Two Models

For most of recorded human history men have dealt with the weather in two ways: adaptation and amelioration. When sea levels rose, men moved cities inland. But for the first time, policy makers don’t want to adapt to climate, they want to change the climate itself. Perhaps no one put it more clearly than Barack Obama in his 2008 nomination speech. Now the seas would fall.  Describing the significance of his vision Obama said, “this was the moment when the rise of the oceans began to slow and our planet began to heal.”

The current program put forward by climate change advocates is frankly one of weather engineering.  Policy makers are going to change the quantity of carbon in the atmosphere by taxing energy consumption -- and thereby reduce carbon. “A carbon tax is a tax levied on the carbon content of fuels…. From an economic perspective, carbon taxes are a type of Pigovian tax [intended to correct an inefficient market outcome ... by being set equal to the social cost of the negative externalities]”

That’s how we’re going to save the world, through Pigovian taxes.

In general governments and big companies (which benefit from government largesse) like Pigovian taxes. The New Yorker writes “a relatively modest carbon tax could cut the projected federal deficit in half. Such a tax would be imposed not just on gasoline but on all fossil fuels—from the coal used to generate electricity to the diesel used to run tractors—so it would affect the price of nearly everything, including food and manufactured goods.”

From the climate change viewpoint making things expensive is excellent because the general idea is to reduce humanity’s footprint on the earth.  Jean-Marc Jancovici who actually helped develop the carbon accounting method frankly admits that effective carbon taxation will probably result in less of everything.  It will come to less economic growth, smaller houses, less wasteful transportation. In fairness Jancovici “eats little meat, uses public transport, has no cellphone and avoids air travel whenever possible.”  He is sincerely willing to put his money where his mouth is.

Not everyone however is so inclined.  Harvard economist Greg Mankiw points out the obvious: the public hates Pigovian taxes. “In a democracy, of course, economic policy is set not by economists but by the general public.”  That probably explains why the Paris Climate accord was never submitted to the US Senate for ratification but was instead approved by Barack Obama’s executive order.

The moral hazard is obvious.  Government likes higher taxes. Cui bono suggests the composition of the We Are Still in Climate Alliance.

“When Trump announced the United States' exit from the Paris Agreement, several states, cities and businesses came out against the decision. The leaders of California, New York, Virginia, North Carolina, Hawaii, Oregon, Washington, Rhode Island and Connecticut joined corporate giants such as the Intel Corp., Walmart, Google, Amazon and the Microsoft Corp. in affirming their continued commitment to the accord. Together, they formed the We Are Still In alliance, which accounts for an estimated $6.2 trillion in the U.S. economy. Gov. Jerry Brown of California and New York City Mayor Michael Bloomberg, meanwhile, teamed up to create America's Pledge, a project aimed at tracking local and industrial efforts to reduce carbon dioxide emissions and quantifying their effects.”