Source: EconLog
by Scott Sumner
“The Financial Times has an interesting interview with Esther Duflo, who was awarded the Nobel Prize in Economics in 2019. She argues that developed nations have a moral duty to compensate poor countries for the damage done by carbon emissions …. Duflo’s proposed tax makes no sense if the underlying problem is externalities. Economic theory suggests the optimal remedy for negative externalities is to impose a tax equal to the external cost — in this case a carbon tax. (This is assuming that transactions costs prevent a voluntary solution.) Instead, Duflo proposes a tax on the rich, which would do little or nothing to address the problem of global warming.” (04/23/24)
https://www.econlib.org/externalities-should-be-handled-with-care/