The Guardian treats us to a piece on how a revenue neutral carbon tax is the answer to climate change:
A carbon dividend feels like a novel, unusual idea. There certainly aren’t many directly comparable fiscal mechanisms in place. But if now isn’t the time to try bold new solutions – when we’ve seen that governments can move mountains in the right circumstances – then when is? And though it looks radical, the dividend really is just a rather elegant solution to a major problem, which neatly circumvents many of the usual political objections to increased taxation. It might even be the first highly popular tax.
Moving market-oriented economies off fossil energy is going to be a long and difficult struggle. Funds will also have to be found to ease the burden of the energy transition in fossil-dependent parts of the economy, helping displaced workers and supporting the communities where they live. But marshaling the power of the price system to rebalance the whole economy away from carbon-intensive industries – while supporting those on lower incomes – seems like a wonderful place to start.
If only we’d been doing this already we’d have got somewhere, right? Especially as someone did tell The Guardian this in 2008:
But enough of this triviality and on to the much more important point: the environmental movement seems to be as a whole deeply ignorant of what economists have to say about their interests. As above we see that they are not ignorant of externalities, indeed they are central to the way the modern subject is taught. We’ve also known, since 1912 or so, how to deal with them: we might tax negative externalities (CO2 being an obvious example) and subsidise positive ones (as we do higher education upon exactly this justification), the 1912 date being when Arthur Pigou published on the subject in Wealth and Welfare. It’s difficult to get much more mainstream as an economist than professor of Economics at Cambridge really and yes, the recent Stern review on what we should do about climate change did indeed advocate the use of Pigouvian taxation. We also have Greg Mankiw, a professor of Economics at Harvard (and a Republican to boot) founding the Pigou Club to push for this as a solution.
That same person going on to point this out at The Guardian today in fact:
Sure a revenue neutral carbon tax is a good idea. That’s why it’s the central recommendation of the Stern Review from all the way back in 2006. It’s also what William Nordhaus has been recommending since the 1990s and is a large part of what he got his Economics Nobel for.
It’s also why 90% plus of economists asked “Well, what do we do about climate change?” have been saying “Have a carbon tax” since whenever.
Yes, obviously, the problem is that emissions aren’t in prices so, adjust prices so that emissions are in prices. Then everyone’s every economic decision takes account of emissions. The basic idea, “Pigou Taxes” is a century old and even economists manage to catch up over that sort of period of time.
As, umm, I pointed out in this very newspaper in 2008:
The solution to climate change is a revenue neutral carbon tax. So, why have we all wasted a dozen or more years without getting on with it?
At which point why is it that it has taken the idiots a dozen years to wake up to the solution? You know, given that it apparently is the most urgent threat to our entire existence?