At Institute of Economic Affairs, IEA’s Director of Research Dr Jamie Whyte explains (here) why taxing carbon is a bad economic idea. Excerpts in italics with my bolds.
The emission of greenhouse gases – CO2 from burning fossil fuels and methane from flatulent livestock – is warming the global climate. Let’s not quibble about this scientific consensus, even if there are grounds for scepticism. The question for economists is the proper policy response.
The standard view is that greenhouse emissions are a classic negative externality, and that a Pigouvian tax should be applied. For example, farmers should pay a “fart tax” for each cow they own. This would internalise the external cost of the farts, and cows would be farmed only when the total benefits of doing so exceeded the total cost.
This is preferable to a cap-and-trade system, because the cap is arbitrary. If the…
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