Move some taxation from general income to a harmonized tax contingent on global temperature (you can apply the tax on fossil fuels directly) and put a climatic tariff to all countries not joining the club.
Almost solved in the 30s… instead of that, multiple overlapping laws, whose combined effect is imposible to assess. Firms asked to produce carbonic accounting. The whole thing is incredible.
That's basically it. Tax the net emissions (excise on fossil fuels and plus equivalent subsidy on CCS) and a Carbon Border Adjustment Mechanism. I'd say just go head and do it, not make contingent.
I find the McKittrick addition extremely intelligent: we can disagree on the key “Climate sensitivity” parameter, and fight on our preferred estimate (this is 1 to 3 discrepancy, not small) for setting the tax. But then, we still would agree on using some observable for
Adjustment of the future tax path.
Additionally, if you know the tax is contingent on real warming, instead of accepting the fixed tax in your investment decisions your would try to use the best science on climate to assess technology choices.
After McKittrick I have become a “contingentarian”; for each factual discrepancy I try to find a mechanism that avoid present conflicts on unknown future facts.
While the optimal tax rate will certainly need periodic revision as costs of different technologies change and climate models change and estimates of damage of CO2 accumulation changes and cost of adaption change, these need to be filtered through models, not crude temperature feedbacks.
You have to trust the modeling process and the modelers. Ex ante commitment to a (more or less complex) feedback formula looks more predictable and easy to agree on.
In any case this a modest difference (the typical “rules vs discretion” problem).
I think you've got it right.
The problem from the perspective of economics is solved:
https://www.rossmckitrick.com/uploads/4/8/0/8/4808045/handbook_chapter_2011.pdf
Move some taxation from general income to a harmonized tax contingent on global temperature (you can apply the tax on fossil fuels directly) and put a climatic tariff to all countries not joining the club.
Almost solved in the 30s… instead of that, multiple overlapping laws, whose combined effect is imposible to assess. Firms asked to produce carbonic accounting. The whole thing is incredible.
That's basically it. Tax the net emissions (excise on fossil fuels and plus equivalent subsidy on CCS) and a Carbon Border Adjustment Mechanism. I'd say just go head and do it, not make contingent.
I find the McKittrick addition extremely intelligent: we can disagree on the key “Climate sensitivity” parameter, and fight on our preferred estimate (this is 1 to 3 discrepancy, not small) for setting the tax. But then, we still would agree on using some observable for
Adjustment of the future tax path.
Additionally, if you know the tax is contingent on real warming, instead of accepting the fixed tax in your investment decisions your would try to use the best science on climate to assess technology choices.
After McKittrick I have become a “contingentarian”; for each factual discrepancy I try to find a mechanism that avoid present conflicts on unknown future facts.
While the optimal tax rate will certainly need periodic revision as costs of different technologies change and climate models change and estimates of damage of CO2 accumulation changes and cost of adaption change, these need to be filtered through models, not crude temperature feedbacks.
You have to trust the modeling process and the modelers. Ex ante commitment to a (more or less complex) feedback formula looks more predictable and easy to agree on.
In any case this a modest difference (the typical “rules vs discretion” problem).
Well you have to trust the designers of the feedback formula, too.
But maybe I misunderstand, the tax would vary according to a formula based on changes in global average temperature or something like that?
You trust them “ex ante”, once when the Treaty is signed, then the tax adjusts in line with the temperature deviation from a baseline path.
https://www.rossmckitrick.com/uploads/4/8/0/8/4808045/handbook_chapter_2011.pdf
“This chapter explores an alternative approach based the concept
of state-contingent pricing, in which agents commit to a pricing rule rather than a path.
The rule connects current values of the emissions price to observed temperatures at each
point in time. In essence, if the climate warms, the tax goes up, and vice versa. A
derivation is provided showing how such a rule yields an approximation to the unknown
optimal dynamic externality tax, yet can be computed using currently-observable data. A
recently-proposed extension coupling the state-contingent tax with a tradable futures
market in emission allowances would yield not only a feasible mechanism for guiding
long term investment, but an objective prediction market for climate change. The
advantage of the state-contingent approach for facilitating coalition-formation is also
discussed, as are directions for research.”
What does the approach yield compared to something like Stern that is with the same "without policies" assumptions.