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The CCC & Carbon Taxes

May 1, 2019

By Paul Homewood

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There has been some discussion about carbon taxes, following James Hansen’s latest foray. In fact he has long advocated such taxes.

You may recall his letter to Obama in 2008, begging for a carbon tax amongst other things. He sweetened the pill then by suggesting that all the tax receipts should be redistributed to the public, just as Trudeau is now proposing in Canada.

But the idea is basically a con.

A carbon tax is designed purely to reduce emissions, and it can do this in two ways:

1) Reduce energy consumption, by raising the price. Demand for energy though tends to be pretty inelastic, and taxes would probably have to be punitive to have any noticeable effect.

2) Make low carbon alternatives competitive by raising the cost of conventional fossil fuels sources.

Once renewables had supplanted fossil fuels, there would be no carbon tax revenue left to redistribute, but we would still be stuck with the higher energy prices owing to high cost renewables.

The Committee on Climate Change is crystal clear that the second reason is the real driver behind carbon pricing.

This is what they said in the Fifth Carbon Budget, published in 2015:

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https://www.theccc.org.uk/publication/power-sector-scenarios-for-the-fifth-carbon-budget/ 

 

In short, their target-consistent carbon price is not based on any assessment of the social costs of CO2 emissions. It is simply the amount calculated to be needed to hit the 2C target.

To make things even clearer, they go on to explain that a carbon price of £78/tCO2 would lift the cost of gas-fired generation above low-carbon options.

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In theory of course a “polluter pays” principle is sensible. For instance, if a company dumps waste, it should pay the cost of removing it.

Carbon dioxide however is a different kettle of fish. For a start, is it even causing any damage to the environment, and if so how would you calculate the cost?

And what about knock on effects? Dearer energy resulting from high cost renewables could have adverse health effects for instance.

Not to mention some of the well known pollution issues connected with renewable energy.

Then there is the question of what happens globally. Britain could decarbonise completely tomorrow and it would have zero effect on the climate.

And what about the money raised? Should that go to third world countries, who supposedly are suffering most from climate change? Or be retained in the UK, where our climate is arguably better than before?

Worse still, for the UK or US to take unilateral action and set carbon taxes, it would dangerously distort economic outcomes, by forcing industry abroad to lower tax countries, where pollution (real and CO2) is  much, much worse. We have arguably already seen this happening as a result of EU and UK climate policies.

 

 

In reality, decarbonisation will end up costing ordinary people an awful lot of money, whether it is achieved via a carbon tax or not.

31 Comments
  1. May 1, 2019 7:17 pm

    Since in reality a bit extra carbon dioxide has no influence on the climate all these taxes have only one objective: get money from naive citizens.

  2. Broadlands permalink
    May 1, 2019 7:37 pm

    In reality… a carbon tax does not lower the level of atmospheric CO2, nor do renewables. Only the technological capture and permanent burial of oxidized carbon can do that…and it’s a hugely expensive “bridge too far”. Hundreds of years to make even a trivial effect.

  3. Francis permalink
    May 1, 2019 7:49 pm

    On April 1, the Canadian federal government imposed a carbon tax in those provinces where the provincial government had not instituted a tax. For those taxpayers residing in the provinces subject to the imposed federal tax, there is a federal carbon tax rebate credit available on one’s income tax form for the 2018 tax year. My wife and I, who file our taxes jointly, garnered a credit of $231CAN.

    I have no idea how this rebate is linked (I’m betting it isn’t.) to the additional cost we will bear as prices on everything increase as the “pricing” of carbon becomes reflected in consumer goods and services.

    And therein lies the fallacy of the federal government’s claim that this implementation of the carbon tax will be revenue neutral for the government and cost neutral for the taxpayer. (If it is cost neutral for me why would I be “persuaded” to change my consumption of fossil fuels?) It won’t be revenue neutral for the federal or provincial government either because the prices of all goods and services are going to rise in response to the addition of the carbon tax. Since the federal and provincial governments charge a consumption tax (Harmonized Sales Tax in my province) on almost all goods and services, their income from this source is going to go up, as are my day-to-day living costs.

    And, no, there has been no proposed or actual reduction in other taxes to offset the carbon tax as many theorists suggest is the “correct” approach.

    Bottom line is that this is just an opportunity for cynical governments to reach deeper into the taxpayer’s wallet.

    • Mac permalink
      May 1, 2019 10:36 pm

      But I’m sure the weather has improved for you since the tax was imposed? After all, that’s what it’s meant to be about right?

      • Harry Passfield permalink
        May 2, 2019 2:57 pm

        No, no! The weather has to deteriorate in order that the climate return to whatever the PTB say is normal!

    • Phoenix44 permalink
      May 2, 2019 9:50 am

      You will be persuaded in the same way you might eat more fish and less steak if the relative prices move – even when your income stays the same.

