Ein paar Anmerkungen zur österreichischen CO2-Steuer

Es ist vollbracht: Österreich bekommt eine CO2-Steuer. Und die Einnahmen daraus werden pauschal an Haushalte zurückgegeben. Ein paar spontane Anmerkungen dazu:

1. Die Reform kann man durchaus als Triumph der Volkswirtschaftslehre werten. Seit Jahrzehnten haben Ökonomen für eine CO2-Steuer als effizienteste Lösung für das Emissionsproblem geworben. Jetzt wird sie in immer mehr Ländern umgesetzt. Dass die Steuereinnahmen dann auch mittels Pauschaltransfer an die Haushalte zurückfließen sollen, könnte eins zu eins aus einem guten VWL-Lehrbuch stammen.

2. Meine Meinung zu CO2-Steuern hat sich nicht geändert: eine globale CO2-Steuer führt bestenfalls zu einer Verschiebung der Produktion von fossilen Brennstoffen von heute auf morgen. Für den Treibhauseffekt sind aber nur die kumulativen Emissionen von Bedeutung. Daher macht eine weltweite CO2-Steuer fürs Klima langfristig keinen Unterschied. Aber, auch wenn das aus österreichischer Sicht schmerzt, Österreich ist nicht die Welt. Die Welt stößt jedes Jahr etwa 36 Mrd. Tonnen Kohlendioxid aus – Österreich ungefähr 0,07 Mrd. Tonnen. “You do the math!”, wie die Amis sagen.

3. Niemand scheint zu wissen (oder die, die es wissen, sagen es nicht), dass Österreich schon bisher eine CO2-Steuer hatte. Jede Steuer, die den relativen Preis von CO2-emittierenden Gütern anhebt, ist eine CO2-Steuer. Die Mineralölsteuer tut genau das. Der durchschnittliche CO2-Ausstoß pro Liter Benzin beträgt 2,7 kg. Die MöSt belastet Benzin mit 48,2 Cent pro Liter. Also trägt Benzin schon jetzt eine CO2-Steuer von (0,482*1000/2,7 =) 178,52 Euro pro Tonne. Die jetzt eingeführte Steuer erhöht diesen Betrag einfach nur um 30 Euro. Nachstehendes Schaubild veranschaulicht dieselbe Rechnung auch für Diesel und Heizöl.

Schaubild 1: Effekt der “ökosozialen Steuerreform” auf den impliziten CO2-Preis. Eigene Berechnungen.

4. Wenn schon die Wirkung auf die globalen Emissionen verschwindend gering ist, wird die CO2-Steuer wenigstens Österreichs Emissionen reduzieren? Ich fürchte auch hier wird die Wirkung gemeinhin überschätzt. Wie Schaubild 2 zeigt, ist Österreich ein Netto-Importeur von CO2, d.h. die konsumbasierten Emissionen sind wesentlich höher als die produktionsbasierten. Österreich ist auch eine kleine offene Volkswirtschaft, die die Weltmarktpreise von handelbaren Gütern als gegeben annehmen muss. Wenn die CO2-Steuer die heimischen Produktionskosten von CO2-intensiven handelbaren Gütern wie z.B. Stahl erhöht, sinken zwar die heimischen Produktionsmengen und die produktionsbasierten Emissionen, aber nicht die Konsummengen oder die konsumbasierten Emissionen. Österreichs Netto-CO2-Importe werden steigen. (Siehe diesen Blogeintrag für eine vollständigere Analyse)

Schaubild 2: produktions- und konsumbasierte Emissionen. Quelle: Our World In Data.

5. Anders sieht die Sache bei nicht-handelbaren Gütern aus. Insbesondere beim Tanken wird die neue CO2-Steuer wohl einen Effekt haben, weil nur wenige Österreicher extra nach Ungarn oder Slowenien fahren werden um 8 Cent pro Liter zu sparen. Ich denke daher, dass es zumindest in den Bereichen Verkehr und Heizen den gewünschten Substitutionseffekt auf den Konsum geben wird. Und Verkehr und Heizen sind zusammen für mehr als die Hälfte der heimischen CO2-Emissionen verantwortlich. Daher bleibt trotz des Einwands in Punkt 4 unterm Strich noch eine Reduktion der konsumbasierten Emissionen zu erwarten.

