ECON 130 Exam 2 Readings #2 (Externalities)

Carbon Tax Concessions and Clean Energy Incentives (“Singapore faces pressure to reveal carbon tax concessions”)

Closed-door tax allowances for major emitters like Exxon and Shell may weaken incentives to reduce pollution by lowering the effective carbon price they face.

Transparency Concerns in Carbon Tax Policy (“Singapore faces pressure to reveal carbon tax concessions”)

Environmental groups argue that without public data on emissions, reductions, and concessions, the public cannot evaluate policy effectiveness or hold firms accountable.

Carbon Leakage Rationale for Allowances (“Singapore faces pressure to reveal carbon tax concessions”)

Singapore defends concessions as necessary to prevent firms from relocating to countries with weaker climate regulations (carbon leakage), which would harm competitiveness.

Uncertain Emissions Reductions (“Singapore faces pressure to reveal carbon tax concessions”)

Government says it is “difficult to isolate emissions reductions” from the tax, highlighting a challenge of evaluating policy impact without transparent reporting.

Household Impacts of Carbon Tax (“Singapore faces pressure to reveal carbon tax concessions”)

A carbon tax around 50 SGD would increase a 4-room flat’s utility bill by ~8 SGD/month, a manageable cost but one that requires protections for low-income households.

Singapore as Regional Climate Leader (“Singapore faces pressure to reveal carbon tax concessions”)

Despite producing only 0.1% of global emissions, Singapore’s high per-capita emissions and leadership role mean its carbon tax design influences Southeast Asian climate policy.

US Role in Global Carbon Tax Momentum (“Singapore faces pressure to reveal carbon tax concessions”)

The U.S. rejecting global carbon pricing efforts slows international progress, making Singapore’s transparency and integrity more important to sustain regional momentum.

Cap-and-Trade Failure in the EU (“After Nobel, Economist Talks Climate Tax” – Nordhaus)

EU cap-and-trade prices collapsed because emission forecasts were wrong, causing permit oversupply and prices too low to change behavior—an example of poor policy design.

Carbon Tax Advantage Over Cap-and-Trade (“After Nobel, Economist Talks Climate Tax”)

Carbon taxes avoid price volatility and prediction errors because the price of carbon is fixed regardless of actual emissions, making incentives more stable.

British Columbia Carbon Tax Model (“After Nobel, Economist Talks Climate Tax”)

BC raised carbon prices but returned revenue as dividends, making households whole; this revenue-neutral design aligns incentives while maintaining political popularity.

Why Carbon Taxes Are Politically Toxic in the U.S. (“After Nobel, Economist Talks Climate Tax”)

Anti-tax movements, energy industry influence, and partisan framing make carbon taxes politically radioactive despite broad support among economists.

Dividend-Based Carbon Policy Appeal (“After Nobel, Economist Talks Climate Tax”)

Tying carbon tax revenue to visible benefits—like checks to households—can reduce opposition by reframing it as a financial gain instead of a cost.

Obama’s Missed Carbon Tax Opportunity (“After Nobel, Economist Talks Climate Tax”)

Nordhaus argues Obama avoided championing a carbon tax despite its economic logic due to political risk, losing a chance for major climate policy progress.

Long-Run Political Acceptance of New Taxes (“After Nobel, Economist Talks Climate Tax”)

Nordhaus suggests initially unpopular policies (like Social Security) can become broadly accepted over time, implying carbon taxes may eventually gain support.

Climate Time Constraints (“After Nobel, Economist Talks Climate Tax”)

Nordhaus warns that achieving the 1.5°C target is nearly impossible and 2°C is unlikely without rapid global action within two decades.

Why Voters Resist Carbon Taxes (“Economists Love Carbon Taxes. Voters Don’t.” – Gleckman)

Voters focus on immediate higher energy prices while benefits feel distant and abstract, making them reluctant to support carbon taxes even when economists favor them.

Washington State Carbon Tax Failures (“Economists Love Carbon Taxes. Voters Don’t.”)

Washington voters rejected carbon taxes twice despite strong expert support, illustrating political difficulty even in environmentally conscious states.

Canada’s Carbon Tax Backlash (“Economists Love Carbon Taxes. Voters Don’t.”)

Several provinces repealed or resisted carbon taxes despite federal mandates, showing political vulnerability even when rebates exceed household costs.

French Yellow Vest Protests (“Economists Love Carbon Taxes. Voters Don’t.”)

Macron’s fuel tax hikes triggered widespread protests partly because most revenue went to deficit reduction rather than environmental or household benefits.

Importance of Revenue Use (“Economists Love Carbon Taxes. Voters Don’t.”)

Carbon taxes framed as funding unrelated government spending face more resistance; using revenue for dividends or popular programs increases political acceptance.

Gas Taxes vs Carbon Taxes (“Economists Love Carbon Taxes. Voters Don’t.”)

Voters often accept gas taxes framed as user fees for roads but oppose carbon taxes framed as environmental policy, highlighting the role of framing.

Carbon Dividend Strategy (“Economists Love Carbon Taxes. Voters Don’t.”)

Rebating revenue directly to households (as in Canada’s proposed rebates) may increase acceptance but has mixed political results.

Political Challenge of Climate Taxes (“Economists Love Carbon Taxes. Voters Don’t.”)

Even well-designed carbon taxes face “uphill battles” unless policymakers find popular, visible uses for the revenue.