Access Economics and CEDA on carbon taxes

I’ve seen a number of reports of statements by CEDA supporting a carbon tax as an alternative to emissions trading. This seemed surprising, since the two are basically equivalent. Given that the ETS is almost in place, suggesting such a variation seemed rather pointless.

But I’ve now received an email from CEDA which appears to explain everything. The real distinction is not between a tax and a trading scheme but between a tax levied at the point where carbon is used and one where final products are consumed. Since Australia exports a lot of embodied carbon, the tax on final consumption would raise a lot less revenue, and cause a much smaller economic shock.

In fact, modelling by Access Economics (PDF) suggests that the loss of income under a consumption-based carbon tax would be about half that from a production-based tax or ETS

So what’s the catch ?

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The macro wars

Paul Krugman’s piece on “Why did economists get it so wrong” has attracted a vitriolic response from John Cochrane, reproduced here. Krugman’s piece was strongly worded, but the reply ups the ante, and I expect further escalation. Economics conferences in the next few years are going to be interesting events.

Given that, as Krugman himself notes, disagreements between economists were notably mild until the crisis erupted, what is going on here?

I’m visiting Berkely at present and just had a chat with Brad DeLong. These are some of the thoughts I had about the great macroeconomics wars as a result.

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The race for a low carbon economy: A form guide

If, as I think is now possible, the Copenhagen summit leads to an agreement to reduce CO2 emissions substantially in the next decade and to very low levels by 2050, we will need to replace, or do without, a lot of energy currently derived from carbon-based fuels. It’s probably a good time to take a look at the main contenders for achieving this. Here’s my form guide. (I’m not going to give lots of links – Wikipedia is, as usual, a good place to start).

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Three Cheers for Judith Troeth

In my last post, I was thinking about the fact that one Liberal willing to cross the floor and combine with Labor, the Greens and Nick Xenophon, would be enough to pass an improved emissions trading scheme. Now, this pattern of votes has combined to repeal the Howard government’s hateful practice, inherited from the Keating Labor government, of charging immigration detainees for their own imprisonment. The sole Liberal was Judith Troeth, and she deserves our heartfelt congratulation.

Alleged Christian Steve Fielding voted, not merely to pass by the other side like the priest and the Levite, but to join the thieves who beat and rob the needy stranger. I incorrectly stated that Steve Fielding voted against the bill. He spoke against, but voted for.

Improving the CPRS

It seems virtually certain that the CPRS legislation will be reintroduced to Parliament later this year, and highly likely that it will be passed with the support of some or all Liberal Senators. The alternative, a double dissolution fought on an issue where the party is split down the middle, would be catastrophic, good reason for any party with an interest in long-term survival to avoid it. I’m guessing the Liberal Party still fits that description, or at least that enough of its members do to provide a Senate majority.

In these circumstances, it’s unlikely that we will see improvements on the current proposal, in fact the opposite. It makes tactical sense for Labor to offer the Libs some further modest concessions, enough to get their support while splitting off the Nationals and leaving the delusion, delay and do-nothing faction among the Libs deeply unhappy.

Undaunted, I’m going to suggest some ways in which the scheme might be improved.

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