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Carbon Markets, Carbon Taxes, and why neither matter
Posted by: McQ on Monday, April 09, 2007

I'm surprised daily by things I read by supposedly thinking people, but this one made me wonder if I'd missed something.

There's an article in Newsweek International where Fareed Zakaria argues that a carbon tax is superior to a carbon market.

As Reason's Ronald Bailey points out, speaking of Zakaria:
He notes that the during the time the Kyoto Protocol was being implemented, 800 coal-fired power plants were built around the world. They emit 5-times more carbon than the Kyoto Protocol cuts.
Fine to this point. Reality and cost meets ecology. Note also that he's speaking here of what is happening around the world.

Zakaria's argument for the carbon tax?
Once you tax carbon, you make it cheaper to produce clean energy. If burning coal and petrol in current ways becomes more expensive because of the damage they do to the environment, people will find ways to get energy out of alternative fuels or methods. Along the way, industrial societies will earn tax revenues that they can use, in part, to subsidize clean energy for the developing world. It is the only way to solve the problem at a global level, which is the only level at which the solution is meaningful...

A carbon tax would also send the market a clear and powerful signal to develop alternative energies. Daniel Esty, a Yale environmental expert whose new book, "Green to Gold," is a blueprint for new thinking about the environment, argues that the only way forward is a "transformational approach that creates incentives for innovation and alternative energy. The way we think about these issues is old-fashioned. We're still trying to limit, regulate, control and inspect. We need to become much more market-friendly. Put in place a few simple rules, and let the market come up with hundreds of solutions. We're not even 10 percent of the way down such a path."

In the end, everyone realizes that innovation is the only real solution to the global-warming problem.
Love the last line. "Everyone" realizes that our "innovation", i.e. that of mankind, is the 'only real solution' to the "global warming problem"? Really. I can only imagine if Sol could laugh, how loud it would be.

And, of course, Zakaria's argument leads to the inevitable conclusion that only government can save us from ourselves. Wow. That's a surprise. Well really it's not.

The surprise, in fact, came from Reason's Bailey:
Just a heads up—I have done a lot of reporting and just completed an article for The American on carbon markets versus carbon taxes. As a generally market-friendly guy, I've nevertheless concluded that carbon taxes is the way to go.
The fact that someone from Reason is advocating a tax on carbon administered by government as 'the way to go' says a lot about why Reason is no longer a magazine to which I subscribe. Freedom and liberty give way to utility maximization involving coercive government. And unthinkly short-sighted as well. As a commenter there quickly notes:
Of course, carbon taxes in the US and Europe will do zero to reduce the building of new coal-fired power plants in China.

In order to reduce global CO2 emissions, every country will have to introduce a carbon tax. Ain't gonna happen.

Unless you want to give the UN the power (and I do mean the power) to collect a carbon tax. Show of hands for giving the biggest kleptocracy known to man a license to print money and hand out favors? Anyone? Anyone at all?
Do I see any hands out there?
Return to Main Blog Page

Previous Comments to this Post 

> The fact that someone from Reason is advocating a tax on carbon administered by government

Yeh, Baily has drunk the anthropogenic global warming Kool-Aid, much to my puzzlement and dismay.
Written By: Paul
URL: http://
Yeh, Baily has drunk the anthropogenic global warming Kool-Aid, much to my puzzlement and dismay.
And look where it leads.
Just a heads up—I have done a lot of reporting and just completed an article for The American on carbon markets versus carbon taxes. As a generally market-friendly guy, I’ve nevertheless concluded that carbon taxes is the way to go.
Written By: McQ
great post.

also: read lindzen in the current newsweek: (1) global climate on Earth has always changed - it is not stable; (2) global warming is mostly natural; and (3) might not be so bad.

excerpt here:
Written By: reliapundit
We need Taxes my friend, Taxes I say, Taxes right here in River City. Tax-Tax-Tax, if it moves Tax it, if it doesn’t, Tax it anyway. People are being frightened by Global Warming, we can’t do much about that, but we can Tax it. Taxes will solve all of man kinds problems.

Carbon taxes will do little to reduce carbon and much to swell the coffers of government with money to waste on bridges to nowhere. The best that can be said for Carbon Taxes is, that fraud is right out in the open.

