Chris Huhne, yes, he\’s a twat

Sigh.

The Energy Secretary backed plans to increase environmental levies by £15 billion to free hundreds of thousands of people from income tax.

He is already drawing up proposals for the proportion of government revenue raised by environmental taxes to jump from 7.7 per cent to 10 per cent within five years, from £35 billion annually to around £50 billion.

He\’s missing the point of environmental (for which, in reality, read climate change) taxes.

It isn\’t that greenery means that such taxes should be higher. Rather, greenery says that there is an optimal level of such taxes.

We even know what that optimal level is, Lord Stern very kindly told us all. $80 per tonne CO2-e.

The UK\’s emissions are of the order of 600 million tonnes a year (you can fiddle around a bit including emissions embedded in imports to make it higher, but when you then deduct emissions in exports and…well, it\’s a good enough figure to be working with).

600 million tonnes x $80 gives us $48 billion or £32 billion pounds.

The the general level of green taxes is already too high. We have already done what we have been urged to do, make the polluter pay the costs of their pollution. We are, in fact, done with climate change.

For remember, the entire structure of Pigou Taxes relies not on \”higher\” taxation but on there being a \”correct\” level of taxation. And no, contrary to what many Statists say, \”correct\” is not a synonym for \”higher\”.

6 thoughts on “Chris Huhne, yes, he\’s a twat”

  1. However, if it will really result in a reducing in taxes on the working poor, then it still might be a good thing, because we all agree that they are too high.

    Another benefit of green taxes, is that they will raise less money over time, as consumers reduce their energy usage. So they could actually lead to a shrinking of the state.

  2. Serf,

    However, if it will really result in a reducing in taxes on the working poor, then it still might be a good thing, because we all agree that they are too high.

    The question is whether it will or not. If it now costs more to fill up a car, will you take that job? If the job you were going to go to involved making widgets on lathes, will that job be there or will it go to China instead?

  3. Brian, follower of Deornoth

    “as consumers reduce their energy usage. So they could actually lead to a shrinking of the state”

    I think you’ll be more likely to find that as revenue falls because we can’t afford the extra energy taxes, other taxes will be re-raised in order to make up the shortfall. The needs of the state are paramount, after all.

  4. “He’s missing the point of environmental (for which, in reality, read climate change) taxes.

    It isn’t that greenery means that such taxes should be higher. Rather, greenery says that there is an optimal level of such taxes.”

    That’s a description of what Pigovian taxes are, not what environmental taxes as a whole are.

    The problem with stating that environmental taxes are too high because they are above the Pigovian level is that, being consistent and applying the same reasoning to income tax, VAT, etc. would lead you to conclude that they are too high at any level above zero, as they create no direct negative externalities.

  5. Paul,

    The difference is that no-one claims VAT, etc will “help us meet our climate targets and our environmental goals”. They are just a way of raising money whereas green taxes are sold as having some additional grander purpose.

    If Chris Huhne was just saying ‘ I want to tax cars more to pay for income tax cuts’ then a Pigovian analysis would be inappropriate, however as he’s the one framing it (partly) as a green tax then it should be considered.

    Phil

  6. Phil: “They are just a way of raising money whereas green taxes are sold as having some additional grander purpose.”

    So what?

    Both taxes are primarily levied to raise money. If somebody points out that levying taxes on activities which create negative externalities could reduce those externalities, there’s no logical reason to conclude from that that those taxes should be capped at a specific level and any extra revenue should be obtained by taxing activities with no negative externalities.

    “however as he’s the one framing it (partly) as a green tax…”

    Yes, but he isn’t framing it as a Pigovian tax.

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