Friday, July 22, 2016

Pigou Breakthrough

Prime Minister of Canada, Justin Trudeau, has announced that his Liberal government will adopt a nationwide price on carbon emissions.  Employing Pigouvian taxes (or subsidies) to internalize putative externalities, as University of Cambridge economist Arthur Cecil Pigou described in The Economics of Welfare, has long been suggested as a cost-effective means to reduce the generation and release of greenhouse gases. Although market-based methods combating climate change have traditionally been anathema to many environmental organizations, the often icy opposition to Pigouvian taxation, or, alternatively, cap-and-trade approaches, seems rapidly to be melting.  Although University of Chicago economist, and Pigou critic, Ronald Harry Coase would likely not approve, Canada has announced it will adopt a Pigouvian approach to curb its carbon emissions, either by individual provinces and territories, or, failing that, through a national policy.  No announcements have yet been made about the taxation of political hot air.