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Cap and trade limits emissions, but then allows you to buy off that limit by paying what amounts to a fine, but a fine that is directed at certain uses (sustain

Cap and trade limits emissions, but then allows you to buy off that limit by paying what amounts to a fine, but a fine that is directed at certain uses (sustainable energy, etc.). One could argue it's not really a market based solution to the problem, since unless the "trade" is high enough, there's no real reason to address the actual problem -- emissions. Making fuel more expensive would force companies to adjust to an immediate operating cost, rather than being able to lobby for higher "caps" or lower "trades". You are essentially creating a new market (with its own rules and inefficiencies), instead of trying to manage an existing one. The problem with taxing the oil coming out of the ground is the incredibly complex nature of an unstable global market that is managed largely by a small number of players artificially controlling the price and a whole futures market trying to hedge against that roller coaster. It's also a market that wars are literally fought over. Finally, it's political suicide since it will impact consumers directly in the amount it costs them to fill their cars instead of indirectly, which they are less likely to blame on oil taxes.

phkahler 10y ago
>> The problem with taxing the oil coming out of the ground is the incredibly complex nature of an unstable global market... Just put a fixed tax per barrel, or per carbon atom, or whatever. The tax shouldn't depend on the price paid for the oil. Just put $1 for every barrel pumped in the US, and every barrel imported and presto - $19M per day of tax revenue ($7B per year) without a major impact to the consumer, and without creating that new market for credits and the associated politics. Do the equivalent for coal and gas too - you know all the carbon sources. People act like passing on a price increase is going to hurt their business, but when everyone has to do it that's not true.
- stinkytaco 10y ago
  Well, other than the fact that you are oversimplifying a complex issue, I don't necessarily think you are wrong. But just to address some of the possible externalities that would have to be considered: 1. Not all oil that comes into the US is in the form of barrels of crude oil. It may come in refined (a small amount, I assume, considering the oversupply of refineries in the US). But more likely it comes in as part of an imported product. 2. Which leads to the problem we already have: if oil is expensive in the US, that further incentivizes moving to where it is not expensive. Instead of buying your expensive fertilizers to grow food in the US, why not grow more crops in Mexico or Canada and import them? 3. Or perhaps oil is a part of the manufacturing process (i.e. plastics). Now it's all of a sudden even cheaper to manufacture outside of the US. Of course, you also have the complicated problem of recycled materials as well. 4. Or it's part of the shipping process. I'm not sure how you even tax this. All these problems need to be managed. We would need to address figuring out how much oil goes into any one thing we consume. We need to address free trade agreements (can we charge duty on a product depending on how much oil was used to make it, ship it or grow it?). We would need to provide incentives to recycling, manufacturing, organic agriculture, etc. etc. It's not that these aren't problems we should try to solve, it's just that "presto, 7B of income a year" is not what will happen.
  - phkahler 10y ago
    Since this is an international agreement, you'd have to tax ALL carbon producers around the world. How you divide that tax revenue between the different countries would then be a political game but much simpler than creating a whole new market for carbon credits. Again, tax the carbon at the source and it won't matter weather it's refined, burned directly, or turned into plastic products, carbon out of the ground will all be taxed at the same rate to discourage it's unearthing. You say I'm oversimplifying a complex issue, but I'd argue that others are making it a complex issue when in fact it's conceptually very simple.
    - lmm 10y ago
      > Again, tax the carbon at the source and it won't matter weather it's refined, burned directly, or turned into plastic products, carbon out of the ground will all be taxed at the same rate to discourage it's unearthing. Doesn't that create the wrong incentives? Digging up carbon and using it to make stuff that is kept around indefinitely / recycled into more stuff / buried when life-expired should be fine - it's putting it into the atmosphere that we want to discourage. (Also there should be a positive incentive for taking carbon out of the atmosphere permanently).

phkahler 10y ago

>> The problem with taxing the oil coming out of the ground is the incredibly complex nature of an unstable global market... Just put a fixed tax per barrel, or per carbon atom, or whatever. The tax shouldn't depend on the price paid for the oil. Just put $1 for every barrel pumped in the US, and every barrel imported and presto - $19M per day of tax revenue ($7B per year) without a major impact to the consumer, and without creating that new market for credits and the associated politics. Do the equivalent for coal and gas too - you know all the carbon sources. People act like passing on a price increase is going to hurt their business, but when everyone has to do it that's not true.

stinkytaco 10y ago
Well, other than the fact that you are oversimplifying a complex issue, I don't necessarily think you are wrong. But just to address some of the possible externalities that would have to be considered: 1. Not all oil that comes into the US is in the form of barrels of crude oil. It may come in refined (a small amount, I assume, considering the oversupply of refineries in the US). But more likely it comes in as part of an imported product. 2. Which leads to the problem we already have: if oil is expensive in the US, that further incentivizes moving to where it is not expensive. Instead of buying your expensive fertilizers to grow food in the US, why not grow more crops in Mexico or Canada and import them? 3. Or perhaps oil is a part of the manufacturing process (i.e. plastics). Now it's all of a sudden even cheaper to manufacture outside of the US. Of course, you also have the complicated problem of recycled materials as well. 4. Or it's part of the shipping process. I'm not sure how you even tax this. All these problems need to be managed. We would need to address figuring out how much oil goes into any one thing we consume. We need to address free trade agreements (can we charge duty on a product depending on how much oil was used to make it, ship it or grow it?). We would need to provide incentives to recycling, manufacturing, organic agriculture, etc. etc. It's not that these aren't problems we should try to solve, it's just that "presto, 7B of income a year" is not what will happen.
- phkahler 10y ago
  Since this is an international agreement, you'd have to tax ALL carbon producers around the world. How you divide that tax revenue between the different countries would then be a political game but much simpler than creating a whole new market for carbon credits. Again, tax the carbon at the source and it won't matter weather it's refined, burned directly, or turned into plastic products, carbon out of the ground will all be taxed at the same rate to discourage it's unearthing. You say I'm oversimplifying a complex issue, but I'd argue that others are making it a complex issue when in fact it's conceptually very simple.
  - lmm 10y ago
    > Again, tax the carbon at the source and it won't matter weather it's refined, burned directly, or turned into plastic products, carbon out of the ground will all be taxed at the same rate to discourage it's unearthing. Doesn't that create the wrong incentives? Digging up carbon and using it to make stuff that is kept around indefinitely / recycled into more stuff / buried when life-expired should be fine - it's putting it into the atmosphere that we want to discourage. (Also there should be a positive incentive for taking carbon out of the atmosphere permanently).