PRESS RELEASE
New Paper Proposes Cost-Effective Climate Policy That Gets Around Key Scientific Uncertainties
London: A new paper, published today by the Global Warming Policy Foundation, proposes a radical new climate policy approach that offers to be the most cost-effective means of curbing CO2 emissions, while automatically adjusting the stringency of the policy to the severity of the problem.
The paper‘An Evidence-Based Approach To Pricing CO2 Emissions’ written by Professor Ross McKitrick (University of Guelph, Canada) proposes to link the level of a tax on CO2 emissions to temperatures in the tropical troposphere, and to create a 30-year futures market for tax-exemption certificates. Investors would then have long term certainty about the carbon price, and the future tax rates would incorporate all known evidence of the likely path of global warming.
If started at a low level and used to pay for income tax reductions, McKitrick’s carbon tax will be economically beneficial even if enacted unilaterally.
“If the climate models are correct, the carbon tax will rise significantly as CO2 levels rise; but if the temperatures remain stagnant or low, then the tax and its economic cost will remain low too,” said Professor McKitrick. “Either way we get the right outcome, and the market will reward industries and investors who make the most objective use of available science in forming long term plans.”
“The temperature-based procedure that McKitrick outlines in his paper would provide a strong incentive for more thorough and objective analysis of possible future developments in the climate system. It thus offers a blueprint for an evidence-based low-cost emissions policy that would also promote the cause of better understanding,” Professor David Henderson writes in the foreword to the GWPF paper.
Full paper is available here
UPDATE: Ross McKitrick writes in via email.
There was an article in the UK Register and a blog post by Marcel Crok. The comment threads at Bishop Hill and Watts Up revealed a lot of confusion about what I was talking about, so I have prepared a detailed response.
Also, a cartoonist in the audience (Josh) made a fun set of visual notes of my talk.
Why do I not even read anything from an organization named the Global Warming Policy Foundation ?
Why price carbon at all? Another namby-pamby concession to alarmists. This is a discussion that should be ended pronto.
What about seniors who do not pay income tax and are the ones dying of cold through “fuel poverty”?
First, the tropical troposphere has been actually cooling a bit, so prices go down before you start?
Second, CO2 is PLANT FOOD and cannot and does not warm the climate.
How does this make unaffordable energy affordable to the Brits that die each year from regional cold? Not that cold weather is a uniquely British problem.
How does this make unaffordable energy affordable to emerging economies? This amounts to a global energy tax and does nothing else that is actually useful. All the costs are paid by consumers including consumers who can’t pay their own way. This is just another transfer of wealth scheme. Somebody’s inner socialist is peaking out.
I have a lot of respect for Ross McKitrick, but this strikes me as an approach that could go sideways a lot of different ways.
For starters, no government has ever met a tax they didn’t like, and more importantly, didn’t try to grow. There’s enough manipulation of temperature records already, do we want to hand government and the scientists who work for government a fiscal incentive to find more warming?
Worse, if we did experience warming, but due to completely different causes, we’d not only be taxing the wrong thing, but those who benefit from the wrong tax would be highly resistant to changing it and would lobby hard to discredit the real science. Kinda like we have now, but with a lot more financial incentive and an even more entrenched beauracracy to maintain it.
proposes to link the level of a tax on CO2 emissions to temperatures in the tropical troposphere
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ROTFL….less than zero
Brilliant, base an Eco-tax on an objective sattelite measurement that isn’t adjust to fit the expecation of unproven models! How can the alarmist argue against a system that will increase taxes automaticaly as the globe warms, and how can we argue against a tax that decreases as the globe cools as I suspect it will.
so mckittrick and the global warming policy foundation are all for taxing carbon pollution to prevent global warming, eh?
they only question they have is how to perpetrate this fraud ‘fairly’.
way to celebrate independence day!
This, coming from Ross, is probably the best solution possible if one wanted to impose such a system. But given what we know of rent-seeking behavior (and government is the biggest and most coercive rent-seeker), the imposition of such a system will soon be diverted and perverted into something that grows like topsy and is used by politicians to bestow favors and buy votes. The correct approach is to fight this tooth and nail.
Bad idea.
Not only would the proposed “carbon tax” give governments an ongoing excuse to fry the numbers, no legislative body is bound by the acts of previous legislative bodies. Politicians would sooner or later cut the link the tropical tropospheric temperature measurements, and just keep enjoying the revenue, regardless of the economic effects of the tax.
The basic weakness is the assumption that CO2 drives temperature. The tax goes up if temperatures go up. But suppose CO2 has little or nothing to do with temperature. Then this is just a natural swing we find ourselves in. But perhaps it will continue swinging upward for some decades or centuries (e.g., recovery from the LIA). In that case, we will continue to pour ever-increasing amounts of money into reducing CO2 but see no payback for our efforts.
I completed a sample of approximately 40 chemistry and other science text books published in the 50s through the 70s. NONE of them mentioned that CO2 was needed to provide carbon so that plants would grow. All of the books mentioned nitrogen, phosphorus, and potassium as the basic elements needed for plant growth [light, water, and temperature:also]. My assumption is that since carbon can not be supplied to plants via the roots, it was not stated as being a plant growth requirement.
Carbon for plants comes from CO2 and only CO2. Without CO2, all plants would die.
Therefore, to properly calculate the pluses and minuses of CO2 for a taxing system, we, as humans on the Planet Earth, need to take into account the benefits of additional CO2 for crop growth.
My thoughts are that a tax credit should be given to anyone [or company] supplying CO2. I personally will eat different foods that produce more CO2 so that I can get this tax credit!
Let us let true science prevail…
This is an attempt to try to please the alarmist somehow or “both” sides. Its far too late for that. Any surrender to the warmists is a complete waste of time and money, especially as there is no discernible warming.due to human activities or C02. It surprises me that Dr Mckritick would even bother especially since it seems he appeard to be quite convinced by now that there is no significant warming if any at all!
“If the climate models are correct, the carbon tax will rise significantly as CO2 levels rise; but if the temperatures remain stagnant or low, then the tax and its economic cost will remain low too,” said Professor McKitrick.
*
This is a contradiction. They are looking at two things (CO2 and temp) pulling in two directions (up and down) and claiming they both warrant taxing if up – even if one is down.
If the temperature is down, they can justify their tax by pointing at the high carbon level. If the temperature is up, they can just point at the temperature. Bingo – you’re taxed either way! No way they are going to say “the carbon level is up, but the temperature is down, therefore it balances out and no tax for you.”
As carbon levels are increasing steadily, without warming, this tax will screw the populace whether there is warming or not. It’s another method of stepping away from the problem they started with in the first place (catastrophic anthropogenic global warming – big alarm, remember?) and ditching it, hoping no one will notice it’s gone, while continuing down the path to dismantling society by taxing it into the ground.
I had the same idea last year. To my way of thinking, it meets the requirements of both sides of the issue. If temperatures go up, as the “consensus” believes, then the tax will go up and work to reign in CO2 levels. If temperatures stay steady or go down, as the “skeptics” believe, then the tax will stay steady or go down.
Personally, I believe the temperatures will stay steady or go down, but this satisfies the precautionary principle because it hedges in case that belief is incorrect.
The other comments about taxing and manipulation of temperature records are legitimate, but if a government is moving towards a carbon tax of any sort, the above approach is, in my opinion, the best way forward.
@EW3 The Global Warming Policy Foundation was set up to be a counter to all the insanity the UK government sadly listens to. You should read them, they are sensible.
If temperatures fall far enough and fast enough, then such a scheme could be extended to offer credits and revenue to people for producing more CO2 in a vain effort to counter the cooling effects of the upcoming Grand Solar Minimum.
go ahead fight this tax. you’ll get regulations instead.
So in this grand scheme of things – who is charging nature for it’s fault in CO2 rising? How are you suppose to tax nature? And to what exact extent does nature contribute to CO2 rising? Who decides? Right – the same morons pushing AGW garbage as per normal. Just tax and that will fix everything. The usual suspects.
Graeme W says:
July 4, 2013 at 1:10 pm
“The other comments about taxing and manipulation of temperature records are legitimate, but if a government is moving towards a carbon tax of any sort, the above approach is, in my opinion, the best way forward.”