Carbon trading is a fraud that is hidden. The Goreites and Europe have embraced carbon trading. Gore has even set up a company ostensibly designed to facilitate carbon trading. So far it looks like a sop to justify his enormous energy use at home. Europe is the poster child for carbon trading and it has failed miserably. Embracing the Kyoto Accord, Europe promised to reduce carbon emissions. Carbon trading was the ‘magic bullet’ that would solve the problem. That bullet turned into a Dum-Dum as Europe has not only failed to meet Kyoto, it’s emissions have risen.

The fear of Global Warming is the perfect excuse for government to exercise greater control over it’s citizens. Even worse since it is perceived as a global problem, it can be used to strengthen the corrupt, bloated United Nations. The dream of the ‘one worlders’, a wet dream at that.
Written By: James E. Fish
Hollywood seems to enjoy these "Carbon Neutral" coupon buying schemes, where you match the amount of CO2 you have emitted by planting trees.

It seems these people have overlooked the fact that Global Warming is causing a huge amount of arctic forrestation as the permafrost melts across the tundra. The solution is simple: don’t do anything. Global Warming pays for itself.
Written By: Jimmy the Dhimmi
I reiterate my point: given the current geopolitical situation with regard to oil, as well as our desire to move away from earlier-generation coal power plants for legitimate pollution concerns (smog and so forth), is there not enough of an incentive to switch to "alternative" fuels already?

Take away global warming as an issue and there are still people all over the place trying to develop new energy sources.

Not to mention that lots of people are already struggling to pay their bills as it is...try breaking it to them that the government wants to stick another huge tax on their gas and electricity and see how much support this gets.
Written By: Matt
Here’s a neutral question. You call yourself a global warming "skeptic". You say we don’t know how much of it is man-made, "whether or not it’s a bad thing" (a position that seems to require a degree of ignorance), and the extent to which we can do something about it.

But the science uncertainty is mostly about how bad it’s going to get, how quickly, and how much we can do about it.

So - regardless of whether China and India come on board or not - we as a nation can certainly do something about it. Our actions will have an effect, whatever that may be. Not to mention, we’ve tended to be pretty good at getting enforcement for things when we really want them.

There’s an entire world of serious people out there seriously evaluating, and worried about, the consequences. By not looking at those consequences in depth, you present yourself as unserious.

Some examples:

Brad Plumer:

Scientists are observing a lot of changes—an increase in glacial lakes, warming permafrost, rivers and lakes that are heating, early springs, weird animal migrations—that are very likely due to manmade climate change.

Some 20 to 30 percent of all species face a "high risk of extinction" if global temperatures rise another 1.5 to 2.5 degrees C above 1990 levels.

Coral reefs are "likely to undergo strong declines," salt marshes and mangrove forests could disappear as sea levels rise, and tropical rainforests could be replaced by savanna.

As far as humans are concerned, the panel expects "increasing deaths, injuries and illness from heat waves, floods, storms, forest fires, and droughts."

Most of these forecasts are backed with either "strong certainty" (which, I assume, means 67-90 percent likely) or "very strong certainty" (over 90 percent likely). For the most part, global warming will have negative effects for both humans and the environment, outweighing the positive effects. The regions that will suffer most include Africa south of the Sahel, due to droughts, and densely populated river delta regions in Asia, due to flooding.

Next excerpt, next post.

Written By: glasnost
URL: http://
This one is right down your alley, McQ: Brad says in that post:

I’ll add one note. The scientists working on the IPCC report are very good. But they tend to concentrate largely on the first- and second-order effects of climate change. There are also potential third-order effects—famines, refugee crises, changes in disease vectors—that are less certain,

David Ignatius:

What Schwartz discovers with his stress-testing makes climate change even scarier: The world already is precarious; the networks that maintain political and social order already are fragile, especially in urban areas; the dividing line between civilized life and anarchy is frighteningly easy to breach, as the daily news from Iraq reminds us. We look at the behaviors of butterflies and migratory birds as harbingers of climate change. But what about early effects on human beings? "The steady escalation of climate pressure will stretch the resiliency of natural and human systems," writes Schwartz. "In short, climate change pushes systems everywhere toward their tipping point."

Schwartz’s report, "Impacts of Climate Change," was prepared by his consulting group, Global Business Network, for a U.S. government intelligence agency he doesn’t identify. The text of the report is available at the online discussion forum PostGlobal ( Here’s a brief trek through the ravaged landscape Schwartz describes.

