Carbon tax watch

carbon-tax-now Well, sort of. Via Timmy I find Will Hutton bemoaning the failure of yet another GW-type summit, Rio-20. We all knew it was going to fail: had I thought there was any question about it, I would have offered to bet heavily on its failure (in fact, so little do I care that I haven’t even looked to see if it has failed. But I assume so…). But there would have been no takers. Nonetheless the pointless waste of time took place, which merely demonstrates how broken our politics is. But we knew that too.

Hutton correctly identifies at least one problem, but fails to see the obvious solution:

Climate change sceptics, most vividly in the US where it has become a basic credo of the modern Republican party, are sceptics because to accept the case is to accept the need to do something collectively and internationally that must involve government. But government is bad.

Sound entirely plausible. He continues…

It is inefficient, obstructs enterprise, inhibits freedom, regulates and taxes. Climate change activists want carbon taxes and to set targets for efficient resource use; they also want regulations to encourage environmentally friendly behaviour. This is the back door through which socialism will be reinvented…

(my bold). You can argue about the inefficient, etc. bits – though that’s what the teabaggers think. But notice the bit I’ve bolded, all of which are first-order unnecessary, though will be pushed by the likes of Hutton and env folk. We need a Carbon Tax Now. And as a sop to the teabaggers to get that, we should make it clear that all the rest of the regulation stuff isn’t needed, so that all their “gummint be evil” stuff becomes irrelevant.

[Update: David Hone, who I used to take seriously but no longer can, has a fascinating, and totally wrong, piece about ETS and appears to happily quote some utter nonsense:

The scheme was intended to deliver a significant shortage of allowances against business-as-usual emissions and thereby oblige ETS installations to pollute less…. Even those stakeholders who have argued for a return to the intended levels of scarcity have been handicapped by a dearth of analysis… The business-as-usual emissions baseline against which both the EU climate target and the ETS caps were set are totally obsolete…

You see the problem? No? OK, let me explain. What this is saying is that those in favour of the ETS see it not as a means of reducing CO2 emissions to a certain level, but as a means of forcing industry to emit less CO2 than it wants to. This is a very puritanical, sackcloth-n-ashes viewpoint, and it has nothing to do with science. Because it isn’t saying that a certain level of emissions (implicitly, if they ever did their sums which I doubt, a certain atmos concentration) is OK; its saying that “a bit less than you can comfortably manage is OK”. The entire point of having an ETS scheme is that Big Gummint decides how much emissions are OK, and issues/sells permits to this level. It makes no sense at all to say “oh, well, since we’re all emitting less than expected we’ll artifically make permits scarce”. All that shows, if its correct, is that they got their calculations wrong in the first place. Which, arguably, they did; but that just shows how stupid the whole scheme is.]

Refs

* What on Earth is Sir David King talking about? – on the dangers of stepping outside your area of knowledge.
* Carbon taxes won’t work. Here’s what will – provides some extremely stupid arguments and poor thinking (h/t Brian).
* Some are still dumb enough to support the ETS.
* Which Is More Corrupt? Wall Street Or Congress?
* Brian is still pushing Cap-n_trade, though; and points at this for how glorious it is.
* Timmy points at The Most Sensible Tax of All in the NYT.
* Carbon Tax or Cap And Trade? Whichever Leaves Less Room For Politics And Corruption
* There will be any amount of special pleading to reserve carbon tax revenues for particular special interests. Here is one example of such pleading, that should be ignored.

Carbon tax now

carbon-tax-now I’ve finally been provoked into writing this post. Though actually it is going to be about something slightly different, or at least I’m going to go through a long rambling diversion, inspired by Idiocy on carbon permits by Timmy.

But since I’m also rather conscious that many of my posts are (when looked back over the period of a couple of years) utterly incomprehensible due to lack of context, I’m going to do some context.

If you look at the problem of Global Warming from an Economics point of view, then it is a perfectly standard problem, that of uncosted Externalities. Which is to say, emitting CO2 is free, but has a cost in terms of climate change. The standard Economics answer is to tax it (in some way) to Internalise this cost.

