I prepared these notes for a conference at Peking University, Beijing that I will be attending this coming Saturday. It is late in the day but comments are very welcome.
1. Introduction. Carbon taxes and, more generally, taxes on greenhouse gas emissions, are a widely advocated means of reducing such emissions to address anthropogenic climate change – see, for example, Metcalf and Weisbach (2009). I examine the positive and normative effects of a generic ‘carbon’ tax that covers the various greenhouse gases, with respect to its tax incidence and welfare effects including ‘double-dividend’ arguments. I also consider the appropriate choice of carbon tax base – issues of the breadth of the tax are considered as well as whether it should be levied on a ‘destination’ or ‘origin’ basis in an open economy. Then I provide an evaluation of the case for a carbon tax rather than an emissions trading scheme. It is clear that although the analysis focuses on design issues for carbon taxes that many of the same issues arise with respect to emission trading schemes. The discussion closes with conclusions and final remarks. Continue reading Positive & Welfare Effects of Carbon Taxes: Some Basic Economics*
One of the interesting and influential figures I met recently in Paris was Professor Donald Shoup from the University of California, Los Angeles - I have a great shot of him iding a (rented) Velib bike near a well-known Parisian tourist attraction. Shoup is one of the world’s experts on the economics of parking. This sounds like a dry topic but it isn’t – parking practices are, in fact, a significant contributor to the unpaid, social costs of motoring. I reviewed Professor Shoup’s The High Cost of Free Parking here. The average US parking spot costs more to provide than the typical car occupying it and underpriced parking is a significant cause of traffic congestion. The gist of Shoup’s argument is that anyone should be able to park anywhere at any time by paying a high-enough fee and that this would reduce excessive traffic partly by reducing socially-destructive search efforts to find a parking spot. One should set supply=demand in the parking market - allowing for entry and exit from spots you will do this if a 15% vacancy level among spots is targeted. I think a dozen quality PhDs in economics could be constructed in Australia on themes developed in Shoup’s book and all would have greater social payoffs than the current batch of mindless atheoretical, time series macroeconomic studies or the surfeit of ‘sophisticated’, useless game theory projects we are producing. Continue reading Parking economics revisited
The Pew Climate Centre have shown that over the last year or so a decreased proportion of US citizens believe climate change is a serious public policy issue and a reduced number believe there is solid evidence that anthropogenic warming is occurring. Climate change delusionists might be credited with inducing these changed opinions but the role of the media is also important. Continue reading Global warming & the issue-attention cycle
While many have devoted time and effort trying to predict what will come out of the Copenhagen meetings I have largely elected to wait-and-see. Even that is difficult – this article from Bridges I found useful. It is the first in a series and I will update. Continue reading Eyes of world on Copenhagen.
The hacked emails from the University of East Anglia on climate change – a good survey of the material is here – have been enthusiastically – though unconvincingly – used to support climate change skepticism. In my view the hack is a non-event. The NYT has a sensible summary of the implications of this material:
“The evidence [...]
Australia’s agricultural sector provides around 16% of Australia’s greenhouse gas emissions. The Rudd Government originally planned to exempt this sector from its CPRS until 2015 but to revisit the decision in 2013. In a major cave-in Jelly-Back Rudd has brought this decision forward and permanently exempted this sector from the CPRS. To realize greenhouse gas emission targets the rest of the community must now face close to 16% higher cutback requirements. In addition farmers will be allowed to sell carbon credits to the rest of the community through such things as their use of bio-char. Continue reading Exempting cowburps & paying farmers not to provide them
This is the basis of remarks I made to Red Symons today on 774 Melbourne ABC. Continue reading Comments on CPRS to Red Symons
My guess that the Government would buckle under local interest group pressure to reject the parallel import of books has proven correct. Mark at LP is pleased to learn that the moves to allow free trade in books suggested by the Productivity Commission have been stopped by the Rudd Government. In fact he asks why have a Productivity Commission [...]
Rudd lets the Coalition have it and he is correct. An excellent speech – to the point and accurate – with sound economics – I have a strong intuition about who wrote it.
It is 20 days until the Senate vote on the CPRS and 31 days to the meetings in Copenhagen. The deceptions coming from the Liberal and National Parties, the lies told by the IPA and the other delusionists, that have reached a crescendo in recent weeks, are designed to prevent national and international deals on climate change. The protagonists in these debates exclude practising climate scientists and include a mix of suckers and fools who deserve contempt more than sympathy. Nor is it useful – or a successful evasion – for some of them to say that they agree AGW is a problem but then to deny every attempt to deal with it. It is a fact that many in the Liberal Party only support moves to deal with AGW because they see votes in it – I have heard these sentiments directly myself. (Update: Many like Nick Minchin are outright denialists. Watch Malcolm and the Malcontents on Four Corners tonight for an update). Continue reading Rudd on Coalition on climate change
An excellent summing up – written and via podcast – is provided by Professor Ross Garnaut at the East Asia Forum. The full speech podcast is here. Well worth a read and [...]
I have not regarded the issue of choosing between a ‘cap-and-trade’ scheme and a ‘carbon tax’ for managing carbon emissions as one of first-order importance. Under certain conditions setting carbon quotas and auctioning them off at some equilibrium price has exactly the same effect as setting a tax on carbon equal to the equilibrium price. It results in the same emissions costs and the same transfer of revenue to the government. Continue reading Carbon taxes or cap-&-trade?
China must eventually curb its carbon emissions in absolute terms if aggregate GGEs are to be controlled. Continue reading Chinese environmental exchanges: carbon trade preliminaries?
Quadrant has outdone itself this time with a forum of views encouraging the Senate over the next week to reject the proposed ETS. It is in the main – not entirely – the same old denialist nonsense – the science is wrong, all due to the sun, the earth is cooling, the earth hasn’t heated over the last decade though CO2 levels have risen, its all too complex, Australia’s contributions to GGEs are small so we should do nothing, the economy will collapse with an ETS, we shouldn’t lead the world, unemployment will increase etc etc. The different authors repeat a core of time-worn fallacies. It is interesting that Quadrant launches a political campaign to defeat the bill when it is primarily a conservative cultural magazine. Continue reading Democracy in operation or irresponsible politicking?
I found this particularly useful. My only question relates to the recorded reduction of growth in energy related GGEs from 2007 to 2008 from 2.8% to 1.8%. This seems too abrupt even given the recession ! Coal now dominates oil and China, whose use of coal is growing at 7.1% annually is dominating recent aggregate global GGE growth trends. This underscores what we already know – an agreement in Copenhagen must involve China. As a matter of arithmetic China must begin to mitigate its emissions more intensively.
Let me take an excerpt from this piece: Continue reading Recent GGE trends
An important effect of the recent Rudd backtrack on climate change policy is that it has reduced the credibility of government climate change policy. As Laura Tinkle remarks today ’One thing that is certain is that the changes this week have not helped rebuild any solid and noisy base of support for the government’s emissions trading scheme’ (AFR p.63).
Why is credibility important? Why is it important to know that the government will have the backbone to take tough decisions on climate change in the face of determined opposition and to carry through with its stated policy intentions? Continue reading Credibility & climate change policy
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