The right way to reduce CO2 emissions is to simply tax the carbon content of fuels as they are sold from the refinery. Increase the tax until the usage goes down.
Simple, effective, efficient, and boring. And hard to virtue signal one's way out of.
Simple, effective, efficient, and boring. And hard to virtue signal one's way out of.
You still have an incentive to reduce emissions, because your dividend is the same regardless and you can reduce your fees. And since most people's net emissions are less than average, most people come out ahead.
But this year the penny finally dropped for me how demoralizingly futile it is to make rational carbon policy in the US by talking about its merits. The success of the Inflation Reduction Act ($370bn for climate) was entirely due to a cunning political hack: not taxing individuals (only corporations) and reducing the deficit at the same time (by staffing the IRS to enforce existing tax collection laws), so that it could be acceptable to the holdout conservative Democrats.
Let's say there is a wood stove that increases cooking efficiency by 2x, this means a lot less trees have to be cut down for cooking. However to a person for whom trees are free, they aren't going to buy a better stove just to save on emissions, they will only start once they run out of trees which is when it is already too late. By charging a fee per tree, even if it is a token amount, people will start calculating and weighing whether cutting down more trees or less trees and buying the stove is the better option. Once they have made the initial investment they may even tell their neighbours about it. A single person changing their mind, can change the minds of everyone.
You say that like it's not the goal.
Yes. People will do fewer polluting things. That's the point.
The harms from the externalities vastly dwarf any total economic reduction.
It's also true that a person with lower-than-average emissions will pay out less than they get back. They'll have a strong incentive to reduce emissions, but even if they don't reduce emissions they'll be better off than before. These people will be the majority.
The people who might feel worse off are those who emit a bit more than average without being rich. They'll need to modify their behaviors if they want to come out ahead. Of course that's part of the whole point.
A lot of people might actually be ok with changing their behaviors, if they know everybody's doing it so it will actually make a difference. Right now we have this public goods situation where the outcome is going to be the same regardless of what you personally do. Dealing with public goods situations is the main reason for taxes in general; it's hard to fund roads with voluntary donations, so most people are ok with paying taxes for roads.
The other benefit of fee-and-dividend is that it makes low-carbon energy sources more competitive. It's not just about getting people to carpool or whatever, it's about getting fossil fuels off the grid and the roads, because they just can't compete.
Of course if that works, the end result might be higher prices that don't get reflected in the dividend. But we don't end up in a apocalyptic nightmare, so there's that.
Wealthy people own businesses and those businesses have a strong incentive to reduce emissions, when they do, they end up reducing the tax burden on their consumers.
The average person wouldn’t have to organize carpools, though it’d certainly be incentivized - at least at the beginning, I’m assuming most wouldn’t, so not doing that, you’d still be a net recipient of tax money. But part of the whole point is that we can’t continue living exactly the same way, if we don’t want to destroy ourselves, and especially our children.
The entire point of a pigovian tax is to create a deadweight loss proportional to the harm an externality causes.
>The amount of money that gets distributed to you with a carbon dividend inevitably is going to be less than your additional tax burden or the consumer surplus from the goods and services you otherwise would have bought without the tax
As I already said, the difference between what you pay in and get out is an incentive to make you cease the activity that produces the harmful externality.
>Of course, you make very good arguments about why the dead weight loss is absolutely dwarfed by the negative externalities of fossil fuel emissions.
That is how a pigovian tax is supposed to work.
>Even if you don't consider climate change, air pollution is a contributor of over 100,000 deaths in America alone. However, this point is moot if people aren't willing to act on those externalities.
This is irrelevant, lots of countries have adopted carbon taxes. The benefits are obvious, less bureaucracy for businesses, more money to poor people, less shaming for a lack of personal action, mitigating climate change, less corruption and wasteful spending.
The alternative to carbon taxes isn't no carbon taxes, the alternative is more micromanagement by the government which is more likely to result in even bigger deadweight losses which are unlikely to be proportional to the amount of negative externalities that are being avoided.
But why would anyone voluntarily follow that? It's not like money is generated out of nothing.
