Better price than a signal quantity signal

It is fascinating to see how a good theory turns into a bad policy. All economists are in agreement: the best way to fight against a negative externality (a cost imposed on others by a polluter does not pay for the cost), it is the tax. CO2 emissions are une externality, taxa them. At 32 euros per tonne (17 to start), all the reductions that cost less than 32 euros per tonne will be performed, which will be sufficient to achieve our objectives at least cost. Better price than a signal quantity signal. This theory, well argued in the Rocard report, is solid and classical. The carbon tax which she gave birth is yet dismissed by the French. Seek error.

There are three. Indeed, the theory is valid only when three conditions are met. The first is that no other policy to fight the externality is in place. The second is that the space where the tax is the same as the space where occurs the externality. The third is that the impact on the fairness be negligible or neglected. Unfortunately, these three conditions are totally raped with regard to CO2 emissions.

First, unlike what implies the theory, it does share not zero in the reduction of CO2. On the contrary, the land on which to advance the carbon tax is already well occupied. Externalities of CO2 are in France already constrained, constrained, taxed, in a thousand ways. They are by the quotas of the European Union. They are by French politics of the environment, including by the Grenelle of the environment, with its standards, bans, taxes, public investment. This beautiful set was presented a few months only as necessary and sufficient to reduce CO2 to desired levels. Promised, juror: without the measures of Grenelle, the planet is lost; with these constraints, it is saved.

Six months later, change of address. For the future of the globe, a carbon contribution would have been far more effective than all these binding measures. But the Government cannot lose face, recognizing that the round table was a mistake and should be replaced by a carbon tax. Then it will be both: a layer of signal-price on the layer of signals-amounts already in place. With the added bonus of the same refrain: without additional carbon tax, the planet is lost; with this tax, it is saved.

This additionality breaks the demonstration of the justification for the tax. An example will make the feel. The Sweden has a much heavier than ours carbon tax, but the price of gasoline in Sweden is less than the price of gasoline in France.

Second, space where the tax applies is France, while the space where the externality of CO2 occurs is the planet. This is not the same space, unlike what implies the theory. The effect of uniform abatement costs at the margin, which based the effectiveness of the tax, cannot be triggered by a single country. No hexagonal price signal will solve a global problem.

One objection is to "lead". But, we already provide. We taxa our fuels to more than 150. Twenty countries, including China and the India, subsidize them. Who seriously believes that increase our fuel taxes to 170 brutally will encourage them to follow us suit

China is committed to reducing its CO2 emissions per dollar of 3 or 4 per year (which is already not so bad), but as it is well to increase its production of 10 or 11 per year, its CO2 emissions will increase annually by 7, i.e. double - you have well read: double-d-' here 2020, which represents an increase of about 7 billion tons. The France claims to reduce releases of the same CO2 by 20, i.e. of 70 million tonnes; Let's assume that the carbon tax generates 10 additional discount, or some 7 million tons. For the decade that begins, 7 million tons less in France, 7 billion tons more in China alone. The game worthwhile well

Because the resources devoted in France, but not in India or in China, to reduce CO2 emissions will increase the relative cost of "made in France". They will encourage our industrialists to dismiss CO2 in India and our consumers to import products manufactured in China. It will always cry on the concentrations of CO2 increase in the world, and the factories close in.

Third, the beautiful theory of the carbon tax ignores its implications in terms of equity. It justifies the tax by its only economic efficiency, its ability to reduce the costs of environmental policy (a highly desirable objective). The misfortune is that these costs are unevenly distributed. The poor spend a greater share of their income than the rich on the consumption of emitting CO2 property, such as heating or traffic. A carbon tax is regressive by gasoline.

The authors of the carbon tax also well understood. They have sought to limit the regressiveness and invented all sorts of rebates and refunds to this effect. But it's a very difficult, if not impossible task. Between the too many incentives that make inefficient tax, and the step enough facilities which make it unfair, the way is narrow.

Therefore remains at the arrival a tax, which will gladly to Nicolas Hulot, but which no longer has much to do with the great theoretical idea of a carbon tax. Opinion this, the elders of the Constitutional Council said. The Government is heading and will seek to pass in addition to the three original sins of its tax. It gives less than a month to rhyme new tax and forced former, global problem and hexagonal measures, and efficiency with equity. We wish pleasure.