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‘The real economic objection to a carbon tax is that it will…have same result as our current policies. Fossil fuels will end up being priced out use & be left with unreliable & expensive alternatives’

By Paul Homewood

A new paper from GWPF calls for the introduction of carbon taxes, instead of mandating renewables:


London, 24 October – An important new paper from the Global Warming Policy Foundation argues that the failure to limit CO2 emissions is a direct result of politicians’ obsession with mandating renewables as the main policy response.
The author, energy economist Professor Peter Hartley, argues that from basic economic theory, the imposition of an emissions tax is the best method of reducing CO2 emissions. However, policymakers have ignored this almost unanimous view of economic experts, and instead have mandated favoured technologies, notably renewables.
According to Professor Hartley:
“Mandating renewables is inefficient in theory and ruinously expensive in practice. There may be a case for subsidising research into new technologies, and there is certainly a strong case for spending on adaptation measures like flood defences, drought-proofing, improved evacuation and disaster recovery procedures, and the like. These defend against extreme weather events no matter the cause, can be chosen to suit local vulnerabilities, and do not require contentious international agreements to be effective. But picking energy winners in just a few countries is proving expensive, dangerous to national security, and worthless as a response to extreme weather events”.
The paper includes comments from two other economists, Professor Ross McKitrick and Robert Lyman. While having some disagreement about the details, McKitrick agrees that the principles behind carbon taxation are “inescapably obvious” and that if such a tax were put in place, “no one would respond to it by flinging vast amounts of money at wind or solar energy.”


Peter Hartley: It pollutes, so tax it (pdf)


Paul Homewood: The paper appears to be rather muddled.

It begins by labelling carbon dioxide as “pollution”. It cannot be overemphasised that it is nothing of the sort. Unfortunately this sloppy thinking leads the author down the road of a Pigouvian tax – the “polluter pays principle”. Yet as the paper acknowledges, there is no evidence that increasing levels of carbon dioxide in the atmosphere are detrimental, even if they have led to a small amount of warming.

And even if such damage did occur in future, how would we be able to quantify it? By setting a tax too high, we would end up causing much greater economic damage.

I would not disagree that mandating/subsidising renewable energy is probably the worst policy, as it is government and not market driven. But worse still, Hartley does not seem to recognise the monumental risks being taken over grid and energy security by this over reliance on wind and solar power.

But the real economic objection to a carbon tax is that it will end up having the same result as our current policies. Fossil fuels will end up being priced out use, and society will be left with an unreliable and expensive alternative, just the same as it is now.

Whatever the costs of global warming may or may not be in decades time, we know for a fact that the wellbeing of people around the world will suffer now without access to cheap, reliable fossil fuels. Eventually some new technology will come along, which will replace fossil fuels because it is better.

That is how economics works, and why the world is so much better off than it used to be. We should not be trying to interfere in that process.