Ottawa’s emission cap on oil and gas sector targets only 1/4 of GHG emissions; contradicts rationale for carbon tax

CO2 is CO2 is CO2— the Implications for Emissions Caps

Main Conclusions

• CO2 is CO2 is CO2: all CO2 molecules are identical whatever their source.
• To a height of roughly 100 km, the atmosphere is a “homosphere”: its composition is essentially the same throughout.
• Any reduction in the CO2 put into the atmosphere will therefore have the same effect as any other.
• If we decide to reduce the atmosphere’s CO2 content, economics suggests we do so in the least costly way.
• As a real-word example demonstrates, a family would reduce its CO2 use by seeking the least costly ways to lower its CO2 output per activity, as well as the least costly activities that it could reduce or even eliminate.
• A family that wanted to do this rationally would equalize the marginal cost of CO2 reduction across all its activities, cutting back more on those that are of least benefit to it and less on those that are of most benefit.
• A country is not just a big family. The least costly ways of reducing CO2 output are known, not to governments, but only to individuals and firms, who have, as Friedrich Hayek put it, “knowledge of the particular circumstances of time and place".
• If a government imposes a price on CO2 emissions equal to their marginal social cost, people and firms will go about finding the least costly way to reduce their emissions and no further intervention will be required.