Why is carbon pricing so hard?

I’ve just published a piece in Aeon (an excellent and free online magazine) drawing on the analysis in my (about to be published) book Economics in Two Lessons. I make the case that carbon pricing, whether through a tax of an emissions trading scheme, is the most cost-effective way to stabilize the global climate. Moreover, it’s straightforward to offset any adverse effects on low-income earners, displaced workers and others.

That raises the obvious question: if carbon pricing is so good, why is it so hard to implement, compared to less efficient alternatives like mandatory renewable targets. One factor, which I discuss, is that the creation of property rights over previously open-access resources creates obvious, and often powerful losers.

I was limited by space, so I couldn’t discuss the more puzzling problem of why regulations are more politically salable than prices even in the absence of income effects.

41 thoughts on “Why is carbon pricing so hard?

  1. The main losers are import competing carbon users and carbon exporters. You can minimise the role of these losers by defining the tax base appropriately. It is unfair for Australian producers of alumina to cop a carbon tax but for exporters from Japan who also use carbon-based electricity to sell their goods tax free. Not only unfair but stupid because carbon leakages will occur as users will shift to cheaper untaxed imported products. So tax the imports at the border as many have suggested. Carbon exports – coal and coal-using products – should be exempt from taxes except for the emissions involved in producing their products – e.g. fugitive emissions associated with mining or other activities.

    The answer to your main question relates mainly to these two issues – they were repeatedly raised during previous attempts to price carbon here and elsewhere. BTW I am not saying leakages are a major issue but they were certainly made to appear to be by previous opponents to pricing. You give the game away if you tell people you want to cancel out 10% of our exports (coal) when there are plenty of other coal substitute producers out their and you outrage the Chamber of Commerce types in the Liberal Party if import competing industries are left out to die tot the (apparent) advantage of foreign firms.

    I blame the inept package of pricing policy proposals that were put forward in the past for Australia’s inability to price carbon effectively.

    For a more complete exposition see:

    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1856884

  2. Good article -very much looking forward to the book. I don’t want to be a pedant and, heck, my own copy leaves much to be desired, but shouldn’t it be “adversely affected” not “adversely effected.”

  3. JAF, I hate making mistakes like that, and will try to get Aeon to fix it. That’s the second typo pointed out to me on this piece. The good thing is that you and others are obviously reading it.

  4. Carbon pricing is hard for the same reason that congestion traffic pricing is hard. People hate new taxes (or paying a price for what was once free) and on top of that don’t trust governments to cut the old taxes to compensate.

    Regulations are different. Unlike taxes, it is far from clear how they hit the hip pocket.

  5. As this study points out, the highest producers of pollution tend not to be the highest consumers of same pollution. There exists an inequality in that pollution is produced and distributed freely but there is a cost to those that have to deal with it. This is a cost that properly, should be passed back to the source.

    https://www.pnas.org/content/early/2019/03/05/1818859116

  6. I left a similar comment at Crooked Timber but it appears to have disappeared. Basically you can build a Coalition around a crude regulation with a tangible result (‘stop dumping toxic waste’), than a subtle price signal with an intangible outcome (‘a changed investment environment’).

  7. It should not be so.
    Yes the punters were worried about the price on carbon before it occurred however once it started just like the GST most but not all worries dissipated.
    It seems to me the current lot of the ALP are as bad at interpreting polls as past lots.

  8. Harry Clarke – you want to exempt importing carbon users, carbon exporters and coal and coal using products from carbon pricing? And you think this will result in a new and improved way to do carbon pricing and reduce emissions? I admit I am struggling to see how. Perhaps if your aim is to preserve the long term viability of these very activities – that are the principle contributors to the problem – this might make sense. If you really want to fix the climate problem, not so much. Actually, not at all.

    In the absence of effective international efforts (which successive Australian governments entered into negotiations to achieve the very least that could be gotten away with) shouldn’t Australia be independently doing more, not less? Is that truly our bottom line – that Australia should do no more than the least efforts of the world’s poorest or most recalcitrant nations (whilst actually encouraging that recalcitrance) – then alternately complaining bitterly about the ‘unfair’ burden and celebrating our sacrifices?

    When creating and using loopholes and cheating to NOT fix the climate problem is celebrated as a win for Australia it just confirms for me that we have a serious problem with ethics and responsibility.

  9. Ken, Of course, sustaining carbon producers, is not my intention. My intention is to tax all the consumption of carbon in the economy and to move towards an international agreement on carbon emissions. .

