Global Warming, Carbon Taxes, and Public Choice
In earlier posts I argued that global warming is probably real, probably anthropogenic, and will probably impose real but not catastrophic, costs. This raises an obvious question: What, if anything, should we do about it?
If I were dictator of the world, the answer would be fairly obvious. Impose a tax on activities that create greenhouse gases designed to reflect the marginal cost they create. That's the standard economic solution, due to Pigou, for problems of negative externalities. Since the tax brings in additional revenue, combine it with a corresponding reduction in whatever taxes currently have the largest adverse effects.
I do not, in fact, support such carbon taxes. The reason is that I do not believe that, if imposed, they would fit the pattern described above.
To begin with, they would not be based on a realistic estimate of the marginal costs; insofar as they would be based on anything, judging by the ongoing arguments over Kyoto and similar proposals, they would be based on some target level of emissions. If, as seems likely, the level of taxes needed to substantially slow global warming was much higher than the marginal damage done, the result would be to buy lower temperature at a price much higher than it was worth, making the net situation worse, not better.
I offer as further evidence the arguments I have been having over at Brian's "Backseat Driving" blog with people who are absolutely convinced that global warming would have catastrophic consequences but curiously unwilling to support that conviction with anything more than handwaving arguments. Judging by casual observation, they are the norm, not the outliers, of their movement.
Furthermore, I think it unlikely that income from carbon taxes would be used to reduce other taxes. The clear evidence here is the repeated pattern with regard to wars. New taxes are introduced as an emergency measure for a war, retained long after the war is over; there is always some politically profitable way to spend the money. In the case of carbon taxes, I am confident that they would be used as an additional source of revenue, perhaps with the argument that the money was needed to ameliorate the effects of whatever global warming continued to occur.
Finally, I suspect that widespread acceptance of the catastrophist view of global warming would result in quite a lot more than carbon taxes. It would provide a new justification for politically motivated interferences in a wide range of human activities. Anyone who questioned such policies would be labelled a denialist, accused of wanting Bangladeshis to drown and African children to starve. Again, look at the ongoing exchanges on Brian's blog.
Hence I conclude that serious efforts to combat global warming would have large costs, costs justified only if there were good reason to be confident that not taking such efforts would have catastrophic effects.
For the benefit of Brian and his friends, I think it might be useful to clarify the relevant terminology, as deduced from their and my usage:
Denialist: (1) Someone who refuses to accept the current scientific evidence on the existence and causes of global warming.
Denialist: (2) Someone who refuses to reject the current scientific evidence on the likely future scale of the effects of global warming.
Catastrophist: Someone who rejects the current scientific evidence on the likely future scale of the effects of global warming, preferring to believe that sea level will go up much more than current estimates predict, and that global warming will result in large increases in frequency, violence, or both of hurricanes as well as other large climatic changes, all of them adverse.