Zakaria’s so-so carbon-tax argument

Fareed Zakaria of Newsweek International proposes a global carbon tax in an essay with one crippling flaw.

Zakaria gives the Kyoto Accord the drubbing it deserves for effectively exempting filthy economies like China’s and India’s (which were filthy but small when Kyoto was signed but are now filthy and big and growing. He points out the problem with expecting them to change without rewarding them for doing so:

Kyoto represents old thinking: if the West comes together and settles on a solution, the Third World will have to adhere to that template. It’s the way things have been done in international affairs for decades, perhaps centuries. But today power is shifting to the emerging markets. China, India and Brazil will have a greater impact on the globe in coming years than Europe will—for better or worse. A new Kyoto would start the other way around. The United States should work out an agreement with these three countries. That would become the new template, defining what further actions are necessary and possible.

Fine. But he also writes:

Congress is currently considering a variety of proposals [for reducing the U.S.’s emissions] Most are a smorgasbord of caps, credits and regulations. Instead of imposing a simple carbon tax that would send a clear signal to the markets, Congress wants to create a set of hidden taxes through a “cap and trade” system. The Europeans have adopted a similar system, which is unwieldy and prone to gaming and cheating. (It is also unsustainable if Brazil, China and India don’t come onboard soon.)

Much of which is true of a carbon tax, too, though, and Zakaria just handwaves it away.

Let me build on the point I ended my previous post on, that carbon taxes are nothing but punishment. Where’s the incentive for China and India and Brazil to sign onto a carbon tax, exactly? What on earth is in it for them, compared with the current situation of no direct extra costs at all for building hundreds of coal plants over the next decade?

Nothing. Setting our long-term environmental goals aside (as they obviously have, given their behaviour up till now), there’s no advantage, no reason why any of those countries would agree to tax its own carbon emissions. The only way you can even make a coherent case for their doing so is if we agree to take the money generated by a carbon tax and put it into emission-reduction programs. This seems to be what Zakaria is arguing for, particularly since he backs into the idea of a carbon tax by saying that somehow we need to subsidize “clean coal,” to the extent there is such a thing.

So here we are back to a smorgasbord of regulations and subsidies, with governments picking winners among providers of different technologies to subsidize, doubtless fights over who gets to collect the global carbon tax and who gets to spend it (and whose domestic industries get to benefit most) and all the other nonsense a carbon tax was supposed to sweep away in one great tsunami of fairness.

Whereas with a cap-and-trade system, which China and India and Brazil could all join, companies that make improvements — or devise technologies allowing others to do so — can come out ahead, not just end up back where they started.

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One response to “Zakaria’s so-so carbon-tax argument

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