    Import competing industries I cannot even see your objection. If you tax alumina produced using coal fired electricity but don’t tax imported alumina that is also produced using coal fired power then the net effect on emissions will be close to zero. Users will switch to using the cheaper imported product and carbon emissions will occur as before – these are carbon leakages. Hence tax the imported product at the border. If the imported product is produced using hydroelectric power (or using coal but subject to a carbon tax equivalent to the Australian tax) then no tax would be imposed at the Australian border because the cheapness now reflects less pollution (or the tax has already been imposed) .

    No one has ever suggested taxing coal exports. Literally no-one. The only emissions that should be taxed are those associated with the mining of coal – fugitive emissions. Coal exports generally can be substituted for from a variety of international sources so taxing Australian exports would have negligible effect on global emissions effect. Of course coal burnt in Australian power stations would be taxed – or a tax levied on the resulting electricity produced.

    Coal-intensive exports (and methane producing exports such as beef cattle) should likewise not be taxed but consumption of these goods inside the economy would be taxed.

    The objective of this policy is to encourage other countries to adopt it – indeed to in effect tax production of emissions so that they collect the tax revenue rather than the Australian government. If our exports were taxed in the same way we would have incentives to levy taxes on these exports locally. Of course no imports to Australia would be subject to a carbon tax if they were taxed to the same degree elsewhere.

    Your suggestions about ethics are a bit below the belt. My guess is I have expended more effort in trying to address carbon pollution in the Australian economy than many. I recognise the extreme severity of the climate problem. But I am interested in solutions which have a hope in hell of being implemented and which do, as your intentions seem to suggest, work towards getting a global agreement on climate. Silly noises about Australian coal exports may make you feel virtuous – in fact they don’t even make much sense for the reasons explained – but will not advance the task of getting towards solutions.

  10. There seems to have been a lot of thought, maybe too much thought, in the consequences of having to make polluters pay the cost.

    I remember, admittedly some decades ago, when factories would run their effluent down to the river – in this case the Lane Cove River. The rivulets would be bright green or blue, with crystals and other growths, and nothing would grow for a meter each side. When it came to banning these practices nobody raised concerns over costs, after a public campaign it was done and I doubt that business has suffered. Certainly the river is a lot healthier with the primary source of pollution being stormwater.

  11. In political-economic terms, stopping greenhouse gas emissions was an n-body problem where n is a huge number and there were multiple political and economic dimensions. Someone fully analytical, from a world systems perspective perhaps, might have predicted that this problem was too difficult to solve and that we would fail to solve it, at least under neoliberalism. That someone was not me. I argued for pigovian taxes. As it turned out, pigovian taxes were not politically feasible, in a climate of neoliberalism, as was proved in the event by the fact that few, if any, major countries adopted them.

    ETS(s) proved partly politically feasible but very difficult to implement in practice. All were effectively useless or minimal in effect (knackered by horse trading and, one suspects, deliberate delay and sabotage) until and when the EU ETS was finally reformed in about 2016-2018. So far as I can tell, it has only just started working in any significant way. Regulation also seemed and seems to be, for all real intents and purposes, a non-starter to this day, under neoliberalism.

    In an age of neoliberalism, where the need for real and effective attention to environmental limits can be deferred or denied, ETS(s) are finally showing some marginal implement-ability in political and economic terms. Nothing else has proved possible under neoliberalism, that is to say under late stage monopoly capitalism. The obstacle is the system itself (as Naomi Klein and many others have said).

    Under statism (heavy handed state action) reinforced by existential fear, direct statist command planning, regulation and compliance – all heavy handed – would work but would also entail heavy economic costs with many economic losers. By existential fear, I mean the fear for life and property induced by the clear and present real beginnings of catastrophic climate change. Then and only then will the people permit, nay demand, a system change. The system change would mean ceding considerable power to the state for the necessary heavy handed statist action at high economic cost. People will pay, or forego, a lot to not die or not be completely broken in financial terms by massive catastrophes, when they finally believe these are real and imminent. .

    There is a limit to what can be done with orthodox economics and capitalism. It’s a fair-weather system in all senses of the term. It doesn’t work when the existential (death-threatening stuff) hits the fan. It can’t meet those conditions. Witness the shift to statism, even in democracies, under total war conditions. History to date has and is empirically proving the need for statism under emergency conditions. An 11th hour victory for this capitalist system could still prove me wrong. We are all awaiting this final empirical test; doing what we can but still waiting on the final results.

  12. Harry – sounds like a case of actions you prefer that won’t be supported by Australia’s government versus actions I would prefer that won’t be supported by Australia’s government. I suspect it is not that no-one has proposed carbon pricing at the source, but that it was and is fiercely opposed – the same as every other kind of carbon pricing is fiercely opposed.

    I disagree that taking one of the biggest source of coal exports out of the global coal market would be pointless. Every ton of coal taken out of the global market is a step towards regaining climate stability. If that were to raise global coal prices then RE looks more attractive. Perhaps the money marketeers will refuse to fund them and it won’t take government actions and it won’t need carbon pricing – and if Australia’s economy cannot cope without coal we really are a pathetic, spoiled lot.

