It's the people who use stuff that emits that cause climate change Credit NASA/JPL-Caltech

All the economists – you know, the experts on matters economic – who study what to do about climate change keep insisting that imposing a cost of carbon emissions through a tax or permit scheme is the efficient manner of dealing witih climate change. To which the usual answer is, yes, but that’s regressive. So, instead, let’s have lots of planning and schemes and regulation instead. Well, yes, but.

As it turns out, taxes are so much more efficient that the burden on the poor falls, even if in isolation the taxes are more regressive. This is, obviously enough, the mirror of the argument that a richer country might be more unequal but the poor are still – or can be at least, better off.

From VoxEU:

A carbon tax would be less regressive than energy efficiency standards

Arik Levinson 05 July 2018

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4 COMMENTS

  1. But this uses regressive to describe taxes in a wholly insane way. Whether something is regressive or progressive does not depend on what percentage of somebody’s income is spent on the item being taxed. By that measure, VAT is both regressive and progressive, depending on whether you are poor, middling or rich, and how much you save. The poor spend a lower percentage of their income on VAtable goods and services than the middle classes, who also spend more than the rich, because the rich save more. So is VAT progressive or regressive?

    And it entirely misses the point if we are talking about externalities, which is all about ensuring that total costs are borne by consumers. Arguing that adding a tax to the consumption of say petrol makes it regressive is as crackers as saying that food prices are regressive because the poor have to pay the full cost of food, and the poor spend a higher percentage of their income on food.

  2. Tim once again assumes we are not dealing with fraudsters, when the evidence is overwhelmingly contrary. To-wit, once they have gotten him to agree that taxation is the answer, provided he can design the tax, the goal instantly shifts, from mitigating “climate change” to doing right by this-or-that Able-Minded Victim Class. We need a tax on the sources of pollution, but one that will not hit the numerous citizens with “POOR” stamped on their foreheads.

    In the unlikely case that industry and liberty are warming the planet and that the planet is incapable of radiating the extra heat into space, by far the most sensible course of action is to levy no tax at all, which will leave the citizenry most able to adapt to any resulting climate change. Especially as we know that any new tax will go directly into the hands of the Don’t Kill The Job crowd, which will ensure that any future measurement is skewed to keep the crisis alive and keep the human race in stasis.

  3. If we want to explore silly, we can argue that any number of taxes and subsidies are progressive. The utility of owning that second car is a lot less than twice that of owning the first one, and the hooker in Pretty Woman enjoyed her first ever opera trip way more than the people having their 10th night out of the year.
    The argument against Pigou taxes is still made though on the grounds of progressivity of the tax system as if this is a key objection, so it needs taking down with whatever ammo you have.
    Good article by Tom imv