[Vision2020] carbon tax

[Paul Rumelhart]

The following article has gone a long way to convince me that we might 
need a small carbon tax as a hedge against the uncertainty of our 
climate change projections.  We would need to keep it small, because a 
carbon tax will affect everything from the price of gas to the price of 
milk.  If we care about the underprivileged in our society, we'd want to 
phase it in slowly and give our society time to make more fuel-efficient 
cars and whatnot.  I would set it up so that the taxes fund more 
research into alternative energy solutions, power grid updates, and 
energy storage solutions.  I would also suggest setting up potential 
adjustments to this tax so that as the uncertainty goes away we use 
raise or lower it as appropriate.

The reason I could get behind a small carbon tax and not carbon credits 
is basically a look at where the money goes.  Money from a tax can be 
tracked and re-purposed as needed with accountability.  Carbon credits 
will only make the richest of us richer, and more work will go into ways 
to screw the system than will go into research into possible alternative 
energy sources.

I wish more people would look towards the center of this debate.  You 
have the Far Right kooks (of which I'm not one) and you have the Far 
Left kooks (of which I'm also not one).  A complete lack of concern on 
one side and a desire to return us to the Middle Ages on the other.

Anyway, here is the article: 
http://blogs.telegraph.co.uk/finance/timworstall/100017600/yes-climate-change-is-a-problem-and-yes-we-do-have-to-do-something-but-in-britain-weve-done-it-already/


  Yes, climate change is a problem and yes, we do have to do something:
  but in Britain, we've done it already


By Tim Worstall 
<http://blogs.telegraph.co.uk/finance/author/timworstall/> Economics 
<http://blogs.telegraph.co.uk/finance/category/economics/> Last updated: 
June 1st, 2012


Perhaps we can sit down and discuss this climate change thing like the 
adults we are? Put the Delingpoles over here, the vilenesses that are 
Greenpeace, FoE and the rest of the forward-to-the-Middle-Ages crowd 
over there, and in that vast howling wasteland between the two positions 
discuss what we really know and what we ought to do about it?

Start with the simple fact that there are really only two important 
things we know about the entire idea. The first of these is that the 
direct effect of a doubling of atmospheric CO2 is trivial, something 
simply not to get worried about. Yes, we convert all the methane, NOx 
and all the rest into their CO2 equivalents, giving us not CO2 but 
CO2-e. And we know very well what the effect, directly, of a doubling of 
this from pre-industrial levels will be. A 0.7 degree rise in average 
temperature. This is simply straight physics and it is indeed 
highlighted in all of the IPCC reports. Less than the difference between 
Yorkshire and Cornwall, possibly than Somerset and Cornwall. At this 
level, quite frankly, who gives a damn?

The second thing we know absolutely is that this is not the end of the 
story, for there are feedbacks, and the really important thing is that 
we don't know where they will lead. Feedbacks are all of the processes 
started by that 0.7 degree warming, and which then amplify (positive 
feedbacks) or dampen (negative feedbacks) that initial direct effect of 
the CO2. You can take your pick from an improbably long list: sea ice 
melting reduces reflection of light back out into space, allows the 
ocean underneath to be warmed: a positive feedback. More CO2 increases 
plant growth (which is why commercial greenhouses pump the stuff in) 
which leads to more humus formation and thus more carbon locked up in 
the soil: a negative feedback.

The cumulative effect of all of these feedbacks is something we simply 
do not know. We don't even know what all the feedbacks are; and of those 
we do know about, we're not sure in which direction they move. While 
there are some reasonable guesses about what the total number and 
direction of them all added together, we're not certain whether that 
total effect is positive or negative.

The general answer from the IPCC and the like is that climate 
sensitivity, the total effect adding in all the feedbacks positive and 
negative, is in the 2 degree to 4.5 degree range, most likely at about 3 
degrees. But there are entirely honest and reasonable scientists 
(meaning those not bought by either Big Oil or Big Environment) out 
there arguing that this range is either too high or too low: that 
climate senstivity is such that possible outcomes range from "who the 
hell cares" to "whoops, there boils Flipper!"

