The governor of Vermont just proposed a very similar state program today.
I’m trying to understand this. So the company has to pay a carbon tax, so they pass that extra cost to the consumer. The consumer pays it at the pump or wherever the situation warrants. And then the government who collected that money from the company gives it back to the consumer. So the consumer overall didn’t lose any money, and the company didn’t lose any money, and the government didn’t keep any of the money.
So what exactly happened? What did it accomplish?
MikeJ
6059
The thing is that people pay in proportion to how much CO2 their lifestyle puts out, but they get paid back an equal share. So dude who commutes 80 km a day in a suburban, heats a 5000 square ft home with oil, etc is getting the same amount back as some who bicycles to work, heats with solar and so on.
If you live a low-impact lifestyle, the people who are doing more of the polluting are paying YOU for the damage they are doing to the climate.
Edit: If you pollute more than average per-capita, you are losing money. If you pollute less than average, you are gaining money.
The other side of this is that low-carbon products and energy sources end up being cheaper and more economically competitive, so they get used more.
It would be nice to price in carbon emissions used to make imported products as well to get the price signal right, but that’s a lot of international cooperation and more complicated. If everyone had the same carbon tax it wouldn’t matter.
My question also.
Sure, but wealthy people will happily pay you to be low-impact so they can keep their jets and yachts and mansions; and middle class commuters will unhappily pay the tax because they don’t have any alternative way to get to work; and carbon emissions will continue.
That’s basically what the new EC president is proposing, though people are skeptical it will go anywhere because of WTO rules and other reasons. Interesting piece in the FT on it today (paywalled, sorry).
Kyrios
6062
I think the argument is that over time the middle class commuters will respond to the pricing signals if they’re strong enough - a more efficient vehicle next time, a stronger weight on a shorter commute when looking for that next job, utilize and/or demand more transit, etc - and you’ll make progress that way. And at least the jets and yachts and mansions are being taxed more heavily; maybe there’s some marginal millionaire that flies and cruises commercial now, who knows. As far as market-based solutions it’s probably the best idea we have so far, and really I think the issue is more going to be that none of the carbon taxes (and associated rebates) will be high enough to really drive the desired outcomes, for political reasons.
If one’s belief is (…correctly) that this is enough of a crisis that we should be looking at stronger solutions than those acceptable within the bounds of Capitalism, it is likely to be unsatisfying.
newbrof
6063
if you put out a CO2 tax, fine, make it really high so that it actually matters. And it is required to invest in public transport and to make it really cheap, otherwise nothing will change for the climate except that the common man is paying more for energy/transport costs.
Fluctuations in US gas prices that are well within the bounds of gas tax rates globally seem to have a pretty big effect on the cars Americans choose to buy.
Kyrios
6065
If we could all be Sweden (USD $120+ per ton), then yeah, I think we might be getting somewhere. Outside of Scandinavia, though, the numbers are not as impactful. Canada’s tax scales up to $38 USD per ton by 2022 and as far as I can tell it’s the most aggressive outside of northern Europe. That $38 per ton translates to something like $0.34 per gallon of gas, which is within the bounds of seasonal swings in the US (or even “gas station on the highway” vs “gas station in town”).
Sweden’s tax would be over a dollar per gallon, which has been enough to drive both auto purchase and miles driven trends in the past, but then we’re getting back to the political considerations of making something like that happen in most of the world - never mind the US where we can’t even get to current European tax levels and haven’t raised our federal gas tax at all in 26 years.
UK petrol tax (which used to grow above inflation every year), is £2.19 per US gallon.
MikeJ
6067
Yeah the tax needs to be higher. I would like to see the Canadian tax continue to go up after 2022. I think the rebate model makes a higher tax more politically feasible than just increasing the gas tax, since people see their cheques go up as well.
Kyrios
6068
Sorry, I was looking at explicitly carbon pricing - obviously the US is way behind on non-carbon-tax gas taxes. Behind, like, everyone, by a massive amount. (1993!)
Looks like the UK is at roughly USD $23 per ton of carbon for its broader carbon tax, which is in line with the top end of EU goals and which is among the highest in the world outside of Scandinavia. (And which might be ready to plummet if Brexit, apparently, from some random news articles on which I have minimal knowledge or background.)
