A Tax that could Save the World?
Available on Wednesday, November 25, 2020 2:45 PM EST
Dear ECON 203 Students:
So now that we’re posed (next week) to review the economics of externalities, it’s appropriate to ask you to read about how to save the world with a simple carbon tax. Such a tax on carbon fuels is known as a “Pigovian Tax,” as you’ll learn in our Week 7 class. It is, however, but one of a number of policy proposals economists recommend to address the question of climate change.
Your first task is to review the University of Chicago Booth School of Business piece below.
Now with the pandemic and concomitant collapse of oil prices, some argue that political constraints have loosened and that something can/should now be done. For a sampler, take a look at the following article.
So what do you recommend as a best policy? A Pigovian carbon-emissions tax? A cap-and-trade policy framework? Increased government regulations? Nothing? since relative price changes in the fossil-fuel and alternative-energy markets will solve the problem, assuming one exists, eventually.
You must choose one of these and defend it, remembering to discuss how this supposedly new political environment (if you disagree, say so explicitly in your post) might or might change things. In your defense, make sure you identify and respond to potential snags and weaknesses, as outlined in the article. You’re welcome, of course, to use additional resources.
As per our class norm, to be eligible to receive extra-credit points, you must make your first post by 23.59, Sunday, November 29. And you must make two follow-up posts before the beginning of our Week 7 class.
Best wishes for a lively discussion. No doubt you’ve not heard the last of this!
Post by Andrew Shepherd
Let me tell you why I love winter, skiing, and why I am savagely pursuing a better understanding of climate change.
I started skiing at age 7 in upstate Michigan while on a vacation at Christmas visiting my Grandparents near Traverse City, Michigan. My mother grew up in the area and skied and worked at a place called Boyne Mountain. Cold, crisp snow, steep runs, and a variety of ski slopes are what Boyne Mountain is known for. I continued my skiing through middle school at pine knob ski area in northern Oakland County, a suburb of Detroit. Pine knob was a ski hill that was created out of an old garbage dump. I used to take a bus from school, walk to the hill, and ski under the floodlights till my mother would pick me up on her way home from her job in Flint Michigan as the public library director. It was a passion that kept me in shape and out of trouble as a youth. Now, as a 38-year-old adult, I have skied in 9 countries on 4 continents. In the last 30 years of my life, I have watched as the winters have changed. Less snow at lower elevations, more snow at higher, which used to be colder elevations. Winters are changing. That is my empirical position that I have viewed in my own life. I have seen it happen. Places that, in prior years, received feet if not tens of feet of snow are now closed.
I joined the Military in 2000. The thing about being combat arms in the Military is that you spend a lot of time outdoors. A lot! I have observed changes in wetlands, mountains, and even significant changes in desert areas just in my lifetime. As I write this, I think of my experiences in Hohenfels, Germany at my first Thanksgiving away from home. We were preparing for our training event in “the box” and we were able to eat Thanksgiving dinner before we left. The snow on the ground was knee-deep. As a young private, I was on a detail to shovel snow for close to an hour in front of the dining facility before the dinner. To my knowledge, that kind of snow has not fallen so early in Hohenfels in years.
Fast forward to 2019. I had the opportunity to tick off a bucket list item. My younger brother Patrick and I climbed and summited Mount Kilimanjaro in early July 2019. We celebrated the fourth of July on the mountain with some friendly British hikers, whom we shared good-hearted jeering while celebrating the independence of the United States. We were out of coffee. They gladly traded their coffee for our tea. It was a good trade. The following morning, on our way to the summit, close to 19,000 feet of elevation, my brother, a guide, and one of the British hikers who were in good enough shape to join us walked over to the glacier on top of Mount Kilimanjaro. It was an amazing experience before the summit. The glacier is the only glacier near the equator in the world. I was able to touch the glacier. They believe the glacier will be completely melted by 2030 due to climate change.
I am amped that we are examining an article from “The Hill”. I am a big fan of The Hill’s YouTube program Rising (n.d.). Rare to see a news source that is willing to call out all sides in the political spectrum.
