Goodbye carbon taxes, hello atmospheric user fees

Economists (at least those who believe in global warming) frequently argue that the best way to discourage overuse of fossil fuels is with a carbon tax. A carbon tax reflects unpriced, external or social costs; the environmental damage created by fuel consumption. With a carbon tax in place, people will only consume fuel if the benefits they receive from doing so are greater than the costs - both the private costs, reflected in the pre-tax price, and the environmental costs, reflected in the carbon tax.

Unfortunately, taxes have a negative image. For example, in the US, almost every Republican member of Congress has signed a pledge that they will never vote for a policy that increases tax rates. 

When faced with political opposition and image problems, there are three possible courses of action. The first is to argue ones point logically, hoping to change people's minds through reason and evidence.

A second is to admit defeat.

The third is to rebrand, and change the image. For example, Canada's bitumen deposits were once called the tar sands, a name that conjures up a (fairly accurate) image of a thick, sticky, black tar-like substance. They have been successfully rebranded as the oil sands, which sounds like clean sparkling oil, with just a bit of sand mixed in.  

Given how well economists have been doing with the first strategy, and that the second strategy gets us no where, I think it's time carbon taxes got a rebranding.

It's not clear why carbon taxes should be called taxes in any event. What distinguishes taxes  from user fees or social insurance premiums is the absence of a quid pro quo between the taxpayer and the government. Paying more taxes does not entitle a person to more government services. By way of contrast, paying Employment Insurance premiums is a necessary (though not sufficient) condition for accessing Employment Insurance benefits.

By this definition, carbon taxes are more like a user fee than a tax. There is a quid pro quo: pay the tax, burn the carbon; burn the carbon, pay the tax. Go ahead and contribute to global warming, as long as you pay your dues.

Renaming carbon taxes "atmospheric user fees" would be a start, but people are smart enough to see through purely cosmetic name changes. If funds raised through the charges on fossil fuels go into general government revenue, it is hard to argue that they are anything other than taxes. If, on the other hand, the revenues are earmarked for tax refunds, low-emissions transportation, tree planting, and initiatives to combat climate change, it becomes much easier to argue that a $0.20 per litre charge on gasoline is, in fact, a user fee.

One strength of economists is that we see through framing, and focus on underlying structures and incentives. Our weakness is that we can easily forget that framing matters.

Comments

[Ryan]

The term "user fee" implies that the more you use the atmosphere (i.e. breathe), the more you pay. Since polluters don't breathe more than the rest of us, I feel that the rebranding doesn't quite succeed.

I will also tangentially add that there are an unlimited number of possible ways we could all improve our behaviors and/or pay into the social contract, but human beings are categorically budget constrained. So while carbox taxes may sound like a great idea when the only thing we think about is air pollution, the reality is not "do you support clean air or not," but rather, "Is clean air a more urgent externality than the millions of other things we all have to pay billions of dollars for annually?"

If someone wants to win me over to a carbon tax, it's not sufficient to present it as a good idea. I need to know that it's a better idea than everything else I'm paying for.

[Bob Smith]

"Is clean air a more urgent externality than the millions of other things we all have to pay billions of dollars for annually?"

But that's Frances' point. If a carbon tax/user fee is packaged with, say a tax refund, then, in aggregate, people aren't paying more taxes (although they will have higher, albeit hidden, costs). It's saying, if (on aggregate) you aren't going to pay an extra dime in taxes, would you support this policy? You response is precisely the response that Frances' observation addresses.

Mind you, I think the problem is less one of framing (since the reduction of other taxes is a common feature of carbon tax schemes) so much as the obaqueness of the attempts to distribute carbon tax revenue out to voters. Spending money on "low-emission transportation, tree-planting or initiatives to combat climate change aren't likely to be highly valued by voters (or at least not by voters who might be inclined to oppose a carbon tax). So even if what the government spends is equal to what it collects, the foregone consumption by taxpayers is likely to be more highly valued than the actual consumption by the government.

Tax refunds/credits might be more effective, in the sense that taxpayers get dollars that they can spend as they wish, although there too the linkage between the carbon tax and reduced taxes may be quite opaque (for example, while lowering the marginal tax rate might be an efficient way of returning those funds to taxpayers, it also ensures that taxpayers aren't likely to notice the funds coming from carbon tax revenue, and also raises distributional isssues). This might be a case for just cutting everyone a "green tax dividend" cheque at the end of each fiscal year, with PWC as an auditor to ensure that every penny of "carbon tax" revenue goes out as a "green tax dividend" even though that's a strategy which doesn't address the inefficiencies inherent in our tax system (thus losing the possibility of a "double dividend" from carbon taxation).

