I thought this was an interesting little comment in an NYT piece about a carbon tax that China is supposedly thinking of introducing:

The Xinhua report about China’s plans did not say how big a tax the country would impose, but it pointed to a three-year-old proposal by government experts that would have levied a 10-yuan ($1.60) per ton tax on carbon in 2012 and raised it to 50-yuan ($8) a ton by 2020. Those prices are far below the $80 (500-yuan) a ton that some experts have suggested would be needed to achieve “climate stability,” and which would raise the cost of gasoline by about 70 American cents a gallon.

That $80 a tonne number of course comes from the Stern Review. However, not everyone agrees with the results of the Stern Review: Richard Tol is certainly less than complimentary about the economic reasoning that led to that figure. But there's two things which should be pointed out about even this lower number.



Clearly, if we impose a high carbon tax right now then we put out of business a lot of organisations and factories that emit CO2. That's part of the point of it of course. However, if we have a low but rising tax (and Nordhaus has advocated one of perhaps $5 now but rising to $240 by 2040) then we'll not put out of business extant factories. But we will be making sure that the next generation of them, the next set of power plants to be built for example, will be low or non-carbon emitting. That is, that we'll not be forcing people to throw away perfectly good plant and capital right now: but ensuring that when they replace it they do the right thing.

And this is obviously cheaper for us all. And yes, climate change is just like any other problem we face. We do indeed want to deal with it in the cheapest manner possible. For quite apart from anything else, solving this one cheaply leaves more resources to go on and solve other ones.

I'd give this Chinese idea two stars out of a possible three so far. Start low and raise the tax in future, yes, a good idea. And assuming that I'm right about the concurrent reduction in subsidies then yes, this is also a good idea. And it would be three stars if they just raised the rate a little bit. Starting at $5 a tonne would get the full three stars. Not that the Chinese government gives two hoots for how I grade it but expressions of opinion and all that....