Carbon Tax, an assessment

Petition idea: Debate the merits of a wider carbon tax (or equivalent) with revenue raised being directed back to the people or to long-term innovation investment.

Taxing carbon is one of the best ways to incentivize the reduction of greenhouse gas emissions.

By putting a price on carbon, emitters are confronted with the environmental cost of their actions and forced to manage their carbon output. While other policy interventions are also required, putting a price on carbon is central to reducing emissions cost-effectively.

As part of the EU, the UK is involved in a form of pricing carbon via the EU emissions trading system (EU ETS).

However 58% of emissions are out of scope of the EU ETS as they originate in transport, buildings, waste management and agriculture.

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If the UK leaves the EU there are scenarios where a Carbon Emissions Tax will be collected but only by UK stationary installations currently in the EU ETS.

Parliament needs to debate the introduction of a wider carbon emissions tax for all industries and sectors and in a way that is just for society.

Positives:

A carbon tax or similar is widely supported by economists (both those associated with right wing ideas as well as those associated with left wing ideas). It goes across political lines.

There is support from business and industry. Most notably many fossil fuel companies are supportive, but the support cross all business industries (for instance, Microsoft).

Much of the infrastructure is already in place to be able to collect such taxes.

Negatives:

A carbon tax is considered “regressive” as it impacts those on low-income more than higher income.

Areas of Debate and Mitigation

A “Carbon Dividend” could be committed to be given directly back to the UK people. This would mitigate the regressive impact. This could be means-tested to further help those on lower income. Adjustments to VAT could also be made. A graduated ramp up can also mitigate impacts.

Or, when, for instance, electricity prices go up by £100, the government could give a £100 dividend that lowers internet costs of a similar non-carbon intensive good/service.

The tax revenue could also be ear marked for innovation. As energy innovation is likely to be a vital part of transitioning to a lower carbon economy.

The tax revenue could also be ear marked for other positive long term investments such as healthcare or education or other investment which have broad support.

A border adjustment for carbon content of imports and exports may be needed to discourage free-riding by other nations.

Formation of a “climate club” as suggested by economist William Nordhaus should be explored.

A mix of all the above ideas is possible and deserves debate.

Conclusion

A comprehensive carbon tax plan should enable reduced emissions, predictability for business, and stimulate long-term investments.

There is strong support from multiple stakeholders across the socio-political divides for a more comprehensive carbon tax. This support is further strengthened by economic and academic work and popular opinion. Negative economics can be mitigated leading to an overall positive for society.

This needs proper parliamentary debate.

Selected but not-comprehensive sources

(will be updated periodically - message me if you have good sources)

https://www.gov.uk/government/publications/carbon-emmisions-tax/carbon-emmisions-tax

https://www.nytimes.com/2018/10/13/climate/nordhaus-carbon-tax-interview.html

http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2017/03/Working-paper-212-Andersson_update_March2017.pdf

http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2017/12/How-to-make-carbon-taxes-more-acceptable.pdf

https://www.clcouncil.org/

http://www.igmchicago.org/surveys/carbon-tax

Nordhaus DICE model below:

and some papers: https://econpapers.repec.org/RAS/pno115.htm

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 Comments (I will add useful comments on sources or ideas to those who message me)

A near universal benefit/dividend softens the tax impact.

Means-testing in general is expensive and prone to errors, it may be better to simply give benefits widely or at least to 80 percent of people, almost universal.

Carbon price escalators have been deemed a success because it provides visibility and graduation; allowing businesses to plan.

The proceeds must be ring-fenced by law so the Treasury doesn't raid it and then split into three elements: one, which goes to everyone except the richest, another to innovation and the remainder specifically to industries that are stranded or most severely affected by anti-competitiveness from carbon tax.

Making sure the impact does not fall on the low income is important, which is why the re-distribution element is crucial.

 

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Jobs, Stories of energy transition

They Grew Up Around Fossil Fuels.
Now, Their Jobs Are in Renewables. / NY times 

“Chris Riley comes from a coal town and a coal family, but he founded a company that could hasten coal’s decline. Lee Van Horn, whose father worked underground in the mines, spends some days more than 300 feet in the air atop a wind turbine. They, and the other people in this story, represent a shift, not just in power generation but in generations of workers as well.