    Below the belt to say I think lying and cheating are the Australian bottom line? Hah! The LNP position is built on brazen lies about the non-reality and non-seriousness of the climate problem, and that is cheating from the word go – no matter that it’s leaders are as assiduous in avoiding clear statements of their true position in public as they are at avoiding clear policy.

    Australia enters into international climate negotiations intending to weaken those agreements, reduce Australia’s commitments to the very least that can be gotten away with, seek allies in undermining their legitimacy and reach and seek at every point to avoid any burden of climate responsibility. Not in spite of being a major coal exporter but because of it. Even the “no regrets” bottom line we appear bound to, which seeks to allow no policy option for fixing the climate problem that result Australian energy costs rise is a consequence of sustained opposition founded upon falsehoods about what the climate problem is about or the extent of the externalised costs. It is absolutely a failure of ethics, responsibility, trust and truthfulness. That looks to me like cheating to me.

  13. 1. In the light of the empirical realities of the global economy (unequal income and wealth distribution among and within the geo-politically defined countries (juristictions) and the unequal technological development, eg unequal industrialisation and methods of production), Harry Clark has a point regarding taxing of imports that have been produced without a carbon tax (ie levy the local carbon price onto these imports.)

    2. IMHO, carbon pricing would have to be international at the same rate. To counter the historical differences in emissions, assuming they can be estimated, transfer payments should be made between the juristictions (development assistance).

    3. My item 2 is not on the agenda. In terms of the empirical realities now, it seems to me it is not possible to have one size fits all approach. For example, IMO Harry Clark’s point is relevant for Australia with a small industrial base.

    4. The idea of having tradeable emission permits has the advantage of allowing technological change, for, which the carbon price signal is supposed to work, to be linked to commercial criteria such as the depreciation of physical assets. Obviously, such a scheme is relevant for economic regions with a large industrial base, such as the EU. In the case of Australia, it would seem to me a straight tax is more sensible. The idea of these emissions permits being traded internationally, without having one central issuing agency for the entire global economy (as assumed in my items 2) would be provide rich arbitrage opportunities (not a good idea).

    5. Tradeable emission permit schemes are often referred to as ‘market oriented’. It is a peculiar terminology. On the one hand it brings out the essence of a ‘market’, namely exchange (A sells his/her spare permits to B). On the other hand it is non-market in the sense that there is no ‘natural positive price’ for pollution (market failure). The quantity of allowable pollution is set by a non-market agent and the institution for trading the permits is also established by a non-market agent.

    6. I can’t see how the notion of opportunity cost is helpful, given that its application relies on a fear factor (unknown consequences but ‘big and bad’). Moreover, there is not one opportunity cost but there are as many as there are individuals in this world. By contrast, starting with a pollution budget estimated by the relevant scientists, the allocation of this budget is a straight forward economic problem.

  14. If you wish to ban coal exports go ahead and try. Good luck – you certainly won’t get any opposition from me or any support from either major political party for that matter. Chance of success is probably less than 10^ -6 but, if you get value from the endeavor please charge ahead. It would have a negligible effect on global CO2 emissions – maybe a small effect via induced global price rises.

    No impact on the economy, Rog? 10% of exports by value, our second-largest export. That might be a small obstacle.

  15. @Harry “Chance of success is probably less than 10^ -6 ” Yes for an immediate ban on coal exports. But an effective ban on new coal mines, starting with Adani, is odds-on to happen once Labor gets in.

  16. This is rather off topic, but I want to call Ernestine Gross’s attention to a paper in which she might be interested.

    Kim, Jongchul, (2018), ‘Propertization: The Process by which Financial Corporate Power has Risen and Collapsed’, Review of Capital as Power, Vol. 1, No. 3, pp. 58‐8

    Click to access b54439_195c222c9b6f42e2bd9bfa054eec4de1.pdf

    Here is an excerpt from the conclusion which generate interest in reading the paper.

    “I conclude this paper by commenting on a possible reform policy of the current financial system from a new perspective. This comment is brief and incomplete, but it offers a direction for future research. The current discourse focuses on how to externally regulate the greedy and ill‐behaved finance sector by adding more regulatory schemes and governmental intervention. This paper implies that we should reform company law or the structure of the law if we want to reform finance in a more fundamental way. One reform policy would be to prohibit any propertization of contractual rights, that is, to prevent all financial investors from enjoying both legal rights simultaneously. In the same vein, Ireland (2010) offers a radical reform policy to correct corporate irresponsibility. He argues that the policy should strictly divide creditors’ rights from property rights, that is, decouple limited liability from control rights. The same reform policy can be applied to MMF reform. MMF shareholders are merely functionless creditors with limited responsibility. The reform would involve no longer granting them property rights in their shares, that is, to abolish the redemption rights of MMF shareholders at par.” – Jongchul Kim.

