Carbon Taxes Increase Global CO2 Emissions. Period.

As the hysteria over global warming heats up, carbon taxes have become the “cool” option.  Environmentalists love them.  So do politicians, who are more than happy to raise taxes while scoring political points.

Carbon taxes, or other analogous pricing schemes, are now prevalent in Western Europe, and are making headway in North America.  For example, California recently joined forces with the Canadian Provinces of Ontario and Quebec to create an integrated cap-and-trade carbon market.

On top of this, many well-known economists support carbon taxes, thinking they’re the best way to mitigate man’s contribution to climate change.  A new report written by thirteen leading economists under the direction of professors Nicholas Stern and Joseph Stiglitz—who won a Nobel Prize in 2001—recommends the adoption of a global carbon tax.

The tax would value carbon emissions somewhere between 50 and 100 USD per ton by 2030, and would cost upwards of $4 trillion.  Theoretically, the tax would raise the cost of using carbon-intensive sources of energy, thereby nudging producers to switch from fossil fuels to “green energy” sources like wind and solar power.  Likewise, it would raise the cost of electricity, thus creating an incentive to use energy more efficiently.

This makes sense in theory.  There’s just one problem.  It won’t work.

In reality, carbon taxes are just that: taxes.  They’re a money-grab disguised with good intentions.  Worse still, carbon taxes will not reduce our greenhouse gas emissions.

Instead, adopting carbon taxes in the West will actually raise global carbon emissions by offshoring economic activity from relatively environmentally-friendly places, like the USA and Germany, to places with lax environmental laws, like China:

Open Markets & Offshoring, or How Carbon Taxes Raise Global CO2 Emissions

Wealth is like water: it flows to the lowest possible point, and continues to do so until the level is equal.  This is why consumers chase cheaper goods, why investors look for undervalued companies, and why multinationals offshore to cheaper markets.  This last point—offshoring—is why Western carbon taxes will actually increase global emissions.

The underlying logic is fairly straightforward.  Pretend there are only two countries in the world: Germany and China.  The cost of doing business in them is identical, however China’s economy is twice as carbon-intensive as Germany’s.  In other words, it costs $1 to build a widget in either country, but the widget’s carbon footprint in Germany is only 1 kilogram of carbon, compared to 2 kilograms in China.

Clearly it’s better for the environment if widgets are made in Germany.

But Germany’s not satisfied: they want to further reduce their carbon emissions.  Therefore, they impose a carbon tax of 10 percent per widget.  This raises the cost of making widgets in Germany to $1.10.  Ideally, German widget-makers will invest in energy-efficient machinery, and the government can use the tax revenues to plant more trees.

Sadly Germany’s politicians forgot something: Germany is an open market.  This means that German consumers can simply buy Chinese widgets—which still only cost $1 to make.

At this point, Germany’s widget-makers have two options: (1) they can foreclose, since they’re unable to compete with artificially cheaper Chinese widgets, or (2) they can move their factories to China and import the widgets back into Germany.  Either way, China ends up building enough widgets for both China and Germany, and Germany doubles its carbon emissions.

Now imagine what our example would look like if China built widgets for $0.1 rather than $1, and they generated three times as much emissions per widget of Germany, since this better reflects reality.  Would a carbon tax in Germany have a hope of reducing global emissions?  No.

Empirical Evidence Suggests that Carbon Taxes Will Increase Global CO2 Emissions

Not only does the logic show that carbon taxes in the West will invariably increase global CO2 emissions, but so does the empirical evidence.

china co2 emissions graph

To begin with, data from the World Bank reveals that China, and other developing countries, produce far more carbon per dollar of economic output (at purchasing power parity) than do Western nations.  For example, China produced 0.6 kilograms of carbon dioxide per dollar of economic output in 2014, whereas America produced 0.3 kg of CO2, and Germany produced just 0.2 kg.

On top of this, China shows no signs of decreasing its emissions any time soon: China’s currently building hundreds of new coal-fired power plants, which will ensure its CO2 emissions continue to rise for decades to come.

Taken together, these facts suggest that every factory pushed out of the West due to carbon taxes actually increases global emissions dramatically, and this will continue to be the case for decades to come.

A number of other studies came to the same conclusion.

One important paper published in Proceedings of the National Academy of Sciences, found that carbon reductions alleged to the Kyoto Protocol were more than offset by increase emissions from imported products.  Glen Peters of the Centre for International Climate and Environmental Research said this of the research:

Our study shows for the first time that emissions from increased production of internationally traded products have more than offset the emissions reductions achieved under the Kyoto Protocol … this suggests that the current focus on territorial emissions in a subset of countries may be ineffective at reducing global emissions without some mechanisms to monitor and report emissions from the production of imported goods and services.

