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Tag Archives: Pigouvian Taxes

Would You Tax Coastal Development?

14 Monday Dec 2015

Posted by pnoetx in Central Planning, Global Warming

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Carbon forcing, central planning, Climate Alarmism, Climate Change, Coastal development, Coastal tax, Federal Flood Insurance, FEMA, Glacier Melts, Glenn Reynolds, Pigouvian subsidies, Pigouvian Taxes, Robin Hanson, Sea Ice Extent, Strait of Gibraltar, Subsidies, Taxing development

Sea Level

If sea levels are truly rising due to climate change, then public policy should stop encouraging new development in coastal areas. Stipulating that this threat is real for the moment, serious and damaging encroachment of the seas might be 50 years away or more. By that time, many of today’s coastal buildings will be gone, or at least candidates for replacement, under realistic assumptions about the average lives of structures. A relatively low-cost approach to the threat of rising seas would be to stop building along the most vulnerable coasts right now and move new development inland. Yet no one wants to do that, least of all coastal property owners. But there is little discussion of this alternative even among the true believers of a coming global warming apocalypse. Why not?

This and related questions have been asked recently by several writers, including Glenn Reynolds and economist Robin Hanson. There are alternatives to discouraging new construction along coasts. Other expensive abatement projects can be pursued, now and later, such as sea walls or even adding land mass excavated from the sea floor or inland. In fact, the prospect of damming the Strait of Gibraltar to protect Mediterranean coastlines has been discussed. The expense of such an unprecedented public works project is what prompted Hanson’s post. To the extent that such remedial projects are not funded privately, they represent social costs arising from coastal development.

The federal government still subsidizes flood insurance on many coastal properties, though efforts to phase-out this FEMA program have been underway for a few years. However, governments seem only too willing to undertake the investment in public infrastructure and ongoing maintenance made necessary by new coastal development. And like other development projects, tax abatements and other subsidies are still granted for coastal development. Why do these policies escape notice from coastal green elites?  Public outlays with private beneficiaries along threatened coasts are an immediate drain on resources, relieving private developers and property buyers of shoreline risk.

Reynolds (perhaps tongue-in-cheek) and Hanson suggest that new development should be taxed in coastal areas. That, and ending subsidies for development along coasts, is an economically and ecologically defensible alternative to the public expense of ubiquitous sea walls. However, a coastal tax might not be in the immediate interests of elites  who claim that mankind faces an insurmountable global warming problem. Better to put off these sorts of remedial measures, especially while you can tax and regulate fossil fuels, and maybe live on the coast!

The position of the warmist community is that carbon emitters must cease and desist, in the hope that the seas will stop rising. They are willing to destroy entire industries (fossil fuels) in pursuit of their goals, but are unlikely to achieve them without inflicting drastic economic harm. If greens are so amenable to central control of economic activity and individual behavior (so long as they are at the controls), it would be prudent to take precautions now that will help to minimize the damage later. Discouraging coastal development with taxes and denial of subsidies is the sort of classic intervention that any Pigouvian planner should love. There is even evidence that sea levels have been much higher at times in the past. An earnest central planner might say that coastal development should always be discouraged to mitigate the risk of destruction.

I am skeptical of alarmist claims, including those related to rising sea levels. In fact, the connection between carbon emissions, global temperatures and sea levels is not well established, and whether sea levels are rising due to human activity is a matter of some dispute. Furthermore, global sea ice extent is not declining dramatically, if at all, and the storied glacier melts have been greatly exaggerated. Climate activists pursue their agenda despite the gross inaccuracy of past carbon-forcing forecasts, the gaping uncertainty surrounding model predictions going forward, and the crushing expense of the measures they advocate. The expense, however, is not one that activists expect to compromise their own standard of living. They either assume that it will be borne by others or that their draconian prescriptions will usher in an era of “sustainability”, powered by new, renewable energy sources. Not many of these alarmists would boast that their policies can quickly reverse the sea level rises they’ve told us to fear, but they dare not suggest taxes on coastal development until they see more convincing evidence. At least that much is sensible, if ironic!

Aside

Can the Carbon Tax

22 Thursday May 2014

Posted by pnoetx in Uncategorized

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Australia, Carbon Tax, Climate Sensitvity, Externalities, Pigouvian Taxes, Precautionary Principle

carbon tax footprint

Economists often fall victim to the naive view that government technocrats can measure the external costs or benefits of an activity accurately. Having performed the necessary calculations, the idea is that optimal taxes or subsidies can be promulgated through the political process and applied to an activity in order to correct or “internalize” these kinds of social effluents. In their focus on private market failure, many economists fail to appreciate the extent to which governments usually “fail” in these and many other efforts. At best, one might hope that such intrusions are directionally correct, but even that is fraught with risk.

A particularly good example involves the presumed social costs of carbon emissions. Carbon tax proposals are very much in vogue, but they are not without controversy. The well-meaning assertions of climate alarmists rely on rather fatuous claims about anthropomorphic warming and an overly broad and unwise application of the precautionary principle. There is a vocal minority of climate researchers who do not believe we have sufficient knowledge about climate sensitivities to make judgements about the true social costs and even some likely benefits of a warmer climate, should that be an ultimate consequence. Moreover, accurately measuring the presumed costs is out of the question. Meanwhile, carbon taxes impose costly burdens in the here and now that are difficult to justify.

This response to Irwin Selzer on carbon taxes is worth reading (with a link to Selzer’s article).

Here is a review and further links regarding the disastrous Australian carbon tax.

And here is Robert Murphy on carbon taxes, in which he discusses some prominent estimates of costs and benefits which show the sometimes enormous danger of setting non-optimal carbon taxes (granting the conceit that an optimal tax is positive).

FYI, the unfortunate Julia in the cartoon above refers to Julia Gillard, the former PM of Australia who pushed for the country’s ill-fated carbon tax.

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