15 2018 at 5:38pm
As others have pointed out, I don’t think that’s the case. Several years ago I did a fair amount of research on corals surviving in high temperature waters, especially corals that might be affected by the Barakah nuclear power plant in Abu Dhabi. (Those will definitely be exposed to some of the highest temperatures in the world.) I’ve forgotten most of the details, but the bottom line is that there are many opportunities for various measures to help corals to live even in extremely high-temperature waters.
I’m thinking of things such as conventional breeding, genetic engineering, artificial substrates, electrical stimulation, and many other possibilities.
Electrical stimulation of corals
aaron
Nov 13 2018 at 1:11pm
If you have to tax, carbon tax is about as good as any, just needs to be offset by more progressive income tax–and maybe get rid of corporate tax and tax cap gains as income while we’re at it.
That said, I do have a problem with carbon dioxide tax as it creates some very perverse incentives. Carbon capture storage is a horrible idea. Palm oil, etc. too.
A simple tax on fossil fuel consumption would be better.
GHG externalities are very unlikely to ever be a net negative. Focus on conservation and energy security.
LK Beland
Nov 15 2018 at 11:02am
The politics of a referendum-approved carbon taxes are difficult. British Columbia introduced its revenue-neutral carbon tax without referendum approval. Interestingly, after its introduction and decrease of other tax rates, public opinion in its favor went up.
The issue about referendums is that the outcome depends a lot on organizational/advertising support.
One aspect is that left-of-center environmentalists want to use the tax proceed to support GHG emissions decrease and fund their favored solutions–which tend to be boondoggles (typically, we’re talking about costs of thousands of dollars per ton of CO2!). They do not trust nor want free market solutions. In 2016, these organizations actually opposed the carbon tax proposal and campaigned hard against it!
Another aspect is that carbon taxes target a few key industries with deep pockets. They will also oppose any carbon tax proposal, no matter if they are revenue-neutral or not. They also convinced right-of-center politicians that they could transform climate-change–which used to be an issue with bi-partisan support–into a good wedge issue to polarize the base and raise funds.
Michael Rulle
Nov 28 2018 at 9:02am
Interesting point on “Climate Change” being the “most external of externalities”. (As a side note, I still do not understand why we accept the term “Climate Change” as a valid objective term. I have never seen an operational definition of the term in a way that we can even construct an experiment). It definitely makes it difficult to take action.
But we have agreed on such externalities before. I think GATT and WTO are examples. While certainly not perfect in a theoretical world of economic optimization, it certainly is better than not having it. We also have been able to address the issue of Ozone layer depletion. The Montreal Protocol and its follow-ups are examples.
I believe it is clear that the degree of belief in the dangers of “climate change” is very low. Additionally, the costs of bad solutions (i.e., proposed rules barely move the needle according to the majority of models) that are put forth are very high. And it is obvious doubling down on the the use of language like “Catastrophic” makes the public even more cynical.
One could say, because we cannot see it, we tend not to believe it despite science. But we believed Einstein’s theory of relativity even though it goes against all Newtonian common sense. Maybe it’s because it did not cost anything to believe it.
I am pretty sure that if we thought there was a 10% chance of an asteroid hitting us in 20 years we could get the world to spend money on trying to stop it.
I think it is clear we do not believe in the idea of “catastrophic” warming. I agree we are also adaptive. I am also not sure what a moderate is on this topic. The arguments that are made tend to be “all or nothing”. It is either Catastrophic or it is nothing. If it’s not Catastrophic I think we should adapt as we need to. If it is Catastrophic we are doomed—-because no one believes it.
I think it is at worst something we can adapt to as time changes.
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