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November 13, 2008



Geldof doesn't get the carbon trading situation right. An EU-wide emissions trading scheme for CO2 has been in place since 2005. Any carbon trading in Germany takes place as a part of this.

There has been no substantial auctioning of allowances though there are plans to increase the share auctioned from 2013, and the revenues could be large.

Although there are proposals from the European Commission to "earmark" the auction revenues, current plans would use the funds for redistribution *within* the EU and for cutting more of EU emissions -- not for development.

This illustrates the more general point, that there is no reason to think that earmarking revenue by itself will increase expenditure on development unless rich-country preferences for such expenditure change.


It's about time that someone mentions the Tobin Tax. I thought that experts had forgotten about how much good it could bring about.


It is really a good idea. I am surprised that nobody has proposed it yet.


Jacques Chirac used to support the Tobin tax, it's odd that Sarkozy doesn't bring it up as part of his desire to "moralize" capitalism. Makes one question whether,beyond all the rhetoric of how things will never be the same, the political will really exists to substantially reform the global political economy?


Sorry Dani,
but I really cannot read to many sensible things in these words. I'm note sure what it means to introduce a tax that "costs taxpayers nothing", but there are plenty of studies out that show that significantly more than 50% of marginal cost increase due to the EU emission trading scheme (ETS) have been shifted forward to consumers (which, by the way, is necessary and a good thing, I believe). More important, I have never heard any convincing arguments how a Tobin Tax would reduce volatility on currency markets or could even prevent speculative attacks or currency crisis. And if we talk about tax revenues, for sure there are more efficient ways to raise a couple of billion dollars on a global scale.

Per Kurowski

Bob Geldof sincerely believes that the current crisis is the result of a runaway laisser faire fundamentalism and he is wrong. There is no laisser faire in having some bank regulators decide on their own upon some minimal capital requirements for banks based on a vague concept of risk and which places a regulatory de-facto tax on risk taking. Neither is there any laisser faire in the empowerment of some few credit rating agencies to act like the world guides on matters of risks, and which made of them the largest propagators of the subprime virus. This though does not take much from the correctness of some of Geldof’s proposals, especially since most of what he argues was just as valid before this crisis.

Carbon trading? To me that has always been like sort of selling indulgences and, as a protestant, I am against it, if it is bad it is bad even if you can afford it; and even though the main preachers of carbon trading surprisingly seem to come from Marthin Luther’s Germany. I much prefer straight forward easy to understand and transparent carbon taxes.

Now unfortunately the reality of the crisis is such that even if the needs for help will increase the availability of resources and the willingness to help will decrease and that, whether you like it or not, will also require diminishing the laisser faire attitude implied in “allowing governments to determine their own agenda”. I have always fought for the right of poorer countries to have their own strong and unencumbered voice but the underlying assumption is of course that the quid pro quo of it is a responsible behavior. In this respect, a continent, like for instance Africa, needs now to be much more forceful in handling their Zimbabwe, if it wants to maintain its credibility.

Finally and with respect of a very small Tobin tax I fully support it, but only because it can help, as a hump, to slow down a bit the frantic speed of capital movements and not so as to “deter speculators” since just the way that I fret over a world unwilling to welcome any risk-taking, which does mostly favor those who have, I would also hate to have a world without speculators and which would only favor the status-quo. Of course you do not want speculators to do harm, but yet they are vital players when it comes to plough the land of opportunities... just as much of the short selling does.

Pawel - student

Don't you think that this 0,5% of Tobin tax would increase the currency rates, after it was introduced. I personally think that for big players it wouldn't make a difference - they would simply take it into account when trying to speculate and only ordinary people would suffer from it. Big institutions would find mathematical models that would include this Tax in the price - only the amount of currencies traded would decrease or the amoount of transaction made on the currency market.

I'm from Europe, so maybe the tax works in the USA differently - because only few Americans go abroud comparing to Europeans.

Fernando Blanco

Greetings from Brazil!
Yes, the Tobin Tax should be given a try. My life and everyone's life would become a bit more expensive, but it could a lot to reduce poverty elsewhere, not to mention to fix the mess that liberalism has created lately.
And many congrats, Professor, for showing us clearly what fraude these Summits are. I just the Communique of today's G-20 and your previously posted.
Best regards,
Fernando Blanco


Supporters of the Tobin tax make one significant mistake: They assume that multiplying current currency trade volumes with 0.5% results in tax revenue of hundreds of billions of US$ - but they totally ignore that trade volumes are elastic. So even if we assume that a Tobin tax could be enforced and not easily circumvented, the problem would be that many trades that are currently made would not be made anymore with such a tax. Why? Because even a 0.5% tax would be extremely high compared to current trading costs or the profit that a trader expects from a short-term deal. How could traders pay billions of US$ in Tobin taxes if that amount is higher than profits of many major banks combined - especially right now?
Short-term ("speculative") trade volumes could of course be reduced, but the idea to hit two birds with one stone - huge revenues that "cost taxpayers nothing" and less speculation) is quite unrealistic.

Another good argument against the Tobin comes from Lasse Heje Pedersen - a tax could move trades away from official (and better regulated) exchange markets:

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