An economist explains: Textbook economics is badly flawed when it comes to climate change
But economists are hardly infallible experts on the carbon tax and other fiscal measures implemented by governments.
- But economists are hardly infallible experts on the carbon tax and other fiscal measures implemented by governments.
- While the carbon tax increase kicked in, the Alberta fuel tax was hiked by 13 cents the same day.
- In other words, the carbon tax has been a blessing for Smith as she deflects attention away from her own government’s role in raising gas prices.
Double standards
- For instance, some homeowners have blamed the carbon tax for higher electricity bills in Alberta, ignoring the fact that the carbon tax does not apply to the electricity sector.
- Double standards abound on the carbon tax.
- While protesters chant “Axe the tax,” they ignore that fossil fuel subsidies cost them more than the carbon tax.
Textbook economics backs carbon tax
- As an economics instructor, a key lesson is that the carbon tax is the least costly method to address carbon emissions.
- In my pedagogical paper on climate change, I refer to McGill University economist Chris Ragan, who states that the carbon tax is more efficient than regulation.
- But the carbon tax incentivizes investment in new technologies to limit the tax payment.
The limits of textbook economics
- The way textbook economics approaches climate change through externalities suggests it’s simply a minor aberration.
- Energy and raw materials are ignored, which means that biophysical or ecological limits are disregarded in the pursuit of growth.
- Keen argues that mainstream economics assumes 90 per cent of GDP will be unaffected by climate change.
- In short, he argues, mainstream economics has been complicit in the existential crisis of climate change.
Radical solutions
- But it may be too little too late, necessitating radical solutions beyond the carbon tax.
- In this regard, Keen argues that carbon pricing is not enough, calling for carbon rationing.
- This happens by going beyond textbook economics and technical jargon by highlighting the ecological and biophysical limits to growth.
I am not affiliated with any organization. Though, I have in the past done research assistance work for the Parkland Institute.