No! The best way forward is for no carbon taxes at all! The line is to be drawn at none; no compromises, no excuses, no carbon taxes period. On this we must be firm, once you give even the slightest compromise they will slowly continue to grow and expand it. Why would anyone in their right mind want more government control?
Steven Mosher says:
July 4, 2013 at 1:38 pm
go ahead fight this tax. you’ll get regulations instead
======
relax Mosh, it’s not for real
Why, if human CO2 emissions are not causing or significantly contributing measurably to global atmospheric warming, do we need to do anything?
They could also determine each year the height of tax with a random number generator. No observations needed. Much easier if you want Monte Carlo Tax for a non-existent problem.
I would rather tax people based on how cold it is where they live.
No, no, no. The system will be adjusted down the line to ensure the ‘right’ level of tax. Government’s love of taxation is one of the reasons we are in this CAGW mess. I get McKitrick ‘s thinking but NO thanks. Finally, let’s get real. The extra co2 has led to a greening of the biosphere. Co2 output should be subsidized not taxed. That’s the scheme we need. I won’t be happy until we reach at least 600ppm in the atmosphere.
“CO2 fertilisation has increased maximum foliage cover across the globe’s warm, arid environments”
http://onlinelibrary.wiley.com/doi/10.1002/grl.50563/abstract
Analysis of trends in fused AVHRR and MODIS NDVI data for 1982–2006: Indication for a CO2 fertilization effect….
http://onlinelibrary.wiley.com/doi/10.1002/gbc.20027/abstract
A fix for scientific uncertainty. That says all that you need to know. Of course the worthless climate models are also brought in for good measure.
“I propose instead that the best way to proceed would be to put a small tax on CO₂ emissions, and tie its subsequent evolution to a suitable measure of atmospheric temperatures. If temperatures go up, so does the tax. If they do not, the tax does not change.”
“Does not change” in case of cooling is not good enough, it is a horrible one-way street. If temperature of tropical mid troposphere happens to decrease, so should the tax. Below a certain point it gets to zero. The big question is what happens next? Turn said tax to subsidizing CO₂ emissions?
“The IPCC predicts a warming rate in the tropical troposphere due to greenhouse gas emissions of between 0.2 to 1.2 degrees Celsius per decade throughout this century.”
Fact check.
RSS TMT (Temperature Middle Troposphere) between 20N & 20S has an overall trend of 0.09°C/decade since measurements started in January 1979, less than half of the lower bound of the IPCC’s prediction. For the last 2 decades it is 0.02°C/decade, one tenth of it. Their upper bound is already 60 times higher than fact. Funniest of all, the last decade has seen a -0.13°C/decade cooling.
Well said and bravo. NO, no, no. They will make amendments and cabon tax people not matter what happens to temperatures. Sheeesh. I think McKitrick is being a bit naive.
This paper by GWPF gave me an idea. Markets can efficiently price things. Oil futures for example. When trying to figure any costs of manmade CO2 emissions, we might ask, what does the money say? I mean in a true capitalistic way. I am not talking about ‘made by some government’ markets. Perhaps one example of what the money is saying is, disappointing sales of Solar Panels. The money says no, unless you give me a government subsidy. I understand there could be many problems trying to quantifying what the money is saying. However, the power of a markets to organize resources is perhaps something to consider.
Monty Python – Tax Thingie
[youtube=http://www.youtube.com/watch?v=MmOHx5Ftez8&w=480&h=360]
CACCA is a statist’s dream: the chance to tax breathing.
@eliza, @Tom in Florida –
Right on!! NO COMPROMISE!!!!!!!!!!
ANY tax will grow out of control if not strictly controlled and limits set on it that are red lines that can’t be crossed – ant the more so if the tax is based on some irrational premise, like carbon. Government and taxes are like fire – useful for limited purposes, but they will burn your house down if you don’t apply DRACONIAN controls over them.
How about making things interesting, as any gambler might say, and make it a negative tax when temperatures fall so that heavy energy consuming industries then get nicely subsidised to produce more CO2 etc when temperatures fall. If nothing else they will then produce so much CO2 to the extent that it should prove or disprove that the Keeling curve is in any way affected by man released C02 or simply a lagging indicator of temperature.
“… and used to pay for income tax reductions,… ”
Assuming that “income tax reductions” means lower income tax REVENUE, looks like this is intentional sabotage of the economy.
TAXES KILL JOBS. (for every gov’t job created, 2 private sector jobs are lost)
So do burdensome regulations (we must fight BOTH — no false dilemmas for us!) They’ve admitted they know that. The Fantasy Science Club either does not care OR….. that is their goal.
EW3 says:
July 4, 2013 at 11:59 am
“Why do I not even read anything from an organization named the Global Warming Policy Foundation ?”
Time to broaden your knowledge base. GWPF is listed as “skeptical views” by this site.The science here is great, but CAGW is about politics. Learn what the socialists are doing to the world economies. This fight will be won by the capitalists once people start to understand the costs vs benefits. It is, and has always been about the money,control, and power. GWPW should be mandatory reading for all elected officials, including the world leaders especially Obama.
I am with everyone who are against such a tax, period.
It is a tax on, amongst other things::
1 economic development, and future competitiveness.
2 jobs and job security.
3. life styles, life style choices and betterment
4.the cost of food production, and hence on what you can afford to eat and how much.
5. being able to run your car
6. beinga able to afford to heat your home to the level and comfort that you desire.
It leads to increasing misery and in extremes even death.
It should be resisted by all possible legitimate means.
Well actually this isn’t a bad idea. It would mean the science would be assessed every day by a bunch of hard headed investors with real skin in the game. At the moment it is held hostage by environmental “activists” and wooly headed political types with no incentive to get it right and every incentive to get the answer they find most convenient.
However the scheme has one fatal flaw. There is no mechanism for ending it once it becomes clear that there is actually no climate problem. Once billions of dollars get invested you can’t easily change the rules, especially if there is a futures market involved. There needs to be an explicit mechanism for winding up the scheme it built into it from the outset. Otherwise when it becomes apparent that CO2 isn’t really a problem then this proposal turns into nothing more than a casino for betting on the weather propped up by compulsary taxes.
No.
At first glance this appears a flawed approach.
This Whole thing is not a bet about who is correct.
The real issue is to get the data right first… and work out if there has been significant change or if it is currently occurring.
Then, we better be pretty sure of the cause.
If indeed it is predominantly human driven, we had better come up with a far less blunt instrument than increasing the cost of energy across the board…..While thousands of huge cars idling in traffic is ridiculous, pricing things like aluminium and steel smelters offshore is more ridiculous: the world has a certain demand (hey, to build windmills!) And someone somewhere is going to do it.
And, last but not least, the tax would be awfully vulnerable to data manipulation and more so to regulatory and legislative changes.
There are many reasons NOT to do this as has been pointed out in comments. However, the proposal puts the alarmists on the defensive and could force them into some blithering loops and whoops about why this can’t be done, further exposing them for the phonies they are.
@Mikeyj –
Unfortunately,the first tenet of los alarmistas’ belief system is, See no contrary evidence, hear no contrary evidence, speak no contrary evidence. They simply believe it doesn’t exist even when it has kicked them in the pancreas. They’re being trampled by facts but they’re so anesthetized by their faith that they can’t feel their heads being stomped on. You could put them in a rubber room with the walls plastered with documents proving the idiocy of AGW and subject them to unceasing broadcasts of facts at 140 decibels and they won’t back off.
The real irony here is that, unlike the sheeple following him down the garden path, der Fuehrer knows full well that AGW is false, but he’s not going to let go of it because it’s his primary pretext for creating the totalitarian state he has set out to impose on America. Hitler and Goebbels would have been proud, and Stalin maybe even prouder.
This looks to me like a proposal with no future. A tax that is permitted to decline as an index temperature declines will not be accepted by the people who think CO2 induced warming is a problem — they have a belief that the “missing heat” will be accumulating somewhere. I doubt that the Democratic majority in the Senate would pass any CO2 tax that had an income tax rate reduction attached to it.
I’m with you Noblesse. It drags all the evidence out in the open and relies on actual evidence. There’s some sleight of hand here. McKitrick is forcing them to re-evaluate their models. Hopefully this includes an ability to distinguish Nature’s CO2 from Mann’s.. oops.. Man’s.
