Ambrose Evans Pritchard takes us through the carbon tax as a solution to climate change:
Britain should opt for the Smithian purity of a tax-neutral carbon price, and let others bluster about green deals. That would be the proper showpiece for COP26 in Glasgow, where Adam Smith taught the world.
We’re obviously in favour of such Smithian solutions, even as we’d note that it’s really Arthur C Pigou under discussion. Stick the one crowbar into the price system and we’re done. As to what the price should be:
The Stern-Stiglitz High-Level Commission on Carbon Prices three years ago opted for a range of $40 to $80, rising to $50 to $100 by 2030. That is the global gold standard. But facts on the ground have already run ahead.
“We think $50 will do the job,” said Kingsmill Bond from Carbon Tracker. “Large numbers are a pipedream that makes it less likely to happen. All you need is a realistic signal and markets will come forward with technologies nobody has even thought of.”
Quite so. Bill Nordhaus got the Nobel for suggesting one variant of this, Nick Stern his peerage for another. The revenue neutral carbon tax is the solution to the problem as described.
The thing to really note though is how cheap this is. UK emissions are around the 500 million tonnes a year level. $50 a tonne means $25 billion, or between friends, let us call that £20 billion. Or about 3 or 4% of our current total tax take.
Note that we do not need to charge that much more in tax - revenue neutral is the point here. Instead we just need to shift what we tax.
Assume, just for a moment, that the mithering mob are correct, this is a civilisation threatening problem. To solve it we need to shift - shift, not increase - 4% of our tax burden. That’s really pretty cheap. This does assume, of course it does, that we use the efficient method among those available to us of solving this problem but then that’s rather the point, the carbon tax is that.
Note that the alternative is not to do nothing. Whatever the truth of it all not being a problem in the first place there is no political outcome where nothing is done. There are too many licking their lips at being able to control society for the initial contention to be rejected. Thus we’re left with a choice of things to do.
The end lesson of this being how incredibly cheap a carbon tax is as a solution to climate change. Really, all it does require is that shift of 4% of the tax burden. Again, shift, not increase.
Whether or not the underlying problem requires that is one thing, but to avoid the idiocies that are going to happen if the fools are allowed to plan matters that’s an absolute bargain.