If only Polly Toynbee understood matters

At least half an excuse for getting that fatted calf backing up away from the bludgeon:

Here’s one action that will be necessary: carbon taxes. Writing in the Financial Times, the economist Tim Harford recently suggested that every product needs a carbon price attached, sending a signal not just to the buyer, but right down every supply chain to use less energy in growing, manufacturing and transporting a product to attract less tax.

This is hardly a new idea and it’s not unique to Tim Harford. Bill Nordhaus gained his Nobel for pointing it out, Nick Stern his peerage. For that is the lesson of the Stern Review. If we accept - whether you do or not is entirely up to you - the basic idea that climate change is a problem we should do something about then the thing we should do is a carbon tax at the social cost of carbon.

Much as it will shock Polly this being something we here have been saying for decades. Get on with it in fact.

That will be necessary. But any climate-abating tax brings on green crocodile tears for poor people, often from the same Tory MPs who just voted to remove the £20 universal credit uplift. The claim that carbon taxes would disproportionately affect the poorest people was what killed off the fuel price escalator – a yearly tax increase devised by the Tories in 1993 to discourage driving – after owner-driver hauliers blockaded oil refineries in 2000. When the climate demands that fuel taxes rise, politicians make them fall.

That being where Polly is failing to grasp the important point. A carbon tax does not mean “tax carbon ever more”. It means “tax carbon this much and no more”.

Back a decade and a bit the fuel duty escalator was too high as a tax upon those emissions. As we pointed out once upon a time (now sadly lost to the ether, sorry) that hike in fuel duty that Ken Clarke started “to meet our Rio commitments” was 11 pence a litre too high when compared with the social cost of carbon.

The correct solution to climate change thus requiring lower fuel duty, not higher. Of course, this being politics no actual cut was made. Instead, not raising the tax again and allowing inflation to degrade the value of it reaches the same end point.

The IMF just proved this for us too. On page 18 here. UK petrol and diesel is near exactly properly taxed to take account of the expenses of emissions, local air pollution, accidents, congestion and the existence or not of VAT.

Just for the hard of understanding - or hearing perhaps - Pigou Taxes mean the right amount of taxation, not more.