Non-secret voting

Occasionally, I discuss strategic voting in some of my game theory classes. In particular, in past classes I have highlighted the trivial point that if people have only two choices (or candidates) to vote for, then it is a (weakly) dominant strategy to vote for your more preferred choice: voting for your more preferred choice can never lead to a worse outcome for you than voting for your less preferred choice. So, everyone will vote for their favorite choice and the vote winner reflects the majority preference. I regarded it as a bit of an embarrassment that such a voting game also has other equilibria, in which some people vote for their less preferred choice. For instance, if every one of the n-1 people other than you (with n ≥ 3) vote for choice A and you prefer choice B, it is immaterial if you vote for A or B because your vote will simply not matter. One can, in theory, even have the paradoxical situation that everyone prefers A over B and yet everyone votes for B. This is an equilibrium! Just not a very plausible one, I would have argued. I have recently learnt not to too quickly discard the weakly dominated equilibria of such a voting game.

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A simple model of community enforcement

Here is the model for my previous blog post on (anonymous) community enforcement. I would call it a simplified symmetric (single-population) version of the model in the paper by Michihiro Kandori entitled “Social norms and community enforcement” in the Review of Economic Studies 59.1 (1992): 63-80. The point of this blog post is to demonstrate that what I have claimed in the previous post can be made logically coherent. I can provide a reasonable and simple artificial world in which we obtain cooperative behavior under the fear of triggering a tipping point as a subgame perfect Nash equilibrium, meaning a self-enforcing situation that is even self-enforcing when the tipping point has been triggered and there is no way back.

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Please leave the bathroom as you would like to find it

Many actions that we take affect other people that are not involved in the decision-making process. In economics, these effects are commonly referred to as “externalities” and the presence of externalities is one of the main concerns that may render free markets inefficient. “Inefficient” means that the ultimate outcome of people ignoring the externalities that they cause on other people is such that there is an alternative outcome that would be better (or at least as good) for all people! The presence of externalities is the main problem behind climate change and also at least one reason why we still have a problem with Covid-19. People, when making their holiday planning, car driving, air conditioning, car purchasing, et cetera decisions often ignore the effect their actions have on the environment and, thus, on all others. People make vaccination decisions weighing their own subjective assessment of the risks for themselves, without necessarily considering that with a vaccination they would also increase the protection from Covid-19 for everyone around them.

There are a variety of measures that governments or other organized groups of people can take to reduce the harm caused by people ignoring these externalities. One can, for instance, debate the (higher) taxation of fossil fuels or laws to force everyone to vaccinate. Often, such measures are probably necessary. There are (possibly rare) cases, however, in which even in fairly anonymous societies, the problem sorts itself out. It can do so through a mechanism of community enforcement. In this post I will describe an argument derived from a 1992 paper by Michihiro Kandori entitled “Social norms and community enforcement” in the Review of Economic Studies 59.1 (1992): 63-80. I will use the examples of mountain tops on which people do not leave their rubbish, bathrooms on trains that remain reasonably clean despite heavy usage, and communal kitchens (such as the one in my department) that despite a lack of regular professional cleaning service and despite a fair number of people using them, remain reasonably clean and usable.

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Allocating fruit among household members

This story is loosely based on real-life events. In the summer, members of my wife’s family all come together to stay with the “grandparents” in one large household. There are typically around 12 of us and we have many small problems. One of these is the allocation of fruit (and other snack items – but I will concentrate on the fruit problem as it is the easiest to describe) among household members. Mind you, this is not a problem that we talk about (much) in the household. Many of us perhaps do not even recognize it as a problem, but it is a problem and one that we solve inefficiently.

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Carbon taxes delay CO2 emissions, but they don’t reduce them

The intellectual history of the carbon tax is a bit of a tragedy.

I always like to say that economists knew the solution to climate change before climate change existed. Arthur C. Pigou laid out the theory of externalities in 1920, long before global warming became a concern. And Pigou also provided the solution: if there is a negative externality, tax the thing that causes the externality. A carbon tax is the straightforward application of this idea.

It took quite a long time for climate change to become a number one concern in global politics and it took even longer for the carbon tax to become a viable idea in policy circles. There still is a lot of misunderstanding about how such a tax would work and it continues to face a lot of resistance. There is, of course, also disagreement about the appropriate tax rate and what to do with the revenue.

And yet, as many people still fail to realize, most countries already have an implicit carbon tax. Almost all developed countries already tax gasoline. The average gasoline tax in the OECD translates to an implicit carbon tax of 85 euros per ton of CO2 – which is in the ballpark of reasonable estimates of the social cost of carbon. That implies, at least to a first approximation, that the average user of a combustion engine car in the OECD already pays the full social cost of burning gas.

