Pricing Carbon

This makes sense:

Coal-fired power stations, airport expansions and new road schemes could all be put on hold following a decision by Gordon Brown that ministers must in future take account of the true economic cost of climate change damage.

Ministers have been instructed to factor into their calculations a notional "carbon price" when making all policy and investment decisions covering transport, construction, housing, planning and energy.

Unfortunately, this doesn\’t:

The "shadow price for carbon", representing the cost to society of the environmental damage, has already been agreed for every year up to 2050 by government economists. It will be set at £25.50 a carbon tonne for 2007, rising annually to £59.60 a tonne by 2050.

That\’s actually higher than the number the Stern Review came up with and that in itself was an outlier. Others (William Nordhaus) have put the appropriate cost at one tenth of that figure. Adding externalities into the costs used to make decisions is great, using the wrong cost isn\’t: it leads to resource misallocation and thus makes us poorer.

But then that\’s the problem with any form of political action about climate change. It depends upon the politicians being well informed, not subject to lobbying and so on. And as ethanol, biofuels, fleet emissions standards, the CFP, the insane insistence upon recycling everything show us, this simply isn\’t true.

11 thoughts on “Pricing Carbon”

  1. And when, in 2008, even the BBC starts to acknowledge that there is a real debate about the reality of carbon dioxide based greenhouse effects being the cause of last centuries warming, and then, when in 2009 it is commonly accepted that the whole thing is a load of scaremongering cobblers, how is Gordon going to explain his insane mismanagement?

  2. In the US they put up a large solar array that will supply thousands of houses
    fortunately they also included output and fossil fuel saved
    doing the math ,the cost of the co2 not emitted is 125 dollars per ton..

  3. Why are you lost Mark? UK total emissions of CO2 are around 600 m tonnes, so using the 60 quid a tone figure would give a tax take of £36bn.

    This won’t fund government spending even in a libertarian fantasty world (defence and police come to about that) so clearly some things are going to have more tax than their CO2 output warrants.

  4. “This won’t fund government spending even in a libertarian fantasty world (defence and police come to about that)”

    I merely observe that we wouldn’t need to spend that on defence and policing if we stopped invading other countries and stopped prosecuting kids for throwing cocktail sausages.

    In any case, £36bn is a nice chunk of cash to knock off corporation tax (giving Ireland a run for their money), or income tax. We could abolish capital gains tax (giving the Swiss something to worry about). Lots of things, in fact.

    Of course, in your Hazel Blears style Nirvana, £36bn is indeed chump change, since we are all drones working at the behest of the State.

  5. It only makes sense if you believe (and it is a belief) that CO2 is causing global warming. When we finally come to the conclusion that it’s the sun, will there be calls to tax its light?

    I know, I know, there probably will be.

  6. I’m sorry, but discussing the correct cost of the damage carbon does sounds to me like arguing over whether there are fairies at the bottom of the garden, or pixies, or even elves.

    These discussions matter only if there is something there, and as it is becoming increasingly evident that there ain’t nuthin at the bottom of the garden, who cares?

    It only matters because I am being compelled by law to put out fairy/pixie/elf feeding troughs at my own expense.

    People, there aren’t any fairies. Carbon dioxide forced greenhouse effects have no significant role in the global temperature increase we saw ten years ago.

    Warming happened, greenhouse effect it wasn’t. Increased carbon dioxide levels serve only to feed plants, which is a good thing.

  7. Counting Cats is right in my view. There would be no warming trend in the data at all if it hadn’t been manipulated to get the answer they wanted anyway. And those fiddle factors are embedded in the computer models. We are being lied to again.

  8. Craig Howard:

    Damn right! Not a moment too soon. Shoulda done it back in the 1740s when ol’ Fred (Bastiat)
    recommended it as a way to protect the profitability of the candle-makers. Never too late, though.

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