A Pigou-Hanson Synthesis for Global Warming
climate models predict that, if greenhouse gases are driving climate change, there will be a unique fingerprint in the form of a strong warming trend in the tropical troposphere, the region of the atmosphere up to 15 kilometres in altitude, over the tropics, from 20 degrees North to 20 degrees South. The Intergovernmental Panel on Climate Change (IPCC) states that this will be an early and strong signal of anthropogenic warming. Climate changes due to solar variability or other natural factors will not yield this pattern: only sustained greenhouse warming will do it.
…Suppose each country implements something called the T3 tax, whose U.S. dollar rate is set equal to 20 times the three-year moving average of the RSS and UAH estimates of the mean tropical tropospheric temperature anomaly, assessed per tonne of carbon dioxide, updated annually. Based on current data, the tax would be US$4.70 per ton…
This tax rate is low, and would yield very little emissions abatement. Global-warming skeptics and opponents of greenhouse-abatement policy will like that. But would global-warming activists? They should — because according to them, the tax will climb rapidly in the years ahead.
The IPCC predicts a warming rate in the tropical troposphere of about double that at the surface, implying about 0.2C to 1.2C per decade in the tropical troposphere under greenhouse-forcing scenarios. That implies the tax will climb by $4 to $24 per tonne per decade, a much more aggressive schedule of emission fee increases than most current proposals.
The tax on carbon is, as Greg Mankiw reminds us, Pigovian. Linking the tax to a measure of temperature change that is tied to the theory of anthropogenic global warming is a form of putting climate modeler’s money where his mouth is. In fact, one can imagine adding a wrinkle where there is a futures market in the temperature indicator, and the tax is tied to the futures price. The futures price would provide a betting market–hence the Robin Hanson half of the synthesis.