Tuesday, April 3, 2007

EPA Regulation of CO2 Emissions

On Monday, the Supreme Court ordered the EPA to revise its policy regarding CO2 emissions (NYT article). It sounds like this will lead toe the EPA regulating CO2 emissions. I can only hope that we get something similar to Pigouvian style emissions taxation as Greg Mankiw has been talking about for some time (two recent posts here and here), and that I will claim to have independently thought up. The important steps would be: 1) find some way to estimate marginal social (distributed) costs caused by CO2 emissions (yikes! that sounds hard) 2) establish some sort of method to estimate emissions by the different polluters (less hard) 3) tax those emissions based on the marginal social costs. This might take the form of taxing emissions directly, or, more likely, taxing fuel based on the CO2 emissions it will release when combusted. 4) enjoy an efficient (though local) level of CO2 emissions :)

Pigouvian taxes have many advantages over other government solutions to pollution like technology subsidies or alternative fuel subsidies. One, the government has to know many fewer technical details about the future of innovations in pollution reduction and fuel efficiency. Also, the system is much less prone to pork, corporate welfare and favoritism. The system also makes it much easier to tell exactly when the government has done enough to reduce
emissions. There are many other reasons, but I won't go into them here.

I am rather cynical about the prospects Pigouvian taxes actually being implemented, but I would love to be proven wrong.

As a side note, the
NYT website is ultra annoying because if you double click anywhere, it brings up a definition for the word you clicked on, and I have a habit of fidgeting with my mouse and double clicking everywhere.

Bush has responded to the Supreme Court ruling (LA Times reports):
But solving the problem, he said, must not cut into economic growth.
"It's going to require new technologies, which tend to be expensive, and it's easier to afford expensive technologies if you're prosperous," he said.
That sounds like subsidies to me.


Wes S. said...

While I have no objection to decreasing CO2 emmissions, I find it amusing that a self-proclaimed libertarian believes govenment will accurately assess the social costs of polluters.

As Rod Sterling would have said, submitted for your approval: Nancy Pelosi, Speaker of the House for the environmentally conscious government, plans legislation to reduce human-caused global warming, but in order to do so effectively, she needs a private 747 to transport a dozen cronies and herself coast to coast non-stop several times a year. What's the social cost of saving the world in the Twilight Zone?

loogel said...

Calling myself a 'lbertarian' refers mostly to my ethics. I am by no means an anarchist or even a minarchist.