Since CO2 climate sensitivity looks like it will be at or below 1C, there isn’t a need to tax air at all.
Why don’t all countries abolish all: death, excise, income, withholding and corporate taxes, abolish the IRS and replace it with ONE 17% Federal consumption tax?
In addition, all countries pass a balance budget amendment that prohibits central governments from spending more than total tax revenues.
This would: save corporations 100’s billions that could be used to increase wages and grow their businesses, increase saving rates, which would increase capital reserves and decrease interest rates, would greatly increase living standards, would save $100’s of billions in expensive filing fees and complicated trust fund costs, would greatly reduce the size/scope of governments and would make it very difficult to avoid taxes among many other things.
Imagine such a world…. perchance to dream….ay, there’s the rub….
Ian H says:
July 4, 2013 at 4:32 pm
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What if the globe continues to warm, and does so simply because of natural variation and/or rebound from the LIA?
Conceptually, why should we be taxed for a consequence (ie., measured warming) which might not have been brought about by manmade CO2 emissions (or other anthropogenic cause), but simply due to nature?
The concept is flawed. First there needs to be firm and definitive proof of manmade warming. Second, there needs to be firm and definitive proof that this warming is bad. Third, there needs to be firm and definitive proof that the warming and/or the bad effect can be allieviated if carbon (or CO2 emissions) are taxed in the manner proposed.
Don’t be suckered. Once a a tax is introduced, government expands and spends the money on other causes and finds it very difficult to reign back the tax and wean itself off the teet of public finance.
If you must play Wall Street games, the only sensible ploy is to pay major CO2 emitters with options on farm and forest crops. Since you’re feeding more plants, you should get some monetary benefit from the plants you’re feeding.
However, sane people shouldn’t be playing Wall Street games at all. When you mess around with Satan, Satan always wins.
SAMURAI says:
July 4, 2013 at 5:08 pm
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Certainly something to consider. But in Europe, we already have consumption tax (VAT, IVA) set at between 17 to 24%, so I guess your figure of 17% is unrealistically low. But then again, government in Europe is very much over bloated and needs to be drastically cut back.
There needs to be an honest and forthright debate on tax and the size of the state and government spending. This debate is long overdue.
Howzabout we just QUIT TAXING US TO DEATH!?
That’s a simple idea, too – but with no opportunity for graft and corruption.
Great idea! It allows governments to steal from the working folks, and speculators will get rich trading carbon futures. What could possibly go wrong? /sarc off
This proposal isn’t new but it needs to be shot with a silver bullet and buried at a crossroads with a fresh sapling stake through its heart.
Evidence? What is this ‘evidence’ you speak of?
Evidence that man’s CO2 emissions are causing some warming
Or evidence that man’s CO2 portion of CO2 warming is causing some sort of problem?
I respect McKitrick, but no to this proposal as is. The only way I could stomach such a deal would be if the carbon emitters were paid a subsidy if the temps drop below the baseline. Then that would be an issue I would have a problem with.
Mosher, are you without principle on the 4th of July? Give me liberty or give me death. Does that mean anything to you? Principle and honor will make you sleep well and will prevail. Grow a set.
Richard– at a 17% consumption tax, that would equate to about $2 trillion/yr in tax revenues; about equal to government spending back in 1992.
$2 trillion would equate to about 13% of GDP. The US curently generates about $2.4 trillion In total tax revenues and spends about $3.7 trillion, with the balance printed and borrowed–hence the over $6 trillion increase in US national debt just under BHO…
It’s gotten completely insane and will not last much longer before the national debt/money printing collapses the US economy.
I think folks are missing the point here. McKitrick has devised a carbon tax methodology that is calling out the alarmists. Telling them to put there money where there mouth is and basing adjustments on objective data. This is not a concession to the alarmists, this is a bona fide in your face challenge.
A great idea by Ross McKittrick. The models have been wrong about the tropical troposphere. It hasn’t been behaving as the models say it should. If it were to suddenly get considerably warmer, that MIGHT start validating the models. If it continues NOT to warm, then the models are wrong.
So, yes — as Greg says — put your money where your mouth is.
I like it, this proposal is a Tarbaby. Linking tax rates to the imaginary hot spot of the teams computer models, is a truly cruel dig.
As others have noted, this proposal of a carbon tax, is actually a droll gotcha.
A tax imposed under McKitricks proposal would end up costing the government. I like the sarcasm implicit in proposing negative taxes.
Hey McKittrick, how about this … NO!
You should come down here to the States and run for office because you would make a fine (R)epublicrat. You’d fit right in as another surrender monkey. A Carbon Tax and Carbon Trading all in one shot? Are you nuts?
I got a better idea. How about a pseudo-Science Tax instead. It would be pegged to the accuracy of the endless bloviating by leftist AGW kooks. Every single time they ring the alarm bell and are inevitably proven wrong they will be required to cough up a fine equaling 100% of the wasted taxpayer funds plus an equal sum in punitive damages. We can start with monetizing the entire warmilist. This will likely result in enough revenue to take a big bite out of our astronomical national debt.
Stuff it Mosher, you predictable jack@ss. Appealing to the patented ploy of the ‘lesser of two evils’ in order to get your tax hike like so many American politicians do all so well. How transparent you both are, as the AGW hoax is unraveling and just awaiting a final co-operative nudge from mother nature herself to kill it completely, you two come along and try to skip right to the end of the story and conveniently step right over the remains of AGW alarmism littering the floor.
Readers should note the irony of pressing for big taxes on our Independence Day, which celebrates was a hard fought battle to get away from unilateral taxes. I don’t expect McKittrick to understand this point but this American called Steve Mosher should. That is, unless he is in the tank with all the other leftist bureaucrats, which is pretty obvious by now. Libertarian my @ss. You talkin ’bout the Queen again, English Bob? 🙂
How so? Is it like an April Fools gag?
An old article on Betting on climate change:
http://www.realclimate.org/index.php?p=161
With many comments. I figured someone had thought this up before. There are tried and true Weather related futures markets for crops. They transfer risk. I’d say they are an example of a zero sum game. Also I’d say it is an example of pure market efficiency. Cargill for example, can place huge bets. I suppose some Utilities smooth their resource cost flucuations as well. From Annan, “…the price in a free market should accurately reflect the aggregated information that is available.” So, can we aggregate all the information available and if we can, will it have any value? I know it’s not the Scientific Method. It doesn’t have 100% accuracy at all times. And it does look a bit like a Consensus, but a Consensus of money which may be better. Another attribute is what it would not be. Not an arbitrary tax, fee, or assessment.
If the models are revised will the futures contracts be retroactively repriced? Oh yeah no room for any insider trading here.
Maybe some of you have not read the original T3 tax proposal from Prof McKitrick in 2007, as a prelude.
http://www.rossmckitrick.com/uploads/4/8/0/8/4808045/t3tax.vv-online.pdf
Some are assuming that Ross wants to admit to CO2 being THE source of climate change to which tax is linked. Not so. CO2 is but a transient example and the tax is linked to temperature changes (from whatever source) affecting a portion of the atmospheric temperature measured by satellite reception of microwave emissions, as has been done since 1978.
I’ve been enthusiastic about this approach from my first reading. It has the effect of making people put their money where their actions are, rather than where their beliefs are. It has an obvious capacity to alter belief.
The only downside I can see is that the mention of a new taxation design encourages tax inventors to a new rush to invent even more taxes. (Like, I was not smart enough to create a T3 tax so I’ll design a new F35 tax instead).
Chad Wozniak says:
July 4, 2013 at 4:58 pm
“The real irony here is that, unlike the sheeple following him down the garden path, der Fuehrer knows full well that AGW is false, but he’s not going to let go of it because it’s his primary pretext for creating the totalitarian state he has set out to impose on America. Hitler and Goebbels would have been proud, and Stalin maybe even prouder.”
The Germans or the Russians didn’t have the second amendment. I think you give him too much credit, he’s not that smart. He is a socialist that makes him stupid by birth.
Steven Mosher says:
July 4, 2013 at 1:38 pm
go ahead fight this tax. you’ll get regulations instead.