It is worth pointing out (another parenthesis, I’ll escape to my main point eventually) that we don’t apply this approach to all things. For example, in the UK, exceeding the speed limit (and getting caught) is penalised by a fine, which deters the poor people, and by having points docked off your license, which deters everyone, since 4 speedings is enough to lose your license for a while. Which is to say, is isn’t Discouraged, it is Forbidden. Another example is killing people: killing people is Bad, but we don’t deter that by imposing massive fines, we lock you up. So even rich folk can’t do it. My sense, from reading various bits of Green literature, is that they think emitting CO2 should be of this “forbidden” nature, and shouldn’t merely be something that you pay to do in order to pay for the externalities. That is a point of view, certainly, but for the purposes of this post, I’m going to ignore it and consider the std.Economics approach. End of parenthesis 1.

So, if we’re going to “tax” CO2 (note that I’m carefully putting quotes around tax, because we might want to do carbon permits) then we need to decide how to sting people, and how much we should charge them. How much to sting them is quite a difficult problem, because it depends on a variety of things which we know moderately well (climate sensitivity, for example), things we’re less sure of (what the airborne fraction will be in the future), and things we’re even less sure of (how much ecosystem damage might occur, and how much it should be costed at. Even attempting to cost ecosystem damage winds some people up, and there is a helpful example from the Grauniad just now. That is representative of the “ecosystem damage should be forbidden, not penalised” school of thought, which as I’ve said I’m going to ignore for this post. If that winds you up, complain, and we can have another post on that) and then there are the things that we know extremely well, but different people disagree on what the value is that we know (discount rate, where we have Lord Stern versus the world). There are a couple of solutions to this difficult problem: the one I’d favour is to not worry about it too much. Set your costs at a reasonable best-guess level; or even start by setting them deliberately low, and then ramp them up as clarity arrives, or it becomes clear that people can tolerate them.

Another diversion: carbon costs can in principle be largely revenue neutral, in that you can (and should) offset them by reducing other taxes (there is still an effect because you’re shifting taxes around the economy and penalising high-CO2-use, but I’ll ignore that for now). People dislike carbon “tax” because it has the word tax in, and they don’t trust the government to do this in a revenue-neutral way. So, a good way to start is at a low level, and establish trust that other taxes will indeed be cut. Ends.

OK, so just for now I’m not very interested in how much to charge people, but the question of how to charge them is interesting. And the two principle candidates are carbon permits and carbon taxes. Carbon taxes are easy: you just tax carbon emissions, probably by taxing fuel and ‘lectric and stuff. Carbon permits are where you make a rule that in order to emit CO2 you need a permit, and you force people to buy permits (or, in the less reputable schemes, you give away a set number of permits) and then people can trade them.

Carbon permits are complex, permit a parasitic trading class, and allow pointless political interference. Carbon taxes are simple and provide little opportunities for parasites. So naturally our political class prefers… yes, you’ve guessed it, the bad system. However, I don’t really want to rant about that either, I want to finally get to my main point, which (to give credit where it is due, came from Timmy, though I think he would say that from his point of view, it is merely the bleedin’ obvious). And that point is…

There is a fundamental difference between carbon taxes and permits. For the permits, you do your science ahead of time and you work out how much CO2 you want to emit, and you issue permits to this level. Anyone wanting to emit CO2 (well, I say anyone, I mean anyone covered by the scheme) then needs a permit to do so. That means you know the maximum amount of CO2 that can be emitted. The idea is that companies that still need to emit CO2 are forced to buy permits, which they will do from people, presumably, who have managed to reduce their own emissions at a cost less than that of the permit they are selling; or who for some other reason have excess permits (like, for example, our idiot EU-wide governments handed out permits like confetti). But never mind: what it means to the bureaucracy that manages the permits is that the price of the permits has become irrelevant. Which is why the Grauniad is silly. When you’ve set the number of permits, you’ve done your job. If you find yourself saying “the price of carbon permits is too low” then you’ve failed to understand the permit system. Of course, to decide how much CO2 should be emitted is tricky. I don’t even know what levels the current EU permit system is designed to produce, and quite possibly they don’t either.

