June 30, 2017

An adequate carbon tax has little to do with costs and much to do with the elasticity of the demand for carbon

Sir, Dr Robin Russel-Jones opines that a revenue neutral carbon tax will not work because of difficulties in “reaching agreement on the level of taxation.” "Support for carbon tax: let’s not get too excited", June 29 

The “market price for carbon credits of less than €10 per tonne of carbon dioxide… provides little incentive for businesses to control their emissions or invest in renewables” and “a carbon price of $166 per tonne of CO2…[based] on “societal costs generated by the burning of fossil fuels, calculated by the IMF… would put fossil fuels out of business”

No, the adequate level of carbon tax will depend on the elasticity of the carbon demand… and the only way to find that one out is by taxing. Put whatever carbon tax like for instance $40 per ton and see what happens. 

Dr. Russel-Jones, Chair of Help Rescue the Planet writes: “there is no reason to think that a business group in which fossil fuel interests are well represented will come any closer to solving the above conundrum than the UN has.”

Yet some of us also argue that there is no reason to think that those profiting from the business of protecting the environment would do so either.

That is why we need the carbon tax that pays out all revenues to the citizens. That aligns the incentives for the fight against inequality with those for protecting the environment, by means of market signals, and so without any hanky panky!