Friday, 4 March 2011

Carbon tax receives economist’s endorsement

Dr Eric Knight, a research associate at the ANU's centre for climate economics and policy and at the University of Oxford, believes Julia Gillard’s current proposal needs a bit of tweaking though. Specifically he’s calling for some detail on how to distribute the collected revenue as well as Australia’s consideration of Nuclear Energy.

Specifically Knight’s proposing a form of ‘dividend’ known as a tax shift. Instead of a check returned to each Australian as proposed by Hansen, Knight proposes to reduce income taxes. The idea of a tax shift is to tax the thing you want less of (such as cigarettes or carbon in this case) and reward what you want more of (i.e. work contributing to Australia’s GDP).

Knight did not provide any detail as to how the income tax cuts would be distributed – but it seems complex to my non-economist brain. Per Hansen’s scheme the difference in your pocket is purely a function of your contribution to carbon emissions. A tax shift has to consider varying tax rates as well as how to deal with the unemployed, disabled and/or pensioners.

The critical point being the return of tax revenue to the people—not the polluters. The effect on their profits can be best managed by phasing in the price on carbon.

Other scientist who support a carbon tax may be found at the Carbon Tax Center. Their list of supporters—just in the USA alone—includes Public Officials, Scientists and Economists, Opinion Leaders, Corporate (Editorials), and other Authors, Writers and Pundits.

Just some of the Scientists and Economists include (in addition to Hansen of course):

Follow the link above to read brief statements, references and other specific background material regarding each individual's support of a revenue neutral carbon tax (i.e. tax and dividend) approach to atmospheric CO2 reduction.

Stephen Chu, US Secretary of Energy and former director, Univ. of California Lawrence Berkeley Laboratory

William Moomaw, Professor of International Environmental Policy and Director of the Center for International Environment and Resource Policy, Tufts University

Steven Running, University of Montana Professor of Ecology

Paul Volcker, former chairman of the U.S. Federal Reserve

Gilbert Metcalf, Professor of Economics at Tuft University

Lawrence Summers, Charles W. Eliot university professor (and former president), Harvard University (and Former Treasury Secretary)

Joseph Stiglitz, Columbia University Economics Professor, Nobel laureate (and former chair of The President’s Council of Economic Advisers and Chief Economist of the World Bank)

Robert Reich, Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley, former Secretary of Labor and co-founder of The American Prospect

Jeffrey Sachs, Economist and director of the Earth Institute at Columbia University

Edwin L. Glaeser, Professor of Economics at Harvard University and director of the Rappaport Institute for Greater Boston

Paul Portney, Dean, Eller College of Management, Univ. of Arizona (and president, Resources for the Future, 1995-2005)

Herman E. Daly, professor in the School of Public Policy at the University of Maryland, foremost U.S. ecological economist, author of Ecological Economics, Steady-State Economics, Valuing The Earth, among other works

Gregory Mankiw, economist at Harvard University

Edward Snyder, dean of the University of Chicago’s Graduate School of Business

Tyler Cowen, economics professor at George Mason University


  1. Carbon tax is a fraud which only benefits large corporations, governments and banks. The Australian Citizens don't want it and won't allow it.

  2. In some ways I agree with a tax to fund the overriding problems we are faced with. However maybe there should be a trial for companies to self-fund their own omission trading scheme which would see them measured on their accountability. It would also give a different approach to the way pollution problems are tackled within companies as there pollution output would now be included in their budgets. The major issues are incentives to tackle Co2, who wants to pay for it?
    Let’s face it we all go about our daily lives using equipment and products that omit Co2. There for we are all responsible right? Wrong we only use what is available to us, if a tax is imposed on citizens then we will be of the belief that we have paid for our pollution so we are not responsible which not a logical approach to the problem is at all.

  3. I think the carbon tax's greatest potential benefit is to bring about a shift in personal behaviour.

    People tend to select lower cost options. A tax on carbon will make some options more pricey, encouraging consumers to opt for lower carbon choices. This doesn't mean, for example, a beef lover will be forced to stop eating beef. But he may end up buying local beef as opposed to something trucked in from across the country. The change may be at the consumer level, or made on the consumer's behalf by a shop owner. Either way, the tax will provide a cash-incentive to reduce the carbon footprint of consumer good and lifestyle choices across the board. There will certainly be many examples of cases where people are 'trapped' by the tax - the only result being a increase in cost. But over the mid- to longer-term; I think one would be very hard-pressed to ID many examples with no choice or cost saving options whatsoever.