      If your buying of carbon is relatively inelastic then thats up to you. Others will have more elasticity. Thats why a carbon tax works well, it let’s us choose rather than the government.

  4. bobn permalink
    May 1, 2019 7:52 pm

    All a load of horse manure given that extra CO2 released into the atmosphere is beneficial to nature, the planet and mankind. Whist it causes negligible but highly beneficial warming, it ‘Greens’ the planet. “Green the Planet – release more CO2!” Might get that on some T-shirts. Any orders?

  5. HotScot permalink
    May 1, 2019 8:04 pm

    Governments are desperate to find any means of paying down THEIR national debt. They can’t just come out and say it so with the UK tax burden on individuals running at around 47% they can’t increase Income Tax, NI, VAT and fuel taxes much higher.

    A carbon tax is the holy grail.

    • It doesn't add up... permalink
      May 2, 2019 9:47 am

      When you collapse the economy you collapse tax revenues with it, whatever tax rates you set.

  6. charles wardrop permalink
    May 1, 2019 8:39 pm

    The desideratum is not more spending on, say Greenery, but UK ending subsidies for renewables and cutting suchlike as far as poss., freeing resources for iuseful purposes.
    We cannot snd should not participate in decarbonisation, just a fraudulemt waste.

  7. Ian permalink
    May 1, 2019 8:40 pm

    I recorded today’s cimate change debate. I’d had enough after the opening speeches. I’m not sure which is worst, the hypocricy or the naivety.

    • The Man at the Back permalink
      May 2, 2019 11:57 am

      Ian – most of our problems (many not related to climate/energy) stem from having only 5 MPs with a qualification in science or engineering. It is why lobbyists have such a lucrative time with politicians. Lobbying is of coursed raised to an art-form in the USA and the EU and not far behind in the UK

      To be fair to Ministers (what grounds do I have been fair to idiots?) where would they get balanced advice. What is required throughout the western world is the sort of commission Trump is threatening. The alarmists (both scientists & politicians) are so frightened of it – well we do know what they have to hide, don’t we.

  8. Adam permalink
    May 1, 2019 9:09 pm

    There ain’t no problem that can’t be solved with a little more tax.

  9. MrGrimNasty permalink
    May 1, 2019 10:10 pm

    MPs declare an emergency, so it must be true!

    https://www.bbc.co.uk/news/uk-politics-48126677

    I’m going to need a cold glass of double hydrogen and a sit down.

    • May 1, 2019 10:47 pm

      “Climate emergency” is more or less an oxymoron. The one changes over decades. The other comes and goes in moments, like a panic.

      Our noble representatives are displaying ovine levels of gullibility here.

      Let each whip the other, and all whip all, into a frenzy, and let us all cry out to the heavens, and beg Gaia for mercy, to forgive us for our sins against her.

      • Ben Vorlich permalink
        May 2, 2019 8:13 am

        It’s the Madness of Crowds gone mad.

  10. markl permalink
    May 2, 2019 1:32 am

    Tax more = more to redistribute. Only explanation needed.

  11. Ian Miller permalink
    May 2, 2019 8:30 am

    I used to joke about the prospect that governments will soon be taxing the very air we breathe.
    This almost unbelievably is what is now ‘on the table’ and is being proposed !!

    • Pancho Plail permalink
      May 2, 2019 8:55 am

      Well, taxing us on what we breath out.

  12. May 2, 2019 9:39 am

    All my working life some fifty years one third of my wages were deducted at source.
    I only recently learned that I was paying for past and future wars.
    Income tax was introduced into the UK in 1799 to pay for fighting the Napoleonic wars. It was introduced as a temporary tax to be renewed each year until no longer required. It was abolished but reintroduced to pay for other wars from Crimea to the First world war and the second world war. It is still a temporary tax and is still renewed every year.
    I remember when value added tax was introduced in 1973. To be levied on luxury goods only we were told at a rate of 10%. It has since increased to 20% and covers a wide range of goods. An attempt was made to introduce the poll tax in 1989 though not successful. The council tax followed.
    Once a government introduces a tax it is reluctant to abolish it.
    The carbon tax will be the same.
    I watched the start of the climate change emergency debate chaired by Jeremy Corbyn.
    He mentioned the Swansea tidal lagoon project. Private Eye magazine has written a number of articles pointing out how expensive the energy it might produce would be. Plus the questionable business background and financing of those behind the project.
    Maybe Jeremy is just hoping to get the young vote. His promising to cancel student debt
    helped him gain votes.

    I think CLIMATE CHANGE is becoming a new religion. It is based on belief and those that do not believe are heretics. Maybe they will introduce blasphemy laws for those who speak out against it as they had till recently on religion. Vast resources will be diverted in the new religion of CLIMATE CHANGE. As happened with other religions with vast resources diverted to building cathedrals and churches and mosques all over the world. The Notre-Dame cathedral took a hundred years to build. Houses for ordinary people was not a priority.