Of course, if the government really wants to sell a carbon tax, forget distributing money out to voters accross the board - after all, a good chunk of voters will support a carbon tax on general principal. If you want to eliminate opposition to carbon taxation provide lump sum transfers to, say, oil sands producer (or oil sands workers). They might even be better off under that scheme to the extent you're transfering funds from pro-carbon tax carbon consumers to otherwise anti-carbon tax carbon producers. In effect, this would be a variant of the pollutee-pay principal (i.e., having people who oppose pollution pay producers not to pollute). Back in law school I made the case for adopting the pollutee-pay principal as a means for overcoming political opposition to efficient pollution regulation (i.e., situations where polluters were politically influential or made up the majority of voters). Although the polluter-pay principal is as close to gospel as it comes in the green movement, on purely efficiency grounds it's just the flip-side of the same coasian bargain as the pollutee-pay principal (obviously it has different distributional implications). To the extent it's politically unworkable, the pollutee-pay principal might be an effective alternative.

[Steve]

How about taking the carbon tax revenue and use it to set up a Canadian soveriegn wealth fund?

[Patrick]

I just don't think people are never going to vote themselves a reduced standard of living under any circumstance, no matter how it's branded. Ask just about any Canadian outside AB: "Do you accept climate change?" They will answer yes. Ask them : "Will you drive less, eat less, turn down the heat, take cold showers, spend thousands renovating, etc. to mitigate the effects of climate change?" And they will say no (probably after rationalizing why they can't possibly do anything, but others really must).

So I've come to the somewhat cynical conclusion that unless the effects of climate change itself begin to obviously impose costs on a majority of [insert proper noun for citizens of a nation-state here] that exceed the proposed taxes/fees by a long way, then nothing will be done.

As it is, we seem to be tracking worse than the IPCC worst case models. I suspect catastrophe is pretty well baked in at this point. And given that there is evidence that the Earth's climate can and has changed dramatically on human time scales in the past, there's really nothing left to do other than to sit back and wait for the fun to begin. Will the Mid West US go Mad Max or will it simply be abandonned? Will heroic (and ultimately futile) attempts be made to save Florida from disappearing beneath the waves? Bets on when a Cat 5 obliterates NYC (talk about internally displaced people!)?

The good news, IMO, is that humans aren't going to break the Earth with AGW (our only option for that is a nuclear holocaust - which incidentally isn't off the table yet). The planet has been far worse and come out just fine. This too shall pass, and with a few exceptions (e.g polar bears, narwhals), it's really humans who are going to ultimate suffer the most. But the problem is ultimately self correcting - kill off a few hundred million humans and smash/abandon enough capital and equilibrium will be restored.

[Robert McClelland]

I have a better name for it; The Inefficient Behavioural Modification Fee.

[Determinant]

People are more comfortable with excise taxes. The less carbon you burn, the less you pay. Your payment is therefore voluntary (well, more voluntary than income taxes). The key is illustrating that someone else will pay, not them, or at least pay a lot more.

[Frances Woolley]

Ryan: "If someone wants to win me over to a carbon tax, it's not sufficient to present it as a good idea. I need to know that it's a better idea than everything else I'm paying for."

The case for an atmospheric user fee is based on three assumptions: (a) carbon emissions contribute to climate change (b) Canadian carbon emissions contribute, on the margin, to the amount of climate change (c) there are some low-benefit activities for which the cost of emissions exceeds the benefits (e.g. using heaters in the summer because the air conditioning is turned on so high). If one rejects these assumptions, there is no case for an atmospheric user fee, and no point in taking the argument further. End of discussion.

If one accepts these assumptions, then the question becomes 'what is the best way to reduce emissions.' I'm not interested in persuading you that carbon taxes are better than everything else you're paying for. If you can come up with a better - and more liberty-preserving - way of reducing emissions, that's totally awesome. Please share it.

Patrick: "unless the effects of climate change itself begin to obviously impose costs on a majority of [insert proper noun for citizens of a nation-state here] that exceed the proposed taxes/fees by a long way, then nothing will be done."

This gets to the heart of the carbon-taxes-as-user-fees issue. The fee for ice time at the local arena pays, at least nominally, for the maintenance costs of the arena - the zamboni, the zamboni guys, the coolants, etc. It's not obvious that the revenue raised from atmospheric user fees goes in any way to those who pay the costs of climate change, e.g. people flooded out from coastal areas in Bangladesh. The political challenge with carbon taxes is to make some connection: this is what you get for what you pay. to establish that quid pro quo.

Steve: "How about taking the carbon tax revenue and use it to set up a Canadian soveriegn wealth fund?"

Interesting idea, I wonder how much it would build support for carbon taxes. I'm a little cynical, mostly because I remember BRIC (BC Resources Investment Corporation), but it's not a bad idea.

[Stephen]

My department changed its name from "Assessment & Taxation" to "Revenue & Assessments". Re-branding!

Personally I don't like any sector specific value-added tax. I would argue just raise the GST, get rid of gas taxes and than say GST rates are doubled for certain inelastic products (like oil). Of course lower income taxes if you're raising the GST (I'd be a bad Tory Albertan if I sounded like I wanted a tax raise).

