Comment by acituan | Hacker News Reader

Comment by acituan | Hacker News Reader

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> market forces that create these problems can be marshaled to solve them. For example, if the wealthiest countries implemented a carbon tax including a border adjustment (accounting for goods from countries with a laxer carbon policy) would give governments a single, simple dial that the could turn to lower carbon emissions.

Taxes are not market forces, they are exogenous interventions on markets. Which means having wealthiest countries implement a carbon tax is not riding market dynamics for free, but a difficult multi-agent cooperation problem that makes defecting competitively very advantageous. This includes for example requiring cooperation with India (5th in GDP) and China (2nd in GDP) who have been enjoying high, multi-year economic growth, whose de-carbonization would hurt their economies disproportionately, unlike other rich countries. Unfortunately exports only account for ~20% of their GDPs so there is only so much leverage to apply there either.

Taxing carbon is just removing the carbon subsidy that we currently enjoy because it isn’t sustainable. If we decide we want to subsidize India’s pollution or whatever, we can still do that. Anyway, you don’t have a market at all without government and you don’t have a government without taxes so appeals to taxes being an intrusion aren’t persuasive IMO.

Google 'black market'.

I'm not sure what point you're making. Even if the tax leads to a small black market for unregulated pollution, the legitimate market would remain regulated and thus our society would reap enormous environmental benefits. Moreover, the effort to thwart the tax constitutes a cost in and of itself, albeit the cost would necessarily be lower than the tax (to the extent that it's not lower, there is no incentive for a black market at all, which is also a real possibility)--this increased cost of pollution will also deter pollution just like the tax itself. Note that we tax lots of things effectively: gasoline, cigarettes, etc, and in none of those cases have a significant portion of the legitimate market moved to a black market--those taxes are quite effective. Lastly, Europe already has its own carbon taxes without the (rather silly) hypothetical consequences raised by critics in this thread.

> Anyway, you don’t have a market at all without government

That is not true, in fact most of the markets in history operated either without currencies (e.g. barter, farm labor etc) or with currencies that have inherent value (e.g gold, silver). A switch to fiat money implies state backing indeed, but a) it doesn't have to be one particular state (e.g. can do business with US dollars in some 3rd world countries) and innovations like bitcoin enable markets without any centralized currency.

> If we decide we want to subsidize India’s pollution or whatever, we can still do that.

That is the crux of the criticism you say you find silly. How exactly? Please show your work, because I am curious how we can subsidize China or India's emissions resulting from their domestic economy.

> Europe already has its own carbon taxes

Again please pay attention to domestic vs imported carbon. Most of the claims of approximating carbon neutrality is much smaller than in reality, because of the increasing consumption of carbon positive goods from developing countries.

Government != currency. In the most general sense it’s just the system that defines, interprets, and enforces property rights. That can be a tribal chief or the US government or the WTO.

> That is the crux of the criticism you say you find silly. How exactly? Please show your work, because I am curious how we can subsidize China or India's emissions resulting from their domestic economy

Writing them a check would be the most obvious way.

> Again please pay attention to domestic vs imported carbon. Most of the claims of approximating carbon neutrality is much smaller than in reality, because of the increasing consumption of carbon positive goods from developing countries.

I agree, there needs to be a border adjustment, and claims of carbon neutrality need to be similarly adjusted for imported carbon. I don’t see how that materially changes the calculus. Maybe the argument is that wide-scale border adjustments haven’t been proven out, and fair enough, but let’s maintain perspective: we’re speeding toward a cliff and we can’t be too concerned about bumps off to the left or the right.

> Writing them a check would be the most obvious way.

How much the check should be for exactly? This is important because even if we assume we can get perfect compliance if we paid for it, you might find the amount required surprisingly, I dare say impossibly, high.

As a thought experiment let's say we are going to subsidize the transformation of China's non-green energy production. For comparison I will use a levelized cost of energy which rolls in capital costs, operating costs, operating capacity efficiency (which is low for renewables) and depreciation. The figures are about 0.1$/kWh for new coal (though most coal already has the infrastructure so will only have non-capital costs) and roughly 0.2$/kWh for solar (similar for other renewables). If you write a check to convert 2019 China's non-green energy production (7000TWh * 70%) the figure we get is $1 trillion, which is roughly the discretionary spending of annual federal budget, %5 of US's GDP and 1.3% of the world's GPD. That is for China only.

No political apparatus in a democracy can muster the political will to justify subsidies of this scale.