#######################
I think you’re correct. Here in Nova Scotia, under Government direction, the power company has invested heavily in wind power. Our rates are increasing at about double inflation, albeit with the “assurance” that it will pay off in the long run. Anyone in a State with a “Green” government should welcome this proposal. Don’t be penny wise and pound foolish.
Oh dear. No. No. No. Wrong on too many levels. I smell something not quite right. I expected better than this.
I hear Steve McIntyre has accepted an office job with Michael Mann.
The good Professor is starting with the conclusion.
Geoff Sherrington : So you’re OK with a tax on temperature? Based on the last 15 years of relatively constant global temperature, that wouldn’t raise more than a few bob.
The only small problem with this is: who is going to guarantee the integrity of the data over time? you believe the people who collect the data?
Ragnaar says: July 4, 2013 at 7:06 pm
“……There are tried and true Weather related futures markets for crops. They transfer risk. I’d say they are an example of a zero sum game. Also I’d say it is an example of pure market efficiency. Cargill for example, can place huge bets….”
Once upon a time, such futures markets actually made sense. If someone was running a biscuit factory he could lock in his price of raw material (to an extent, there were grain futures, but no wheat flour futures) up to a year and half ahead. The farmer was happy, because he could also lock in his price that far ahead. Neither knew if the upcoming year would be a drought or a glut, but both were happy they would likely be in a position to make some predictable profit from their business.
Then along came the commodity traders. One would put up a contract to sell wheat he did not have, and another would agree to that contract to buy wheat he did not want. Coming up towards the due date all the trader contracts would cancel out as they reversed their positions with a profit or a loss, and at the end, some physical deliveries would get made, between the real farmers and grain traders. This was probably a good thing, adding more liquidity. And Ragnaar is correct, it is a zero sum game, except, very importantly, minus commissions.
But then every man and his dog got into commodity trading, including the huge financial houses with their masses of computer traders. The money sloshes in and out like the tide, and although eventually the price is anchored somewhat by the physical trades, it is equally likely the futures trades are affecting the physical price. Behind it all is a huge non-productive business of commissions and accumulated trading profits, which lands primarily in the hands of big business.
On top of this we have all sorts of obscure ‘instruments’ supposedly devised ot allow hedging, but in reality adding to an opaque casino business.
Carbon trading would be a worse rendition of the above, except with absolutely no evidence whatsoever of the regulatory pressure of some sort of a real physical value.
Now note about 50 percent of the world’s business market capital is in some 150 multinational companies, Note that three quarters of those 150 companies belong to the financial sector.
These are the people who are the keenest for a carbon trading scheme.
And I think it is quite likely they are not doing it to save the world.
http://www.paecon.net/PAEReview/issue64/HelbingKirman64.pdf
what is this nonsense about tax making the warmists put their money where there mouth is?
it’s MY money they want put where their mouth is.
it’s Your money they want to get their bloated lips around.
mckittrick’s plan is for us to be sucked dry – there is no other possible outcome.
IT’S A COOKBOOK!
Absurd idea and a transparent attempt to get the Camel’s nose (adopt carbon tax) under the tent.
When it gets colder government subsidizes the use of “fossil fuel” based energy
When the climate stay the same there is no tax or subsidizing on the use of “fossil fuel” based energy.
When it gets warmer you are taxed.
That means even more political motivated adjusting of the data?
Folks, ease off on Ross McKitrick.. He is the other M in the hacked/ released emails attacking Him and Steve McIntyre when they challenged the hockey stick. And, the GWPF is definitely not a warmest/ alarmist group.
I believe what he is trying to do is challenge the warmest team with their own dogma. If the warming meme proves to not be true then no taxes. Some politicians in many countries would charge blindly forward with a carbon tax without exception. This idea puts the ball in their court and is hard for them to challenge.
However, I have to agree with the danger of corrupt enforcement.
In that regard it seems that all organizations, without oversight, try to assume too much power and become corrupt. In the States, the EPA, which was created during the Reagan administration began as a
valuable and trustworthy organization. Now, it wants to go deeper into the dark side.
McKitrick forgot to factor in hype, the life blood of climate warming.
DarrylB says:
July 4, 2013 at 8:39 pm: Shame on you. Richard Nixon caused the EPA to be formed. Ronald Reagan never would have instituted such a sham organization.
The world has been warming at a rate of half a degree per century for about 300 years. With all due respect, Ross McKitrick is proposing imposing a tax on me which will go up if the temperature continues its 300 year slow climb … and I’m supposed to think this is a good idea?
Ross’s comment on this is:
This part is too good:
No, it doesn’t make sense to tax warming, that’s barking mad. Ross wants to tax warming because it costs money somehow? Cold costs money. Look at the little ice age, and the damage it caused.
I’m supposed to be impressed because if it cools the tax goes down? What part of “any tax on energy hurts the poor” is hard to understand?
This is just some bogus insurance scheme to protect us from the evils of warming. Look, Ross, if you want insurance buy your own, but don’t tax the planet to protect us from warming. I assure you I don’t want such insurance, as warming is generally beneficial.
Next, anyone who calculates the “marginal damage of CO2” and makes NO EFFORT to calculate the “marginal benefits of CO2” gets no slack from me. That is intellectually lazy and absolutely unacceptable.
Next, Ross says that:
That’s hilarious. The earth has been warming, in fits and starts, for 300 years. Ross is claiming that we can find something that has not been warming for 300 years to use as our gauge … say what? You can’t just assume a stationary process, there’s no evidence for that at all.
Then we have this one:
I don’t care how lunatic their policies might be or how costly they might be, that doesn’t make a slightly less loony alternative acceptable. I’m ashamed to even see this pathetic argument. The cost of alternative policies does not make your policy cost-effective.
Finally, the ugly reality of taxes on energy, as I have pointed out many times, is that they are the most regressive taxes on the planet. They hit the poor the hardest, and their is no relief like with income taxes, no minimum level. The poorer you are, the more the McKitrick Tax will screw you.
I hate to say this, because Ross is the McKitrick of M&M who has done so much for real science. But truly, Ross, this is industrial strength stupidity. I don’t want to be in the same room with this idea.
w.
Jim F.. Thanks, I stand corrected. Also shame on an old man for relying on memory, and not checking on the facts.
I gave this idea a cursory approval because of the source, again shame on me.
I would again like to emphasize all the positive and meaningful work R. M. has done. However, although I believe that the reason for the proposal is well intended, one has to agree with the assessment of Willis Eschenbach.
An excellent idea and one I’ve been in favour of for years. Relating carbon price to actual temperatures puts the debate about model forecasts back with the academics. If the world warms we have a high tax, if it doesn’t we have a low tax.
What has been the result so far? Global mean temperature has gone up steepish since 1980. Co2 has been above the ‘safe’ level of 350ppm for some time now. Where is the evidence of damage? Worse weather? No. Worse tornadoes? No. Hurricane killers? No. It’s no all the way down.
Worse climate? No. How about benefits?
Sadly Ross seems to have ignored the real purpose of carbon taxation: to extort money for government spending. Evidence is irrelevant. If evidence mattered then all anti-carbon legislation and taxation would have been abolished already. The models have, without exception, failed to predict climate. The policy demonstrably harms the poor, destroys the industry and economic activity that creates prosperity and keeps the developing world from developing and improving the lives of billions.
It is pathetically naive to assume that the pro-tax faction has any integrity, honesty, reasonableness, susceptibility to reason/evidence or would allow their income streams to be shut down. They’ve already demonstrated they are blind ideologues who will happily keep on manipulating data and policy to suit themselves even when they’re repeatedly caught committing this fraud.
We shouldn’t be looking at this tax. We should be abolishing all the existing policy mistakes, putting nothing in their place and working out ways to prosecute those responsible for this gigantic fraud. It’s not ok for companies or individuals in the private sector to manipulate markets for their benefit. We have laws against such behaviour for very good reasons. Why should it be ok for governments to manipulate markets like this?
Willis: Well said, sir. Excellent analysis.
RE: “… it actually makes sense for the tax rate to be higher if there is has been an increase in the temperature measure even if it was due to natural warming:”
So another Super El Nino and the tax would what? Double? Quadruple? I’m with Willy E here. The idea is stupid at best and dangerous at worst.