Anders Aslund (2020) is the exception. Did anyone else google “vainglorious”? I cannot begin to describe the vainglorious puff piece he has created. As a matter of principle, I am leaning towards defending the article by Aslund (2020) because I like The Hill. However, when a paragraph is begun with “The empirical”, as was done by Aslund (2020), great skepticism should be applied. Merriam-Webster (1576) defines “empirical” as “1. originating in or based on observation or experience; 2. relying on experience or observation alone often without due regard for system and theory”. The misrepresentations and outright trash written by Aslund (2020) are best outlined by his statement:
Fortunately, commodity prices do not stay high forever. Commodities move in long-term cycles of 25-35 years. From 1981-2000, oil prices were low, but then they rose and stabilized at a high level from 2001-2014. Finally, in 2014 oil prices collapsed and now they are likely to stay at a low level for a decade or so regardless of what OPEC does.
As if to say that commodities are some kind of “celestial” body that orbits the sun. Aslund (2020) has conveniently forgotten any kind of geopolitical strife, geo-locational availability, and market growth of fossil fuel industries. Every paragraph in the piece contains cherry-picked conclusions that could be compared to a person’s “empirical” evidence that “when I wear blue socks it rains”.
To cap and trade. Who will pay and who will suffer based on previously proposed and trade schemes is the question that should be asked? Better still, who benefits. In Maiello & Gural’s (n.d.) piece it is noted that
While the politics of pricing carbon are difficult locally, global political schisms are another obstacle to implementing any plan to reduce carbon emissions. The planet is divided into 195 countries that share a single atmosphere, and the atmosphere [does not] much care where emissions come from, as the impact on climate is the same. Meanwhile, no country or state wants to hurt its economic competitiveness. “A region or nation that moves ahead of its neighbors on climate policy can potentially put its own carbon-intensive firms at a disadvantage. This is a major policy concern,” write Stanford’s Lawrence H. Goulder and Andrew R. Schein in a 2013 paper.
The same amount of pollution will happen. It will just be done somewhere else. You will pay for it if you live in a “wealthy” country, money will be received in the [poorer] countries who are willing to “emit”. The environment will not be helped. It will change nothing.
“Nothing” Is the choice. Not the “nothing” that is the status quo. Something does however need to change. A Pigouvian carbon-emissions tax would have no guarantee that governments allocate the money generated to solve the problem of climate change. A cap-and-trade policy would do nothing but serve companies that do business in both countries.
Governments should instead invest their efforts into mitigation in the short run, and technologies that replace carbon energy in the long run. How this will be done, is something that folks cannot seem to get right.
Andrew R. Shepherd
Aslund, A. (2020). Low oil prices are good for democracy and peace. The Hill. April 26, 2020. https://thehill.com/opinion/energy-environment/494725-low-oil-prices-are-good-for-democracy-and-peace
Maiello, M., Gural, N. (n.d.). The tax that could save the world: Most economists agree on how to tackle climate change. Can politicians make it happen? Chicago Booth Review. Accessed November 30, 2020. https://review.chicagobooth.edu/economics/2019/article/tax-could-save-world
Merriam-Webster (1576) Empirical. Merriam-Webster. Accessed November 30, 2020. https://www.merriam-webster.com/dictionary/empirical . (1576 is the first written use of the word “empirical”)
Rising (n.d.). Rising. The Hill. Accessed November 30, 2020. https://thehill.com/hilltv/rising
Post by Timofei Kovalenko
Global warming is a thing, but so is global cooling. We can look back to April 5, 1815, with mount Tambora’s volcanic eruption setting off a chain reaction to the global climate . The following year is known as “The year without a summer . Historically, there is evidence of an Ice Age, a flood, and many other Catastrophic to life events. What is also interesting is that the biggest contributor to climate change is greenhouse gas, H2O . So while I think that man-made climate change is given us humans to much credit for having such power, it is my position that we are all individually responsible to leave our environments in a better condition than it was entrusted to us. Oil has contributed to human civilization in both positive and negative ways. It has given us cheat energy and plastics, but the negative side has given us polluted air, water, and land, with emissions, plastic waste, and many other Byproducts. However, adding a tax on anything is a bad approach to any problem. Any money that ends up in A government’s Coffer ends up being Mismanaged and wasted. Anyone that has worked for the government, knows that As the fiscal year approaches, The agencies go on a spending spree to make sure that their budget is completely spent in order not to get a cut in their budget for the following year. So no, any tax to solve any problem is a waste of peoples hard earned money and should never be done. It is the responsibility of every individual person that sees the problem to be a Good steward of the resources there responsible for.
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