The CCC & Carbon Taxes

By Paul Homewood

There has been some discussion about carbon taxes, following James Hansen’s latest foray. In fact he has long advocated such taxes.

You may recall his letter to Obama in 2008, begging for a carbon tax amongst other things. He sweetened the pill then by suggesting that all the tax receipts should be redistributed to the public, just as Trudeau is now proposing in Canada.

But the idea is basically a con.

A carbon tax is designed purely to reduce emissions, and it can do this in two ways:

1) Reduce energy consumption, by raising the price. Demand for energy though tends to be pretty inelastic, and taxes would probably have to be punitive to have any noticeable effect.

2) Make low carbon alternatives competitive by raising the cost of conventional fossil fuels sources.

Once renewables had supplanted fossil fuels, there would be no carbon tax revenue left to redistribute, but we would still be stuck with the higher energy prices owing to high cost renewables.

The Committee on Climate Change is crystal clear that the second reason is the real driver behind carbon pricing.

This is what they said in the Fifth Carbon Budget, published in 2015:

https://www.theccc.org.uk/publication/power-sector-scenarios-for-the-fifth-carbon-budget/

In short, their target-consistent carbon price is not based on any assessment of the social costs of CO2 emissions. It is simply the amount calculated to be needed to hit the 2C target.

To make things even clearer, they go on to explain that a carbon price of £78/tCO2 would lift the cost of gas-fired generation above low-carbon options.

In theory of course a “polluter pays” principle is sensible. For instance, if a company dumps waste, it should pay the cost of removing it.

Carbon dioxide however is a different kettle of fish. For a start, is it even causing any damage to the environment, and if so how would you calculate the cost?

And what about knock on effects? Dearer energy resulting from high cost renewables could have adverse health effects for instance.

Not to mention some of the well known pollution issues connected with renewable energy.

Then there is the question of what happens globally. Britain could decarbonise completely tomorrow and it would have zero effect on the climate.

And what about the money raised? Should that go to third world countries, who supposedly are suffering most from climate change? Or be retained in the UK, where our climate is arguably better than before?

Worse still, for the UK or US to take unilateral action and set carbon taxes, it would dangerously distort economic outcomes, by forcing industry abroad to lower tax countries, where pollution (real and CO2) is much, much worse. We have arguably already seen this happening as a result of EU and UK climate policies.

In reality, decarbonisation will end up costing ordinary people an awful lot of money, whether it is achieved via a carbon tax or not.