Greta Thunberg. Her name has become regular in the media over the past year and a half, and her presence in the media has intensified over the last six months. If someone doesn’t already know her, Thunberg is self-proclaimed 16 year old “climate activist” who launched the Fridays For Future movement, a civil society mobilization to reduce the effects of human actions on climate change, such us our annual CO2 footprint.
But the problem, more than the objectives, lies in the means proposed to achieve them. All you have to do is listen to some of Thunberg’s speeches, read a couple of his articles and… voilà! Her deep anti capitalist ideology has discovered without any craftiness. a system to which she blames all the evils and against which she proposes strong interventionist proposes which she tries to save the world. Without judging whether this measures are efficient or not in the long term in protecting the environment, it can be said that Thunberg is profoundly ignorant of the most elementary concepts of the economy, specially market incentives.
Such a fast energy transition would drive up prices, with a regressive effect on society.
The movement Fridays For Future has repeatedly stated that its only objective is to achieve at least zero emissions production quota which accounts for 75% of the total energetic mix. In almost all country, this contribution of clean energies doesn’t exceed 35%, and is less than 30% in more than half of the EU Member States. Thus, Thunberg’s speech clashes head-on with the fact that such a rapid energy transition would drive up prices due to the current lack of means of generation and infrastructure. This increase will have an obvious regressive effect on society, since those in the lowest quintiles of the income distribution scale are, in turn, those who devote the largest percentage of their income to the energy consumption.
The movement Fridays For Future has partially ignored this argue, thus they have already done a supposed solution to the problem; one which, according to them, will also help reduce emissions in the short term. They are asking for a tax of 180 euros per ton of CO” emitted. To understand the impact of this tax, we turn to the calculations of Luis Gómez, a Spanish biochemist who is living in Germany author of the blog desdeelexilio:
The kids go out on fridays on the street and demand a CO2 tax pf, for example, in Germany, 180 euros/tax per year, from now on! And propose a zero level of CO” emissions by 2035. In Spain, were we emit about 320 million of tons of CO2 per year, the bill for such a tax would be about 58.500 euros per year.
To give an idea of the significance of the amount: in 2018 we spent 51.275 euros on education. We are talking about 58.500 euros that would suddenly leave the private coffres to to swell those of the State, I suppose to subside control organismes, various observatories and companies of dubious commercial achievement success, but with a “commendable” sustainable project.
But, ¿why massive and coercitive taxes don’t represent a solution? ¿Why in this case a pigouvian fiscality would be more efficient?
First of all, let’s talk about carbon tax. In order to be efficient and fair, they should be neutral or, at least, intended to help those most directly affected by pollution. ¿Why? It’s very simple. Because of the negative externalities. BUt,¿what are the negative externalities? Thus the technical name given to those indirect effects, positives or negatives, caused by the activity carried out by a third party, in which the agent concerned is not involved.
For example, if someone opens a bike shop in the center of a town, it could contribute to reduce the pollution level of the zone. A smoker would create passive smokers around him. What happen with pollution is very similar to the second example. A factory can impose costs (not only monetary) on third parties not related with their commercial activity. To internalize this cost, the State will intervene, introducing a coal tax, or a pigouvian tax, named after the well known British economist Arthur c. Pigou. This tax won’t only serve to internalise costs, but also to discourage this polluting activity by exposing its rial costs.
The to achievement a high level of efficiency through this tax is not to maximize revenue, but to minimize costs on third parties. Let’s take an example of environment tribute which has been poorly implemented, and one that was done perfectly. To illustrate the first case, let us recall President Sanchez’s famous diesel tax, by which his price was equalized with that of gasoline. This affected mainly those whose were more dependent on diesel, specially small businesses with vans, or drivers of large vehicles with large families. It was thus configured like a pigouvian tax, with a worse impact to those who represent an unfavourable economy situation.
In contrary, one case of well articulated pigouvian taxes was that of Canada. Justin Trudeau followed the recommendations of some economists like Gregory Mankiw and decided to set a surcharge of 20 dollars per ton of CO2, which will rise to 50 dollars by early 2022. This isn’t the good part, but 90% of the income obtained will return, in cheques, to the pockets of the citizens, who are directly responsible for how they spend it, and not the Government. According to calculations made by the Canadian administration, each family will receive an average of $700 a year from the new carbon tax, which will fully compensate for the negative externalities of pollution.
The economist Lorenzo Bernaldo de Quirós has several times about the dependence path of investments in the energy sector. This means that the inversion decisions taken today in relation to this sector will show their effective results in the very long term, which is why the dynamic costs of decarbonized process are more important than static ones. Because of that is essential to reduce infrastructure costs, bureaucratic procedures and entry barriers. These flexibility policies would facilitate the direct financiation Investment from countries with a high degree of specialization in our sector of interest, such as China, Israel or the United States.
If we are owners of something, we should be responsible of all the costs which its produces. Therefore, the taxes on coal will be justified as long as their aim is to internalize costs, and not to confiscate it: just what Thunberg and its movement pretend.
