In response to a column by Andrew Coyne in the National Post, Colby Cosh outlines the intellectual origins of carbon pricing:
As Andrew knows, the intellectual origins of carbon pricing are purely classical-liberal. Maybe you have to belong to our club to spot that he has carefully not called it an invention of the “left.” When I was an undergraduate, it was the unfashionable libertarian and Hayekian zanies, not the despondent post-Cold-War Marxists, who were preaching what would become mainstream environmental economics. The left has been slow rather than fast to accept the idea of putting a mere price on what they regard as an inherent evil.
British economist Arthur C. Pigou (1877-1959).
Photo via Wikimedia Commons.All of the foundations of carbon pricing were developed by economists that the left, in all varieties, now regards as cartoonish modern-day demonoids. The gentle Arthur Pigou, who developed the concept of economic externalities and the idea of taxing them, might still pass muster. But Pigou’s reformer-reviser Ronald Coase is deeply suspect, having pioneered an amoral analysis of externalities that tackles social-cost problems like environmental pollution without assigning blame to, or even necessarily acting against, the polluters.
In his paragraph Andrew almost explicitly outlines the theory of the “double dividend” from replacing bad, economically distorting taxes (like the one we impose on incomes) with taxes laid directly on externalities like carbon. The double dividend is pure Gordon Tullock, who is now a hate figure on the left for his role in creating public choice economics.
You can see that this analysis gets pretty complicated in a hurry. The idea of carbon taxation isn’t really of the right or the left. The best term for it might be “neoliberal,” although some people think there is no useful place for that word. To the degree that the left has accepted carbon pricing, they have done so as a (perhaps mostly unwitting) compromise with otherwise abominable thinkers like Coase and Tullock. Total state command-and-control of the economy isn’t an option in today’s Western world, and since there’s a neo-Malthusian crisis in the atmosphere around us, we had better try to solve it without having to execute a global socialist revolution first.
But if instinctive suspicion of the state is a feature of the conservative mind, carbon pricing doesn’t solve the problem completely. Canadian carbon tax designs have been given redistributive features, which makes them more acceptable politically to people who aren’t instinctive or innate conservatives, but creates confusion and distaste for those who are. And to the degree conservatives are inclined to doubt that the state will cut other taxes to make carbon prices revenue-neutral, they have been partly justified, so far, by the history of Alberta and B.C. The “double dividend” is a good idea: can governments be trusted to actually let us collect it?
In a nutshell, that lack of trust is why I’m generally opposed to the federal carbon tax system, even though the idea of carbon taxes (when properly implemented) are far less distorting to the economy than the hodge-podge of taxes and regulations we have now.