    • Ian permalink
      May 2, 2019 10:19 am

      Becoming a new religion? It’s Waaaay beyond that.

    • Pancho Plail permalink
      May 2, 2019 12:40 pm

      There is already pressure to make climate denial a crime. A clear legal definition would be a good starting point, because at the moment there is no defence against a constantly changing charge.

  13. Phoenix44 permalink
    May 2, 2019 9:45 am

    No, still all wrong. Nobody should lose money from a carbon tax any more than you “lose” money by having the price of a carrot the right price. The point is that the price of carbon is the actual price, not a lower price than it should be. We can argue if carbon has a cost to the environment or not, and is so what that cost is, but that doesn’t change the logic of a tax on externalities.

    You are arguing for the price of carbon to be subsidised by the poor and by those who use less of it.

    As for the money raised, as Hansen suggests (badly) it should simply replace other more damaging taxes, such as taxes on labour. Thus the tax take stays the same, after tax income stays the same, but spending patterns now change to reflect actual prices. Then you let markets come up with non-carbon energy that is cheaper – because carbon is properly priced. It us an entirely efficient, free market non-coercive way to solve the problem.

    We will not convince anyone that mattrs that CO2 is not a problem until temperatures fall, so we should be arguing for the best way to “solve” the problem – which far and away is a carbon tax.

    • Phoenix44 permalink
      May 2, 2019 9:52 am

      By “best way” I mean least damaging.

    • It doesn't add up... permalink
      May 2, 2019 10:02 am

      The imposition of any tax tilts playing fields and affects the economy. If you start imposing an alleged externality tax on one thing there will be an increase in other externalities.

      I think Bjorn Lomborg would dispute your final assertion. I think he has the right approach.

    • May 2, 2019 10:19 am

      What is this “cost of carbon”?

      You still miss the point. Carbon Tax is intended specifically to end fossil fuel energy and replace it with higher cost renewables.When that happens we are stuck with higher energy bills, and no tax revenue to redistribute.

    • The Man at the Back permalink
      May 2, 2019 12:22 pm

      Yes Phoenix – I agree with Paul. If you distort a market you end up with problems and since the idea is to stop FF use, you will end with a more expensive means of producing energy whatever happens. The only intention is to make FF more expensive to make it appear that renewables are less expensive.

      If it is to act like a market then ALL taxes and subsidies come off the means of producing energy and the market will decide. Once governments pick winners by messing in the market – we will all be losers.

      First you spread the idea that FF are subsidised. When you ask anyone who says that to show you an example, the overwhelming majority can’t. The few who can answer say it because FF is not taxed. In other words it is subsidised in the same way we don’t tax food.

    • MrGrimNasty permalink
      May 2, 2019 1:02 pm

      Phoenix44, your carrot analogy is a non-sequitur, and your first paragraph end is self-contradictory.

      Taxes rarely (if ever) replace other taxes. History shows taxes designed to ‘stop’ something just become another pot of money to be wasted. If it succeeds in causing a behavioral change, then the new behavior gets taxed to maintain the new level of government waste. Taxes work like a ratchet for government spending. If as you ludicrously say people did end up paying no more overall, then they would just divert their spending to pay the carbon tax and the purpose would fail. Additionally, there is always a cost/loss associated with collecting any tax, in itself money down the drain. You are suffering a massive logic fail.

      The only time car mileage reduced in the UK was when the price of fuel became so expensive relative to household budgets, that it became a choice of drive or eat/heat. If the government had started handing out a petrol rebate, mileage would have returned to the mean.

      Carbon dioxide production is an irrelevant byproduct of something that has a massive net benefit, not a cost. There is no ‘right’ price for carbon dioxide. You just want to make fossil fuel energy so artificially expensive, that inefficient bad engineering solutions that the free-market economy would never normally countenance, can compete, i.e. it’s a subsidy.

      As is already being seen with ‘green’ subsidies, this is just a regressive tax on the people in society already least able to afford it, and immensely damaging to the UK’s economy/competitiveness/productivity.

  14. May 2, 2019 9:51 am

    Piling ignorance on top of ignorance is not a good way forward, but that’s what we have with so-called climate policies.

  15. Ian permalink
    May 2, 2019 10:02 am

    It’s Loony Toons time again:

    https://www.telegraph.co.uk/business/2019/05/02/three-cheers-climate-committee-no-cost-zero-emissions/

    He hasn’t asked himself the question: If green investment is so attractive, why are the entrepreneurs sitting on their hands? He has solutions (he thinks) for transport energy, but what about other oil uses?

    • Pancho Plail permalink
      May 2, 2019 12:53 pm

      I used to rate Ambrose Double-Barrelled as an astute commentator on business matters. Sadly he joins the rejects in my waste-basket after this piece of science fiction.

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