Timmy elsewhereMarch 29, 2014 Tim WorstallTimmy Elsewhere9 CommentsAt the ASI. Something changes in the climate change debate. previousTimmy elsewherenextHurrah! Ritchie’s tax gap just shrank by billions and billions! 9 thoughts on “Timmy elsewhere” Ljh March 29, 2014 at 10:57 am Please would all those caring types, keen to demonstrate their devotion to Gaia, now tear down the subsidy farms of birdmurdering, landscape destroying, cement consuming ecocrucifixes and revert to protecting the environment from something more robust than plant food. bloke in spain March 29, 2014 at 11:44 am Posted this over at the ASI but I’ll copy to here because I genuinely don’t understand the logic of Pigou taxation. Maybe someone can explain. But, Tim, You don’t explain how the 80$/tonne carbon tax reduces emissions. Yes it produces revenue for governments at the consumption end of energy use & encourages reduced consumption. But at the production end, the oil exporters, there’s a corresponding drop in demand for oil – the price falls in response – and the nett effect is zero. Presumably the market for other energy sources works similarly. There’s simply a transfer of wealth from the producing nations to the carbon tax collecting nations. This always a problem with Pigou taxes. They do change behaviour but can only do so in the intended way if the supply end of the calculation is closed. It’s the same story as the ASI championed London Congestion Charge. The amount of traffic on London roads was limited, pre CC, by the congestion. The supply of possible road users was much larger. Introduce CC and lower value users are pushed off the road. To be replaced by higher value users taking advantage of reduced congestion. Same amount of traffic. It’s not even of particular benefit to Londoners because the “value” here is the value to the user not the community as a whole. It maybe pricing off the road providers of valuable services & replacing them with those who are simply higher earners. Favouring estate agents over plumbers. Pigou taxes aren’t compatible with open markets. Bloke in Oxfordshire March 29, 2014 at 3:40 pm BIS, “It’s not even of particular benefit to Londoners because the “value” here is the value to the user not the community as a whole.” But that user has to pay the community to gain that thing. So, someone spends £10 on the CC, that goes into a pot that then gets put into the TfL budget that gets spent on tubes and buses on behalf of the community. It’s simply about selling a scarce resource most efficiently. And while the CC is rather crudely calculated and could be better designed, that’s the fundamental principle of road pricing. bloke in spain March 29, 2014 at 4:11 pm @BiO It depends on whether one sees subsidising public transport from road charging as a benefit. Who’s being subsidised? As it’s weekday congestion we’re talking about, it’s obviously employers. It reduces the wage cost needed to attract workers to Central London. And it’s business activity in Central London creates the congestion in the first place. PJF March 29, 2014 at 4:55 pm “You don’t explain how the 80$/tonne carbon tax reduces emissions.” BIS, I dunno, does it need much thought beyond the basic “if you tax something you get less of it”? Sure there are complications of incidence, etc, but the essential point of making something more expensive is that it will cause people to use that something more economically “wisely”, and make alternatives (known and unknown) more economically attractive. Result: reduction of use. There are many ways to make “carbon” more expensive, and if that’s what we need to do then I’d rather have Tim’s $80/tonne + markets than an army of twats with clipboards crawling through people’s houses + govt windmills. “Same amount of traffic.” Perhaps, but much more economically valuable traffic. A higher proportion of Bentleys carrying Twitherington-Fortisques to the City to buy and sell companies worth billions, and a lower proportion of Renault 5s carrying Smiths across the centre to meet up with Jones for a pizza in Kennington. bloke in spain March 29, 2014 at 6:35 pm “BIS, I dunno, does it need much thought beyond the basic “if you tax something you get less of it” Yes. It does need more thought because the sentence should read -When you tax something, the price increases, *then* you get less of it. But that implies the supply cost remains static. From the producer end, there’s a reduction in demand thanks to higher consumer prices. The producers need to maintain revenue so they adjust supply price to match the tax take. You’ve now actually got higher carbon emissions because it takes more volume of supply to achieve the same revenue. With oil, in particular, it’s not even as if there’s much of a floor to the oil price in sight. On the CC. Depends on your definition of “value” doesn’t it. You do actually have to pursued people to go along with this. All taxes are voluntary, in the end because we can always lynch politicians. PJF March 29, 2014 at 11:28 pm “It does need more thought because the sentence should read -When you tax something, the price increases, *then* you get less of it. So saying “if you jump into the sea you get wet” is less thoughtful than saying “if you jump into the sea you end up in the water, *then* you get wet”? Is that it? Putting a tax on CO2 (production and/or consumption) and then letting the market adapt will certainly result in less CO2 being emitted than if the tax wasn’t there. It cannot be otherwise. In your scenario the producers absorb the cost and thus will have less money to spend elsewhere in the economy – reducing demand for CO2 use, and so on. Artificially forcing people to pay more for their energy when there is no effective alternative is fundamentally a tax on civilisation. Politicians should expect people to be less civilised… bloke in spain March 30, 2014 at 9:53 am @PJF My point was; the tax does not raise the price. And at the producer end, the oil exporting countries absorb the cost by pumping more crude out of the ground. I note from today’s paper, Iraq is coming back on stream to the tune of 4m barrels a day, with a prediction of a fall in the oil price as a result. It’s markets doing what markets do. Correcting for supply/demand. If the exporters wish to maintain revenue levels, at a lower price, they have to increase production to do so. From another angle, I’m not even sure if Pigou taxes work in any real world. Governments will try to maximise tax revenue. This what governments do. If there is an opportunity to tax, they will tax up to the level the economy can sustain. So if there is a possibility of taxing carbon at £80/tonne, that tax will be imposed, irrespective whether it carries the label “carbon tax” or not. A supposition that seems to validated by Tim’s repeated assertion, energy taxes are well above that $80/tonne. Government does tax to the maximum level can be sustained. And would do, irrespective if there was a Carbon Tax or not bloke in spain March 30, 2014 at 10:05 am Incidentally, exactly the same happened with congestion charging. It was introduced at £5 p/d. It produced no change in congestion. I know because i was driving through London traffic. It was raised to £8. I gather it’s now £10. There’s still the same level of congestion. It’s simply a revenue opportunity. Its level is set by what London’s politicians think they can squeeze out of road users & follows the tried & tested frog boiling strategy. Leave a Reply Cancel replyYour email address will not be published. Required fields are marked *Comment Name * Email * Website Save my name, email, and website in this browser for the next time I comment.