Essentially, local carbon taxes are not a useful tool for mitigating a nation’s carbon footprint.  If anything they actually raise global emissions.  The paper also notes that China accounts for some 75 percent of the developed world’s offshored emissions.

Another study published in The Guardian, found that “50 percent of the rise in Chinese emissions are the result of goods for foreign markets.”  This was echoed in a different study from the scientific journal Geophysical Research Letters, which found that cuts in carbon emissions by developed countries have been cancelled out “many times over” by increases in imported goods from developing countries—especially China.

Another study found that all of the trumpeted carbon reductions in places like Germany fall apart under closer scrutiny:

According to standard date, developed countries can claim to have reduced their collective emissions by almost 2% between 1990 and 2008. But once the carbon cost of imports have been added to each country, and exports subtracted – the true change has been an increase of 7%. If Russia and Ukraine – which cut their CO2 emissions rapidly in the 1990s due to economic collapse – are excluded, the rise is 12%.

In the same period, UK emissions fell by 28 million tonnes, but when imports and exports are taken into account, the domestic footprint has risen by more than 100 million tonnes. Europe achieved a 6% cut in CO2 emissions, but when outsourcing is considered that is reduced to 1%.

Together, these studies conclusively show that the offshoring of Western industry to China has actually increased global carbon emissions.  It is unreasonable to assume that a carbon tax, which will further increase the incentive for business owners to offshore, will magically reduce global carbon emissions.  There is no silver bullet.  Carbon taxes are a pipe dream.

Carbon Taxes Won’t Reduce Global CO2 Emissions—Now What?

Carbon taxes will not reduce global carbon emissions—they’ll only make things worse.  So what should we do?

We should stop and put things in perspective.  No matter your opinion on climate chance, we should begin with the assertion that carbon dioxide is not a harmful chemical in the traditional sense of the word.  It’s actually essential for all life on earth—plants need it to live.

The obsession with carbon emissions is allowing many real polluters to fly under the radar.  For example, fertilizers and pesticides runoff from our farms is creating gigantic “dead zones” downstream.  Algal blooms are choking out life a the mouths of major rivers throughout the world.  Likewise, deforestation is (often unnecessarily) stripping the world of its most precious habitats.

These are real environmental problems that aren’t getting attention because carbon dioxide is so ardently demonized.  It’s at the point now where environmental activists are willing to spend millions of dollars to build carbon filtration facilities that will do the work of a few thousand trees.  Likewise, we’re spending billions to transition to green energy, despite objective evidence that green energy is a pipe dream.

It’s time we put things in perspective, triaged the situation, and started frying the biggest fish first.

Read more at National Economics Editorial

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Comments (12)

  • Avatar

    Spurwing Plover

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    Okay Greenpeace lets see you sail your ships off to China maybe take the Sierra Club,NRDC,EDF,Etc with you on your merry little trip and take a complaint to the Useless Nations maybe sue China for this mess and bad air but i’m not holding my breath waiting

    Reply

  • Avatar

    David Lewis

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    This article made a number of excellent points. I also read articles written by warming alarmist. Many of them are very aware of the shifting rather than the reduction of carbon dioxide emissions. They believe that is necessary to reduce emission, but are frustrated in these results. I have read many articles by alarmists that said the Kyoto Treaty did nothing more than shift emissions from Europe to China. Unfortunately this also shifts employment from Europe to China.

    However, liberals are always anxious for excuses to raise more taxes. After all, socialism is expensive. An excuse to create more taxes is one of the many hidden agendas that keep the warming fraud going.

    One thing that we need to be very aware of are the real problems being masked by the climate change fraud. Damage from fertilizer run off has the potential of being as bad as if the dire predictions of the IPCC for warming were true. I read an article from one scientist who believed and both problems and thought that fertilizer one is a greater threat. The trouble with this problem is the solution doesn’t support hidden agendas such as new taxes, forces people out of their cars and into public transportation, an excuse to expand the size and reach of government, an excuse to transfer the wealth of industrial nations to third world countries, provide subsidies for renewable energy, provide grants for researchers to write alarming articles, de-industrialize America, or dismantle the free enterprise system. The fertilizer problem can be addressed by stopping over use and placing foliage in the path of run off to intercept the fixed nitrogen.

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    • Avatar

      G

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      Quoting David Lewis: “After all, socialism is expensive. An excuse to create more taxes is one of the many hidden agendas that keep the warming fraud going.”

      And the best thing about carbon tax schemes is that they are arbitrary and capricious. Socialism also relies upon this kind of deception; taxation without accountability, to survive. Anytime the left has to show results and outcomes they are in trouble.