That hasn't stopped taxes in a democracy.
Ideally, this would have the following effects:
* Make local manufacturing more competitive - introducing only local regulations gives companies a big incentive to produce in less stringently regulated areas. Correcting this could bring back manufacturing and be politically popular.
* Give companies an incentive to develop sustainable processes.
* Give companies an incentive to lobby other governments to introduce more stringent rules.
* Align cost of goods with actual externalities, motivating people to buy more sustainable products.
* The toll revenue could be used to improve carbon saving initiatives, such as public transport and sequestration.
And the next president will lose the election in a landslide for ending the free money.
Instead, they could tax gasoline at $1/gallon (and do similar things for other greenhouse gas sources, such as coal, meat and concrete), and use the resulting funds for carbon capture.
If you want a progressive tax, tax new cars at $2 * 200,000 miles / EPA combined miles per gallon. This will instantly make all new cars carbon neutral or negative at the tailpipe. Similarly, you could also tax embodied carbon on all new goods.
The $1/gallon of gas computation works like this:
Burning a gallon of gas produces 20lbs of CO2. (The O2 in the CO2 comes from the atmosphere, explaining why the CO2 weighs more than the gasoline.)
A ton is 2000 lbs, so 100 gallons of gas emits a ton of CO2.
Atmospheric carbon capture looks like it will cost roughly $100 / ton at scale, or $1/gallon of gasoline.
Taxing the C also properly accounts for different fuels having different energy per C atom.
I'm hesitant to think taxing gas at the pump makes any sense, I think maybe taxing diesel though could be a better thing because diesel is used more commercially by big rigs, which is a tax on commercial industries rather than consumers. Jet Fuel and such should have a very high tax, because that's something most people don't use, and isn't really a 'necessity'. Fuel at ports should also be taxed, and I think ports/airports should be under some global climate action 'congress' or something that ensures equal taxation and carbon offsets globally are being applied.
Though, if we were to use all the tax revenue or at least maybe 50% for UBI to say anyone with < 100k annual salary, I think it wouldn't matter if we taxed everything more evenly including gas at the pump, in fact that'd probably encourage more support for taxing carbon offsets since much of it goes to taxpayers as cash in their pocket.
seems fair without rewarding the people who drive clunkers.
But you know there's only one political party in america willing to spend money to help preserve the environment. And there's another party in america that actively works against any environmental policy for purely culture-war reasons. And if party A raises the price of gasoline, then party A gets immediately voted out and party B will find a way to push even harder in the opposite direction.
We need a way to offset carbon that is politics-neutral. And I'm afraid gasoline prices are front-and-center as a political arena these days.
This is, in many ways, the ideal for most people. One can say "Climate Change is really important" while blaming "The Corporations" for what they're doing and simultaneously blaming the President for "raising the price of gas".
That way you can appear virtuous while not sacrificing anything.
Coal emits twice the CO2 per energy than natural gas does.
The problem does become partly a tragedy of the commons though. If eg China doesn’t tax carbon at all internally, then we’d need to figure out how to appropriately tax the emissions of imported finished goods so as not to incentivize them to release CO2 as a competitive advantage. Even if we do that, they may still trade with another country that doesn’t tax imported goods either. One benefit for carbon offsets is they can in theory be used to incentivize cross-border emissions reductions without requiring the poorer countries to sacrifice anything.
I'm not saying your wrong, only that raising the price of fuel raises the price of everything else. Fuel prices go up, shipping prices go up, shipping prices go up, product prices go up, product prices go up, less people can afford to life. Company expenses go up, company looks for ways to cut expenses, often by lowering employment, etc...
VS coming up with cleaner and cheaper ways to fuel things, then everything goes in the other direction. Cheaper fuel = cheaper shipping = cheaper products = more poor people can eat. Companies make more money they can hire more people, etc...
I know that's easier said than done, just pointing out raising the price of fuel is not a simple solution beacuse it has extreme consequences.