  17. Harry – no I do not expect any Australian government made up by MP’s of the sort we are most familiar with to attempt to phase out coal export. Yet I also see a real shift from the combination of denial and apathy in the Australian public – an election ten years from now could see very different community attitudes. Especially should the alarmist messages about our utter economic ruination by climate activism out to destroy free enterprise and democracy – ie lying – loses it’s traction in the face of 4 decades rather than a mere 3 of top level science based expert advice. And, of course, increasing real world experiences of climate harms.

  18. If we still have Australian governments that are still unequivocally supporting coal exports at current or higher levels a decade from now the world as well as Australian democracy will be the worse for it, not better. It will be evidence of the enduring power of Doubt, Deny, Delay politicking – ie lying and cheating – for preventing or overturning policy based on the top level expert advice.

    A ‘healthy’ coal export industry will advance us globally towards the more extreme climate possibilities – and I hope that Australians will recognise a thriving coal export industry is not worth it’s economic ‘benefits’ to Australia. Whatever the means, it has to stop – and the sooner that can be achieved the better.

  19. The climate crisis illustrates, indeed demonstrates empirically, the fundamentally and extensively fallacious nature of orthodox economics. Two founding postulates of orthodox economics (OE) are “unlimited wants” and “scarcity of resources”. The manner in which these are falsely derived, then advanced in inaccurate form as undeniable axioms, illustrates the ontological poverty and lack of intellectual honesty in OE.

    “Unlimited wants” is not a complete and objective description of humans. Rather, it’s a moral philosophy permission. Under this permission, humans are given licence to have unlimited wants. If this licence is taken literally and extensively, it is seen as justification for the individual to garner as much as he wishes to himself and for humans to take as much as they wish from nature. Thus, what orthodox economics claims is an objective ontological object (saying something objectively real and complete about humans) is really a moral philosophy a priori. Further, it is clearly one which is not a complete description of humans. Humans are extensively capable of moderating and delaying wants, as opposed to the stricter and finally absolute limits on moderating and delaying needs.

    Needs, in contrast to wants, are certainly not unlimited. Indeed, if needs (food, water etc.) are over-satisfied then harm ensues (e.g. morbid obesity and water toxemia). The concept of satisficing sums this up, meaning to satisfy and suffice. Satisificing can also be applied to wants but OE rules out a priori the satisficing of wants, except of course by default for the lower and precariat classes. Over-satisfying wants leads to marginal returns on wants. The corollaries of over-satisfying some individuals’ unlimited wants are the immiseration of other individuals and/or the destruction of nature.

    Orthodox economics (OE) may either treat “unlimited wants” as a (demonstrably false) description of humans or treat it as a moral philosophy prescription for humans and economics. It cannot have it both ways. All schools of OE follow the second treatment in practice but fail to honestly state that it is their moral philosophy prescription for economics. It is normative economics not descriptive (positive) economics.

    In detail, the mistake made is as follows. A property is ascribed to humans, by abstraction, when humans cannot possibly have that property as their sole proper and complete description in full relational context with their own nature and the world. This is a kind of category mistake. Humans, taken in isolation, instead of in context in social and environmental systems are characterized uni-dimensionally as black holes of unlimited wants. It is this uni-dimensional imputation which is at the heart of the problem. As I noted earlier, the imputation becomes a prescription; a prescription for individual behaviour and a prescription for economic theory and practice which by its own system reinforcement (complex system feed-backs of the prescriptions or axioms of OE) becomes a self-fulfilling prophecy in practice – thus a circular proof of its own theory. We are told we have unlimited wants. We are told to indulge them. We then act that out. We act is if neither ourselves nor the world will be damaged by our indulging our wants to the utmost. Indeed, we are told that unlimited wanting is virtuous, personally and economically. Of course, the world is being damaged by unlimited wants and OE, even its revisionists, reformers and apologists, cannot find a theory which saves OE and the world. The choice truly is going to be for one or the other.

    The matter of abstraction of primary attributes from extensive complex system reality (the real world or real cosmos) is where OE attempts to copy hard science, especially physics, and fails. It is standard practice in physics and indeed methodologically necessary, to abstract primary attributes (called “primary qualities” in some philosophies) and quantify them. Mass may be regarded as a primary attribute of all objects possessing mass. The objects may be very diverse but all possess the attribute of mass. Comparison and aggregation imply “making the incommensurable commensurable in some fashion. We begin with incommensurable items – ‘apples’ and ‘oranges’ – and then use a common dimension (primary attribute) to make them commensurable. The dimension (primary attribute) converts qualities into quantities that can then be universally compared.” – Blair Fix from his paper “The Aggregation Problem: Implications for Ecological and Biophysical Economics.” In mathematical terms, primary attributes are dimensions along which we measure and compare different objects.