Of course, the problem with the existing implicit carbon taxes is that they are not uniform. The taxes on gas and diesel are much higher than those on coal, natural gas, and kerosine. There is a lot of variation in tax rates between countries. So the existing carbon taxe regime leaves a lot of room for improvement. But enacting an optimal carbon tax wouldn’t require us to change our tax system fundamentally – we would just need to tweak the existing fossil fuel taxes.

And let’s not forget the EU cap-and-trade system which imposes another implicit carbon tax on a broad set of emitters, from electricity generation to steel factories, refineries, and other energy-intensive industries to commercial aviation. The current price of carbon in the certificates market is 51 euros per ton – again, not far from mainstream estimates of the true externality.

Now here comes the tragedy – at the exact time that a carbon tax has become a mainstream idea, economists have started to realize a major flaw with it: A carbon tax may not actually reduce carbon emissions over the long run, but merely change the time-path of emissions.

Readers of this blog have long understood this. Hans-Werner Sinn has understood this even longer. Recently, I have seen indications that more and more economists are becoming aware of it.

Here is a graph from a recent paper by Jose Luis Cruz Alvares and Esteban Rossi-Hansberg:

Source: Cruz Alvares and Rossi-Hansberg (2021)

Under business as usual (represented by the light-green curves above), this model predicts that CO2 emissions would peak around the year 2100 and then start to decline, while temperatures would rise by about 7 degrees relative to pre-industrial levels. With a carbon tax of 50% (brownish curve), the peak of emissions would be shifted in time by a couple of decades and temperatures would rise somewhat less rapidly, but they would end up with the same cumulative emissions and the same long-run temperature increase. A higher tax rate (blue and dark green curves) would simply shift the time path of emissions and temperatures further into the future.

So these model projections show that a carbon tax merely stretch out the cumulative CO2 emissions over time without any long-run impact on the climate. No matter what tax rate is applied, in the long-run we’re going to end up with a rise of about 7 degrees.

This is a devastating result for carbon taxes. (Too devastating for the authors to put in the abstract, where they try to down-play this result as follows: “Carbon taxes delay consumption of fossil fuels and help flatten the temperature curve but are much more effective when an abatement technology is forthcoming.” I think “help flatten the temperature curve” is a little misleading , since it is really just a postponing of the temperature increase.)

The Cruz Alvarez and Rossi-Hansberg paper is notable for a number of other results. For instance, it has bad news on clean energy subsidies:

Clean energy subsidies have only a modest effect on carbon emissions and the corresponding evolution of global temperature since, although they generate substitution towards clean energy, they also lead to a reduction in the price of energy which results in more production and ultimately more energy use. These effects tend to cancel each other out.

Cruz Alvares and Rossi-Hansberg (2021), p 4

And it is the first paper I have seen (though I do not claim to have read every relevant paper) that tries to estimate the welfare cost of climate change taking into account that people will change their behavior when temperatures rise (including, if necessary, leaving their current home and migrate to better climates).

This is their summary of the key findings regarding welfare:

With the quantified model in hand, we can simulate the economy forward over several centuries and evaluate the economic consequences of global warming. This phenomenon is expected to have heteroge- neous effects over space, where the hottest regions in South America, Africa, India and Australia experience welfare losses of 15% and the coldest regions in Alaska, Northern Canada, and Siberia undergo welfare gains as high as 14%. On average, the world is expected to lose 6% in terms of welfare, although the exact number depends on the yearly discount factor.

Cruz Alvares and Rossi-Hansberg (2021), p 4

I have some trouble converting this finding into something tangible. Is a 6% drop in welfare a big deal or not? Imagine a politician saying “Vote for me, and I will make you 6% happier?” Would you vote for the guy? I don’t know. Maybe. I guess the question is: compared to what? Footnote 36 of the paper provides a clue:

Global average welfare losses are calculated as the population weighted average of the relative present discounted value of utility in the baseline case relative to the counterfactual without global warming.

Cruz Alvares and Rossi-Hansberg (2021), p 28

So this is one way to think about it. Taking the authors’ chosen discount factor of 0.964, a 6% reduction in the present value of utility is equivalent to an annual reduction of 0.21% for every year into eternity. For small changes, the change of utility is closely approximated by changes in income. Therefore, a 6% loss in welfare translates into a 0.21% loss in annual income, now and forever. Given that the average income of a world citizen in 2019 (pre-covid) was about 18,000 US dollars (purchasing power adjusted), the annual cost of climate change for the average world citizen is about 40 dollars.

