Carbon tax splat

A few of you asked me for more commentary on this linked articleWill is on board but I think it is provocative but unconvincing.  Here are a few points: oddly, the author doesn’t mention the strongest argument against such a tax, namely that the Chinese and others may not follow suit.  I don’t worry much about one-time compliance costs if energy improvements bring a sounder long-run state of affairs; admittedly a big if.  The side deals from a tax will be bad and I expect an inefficient version of whatever happens; that said this does not disfavor reform vs. the status quo since the status quo has very bad side deals too; whether those side deals get worse, or by how much, depends on how the counterfactual is specified.  Under some scenarios the side deals in fact get better.  Uncertainty alone does not favor inaction, rather it favors action as a kind of insurance policy against very bad outcomes.  And uncertainty about long chains of causation most definitely does not, per se, favor reliance on market prices, rather it favors agnosticism about market vs. government.  Waiting does seem very costly to me; read Six Degrees.  I am far from convinced that the Nordhaus model is the best way to think about the costs of warming.  The author of the post is at his best when arguing: "a tax is unlikely to work," at his weakest when arguing "this means the best course of action is no tax at all."

The bottom line is that the whole thing is likely to end very badly for at least one billion of the world’s people, no matter what we do within the feasible set.  In the meantime we can tell them they ought to get richer, and of course they should, but that’s hardly a solution either.


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