I’m not arguing that we should subsidize China at all. Frankly we subsidize them too much already, but that’s a separate topic. My only point is that we taxing carbon doesn’t preclude subsidizing them to whatever extent we choose. It seems like you’re arguing that if we pass a carbon tax it will hurt China’s economy because business will move to greener countries (countries who are now competitive after adjusting for pollution, which is what a carbon tax aims to do), and that the US has a moral obligation to reimburse them (China) for that lost business. If I’m misunderstanding, I apologize and perhaps you could clarify; however, if I understand correctly, then I strongly disagree. The West in general and the US specifically has already made China’s economy world class and that at the expense of the environment and arguable to our own economic troubles (particularly inequality). We have no moral obligation to China, IMHO.

I guess I don't quite get what you suggest we should subsidize. China and India are two of the big, emerging polluters, and their exports only account for roughly 20% of their GDP. So a good 80% chunk will run on non-green energy even if we devised the perfect policy to make the remaining 20% of the entirety of their exports green. (US imports only a portion of that but let's assume entire world cooperated).

This is not accounting for the havoc it would wreak in international trade obviously, hurting China's exports is never hurting them alone, because trades not only go both ways, but also through; meaning depending on a lot of Chinese intermediary goods that we export affects US's GDP, and also worlds GDP. If I am understanding suggestion correctly, for example a carbon tax on iPhone's manufacturing would reduce how many iPhones are sold in the entire world, not just US, and ultimately would impact US's economic power in the form of a reduction, which also reduces the ability of "writing checks" for other interventions.

This is why policy design is tricky.

I don’t think we should subsidize anyone, neither China nor India, but only pointing out that a carbon tax doesn’t prevent us from doing so if we wanted to.

Ultimately I still don’t understand why you’re claiming that we depend on China and India to implement their own carbon taxes in order for us to be successful. If all wealthy countries implement a carbon tax with a border adjustment, China and India will either have to invest in greener tech and practices to compete in the wealthy first world market or be content in a less valuable market where pollution is allowed to be externalized.

> This is not accounting for the havoc it would wreak in international trade obviously, hurting China's exports is never hurting them alone, because trades not only go both ways, but also through; meaning depending on a lot of Chinese intermediary goods that we export affects US's GDP, and also worlds GDP.

Of course it’s going to hurt our economy. We’ve been living partly off of unsustainable environmental debt, and the whole point of a carbon tax is to reckon with that. Economic pain drives us toward greener solutions so we can enjoy a sustainable economy. The only “trick” to a carbon tax is deciding what the carbon tax rate should be at any moment in time to balance economic pain with necessary environmental goals. We should want to avoid an abruptly high carbon tax rate and prefer an initially low rate that rises gradually to allow our economies some time to invest in and implement green technologies, but waiting longer to implement the tax means the carbon tax rate will have to grow more steeply which translates to greater economic hardship.

Just about everything humans do is an exogenous intervention on markets, one way or another. And markets respond to them, via the cited market forces. The notion of the "free market" is a toxic fiction. Any market that works for its participants is intricately curated.

> Just about everything humans do is an exogenous intervention on markets, one way or another

Markets is simply the name for a particular collective of human interactions in response to pricing signals based on supply and demand, it is not a separate entity of its own. Taxes are exogenous in that they distort the equilibrous price points. That is not saying that it is always bad, because markets do fail.

> The notion of the "free market" is a toxic fiction.

Free market is a useful fiction for some economic modeling. No one has invoked the notion that real world markets has to/can be free, as mentioned, they do fail. But also interventions on them do fail catastrophically too.

This is important, because whether to intervene with markets or not is not as hard as the question of exactly in what manner to intervene. Our pet economic policy/intervention ideas might sound nice but rarely work exactly the way intended without side effects. Lack of a carbon tax is doesn't have to be due to a conspiracy of misanthropic apocalyptic evil but simply due to the difficulty of the multi-agent cooperation it requires based on the current incentive structures.

Can you elaborate on multiagenct cooperation? I grant your abstract point that markets are hard, but carbon taxes specifically are pretty straight forward and we can see that Europe has no disastrous consequences in their implementation. Further, we know to a very high degree of confidence that continuing our carbon subsidy will have disastrous consequences. A carbon tax is the simplest and most elegant solution.

> Can you elaborate on multiagenct cooperation?

In short what Paris Agreement intends and what it fails to achieve. It assumes signatories will be voluntarily reducing their carbon emissions without binding enforcement, and they don't.

