Some weeks ago Peter Drysdale at East Asia Forum gave me a gentle slap on the wrist for being too cautious in my support for higher carbon prices to spur development of low carbon technology. 'A higher carbon price is central to getting incentives right to encourage the massive investment in carbon fuel alternatives', said Peter.
Now today I read this piece from the free market Cato Institute, which struck me as the most compelling case I have seen for the 'do nothing' (or at least 'do very little') school of climate change. And in it, author Jim Manzi pans the argument that we ought to create an artificial scarcity for carbon to incentivise development of low carbon technology. He says any carbon tax would be 'insanely expensive' yet still not high enough to work as an incentive for new technology. Trouble is, Manzi never says exactly why he thinks that's the case, though he does warn that much of the revenue from a carbon tax could be wasted on industry policy.
The whole article is worth a read, though below is a neat summary that Manzi himself provides. I'd love to hear arguments explaining why this is wrong:
In summary, then, the best available models indicate that 1) global warming is a problem that is expected to have only a limited impact on the world economy and 2) it is economically rational only to reduce slightly this marginal impact through global carbon taxes. Further, practical knowledge of the world indicates that 1) such a global carbon-tax regime would be very unlikely ever to be implemented, and 2) even if it were implemented, the theoretical benefits it might create would almost certainly be more than offset by the economic drag such a regime would produce.