    Fix also notes crucially, that “dimensional choices affect aggregation”. I refer the reader here to Fix’s paper for a full explanation of his ideas in his specific subject and context setting. I am making a wider claim here but it is wholly suggested by Fix’s concepts and exposition. My wider claim is that dimensional (primary attribute) choices seriously affect our modelling when modelling complex systems. Complex system modelling is another kind of aggregation problem, especially when a complex agent or agents (a human or humans) is/are grotesquely one-dimensionalised to enable aggregation, or conjunction, with other elements in a complex system model, which claims to model something real, if it claims to be descriptive (positive) economics. My point, in broad terms here, is that such a model can only be prescriptive at best. It never can and never should pretend to be descriptive, though OE of course pretends to be descriptive in many ways. By pretending description it pretends it has the right prescriptions. However, it commences in prescription. It is an entirely sophistical and circularly justifying system.

    Clearly, I am arguing that Orthodox Economics is not just an incomplete and inadequate modelling system. It would be possible to argue, if it were merely an incomplete and inadequate modelling system, that it was simply meeting and crossing boundary conditions into a zone where its basic theory was no longer adequate. This is the position, I imagine, of those who wish to continue to reform OE. I am arguing that OE is fundamentally flawed ontologically. OE does not understand, cannot even conceptualise in its own terms, that its dimensional (primary attribute) mis-attributions and over-simplifications render it incapable of understanding and analysing complex system dynamics.

    If OE were accurate enough and basically adequate, it would not create the catastrophic social, economic, climate and ecological crises which we face. These developing crises can longer be denied. They are the (near) empirical proof of the intellectual poverty of orthodox economics.

  20. Harry Clarke kicked off the comments by proposing that carbon pricing work domestically, be charged for domestic carbon production whether for local or export supplies (of goods or of services), and be charged for imports (on carbon produced elsewhere, so far as no carbon pricing applied there). (I hope I am not getting his comments wrong. He has returned to comment on what others have said, and to argue trenchantly against a ban on coal, and presumably gas, exports either by way of pricing the carbon in those exports or as a proxy for carbon pricing.)
    I think Harry Clarke is right, as I understand his views.
    We can carbon price in Australia, as a partial move towards pricing things more correctly. The more carbon is produced domestically, the more cost needs to include that of carbon production. The more carbon is produced for what is used domestically, the more cost needs to include that of carbon production.
    There is a problem with exports. On the VAT model, it could be argued that exports should bear no cost of carbon produced even up to the point of export. But this would then limit carbon pricing in Australia to domestic consumption items – and would distort the decision to produce as between domestic and foreign supplies. (The VAT model is, really, one of exporting tax base along with goods. Its European origin is as a concealed subsidy for net-import EU members. In principle, the value added before export should be taxed where the value is added: where the tax base contributes to the framework for adding that value.)
    But problems can’t be avoided while we have, and others lack, a carbon price.
    I don’t have strong preferences for ‘carbon tax’ (with or without redistribution of the proceeds in a way that does not reflect carbon production) as against ’emissions trading’. Both methods depend on monitoring of actual carbon production, both overall and business by business (at least, for those from whom the tax is collected). Both involve tweaking the system from time to time to reflect the intended price of carbon production (one that more fully collects for what are otherwise externalities). Neither works without both monitoring production and regular tweaking.

  21. Ikon, I agree “unlimited wants” is historically tied to ideals of prosperity and affluence.

    I prefer “opportunity cost”, as von Wieser in the 1870s, D.I. Green in the 1890s (who coined the term), and JQ in the 2000s explain it, because it doesn’t have those connotations. It pretty much explicitly says that “humans are extensively capable of moderating and delaying wants”.

    And because it’s practically useful. I apply it every day to the running of my business. The results are empirical, accurate and reproducible.

    “Unlimited wants” isn’t exactly something you can plug into an equation.

  22. Nick,

    I take your point about opportunity cost. It is clearly a more sophisticated and defensible proposition than “unlimited wants”. Although, it must be said that the second term is still much favoured in bowdlerized, rhetorical and pedagogical economics for the public and undergraduates, so far as I can see. I have in vain butted my head against “opportunity cost” as a concept before now. However, I still think it has a fallacy in it if price opportunity costs are claimed to be the same as real opportunity costs, especially the more one aggregates costs of each type and over time.

