Comments on: A Question of Balance: Finding the Optimal Carbon Tax Rate

By: Mike

Mike — Tue, 30 Dec 2008 05:30:41 +0000

Taxes on the American people and businesses need to be reduced or eliminated on every level. To talk about a new tax is insane. New low or non carbon fuels should be sought after by private companies driven by the free market. The neutral tax will only be the beginning. How long will it be neutral? Not long if you put it in the hands of the politicians.

By: James Handley

James Handley — Tue, 21 Oct 2008 03:29:01 +0000

Perhaps it’s not quite a "recommendation," but the IPCC’s "Summary for Policymakers" (p. 18) says,

"An effective carbon-price signal could realise significant mitigation potential in all sectors. Modelling studies show that global carbon prices rising to US$20-80/tCO2-eq by 2030 are consistent with stabilisation at around 550ppm CO2-eq by 2100."

Thus IPCC’s “suggestion” is a bit below CTC’s recommendation to start at $10/tCO2, stepping up to $100, while IPCC is higher than the other three economists’ proposed rates. But rates based on a goal of 550ppm may not be protective enough. For example, Dr. Hansen now says 550ppm CO2 would lead to "disaster" including a 2 meter sea level rise.

By: James Handley

James Handley — Mon, 20 Oct 2008 21:54:13 +0000

Dr. Tol, Thanks for your contributions to economic policy to address global warming and specifically to assessment of the cost of climate damage. True, the IPCC doesn't make policy recommendations. But its report has provided support for others, notably NASA's lead climate scientist, Dr. James Hansen, the Stern Report, the UN Framework Convention on Climate Change (UNFCCC), a number of European countries, the State of California and others who have either suggested or explicitly referred to 80% carbon cuts by 2050 as a target commensurate with the scale of the problem. More recently, Dr. Hansen and other climatologists' concern about approaching climate "tipping points" (beyond which run-away climate feedback would ensue) led Bill McKibben and others to advocate a more protective goal of stabilizing CO2 levels at 350ppm. Regardless of the specific goal, it's fair to say that there is no case for further delay in setting aggressive policy to reduce GHG emissions; I wanted to be sure to credit the IPCC for sounding that clear alarm. Dr. Tol, you're an economist who's studied estimates of the projected cost of climate damage. I'm curious about your views on: a) the need for carbon pricing policy, b) the most effective policy, and c) the subject of my article, appropriate rates.

By: Richard Tol

Richard Tol — Mon, 20 Oct 2008 07:17:18 +0000

Note that the IPCC does not make any recommendations. Indeed, it’s mandate is to assess the research and give the necessary knowledge to policy makers to reach an informed decision. Any "recommendation" by the IPCC is in the mind of the reader only.

By: David Collins

David Collins — Sat, 18 Oct 2008 20:09:29 +0000

A separate comment (I wish I could separate paragraphs!): I do not like the idea of governments "picking winners" in technologies whose pumps should be primed by Carbon Tax revenues. That being said, I would like to see some of the revenues go toward improving rail and public transport infrastructure, making roads (urban, suburban, rural) more bicycle-friendly, and so forth. Up to a point; only up to a point, though. If people do recreational stuff closer to home, less transportation energy is expended, so let’s put Carbon Tax money to work cleaning rivers, so folks can go fishing nearby (and dare to eat the fish!), developing ski hills near Chicago so folks don’t have to go to Vail, and so forth. But this gets to be like the relationship between The Cow with the Crumpled Horn and The House that Jack Built.

By: David Collins

David Collins — Sat, 18 Oct 2008 20:01:10 +0000

An excellent report and summary, Mr Handley.
My own visceral reaction is that that the "marginal cost" of CO2 emissions is not really so well known or understood to be figured in calculations of what the Carbon Tax rate should be. I hesitate to put a dollar or euro price on the loss of species, of reduced flows in major Asian rivers, etc. Economics, even at its best, can help establish prices but is helpless at determining values. That being said, count me among those who opine that we will never reduce or mitigate AGW with a list of Thou-Sall-Not’s. The "best guess" CO2 marginal costs should set floors under carbon tax rates. And thanks again for an interesting, thought-provoking essay.