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A Question of Balance: Weighing the Options on Global Warming Policies

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  • Posted October 31, 2008

    more from this reviewer

    Misguided plea for another tax on energy

    William Nordhaus, Sterling Professor of Economics at Yale University, urges a global carbon tax to cut carbon emissions.<BR/><BR/>He admits, ¿on the side of climate damages, our knowledge is very meagre.¿ Yet he then writes that his `best guess¿ is that climate damage will cost 2.5% of world output per year by 2100, if emissions are not cut. But the Intergovernmental Panel on Climate Change says that with the forecast 3oC increase, ¿Globally, the potential for food production is projected to increase.¿ What could be more important than increasing food production?<BR/><BR/>Nordhaus rightly attacks three recent proposals: the Stern Review¿s proposal, backed by the Brown government, of an 85% global cut in emissions by 2050, Al Gore¿s proposed 90% cut in US emissions by 2050, and the German government¿s proposal to cut global emissions to 50% of 1990¿s levels by 2050. Nordhaus points out that all three proposals would cause great damage, because they would all cost huge amounts in the short term, about $17-22 trillion each. <BR/><BR/>Nordhaus also attacks the Kyoto Protocol as too dear. Its adherents hurt themselves by adding to their production costs. He admits that a stronger Kyoto ¿would involve strenuous efforts virtually without precedent among international agreements.¿ <BR/><BR/>But so would the global carbon tax that he proposes. If every nation imposed the tax, it would cost $2 trillion. He says that this tax should be $27 per ton of carbon at first. In the USA, this would add 9 cents to the price of a gallon of petrol and 10% to the price of coal-generated electricity. The total US tax take would be $50 billion a year. He wants the tax to rise to $90 per ton by 2050 and to $200 by 2100. <BR/><BR/>But any country fool enough to impose this tax would force its energy-using industries abroad to some country that didn¿t impose the tax. So the tax wouldn¿t cut global emissions, but it would cut living standards in countries that imposed it.

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