To make a carbon tax work, on the other hand, you need to decide how much damage the CO2 is going to cause, and you then penalise emitters at this rate. This too is tricky, but is does allow the normal market conditions to operate, rather than requiring explicit government intervention, which I think is a good thing. In theory, it is what the Stern report has allowed us to work out. You still need to do pretty well the same science as you needed to do to set permit levels, but what you don’t have to do is the complex step of deciding what CO2 levels the government wants to see. It provides a softer (you can start with an under-estimate of the cost, to ease people in, for example; and it still works), but more continuous pressure. With permits, if you accidentally set the limits too tight for any one year, then (if anyone takes the limits seriously) you risk some of your industry grinding to a halt, unable to find any free permits. Or, conversely, if there is an economic slowdown, suddenly permits become effectively valueless, because there are excess permits no-one wants to burn, and the Grauniad becomes sad.

Conclusion: carbon tax good. Carbon permits bad.

[Note: this post got updated, overwritten, and originally published with the wrong date, thereby pushing it below the visible level. Now pushed to the top again]

[Update: there is another interesting example, again courtesy of Timmy, or what happens when you try to set your limits by another process: just deciding on limits, and then sort of giving various institutions quotas. First off, those targets aren’t very important to the institutions, so they ignore them. And secondly you encourage a whole pile of clip-board tickers to go around measuring them. Compare that to a simple carbon tax: in that case, fuel prices just go up, so your institutions actually care, and no external pressure is needed.]

[Update: and another thing: with carbon taxes, you don’t have to wait for international agreement. You can just do it, in a manner revenue neutral within your own economy. CF points out in the comments that you may need to pay attention to imports, though]

Refs

* Timmy, Chasing Rainbows – credit where it is due, Timmy is the source for my understanding of the central point of this post
* Hansen on cap-n-trade vs carbon tax – Me in 2009
* Atmoz joins the campaign.
* Can’tcun
* A carbon tax is meant to hurt a little, but we have a choice: we can change – New Anthropocene.
* Australia’s carbon tax
* Timmy in El Rego
* Hot Topic: the case for a carbon tax “There is no policy instrument that is more transparent and administratively simple than a carbon tax.” Unfortunately its overtness tells against it politically because voters, politicians and emitting industries see the price very clearly and can calculate what they think it might cost them. But in Shi-Ling Hsu’s view environmental measures that purport to be painless are either misleading or set to accomplish nothing.”
* November 08, 2011: Australia Carbon Tax is Passed
* Larry Summers Calls For A Carbon Tax Now That Oil Prices Have Fallen – Timmy, Jan 2015.
* How Not to Pass a Carbon Tax – GREG MANKIW, August 2015.

Can’tcun

carbon-tax-now I largely ignored Copenhagen (the conference, not the city, I hasten to add: very nice place I’m sure and I mean no disrespect) and chose instead to push for Carbon Tax Now, though I felt obliged to read a little bit of what they had to say. But now we have Cancun. What to say about that, other than rather unoriginal puns?

Nothing but the obvious really: it was a total failure and it would have been better if it had never occurred. Cancun was the triumph of the negotiator-class: the parasites encouraged by all the process: yet another waste-of-time conference designed purely to generate paper (you can get a feel for this by reading some of the stuff that the otherwise sane Ben Hale blogged. The aura of “why did I bother turn up” is palpable. Probably, someone gave him a grant). HT has quite a nice article which attempts to smile through the gloom:

Although it’s not everything we need, the agreement on the table puts the UN negotiations back on track after the shambles of Copenhagen last year. Expectations were lowered in the run-up to Cancun and completing the final agreement was never a possibility… when it became obvious that a deal had been crafted, there was such a palpable feeling of relief… the Bolivian Climate Change Ambassador complained that governments had not gone far enough in agreeing emissions cuts. He is right, but for almost all the governments, the deal on the table is a good step forward, and all that could be achieved…. The emissions reduction pledges in the Copenhagen Accord were merely noted in this Cancun agreement. They fall woefully short of the level of ambition required to avoid dangerous climate change… the good news is that, for the first time in the agreement, there is recognition of the inadequacy of the pledges…

The main touted success appears to be the establishment of a $100 bn Green Climate Fund, which has a lot of people licking their lips over a nice big barrel of pork. Lots of well-paid Western Negotiating Types are going to get a pile of very well paid jobs out of it, and if there is any money left over a number of Developing Country types may get some Pork (for some odd reason Turkey gets its very own special Pork: para 142). But given the real amounts in play, and the rather slim chances that the $100 bn will ever materialise (This headline-grabbing promise, however, is not part of the UN process and is merely an aspiration of rich countries), the West gets off cheaply and is happy.

