The Economics of Global Warming Reduction

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The Economics of Global Warming Reduction

Main article: The Economics of Global Warming Reduction

It is widely but mistakenly believed that economic measures to reduce global warming would harm economies. For example, the US President George Bush said that Kyoto was "was a lousy deal for the American economy." [1]

In reality a tax on crude imports that would reduce consumption would also provide huge economic benefits to importing countries like the US, Germany, Japan, India, China, Brazil etc. This follows from the optimal tariff theory [2] of English economist CHARLES BICKERDIKE (1906) or even earlier in the work of another English economist Robert Torrens (1844) [3]. Essentially optimal tariff theory applies in the special case when a large importing country can affect the price of the product it is importing (a condition that would certainly apply to a cartel of the US, Japan, Germany, China and India).

Sample calculations show that a 200% tax imposed on crude imports would cause consumption to fall by 9% and price in the world markets to fall by 54%. It would give the US government new tax revenues of $200 billion a year and a revenue neutral policy would return this to the US consumers as lump-sum tax break. The resulting net increase in purchasing power fo the US consumers (economic stimulus) would be $117 billion. How is it possible that the US consumers benefit by having tax which they paid at the gas pump returned to them? Because the fall in demand leads to the foriegn producers getting a lower price for crude.

The net reduction in wealth transfer from the US consumers to foreign producers (like the governments of Saudi Arabia, Russia, Venezuela etc.) would be $133 billion a year.[4]

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