A carbon tax may not actually do a whole lot for emissions

There's a chicken/egg problem at work.

A carbon tax is most economists' favourite method of dealing with climate change. It is exactly the sort of simple, market-driven intervention that they tend to like: set a price per tonne of carbon emitted which is equal to the value of the damage that tonne does to the climate, and then sit back and what businesses and consumers react. Some may cut their usage; some may switch to low-carbon sources of energy, which suddenly become cheaper comparatively; and some may choose to just pay the extra cost (what happens in that last situation is debatable – some think the money should just count as general taxation, others that it should be put towards climate change prevention and mitigation).

The Washington Post's Brad Plumer suggests that it may not work as well as we would hope, however. He reports on a recent MIT study looking at the likely effect of a $20 a ton carbon tax in the real world – the value proposed by a pair of MIT researchers last month.

Plumer writes:

Sebastian Rausch and John M. Reilly of the MIT Global Change Institute recently put forward a proposal for a $20/ton carbon tax that would rise 4 percent each year, starting in 2013. (The funds would be used to offset taxes elsewhere.) Here’s what their economic model predicts would happen to U.S. greenhouse-gas emissions:

Blue line: MIT reference case with no carbon tax. Black line: EIA reference. Green line: Scenario with MIT carbon tax in place.

With a carbon tax in place, U.S. greenhouse gas emissions do start declining quite a bit (this is the green line). But by 2030, emission levels stall, even though the carbon tax keeps rising and rising each year. The United States wouldn’t get anywhere near the 80 percent cut by 2050 that the White House has envisioned.

One explanation here is that MIT’s proposed carbon tax just isn’t high enough. But Muro favors another possibility–that a carbon tax alone isn’t enough to drive deep reductions. The private sector tends to under-invest in energy R&D and key bits of infrastructure such as transmission lines. Without further policies, it’s unlikely that we’ll see a sweeping transformation of our energy system to give people alternatives to coal plants and gasoline-powered cars.

This echoes an argument I've heard several times from those on the more technical side of climate change prevention. For all that the economists and politicians like to talk about creating the conditions in which the private sector will be incentivised to help tackle climate change, those who are more keenly aware of the massive costs involved tend to be rather more pessimistic.

They point out that the carbon tax model provides a cash injection to providers of low-carbon energy – but only after the tax is already instituted. As a result, there's another weak link in the chain, which is the ability of those providers to secure loans to build the capacity required. That's possible for massive companies looking to get into a new area; and it's possible for smaller companies, provided they get enough certainty from the government to be able to convince bankers.

But the fear is that larger companies, already strongly embedded in the conventional energy infrastructure, have little incentive to devote money, which could be used to lower the cost of polluting fuels, to instead build new capacity; and smaller companies won't be left with enough time between when the government finally confirms a carbon tax, and when their new generation is actually needed.

At the same time, though, there is growing evidence that some companies really are going above and beyond the call of duty. Some of it may be greenwashing, and some may be token expenditure, but if there really is any sizeable investment in low-carbon infrastructure, then it makes a carbon tax that much more effective.

Carbon taxes can only lower emissions if they raise the price of polluting relative to an alternative. If that alternative isn't available, then they risk being simply another source of revenue for the state.

Wind turbines being prepared. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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How to think about the EU result if you voted Remain

A belief in democracy means accepting the crowd is wiser than you are as an individual. 

I voted Remain, I feel sick about this result and its implications for what’s to come. But I’m a believer in democracy. This post is about how to reconcile those two things (it’s a bit unstructured because I’m working it out as I go, and I’m not sure I agree with all of it).

Democracy isn’t just fairer than other systems of governance, it’s smarter. It leads to better decisions and better outcomes, on average and over the long run, than countries that are run by autocrats or councils of wise men with jobs for life. It is simply the best way we have yet devised of solving complex problems involving many people. On that topic, if you’re not averse to some rather dense and technical prose, read this post or seek out this book. But the central argument is that democracy is the best way of harnessing ‘cognitive diversity’ — bringing to bear many different perspectives on a problem, each of which are very partial in themselves, but add up to something more than any one wise person.

I don’t think you can truly be a believer in democracy unless you accept that the people, collectively, are smarter than you are. That’s hard. It’s easy to say you believe in the popular will, right up until the popular will does something REALLY STUPID. The hard thing is not just to ‘accept the result’ but to accept that the majority who voted for that result know or understand something better than you. But they do. You are just one person, after all, and try as you might to expand your perspective with reading (and some try harder than others) you can’t see everything. So if a vote goes against you, you need to reflect on the possibility you got it wrong in some way. If I look at the results of past general elections and referendums, for instance, I now see they were all pretty much the right calls, including those where I voted the other way.

One way to think about the vote is that it has forced a slightly more equitable distribution of anxiety and alienation upon the country. After Thursday, I feel more insecure about my future, and that of my family. I also feel like a foreigner in my own country — that there’s this whole massive swathe of people out there who don’t think like me at all and probably don’t like me. I feel like a big decision about my life has been imposed on me by nameless people out there. But of course, this is exactly how many of those very people have been feeling for years, and at a much higher level of intensity. Democracy forces us to try on each other’s clothes. I could have carried on quite happily ignoring the unhappiness of much of the country but I can’t ignore this.

I’m seeing a lot of people on Twitter and in the press bemoaning how ill-informed people were, talking about a ‘post-factual democracy’. Well, maybe, though I think that requires further investigation - democracy has always been a dirty dishonest business. But surely the great thing about Thursday that so many people voted — including many, many people who might have felt disenfranchised from a system that hasn’t been serving them well. I’m not sure you’re truly a democrat if you don’t take at least a tiny bit of delight in seeing people so far from the centres of power tipping the polity upside down and giving it a shake. Would it have been better or worse for the country if Remain had won because only informed middle-class people voted? It might have felt better for people like me, it might actually have been better, economically, for everyone. But it would have indicated a deeper rot in our democracy than do the problems with our national information environment (which I accept are real).

I’m not quite saying ‘the people are always right’ — at least, I don’t think it was wrong to vote to stay in the EU. I still believe we should have Remained and I’m worried about what we’ve got ourselves into by getting out. But I am saying they may have been right to use this opportunity — the only one they were given — to send an unignorable signal to the powers-that-be that things aren’t working. You might say general elections are the place for that, but our particular system isn’t suited to change things on which there is a broad consensus between the two main parties.

Ian Leslie is a writer, author of CURIOUS: The Desire to Know and Why Your Future Depends On It, and writer/presenter of BBC R4's Before They Were Famous.