    I posted a long piece on Scarcity on the MMT and Seigniorage topic. It maybe contains a lot of waffle as I try to work things out and express them quickly in blog form. However, I think there’s enough in it, if you work through it, to cast doubt, not on opportunity cost as a real cost (stuck in the desert I can drink two liters of potable water or I can put it in a boiling radiator but I cannot do both) but on opportunity cost as a concept which tells us enough about real costs from “mere” economic opportunity cost calculations. This is because the set of economic costs is not the same as the set of real costs. Not all real costs are drawn into economic opportunity cost calculations.

    A key paragraph from that other post, slightly modified (as I find faults and omissions in it) is:

    Growth economics self-reinforces exponentially through at least three potentially exponential mechanisms. The first is quantitative growth itself. The second is technological growth, sans oft over-rated substitution effects and taking into account the near-ubiquity of Jevons Paradox in practice. A third, which depends on the first two, is an exponential introduced by the reduction of free goods. The very process of growth crowds out free goods. What was a free good ceases to be a free good. Where one person could use a free good to satisfice without reducing the ability of one more to satisfice on that free good (meaning no opportunity cost), the activities of many persons function to introduce an opportunity cost where there was none before. The nth person can no longer satisfice on the remainder of the free good. Few free goods, except those in super-abundance and super-ubiquity, like oxygen in the atmosphere or the navigable high seas, escape this rule in a crowded, industrialised world. The formerly free good now becomes subject to opportunity cost and thus the object of direct competition. This direct competition will be solved by physical aggression (violence, exclusion), or rationing or price. The third option arises by drawing the former free good into the economic system and essentially rationing it by price, with the state’s monopoly on violence ultimately underwriting the stability of the ownership and pricing system (rights in property and rights in contract). Thence we see that rationing and violence are never fully done away with by market price but they are overlayed, and transformed in expression, by market prices.

    Take notice of the argument about an introduction of an opportunity cost where there was none before. The failure of applied opportunity cost calculations at a point in time to predict the future trajectory of opportunity cost because of limit-approaching (asymptote) effects on free goods means something important about opportunity cost theory, I think. I don’t pretend to know yet exactly what that something is or means in comprehensive terms.

    I’m operating above both my IQ and educational “pay grades” in trying to theorize this stuff. However, I prefer to make my own attempts rather than be in imitative thrall to any one orthodoxy. All that means probably, is that I make idiosyncratic and syncretist attempts to get new ideas by working through several un-orthodoxies simultaneously. In an emergent sense, that is probably how both valid new ideas arise and also how all sorts of incoherent messes and drivel arise. 😉

  23. If proposals like carbon taxes at mine-heads or ports seem outrageously extreme now I expect we ain’t seen nothin’ yet. When the level of community awareness and concern gets high enough pricing carbon on exports or even directly limiting them will not be outside the Overton Window. I will continue to support efforts to raise levels of concern to those levels.

    The fossil fuel income Australia will forego by treating climate change seriously is not worth the costs of failure on this – and I expect the economic opportunities from RE will be significant and will include greater demand for other kinds of mineral resources. Diminishing the economic alarmist fear of The Transition may be RE’s most significant early benefit, Without the obstructionist forced minimising, compromising and inclusion of get out of carbon pricing free loopholes for the very industries that are the biggest contributors of emissions is going to make future large scale RE development more effective.

    And I imagine those on the Right who have great faith in nuclear, but cannot bear to use climate concerns to promote it or make clear climate policy that includes it will belatedly become more effective in promoting it. Although “just use nuclear, climate fixed” notions that work well when they are purely rhetorical, without any actual commitment, will face actual scrutiny when they become actual policy option under consideration.

  24. mrkenfabian,

    I agree 100%. At the same time I am advising my 25 year old twins for their respective life paths;

    (a) Long term, live well above sea-level; 50 vertical meters should do it.
    (b) Live 2 meters above a 1 in 1,000 year flood level.
    (This is based on current assumptions now,,or soon, being a factor of 10 out.)
    (c) Use an underground or semi-undergound house design.

    There are extant designs, with or without firestorm shutters depending on the window quotient.
    These houses are naturally well insulated and have a huge thermal ballast capacity.
    A semi-rural setting is best with full solar power and water collection facilities.
    Have batteries and water tanks (water tanks underground within the house).
    Be connected to power and water grids if possible but have the capacity to “island” for up to a month.
    Don’t go full prepper but still have reasonable stocks of non-perishables and water for a month or two.
    Rely on concealment and non-obtrusiveness in the landscape and social-scape.
    Have nothing to do with man-traps and guns.
    Seek cooperative and friendly arrangements with neighbors and locals
    (Who will know you are there but that knowledge will be largely local.)
    Hope there isn’t a large war.

    This is how I would prepare now if I were 25 on a professional income or a double income with a partner. The world is going to change radically but how radically we do not know. The above hedges bets nicely I think.