A first set of disasters waiting to happen involves stressed ecosystems. Human actions — deforestation, overfarming, rapid urbanization — have created special vulnerabilities to catastrophic natural events that are likely as the climate changes globally. In an interview, Schwartz cited the example of Haiti, which because of deforestation and loss of topsoil is "an ecosystem at the edge." A prolonged drought or a devastating hurricane could tip Haiti over that threshold — and produce a refugee crisis of tens of thousands of boat people fleeing a devastated country.

Or take the problem of rising sea levels: Climate scientists are uncertain how fast the icecaps will melt and the seas will rise. But in Bangladesh, where millions of people live at or near sea level, even a small increase could produce a catastrophe. In a severe monsoon, 60 million to 100 million people could be forced to flee inundated areas, Schwartz warns, producing "the single greatest humanitarian crisis we have ever seen."

Lack of water may be as big a problem as flooding. Schwartz notes that more than 700 million people now live in arid or semi-arid areas. Climate change could tip this balance, too, producing severe water shortages and even "water wars." Tens of millions of people may become water migrants. The world’s feeble political systems can’t cope with existing migration patterns, let alone this human tide.

And finally, there is the problem of maintaining social order in a stressed world. You don’t have to go to Baghdad to see how quickly the social fabric can be shredded; just look at New Orleans after Hurricane Katrina. The stresses come in part from rapid urbanization. Schwartz notes that in 1900, one in 20 people lived in cities; today it’s about half, and the percentage is rising fast. Without strong and supple governments, this could become a world of vigilantes and militias, desperate to control scarce resources.

Trying to control terrorism in a world where Thomas Barnett’s "Arc of Disconnection" is disintegrating rapidly due to global warning is going to only going to get harder, and harder, and harder.

Written By: glasnost
URL: http://
I realize that I never asked the question, which is:

Sure, you can smack down proposed solutions as taxes, therefore violations of liberty, etc -

but have you really thought through, sat down and read in detail, the kinds of consequences that serious, reputable people are finding increasingly likely?

The insurance industry lives and dies on whether or not they can predict global risk events. They’re sure not in the doubters column:

The Intergovernmental Panel on Climate Change (IPCC) issued its "Fourth Assessment of Working Group II," which updates past studies and sets forth the "current scientific understanding of impacts of climate change on natural, managed and human systems, the capacity of these systems to adapt and their vulnerability," the IPCC said in a summary of its findings. "It builds upon past IPCC assessments and incorporates new knowledge gained since the Third Assessment."

That report is ancient history. It was issued in 2001, when there were still many in the scientific community who still questioned the existence of a global warming trend and the seriousness of the impacts it might have. Six years later that’s no longer the case. No serious scientist today disputes the existence of global warming, even though its potential impact remains the subject of continued analysis.

The IPCC was unequivocal. It stated: "Observational evidence from all continents and most oceans shows that many natural systems are being affected by regional climate changes, particularly temperature increases." The report cites the following examples – all of which are well documented with scientific studies:
— Changes in snow, ice and frozen ground (including permafrost);
— increased run-off and earlier spring peak discharge in many glacier- and snow-fed rivers;
— warming of lakes and rivers in many regions, with effects on thermal structure and water quality;
— earlier timing of spring events, such as leaf-unfolding, bird migration and egg-laying;
— poleward and upward shifts in ranges in plant and animal species;
— shifts in ranges and changes in algal, plankton and fish abundance in high-latitude oceans;
— increases in algal and zooplankton abundance in high-latitude and high-altitude lakes;
— range changes and earlier migrations of fish in rivers.

Under the category of "Other effects of regional climate changes on natural and human environments," which are harder to gauge, a partial list of the IPCC’s report includes an analysis of the following:
— Effects on agricultural and forestry management at Northern Hemisphere higher latitudes, such as earlier spring planting of crops, and alterations in disturbance regimes of forests due to fires and pests;
— some aspects of human health, such as heat-related mortality in Europe, infectious disease vectors in some areas, and allergenic pollen in Northern Hemisphere high and mid-latitudes;
— some human activities in the Arctic (e.g., hunting and travel over snow and ice) and in lower elevation alpine areas (such as mountain sports);
— settlements in mountain regions are at enhanced risk to glacier lake outburst floods caused by melting glaciers. Governmental institutions in some places have begun to respond by building dams and drainage works;
— in the Sahelian region of Africa, warmer and drier conditions have led to a reduced length of growing season with detrimental effects on crops. In southern Africa, longer dry seasons and more uncertain rainfall are prompting adaptation measures;
— sea-level rise and human development are together contributing to losses of coastal wetlands and mangroves and increasing damage from coastal flooding in many areas.