There was a comic I read a while back during the 2008 financial crisis, describing the banking sector as a group of wizards building a massive tower in a town. Eventually, it grows too large, wobbling and nearing collapse. The wizards beg the townspeople for help. The townspeople say this is the natural consequence of their actions, but the wizards counter that should their tower fall, it is large enough to do significant damage to the town as well. Thus galvanized, the town gathers together and shores up the foundations of the tower, securing it. At which point the wizards promptly go back to making it even taller and grander, because no one ever learns a lesson.
People are extremely averse to direct negative consequences of actions, but are much more nonchalant about indirect negative consequences, especially of inaction (see; the trolley problem). There is always hope of a miracle cure. That is the thrust of your argument; strong action now may fix the issue, but cause widespread suffering in the short term. Whereas the status quo is a slowly boiling pot, and perhaps someone will find a way to turn off the heat while we languish here, but more likely someone won't and waiting will lead to an even worse economic outcome when global supply chains are disrupted even more forcefully than by a simple tax hike.
You can easily find tons of articles about how inflation hurts the poor most. A carbon tax has the exact same effect as inflation as it raises the price of everything. Vs say an progressive income tax.
https://www.npr.org/2022/05/11/1097966775/inflation-poor-inc...
Another way to think about it is the right price of carbon is (in steady state) is the cost to remove the equivalant amount of carbon if we dont want to worsen the situation. So a small portion of this revenue (carbon-tax) could be directed towards subsidizing properly vetted carbon removal techs. of course this number will be high initially so we'll have to taper in the change but it will also give chance for better public acceptance and maturity for carbon removal tech.
I don't think there is the political will to jack up carbon costs and force consumers to decide between paying or just using less.
Also, be honest about how we're rapidly barreling toward the end of economic growth because the weather keeps destroying industrial and agricultural production.
Unless OP is just using hyperbole to make a point, in which case maybe they shouldn't.
You must have heard about the fires in California in the last few years, right? Look up what's happened to air quality on the west coast from the smoke.
Edit: Santiago in Chile seems to be close to such a case. Interestingly, 70% of the population want to see a return to public ownership of water rights. And it's pretty hard to find evidence having private ownership of water rights is helping ensure long term supply for all.
Increasing the price causes demand to drop. Increasing it so the demand matches the supply means no shortage.
Water usage is just as elastic as any other consumption behavior. Heck, I halved mine this year by simply selectively letting parts of my yard dry up in this hot summer. And enterprises can pass increased prices on to the final product.
Some rich people didn't want their lawns to go brown, so an entrepreneur rented some tanker trucks, filled them up outside the region, drove back to Seattle, and watered their lawns.
This caused a hue and cry about how unfair this was, and another ordinance was passed to make it illegal to truck water in.
However, it is exactly what you asked for - an example of the free market delivering when the price is high enough.
As for biological needs, I recommend reading "Empire of the Summer Moon" about how the Comanche were able able to survive in the desert. This included killing their horses and drinking the contents of their stomachs as an example of how far they would go to get water.
Besides, biological drinking water is only a tiny, tiny fraction of human water consumption.
Another example, when there are natural disasters, entrepreneurs would truck in bottled water and gasoline and sell it (until the government put a stop to that, too).
Some businesses die but the others adapt and find solutions. It’s where human creativity and innovation shines. An expensive item is a great motivator to find alternatives.
"The trend is clear: Emissions generally rise with wealth...The richest 1%—... earning $109,000 a year—are by far the fastest-growing source of emissions."[1]
And at least according to that article, it's not due to international disparities in wealth.
"people’s emissions within countries now overwhelms the country-to-country disparities."
[1]https://www.bloomberg.com/graphics/2022-wealth-carbon-emissi...
I think air flight is typically my largest source of CO2 emissions, and certainly will be this year.
Let alone moving around a building-sized yacht, building and maintaining mega mansions, or flying a private jet in the super-rich circles.
Poor people are generally emitting well below the average currently. They take fewer flights, have smaller houses and buy less stuff in general. With current levels of emissions, they would be getting paid without reducing emissions at all.
