Monday, December 28, 2009

Port or Starboard?

Another highly amusing post over at Mr E's place has alerted me to this article on Carbon Taxes; something that I consider to be a way for a clique to make a stack of cash.

That aside, this statement in the article confused me somewhat:

I am an economist, and so I supported a carbon tax. A carbon tax means that we can leave it to the market to find the lowest-cost way of reducing global warming, with governments setting the tax at the rate necessary to bring global warming emissions within appropriate levels as determined by natural scientists.

The concept that controlling price and supply in some way means that we're leaving it to the market it one which is hurting my booze-addled post Christmas brain. I thought that if we wished to leave something to the market then we did just that: left it to the market. Laissez faire; let's not have any government interference and leave it all down to utils. Surely by imposing a tax we are shifting everyone's indifference curves around?

Is this wrong? Is this the view of economics only seen by libertarians whilst the left have hijacked economic theory to suit their own ends? I wouldn't be surprised if they had, of course, only disappointed and left hoping that this isn't taught in schools.

Whilst Tim has changed his mind on carbon tax, alas it's only because he wants to see it as part of a huge scheme of measures designed to regulate us back to the stone age. The only people I can see this climate change fanaticism benefiting are the well connected in developing countries and people who benefit from carbon trading. Like the chairman of the IPCC.

Or maybe it's just the port talking.


Optimistic Cynic said...

What he means by:-

"A carbon tax means that we can leave it to the market to find the lowest-cost way of reducing global warming"

is that you tax the external effects of pollution and then just leave it to the market beyond that to decide what to do about it. Some people may just pay for their pollution. Others may choose to pollute less. Companies will invest in cleaner technologies that will give people a way to save on their pollution bill.

Leaving aside AGW, that is precisely the best way to deal with pollution - it's fair, cheap to manage, far simpler than numerous government schemes and deals with precisely what the issue is.

Regulation is absolutely not the right answer. He talks about houses that leak fuel, but this is where pollution taxes come in. If you think that a solution (like getting cavity wall installed) will save your fuel leaking, you'll pay for it.

Mark Wadsworth said...

I'm with OC on this one.

In the pantheon of 'really fucking awful taxes' (with VAT, National Insurance and benefits means testing at the top), taxes on fossil fuels are pretty innocuous.

Whether the tax should be set at a rate which covers the external cost (and apparently UK fuel duties etc already do that) or whether it should be a much higher rate to drive emissions down to some made-up level is another topic.

But either way, a carbon tax (especially if other taxes reduced accordingly, big if) is infinitely better than cap and trade which is just an excuse for the govt. to give its friends and donors free money.

Trixy said...

I agree that it's on the lower end of the scale compared to some of the shockers but it's still a group of people artificially raising the price of something which isn't leaving it to the market in the traditional sense. It's tampering with it then asking the market to crack on but don't forget to give the Treasury a load of cash to waste.

James Higham said...

How's the New Year brain today, Trixy?