Inkless Wells

Paul Wells on all the latest out of Ottawa—along with the occasional post about jazz. Follow Paul on Twitter: @InklessPW
He also offers his thoughtful perspective of Stephen Harper’s last 10 years in his recent eBook, The Harper Decade.

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PermanentTaxOnEverything: The cavalry appears, from an unexpected direction

by Paul Wells on Thursday, June 19, 2008 9:27am - 0 Comments

Those lying Lieberal leftards at the American Enterprise Institute explain the advantages of carbon taxes (sorry, green shifts) over cap-and-trade mechanisms.

Tags: inconvenient conservatives, permanent tax on everything, policy talk make brain hurt

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http://worthwhile.typepad.com Stephen Gordon

It really should be stressed that to a first approximation, carbon taxes and cap-and-trade are identical policies: prices go up, quantities go down. The differences in that article are about second-order issues.

Then there are the third-order differences:

* It’s easier to get not-too-bright Republicans to vote against something that is actually in their long-run interest if you can demagogue it by calling it a tax.
* It’s easier to get not-too-bright Democrats to vote for something that actually is not in their long-run interest if you can demagogue it by claiming that it’s just a restriction on the behavior of corporations and not something that directly impacts people.
http://economics.about.com Mike Moffatt

Milton Friedman in Free to Choose:

“Private enterprises will bear all the cost only if they are required to pay for environmental damage. The way to do that is to impose effluent charges–not to have one government agency impose arbitrary standards and then set up another to cut through the first’s red tape.”

The way big-C Conservatives have been talking, you would think they believe that *all* of the tax will be directly passed to consumers who won’t change their behaviour at all – they’ll just eat the tax.

Is it time to start calling Tories “Demand Curve Deniers”?
http://economics.about.com Mike Moffatt

“It really should be stressed that to a first approximation, carbon taxes and cap-and-trade are identical policies: prices go up, quantities go down. The differences in that article are about second-order issues.”

One issue that is often overlooked is the following:

Any cap-and-trade plan is likely to have fines for non-compliance which are proportional to the amount over the cap emitted. Those fines aren’t likely going to be set at levels which would seriously cripple industry.

If you have a cap-and-trade system with a low enough cap it is likely going to be rational for some firms to not bother trying to buy credits; they’ll just pay the fines. That is any cap-and-trade system is likely to have an upper bound on how high the price of carbon can go (that upper bound being the size of the fine).

Because of all that, any cap-and-trade with sufficient ‘bite’ is going to end up being a carbon tax. But with a lot more overhead and a lot more time spent by firms mucking around in carbon markets.
Peter

Paul, I was just reading your article on Dion-McCain, and I’m puzzled by the last sentence.

“The smart money is against both Dion and McCain. It is some consolation to both men to remember that in both cases, the smart money always was.”

Always was what?
Bill Simpson

Both schemes assume an accurate calculation of the cost of emitting a ton of carbon. This seems a fantastical exercise and there is no climate model which will take us anywhere near a reasonable answer.

In any event, it may be a whole cheaper to mitigate the effect of a ton of carbon than whatever amount is proposed.
Brian

Just so I’m clear on this — I get a $2,000 break on my income taxes and under the best case scenario I’ll have to pay $2,000 in carbon taxes throughout the supply chain. In doing so, we will have magically garnered the ability to control the weather (at least until China negates our reductions in about a week)

If putting a price on carbon is the answer, why is there a price on some carbon and not others (fuel at the pumps and farmers)?
DT

I don’t know about the rest of you, but I’m just going to put the income tax refund in the tank of my F-150, behavioural changes my a**