      Reply

      • Avatar

        Sonnyhill

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        Just how expensive is Socialism? I’d like to see the calculation. (balanced budget? LOL)
        Election promises pit losers against winners.
        Losers have nothing left to lose so they vote for the freebies.
        Socialists win the election because there’s just enough losers. They create a new tax to pay the interest on the bonds they need to borrow to reward the losers. The debt load increases, creating more losers.
        You thought you were a winner but you’re really treading water. Eventually, you get old, lose your job and vote for the freebies. You don’t want to sell your house. Let the next generation of idealists pay the freight.
        Even though Socialists run out of other people’s money, they can print more money and deflate that irksome revolving credit card debt under the carpet.
        Lose an election once in awhile, take a Harvard gig, it’s so easy.

        Reply

  • Avatar

    Sonnyhill

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    We have always known that pollution followed outsourcing offshore. NIMBY’S love the idea. Why wouldn’t the carbon dioxide follow? (CO2 is NOT pollution).
    Our politicians know what climate change is, they invented it. We’ll keep using fossil fuels. Suppliers will collect carbon taxes and hand them over, to keep our governments out of bankruptcy and off their back. Or else.
    Earth won’t notice any of it. Some voters might, hopefully the independent swing voters.

    Reply

  • Avatar

    Sonnyhill

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    David, fertilizer run-off is literally money flushed down the drain. Erosion controls are practiced , soil is too valuable to let it go.
    However I have repeatedly pointed out that farmers are over-producing food, and suffering financially for it. Less fertilizer equals less produce. There’s a solution in there somewhere.

    Reply

  • Avatar

    Spurwing Plover

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    Those who think CO2 is a conaminate are eather stupid or have fallen Hook,Line & Sinker for all the enviromental malarkey from Greenpeace,NRDC and EDF’ Sierra Club,DiCaprio and Bore

    Reply

  • Avatar

    JayPee

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    Carbon taxes are simply taxes and nothing else.
    Attaching a name to the tax is nothing but a cheap supposed justification for its implementation.
    It is still nothing but a tax
    and given the modern economic system which has existed for 100 years
    There is no justification for any tax at the national level given the fact that all commerce is conducted in fiat currency units.

    All taxes no matter how slight or necessary are a
    bloodsucker to any nations economy or commerce.
    ALL TAXES

    The smelly Useless Nations wants to enact a tax
    They also want a standing military
    They also want global dominance of the
    Atmosphere and
    Hydrosphere

    Is anyone understanding of what a monster was created by the stupidity of
    Roosevelt and Truman.

    Reply

  • Avatar

    Sonnyhill

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    The failed League of Nations was replaced by the United Nations. Just a name change.
    A UN Army would be the world’s biggest law firm. Not very effective in Afghanistan, North Korea, Syria, etc. But they could stop civilization in its tracks.

    Reply

  • Avatar

    Spurwing Plover

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    The UN has never ever been about World Peace its all about World Goverment under the Useless Nations and after WW I america refused to join the League of Nations and therefore we should have absolutely nothing to do with the United Nations and throw away all those UN Treaties especialy the Small Arms Control Treaty signed by american traitor John Kerry

    Reply

  • Avatar

    Amber

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    Businesses exist to make a profit . Therefore businesses already have a self interest in energy efficiency options . For a carbon tax to be effective in volatile and open energy markets the carbon tax has to be punitive and the University professors and governments know it . In British Columbia natural gas prices were about $10.00 per GJ
    when a carbon tax was imposed by a Liberal government .Today the commodity price is $2.05 per GJ and the carbon tax is $1.49 on top . So 10 years ago the $10 price now compares to $3.55 including the carbon tax currently . If $10.00 didn’t send the right “price
    signal ” to save the planet is $3.55 ?
    It’s time governments stopped lying to the public.Carbon taxes are just one more tax to bolster government revenues while hollowing out the middle class , causing fuel poverty ,and a great reason to export jobs. Businesses are cowards they only stay where they are welcome . China is laughing it’s ass off at the stupidity of the west and the offshoring of manufacturing ensures higher levels of CO2 and things that are real pollutants .
    More people die in the UK each year from fuel poverty than all allied casualties on D- Day . But isn’t that “Greens ” actual agenda ….depopulation and western countries economic destruction ? If companies like Tesla have any chance of survival (and they don’t without tax payer subsidy ) they will end up in
    China being fed energy from coal plants .
    The big brains should be promoting just the opposite . Reduced domestic energy costs in order to mitigate greater pollution .
    The west are such suckers .

    Reply

  • Avatar

    Spurwing Plover

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    I saw a picture of some idiot with a sign reading ANIMAL AGRICULTURE IS DESTROYING THE EARTH yeah what a jerk they are the fact livestock have been roaming the erath for thousands of years yet its only now at leasr according to some idiots and probibly strict vegans that old Bossy Cow is wrecking the planet just proves a study which claims strict vegans might have shrinking brains well a certian vegan just kicked the bucket and their name was CHARLES MANSON

    Reply

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