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The very point of carbon permits is that you don’t control the price

Summary:
There are two basic market methods of controlling carbon emissions - carbon permits and carbon taxes. That second allows you to control the price of dealing with emissions but the quantity thereby changed is unknown. The aim of carbon permits - along with market trading of them and so on - is that the quantity allowably emitted is known but the price of the action is both unknown and uncontrolled:Ministers are considering a dramatic intervention in the carbon market to cut the amount big polluters have to pay for emissions permits.Prices have soared in the past month, from about £50 per tonne of carbon dioxide to £74. The Department for Business, Energy and Industrial Strategy said in a stock exchange announcement that prices had breached the threshold for the government to step in.No,

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There are two basic market methods of controlling carbon emissions - carbon permits and carbon taxes. That second allows you to control the price of dealing with emissions but the quantity thereby changed is unknown. The aim of carbon permits - along with market trading of them and so on - is that the quantity allowably emitted is known but the price of the action is both unknown and uncontrolled:

Ministers are considering a dramatic intervention in the carbon market to cut the amount big polluters have to pay for emissions permits.

Prices have soared in the past month, from about £50 per tonne of carbon dioxide to £74. The Department for Business, Energy and Industrial Strategy said in a stock exchange announcement that prices had breached the threshold for the government to step in.

No, that’s not what you then do. Having decided to go the permit route - we disagree, think the settled price but unknown quantity of the tax is better - then that’s the decision that has been made. To control volume not price. You don’t then try to control the price again as you’ve just made the opposite decision.

If we’re honest about it we’re not all that worried by the original problem, climate change, itself. What does keep us awake at nights with attacks of the screaming abdabs is that near no one seems to be paying any attention at all to what has been shown and proven to be true about how to deal with it if it all does exist and does need dealing with.

You wish to control volumes of emissions? Then fine, do so. But don’t then try to control prices as well. You’ve made a choice, stick with it. Quite apart from anything else if you intervene to increase emissions permits if the price begins to bite then no one will bother to worry about reducing emissions, will they? Because there will be intervention as soon as the price begins to bite.

Blimey, we ask you, where do these people get their ideas from?

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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