  25. Ikon: “stuck in the desert I can drink two liters of potable water or I can put it in a boiling radiator but I cannot do both”

    Actually, in that example, you can do both 😉

    I think you identify the problem correctly. Too much economic reasoning is clearly politically and ideologically driven towards growth and profits at all costs. The costs preferably borne by someone else (Harry’s solution)

    But opportunity costs aren’t negative externalities. Opportunity costs cost me. Negative externalities cost someone else. Most companies won’t account for negative externalities, let alone pay them, unless they’re required to by law. Regulation forces companies to include those costs in their accounting.

    Hence, why a carbon tax is so important. It’s not a problem of economics, but political will.

  26. To meet Harry halfway, I’d suggest:

    “Australia will only export fossil fuels to those countries which have a working and effective carbon pricing scheme in place.”

    We could introduce that policy in 2025. And begin phasing out exports and production all together between 2030-2040.

    The sheer amount of superannuation money forced to flow into the rest of the economy (hundreds of billions) would be of massive social benefit.

  27. Nick, That is effectively taxing the exports but refunding the proceeds of the tax to the country receiving them. It won’t work.

  28. Why is carbon pricing so hard?
    Because all those ideas presently mentioned in the discussion generally are punitive and would cover the most of the population in some form.
    Ideas coming from government should not be punitive for large sections of population. This is the major reason that Soviet block has failed.
    Me personally, do not believe that human actions are the contributing a large percentage to climate change that is still real. When you take a look at the really long term temperatures on earth (0.1 milion years) you will notice huge climate changes long before human population could have affected it. Simply huge temperature changes that are very moderate in last 10,000 years ever since the Ice cap over North America melted and rose see levels for about 400 feet. Nobody can figure out where the energy needed to melt that much of ice came from. Even if placed in Sahara that much ice would need thousand of years to melt. Yet that climate change happened in decades when there was no population to cause it.
    Climate Change is real but we are not doing it that much as something else is.
    Still i would like to have cleaner environment then it is now.

    Making the cleaner environment by punitive action by government is simply wrong way to go, especially that people are so divided over it.
    The solution should be to act rewardingly from government. Pay for cleaning or better yet to organize cleaning or collecting of the pollution that polluters create while keeping the present laws on environment protection active so the program is not simply abused by polluters.
    The project should be a part of the Job Guarantee.

    While the present low employment is conducive to such program, in times of full employment there would be no resorces left for environmental programs.
    I find that very destructive jobs are in marketing sector. Marketing on such scales is simply destructive . While the job number reduced by technology we can see that major growth of jobs is in entertainement and marketing. Entertainment is not bad but marketing is just destructive and create bad dynamics of much lieing in society. market yourself at any cost is very prevalent in society all over the globe. And i think that commercial marketing is a major contributor of that.
    Place a large tax on marketing industry to reduce it and create employment for environment projects on a permanent base.

    Again, solutions should not be punitive from the side of the government but provide a free service to keep the environment clean in all areas. Collect pollution for free and governments will get a better rap. MMT explains that governments can run deficits as much as needed. Consolidated government has a financial set up to provide sovereign governments with unlimited power of organization at a desired goals.

  29. Harry, you want no carbon tax on fossil fuel exports. The least we can do in that case is ensure carbon emissions from those exports are being taxed appropriately in the countries we’re exporting them to. Otherwise we’re just kidding ourselves. And it’s not just another way of taxing exports, because just taxing exports doesn’t incentivise other countries to introduce carbon pricing.

  30. Nick, You didn’t read what I wrote carefully.

    We don’t rule the world so the “least we can do” claim is meaningless. That is our objective not something we can force.

    BTW no-one as far as I know has ever (ever!) suggested taxing carbon exports because coal (apart from fugitive emissions associated with mining it) is not a pollutant – burning it is. So it is taxed where it is burnt.

  31. That’s totally disengenuous Harry, why would anybody dig up coal if they didn’t want to burn it? It has no other use so it is a pollutant, unless it remains in the ground.

  32. Disingenuous, indeed. Makes me think of cigarettes – harmless unless you set fire to them and inhale the smoke; nothing to do with tobacco growers or cigarette manufacturers!

    If responsibility for climate consequences could be sidestepped with a warning label – “Flammable product. Keep away from naked flames” or perhaps “No responsibility taken if burned” – the climate science deniers and coal boosters could have skipped funding all that FUD. Pretending that coal boosting is lifting the world out of poverty whilst pretending the external costs don’t exist or don’t count – mid range estimates of US$40 per ton of CO2 mean the external costs exceed the sale price – is also disingenuous.