Perhaps. But the reason we’re talking about market-based solutions is because the elites know market-based solutions pose no threat to their standard of living.
Also, the knock-on effects seem even more regressive to me. Business people will continue to travel, because they can expense the tax. Their employers will pass that cost on to customers, too. All the costs flow downhill to the people least able to change their lifestyle. Buying a more efficient car means buying a car with new carbon taxes embedded in the price.
It works because much of the UK has decent mass transit. Not really gonna work in Phoenix or LA.
I’m not saying that. I’m saying that historical evidence in the US shows that price increases that are well within global bounds already have a material impact on the decisions of American consumers, so modest carbon taxes should too. SUVs became much less popular when gas prices were much less than £2 more expensive.
Demand for gas itself may be relatively price inelastic, but demand for gas burning vehicles is not.
Phoenix is in the midst of a major rapid transit expansion and just last month voted to continue the expansion, despite efforts by oil-funded billionaires to convince people to oppose it (66% majority in support of transit!). Los Angeles has true high speed rail under construction and 17 rapid transit projects. How about your city?
Or not. Most businesses track travel expenses as another, uh, expense, and have programs or policies to reduce.
Your constant shout-back of “regressive” has been shown to be wrong or at least not a major factor, and one that can be addressed through policy or programs. Try reading up on it, it’s literally “Myth Number 1”. The average Ontario household will pay $244 in direct and indirect costs for carbon, but will receive $300 under the “climate-action incentive,” for a net benefit of $56. The majority of households paying more than average are those with larger homes.
In fact, carbon taxes in some cases have been found to be a highly progressive, even before rebates.
Abstract: This study investigates the distributional implications of the revenue-neutral carbon tax policy in British Columbia. We use a computable general equilibrium (CGE) model of the Canadian economy and disaggregate households into deciles by annual income using data from a large household expenditure survey. Using the model, we find that the existing BC carbon tax is highly progressive even prior to consideration of the revenue recycling scheme, such that the negative impact of the carbon tax on households with below-median income is smaller than that on households with above-median income. We show that our finding is a result of welfare effects of a carbon tax being determined primarily by the source of a households’ income rather than by the destination of its expenditures. Finally, we show that the existing revenue recycling scheme is also progressive. Overall, the tax appears to be highly progressive.
But I’m sure you’ll have another one-line counterpoint. “Doesn’t mean it’s not regressive!” or something?
Phoenix’s light rail system is nascent and nearly useless for commuting. Millions commute by car every day, and commute distances are LA-like given the sprawl of the city and suburbs.
(I lived in Phoenix off and on for decades.)
In which case, there is zero incentive to change, right? If change means buy a new electric car or add two hours to your commute or change out your home heating system to electric, that $56 dollars isn’t even a start.
More than one line, sorry. I’m asking for an example of a carbon tax proposal that’s going to make a difference. This doesn’t sound like one.
MikeJ
6074
There are smaller changes that make a difference at the margin. Plus the size of the tax goes up every year. I think the tax needs to get a lot bigger, but I understand that starting off with a giant increase is politically harder. Having a hidden tax and a visible rebate increases support for the tax and make high-carbon options look naturally expensive, which they should be.
Did you live on an LRT corridor? Ridership has exceeded projections (50,000 per day), and it has stimulated development along the corridors. It’s even given credit for attracting marquee events such as the superbowl. It clearly has broad support by the public. It’s a great system!
Multiple people keep saying, and showing with evidence, that increasing cost of fuel changes behaviour over time. But your claim that energy demand is inelastic (a fancy way of saying your complaint that no-one will buy an electric car if the price of gas goes up) is also wrong. It’s Myth number 5 in fact (see prior link).
You’re not giving a critical view here. You’re giving a cynical view contrary to evidence.
There are 5 million people in metro Phoenix, a city of 38k square miles; and 1light rail line of 28 miles. I like it and support it, but it isn’t a transit system.
I believe them! I have no doubt that is true.
I don’t claim that, either in the fancy form or the plain one. I’m saying it’s an unimpressive plan given the challenge.