It is this "we don't know" that leads to needing to do something. 
Economists call this uncertainty, and the correct and reasonable 
reaction to uncertainty is insurance. It can sound a little odd: the 
idea is that the less we know about the effects of climate change, the 
more we ought to do about it. But consider insurance against your house 
burning down. If you know the chance is 1 in a million then you'll not 
be willing to pay (much) more than one millionth of its worth to insure 
it. If the risk is 1 in 10,000, then perhaps one ten-thousandth of the 
value. But if you are uncertain what the risk is then you are willing to 
pay much more of the value in order to gain insurance.

At our current state of knowledge about climate change, we do not face 
risk. We face uncertainty: the greater that uncertainty about climate 
sensitivity, the more we should be willing to expend to insure ourselves.

So this is what we know about climate change. We know there will be some 
effect from emissions, and we also are uncertain about what that effect 
will be. The uncertainty itself means that we should do something. But what?

I've already explained this here 
<http://blogs.telegraph.co.uk/finance/timworstall/100016929/why-the-answer-is-a-carbon-tax/>. 
Don't listen to the ignorant hippies to our Left, or to those shouting 
that there's nothing to it from the Right. The answer is, quite simply, 
a revenue-neutral carbon tax.

The outcome of all of this climate science is that we face an economic 
problem. How much will it cost us to reduce this uncertainty, against 
the benefit we will receive from reducing it? The answer is not going to 
come from those who are ignorant of economics, nor from those who deny 
the uncertainty. It's an economic problem, so we need to use the tools 
of economics to study it.

Which is what a number of people have done. Amazingly, over on the 
hysteria-about-Flipper side, Nasa's James Hansen manages to get the 
point: a tax on fossil fuels as they come out of the ground, rebated to 
households. It's worth noting that this would add $1 to a gallon of gas 
in the US: in Europe we're already paying this, so we're done on that 
score. There's also William Nordhaus, the granddaddy of researchers into 
the economics of climate change. Start with a small tax now and commit 
to raising it in the future. This enables us to work with the 
technological and capital cycle, reducing the total cost. Or there's the 
Stern Review, which essentially states that throw a bit of money at R&D 
and a carbon tax of $80 per tonne CO2-e and she'll be right. Gaia that 
is, or at least our relationship to her.

Which brings us to our final question: is this expense worth the 
reduction in uncertainty? Entirely arguable, that one. The argument 
revolves around how much you value what happens now against how much you 
value what happens in the future.

Except for one little point: we in the UK are already paying that carbon 
tax. With emissions around the 500-million-ton mark, that $80 per tonne 
tax works out at about £25 billion or so that should be paid in tax to 
solve the problem, entirely and absolutely. And in the UK, when you add 
up fuel duty, Air Passenger Duty and all the rest, we already pay that 
and more in carbon or greenhouse taxes. We're not paying it in all the 
right places, this is true: fuel duty and APD are too high, while diesel 
for farmers and trains is too low. But given that the total amount is 
already being levied, all we need to do is shift around what is already 
being charged to solve the climate change problem.

We've then got to go and convince everyone else: but think how much 
easier that will be once we show quite how cheap and simple the solution 
is. No more of the mantra that we've got to end industrial civilisation: 
three squares a day has become something of a habit for many of us. And 
no more of the shouts that nothing needs to be done.

There really is a Climate Change Conspiracy, of course, something we'll 
come to next time. But it isn't about the science. The science tells us 
that there is uncertainty; uncertainty is an economic problem to be 
solved through economic methods. And given that we're all already being 
forced to cough up enough green taxes to provide that economic solution, 
why don't we just get on with the tinkering around the edges of the 
current system to enforce that solution?

Rather than, say, either version of howling at the Moon that is the 
current Left and Right of the debate?



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