I like the idea of a soveriegn wealth fund but would like to see the debt paid down first.

[Simon van Norden]

Um.....I thought cap 'n trade avoided a lot of the problems with the T-word. Firms just have to pay for quotas if they want to emit CO2....govt. stands back and invokes "the magic of the free market." (huzzah!)

If the govt. can't resist dipping its beak, then it's just some "auction-derived lease revenues" or "crown royalties" or perhaps a "special levy" on those firms allocated large quotas.

[Simon van Norden]

"unless the effects of climate change itself begin to obviously impose costs on a majority of [insert proper noun for citizens of a nation-state here] that exceed the proposed taxes/fees by a long way, then nothing will be done."

If you think for a minute about that statement, you'll quickly find that it breaks down.

Here's one example. I'm travelling in Western Europe at the moment; most of what I'm seeing directly contradicts that statement. I've seen no obvious costs of climate change on *any* of the citizens here (never mind a majority of them), but high energy taxes, strong public commitment to reducing carbon emissions and energy conservation. I'm presently in a country with federal elections later this week and 20 parties running. Haven't seen anyone running against current local policy on global warming.

[Simon van Norden]

Perhaps the following modification is more empirically consistent

"unless the effects of climate change itself begin to obviously impose costs on a majority of [insert proper noun for citizens of a nation-state with important fossil-fuel production here] that exceed the proposed taxes/fees by a long way, then nothing will be done."

[Frances Woolley]

Simon: "Um.....I thought cap 'n trade avoided a lot of the problems with the T-word."

The best way to think of cap 'n trade is as being a lot like an old-style command and control system of pollution regulation, but with firms able to buy and sell their rights to pollute. Like command and control, someone has to go around and make sure that people aren't emitting any more than they're allowed to emit, and that trades are legitimate, that is, the selling firm is actually scaling back its emissions.

All of this works fine when there are a fairly limited number of large producers of emissions. It doesn't work nearly so well when there are millions of tiny producers of emissions. There an atmospheric user fee (o.k., carbon tax) works better.

I spent some time in Britain this summer - price of petrol in pence was pretty close to the price of gasoline here in cents. I wouldn't characterize it precisely as you do. IEnergy taxes have been high in Western Europe for decades, long before global warming became a concern. Probably had something to do with the War.

Maintaining high energy taxes is one thing - people have had years to adopt to a lower-energy life-style. Going from low to high energy taxes is a different kettle of fish entirely.

[Determinant]

On that note, how much higher are energy taxes in Europe than in Canada? Graphs please. Where's Stephen Gordon when you need an econometrician?

[Steve]

Frances: Yes you have to get from low to high in baby steps. This is a brief one on how the UK got from from one of the lowest to highest taxes on gas - http://en.wikipedia.org/wiki/Fuel_Price_Escalator

[Patrick]

Simon: Mostly I was thinking about Canadians and Americans, so yeah.

Actually, to be totally honest, I was just venting my spleen and it was totally accidental that anything vaguely coherent resulted. A more succinct comment would have been "I think We are screwed".

[Steve]

Determinant: Here's some EU data http://www.energy.eu/ Don't know where to get equivalent data for Canada. We've been renting rent here in Calgary since our move 3+ years ago, all utilities included, so I don't have a good feel for comparisons between here and the old country. However my gut feel is electricity is similar, natural gas possibly cheaper here.

[Simon van Norden]

"[Cap and trade] works fine when there are a fairly limited number of large producers of emissions. It doesn't work nearly so well when there are millions of tiny producers of emissions. There an atmospheric user fee (o.k., carbon tax) works better."

Of course what we have is a small number of large producers and millions of tiny ones.
Anyone know how they breakdown into Canada's overall CO2 emissions?
Anyone know how well you can prevent caps on big emitters from bleeding into increases by small ones?

I also think its wrong to characterize the European response as just standing pat with the high energy taxes they've had for decades. Drive around Northern Europe and look at the new windmills dotting the ridges; drive around southern Spain and see the large-scale solar energy investments. That's high-cost power backed by major public policy decisions. You might argue that there's more efficient ways to reduce CO2 emissions and you might be right....but I understood your theme to be about what was politically possible. My point is that in the EU, they have moved on CO2 much further than in North America, despite the fact that it was not cheap.

That raises the question of why something was politically possible in the highly-fragmented world of European politics but not in Canada.

[Simon van Norden]

"IEnergy taxes have been high in Western Europe for decades, long before global warming became a concern. Probably had something to do with the War."

Um....I thought that was because they wanted cash to invest in public transport (and in some cases, also wanted to protect highly-unionized, loss-making, govt.-owned railways.)

Go driving even in less-rich places like Sicily or Portugal: European roads put Canadian highways to shame!

[Nathanael]

"Patrick: "unless the effects of climate change itself begin to obviously impose costs on a majority of [insert proper noun for citizens of a nation-state here] that exceed the proposed taxes/fees by a long way, then nothing will be done." "

But this has already happened in the US (just add up the droughts, wildfires, hurricanes, crop failures, etc), and still nothing has been done. Perhaps the connection between people's personal costs and the original cause is insufficiently "obvious" to very stupid people.

