Would a Carbon Tax Actually Reduce Carbon Production?

Ever since I lived in Germany more than thirty years ago I’ve been in favor of a carbon tax of one form or another. Originally, my reasons were largely geopolitical. More recently environmental concerns have been added to those geopolitical ones.

In the last few weeks I’ve begun to wonder whether a carbon tax would actually reduce carbon production in the United States to any appreciable degree. The central reason is differential production of carbon among earners of differing income levels.

A place to start thinking about this is with this study (PDF). It’s not a study, really, more a collection of anecdotes but they’re interesting and suggestive anecdotes. The findings of the study are that

1. The overhead costs of living in the United States put reducing carbon production below a fixed level that’s above most of the rest of the world beyond the control of individual behavior. This actually may be more of a premise than a finding. But it means that even if you live in a cardboard box and don’t work your carbon footprint will be higher than the average Indian’s.
2. For most Americans there’s not a huge amount separating this overhead level and their actual carbon footprint.
3. This begins to change at about the top income decile and carbon footprint and the carbon footprints of the top .1% of income earners is orders of magnitude higher than that of those at lower income levels.

The short version of this is that people in the upper income decile have a carbon footprint something like an order of magnitude higher than the average, Bill Gates has a carbon footprint 10,000 times the average, and the carbon footprints of those in the upper income decile including Bill Gates are included in the average. Clearly, if they were excluded from the average the average for the lowest nine deciles would fall. How far it would fall is, as my mathematics textbooks used to say, an exercise left for the interested student.

The anecdotal results are supported by a somewhat more systematic study done in British Columbia. In the study the authors pitch the idea of individual offsets as a means of reducing income inequality. Frankly, I’m leery. I think you can grind only so many axes at a time and, if the objective is to reduce carbon emissions, shouldn’t we be doing that rather than implementing a policy that will reduce carbon emissions only at the margins but is bound to require a large civil bureaucracy and will be subject to political finagling since it picks winners and losers?

Going back to the cardboard box and Buddhist monks living in the woods doing nothing but pray and eat bark. I think that individual carbon production can be divided into three categories: overhead (the level of the guy living in the cardboard box), mandatory (the level of people with homes and going to jobs), and discretionary (everything else). Offhand I’d guess that a lot of carbon production for most people is the result of commuting to work. Over time a carbon tax high enough might have the effect of causing people to move closer to their work but I strongly suspect that for many that isn’t really an option.

A guy who commutes from the West Side of Chicago to Schaumburg every day doesn’t do it for the fun of it. There aren’t enough jobs on the West Side of Chicago and there isn’t enough low cost housing in Schaumburg. If you have a high enough carbon tax, something’s got to give. Either there need to be more jobs on the West Side of Chicago, there’s got to be more low cost housing in Schaumburg, or working stops making economic sense.

I don’t know what it’s like where you live but here at the far north end of Chicago and in the adjoining suburbs we’ve been eliminating the last few remaining pockets of low cost housing like mad over the period of the last ten years. The motels and SROs that used to exist are gone. What’s left is a lot more expensive.

There are any number of barriers to businesses relocating into the city of Chicago, city regulations and the pain of dealing with city government not the least of them. However, I suspect that a lot of managers want to live closer to where they live, too, and they don’t particularly want to live on the West Side of Chicago.

Thinking along those lines I’m beginning to think that a carbon tax might be more likely to make work less worthwhile than it is to reduce carbon emissions for one, simple reason: for those producing the highest amount of emissions no imagineable tax is high enough to cause them to change their behavior enough to reduce their emissions and those whose behavior will be affected by the tax don’t have enough discretionary emissions to make a big difference.

All of this reaffirms the direction I’ve been heading on this for some time: to the extent that reducing the amount of carbon in the atmosphere is a problem, geoengineering is probably going to be the only game in town.