You can read Outcome of the work of the Ad Hoc Working Group on long-term Cooperative Action under the Convention, though I’d bet you probably won’t. But who could fail to agree when they affirm that enhanced action on adaptation should be undertaken in accordance with the Convention; follow a country-driven, gender-sensitive, participatory and fully transparent approach, taking into consideration vulnerable groups, communities and ecosystems; and be based on and guided by the best available science and, as appropriate, traditional and indigenous knowledge; with a view to integrating adaptation into relevant social, economic and environmental policies and actions, where appropriate?

Around para 50 I started skipping heavily. Around paras 80-100 I thought I was losing the will to live, but then up came para 102:

Decides that the Green Climate Fund shall be designed by a Transitional Committee… shall have 40 members, with 15 members from developed country Parties and 25 members from developing country Parties, with: (a) Seven members from Africa;
(b) Seven members from Asia; (c) Seven members from Group of Latin American and Caribbean States; (d) Two members from small island developing States; (e) Two members from least developed countries;

No pretence that membership will be decided on merit then. Incidentally, the $100 bn is written in, as

98. Recognizes that developed country Parties commit, in the context of meaningful mitigation actions and transparency on implementation, to a goal of mobilizing jointly USD 100 billion per year by 2020 to address the needs of developing countries

But that certainly doesn’t sound very binding. After that the text seemed to rather fizzle out and I found nothing worth quoting or mocking. If you find any good stuff in there, please leave a comment.

So I think it has now become perfectly clear that the entire giant international process has stopped being a way to negotiate meaningful cuts in CO2 emissions and has become – well, has been for years, I’m not sure when this first happened, it was a gradual process I suppose – subject to capture by the negotiators, as these things so often are. Far too many people now have far too much of their energy wrapped up and invested in lobbying this bloated zombie process. It needs to die.

Where to go from here?

First off, recognise that it (the current process) has failed and needs to be thrown away. It was a nice try, but gets no cigar. Saying “but it is the only game in town” won’t work. The reason all these long years of negotiations have failed to produce anything meaningful is because there is no real heart available from the politicians to do so – which in turn means lack of heart from the public, since politicians on the whole aren’t the sort who stand up for Principle above Votes, and those who do tend to become Ex Politicians and Lessons. Trying to negotiate a global deal is just too difficult, the only way forward is more local agreement. And as far as I can see the best option is revenue-neutral carbon taxes, honestly applied (which means stuff like no dumping on nukes just cos you don’t like them – or if you must, don’t do it under the guise of a carbon tax. Of course, stopping subsidising the coal mining industry would be a thing to do first, if at all possible). As far as I know, this isn’t a change of heart by me. If you can find me an earlier quote from me contradicting any of this, I’d be interested and you might well win a Valuable Prize of up to $100 bn.

So I shall start my Carbon Tax Now! campaign (in a token attempt to do some research I found this but didn’t of course read the associated pdf). I’ve done the first essential step – I’ve made a logo. I hope you like it. Feel free to “join” me. yes, I know there are Vast Insurmountable Policital Hurdles to overcome. Fear not – I have no interest in them. I’m not a practical politician, you may have noticed. Anyway, this is but the post about Cancun – the post about Carbon Taxes vs Cap-n-Trade is still to come.

This is all The Politics, of course. It doesn’t affect The Science in the least.

Refs

* France unveils carbon tax?
* mt – “You don’t run a ship with six big captains, a dozen less influential captains, and a hundred and forty minor captains”
* Yes, agreed, carbon tax now!
* Nature, unable to admit the truth
* Cancun: A reason for optimism? – no, but worth reading anyway.

Hurrah: Copenhagen dampens banks’ green commitment

Says the Grauniad. Not the “Hurrah”, I added that. The Grauniad doesn’t come out for it being good or bad news. But I think it is. Emissions trading is a waste of time and an enormous waste of money, promoted mostly by those who hope to get rich on it.

Carbon Tax Now.

My previous post refers.