I agree. Marketing is what it's all about. Remember, the "clean coal" bullshit in the US was basically killed by one good TV ad.

[nemi]

Frances: "The best way to think of cap 'n trade is as being a lot like an old-style command and control system..."

Sure, and the best way to think about atmospheric user fees is as environmental taxes, but are we not playing the rebranding game here - and nothing beats "privatization of the atmosphere" (at least not with respect to the major western deontological ethics approaches - i.e. the kind of idiots (beucase ethics is objective - right?) that would see a rebranding (or reconceptualization) as a perfectly legitimate reason to change their mind).

It could even be studied. Take a couple of libertarians who fully understand the consequentalist rationale for cap and trade and reformulate it with a emphasis on the creation of private property rights etc., and see if they change their mind. My success rate is 100 %, but the sample is pretty small and certainly not representative.

[Steve]

Simon: I would be wary of taking the EU - Canada road comparisons too far. 1) population density helps, 2) the lack of brutally cold winters in most of the EU allows for better roads, and easier year round maintenance.

Also the EU paid for a lot of roads to be built in the "periphery" countries such Portugal, Ireland etc following waves of EU expansion. This was partly to ease pan-European road freight (http://ec.europa.eu/ten/index_en.html) which handily acted as transfer payments to the same poorer countries from the richer ones in the EU. It will be interesting to see how well these roads stand up in the next 10 to 15 years.

A blanket carbon tax is difficult from a partisan political standpoint because (from the UK experience of attempts to put 15% VAT on domestic energy bills) it is easy for opposition parties to find a poor, elderly person who has to choose between heat and food/rent and let the media run with it.

It really needs to be provincially driven, start on drivers and start small, we're easy targets. Frankly if you are stupid enough to buy an huge truck to commute from the suburb to down-town for work well suck it up baby and pay through the nose. Once one province is reducing deficits this way the others will follow. It is also relatively easy for people to switch to a more fuel efficient vehicle than a house. Once people are used to that you can start on domestic energy prices. It's a long term game 20+ years to change behaviour, that's my British experience.

[Patrick]

Simon: "Of course what we have is a small number of large producers and millions of tiny ones. "

IIRC, the biggies are transportation (i.e cars an trucks) and coal fired whatever, in that order. Various industries are bad too - stuff like tar sands upgrading, making steel. Google could probably tell me, but it's late and I'm lazy. It pretty much boils down to parking the cars and shutting down coal fired anything.

<rant>
Personal vehicles are the elephant in the room. They account for the a big chunk of GHG emissions. Humanity needs to make large absolute reductions in emissions (something even the Europeans haven't managed). Intensity reductions are not going to help. The atmosphere doesn't care about intensity. It cares about PPM. To accomplish absolute reductions while still leaving room for advanced civilization to continue, I think means North Americans must cut driving drastically. Not. Going. To. Happen. The built environment in North America is not workable without cars. We aren't going to willingly abandon the suburbs and exurbs. I look at the asteroid belt of beige vinyl McMansions (each with a 2 car garage protruding like a pig's snout) orbiting Calgary and Edmonton and I despair. Those monstrosities represent peoples' dreams, aspirations, hopes, savings, and investments. Absolute reductions in GHG emissions implies driving their utility to zero; they are useless without cars. There's no way for public transportation to economically serve clusters of flower shaped dead-end crescents (BTW, is that a product of urban designers getting bored of drawing plain old bocks?). At best the buildings can be salvaged and the land returned to the cows. At worst the houses will be abandoned to rot. Of course the owners are going to resist. And they certainly aren't going to get with the program and take one for the team.

At this point, economists usually pull out the the technology trump card. Malthus was wrong (or more likely just got his dates wrong)! I concede that we may yet 'tech' our way out of this mess. But the engineer in me is doubtful. We run cars and airplanes on liquid fossil, and have for a hundred years or so, because they are special. The chemical and physical characteristics of gasoline and kerosene are just right. The energy content is enormous, they aren't too unstable, too volatile, too toxic. Alternatives inevitably either blow-up if you drop them, the fumes kill you, the stuff needs to be cooled to -100C and pressured, or otherwise impose some other constraint that makes them useless as replacement fuels for internal combustion engines used on a large scale. If something better was available, we'd already be using it.

In other words, we are screwed. I'll shut-up now.
<rant/>

[FS]

"All of this works fine when there are a fairly limited number of large producers of emissions. It doesn't work nearly so well when there are millions of tiny producers of emissions. There an atmospheric user fee (o.k., carbon tax) works better."

This ain't that much of a problem if you lift the levy / permits directly a the source - the producers of carbon energy sources. Since those are very few entities, it is a lot more efficient to let them buy permits for the sale of energy sources scaled by the carbon content (and perhaps some other GHGs) than to market permits to the consumer. The producers will lift their prices accordingly - main principle of any excise tax.

