Sunday, September 25, 2011

Tyler Cowen summarizes my thoughts on Pigovean carbon taxes perfectly:
1. Other countries won’t follow suit and then we are doing something with almost zero effectiveness.

2. It may push dirty industries to less well regulated countries and make the overall problem somewhat worse...

4. Especially for large segments of the transportation sector, there simply aren’t plausible substitutes for carbon on the horizon.

5. A tax on energy is a sectoral tax on the relatively productive sector of the economy — making stuff — and it will shift more talent into finance and other less productive sectors.

6. Oil in particular will become so expensive in any case that a politically plausible tax won’t add much value

The bottom line is that there are massive coordination and enforcement problems that may increase emissions globally.
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