-barn
I think this is interesting. Its betting the temps, which if as alot of us think, cooling is occurring, there is no tax at all. Very interesting. Perhaps its my natural competitive mode, but if we are right and temps go down, then we force their hand. Interesting.. though i dont think we should tax
it, but it would be a nice way to drive them from the field.. if we are right
If people are carrying out an activity that is extremely dangerous to millions of people, then the activity is outlawed and anyone continuing the activity is imprisoned. They are not told there is a tax to pay but if you pay that tax you can carry on! If I started building a nuclear weapon in my backyard I would be prevented from continuing – I wouldn’t be told to pay a tax and then it would be alright. The CAGW case is that if CO2 emissions continue then the existence of the human race is in peril from catastrophic changes to the climate. But if you want to you can carry on emissions at the same level as long as you pay taxes to the politicians?? It is the very notion of a so called ‘carbon tax’ or ‘carbon credits’ that shows that the politicians do not believe there is a threat from catastrophic climate change.
The most cost effective method of reducing CO2 emissions is providing and developing energy sources that are like … you know … more cost effective. Injecting government – world government, no less – into the atmosphere, tends not to be so cost effective while producing intended consequences that are not admitted and often, if not always, counterproductive. It is good that warmists should at least try to avoid negative consequences and it might even be intellectually teasing to discuss the details of McCittrick’s proposal, but … No.
So we tie the cost of energy to tropical warming and cooling even if it is a natural factor beyond our control that causes those changes?
Madness.
The following ‘Taxes’ apply just to the UK. Of course, there will be similarities with other countries taxation systems. My argument is that, like most taxes, if a CO2 tax is introduced (a penalty for adding about 4% CO2 to the existing 1/320,000th of our atmospheric gas with no noticeable effect whatsoever on our weather) the tax should be applied universally with few exemptions. Allow me to explain . . . .
When tax is applied to alcohol (excise duty & VAT), no beer, cider, wine, fortified wine, spirit or liqueur is exempt. Only if you make your own wine or beer at home (not from a kit), you are exempt.
Tobacco tax applies to all cigarettes. No cigars, pipe tobacco or hand rolling tobacco is exempt. Neither is it legal to grow your own tobacco without paying HM Revenue & Customs.
Fuel duty applies to all fuel; stamp duty to all property and Corporation Tax applies to all Limited Companies. You are, however, exempt from inheritance tax if your estate is worth less than £325K (approx 18% of UK homes or if you pass your estate to your spouse). You are also exempt from paying VAT on certain zero-rated commodities such as most foods, all books and children’s clothes. On the whole, most other taxes are universally applied.
So, by comparison, a carbon tax should apply fairly (with few exemptions) to most things where an amount of man-made CO2 adds to the naturally occurring existing levels in the atmosphere.
Carbonated drinks, Welding Gas, PCB Laser cutting, Modified Air Processing (MAP), Refrigerants (incl. air conditioning), Propellants (extinguishers & life jackets), Dry Ice Pellets (sandblasting), Calcification treatments, Water Purifiers, Yeast Fermentation Products (bread, beer, wine), Yeast Extract, Bicarbonate of Soda (cakes, snack foods, biscuits), Man-made Compost Heaps, Domestic Wood Burners, Incinerators, Limescale Removal Products, and much more besides . . . .
Ironically, most ‘tree-huggers’ who, on one hand, remain convinced that their Emperor is still wearing the finest suit of clothes (CO2 induced armageddon) probably also use all of the above man-made CO2 emitting products or processes. I hope they feel guilty.
As a vouch skeptic, I do not believe in hypocrisy, so can I qualify for Carbon Tax Exemptions if I can prove I do not believe in CAGW?
Now, where’s that can of ‘flat’ Coke. Yum.
GeeJam
This is simply crazy. Governments never relinquish revenue once they realize it. If this were instituted, once we were taxed at any level, no government on earth would ever lower that tax rate if the trigger mechanism were reached. We all know it. They would use all sorts of excuses for it, but they would never actually lower the rates. Governments are simply incapable of spending less.
Look at what happened with the Sequester where the government was simply forced to reduce the rate at which it was supposed to increase spending? Look at what is going on in those states where the gasoline tax is finally forcing people to actually drive less or buy the fuel efficient cars they wanted us to or both – they’re floating the idea of taxing us for miles driven using a government imposed GPS in our cars to make up for that revenue they’re losing.
Willis succinctly sums up all that is wrong-headed about Prof. McKitrick’s new carbon tax. If you haven’t read it, go up-thread and please do so, right away.
As far as I’m concerned, (a) warmer is better; (b) given the Earth’s climatic history, some kind of catastrophic warming is extremely unlikely, maybe impossible; (c) even if warming were bad, CO2 has not been shown to measurably cause any of it, so what’s the point of taxing ‘carbon’? (d) what the people of the Earth need is vast amounts of cheap energy—a tax will not help make that possible.
Trying to play the ideologues and fanatics at their own game will never work. All the schemes for testing women for witchcraft are complicated and uncertain. So let’s devise a simple one: any old crone with a hook nose will be defined as a ‘witch’ and dispatched summarily. Simpler is better, right?
/Mr Lynn
Is this July 5th or April 1st?
I think I understand the idea of an “externality.” I can see why, if certain individuals or groups are harmed by effects of economic activities – such as CO2 emissions – there is a good case for making those who caused the harm compensate those they harmed.
In that case, the way forward is to identify the specific individuals and groups who have been the victims of warming caused by CO2 emissions, and to make the perpetrators compensate them.
But taxes cannot be a solution to such a problem. Taxes don’t compensate victims; they merely take away wealth from honest productive people and give it to the corrupt political class. So this idea, for me, has failed as soon as it mentions tax.
Dear Ross, why don’t you look at the question: Who, specifically, would be damaged by x degrees of putative warming, and how much?
Under the guideline that nobody expects Canadians to be funny ( a little cross-border humor from Seattle) and that I missed a /snarc tag or wink, I revisited RM’s proposal above and also his rebuttal to the comments on this and Bishop Hill’s page. I retain my earlier impression – RM is proposing a classic tax/spend solution managed by “Big Government” and which is a transfer of wealth into the hands of people who are not very well respected for the way they’ve handled the wealth we’ve already transferred to them. Not very different at all from what Al Gore might suggest. This is disappointing.
Willis Eschenbach: But truly, Ross, this is industrial strength stupidity.
Good sledge-hammer blows in your post. My thought was “sophomoric” — something a clever guy thinks up about 2am the day an essay is due.
Ross,
Your proposal appears to me to be well considered and probably the best policy we could expect to have any chance of implementation. If most of the critics would carefully read and understand your response, they might change their minds. Usually I agree with Willis, but here I think he does not understand the economics.
markx says:
“Behind it all is a huge non-productive business of commissions and accumulated trading profits, which lands primarily in the hands of big business.”
I agree there are commissions and they can be excessive compared to the value received. I invest most of my money in low cost index funds. I am not sure what to say about their trading profits. I might suggest they tend to zero over the long run. While admitting this idea will probably suffer from a lack of traction, I thought about what do established future markets include? Expectations of dought, lower and higher temperatures (Heating and running AC) and rainfall. Even Frost (Trading Places OJ futures) and Lumber production. So the situation might be a number of players are currently predicting the future weather, in so far as it effects either their Cost of Goods or sale the commodities they produce. To model these existing futures markets and then exclude all non-weather related factors would perhaps show us what the money is saying in regards to expectations of future weather. I once heard a great remark. In the middle of a flow chart there was a box that said, ‘Insert Miracle Here’, I understand I’ve a lot of wishful thinking here, in the face of many problems to overcome. There already is some incentive for a better understanding of futures markets, money for instance, and there are some shall we say, energy companies already concerned with global warming and who may be using futures markets today.
Willis,
It’s strange that you make a posting condemning the insane costs of bad climate policy, then write a diatribe against an alternative that, had it been pursued instead, would now cost nothing and would have left electricity prices at their undistorted, competitive level.
In my UK presentation I showed a graph of the tax rates that would have resulted if my policy had been implemented in Canada in 2002 at a starting charge of $15/tonne, which at the time was the Canadian government’s proposed upper limit on what they thought industry should pay for abatement. As of last year the tax would have been down to -$5.81 per tonne. Yet the upshot of your two postings is that you actually prefer the insane renewables-and-regulation approach because at least it’s not a “tax”.