IMO the main difference between cap and trade and a tax nowadays is price stability and the Weitzman-Problem (http://green.blogs.nytimes.com/2009/07/02/carbonomics-the-price-vs-quantity-debate/).

In that direction, I still think most analyses support taxes over cap-and-trade in our times.

The other point is that most cap-and-trade-programs grandfather their permits to large extent - thus denying themselves of the possibility of using the revenue to either further support ecological issues, moderate distributional hardships of the rising energy prices or reduce distortionary taxation.
Even those Dutch Economists who worked out the analytic questionability of the Double Dividend in the mid-nineties said that a revenue-rising program where the revenue is used to offset other distortionary taxation is more efficient than a grandfathering program.

[Frances Woolley]

Simon - I agree with you that there are lessons to learn from Europe about the politics of moving to lower emissions, higher carbon taxes regime.

But one has to be very careful when generalizing those lessons to Canada. Political opposition to cap and trade has been muted by the fact that new entrants have been allowed to get emissions permits for free - now that the free permit period is running out for Poland, there's more push-back. Also, in Europe, protecting the environment shades into protectionism - see, e.g. the recent proposal to levy a charge on flights originating from outside of Europe. In terms of the topic of this post, marketing carbon taxes - it seems that one of the lessons from Europe is that taxes are more politically acceptable if they're hidden. This gets back to the point I've raised before about the virtue of stealth taxation.

Patrick - economists tend to look at carbon taxes in terms of their impacts on the margin, i.e. reduction in gasoline use with an increase in taxes. The average consumer is much more concerned with their total tax bill. You're absolutely right - anything that is going to change people's behaviour significantly is going to have major impacts on prices, income, and wealth.

nemi - I agree with you that a rhetoric of private property/markets/freedom has been used to market cap and trade, and is indeed an example of (partly) successful marketing. In part that's why I wanted stress the parallels between cap and trade permits and traditional quantity controls. Cap and trade sets quantities and lets the market do its thing, carbon taxes set prices and let the markets the market do its thing - it's hard to argue that one is fundamentally more pro-market than the other. Both have a role to play - e.g. imposing a carbon tax on Canadian producers would make it even harder for them to compete in the US market. Cap and trade (with grandfathered permits) is a way of controlling the amount of emissions while making it possible for our producers to export to the US.

[Frances Woolley]

FS - thanks for the comment and the link. when I write about cap and trade I'm implicitly assuming that existing producers are grandfathered with free permits that last a long time. If producers have to buy permits every year on an on-going basis, cap and trade starts looking much more like a carbon tax.

[reason]

Look in my view the way to sell it is simple. Make it revenue neutral. Explain that the net effect is 0 (the revenue raised will be equally distributed), but their neighbour with the oversized car and poor insulation will be a net payer, but with their modest sized car and good insulation they should get a net benefit. Appeal to schadenfreude!

[Frances Woolley]

reason - interesting. BC did that, to some extent, with their carbon tax rebate scheme - one of my students was very happy about her cheque. I'm wondering if loss aversion starts to kick in here, i.e., people get more upset about losing $100 than they are happy about gaining $100?

[Chris J]

Many of these ideas were tried by Dion and no one outside of some academics took him seriously. We have federal and western provincial governments (+NFLD?) that want to extract and burn as much oil as possible. We have Ontario trying to be reasonable.

Maybe the taxes will kick in when outdoor skating rinks are not possible in Canadian winter and the US plains are baked dry. There is an enormous amount of noise that basically lies about the science (think tobacco meets creationism) that makes people wonder of its real. (It is.)

We need a way of making (preferably liquid) fuel from carbon in the air. Some sort of artificial photosynthesis. I am afraid that only thing that will fix this problem is an enormous world-wide R&D effort.

[reason]

"We need a way of making (preferably liquid) fuel from carbon in the air. Some sort of artificial photosynthesis."

How about photosynthesis, then? This is a serious potential solution - breeding salt tolerant oil producing algae, that grow on flooded (with sea water) deserts.

[Frances Woolley]

Chris J: "Maybe the taxes will kick in when outdoor skating rinks are not possible in Canadian winter:

Hey, get with the program, there's a simple solution: artificial outdoor ice. Works in Toronto, now coming to Ottawa ;-)

More seriously, my grandfather, who was physics teacher, used to lecture us about how leaving the fridge door open actually makes a room warmer. Artificial outdoor ice always makes me think of him - then I start thinking along the lines of Patrick above i.e. we're doomed. I'd say "yup, the canal is toast" but it would upset Nick.

[Ryan]

Frances, unfortunately you completely missed my point. (So did Bob.) You said:

The case for an atmospheric user fee is based on three assumptions: (a) carbon emissions contribute to climate change (b) Canadian carbon emissions contribute, on the margin, to the amount of climate change (c) there are some low-benefit activities for which the cost of emissions exceeds the benefits (e.g. using heaters in the summer because the air conditioning is turned on so high). If one rejects these assumptions, there is no case for an atmospheric user fee, and no point in taking the argument further. End of discussion.

