Wednesday, June 13, 2007

Carbon Taxes: A Canadian Perspective?

Call their tax

Why not tie carbon taxes to actual levels of warming? Both skeptics and alarmists should expect their wishes to be answered.


With this stalemate in mind, I would like to propose a thought experiment about a climate policy that could, in principle, get equal support from all sides.

The approach is based on two points of expert consensus. First, most economists who have written on carbon-dioxide emissions have concluded that an emissions tax is preferable to a cap-and-trade system. The reason is that, while emission-abatement costs vary a lot, based on the target, the social damages from a tonne of carbon-dioxide emissions are roughly constant. The first ton of carbon dioxide imposes the same social cost as the last ton.

In this case, it is better for policy-makers to guess the right price for emissions rather than the right cap. Most studies that have looked at that the global cost per tonne of carbon dioxide have found it is likely to be rather low, less than US$10 per tonne. We don't know what the right emissions cap is, but, if we put a low charge on each unit of emissions, the market will find the (roughly) correct emissions cap.

Second, climate models predict that, if greenhouse gases are driving climate change, there will be a unique fingerprint in the form of a strong warming trend in the tropical troposphere, the region of the atmosphere up to 15 kilometres in altitude, over the tropics, from 20? North to 20? South. The Intergovernmental Panel on Climate Change (IPCC) states that this will be an early and strong signal of anthropogenic warming. Climate changes due to solar variability or other natural factors will not yield this pattern: only sustained greenhouse warming will do it.

Pondering this one. I have a feeling that I want to play with a couple scenarios and then do a write up later this summer.

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