If your top preference is the “do nothing at all” option, then don’t just blast away at improvements to the current mess, explain how we get to your utopia. It is conceivable (albeit low probability) that people worried about climate change would agree to swap the current, costly policy regime for my emissions tax, since they would recognize that if they are right about warming, it will turn into an aggressive emissions control measure over time. But it is not conceivable that they would simply dismantle the current policies in favour of nothing at all. So you won’t get enough agreement among decision-makers on the zero option to make it politically viable. So it’s a utopian ideal, i.e. irrelevant. Consequently your knee-jerk reaction against a possible alternative is a tacit endorsement of the status quo.
I don’t detect any “thinking” at all in your post. Suppose there is half a degree warming per century for another 300 years. And suppose your choice is (a) my tax, that would start low enough not to be noticeable and drift up so slowly that after 300 years you’d still hardly know it was there, or (b) the California madness writ large, spreading everywhere, amplified by whatever Obama comes up with in the years ahead. And there is no utopian third option of (c), nothing at all, unless your magic unicorn can take you there and show the rest of us the way. You’re having difficulty seeing why (a) would be a good idea relative to (b)?
Well let me help you out. First, it has become rather obvious that politicians perceive a lot of pressure to keep warmists happy by implementing GHG abatement policies. My proposal has a chance at obtaining majority support since everyone expects to get the outcome they prefer. Instead of all the interventionist energy policies we’ve actually seen over the past decade, my proposal would have left us with undistorted energy markets and a carbon tax below zero. Still having difficulty seeing the advantage?
That’s not all. the accompanying futures market (which you didn’t comment on in your screed, making me suspect you didn’t actually read the underlying paper) would yield an objective 30 year set of predictions about global warming, and in one stroke depoliticize the climate modeling/prediction field. Tell me how your unicorn-ride-to-the-zero-option-fantasyland strategy solves that problem.
The tax is on emissions. The only way to equate the tax on emissions with a “tax on warming” is if you assume that emissions = warming! If that’s your view, there’s a prima facie case for having policies in place in case the changes are net harmful. Otherwise it sounds like you don’t like the policy because you don’t think emissions affect the climate, but you also think emissions do affect the climate, but you think the effects are beneficial. Which is it? If the latter, it’s all very well to assume all the changes are beneficial, but you can’t expect the world’s policymakers to base their decisions on your assumptions, even if you are correct. (Well, except for all the policymakers in your unicorn fantasy-land. But they don’t seem to have a lot of clout in the real world.)
Ah the poor. These would be the ones who are benefiting so much from the status quo approach to energy & climate policy, and who would be so devastated if that policy apparatus were eliminated and replaced with a carbon tax that starts low enough not to have much effect on prices, lately goes below zero and won’t ever go up as long as warming fails to materialize. No, what’s hard to understand is your apparent preference for the status quo.
As for the convexity issue, I spelled out the assumptions about the damage function in my Energy Economics paper. While I assume it is convex, I also impose the assumption that the longer the time lags between emissions and changes to the state variable, the less the curvature of the damages function. This imposes, among other things, local linearity in the neighbourhood of the current value of the damage function, with a window that widens, the longer the lag structure of the state variable. If you had bothered to read any of the background work on this tax mechanism you’d see your knee-jerk objections about the convexity assumption are simply off base and you don’t know what you are talking about.
So now it’s not a tax on warming, it’s an insurance scheme. Can’t you keep your inflammatory misrepresentations consistent from one paragraph to the next? This is not an insurance policy against possible effects of warming. Insurance policies require an upfront payment in exchange for a promise of compensation in the event of a specified peril. I’m not proposing a compensation mechanism, nor am I proposing to “tax the planet”. So you think global warming is beneficial—good for you. Generally speaking so do I. It’s global warming policy I worry about, as well as the politicization of the science. To fix those things you need to have something to say to the people who think warming could be harmful. My proposal is a way to fix both problems while appealing to the folks who are worried. If you’ve got an alternative that doesn’t involve unicorn rides to utopia, I’m all ears.
In my response paper I wrote: “Computing the marginal social damage of a tonne of CO2 emissions is not only highly complex, but in all likelihood a fool’s errand. There are far too many arbitrary assumptions involved, and the range of estimates that have been published is so wide as to simply amount to a confession of complete ignorance. It may be negative, it may be zero, it may be positive; it likely isn’t large, but who knows? Not me.”
You notice the word “negative” in there? Do I need to spell out what that implies? Oh okay. The marginal damages calculations are done net of benefits. They’re already in there. You could have inferred that from what was written, or looked it up, but I suppose it’s much more fun to blast away at perceived intellectual laziness in others.
More to the point, do I sound like I’m endorsing these calculations? I’m proposing a way that gets around the necessity of doing them. Again, if you’ve got a better idea, let’s hear it. Since president Obama has just enshrined a giant “social cost of carbon” into federal rulemaking, your unthinking attack on an alternative that could do away with the need for it baffles me.
Talk about moving the goalposts. I don’t know if any state variable will be constant for 300 years, but who cares? The one I propose has been relatively stable for 30 years, which is long enough for the purpose of this policy. And I also suggest applying a slight smoother to it, such as a 3-year moving average, to suppress irrelevant weather-related volatility. The IPCC insists (by implication) that in the absence of GHG forcing the tropical mid-troposphere measure would have been pretty stable over the entire 20th century. Whether that’s true or not, what matters is the people who endorse IPCC models would be obliged to accept the premise. Got a better candidate? You need a state variable that is reasonably stable against natural changes and yet is expected to respond quickly to changes in GHG levels in such a way as to capture the magnitude of any global warming effect. Feel free to name a few.
This is a non-sequitur. Do you know what the term “cost-effective” means? In basic economics texts, it means that it satisfies the equimarginal condition, in other words it distributes the compliance burden in such a way as to equate marginal abatement costs across emission sources, thereby minimizing the overall costs of achieving the given policy target. And by recycling the revenue into alternative tax reductions, it minimizes the macroeconomic cost as well. Revenue-neutral emission taxes have these features, and the reasons have long been established in the economic literature. I wrote a whole textbook on this if you want to look it up. These are properties of the policy itself and are not contingent in any way on the alternatives it replaces. I don’t spell all this out in every piece of writing on the subject because at a certain point you have to expect that people will do a bit of elementary reading for themselves.
What’s pathetic is when an ordinarily intelligent commentator lets superficial, reactionary emotions get the better of him, leading him to launch an error-filled diatribe that has the effect of endorsing the status quo he elsewhere condemns, while ridiculing an option for change that he ought to have realized gives him him the very outcome he wants.
The ideas proposed by this paper is so naïve, one wonders if Professor McKitrick hasn’t perhaps been commissioned by some government to write it.
Ross, thank you for your response.
Ross McKitrick says:
July 5, 2013 at 2:00 pm
I truly don’t understand this argument, that your energy tax is less bad than what California has. I know that, there are many things not as bad as California’s energy policy … and?
Yes, and if the temperature had gone up since 2002 the tax would have gone up, and in neither case are humans known to be the cause … and yet you want to tax it.
Also, I don’t understand when you say the tax “would have been down to -$5.81 a tonne”. Is that a negative tax, minus $5 per tonne? What is a negative tax?
If you are asking is your energy tax better than the existing Canadian energy tax, sure, I’d take yours any day. But I’d likely take a host of ugly things over the existing energy tax.
But yours is still an tax, and all energy taxes hurt the poor.
As to your question of how to get there, I can tell you how NOT to get there. That is to agree with the idea than an energy tax is something worth having, and claim that the only real question is “Solving the dynamic rate-setting problem”.
The dangerous part is where you agree that an energy tax is something worth having. It is not. Taxing energy is not just non-productive regarding temperatures. It is actively destructive to both the poor and to the environment, no matter whether the size of the tax is set by Parliament, by lottery, or by tropospheric temperature.
I’m sorry that you’re so depressed about the state of the world. Me, I’ve seen lots of change in the support for that kind of policy madness, particularly in the last few years. People are getting fed up with sacrificing and being taxed for two hundredths of a degree of cooling in a century.
Gosh, my mistake, I must have left it out accidentally.
