James,
it's been an enlightening discussion for me, clearing up a few things
in my own mind.
>From a marginal cost of emissions avoided approach, it makes sense to
raise taxes across the board to that level, it just so happens that the
actual taxes/subsidies on fuels are determined by many more factors,
with an estimate of the marginal cost of emissions avoided only one
component.
One reason gasoline taxes are so high is that the state needs revenue,
and so something needs to be taxed to pay for necessary state
expenditures. Labour is for example, even though there is no suggestion
that it ought to be discouraged, or that it is always associated with
pollution or external damages.
I originally commented because you mentioned carbon taxes as a no
brainer, and that made me wonder why, if it is a no brainer, on the
face of it, it isn't a widely used instrument.
After our discussion, I now think the answer is that climate damages
are considered in the taxation/subsidy decision, but the implied level
of the carbon tax is only around $25 per metric tonneof CO2 in Europe,
while other considerations bring taxation for petrol up to $250 per
metric tonne of CO2, and taxation for coal to zero or even negative
values in parts of Europe.
I also think that it is quite hard to make the tax explicit. One reason
is the argument used for ecological tax reform: Taxes introduce
economic distortions (disincentives to production/work), and those may
be quite harmless for petrol, and rather major for labour (or domestic
coal). Therefore, taxing petrol rather than labour may result in
economic gains, and the cost to society of the tax is much lower (ie
may actually be negative) than the cost to the fuel purchaser.
On your two points specifically:
On "polluter pays" I am not sure what you mean. I do think that
European governments take climate into account when setting fuel
taxes/subsidies. Are you saying you disagree with that, or do you mean
something else with "polluter pays" in this context?
I am sure it is possible to design taxes that'll avoid a major rush
away from coal as an unintended consequence. But aren't policymakers
doing that already? And isn't the question then not, what the implied
value of carbon dioxide emissions reductions should be, and whether
European/American policy is undervaluing the benefits of emissions cuts?
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