The last observation should be of particular concern to the insurance industry, as it is in the front line as far as underwriting the ever increasing risks inherent in rising seal levels and coastal development. For a thoroug analysis of the impact climate change potentially has on the industry consult Lloyds ’’360 Report," which is detailed in the following article.

Read the whole article for a long, long list of potential problems the insurance industry is interested in.
Written By: glasnost
URL: http://
"As far as humans are concerned, the panel expects "increasing deaths, injuries and illness from heat waves, floods, storms, forest fires, and droughts."
The panel expects people of the third world to live in the same povert-stricken conditions as they do today - this, of course, will be the case if they choose to adopt Al-Gore’s strategy and curb industrial output. Its easy for the Goracle to be satisfied with the current level of global poverty, and propose to subsidize their misery with some sort of socialist coupon scheme; However, millions of poor people die every year anyway due to floods, droughts, earthquakes, tsunamis and other events that have nothing to do with Global warming.

So here are a few points for the offset crowd to ponder:

1)Social consequences that are a result of Global Warming (even if it is exclusively mad-made), may be mitigated by the very poverty-reducing industriousness that causes it.

2)If you choose the draconian, industry capping approach, you better be 100% sure that Global Warming is anthropogenic, or else the poor people are going to suffer immensly if all the disaster predictions hold true while they weren’t allowed to prepare for them.
Written By: Jimmy the Dhimmi
So - regardless of whether China and India come on board or not - we as a nation can certainly do something about it.
Accepting, arguendo, your stipulations, to what end do we "do something" without others doing at least as much?

Don’t bother, it’s rhetorical and besides, you nor science can answer it anyway.

And that’s the crux of the argument about the real, not pseudo effectiveness of a partial carbon tax or carbon markets.

This is all feel good stuff and reminds me mightily of the unilateral disarmament crowd. As anyone with the sense of sheep dip knows, disarmament only works if everyone disarms.
Written By: McQ
Glasnost: I for one am one of those "skeptics" you admire so much. I for one, however do not possess the "degree of ignorance" you suppose of a skeptic. You see, I am one of those who actually work as an environmental analyst and one of my specialties is Air Quality, and Air Conformity Analysis.

Before you walk around labeling "skeptics" as ignorant, you might take a good look in the mirror, there buddy and ask yourself "What color koolaide am I drinking these days?"

You say "So - regardless of whether China and India come on board or not - we as a nation can certainly do something about it." I would also like to point to the first paragraph of your comment where you use the term "global warming".

And now I would like to point out a simple fact to you "glassy", You don’t get the "world" involved, then you got squat! What passes for climate in your part of the world, was circulating on the other side of the planet 30 days or so ago. And in that time, do you think the air will have gone through some sort of magic wringer, taking out all the bad old poopie stuff? The short answer to that is - NO. The long answer to that is - NO!

You believe the "global warming" hype? Then look this over - By the year 2020, China will have outstripped the US CO2 production. By the year 2030, India passes us by - and both of these will occur without one iota of reductions on our part! And those are just two of the nations out there. Look at the entire Kyoto Accords. Look at all of the nations that have signed up to the hype. Not one has met their Year 2000 goals - and it is now 2007! And not one of them is working overtime to correct their problem! And while Europe sneers at the US for our stance relative to the hype, they have increased their CO2 output by 2.5% since 2001 while the US has increase theirs by 1.5%! And they signed the accords!

You want to put our economy in a wringer - fine - get the rest of the world to jump in the pot with us and actively seek to "save the planet" and I got no problem with it. You let the rest of the world off the hook or let them pass - then go pee up a rope!

Written By: SShiell
URL: http://
But the science uncertainty is mostly about how bad it’s going to get, how quickly, and how much we can do about it.
Yeah—we are uncertain on essentially all the big questions. The "how bad it’s going to get" question also suggest that we don’t know it’s gonna get bad. The "how much we can do about it" part implies uncertainty about how much we are responsible for it.