I would pick a) over b) any time. But nobody has just that choice. To start with, most states in the US have no CO2-based energy taxes at all.
So suppose your choice is (a) your tax, or (c), nothing at all, which is the condition not only in most of the US but in most of the world … to quote a friend of mine, “you’re having difficulty seeing why (a) would be a disastrous idea compared to (c) no energy tax?
Google “the nose of the camel” if my meaning is obscure. You are making the same stale argument “mine is better than that abomination”. Yes, it is … but yours is also an abomination, justa a smaller one.
Same argument, “but Daddy, he did worse”. I’m not buying it.
Why on earth would I want “an objective 30 year set of predictions about global warming” from a bunch of businessmen, when “an objective 30 year set of predictions about global warming” from specialists in the field is meaningless?
No, that’s not my view. If you propose a tax that increases when it gets warm, in common English that’s called a tax on warming no matter where the tax is applied. I can call it a “tax whose dynamic rate-setting is based on warming” if you’d prefer … and it still doesn’t make sense.
No. Those are the ones who are being impoverished and disenfrachised by the mad global rush to tax energy. They are the ones hurt when the World Bank stops giving loans for cheap energy. Your attempt to sneer at them is pathetic.
Would they like your tax instead of something much worse? Yes, they would, you’ve made that point again and again … so what? Everyone would like to be screwed less, but that doesn’t mean they want you to screw them.
Call it what you will, Ross, I don’t care, it’s a way to tax carbon energy.
Most of the world doesn’t have an energy tax applied to carbon. You propose one. That is not “a way to fix both problems”. It is not a way to fix any problem
You don’t seem to get it. For most of the world, your proposal is a NEW TAX ON CARBON ENERGY, energy which has not been taxed before, which will have the predictable effects on the poor, the economy, and the environment.
Sure, it’s better than the Canadian crap, but so what? For most of the world, including the US as a whole, we have no special CO2 based taxes on carbon fuel. So stop with the “It’s better than Canada and California”, that means nothing to the US as a whole or most of the world for that matter.
Ross, you say that the “tax mechanism provides a computable approximation to the unobservable marginal social damage path”. In other words, the temperature (which is the mechanism you propose) somehow provides an approximation to the damage.
But you’ve already decided that up is bad! You’ve already determined that the net costs exceed the net benefits as temperatures rise, so that the tax has to rise as a result. And I haven’t a clue how you decided that, but clearly you didn’t include all of the external benefits. CO2 fertilization alone is worth $300 billion per year … did you include that? How about increased growing season length … included in the mix to determine that warmer is bad, taxes go up?
Obama would agree to your tax plan, say “Thanks very much”, and still keep the federal rulemaking in place … and your argument that “my plan is better than Plan X” is getting old.
Huh? What does “relatively stable” mean? In fact, the tropical tropospheric temperatures have increased over the last thirty years, not by much but they are increasing.
The IPCC insists (by implication) that in the absence of GHG forcing the global average surface temperature would have been pretty stable over the entire 20th century … so what? The climate system in general is not stationary, including the tropical tropospheric temperatures, on ANY scale from minute to millennia. So no, I can’t think of anything that is stationary, but I can think of lot of measures the IPCC would claim would be stationary.
Well, I’m glad to know that, and I’ll keep it in mind next time I’m called on to satisfy an equmarginal condition.
To the portion of the planet who aren’t economists, on the other hand, “cost-effective” means that you get some bang for your buck. “Cost-effective” means that at the end of the maze you get enough cheese to justify running the maze.
But with your plan to increase energy costs, we get no cheese. There’s no measurable reduction of temperature. There’s no benefit to society. Instead, it’s all loss, with the poor and the environment hit hardest. We’re being taxed and we’re not getting a damn thing in return … and here in the real world we call that “not cost-effective”
I’m also glad to hear that, and I’m sorry to be contrary … but I’m of the opinion that any scheme such as yours which merely redistributes wealth and does not create any wealth is not what is needed at the moment … yes, you might minimize the cost, but that’s just another “my plan is better than X” argument.
Here’s the bottom line. Taxing energy slows development, reduces the wealth of a country, slows the economy, and is the most regressive tax known to man because the poorer you are, the more it costs you. Plus, since environmental care is linked to development, taxing energy damages the environment.
Now, I’m willing to accept such a tax if there is a corresponding benefit. But because of the regressive nature of the tax, and the resultant damage to the poor and the environment, it would have to have a large benefit to be worth it.
So … where is the huge benefit in your plan that would make it would adopting as an alternative to having no carbon tax?
Dang … take a deep breath there, you’ll feel better. Everyone agrees with me most of the time, tells me how insightful I am … except when I’m talking about them, then it’s all just an “error-filled diatribe”. Funny how that works.
But truly, Ross, “my plan is better than some alternative pile of garbage” is a MEANINGLESS ARGUMENT when for most of the world (including most of the US) the alternative is no carbon tax at all … and even if not it’s still a logical error. Yeah, I’d rather be in the county jail than in the Colorado Supermax, but that doesn’t make either one a good plan as you repeatedly have insisted in your comment. That’s the argument I don’t want to be in the same room with, that because your plan is not as barking mad as those of the alarmists, it is worthy of consideration. That dog won’t hunt.
And again, thanks for the length and detailed quality of your reply.Here’s the takehome question.
If a country/state has no carbon based tax, would they be better off with your tax or no tax? And if the answer is your tax, why?
I suspect you think the answer is “No Tax” … and if so you could have saved a lot of trouble by stating so from the get-go. However, that’s a guess, you might think the answer is “Your Tax” … and I suspect that’s what has people agitated, including myself.
w.
My solution is a bit different; address the core of the problem.
An exponential decrease in funding and salaries for all alarmist climatologists in line with the average difference between T predictions of their models and lower troposphere T. Only models predicting more than 0.1 deg C per decade will be accepted.
If a country/state has no carbon tax, and no command-and-control anti-energy policies, including subsidies for renewables, wind energy mandates, biofuels policies, upward-ramping energy efficiency standards, bans on incandescent lightbulbs, etc etc, and no constituency pushing for any of these things or any other climate policies now or in the future, then they would have no reason to support my tax proposal except insofar as a switch from payroll to energy taxes might be a welfare-improving tax reform. I can’t think of any jurisdiction described by the foregoing. I can think of a lot of places, including the US, that have much worse policies, that would be better off under my plan. You are making an unattainable ideal the enemy of an attainable good.
For all my own skepticism, it remains the case that we are adding a lot of CO2 to the air and it is an infrared absorbing gas, and it’s perfectly legitimate for people to worry that there might be negative long term consequences. It is not legitimate to assume that we already know they are catastrophic and we should aggressively scale back global energy use, but that idea is already out there. If your policy plan is simply to declare with serene confidence that CO2 is no problem, nobody is going to listen to you. My proposal implies: if it really isn’t a problem, the policy remains relatively small and harmless, but if the alarmists are right, it builds an increasing financial penalty into carbon-intensive energy use. Everyone expects to get their preferred policy path, and the atmosphere will decide who is right, rather than politics and mob rule.
The point of the futures market is that the tax path is revealed long in advance and it integrates all available scientific information, as well as weeding out all the bad climate models (or rendering them irrelevant for policy purposes).
Because unlike scientists, markets have billions of dollars at stake in getting accurate forecasts and investors will ruthlessly sift through the noise to find the models that are able to produce the most accurate forecasts. Under the current system, incentives favour models that generate the most alarming forecasts, and systematic errors year after year are ignored because there is no penalty for being constantly wrong. Under my proposal, investors will have no incentive to accept systematically exaggerated (or understated) tax path forecasts since errors in either direction are costly. GCMs might simply be abandoned altogether in favour of simple empirical forecasting models if they do a better job.
Ross McKitrick says:
July 5, 2013 at 7:16 pm
Many, perhaps most developing countries have no bans on incandescent lightbulbs, or biofuel policies, or any of the crap you mention. You should get out more. Most of them can’t afford that kind of lunacy. If they do have them, they’re just for show, and not enforced. Show me, for example, the energy efficiency standards or wind energy mandates of Haiti or Lesotho or the Solomon Islands …
Also, it sounds like you are claiming that your plan “as a switch from payroll to energy taxes might be a welfare-improving tax reform” …
Yeah, that’s the ticket. Don’t tax businesses, tax energy because that screws the poor, that’ll improve welfare …
Ross, it is “perfectly legitimate” to worry about anything you want to worry about. That’s your inalienable right, to sweat bullets about whatever you might choose.
