Wednesday, December 25, 2013

Splitting the cost of carbon

Eduardo Porter has an interesting column about the issue of how to split the costs of carbon between "producers" and "consumers." From an economic point of view, the question has a simple and elegant answer: a uniform, global (harmonized) carbon tax would split the cost between producers and consumers in an efficient manner. Since the supply of most manufactured goods is probably quite elastic, much of this tax would be passed onto consumers. The exception would be the countries reliant on producing and selling fossil fuels: they would be hammered. Additional distributive questions would remain: Would it be fair to demand "reparations" for the West's historical carbon emissions? Should richer nations redistribute some of their carbon tax revenues to poorer nations? And the overriding question of who will exercise the necessary political will and global leadership would remain as well.

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