Eventually after the rest of society reduces emissions, they might have to reduce emissions, but that would only be after the rest of society sacrifices much more consumption.
You need to consider the downstream effects of the tax. The oil can only get taxed once, but the effects are compounded throughout the entire economy. For example, truck drivers would see dramatically increased expenses. For examples, truck drivers would have to pass on the cost of the fuel to transport freight. Meanwhile, other drivers will be forced to quit, which reduces our total freight throughput, which makes shipping even more expensive.
Either the customer pays the retailer who pays the truck driver with the exact money the truck driver paid, or the customer does something cheaper and there is more money to go around because the customer is not paying for all the harms trucking does (including their kid's asthma bills and several dollars per gallon in road upkeep).
The only way demand for freight transport would go down is by reducing inefficient dead space in product packaging - ie exactly the type of efficiency improvement we would want from a tax.
If the money in is proportional to carbon, and the money out gets distributed perfectly evenly by population then the net result is progressive.
The only way that can not be true is if emissions scale up faster than income scales down or if we listen to people citing fake concern for the poor to enact a means testing program that redirects 90% of the money to serco and other cronies for enforcement.
Monetarily, sure, but in practice the effect would feel regressive because income scales more faster than emissions. Someone who is 1000x richer than average isn't going to live in 1000 houses, eat 1000x more beef, or drive 1000 cars simultaneously. This means that they're in a much better position to simply eat the cost of a carbon tax while the poor and middle class will actually have to make the sacrifices to reduce emissions by carpooling, turning the heat down in winter, etc.
The tax is mildly regressive and the rebate is extremely progressive. The poor person who makes all those lifestyle changes in response to the tax is much better off than they were as the upper bound on their contribution sans rebate is less than what they were paying to begin with.
So stop your fake concern for the poor who would have more options, and more spare cash.
They would have fewer options. They already have the choice to reduce to emissions without a carbon tax, and now they have financial pressure to go down that path.
And no, it's not "fake concern". As I've said many times, I'm pro carbon tax. I'm explaining the real economic factors that make the carbon tax politically infeasible. All it takes is a particularly cold month in the north, where people are far more reliant natural gas heating, for the pro-carbon tax camp to completely burn all their political capital for the next hundred years.
If you have $200 in your pocket for heating and natural gas heating costs $190 (because you have an equal share if the rebate but a smaller than equal share of the tax burden), you're far better off than if you have $100 in your pocket and it costs $100. If there are other options that cost $150, you now have the freedom to choose them when previously your only choice was gas.
The poor don't have to sacrifice anything unless the average carbon emissions drop to below what the poor are currently consuming. Until that happens, the poor can continue to emit whatever they currently do and get paid for the fact that they don't consume more.
I don't think "virtue signaling" (or its lack) is the problem.
[1] https://www.pewresearch.org/science/2022/03/01/americans-lar...
1. a job tied to fossil fuels
2. concerns that energy prices will go up without fossil fuels
3. lack of alternatives for things like trucks etc.
4. Religious beliefs.
5. Trolling the libs.
6. Belief that carbon taxation is a scheme to impoverish their nation for social justice.
7. Belief that global warming will be good for their community.The best way is to make the alternatives to anything you want to get rid of overwhelmingly more attractive to decision making entities (people, companies, etc.), who will then choose with their free will. Not easy to do, but some are working on it.
You have completely forgotten about import/export. If you tax only American fuel, then American exports become very expensive, while imports become cheap.
Guess what happens next?
Setting up a tax scheme for fuel that taking into account import/export is incredibly complicated, your system is probably the most complex solution there is!
Just like the US car manufacturers don't really want Democrats and Repbulicans raising and lowering emissions standards every four years, big corps (other than coal producers maybe) don't really want the carbon tax to go up and down on a political whim. This is basically them setting aside the carbon tax money, and applying the carbon tax pressure to themselves internally, so they end up in the same place as a carbon tax would lead them.
As with a pure cabon tax, in many ways it doesn't matter what the money is spent on. As long as there is a financial disincentive for people to burn carbon when there's an alternative, it all kind of works out.