For the worry to be grounded in reality, however, we need more than unconfirmed theory—we need evidence that CO2 is something to worry about. And that I’ve never seen.
Indeed the idea is out there, that is true. There’s lots of crazy ideas out there. Heck, I’ve heard that something like a third of Americans think the planet is only 6,000 years old … should we take that seriously as well, and plan taxes around the expected date of the resurrection?
My “policy plan” is to tell the truth, that any kind of energy tax harms the poor, until the idea sinks in. It’s a new idea, there’s not a lot of folks pushing it yet, but they’re increasing every day. I’ll tell you something funny. The most popular post I’ve ever written, most read and most reposted, was “We have met the 1% and he is us“. That post was about nothing but the madness of energy taxes because of how they harm the poor.
My other “policy plan” is to continue to research the real nature of the climate and its vagaries, and to oppose bad science wherever I find it. Despite your despair, we’re winning that battle. Yes, it’s far from over, but now is not the time to compromise and say “energy taxes are OK, the only dispute is how to set the rates”. No, energy taxes are not OK. They harm the poor and the environment, and absent a really large benefit, why would we even entertain the thought?
So despite your dark despair about anyone listening to me regarding energy taxes, you’ve already been proven wrong—people have paid more attention to that message than any other I’ve ever posted.
Moving on to your plan and the warming world, the world has been warming in fits and starts for 300 years, and obviously not from CO2. This warming hasn’t been a problem.
Under your plan, depending on the size of your escalator clause, which of course the politicians will jack up as soon as the tax is passed, a continuation of that natural process will cost me either some more or a lot more money. In other words, you are going to charge me because of a process that’s been going on for 300 years … and exactly why should I pay extra because the earth is doing what it’s done for centuries?
You keep claiming that your whiz-bang tax on energy will somehow miraculously stop that 300-year-old warming from occurring … perhaps you could explain how that will happen.
You assume that there are “models that are able to produce the most accurate forecasts” of the next 30 years of climate … and despite that, as an economist I doubt greatly that you believe that there are “models that are able to produce the most accurate forecasts” of the stock market … but the climate is even more unpredictable.
Your statement is equivalent to saying that you trust the players at the craps table to predict whether the player will crap out or not more than the scientifically calculated odds, because the players have money at stake in an getting an accurate forecast. Sorry, but even having billions of dollars at stake doesn’t make you any better at saying whether it will be warmer or cooler in thirty years.
As a result, no, neither scientistis nor people with “billions at stake” have any clue whether the climate will be warmer or cooler. You are deluding yourself badly if you believe that in the arena of prediction of chaotic systems, money will make you better at guessing the future. If that were true, wealthy folks would always beat the stock market … you see that happening?
Ross, I appreciate that what you are trying to craft is a fairer way for people to get screwed by an energy tax than the California or Canada taxes … but you’ll have to forgive me if I don’t see the logic in that.
My main question is, where’s the beef? Where’s the benefit? If we do everything you suggest, what do we get out of it? That’s the part that bothers me, because so far the only guaranteed results I see from your plan, the only thing we can be sure will happen, are the poor get screwed (except less than if the plan were crazier), and the environment gets damaged (except less that under the more draconian proposals). Great plan you’ve got there …
So … where’s the beef?
Again, thanks for your detailed response. And I do apologize that at times my passion overwhelms my politeness, and I tell ugly truths bluntly … but I am passionate about both the poor and the environment. I’ve spent a good part of my life fighting for both, and now the environmental organizations I used to support are doing their best to undo my life’s work, to keep the poor in poverty. It does rankle. Pointman put it very eloquently:
So when you want to join the environmental organizations in causing damage and misery, when you blithely plan to harm the poor and the environment with no visible benefits, yes, Ross, my blood does get angrified … mea maxima culpa. And you saying “but I’m hurting them less than California does”, that doesn’t help, the poor are assuredly not impressed by that pathetic excuse …
My best regards to you,
w.
Willis, the big advantage of McKitrick’s scheme is that it calls the bluff of the alarmist industry and provides politicians with a credible weapon in response. Once implemented the rational investment sector will soon cut through alarmist nonsense and the futures market will give an uncompromising verdict. Your “bunch of businessmen” can hire all the “specialists in the field” they need in order to do so. They would certainly hire McIntyre rather than Mann.
McKitrick’s scheme could do harm if temperatures rise from factors other than CO2. That risk needs close monitoring.
Alan Wilkinson says:
July 5, 2013 at 8:57 pm
Thanks, Alan. Since the temperature of the earth has been rising in fits and starts for about 300 years, and it is clearly not from CO2, that is not a “risk”. It is a very probable outcome.
Also, despite Ross’s claims that I’m somehow naive, he makes a couple of incredibly naive assumptions.
The first is that his plan will be adopted in exclusion to all other carbon taxes. Riiight … when has that ever happened? Taxes are always “in addition to”, not “in lieu of”.
The second is that the size of the tax will be small. I remember my father, who was born in 1903, railing about the income tax, saying “They swore when they implemented it that the top rate would never be more than 7% of income.” And despite him only being ten years old when the tax was voted in, it would not surprise me a bit if that were true, because no tax has ever ended up as small as it started. Plus he was a very smart and observant person, even as a kid.
So once the politicians had the McKitrick Tax in place that would automatically give them revenue if the temperature went up, they’d immediately up the tax rate as soon as the temperature started to rise.
And of course, if the temperature fell, they’d just do what Obama’s doing with Obamacare, granting waivers against lowering the tax, and autocratically changing the rates to not lose as much when the temperature fell.
So I find his earnest assurances that this wouldn’t cost money unless temperatures rise, and even then a small rise will bring a small tax, to be about as reassuring as the US Government’s reassurances that income tax would never be more than 7% … we know how that turned out.
Look, I’m not an “anti-tax” guy. Taxes can be both necessary and proper, although we can debate which ones and where.
But a tax which goes up if a 300 year old trend continues, a tax which has no benefits and is wildly regressive?
Sorry, I’ll pass.
w.
Spot on, Willis. That’s absolutely on the nail. A carbon tax or an energy tax based upon some hypothetical rise or fall in temperature is pure unadulterated tosh. And it is incredibly naive to think that Governments will roll back on any taxes or make a carbon tax ” in lieu of “. Anybody who thinks that is not living in a real world. Any new tax will always be ” in addition to ” and will never come down in cost for the general public. Only the top corporations will get away with more benefits which they can wheedle out by doing backroom deals. This energy tax will be of a reverse Robin Hood nature, robbing the poor to make the rich more richer.
Willis, I agree with your assessment of the politics. New tax is simply manna from heaven to politicians and bureaucrats and any carbon tax will much more likely be abused than applied honestly.
Ross – It may sound like a good idea but what is your expected outcome?
My guess is the new lawwill get the temperature calculationsfrom the IPCC or a US scientific body like NOAA.
CO2 goes up, temperature goes up and they raise the tax.
Next year, CO2 goes up, temperature goes up and they raise the tax.
At what point is this cycle changed?
How does anything get fixed? Whatever that means. If we give the government a few trillion dollars (which will be added to the general revenue) they’ll stop all of the F3, F4 and F5 tornadoes? What’s your expected outcome? I would never trust the numbers.
Full disclosure, I consider myself libertarian and I don’t like the idea of giving government another revenue stream….They got plenty.
Maybe I’ll approve – as long as I provide whatever temperature readings I want and I decide how to spend the money. Oh wait, that’s what they want to do…Such a deal!
If Obama wants a little extra spending money let him write another questionable Executive Order that can easily be cancelled by a future president. If congress makes it a law it’ll never go away. It’ll just be written so they can tweak it each year to improve revenue. That’s what taxes do and that would be okay with everybody in positions of power.
I agree with Willis, “this is industrial strength stupidity.”
cn
it’s befitting on independence day
to remember how we got that way
by throwing the damn tea in the bay!
and those who were lesser men
became canadienne.