What I'm saying is that these assumptions are sufficient to address the fact that a carbon tax is a good idea.

On the other hand, they are NOT sufficient to justify why I am better off with a carbon tax than I am without a carbon tax.

You merely IMPLY that climate change is a major issue in my life. We are supposed to take that for granted. What I'm saying is that if you want people to go along with a carbon tax, you either have to either (a) demonstrate specifically how their lives are enhanced with a carbon tax in a way that makes them prefer the tax to a no-tax situation or (b) demonstrate that the tax helps them avoid a clear and present danger in their lives that is far more costly than the tax itself.

It has nothing to do with rejecting your assumptions. It has everything to do with having values and preferences over and above what you have chosen to include in your model.

[Shangwen]

I think AGW is a real and very serious problem. However, given that support for it and related subsidies seem to be built largely on conspiracy theories and hatefests (private businesses want to destroy the world, fat Americans in SUVs are killing us all, etc.), and likewise for some of the opposition (world government, mad scientists, etc), why not just construct one (or a set) of median conspiracy theories to garner political support? We already know that works.

Let’s face it: 99.99% of us are deeply unenlightened on the science and the complexity of the analysis, and support for policies is driven largely by the flattering of one’s political preferences. An equal percentage are unenlightened on the merits of GGH-reducing technologies. This isn’t a learning phase. Give it up.

[Frances Woolley]

Ryan, whether you are better/worse off with a carbon tax is not the issue. Given that the benefits of carbon taxes will be enjoyed by future generations, and the costs are felt by present ones, you probably will be worse off. The issue is whether or not framing/marketing carbon taxes differently affects the political support these generate. If you don't think framing/marketing matters, that's fine, say so - and evidence to support your position would be really cool if you have it. Otherwise, keep your remarks on topic, or risk deletion.

Shangwen - fair enough. B.t.w., responding to your comments on twitter, I do pay to cross a few pay walls, including the NYT and the Hockey News, just not the Ottawa Citizen.

[Patrick]

Frances: it's the tinkering, not the margin I was complaining about, if you get my meaning.

[Patrick]

reason - can it be revenue neutral? Any incentives that do anything on the scale required imply a massive re-organizing and re-working of gigantic swaths of the capital stock in a relatively short period of time. That's bound to hurt.

[Ryan]

Frances - Opportunity costs are on-topic, right? The topic of the post is whether re-branding carbon taxes as user fees will make them more politically palatable. My response is, no, not for those who object to carbon taxes on the basis of the opportunity costs associated with the tax. For those folks, they have given the original "branding" and associated assumptions due consideration and have simply expressed a value preference other than yours. Those folks will need a framing of the tax in line with what I described above, one that directly addresses their values and preferences.

As you can see, I have accepted your assumptions and have directly responded to the issue of framing/marketing. I therefore consider this to be on-topic, but if not, you are free to delete my comments from your blog.

[Bob Smith]

Reason: "Explain that the net effect is 0 (the revenue raised will be equally distributed)"

The difficulty is that the net effect isn't zero.

If you ignore (or don't believe in) the benefits of carbon taxes (i.e. reduced carbon emissions) there is a "deadweight loss" (it's not a real deadweight loss, but I'll come back to that) associated with carbon taxation. Even if every dollar is returned to voters and there are no compliance costs (both strong assumptions), people are worse off. Now, if carbon taxation is optimal (i.e., there are benefits from reducing carbon emissions), what I've called the "deadweight loss" isn't real deadweight loss since there is an offsetting benefit from reduced carbon emission. People should be better off than they would be without carbon taxation. But that benefit is intangible, whereas the apparent "deadweight loss" is real ("Have you seen the price of gas? I'm not driving to the cottage this weekend") and the benefit may accrue to non-voters (say, the inhabitants of small pacific atolls). In that case, even a revenue neutral carbon tax isn't likely to strike voters as appealing.

In that respect, I suspect the problem is less one of voters' irrational aversion to taxes that can be addressed by framing, so much as a rational aversion to policies that are not obviously beneficial to the voters in question. When Greens present carbon taxes as being costless they blow their argument out of the water, because voters (rightly) realize that that isn't the case.

[Simon Coulombe]

As far as I know, high energy taxes in France predate concerns about global warming. I've always thought it was more of a raise revenue/reduce import, now justified with climate change.

Bad excuse, good policy.

In 1990, taxes represented 196% of the before-tax price of gasoline in France: http://fr.wikipedia.org/wiki/Essence_%28hydrocarbure%29#Prix_des_carburants

[Simon van Norden]

On the subject of big vs small emitters of GHG, see http://www.ec.gc.ca/indicateurs-indicators/default.asp?lang=en&n=31022B8E-1

"In 2010, just over one-third (38%) of Canada’s greenhouse gas (GHG) emissions came from 537 facilities. These facilities reported emitting 262 megatonnes (Mt) of carbon dioxide equivalent (CO2 eq)."