40 bucks isn’t a lot. But there is, of course, a lot of uncertainty and a lot of variation across countries. Helpfully, the authors include this graph showing the regional variation of welfare losses (less helpfully, in the graph, red means welfare gains, blue welfare losses):

Cruz Alvares and Rossi-Hansberg (2021), p 29

In conclusion, I see signs that the academic consensus is slowly shifting away from the carbon tax precisely at a time, when that idea is getting a lot of traction from policy makers. I continue to believe, and I am emboldened by the research discussed above, that the solution to the problem of climate change is to curb the extraction of fossil fuels directly.

Ricardian Equivalence confirmed

According to the so-called Ricardian Equivalence theorem, cutting taxes or increasing transfers does not stimulate aggregate demand, because private households offset tax cuts or transfer increases by saving more.

The proof of the theorem is as follows: If the government cuts taxes (or raises transfers) by 1 euro today without cutting government spending, the public debt increases by 1 euro. To service the additional debt, the government must raise taxes by r euros, r being the interest rate, in every future period from tomorrow to infinity. The present value of those future tax payments is 1 euro (=r/r). This is the amount households need to save today to pay those future taxes.

David Ricardo was the first to lay out this simple point of arithmetic in a debate over how the British government should pay for the Napoleonic Wars. But he went on to reject the conclusion that government deficits are offset by private saving arguing that households are too short-sighted to take into account those future tax payments in their saving decisions. So David Ricardo did not believe in Ricardian Equivalence.

Whatever.

In preparation for my Principles of Macroeconomics class, I wanted to check if there is any correlation between government deficits and private saving. I didn’t expect to find much. So I was surprised when after a few minutes of fiddling with FRED, the awesome data base of the St. Louis Fed, I got this:

The red line is the primary government budget balance in percent of GDP, (T-G)/Y in conventional macroeconomic notation. The blue line is personal saving in percent of disposable income (Y-T-C)/(Y-T).

Look how the blue line tends to move up whenever the red line moves down, and vice versa. Your eyes do not lie. The correlation coefficient between government saving and private saving is -0.12, statistically different from zero at usual confidence levels (the t-statistic is -1.85).

Is this the most solid econometric evidence ever? No, but it is a sign that Ricardian Equivalence is not so out of touch with the data as you might think.

Coronavirus und Lebenserwartung: Statistik Austria verwirrt

Der Standard berichtet:

Die Corona-Pandemie hat den stärksten Rückgang der Lebenserwartung seit Beginn der Aufzeichnungen 1951 ausgelöst. Während wir es in den letzten Jahren gewohnt waren, immer älter und älter zu werden, gibt es nun erstmals einen massiven Knick in der Lebenserwartungsstatistik.

Grund dafür ist eine sehr hohe Übersterblichkeit in den letzten Wochen des Jahres 2020. Neue Daten der Statistik Austria zeigen, dass im gesamten Vorjahr etwa zehn Prozent mehr Menschen starben als im Durchschnitt der vergangenen fünf Jahre. Insgesamt waren es rund 90.000. […]

Konkret heißt das, dass ein Mann, der heute in Österreich geboren wird, im Durchschnitt 78,9 Jahre lang leben wird. Bei einer Frau sind es durchschnittlich 83,7 Jahre. 

https://www.derstandard.at/story/2000123287763/statistik-austria-ueber-90-000-todesfaelle-2020-lebenserwartung-sinkt

Damit sank die Lebenserwartung im Vergleich zum Vorjahr bei Frauen um ein halbes Jahr, bei Männern um etwas mehr. Die Statistischen Ämter anderer Länder lieferten ähnlich verheerende Zahlen: die amerikanische Gesundheitsbehörde CDC meldete sogar einen Rückgang der Lebenserwartung von einem ganzen Jahr.

Diese Zahlen können nicht stimmen.

Experten schätzen, dass ein an COVID-19 Verstorbener im Schnitt 12 Jahre seiner Lebens verlor. Multipliziert man das mit den 8.500 Corona-Toten in Österreich kommt man auf 102.000 verlorene Lebensjahre. Bezogen auf die Gesamtbevölkerung von 8,86 Millionen ergibt das eine durchschnittliche Reduktion der Lebenserwartung von 0,01 Jahren. Das ist ein Rückgang von etwa vier Tagen, nicht sechs Monaten wie der “Standard” berichtet. Der von der Statistik Austria gemeldete Wert ist um das 40-fache zu hoch. Wie kann das sein?

