Bryan Caplan  

Cartoon Introduction to Climate Change: Pollution Taxes Illustrated

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Here's another page from The Cartoon Introduction to Climate Change that's worth more than all the demagogic words spoken about pollution taxes.  Now in stores.  Click to enlarge.


[Excerpted from The Cartoon Introduction to Climate Change by Grady Klein and Yoram Bauman, reprinted with permission from Island Press.]

COMMENTS (3 to date)
ThomasH writes:

I don't get the cartoon.

People who want to reduce the harm from CO2 do not think such policies will make energy cheaper. (If zero carbon emitting technologies were cheaper, they would already have been adopted and we would not need a policy). Even the lowest cost policy, a carbon tax, will increase energy costs and the cost of everything that uses energy which is everything. That's where the growth-mitigation trade off comes from. Now it's also true and very much under appreciated by one of the US political parties that the costs are not infinite, will not crash the economy, are not "job killers" etc, but that's not the same as having no cost at all. [Jobs "destroyed" or "created" is a pretty meaningless concept over the time periods needed to analyse climate change. As Keynes did not quite say, "in the long run we are all employed."

What "demagogic words" are spoken about pollution taxes?

J.D. writes:
ThomasH: If zero carbon emitting technologies were cheaper, they would already have been adopted and we would not need a policy.

This is incorrect. We don't know at present whether carbon emitting energy is relatively cheaper than zero carbon emitting technologies precisely because the costs of carbon emissions are not reflected in the price of carbon emitting fuels.

It's possible that if such costs were internalized in the price of carbon emitting fuels, the zero carbon emitting technology would be relatively cheaper. There's also the fact that there are returns to scale with respect to zero carbon emitting fuels that we haven't obtained because such fuels are currently not in wide use. There are also large fixed costs in clean energy.

A carbon tax would change the current dynamics of the energy market we have by making the price of each kind of fuel reflect its actual costs. And as more people moved to zero carbon tech, we would gain the benefits of less carbon emissions, and the cost of zero carbon tech would fall as returns to scale are achieved and the high fixed costs are distributed across more customers.

ThomasH writes:

Sorry, I could have said cheaper "at current market prices" or something like that. The point is that owners of technologies that generate energy that emit CO2 into the air damage others but the costs of that damage does not show up in the prices they face when deciding which technology to us and what level of output to chose.

Since this concept is pretty widely understood by those who want to do something to change these incorrect incentives, I was puzzled at Prof Caplan's phrase "demagogic words."

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