What's Wrong with Tying a Carbon Tax to Temperature?

John Teirney goes hunting for a Grand Bargain between climate change skeptics and reformers. It's a carbon tax tied to the temperature near the equator. If the temperature goes up, the tax goes up. Clever idea. But the perfect bargain? I don't think so.

It reminds me of I went to visit colleges, I heard at least five tour guides tell me "We have a saying in Massachusetts [/Vermont/Maine/Connecticut/New Hampshire]. If you don't like the weather, wait five minutes!" This was never a funny comment, and Massachusetts isn't on the equator, but it highlights thing thing that temperature does, which is that it changes, a lot. So if you're designing a tax that moves with the temperature, presumably you don't want it bobbing up and down like an afternoon stock market. You want to send a steady price signal. That requires you to average out temperatures over a long period of time. But how long? Years? We've seen the temperatures can move dramatically within a decade, and since the trend is warming, it means that we'd probably be taxing last decade's colder temperature. Better than nothing, but not a compromise the eco-community should be grasping at, especially since tropical temperatures aren't a leading indicator of some of the most serious warming trends.

Charles Komanoff piles on:

But sadly, his tax isn't well suited for the climate crisis because it fails to provide the clear price trajectory needed by businesses, entrepreneurs, and others with long time-horizons for carbon-critical capital investment (power plants, location choice, product development, etc.)

Had the U.S. implemented a McKitrick tax in, say, 1988, when James Hansen brought the climate crisis into American consciousness, we might be well on our way to a low-carbon economy. Twenty years on, we need a clearer price signal than his proposal offers.

True, and it's possible that we get nothing out of the cap and trade legislation this year -- that it bogs down in the Senate and we wait another election cycle or four to do something about the environment. So sure, I'll concede that yes, this a way to price carbon, which is better than not pricing carbon at all. But there are principled reasons to object to this idea as the Grand Solution of climate change reform.