The choice of a carbon tax is about efficiency

So I know there’s not much point in getting worked up about Cut and Paste, the Australian‘s rather lame attempt at a sottisier (it is compiled by someone with a very weak grasp of irony, policy, and even punctuation).

But its attempt to embarrass Christine Milne this morning gives an exhibit of a common misconception about climate change policy.

South Korea and India won’t stand for it! Christine Milne, Senate Hansard, Wednesday:

IF you think the rest of the world is going to put up with Australia behaving as a pariah, have another think. The Koreans will put a tax on coal imports. The Indians have already done it and that will be something that continues.

Is India really that committed to climate change action? Christine Milne, Sky’s Australian Agenda yesterday:

PETER Van Onselen: What about Clive Palmer’s dormant ETS policy idea? If there is nothing better on the table is that something that the Greens would consider voting for to at least get it in place?

Christine Milne: It is a mirage. The closer you get to it the further it moves away. When Clive came out this week and wanted India in it, like anyone who understands climate politics around the world knows, that means it is never going to happen.


Of course, anyone with a fundamental grasp of logic understands that the two statements are not in conflict. India’s climate abatement strategy, such as it is, does indeed rely partly on coal taxes. What Milne suggested was that India was unlikely to introduce an emissions trading scheme any time soon, which is probably correct. 

The argument for a carbon tax, or an emissions trading scheme, is not that a ton of carbon dioxide foregone by a comprehensive carbon tax is any better or worse than one foregone by a selective coal tax, or by tree planting, or whatever: it’s that it is economically more efficient to tax broadly rather than narrowly. And by ‘efficient’, what we mean is ‘cheap’.

For any given abatement target, it will cost less to achieve the target by means of a broad-based price mechanism than by ad-hoc approaches. That’s why a carbon tax or an ETS should be thought of as economic policy as well as environmental policy.



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