More Government Won’t Fix Carbon Taxes

Writing in the Guardian, Simone Tagliapietra opines The world won’t be a greener place until it’s a fairer one. Moving to a green economy will likely make the world less fair, since converting to electric vehicles and retrofitting buildings costs money, and if the government mandates that everyone must by more expensive products, the higher costs fall hardest on those who can least afford it. How does he propose that this be avoided?

The green revolution is already unfolding, driven by a stunning reduction in the cost of green technologies and by a global momentum for climate neutrality by the mid-century.

The cost reductions cited are in electricity generation. I’m not sure they take storage into account, which is critical for solar and wind generation. According to the EPA, only 25% of CO2 emissions are due to generation. 29% are due to transport. Electric vehicles are still much more expensive that their gasoline and diesel powered counterparts; while their cost reductions may be stunning, they are merely so relative to the prices that technology enthusiasts were paying.

So, if cheaper green technology and an unprecedented political green ambition are rapidly converging, what could go wrong? Unfortunately, the situation is not as simple as it seems. Decarbonisation will reshape our economies and our lifestyles. Nothing will be left untouched in the process: the green world will be profoundly different from the one we know today.

And will there be cheap green technologies in farming, industry, and home heating? Because these account for the remaining emissions, close to half of the pie.

But such a radical transformation also raises questions about who should bear the cost of climate action, both within and between countries. The cost of climate action can not disproportionately fall on the most vulnerable, exacerbating inequality. Climate action should be designed in a way that improves social equality. And this is precisely what a new green social contract should be about.

I have no faith in climate policy researchers like Tagliapietra to design climate actions that they can in any way predict the outcomes of. Governments and economists have shown over and over again that they are incompetent to do so. Moreover, Tagliapietra works for Bruegel, a Brussels think-tank with ties to the World Economic Forum, who brought us Build Back Better and the Great Reset.

The French experience with the gilets jaunes – Yellow Vests – movement represents the clearest example of the perils and political headwinds that governments worldwide face as they try to wean their citizens off fossil fuels. The French government was right to introduce a price on carbon in transportation in 2018. But it would have immediately translated into higher petrol and diesel prices, hitting hardest people living outside French cities who were already feeling the pain of stagnating incomes and lacking the same public transport options as urban residents.

Exactly. One would think an idiot could have predicted this, but somehow, no one in the government realized that raising taxes on fuel would affect people who need fuel to make their livings.

Had the design of the carbon tax included compensation mechanisms to cushion the blow for the most vulnerable, the backlash could have been prevented. This is exactly what a group of economists including 28 Nobel laureates and four former Federal Reserve chairs – among them Janet Yellen – have been calling for in the United States: the introduction of a robust carbon tax, together with a compensation system to ensure that the most vulnerable benefit financially by receiving more in “carbon dividends” than they pay in increased energy prices.

And this will mean that either income taxes increase, hurting the tax payer, companies’ costs increase, and are passed on through higher costs of goods, hurting everyone, or the government takes on more debt, increasing their cost of borrowing, leading to higher taxes that hurt taxpayers.

This discussion illustrates how important it is to include equity and fairness considerations into the design of climate policies. Even in Europe, the global climate policy frontrunner, support for climate measures is broad but shallow. In a recent survey conducted in eight European countries, the Open Society European Policy Institute found that nearly all voters were happy to buy less plastic, though far fewer were keen to pay more for fuel or flights.

Makes sense. Since flying is largely a luxury, I would have thought taxing it would be easier to get away with.

In short, as climate policies become stronger, new gilets jaunes-type movements could emerge across the continent. The usual suspects here span the coal mining regions of Poland, that are highly reliant on carbon intensive industries, to those cities in which mayors have declared war on diesel cars.

What’s green about diesel cars? Diesel causes much more smog that gasoline.

Populists and culture warriors may well find in climate policy their new flagship issue, arguing that urban elites are driving the policy but the cost ultimately falls on the shoulders of “ordinary” citizens. This risks making it politically more dangerous for mainstream parties to really go green, as parties on the extremes offer voters an easy alternative. But a new green social contract could interrupt this political vicious cycle.

Urban elites are driving policy and the cost of carbon taxes does ultimately fall on the citizens, one way or the other. A new green social contract will just be another such policy, driven by elites. Millionaire politicians who claim to be for the common man are generally a bunch of hypocrites who serve corporate masters behind closed doors. We don’t trust you.

Equity and fairness considerations go well beyond national boundaries. As developed countries scale up domestic climate actions, they will probably introduce measures – such as carbon border taxes – to ensure that their industries are not undercut by competitors based in countries with weak climate policies. Already in the initial stages of development in the European Union, such measures were also pledged by Joe Biden as part of his election campaign. Boris Johnson is now considering using his G7 presidency to try to forge an alliance on carbon border taxes.

If we are going to penalize your own industry, clearly other countries must not allowed to profit at our expense. Since corporations control government through ‘donations’ and lobbying, they won’t allow governments to penalize them unfairly. Of course, multinationals will be happy to exploit governments that don’t impose such tariffs in exactly the way they have destroyed our manufacturing capability by offshoring it to China, were environmental controls are practically non-existent. The Chinese, though signatories of the Paris Accord, have made no commitment to reducing their emissions in that Accord.

However, carbon border taxes could affect the economies of the poorest countries. A recent survey conducted by the Konrad Adenauer Foundation on the perceptions of policymakers in the Asia-Pacific region revealed how carbon border taxes are perceived as protectionist and discriminatory towards developing countries.

Developing countries think that tariffs imposed on them are protectionist? Quelle surprise!

As with domestic carbon taxes, this problem can be prevented by factoring equity and fairness into the design of the measures. The poorest countries could be exempted from border charges for example. Another possible solution would be to use the revenues from carbon border taxes to scale up international funding for green projects in these countries. This discussion should be at the core of the international dimension of the new green social contract.

As long as China and India are exempted from action, why should they be exempt from tariffs? Who will determine who pays and who is exempt? The World Trade Organization? We don’t trust them.

At the national level, countries can learn from France, which eventually reacted to the gilets jaunes crisis with the launch of the Citizens’ Climate Convention – an experiment in direct democracy aimed at identifying climate solutions rooted in social equity and fairness. Internationally, the same principles could be placed at the core of the forthcoming Cop26 UN climate talks in Glasgow. Such actions are fundamental to ensure long-term social support for the green transition, and to prevent its derailment – which would have catastrophic consequences for the planet.

Was the convention any more than a pacifying gesture? Direct democracy is dangerous. Look at some of the crazy things passed into law by ballot measures put on the bill in California. Look at the rejection of election reform in British Colombia’s referendum.

I don’t think there are easy answers to dealing with climate change. One obvious first step is to immediately halt corporate welfare for the fossil fuel industry. Why did we sign the Paris Accord if we are going to continue to fund the emitters? Trudeau even bought an oil pipeline at tax payers expense. If you want us to trust you to use the force of government to help mitigate climate change, I’d suggest that you first stop doing stupid shit.

About jimbelton

I'm a software developer, and a writer of both fiction and non-fiction, and I blog about movies, books, and philosophy. My interest in religious philosophy and the search for the truth inspires much of my writing.
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