They come from places where fossil fuels like coal provided lifelong employment for their parents, grandparents and neighbors. They found a different path, but not necessarily out of a deep environmental commitment. In America today there is more employment in wind and solar power than in mining and burning coal. And a job’s a job....”

 

Me: fascinating accounts of how the economics of wind and solar and the direction of energy markets is convincing a new generation to work in wind and solar over coal and oil  

link here: 

 https://www.nytimes.com/interactive/2019/03/26/climate/wind-solar-energy-workers.html

UK life expectancy and healthcare spend vs OECD. NHS success story?

UK life expectancy expanded - in line with the OECD average (more or less, there was a little catch up) until recently where (like in a few countries) it seems to be flattening. This is a blunt but well understood measure of a population’s health.

A similar type of trend can be seen in childhood mortality. Although experts can gripe with the data, the overall trend is likely robust. There is also some catch up from OECD average from a poorer start.

This is a good achievement by the UK given what the UK has spent on healthcare since the 1970s.

My general observation here is that the UK has underspend / invested less in healthcare but has managed to obtain an average to above average results.

The under spend as % GDP has been 2 to 4 percent points lower than OECD peers on average. This has been going on since the 1970s. (The World bank data is from 2000, sourced from WHO)

There are many factors that combine to impact life expectnacy and health. Correlation is not causation.

However, I think there is enough data and evidence to suggest that given the amount the UK has invested in health (and social care and education) that if the UK wants to continue the positive trends in health, it will likely have to spend more or at current levels of spend the health out comes will - in my view - likely to continue to tail off.

In this sense, the UK’s NHS has been a unique system that has enabled outsized gains in health outcomes for the amount of spend over the last 50 years.

OECD data.

OECD data.

I can’t make a nice graph widget, but I can show how this % spend on GDP goes back to the 1970s. so this is arguably about 50 years of under spend, at even the lower end of 2% of GDP that’s somewhere in the region of £500bn to £1,000 bn (yes 1 £trillion) in culmulative under spend compared to what would have been spent on the OECD average %.

(Now whether it would have been well spent or what else the UK spent the money on is another debate - maybe the OECD over spent given its outcomes… but given the UK is uniquely low (though Italy is close in some years and has slightly worse outcomes broadly) .

You can see how Germany is approx matching the UK since 1970 on life expectancy and trend (OK it did slowly gain beofre mathcing), but was spending much more of GDP to achieve that.

Univeral Basic Income, Finland experiment

A trio of articles looking at the Universal Basic Income idea and recent trial in Finland. Plus link to the Finiland page.

Tiny Indian state wants to pay its citizens a universal basic income | South China Morning Post / WaPo

If successful, the experiment by Sikkim, one of India’s most progressive states, would help alleviate poverty and address the challenge of job automation

https://www.scmp.com/news/asia/south-asia/article/2182595/tiny-state-india-wants-pay-its-610500-citizens-universal-basic

Universal basic income in India is a tantalisingly close prospect

Biometric ID cards and the squeeze on the rural poor are propelling the idea forward | Financial Times  

https://www.ft.com/content/a7ef07ec-2a00-11e9-9222-7024d72222bc



Finland's grand universal basic income experiment raises more questions than it answers | WIRED

Universal basic income might make people feel less stressed but doesn't necessarily fix unemployment

https://www.wired.co.uk/article/universal-basic-income-policy-universal-credit


Me: Along with a “job guarantee” idea, UBI started off as a fairly radical idea with now some significant small scale experiments behind it. I’m cautious as to how much other places can extrapolate from Finland, but overall it neither seems to help nor hinder your job prospects, but makes you feel happier. Maybe that’s enough given the highly admin intensive and relatively poor long-term outcomes for the current “job seeker” type benefits/sanctions, despite policy-maker backing.  


“In Britain, intensifying the use of sanctions and introducing harsher penalties associated with being sanctioned has been largely ineffective  at increasing flows from JSA into sustainable employment.” doi:10.1093/cje/bex088 Job Seeker’s Allowance (JSA) benefit sanctions and labour market outcomes in Britain, 2001–2014 Martin Taulbu et al. (2018)  https://academic.oup.com/cje/article/42/5/1417/4827894

Link to the Finland experiment here: https://www.kela.fi/web/en/basic-income-experiment-2017-2018