Wie in diesem kurzen Artikel erklärt wird, gehen die Statistikämter bei der Schätzung der Lebenserwartung von einer wesentlichen Annahme aus: nämlich, dass das Sterberisiko in jeder Alterskohorte in Zukunft genauso bleibt wie im Jahr 2020. D.h. die Wahrscheinlichkeit, dass ein im Jahr 2020 geborener Mensch im Alter von X Jahren sterben wird, ist gleich der Sterbewahrscheinlichkeit eines X Jahre alten Menschen im Jahr 2020. Das ist eine sinnvolle Annahme in einem gewöhnlichen Jahr. Aber 2020 war kein gewöhnliches Jahr.

Mit anderen Worten: Die Statistik Austria geht implizit davon aus, dass sich die Corona-Pandemie von 2020 jedes Jahr genauso wiederholen wird. Die Mitarbeiter der Statistik Austria sind sich dieser Annahme natürlich bewusst, weshalb auch auf ihrer Website folgender der Hinweis steht:

Die für ein Kalenderjahr berechnete Lebenserwartung bei der Geburt gibt an, wie viele Jahre ein neugeborenes Kind im Durchschnitt leben würde, wenn sich die im Kalenderjahr beobachteten altersspezifischen Sterberaten in Zukunft nicht mehr ändern würden.

https://www.statistik.at/web_de/presse/125167.html

Nur das Problem ist: Die so geschätzte Lebenserwartung macht für das Jahr 2020 eben leider keinen Sinn. Und der Warnhinweis geht erwartungsgemäß in der medialen Berichterstattung völlig unter. Sogar der “Standard”, der für sich in Anspruch nimmt ein Qualitätsmedium zu sein, (des-)informiert seine Leser, dass ihre Lebenserwartung um 6 Monate gesunken sei, ohne auf die falsche Annahme, die diesem Wert zugrunde liegt, hinzuweisen.

Einigermaßen bizarr ist auch der Titel, den die österreichische Akademie der Wissenschaften für ihren Beitrag zu diesem Thema gewählt hat:

COVID VERRINGERT LEBENSERWARTUNG, STIEHLT ABER KEINE LEBENSJAHRE

Die durchschnittliche Lebenserwartung in Österreich ist laut vorläufigen Zahlen der Statistik Austria im Corona-Jahr 2020 um sechs Monate gesunken. Das heißt aber nicht, dass die Österreicher/innen jetzt weniger alt werden, erklärt Demograph Marc Luy von der ÖAW.

https://www.oeaw.ac.at/detail/news/covid-verringert-lebenserwartung-stiehlt-aber-keine-lebensjahre

Hä? Wenn COVID keine Lebensjahre stiehlt, wie kann sie dann die Lebenserwartung um ein halbes Jahr verringern? Wenn die Lebenserwartung nicht die zu erwartenden Lebensjahre misst, was misst sie dann? Und wozu braucht man dann diese “Lebenserwartung” überhaupt?

In einem normalen Jahr misst die Lebenserwartung das, was jeder glaubt, dass sie misst. Aber eben nicht in einer Pandemie. Die Statistik Austria täte gut daran, die Berechnung der Lebenserwartung für 2020 anzupassen.

(Hat tip to David Friedman, durch den ich auf das Problem aufmerksam wurde.)

Two riddles

Riddle #1: Are you better off if your wealth increases?

Julia owns shares in a company which pays her a dividend of 100,000 a year. She spends all of her dividend income. At an interest rate of 10 percent, the market value of her wealth is 1 million. When the interest rate falls to 1 percent, her wealth goes up to 10 million.

How much better off is Julia?

adapted from Ben Moll: https://benjaminmoll.com/wp-content/uploads/2020/06/HKS_comment.pdf

Riddle #2: Are you better off if the price of your house increases?

Joe lives in a house worth 1 million. He has borrowed 1 million at 10% interest to finance the house purchase. Due to a sudden increase in demand for local houses, Joe’s house rises in value to 1.2 million.

How much better off is Joe?

The obvious answer is wrong. Ben Moll has the correct answers in this short paper.

The point: Wealth isn’t welfare. Wealth statistics (and a fortiori wealth distribution statistics) are often misleading.

(Here’s a graphical clue:)