Taxing Carbon is Bad Economics

Science Matters

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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About Jim Rose

Utopia - you are standing in it promotes a classical liberal view of the world and champion the mass flourishing of humanity through capitalism and the rule of law. The origin of the blog is explained in the first blog post at https://utopiayouarestandinginit.wordpress.com/2014/03/12/why-call-my-blog-utopia-you-are-standing-in-it/

2 thoughts on “Taxing Carbon is Bad Economics

  1. nottrampis

    Sorry but his arguments against a pigouvian tax are poor and he clearly has no idea of the costs of warming in the Arctic areas Russia in particular.

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