In today’s news, there is some talk about the new report from the National Round Table on the Environment and the Economy. Much of it has surrounded the possibility of a carbon tax as a vehicle for assisting the with reduction of Canadian greenhouse gas emissions. One comment from the CBC struck me as especially wrong-headed. In relation to a carbon tax, a person being interviewed said that it “would specifically impact western oil producers who might have to carry the brunt of such attacks.”
The fallacy here is that western oil producers have the right to emit as many greenhouse gasses as they like, for free. If your neighbour was running a pulp mill in his back yard, allowing toxic chemicals to ooze throughout the neighbourhood, nobody would call it an ‘attack’ when he was made to stop. Arguments implying that industry or private individuals have the right to impose ecological harms upon others need to be challenged in terms of fairness and ethics. Otherwise, they obscure the true character of the situation and help to perpetuate the status quo.
Panel pushes debate on carbon tax
BILL CURRY
Globe and Mail Update
January 7, 2008 at 1:37 PM EST
OTTAWA — The Canadian economy can transform itself into a clean-running green machine by 2050, slashing its emissions by more than half with very little economic pain, say the authors of a new report from the National Round Table on the Environment.
Panel proposes carbon tax
Western oil producers face heavy penalties if Ottawa adopts expert panel’s proposals
BRIAN LAGHI AND DANIEL LEBLANC
Globe and Mail Update
January 7, 2008 at 1:02 PM EST
The full NRTEE report:
Getting to 2050: Canada’s Transition to a Low-emission Future. (94 page PDF)
Marx’s theory of value shows why in capitalist production, value is actually created which was not previously there – in other words, people can make a profit without ripping anyone off.
However, it seems that in general, value is actually produced by externalizing costs, in other words, by ripping someone absent off.
Tristan,
In most situations, the value added by industry exceeds the harms caused by externalities. In theory, industry should be able to compensate the losers. Of course, there are plenty of problems with that sort of Coase-style analysis (what if the losers prefer being left alone to being polluted and compensated?).
Industries that actually create more externalities than added value (the oil sands probably qualify) are precisely what effective regulation should render impossible. Of course, it is very difficult to stand up effectively against so much money.
How do you know industry adds more value than it does harm through externalities?
Admittedly, that was just an assertion. Actually working it out would require a comprehensive calculation of all the externalities associated with a particular industry. There would also be the tricky question of valuing impacts upon future generations.
If the calculation demands leaving as much and as good left over, then I don’t see any way it could come out positive. Even if we discount natural resources of the extractive kind. In other words, not calculate for the missing ore after a mine is mined out, but do calculate for the ruined river system if the mine produced tailings. The cost, I think, should be the total cost of dealing with the tailings are restoring the site to a similar environmental state as it was found in.
These costs are insane, and therefore I don’t see any way we could afford them.
I suppose the thesis I’m asserting is that hardly any industry would be possible if the right to pollute was not assumed.
The other way of doing the calculation would not be to tabulate every cost for “as much and as good left over”, but “enough left over to sustain human culture”. In other words, imagine Easter Island having had a tax on the exploitation of natural resources such that there were never too many trees cut down such that they would never grow back, similar for aqua culture. Multiply over the planet.
Actually, this makes the question essentially, “Can global human culture sustain itself”, even as a formal possibility.
Leaving “as much and as good for others” was never a realistic aim. Locke’s whole theory of property is nonsensical in a finite world.
The question here is simply whether the net utility generated by particular industries – or industry in general – is positive. Potential Pareto optimality, rather than the actual sort.
In practical terms, the only externalities that will ever be costed in through policy are those where the connection is relatively definite and proximate. Even on those criteria, there are a good number of industrial activities that may find themselves taxed out of existence.
The broader question of the net impact of industries and industry really cannot be answered on the basis of our speculation.
Expert panel calls for carbon tax to reduce greenhouse gases
1 day ago
OTTAWA – One way or another, Canadians must start paying for carbon dioxide emissions if the country is going to seriously reduce greenhouse-gas emissions, says a national advisory panel.