For a while let's assume that energy production is the only activity that causes carbon emission. Compared to staying at status quo, reducing carbon emissions is at least expensive for its infrastructure transition costs, but can also be more expensive for its operating costs if the country was particularly rich in non-green energy resources. This means, making a transition while others are not is particularly disadvantageous to that state's economy; they will be producing everything for more expensive while buying cheaply produced non-green imports from non-abiding countries. This is even worse if we consider that no single country's carbon neutrality means much for meeting global warming targets.

This means defecting is very profitable for any given country, which creates a game theoretic equilibrium at no one doing any decarbonization. Transitioning to the other equilibrium (where everyone is handicapped equally with green production) requires every agent to be ensured that other agents are not defecting in a lockstep fashion, and current policy tools cannot achieve that (at least yet).

It seems like you’re correctly identifying the tragedy of the commons nature of environmentalism, but then advocating that we ruin the environment because if we don’t someone else will, which is to say the only sure-fire way to lose. Maybe I’m misreading—it’s late. Hopefully you will correct my error.

I am not advocating that, in fact I am with you in how bad it is, but I am also telling what the incentive structure looks like and what would it take to move it to the other equilibrium point. There are many and different types of agents in this game and appeals to morality or apocalypticism just don't work on them. There needs to be a concrete, depolarizing, global leadership that coordinates this transition, to make sure parties don't defect despite cheating being very profitable, and they also believe that this will be the case with others.

Paris agreement was an attempt at this but also demonstrated that we still couldn't muster the political will to do anything sufficiently concrete. Unlike nuclear weapons, which has much fewer agents to coordinate with and a more immediately imaginable impact, climate change proves to be difficult problem regarding the nature of coordination it requires and ease of popularizing the policies around it. We need tools to match that difficulty.

Thanks for clarifying. I don’t see why the Paris Agreement is a useful analog for a carbon tax. A carbon tax doesn’t depend on the good faith of partner countries, but the border adjustment itself incentivizes other countries to reduce their emissions (they want to trade with us). The more wealthy countries who implement a carbon tax with border adjustment, the stronger this incentive mechanism becomes. There is a political problem in getting a larger block of wealthy countries on board, but it’s not unrealistic to think of Europe and North America forming that initial block, and surely there’s enough wealth in those markets that it would incentivize other countries to get on board.

In whatever case, I can’t imagine an environmental solution that won’t have the same (or worse) political problems. As far as I can tell, border adjuster carbon tax most neatly and efficiently aligns incentives.

Yet people are continually intervening in markets, almost always without causing failure. An intervention that produces undesired results can be stopped or modified, provided it it not forced by legislation or biased perception, and something else tried. That is how most ongoing interventions have evolved.

In the US, the necessary flexibility is provided by agencies issuing regulations under statutory authority.

While lack of a carbon tax might not be the result of active evil -- throughout history it has been the result, instead, of garden variety ignorance and sloth -- evil can certainly play a role, and does.

In the US, failure ever to apply laws on the books enabling direct prosecution of corporate officers, or revoking corporate charters, or regulating behavior of monopolies, are indications of evil at work.

> Yet people are continually intervening in markets, almost always without causing failure. An intervention that produces undesired results can be stopped or modified, provided it it not forced by legislation or biased perception, and something else tried

I find that perspective very naive. Economy doesn't have an undo button. If that was the case we could have reverted all the financial crises, depressions etc before they spiraled out. History is full of such failures caused by or made worse with interventions. Economists get a lot of crap for not being a proper science or not being able to predict the future perfectly, but they are what stands between such failures and the impression of "almost always without causing failure". Economy is like a pool table, in which you might aim for your ball to one hole, but might inadvertently hit your opponent's ball into a hole or mess up the table otherwise. There is no undo once you make the hit. Job of the economists is to find the best angles.

> In the US, failure ever to apply laws on the books enabling direct prosecution of corporate officers, or revoking corporate charters, or regulating behavior of monopolies, are indications of evil at work.

Well good luck with that then, because I don't know any solution to solve "evil" other than calling the priests. When we turn these dynamics into conspiratorial archetypes, we shoot ourselves in the foot because it messes up with the framing of our agency. We either give up in resentment to the "evil", or we need to be a force of "good" and fight it, while forgetting that we are dealing with massively complex, dynamical, emergent systems with parameters too many and too big to optimize by a single person, ideology or solution. Just like we don't debug code by invoking "good and evil" because it is a stupid dichotomy that doesn't match the sophistication of the problem, we most likely can't debug society/economy/ecology with that either.

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