Indiana Economists Endorse “Carbon Tax”

Recently fifty Indiana economists issued a public letter to their state’s legislature endorsing a “carbon tax” as an economically wise way to curb global warming by reducing carbon dioxide emissions.

The fundamental premise of taxing CO2 emissions is that they cause more harm than good (and thus are what economists call a “negative externality”—a cost of doing business not borne by a firm but foisted off onto others—the typical case with pollution).

Economists are right to say that taxing negative externalities is a good way to reduce them, but their expertise in economics doesn’t equate with the expertise necessary to determine the quantity (measured in dollars) or even the sign (negative, meaning harm exceeds benefit, versus positive, meaning benefit exceeds harm) of an externality. To determine whether CO2 emissions are a negative externality and, if so, the quantity of that externality requires expertise in a wide range of sciences (physics, chemistry, meteorology, oceanography, astronomy, solar physics, geology, biology, and more).

These economists begin with the assumption that CO2 emissions are a negative externality. But there is good evidence that instead they’re a positive externality. Here’s the reasoning in simple terms: The alleged harms from CO2 emissions come from its contribution to global warming, but there are reasons to think the benefits outweigh the harms.

First, CO2’s contribution to global warming is near its maximum already because CO2 absorbs heat radiating from Earth’s surface out toward space only within certain bandwidths of the energy spectrum, and the amount of CO2 already in the atmosphere is already enough to have absorbed almost all the radiation in those bandwidths, as shown here, so that adding more would absorb very little more heat and thus would warm Earth’s surface only a little.

Indeed, William Happer, physics professor emeritus at Princeton and an expert on infrared-absorbing gases (of which CO2 is one) calculates that, because of this, doubling atmospheric CO2 concentration from the present ~415 parts per million to ~830 ppm would result in a negligible increase in global average temperature.

Second, according to the theory underlying fears of dangerous warming from added atmospheric CO2, the warming occurs more toward the poles than toward the equator (i.e., more in the frigid and high temperate zones and less in the tropics and subtropics; see the map below), more in winter than in summer, and more at night than in daytime.

In other words, the increase in average global temperature comes mostly—perhaps almost entirely—from raising low temperatures and very little from raising already high temperatures. That’s clearly beneficial, since, e.g., it expands farmable land into areas previously too cold, it lengthens growing seasons by delaying first frost in fall and accelerating last frost in spring, and it reduces the number and intensity of cold snaps—which on average kill 15 times as many people per day as heat waves of the same intensity.

Third, Warming isn’t CO2’s only effect in the atmosphere. It is essential to plant growth, and as its concentration rises plant growth increases.

On average, every doubling of atmospheric CO2 concentration causes a 35% increase in plant growth efficiency; plants grow better in warmer and cooler temperatures and in wetter and drier soils; they make better use of soil nutrients; they resist diseases and pests better; consequently they expand their ranges into areas warmer and cooler, wetter and drier, with worse soil and more diseases and pests, than those to which they previously were restricted, and they grow more densely. (See the graphic below of satellite measurements of increased plant growth around the world.) In addition, they improve their fruit-to-fiber ratio.

The result is more food for everything that eats plants—and everything that eats things that eat plants. One major study, reviewing hundreds of others reaching back some six decades, concluded that the CO2 we added to Earth’s atmosphere from 1960 to 2012 resulted in an added $3.2 trillion worth of crop harvests over that period, and that the CO2 projected to be added from then to 2050 would add another $9.8 trillion. That means the supply of food will be higher relative to demand than it otherwise would be, which means its price will be lower. That’s a benefit to everyone but especially to the poor.

The letter’s authors also argue by analogy between taxes imposed on sulfur emissions from power plants and CO2 emissions. The former were highly successful at reducing sulfur emissions in a cost-effective way; therefore the latter should be similarly effective. This ignores some important facts. Among them:

Sources of sulfur emissions are thousands of times fewer, and much more restricted in location, than sources of carbon dioxide.
Sulfur is much easier, and much less expensive, to capture from airborne effluent than carbon dioxide and to store (sequester) once captured.
Sulfur emissions have a much shorter half-life in the atmosphere than carbon dioxide and so were much more geographically restricted in their prevalence, while carbon dioxide emitted anywhere in the world will remain in the atmosphere much longer and circulate all over the globe, making restrictions in one locale of little effect (for good or ill) unless they’re matched by equivalent restrictions all around the world.

More serious studies of a “carbon tax” (really a CO2 tax) reach quite different conclusions from that in the letter. Here are some examples:

Indiana Economists Endorse “Carbon Tax”—But Should They?

About E. Calvin Beisner

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