[Simon van Norden]

....they also give a map....the number of those facilities in Alberta looks amazing! No wonder ec.gc.ca is having their budget cut!

[Jacques René Giguère]

Frances: EU imposing carbon fees on incoming flights is not protectionism as they are also imposed on European airlines. It is an anti-dumping duty.
If you abolish slavery but import slave-produced goods, you have not abolished slavery...
In England, workers supported abolitionnism but didn't care if slavery still existed in cootton growing. It wasn't until the Civil War in the US that they turned whole hog against the South.

[Simon van Norden]

For the GHG breakdown by province: http://www.ec.gc.ca/indicateurs-indicators/default.asp?lang=en&n=18F3BB9C-1
For the breakdown by sector: http://www.ec.gc.ca/indicateurs-indicators/default.asp?lang=en&n=F60DB708-1
For the latest annual inventory report: http://www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=AC8F85A5

Note that the latter puts the fraction of Canadian GHG emissions from transportation sources at under 30% vs. 45% for "stationary combustion sources". I take this to mean that the problem is not just cars and trucks.

[Patrick]

IIRC, the AB emissions mostly come from our coal fired power plants. Tar sands are bad, but coal fired electricity is really awful. Of course, AB has something like 70% of Canada's coal deposits too.

Excuse while I go idle my truck.

[Patrick]

Here's the EPA site breaking down worldwide sources:

http://epa.gov/climatechange/ghgemissions/global.html

[Frances Woolley]

Jacques Rene - you and I see it that way, but will various international trade tribunals? This is an absolutely critical issue for carbon taxation, that is, the ability to impose equivalent taxes on the carbon content of imports.

Simon, Patrick, thanks for those links! I'd figure those large facilities on the Alberta/Sask border are mostly tar sands? There's also some interesting things about energy regulation in Alberta, something about the way transmission is financed, that makes these large facilities more economics.

Bob: "a rational aversion to policies that are not obviously beneficial to the voters in question" - here the parallel with Europe is, perhaps, instructive. In England cities are more compact, buses are free for over 65s, and come frequently. That makes it much easier to get around without a car, so gasoline taxes don't cut people off from daily life the way that they do here. So it's not just a matter of selling carbon taxes (though that matters), it's about constructing cities in a way that makes a lower carbon lifestyle possible.

[Andrew F]

"We need a way of making (preferably liquid) fuel from carbon in the air. Some sort of artificial photosynthesis. I am afraid that only thing that will fix this problem is an enormous world-wide R&D effort."

It is happening. In addition to fuel from algae, there are other biofuel initiatives that are promising. Cool Planet Biofuels had an inexpensive catalytic process for converting dry biomass into gasoline and highly activated black carbon that can be added to soil as a fertility-enhancing amendment using pyrolysis. They have venture funding from Google and General Electric and a bevy of big oil companies including BP, ConocoPhilips, and NRG. They are in the process of scaling up their process.

[Determinant]

Frances:

In Nassau, Bahamas, a city of 750,000 much local transportation is in the form of jitneys, a van about the size of a mini school bus. The operators are private and the service is very frequent. You can own a car, but you can certainly get by without one on the island. Many Bahamians don't own cars, they aren't wealthy enough and truthfully don't need one.

[Frances Woolley]

Determinant - that's actually something I've been thinking about lately. You probably know that on sites like kijiji people run what are, effectively, private bus services, operating on the Ottawa/Toronto corridor - they just advertise "going to Toronto, will take extra passenger for $XX". A minivan with 5 people in it at $50 each - there and back - it pays more than minimum wage, and it's all cash under the table.

[Andrew F]

Transit is one giant mess of government over-regulation and inefficient monopolies.

There are illegal taxis that operate in Toronto. They generally seem like people trying to make some extra money with the family minivan on Friday/Saturday nights.

[Lindsay]

There is also the complication of the legal requirements of a user fee. User fees cannot be used for general revenue purposes but instead put into a specific revenue account and used to defray the cost of the good or service being charged for. Additionally, user fees cannot generate a surplus: there must exist a nexus being the quantum charged and the cost of the good or service provided. There must be a reasonable connection between the cost of the service and the amount charged, but it does not have to be exact. These the constitutionally required elements of a user fee. A regulatory charge might be a better policy tool than a user fee when it comes to a re-branded carbon tax.

[Frances Woolley]

Lindsay - when you say "constitutionally required elements of a user fee", which constitution/jurisdictions are you speaking of?

[reason]

Ryan,
"You merely IMPLY that climate change is a major issue in my life."

You do understand the concept of an externality do you. You seem to be taking methodological individualism to a new extreme here. Maybe the effects on OTHER PEOPLE might be important as well.

[reason]

P.S. Those other people might be your descendents.

