Pigouvian Taxation Laser Talk

Carbon pollution from the burning of fossil fuels carry significant “external” costs to society, such as the cost of more extreme storms, droughts, floods, and wildfires, as well as much higher healthcare and military expenses. These costs are expected to rise dramatically [1, 2].

Economists from both sides of the political spectrum, including Mitt Romney’s economic advisor Greg Mankiw [3, 4], adamantly believe that these costs should be borne by the companies responsible for the pollution, and that it will improve both the economy and the environment.

These fees, referred to as “Pigouvian” taxes, incentivize these companies and consumers to both reduce the pollution and its costs, and to create the clean, low-carbon jobs and industries of our future. An example of effective Pigouvian taxation is cigarette smoking. 50% of Americans used to smoke, now less than 20% do [5].

Note: Some of the other members of the Pigou club include Bill Nordhaus, Martin Feldstein, Gary Becker, Robert Frank, Andrew Samwick, Ted Gayer, Mike Moffatt, Ken Rogoff, Paul Krugman, Greg Easterbrook, John Tierney, Jonathan Rauch, Thomas Friedman, Joe Klein, Andrew Sullivan, Jane Galt, Christopher Farrell, William Baldwin, Clive Crook, Al Gore,  Alan Greenspan, George Schultz, Tony Lake, Nicholas Stern, Hal Varian, Larry Summers, Richard Posner, David Frum, Nouriel Roubini, Joe Stiglitz, Brink Lindsey, Tim Harford, Rob Stavins, Ray Magliozzi, Robert Samuelson, Dan McFadden, Charles Krauthammer, Paul Mulshine, Kevin Hassett, Jason Furman, Anne Applebaum, Paul Volcker, Bill Frenzel, Isabel V. Sawhill, Charles Stenholm, William Hoagland, Robert Shapiro, David Leonhardt,Morton Kondracke, Gilbert Metcalf, Fred Foldvary, Arthur Laffer, and a majority of economists [6].

 

  1. IPCC, 2011: Summary for Policymakers. In: Intergovernmental Panel on Climate Change Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation [Field, C. B., Barros, V., Stocker, T.F., Qin, D., Dokken, D., Ebi, K.L., Mastrandrea, M. D., Mach, K. J., Plattner, G.-K., Allen, S., Tignor, M. and P. M. Midgley (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA
  2. Jergler, Don. “NOAA: 2012’s U.S. Billion-Dollar Extreme Weather Events ‘Impressive’.” Published: Jan 4, 2013. Insurance Journal.  Last accessed: 4-29-13.
  3. Mankiw, Greg. “The Pigou Club Manifesto”. Posted: Oct. 20, 2006. Greg Mankiw’s Blog. Accessed: 4-29-13.
  4. Mankiw, N. Gregory. “One answer to Global Warming”. Sept. 16, 2007. The New York Times. Last accessed: 4-29-13.
  5. Lydia Saad. “One in Five U.S. Adults Smoke, Tied for All-Time Low”. Aug 22, 2012. Gallup. Last accessed: 5-22-13.
  6. Mankiw, Greg. “Rogoff joins the Pigou Club”. Posted: Sept 16, 2006. Greg Mankiw’s Blog. Accessed: 5-15-13.