    As for the “least we can do” claim, I stand by what I wrote. I believe Australia is responsible for the position it takes in international obligations. I’ve seen no evidence of any ambition to achieve the most emissions reductions, whether domestic or global – but plenty of evidence of anti-ambition to keep Australia’s obligations low.

  33. Re: https://johnquiggin.com/2019/03/13/why-is-carbon-pricing-so-hard/comment-page-2/#comment-206499

    Ikonoclast,

    It looks like you are saying one is not a ‘full’ prepper without taking man-traps and guns on board. Given that, then what you have listed must still approach describing a 99% prepper. The guns and traps in your “semi-rural” to wilderness refuge could well be for food alone and not man… Fine lines to draw, I know, but survival is often a close run thing. I tell my kids, near the same age as your twins, to make the same preparations… I recall that I thought a bit less of my father when, back in the 90s, then in his mid-70s, he said whenever the subject came up that he’d be dead before climate destruction caused TEOTWAWKI. Prospect of personal oblivion seemed to render the prospect of TEOTWAWKI remote. Now TEOTWAWKI is all but a fact of history, and soon, yet I now am old enough and resigned to the fact that I will most probably lazily duck it myself despite the energised 25 year old within having now the knowledge and resources to do some survivalist prepping. I know my time is limited. I’m sure my kids’ time to prepare is also limited. I’m old enough to grok how fast time flies, but actual 25 year olds are still immortals. I could set up a prepper refuge, but I likely will not need it, and the kids wouldn’t know how to utilise it when the time came. I’m being swept with the tide some way towards my father’s situational outlook back when. I may soon build a boat to cruise upon the sea instead of a proverbial ark to leave prepped and propped upon some fertile mountain slope.

  34. Svante,

    I don’t see my advice as anywhere near full prepping. Guns and man-traps are 50% of hard prepping. Fortressing, surveillance and hoards of food, fuel etc. are the other 50%. I’ve advocated about half of the second half, if that. Halve that again for just 1 month of supplies. That makes it about 12.5% of hard prepping. But it could be quickly taken to 25% at need.

    (Actually full prepping advocates 12 to 24 months of supplies. If you need that much then civilization won’t be coming back. The environment will be so degraded after that you won’t be able to feed yourself after that anyway. So forget 24 months supplies, a young family will need 24 years of supplies. LOL, good luck with that.)

    The underground or semi-underground house is intended as a fortress against environmental hazards only (heat, cold and bush-fires). It would be designed in that fashion. Such an underground house may well be cost neutral in the long term, factoring in maintenance savings, energy savings, insurance savings etc.

    It’s wise to build well above sea levels and flood levels anyway. The levels I suggest indicate a very high risk aversion but again the extra financial costs are probably zero or even negative. Further from coastal and river scenery, land is usually cheaper. There’s plenty of nice bush. I like bush but not bush-fires. The house would be fully immune to bush-fires. There is just the issue of preventing smoke intrusion but smoke at ground levels is at the lowest concentration.

    The other aspects are not heavy prepping, just keeping a low profile and friendly cooperation with neighbors. Being outside full urban areas is nice to avoid riots, civil unrest, and that sort of nonsense. Outbreaks of that are possible. I am not envisaging full societal breakdown. If that happens then most people are dead already, or wishing they were.

  35. Harry: “Cigarettes are likewise taxed when sold.”

    Australia doesn’t grow or export tobacco.

    https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/edrates/excise-duty-rates.html#_Toc527013632

    https://www.thejakartapost.com/news/2019/03/18/indonesia-nets-931-6m-for-cigarette-exports.html

    There are a few others, mostly developing nations. Many countries have had them at various times , but the tobacco industry has fought hard to have them stamped out.

    Got to have free trade at any cost.

  36. Harry – “It can be burned in different ways”. Coal not tobacco presumably. I hope you aren’t buying into the nonsense that HELE is low emissions; it isn’t. Or that CCS is feasible – Carbon Capture and Storage means dealing with 2 to 3 times as much CO2 (by weight) as there was coal, and requiring a lot more sophisticated technology than unpressurised ship’s holds or open rail carriages. And it would have to go somewhere very deep that has never been drilled before, or even during the process of pumping it underground – because how long do we expect concrete plugs to last? An interesting dilemma.

    We will only successfully deal with climate change by facing up to it and sacrificing expectations of an enduring fossil fuel industry, whether for domestic consumption or export.

  37. No-one ever has suggested taxing coal. It isn’t on the radar nor has ever been. The debate is about whether to tax the production or consumption of emissions. My argument is that a production base is preferable. The argument I develop concerns that. A lot of irrelevancies here.

  38. Like tobacco, the idea should be to tax coal before it goes up in smoke.

    Both coal and tobacco are harmful to public health and a drain on resources and their reduction or elimination should be seen as a nett saving to the economy.

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