The point of the economy is to maximize benefits while minimizing downside.
Burning fossil fuels cases problems such as respiratory issues, but it also has major benefits for the people doing it like being able to travel quickly. We don’t want to ban it, but you want your personal benefit while convincing other people to burn less because it harms you. Further you don’t want the overheated of a complex system because that’s expensive.
Enter a flat carbon tax where people can decide to keep doing everything the same way at the cost of paying more, but they also get cleaner air from the people who did cut their emissions. While the people who cut back get both cleaner air and the benefits from other peoples carbon taxes.
You do need to pick a reasonable tax rate, but you avoid the planned economy issues from say cap and trade or company specific EV subsidies.
Finally, the real benefit is when building new infrastructure. A 1 cent or even 10 cent per gallon carbon tax might not change your driving behavior but it’s going to convince many people to get more expensive but also more energy efficient systems because the ROI increases. Which then increases R&D and economy of scale for such systems, you basically get the benefit of a subsidy without spending taxpayers money.
Negative externalities such as climate impact are a cost that is not priced in. This results in higher production than is actually economically optimal.
What was the incremental taxation rate that should have been assessed throughout the industrial revolution to price in then-present and then-future externalities?
No one rate would have been perfect over such a long period.
All the way back in the 1600’s coal pollution was considered a significant problem which prompted legislation by King James I to restrict coal burning. There were few effective mitigation strategies, though ultra tall smokestacks were fairly effective in reducing harm to those in the imitate surroundings so very early on that may have been useful etc. Similarly outside of large cities the health effects where less significant.
That said, as recently as 1952 a single 5 day event killed 4,000-12,000 people in London depending on how it’s counted. So, the ideal rate would have been non zero even before climate change was a significant issue.
I agree pollution from the industrial revolution started long ago (i.e. King James I) and it's killed people recently (i.e London 1952). I agree the correct rate is non-zero.
There should be some average rate that approximates whatever instantaneous rate would have been instantaneously perfect.
We have the benefit of being able to look backward on this era with near-perfect information. A proposal for taxation for externalities that is historically calibrated has a chance of being adopted. Otherwise, it's just fist shaking and chanting "externalities".
A business that creates $1 of value by imposing $2 of costs on other parties is wasteful: the economy would be better off if such business models didn't exist.
For carbon these costs look like increased healthcare due to pollution, decreased agricultural efficiency due to weather changes, government paying for environmental remediation or carbon capture, loss of tourism when the USA and Europe is covered in smoke for large parts of the summer, ski fields closing due to lack of snow.
Why can't we let the free market sort this out? More than most externalities, carbon pollution is expensive to reverse: CO2 that costs $10 to suck out of the air might only cost a company $1 to not emit in the first place.
There's also a time component: if there were no taxes or fees for dumping waste we'd have a really efficient decade in the stock market then all be dead by the end of the century.
I'll admit that when they say "efficient" that word is doing a lot of work.
Disincentivizing private jet usage simultaneously incentivizes alternatives, the most analogous of which is buying at ticket on a major airline. Those airlines operate at economies of scale and are far more efficient in their use of fuel/person/mile than private jets. Less analogous alternatives would be setting up a remote meeting or phone call.
