Counterparties: When climate change gets fiscal

By Ben Walsh
November 15, 2012

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Neither candidate paid much attention to climate change during the presidential election: it wasn’t so much as mentioned in any of the three debates. Then came Superstorm Sandy, Mayor Bloomberg’s climate-motivated endorsement of President Obama, and Businesweek’s mince-no-words cover. There’s also the fiscal cliff (or austerity bomb, if you prefer). What better time to start taxing carbon?

The logic is simple: a carbon tax could raise $1.25 trillion over a decade, and according to Treasury officials, the President could be on board. Even anti-tax crusader Grover Norquist, famous for his pledge to never raise taxes, was open to the idea of a “carbon tax swap” — until the denialist Koch brothers intervened and Norquist hastily reversed his position.

In his first press conference since the election, the President put secondary importance on climate change. Now Brookings’ Barry Rabe says that “enacting a carbon tax to address climate change and fiscal woes may be as plausible as relying on new leadership to steer the Chicago Cubs to their first world championship in over a century”. Ouch.

As Dylan Matthews points out, a carbon tax was never really a fiscal panacea to begin with; according to an MIT study, for instance, it wouldn’t allow income tax rates to come down much. As Mark Thoma writes:

Attempts to insulate various groups from the consequences of the tax…will eat into potential revenue, and the fact that the response to the tax will be greater as more time passes — for example as people switch to more efficient cars and appliances — will also reduce revenue.

Even so, there are reasons to believe a carbon tax could be coming. California now has a functioning cap-and-trade system; it’s never been less profitable to run coal-fired power plants; and climate legislation is still supported by companies from Alcoa to Weyerhaeuser. — Ben Walsh

And on to today’s links:

Long Reads
What it’s like to grow up unable to feel any pain – NYT Magazine

EU Mess
The eurozone is a recession in “all senses of the word” – FT Alphaville

Startups
How did Spotify’s valuation fall by a $1 billion in 6 months? Ask Netflix – All Things D

Housing
FHA is reportedly nearing insolvency – NYT

Hackers
“No matter how complex, no matter how unique, your passwords can no longer protect you” – Wired

China
Meet the sever new leaders of the world’s most populous nation – Quartz
China’s great leveraged bet on economic growth – Peter Orszag

Helpful Reiminders
Social Security, America’s most effective anti-poverty program - Dylan Matthews
16% of Americans live in poverty – Census Bureau

Charts
A look at Samsung’s stunning rise in the mobile phone market — and Google’s failure – Asymco
Siri really isn’t Apple’s future – Counter Notions

Wonks
How long does a lie last? – Scientific American
Healthcare is moving toward pay-for-performance: Behavioral economics suggests it won’t help – Health Affairs
Nate Silver answers the most burning post-election questions – Deadspin

Awesome
The tale of Laurel Touby, bold millionairess, so far – Choire Sicha

The Singularity
Ray Kurzweil’s new theory of the mind just “doesn’t work” – New Yorker

Possibly Useless Data
The outcome of all 456 episodes of Law & Order, graphed – Overthinking It

Dubious Milestones
JP Morgan becomes the first company since Enron to be temporarily banned from energy trading – Reuters

The Fed
Does the Fed need “explicit policy goalposts”? – Mark Thoma

Alternative Currencies
Why coke cost a nickel for 70 years – NPR

Niche Markets
3 credits in 10 days for less than $400: the price of NCAA academic eligibility – Chronicle of Higher Education

Same As It Ever Was
“Pressing 1,000 singles in 1988 gave us the earning potential of more than 13 million streams in 2012″ – Pitchfork

Crime And/Or Punishment
BP gets a record $3 billion fine for the Gulf oil spill disaster – BBC

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Comments
One comment so far

Energy markets are complex and critical for economic function in industrial economies. Tampering with these markets can only result in poor outcomes. We have to learn this lesson the hard way every few generations. A solution looking for a problem. Like pushing on a string.

Global warming is a non-problem. major tax or regulatory initiatives will leave us with a more costly, less reliable energy infrastructure. Tens of millions more unemployed, freezing in the dark. All thanks to progressive zealots and rent-seeking toads.

See http://www.climatedepot.com for facts & science.

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