I'm becoming very tired of liberals redefining baselines. The most recent example comes from the IMF. According to them, we can reduce carbon emissions by decreasing subsidies to fossil fuels. So far, so sensible. However, when you learn what they're classifying as subsidies, you see that they're warping traditional definitions, as liberals like to do.
Burning fossil fuels clearly has a negative externality--it harms people who don't directly use it because of pollution. One way to offset the cost to the public is to tax the burning of fossil fuels. This way, those harmed can be compensated and those who use the fuels have a disincentive to do so.
What the IMF does is says, any tax on fossil fuels below this level of optimal taxation, we're going to call a subsidy. This is another strategy from liberals--to skew traditional definitions in new directions. Usually we think of a tax as any price increase caused by the government and a subsidy is a reduction in cost or a payment to users from the government. The baseline has always been government non-intervention.
Now, the IMF wants to argue that the baseline should be the optimal tax on it. I wonder if that works the other way around. Can we say that something with a positive externality should be subsidized, so any failure to subsidize should be considered a tax? Should we go around from now own decrying the fact that the government taxes landscaping?
The level of optimal taxation/subsidy is impossible to determine; we should stick with the baseline of zero government intervention.
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