The bottom line is we need more information before we destroy our economy or confront China et al over this.

What is it with leftists an an inability to consider cost and benifits? Or do they see harming the US economy as win-win?

Written By: Don
URL: http://
In my view the reason that neither carbon markets nor carbon taxes can be effective in curbing our production of greenhouse gases has less to do with physics or economics than with politics.

We are subsidizing the increasing consumption of energy massively. One of the several ways we’re doing this is in subsidizing highway construction. If any tax or market proves effective in influencing behavior and we maintain the energy consumption subsidies, there will be political pressure for relief. The measure has a disparate impact on the poor. It reduces the number of jobs in my district. This industry is vital to national security. The excuses go on and on.

The solution is to remove the subsidies first. Otherwise any strategy to reduce production will be subverted.
Written By: Dave Schuler
Carbon offsets is a scam. People like Gore need to stop making excuses why they use more energy than 230 other people, and why they can’t fly coach like the rest of us to talk at conferences. Same for Prince Charles et al.
Written By: capt joe
URL: http://
And now from a different Scientific perspective:

A meteorology professor at the Massachusetts institute of Technology says there is no compelling evidence that global warming will lead to a catastrophe — and in fact might be beneficial. Richard Lindzen writes in Newsweek: "Much of the alarm over climate change is based on ignorance of what is normal weather and climate. There is no evidence that extreme weather events are increasing…Indeed, meteorological theory holds that, outside the tropics, weather in a warming world should be less variable, which might be a good thing."
Lindzen says most of the current alarm over climate change is based on what he calls "inherently untrustworthy climate models, similar to those that cannot accurately forecast the weather a week from now."

Meanwhile, top hurricane forecaster William Gray of Colorado State University called Al Gore "a gross alarmist" during the closing speech of the National Hurricane Conference in New Orleans.

Gray says the recent increase in strong hurricanes is part of a natural cycle that has nothing to do with global warming. He says Gore is, "doing a great disservice and he doesn’t know what he’s talking about."

Special Report, Fox News
Written By: James E. Fish
It’s April and we are still getting snow.

It seems like we have done too much to prevent global warming already.
Written By: Josh
URL: http://
Lol to Josh. By the way, Did you guys know that "Algor" in Latin means coldness? I’m not kidding. Check out these:

Algor at William Whitaker’s Words
Algor at University of Notre Dame
Algor is related to words like alga ("seaweed") and algeo, algere, alsi ("to be cold").See here.
Written By: Jimmy the Dhimmi
How come no one challenged this stinker? - "Once you tax carbon, you make it cheaper to produce clean energy."

Burning coal and emitting carbon dioxide is the cheapest way to make electricity today. If you tax the emissions, you making burning coal more expensive. This does nothing to make the alternatives CHEAPER.

The next cheapest electric source is nuclear. How does making burning coal more expensive make a nuclear power plant cheaper?

In fact it does just the opposite. Building a nuke involves inputs from the economy, still half powered by coal. Those inputs become more expensive making nuclear power plants more expensive too. Just the price of steel will go up from additional controls on blast furnances and foundries.

One could capture the CO2 from a coal plant but the rule of thumb estimate is that it increases the cost by 40% and reduces output by 40%.

And for what?
Written By: Whitehall
URL: http://
Mr. Fish,

How does anything Lindzen or Gray wrote help the Democratic Party?

You need to quite quoting Faux News and get with the program . . .
The next cheapest electric source is nuclear. How does making burning coal more expensive make a nuclear power plant cheaper?
Who wants to make nuclear cheaper? What do you think all the regulations are for?

The goal isn’t cheap energy, the goal is to make Amerika pay for its sins . . .

Written By: Don
URL: http://
How does anything Lindzen or Gray wrote help the Democratic Party?
What they were discussing was Science not Politics, where do you see anything about the Democratic Party? Science should not be the domain of political parties. There being reported by Fox does not invalidate anything. These were standard AP style stories.
Written By: James E. Fish
You need to quite quoting Faux News and get with the program . . .
I don’t understand your point. Fox did not report these stories, they were from the wire services. Rather than asking, Why did Fox report them? Considering the credentials of the scientists involved the question should be, Why didn’t other news outlets report them? Perhaps because they don’t fit the Global Warming storyline?
Using your standard, The New York Times motto should be “All the news that fits, we print”
Written By: James E. Fish

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