The National Round Table on the Environment and the Economy released a report Monday saying federal and provincial governments should immediately begin negotiating a national price on carbon.
While the influential panel stops just short of stating that a carbon tax must be imposed, it does suggest that’s the preferred option – in concert with an emissions trading system for industrial polluters.
Industry doesn’t have the right to pollute, but it does have the right to only be taxed on pollution that the government can prove. Furthermore, that transfer is only really justified if the money collected is used to somehow help the people negatively affected.
KEITH BOAG (CHIEF POLITICAL CORRESPONDENT):
This is a deliberate play to move the carbon tax discussion into the mainstream.
GLEN MURRAY (NATIONAL ROUND TABLE ON THE ENVIRONMENT AND THE ECONOMY):
We think it’s helpful that someone comes out and takes this on and tries to shift the debate so that politicians have some more room to make better decisions for Canadians.
KEITH BOAG (CHIEF POLITICAL CORRESPONDENT):
The important part here is not just what’s said but who is saying it, and that’s why environmental activists are smitten.
STEPHEN HAZELL (THE SIERRA CLUB):
Let me tell you, the National Round Table, they’re not a bunch of raving environmentalists like me. These are mainly business people who have got some interest in the environment, so I think it’s a crew that the Government should pay close attention to.
The surest and most effective way to change behaviour and promote research and investments in clean technologies, says the panel, is to put a significant price on carbon emissions. And the faster that is done, it says, the lower will be the price needed in future years, and the lower the overall cost to the economy.
The report suggests that the best way for Ottawa to build a price for emissions into our economy is through a combination of a “carbon tax” on consumers and a “cap-and-trade” system that allows companies that produce less carbon than their caps permit to sell their unused quotas to companies that exceed their caps.
This is a sensible proposal because, while the purpose of a carbon tax would be to promote the use of carbon-free fuels and increased efficiency in the use of fossil fuels, it would also generate extra revenues that government doesn’t really need. Accordingly, the introduction of a carbon tax should be tied to an offsetting reduction in income taxes, so that Canadians who conserve energy find themselves no worse off than they would have been without a carbon tax.
Milan, while this is a descriptive claim:
“In practical terms, the only externalities that will ever be costed in through policy are those where the connection is relatively definite and proximate.”
unless you think this is something which is wrong, something which must change, then how are you not yourself tacitly asserting the right of industries to pollute in cases where the externality is not connected definitely and proximately to some party’s interest?
Tristan,
There may be some level of diffuse harm for which it isn’t worth anyone’s time to try and calculate restitution.
Imagine leaving the door of a big lecture hall open for a few seconds, cooling the air a small amount. Have you meaningfully harmed the people in the room? The same could be said about industry putting a few micrograms of sulfur dioxide into air thousands of kilometres away.
There is also the possibility of an error of false attribution: blaming a party for a harm that actually isn’t caused by them. The chances of that increase with the distance between supposed actor and supposed acted upon, as well as with the tenuousness of the causal connection.
There is an important trade-off between efficiency and equity. We don’t want to live in a world where people cause one another substantial harms frequently and no systems of compensation exist. At the same time, we don’t want to live in a world dominated by the search for harms and attempts to seek redress from them.
Both as individuals and societies, there is some level of undeserved harm we need to accept if we are to live relatively free lives.
When it comes to pollution, it is also pragmatic to focus on the most egregious remaining externality. You will probably never get to the bottom of the heap (new technology and conditions create new problems), but you will maximize the utility payoff for your efforts, subject to the limitation of your own fallibility.
Mankiw’s Principles
1. People face tradeoffs.
2. The cost of something is what you give up to get it.
3. Rational people think at the margin.
4. People respond to incentives.
5. Trade can make everyone better off.
6. Markets are usually a good way to organize economic activity.
7. Governments can sometimes improve market outcomes.
8. A country’s standard of living depends on its ability to produce goods and services.
9. Prices rise when the government prints too much money.
10. Society faces a short-run tradeoff between inflation and unemployment.