[reason]

As a general comment here - especially when talking to Canadians (who arguably are likely winners in the medium term) - climate change should be seen as (to a significant extent) a moral issue, not just an economic issue. It is a bit like an argument about vaccination. In a population with effective heard immunity and individual not being vaccinated may actually gain by avoiding the small risk involved in vaccination. But if enough people do that, then the heard immunity disappears and everybody (including the refusnik) is worse off.

[Bob Smith]

"climate change SHOULD be seen as (to a significant extent) a moral issue" (emphasis added)

Maybe it should be, but it isn't. That's the reality of the policy environment people have to deal with.

[The Keystone Garter]

Hyperinflation fixes this (pledge brain) eventually.

[Jacques René Giguère]

Canadians likely winners?
Plants adapt not only to cliamte and weather but to soil. Here, there are mountains and the soil is thin on the granite. Would a warmer climate enable us to grow wheat, apple orchards or palm oil tree instead of black spruce? Or would we simply get a dead desert?

[Frances Woolley]

Jacque Rene - I read reason's comment as Canadians being winners from action against climate change, because of the impact on the North, but I think you're right.

I really think a lot of people have no idea the extent to which Canada is, in the immortal words of the Arrogant Worms, rocks and trees and trees and rocks. There are plains around Hudson Bay, could these ever be arable, or are these just peat bogs?

[Jacques René Giguère]

Mostly peat bogs. Solid enough to bear spruce groves which are beginning to appear...

[reason]

Longer growth season in the prairies? (Dirty) oil supplier?

[The Keystone Garter]

Ryan, why does a carbon tax have to be the best utility of cash? Why can't it just be better than whatever the tax takes resources from? It is a simple binary choice: tax carbon or give the revenue to who gets taxed. A carbon tax doesn't have to be a prepaid redheaded hooker coming to your door by accident.
We are in structure permanent deficit. The Dion shift works even less now. I get alot of crap from people (not offering a job or understanding welfare is a dartboard, isn't a GAI for single men) to be cleaner and work more. I've given the job search a full, 75% and 1/2 hearted as the last yr evolved...employers are dumb not to use their petro/banking corporate tax-cut profits to hire. When people elect retards, others try to volunteer their jobs for them. If you want to know why I can't get laid or relax anymore, look in a mirror. With little spare time, reading about batteries, thermoplastics (a recyclable oil fraction), 85% plastic
producing shockwave ethane reactor....I'm about 3/60 asking women out. Bad time ROI for me. Go find some overpaid idiot to lay and don't make me S.Penn. by magically expecting me to be smooth.
Buying up the most carbon intensive (including peat) oil sands properties is my preferred option. I don't like Harper making Canadians dumb (beyond no WMDs no regressive technologies/brainwashing) on the AGW portfolio. It makes it harder post-CPC to fix the mistakes of those who believe Revelations is our near-term destiny.
The carbon shift was attacked by Layton. Forget Duceppe's position. If NDP supported it I'd guess it would be inevitable. lol, Loughheed was the one who didn't get one of 8 port Provinces on board as owners of AB petro products.
Steve: that is brilliant. Do what Norway is doing (AB's about 1/3 of this says Pembina). Does Norway have Stockholm Syndromw? The most common method of oil production is nationalized. Better trickle down in Venezuala than here. My Cgy electricity bill was $80/month, $20/month in Wpg. SK is missing out on cheap power.

[The Keystone Garter]

F.Wooley, the Hudson's Bay Lowlands are flat. Peat moss hold water. HBLs after the ice age ended, are isostatically rebounding, forming rdiges parallel with the cost. The 2nd best peat moss reservoir of carbon next to a plain/bog in Northern Russia. I googled cdn estimated of 227GT of C, or 20x global annual emissions. The cold temps allow the peat (esp Sphagnum fuscum) to accumulate (unlike breakeven warmer peat and rainforests) at, after squished for 30 yrs, 1mm/yr for 15000 years (15M deep potentially). There is also permafrost to consider...
Everything is drying out, not considering Arctic Ocean melt or other AGW effects. So bogs become spruce. Spruce become grasses, desert.
For agriculture, it is tough to make estimates with out AGWprecipitation estimates. We might be the only country the makes out better under light (+2C) AGW, but by mid century we probably lose, less likely if a taxpayer funded investment in agriculture (AB has announced this). I like agri-plastic products instead of diesel and gasoline. Did someone here say cars can't be battery because gas is a magic juice?! Jet fuel maybe. An expert thinks can be liquid hydrogen, I am bearish on anything but the hydrogen salts at present, though have a few papers done in a week (instead of enjoying life).

[The Keystone Garter]

Francis, if we turn our lowlands into farms, our civilization will be immediately wiped out. Why??? I like dams up north as preserved water, but too much water is bad for crops and fuscum. I'd like to find a way to sequester trees in existing peat bogs or novel ones...

[Window icons creator for Win8]

You are not right. I can prove it.