[josho]

I've read bad things about carbon credits. Specifically that it's inefficient—you now have the overhead of a new market and middlemen making their cut. Whereas revenue neutral carbon tax is a far simpler method that still changes behaviour.

[greggyb]

A revenue-neutral carbon tax requires impossible knowledge to implement. Without a market price system, you cannot determine such a tax.

Further, tax changes move at a glacially slow pace compared to the process changes and technological progress that would be natural reactions to increased costs of producing carbon.

[josho]

I'd love to hear how you rationalize a tax requiring "impossible knowledge to implement". Taxes are a pretty universal way to disincentive economic behavior, the only question seems to be what tax rate to add. But, that seems easily solved.

For example, a carbon tax obviates the need for market pricing, simply set your target, e.g. 20% reduction in carbon use in 10 years, and fix carbon tax increases/decreases tied to that target, so that if you fall behind reaching that target a tax rate increase automatically kicks in for the next year.

[greggyb]

I don't say a tax requires impossible knowledge. A revenue neutral tax would be though. The intent there is to achieve economic efficiency, which cannot be determined in the absence of prices. This link provides a pretty good overview of the issues and the extra reading/criticisms are worthwhile[0].

>For example, a carbon tax obviates the need for market pricing, simply set your target, e.g. 20% reduction in carbon use in 10 years, and fix carbon tax increases/decreases tied to that target, so that if you fall behind reaching that target a tax rate increase automatically kicks in for the next year.

This is neither a strategy for implementing a properly revenue neutral tax, nor to drive toward any sort of efficient allocation. It is completely viable, though, if your goal is not revenue neutrality or efficiency.

I do not here make the argument that revenue neutrality or efficiency must be the aim of such governmental action, only that these two specific aims cannot be accomplished by a government imposing taxes.

[0]http://en.wikipedia.org/wiki/Economic_calculation_problem

[josho]

I see the point made by the economic calculation problem for state planning, but don't see how it applies to a carbon tax as a scheme to incentivize behavior.

Eg. Governments do a lot already to (dis)incentivize behavior through tax policy. Are you saying this doesn't work?

I'll do some further reading on cap and trade, most of my knowledge on this matter is from the book Storms of my Grandchildren, which speaks to the issues against cap and trade at length.