Pirate's Cove

Canadian Terence Corcoran makes the case that a carbon tax doesn’t really reduce the use of fossil fuels, particularly in discussing the Canadian carbon tax schemes (via Watts Up With That?)

Carbon tax smackdown: Terence Corcoran says higher prices at the pump don’t mean fewer emissions

According to the oracles of carbon economics, a carbon tax must be applauded because it is a “market-based” tax that acts just like a “market price” which, under the infallible economic laws of supply and demand, will automatically produce reductions in carbon dioxide emissions more efficiently than regulations and other big-government measures.

As the current $20-a-tonne federal carbon tax — about 4.4 cents per litre of gasoline at the pump — rises to $50 or $100 or even $200 in years to come, fossil fuel consumption will fall, an outcome allegedly guaranteed by economic theory.

None of this carbon tax dogma stands up well in the real world, as I will demonstrate shortly.

We’ll skip by the types of carbon tax schemes mentioned and dissected, such as the new favorite, the carbon tax and dividend type, which sees the Government causing your cost of living to artificially rise, then they refund some of that money back to you (which means you are now even more reliant on the Government. Strange that, right?), and move on to the impacts (though Corcoran does mention that British Columbia gave up on refunding anything and keeps it all)

Of all the myths surrounding a carbon tax, the greatest is the foundational claim that an increase in the price of fossil fuels will lead to major reductions in carbon emissions, thereby saving the world from the perils of climate change. Yale University’s William Nordhaus, a 2018 Nobel Prize winner, argues in The Climate Casino that a “sharp price rise” is needed to “choke off” growing carbon emissions.

Gasoline price history in North America suggests the choke-off theory is at least debatable and more likely unsupportable.

In the United States, the price of gasoline soared more than 60 per cent to US$3 a gallon during the 1970s and went through another price burst to almost $4 a gallon in the early part of the 21st century. Increases of that magnitude — up to $2 a gallon — are equivalent to imposing a carbon tax of $160 a tonne. But U.S. consumption of gasoline declined only slightly, and for other reasons (see graphic).

In Canada, gasoline consumption has grown steadily over the past 40 years despite bouts of severe price increases that were equivalent to carbon taxes of up to $500 a tonne (see graph).

The reason high prices/taxes don’t produce dramatic cuts in demand is well-known. Studyafter study has concluded that gasoline is dominated by what economists call “price inelasticity.” People do not change their behaviour in the face of rising prices when the product is essential to their economic success. There are some recent counter-studies, but it is clear that the market-price theory is still highly theoretical.

The piece provides lots of graphs and charts to back this all up, worth flipping to the article to see them.

Think about it: when the price of gas has spiked this century, especially when it was way up in the high $3 to $4 range, did you change your behavior that much? Perhaps a little bit. Maybe one less trip to the beach, but, you still went. You still drove to work. People who don’t carpool mostly didn’t start carpooling. They didn’t start taking the bus. And, get this, if you look at places like the United Kingdom, which has placed massive costs on fossil fuels other than carbon tax schemes, making gas way, way more expensive than North America, the only thing that truly caused a dip was the Great Recession this century. People still paid for it.

Which leads us to another delusion. A carbon tax is said to be a beautiful free market substitute for costly and inefficient regulation. Some economists used to say that carbon taxes were preferable because they left “no room for planners.”

On the contrary, carbon control and pricing have become a bureaucratic paradise for central planners and economic control freaks.

In Canada, governments still plan to regulate coal out of existence. Electric vehicle mandates and quotas will be issued; fuel consumption standards will be imposed on non-electric vehicles. Carbon sequestration will be required for major industries. Alternative energy forms must be subsidized. Industrial emission standards will be regulated into existence by state planners, although scores of exemptions will be needed.

The astute reader will by now perceive that the hard-core case for carbon pricing as a “market-based” regime that will let the “market mechanism” of the “carbon price” do the work has been thrown overboard.

Carbon taxes are not free market mechanisms, they are government imposed, government run, government priced market mechanisms. What’s the political system that this is called?

The thing is, the leading members of the Cult of Climastrology surely know this all, but, even if they don’t, they do not care, because the purpose of any carbon tax scheme is to put more money in the hands of government, to grow government, and to give government more power over everything.