Suppose the harm of emissions is restricted to the cost to governments adapting to sea level rise. An optimal policy would tax emissions at a rate which generates revenue equivalent to the cost of adapting to sea level rise. Taxpayers are not made worse off by this policy, and consumers can enjoy a source of energy still cheeper than alternatives in some situations (e.g., running a generator on a cold day). What happens then when the costs of sea level rise fall on future governments? Should this change the policy rationale for taxing carbon? Heath’s answer is that the situation changes very little. Enter the following dialogue between a younger generation (G2) and an older generation (G1):
G2: Your generation benefits from cheep carbon without picking up the associated costs. Morality demands that you sacrifice whatever necessary to confer benefits on future generations. Economic growth is compounding, failing to make sacrifices now could mean magnitudes less welfare in the future.
G1: Maximisation is far too demanding. We do not expect our ancestors to have made sacrifices in this way. In fact, you inherited a society with a GDP higher than ours, does fairness not demand that we maximise our own GDP even if this means emitting more carbon?
G2: The benefits of greater GDP is a side-effect of you pursuing your own interests. We are the ones putting out our hand and offering you pensions and security of your savings, it is you that owe us something in return. If we are to stand in a reciprocal relation to each other, fairness demands you at least pay for damages. With respect to your emissions, the cost of paying us for the damages will far exceed the benefits you gain from emitting, so you would do better to just control your emissions though an appropriately priced carbon tax.