Ross McKitrick, a professor of economics at Canada’s University of Guelph, has proposed a conditional carbon tax he hopes will break a global warming policy stalemate.
Debate about ways to address global warming tends to focus on two questions: Does scientific evidence justify the economic costs of sharp greenhouse gas reductions? And what is the most economical and efficient way to cut greenhouse gas emissions if a policy decision is made to do so?
Many scientists, economists, and policy analysts are hesitant to discuss the second question for fear of appearing to cede the debate on the first. With climate scientists sharply split on the science of global warming, and with real-world data indicating no acceleration of the very moderate recent warming, they worry a serious discussion of the economics of greenhouse gas reductions could provide undue momentum to one side of the global warming debate.
Mutually Agreeable Solution?
Not necessarily, says McKitrick. Writing in the June 12 National Post, McKitrick outlined a self-regulating carbon tax that would rise and fall with real-world temperatures.
According to McKitrick, “climate models predict that, if greenhouse gases are driving climate change, there will be a unique fingerprint in the form of a strong warming trend in the tropical troposphere.” Why not, then, impose a carbon tax that is tied to real-world temperature readings in the tropical troposphere?
Calling Everyone’s Bluff
Under McKitrick’s proposal, the carbon tax would be, in dollar terms, 20 times the three-year moving average of tropical troposphere temperatures above the 1979-1998 average. In other words, with tropical troposphere temperatures currently 0.235º Celsius above the 1979-1998 average, a current carbon tax would be $4.70 per ton.
The formula was deliberately chosen at 20 times the three-year moving average, McKitrick explains, because the best economic estimate of the cost to society of carbon emissions is currently about $4.70 per ton.
If temperatures continue to rise, as many scientists predict, the carbon tax automatically rises, providing economic incentives for carbon emitters to cut their emissions. If temperatures level off or rise only slightly in coming decades, as many other scientists predict, carbon emitters are not unjustly punished for their benign or minimally harmful emissions.
Noting “most economists who have written on carbon dioxide emissions have concluded that an emissions tax is preferable to a cap-and-trade system,” McKitrick argues that under a temperature-linked carbon tax, “the regulator gets to call everyone’s bluff at once, without gambling in advance on who is right. If the tax goes up, it ought to have. If it doesn’t go up, it shouldn’t have. Either way we get a sensible outcome.”
Encouraging Unbiased Science
“Best of all,” McKitrick wrote, his temperature-linked carbon tax “will encourage private-sector climate forecasting.
“Firms will need good estimates of future tax rates, which will force them to look deeply, and objectively, into the question of whether existing climate forecasts have an alarmist bias,” McKitrick noted.
“The financial incentives will lead to independent reassessments of global climate modelling, without regard to what politicians, the [Intergovernmental Panel on Climate Change], or climatology professors want to hear,” McKitrick added.
Potential for Mischief
Global warming experts are intrigued by the proposal, but wary of how a sound idea might be turned into harmful public policy.
“If I were for a carbon tax, I’d be for McKitrick’s carbon tax,” a prominent global warming expert said on condition of anonymity. “But I continue to believe that any carbon penalty is putting the policy cart before the technology horse. The world is still too energy poor to go on an energy diet. Also, I fear that a self-regulating tax system would quickly morph into a politically manipulated system.”
“Who would be in charge of determining what the temperature was?” another expert asked, also on condition of anonymity. “Would special interests be able to get special treatment on the tax? If emissions didn’t go down, wouldn’t there be an outcry that we must raise the tax regardless of the temperature?”
Right Incentives
Nevertheless, McKitrick’s proposal can be a good one if it can avoid being ruined by political tinkering, said Julian Morris, director of the International Policy Network and a visiting professor of economics at the United Kingdom’s University of Buckingham.
“For my money, Ross McKitrick’s tax is among the smartest ideas going right now,” said Morris. “It is less damaging than a permit scheme. … It would address the problem in a relatively efficient manner, if one actually exists, but would otherwise be self-negating. It would incentivize substantial private investment in climate research, thereby countering whatever biases exist in publicly funded research, and it would incentivize the search for low-cost alternatives to emissions reductions.”
“I don’t like it,” disagreed Jerry Taylor, a senior fellow at the Cato Institute. “Adaptation is cheaper than mitigation. And even if it weren’t, geo-engineering is almost certainly cheaper than mitigation. While I agree that a global carbon tax is the most efficient way to go about mitigation, I do not think mitigation is called for.”
James M. Taylor ([email protected]) is managing editor of Environment & Climate News.
