gaseous Goodhart

China’s top climate change negotiator wants the Chinese export sector to be excluded from their targets, and “consumers to pay” instead. This is not good news.

For a start, the tactics. It means accepting the principle of letting some special interests off. We know, after all, that there will be the mother of all lobbying wars about this, all wanting their pet interest group to be left out. Therefore it’s best to hold a firm line as long as possible, minimising the damage. Also, even if this isn’t just special pleading, the output (no CO2 target for much of Chinese industry) is identical to the effects of special pleading. So it’s worth treating it as such until proven otherwise.

After all, if it proved to be honest, you can always make a gracious concession later; but you can’t take back concessions you made earlier so easily.

Secondly, there is no end to this argument. If they claim a right to export all they like and bill the customer for the CO2, then for this right to be effective, they must also have a right to import capital goods – machine tools, Siemens power stations, that kind of stuff. Wham, half the German engineering sector wants a note from mum too. What about the primary exporters? And come to think of it, if it’s the consumer’s fault, some of that responsibility must rest with the people who lent them the money…which for the dollar zone was the People’s Bank of China, State Administration of Foreign Exchange.

More seriously, it’s a really bad idea on the substance. The mechanism of action is something like this – imports containing a lot of embodied CO2 would be taxed and would cost more, so people would buy less carbony ones, and Chinese exporters would stop producing so much CO2. But it’s a very long set of tongs; too many moving parts. Unless the energy used in the product is a hell of a lot, the tax component won’t be that great compared to the range of prices for that kind of product. The exporter might not notice, or might attribute the drop in sales to something else.

Just taxing fossil fuel at the point of sale, already, has the huge advantage that it falls directly on the user, who has the most control over how much gets used, and it’s explicitly and unmistakably down to the fuel.

Further, how many SKUs (Stock-Keeping Units – individual products) does the Chinese export sector produce? It’s got to be in the tens of thousands at the least. Under this proposal, each one would have to be carbon-audited accurately and regularly and assessed for taxation on that basis. It is far from clear whether the importing state or the exporting state would do this. Just taxing fossil fuel, already, involves less than a dozen SKUs, which happen to be bulky, smelly, heavy, or black and dusty, and therefore difficult to hide on a big scale.

And every manufacturer would have a fine incentive to lie about the CO2 emissions associated with their product; if you can bring yourself to put melamine in the milk, you can surely lie about your electricity bill. It’s the worst Goodhart’s Law violation I’ve seen for a long time.

But here’s the really weird bit. Whether the CO2 tax is applied at source as a fuel tax or a cap-and-trade system, on crossing the border like a tariff, or at the point of final sale like VAT, the economic upshot is essentially the same; goods subject to it would cost more than goods not subject to it, and goods subject to it that contained more CO2 would cost more than ones with less.

Either yer man is hoping that the importing states wouldn’t bother to impose the tax, or else his argument is actually indistinguishable from the one he’s trying to shoot down – that there should be a tariff on goods from states that don’t implement a CO2 tax.

Alternatively, he’s just talking his book, setting a negotiating marker in a cost-free fashion. In which case, time to pick it up and run it back.

If this leaves you in need of an optimism fix, have a look at this GSFC feature. The “shorter”: ozone depletion would have made it unsafe to go out in the sun for as long as five minutes essentially everywhere by 2065, but we, ah, fixed it. (Via German ScienceBlogs; if you speak German there’s also a fascinating interview with Paul Crutzen here.)


  1. 1 a question of demand « Alternate Seat of TYR

    […] A buyers’ co-op sounds good; after all, power from the grid and the gas network would be purely a cost to it. But it’s more complicated than that; you’d want it to have an incentive to put cold in the beer, whilst also having one to minimise its use of (nonrenewable) energy. And it’s hard to imagine how you’d go about operationalising this. It’s a micro-version of the issues in this post about the intersection of CO2 taxes and international trade. […]




Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s



%d bloggers like this: