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For the imported good buyer, there's a price increase. It does not matter to him who collects the tax that increased the price - an import tariff imposing gover
by ovi256 7y ago
For the imported good buyer, there's a price increase. It does not matter to him who collects the tax that increased the price - an import tariff imposing government or an enlightened carbon-scheme participating foreign government. This will reduce demand like any other dead weight loss, and yes, depress economic activity, employement and thus wages.
BTW, most countries already have carbon taxes on fossil fuels, they just don't bother calling them that. They call them fuel excise taxes. Around 60% of the price a consumer pays for fuel in the EU is fuel excise tax, in other words, a 150% tax. In the US, it's only about 20%. Here: https://en.wikipedia.org/wiki/Fuel_tax#China https://en.wikipedia.org/wiki/Fuel_tax#China
What's your estimated impact of this already huge tax ? Think about the demand elasticity of fuel and energy products.
- adrianN 7y agoIf you read the literature about carbon taxes, virtually everybody recommends a scheme where the carbon tax is paid out again, so there is no effective price increase for the consumer if they have an average carbon consumption, but everybody still has an incentive to switch to less carbon intensive alternatives.
- ovi256 7y agoRight, that would be different, but I feel that's the kind of detail that gets lost in translation when it becomes government policy. Given the average EU government greatly enjoys the already 100%+ tax on fuel they have, why would they bother with this complicated, not even revenue raising scheme ? They can just crank that 100% lever to 200% or whatever. Can any of the economists proposing this scheme ask for a guarantee of any kind that if they help push this scheme, details like this one won't get left out ? Of course not. They'll cheerlead it and then blame the government, forgetting their complicity.