Higher costs is the point – updated

Complaints that the ETS will impose higher costs on us seem to have missed the point – that’s what it’s supposed to do.

Imposing higher costs on activities which cause emissions is designed to provide an incentive to change behaviour which will lead to reduced emissions.

Matt Nolan at The Visible Hand in Economics puts it simply:

 Even if you don’t believe in global warming, we have a liability that is based on carbon emissions.  As a nation, either people who produce the carbon pay for it – or everyone pays for it through higher taxes.

So here in lies the question – do we want higher prices for carbon goods or lower incomes because of higher taxes?  Given that the liability is a function of the amount of carbon we produce, it follows that pricing carbon on the basis of this will lead to the “best” solution – no matter what political party you support.

If the cost of something rises, it doesn’t follow that consumers’ costs will increase by the same amount.

If the price of fuel and power go up, we have a choice about paying the increase or using less. Saving fuel and power will save money. 

Using less energy and using what we do use more efficiently makes economic and environmental sense whether or not you think the climate is changing.


Scrubone gets it and Kiwiblog’s post on Matt’s post has generated lots of comments.

9 Responses to Higher costs is the point – updated

  1. Cadwallader says:

    Sorry but your penultimate paragraph does not constitute a choice. This odious tax will be 100% pervasive and is indefensible on the grounds of “choice!” (or any other ground for that matter.) All goods and services will be affected by this tax.

    Your watering down of its effects on any grounds is an attack on the fundamental principle that all additional taxes run counter to productivity. The ETS is bad news for us all and will attack us at each and every cash-register we may encounter.


  2. singularian says:

    What emissions are you talking about?

    Carbon? – Carbon is the 4th most common element in the Universe. Gonna have to pay a lot of tax to get that under control.

    C02? – Again – there is no scientifically proven relationship between C02 and CAGW except the basic physics. The basic physics say there is nothing to worry about by a doubling in trace C02.

    So, what are we really taxing? What is the tax going to do? How large is the energy reduction going to be by increasing the tax? Any reduction at all? I’d be willing to bet there will be no reduction in the next 100 years, if anything energy use will continue to rise. What is the revenue from this tax going to be used for? Propping up ‘alternative’ energy sources that aren’t actually viable without subsidy?

    There is only one energy source that is C02 free and efficient and cheap – Nuclear – lets go there instead of wasting billions on fly by night subsidies, forestry owners and politicians egos.

    Come on, if you really want to do something about the energy problems we MAY face in the future, start pushing Nuclear energy, until then, I’m afraid you’re just another muppet pushing the party line.


  3. pdm says:

    HP – I meant to put this in my comment yesterday.

    So called Global Warming or Climate Change is just nature doing what it has done since the world began and there is no justification for any Government to place a tax on any part of it.



  4. Fredinthegrass says:

    I could go along with your reasoning in a perfect world, but the world we live in
    aint. Call me cynical but with politicians and ‘big’ business involved I get worried.
    Can you prove to me that no one is on the ‘make’?
    Are you really sure the ‘science’ we are being quoted is accurate.
    Have all factors been taken into account on arriving at the numbers?
    I am very unsure of these things.


  5. Cadwallader says:

    Unlike “Fredinthegrass” I am not worried about so-called “big business” (whatever that is?) but I am concerned about big government. Every new form of taxation heralds more justification for the state to plough through our lives and affairs. The ETS will be yet another threshold for this behaviour.

    I read recently that the tax model of “income tax” is now regarded as a dated mechanism for pillaging the citizenry and newer more pervasive taxes are being fervently explored. The ETS rort is another. Forget the rhetoric about saving the planet, (I am confident the planet can do that for itself,) forget efficiency (find a government which has ever achieved that!)this is just another revenue siphon for an over-spending state!


  6. Adolf Fiinkensein says:

    It’s John Key’s New Tax. Nothing more, nothing less. On this one he has his ears closed.



  7. Gravedodger says:

    John Key has made a successful career in banking and money trading and I assume that creates a confidence in a trading scheme.
    Having seen a fair chunk of the rewards of my life’s work soaked up by ticket clippers I am very wary.
    Why, if consumption of carbon is the thrust now that the AGW science is being questioned, don’t we just have a carbon Tax instead of an airy fairy calculated system where so many of the parameters are indefinable and open to doubt in the mind of the layman.
    A carbon tax would give credence to the argument more and more citizens in NZ are supporting, to look at Nuclear energy as the one true low carbon, environment saving, growth creating way forward.
    When the GST was introduced we saw so many of the “wide boys” create opportunities for wealth creation as the tax bedded in and will those same and their ilk see similar opportunities here with ETS.
    Can we stop for a “cuppa” Mr Key, It was a disaster last time Govt did that I know but it might just be a good idea now. I think you have created a big enough space for the Dwarf of Herne Bay to make a comeback. This will be pure gold for him to grab those Nats who feel betrayed and cant go to Labour but want to give you a message,I don’t think they will go to ACT if that is what you are banking on. Just think for one moment a government in 2011 with Goff as PM trying to hold the two wings of his party along with the Greens, Winston, Peter and Jimbo (he may not be mayor of CHCH) The Maori party again marginalised, the damage paying all those off and an opposition in disarray.
    Sometimes being old gives a comfort previously unknown.


  8. JC says:

    Yes, the science is shonky
    Yes, tax gathering is the aim
    Yes, there are energy considerations

    But behind all that is a convergence of academia, science, energy businesses and greenies to determine the way we live.

    Its an evolution of the “Iron Law Of Oligarchies”.



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