3 ms·

Not trying to defend fossil fuels here, but I'd interpret that 2015 global fossil fuels subsidy figure ($5.3 trillion) with some caution. Looking at the paper,

by spangry 10y ago

Not trying to defend fossil fuels here, but I'd interpret that 2015 global fossil fuels subsidy figure ($5.3 trillion) with some caution. Looking at the paper, they're not really talking about direct subsidies. They're counting 'implicit subsidies' like "undercharging for global warming", "air pollution", "broader vehicle externalities" etc. These unpriced externalities make up at least 78% of the total estimated fossil fuel subsidy. This is a fair thing to do in theory, assuming the same approach is used when pricing other forms of energy generation. But deciding what is and is not an attributable externality is a bit subjective, and externalities themselves are notoriously difficult to quantify. All that aside, even if global warming somehow didn't exist, it still makes a lot of sense to phase out coal power generation, as it causes around one million deaths per year (mostly from air pollution).

dmix 10y ago
Is this the study you are referring to? http://www.sciencedirect.com/science/article/pii/S0305750X16304867 http://www.sciencedirect.com/science/article/pii/S0305750X16... I believe he's pretty honest about the limits of the estimations and the difficulties defining "subsidy". > While there are many caveats (discussed below) to the estimation procedures and findings, the policy implications of the paper are clear: energy subsidies are very large and their removal (which entails levying Pigouvian taxes) would generate substantial environmental, fiscal, and economic welfare gains. All of those subsidies still have an overall effect on the market prices. The external costs (accidents, gas prices) are factored in as people decide to buy cars and company financial officers always consider tax deductions or other benefits. You don't have to hand cash to a firm to significantly reduce their operating expenses. Although I do agree that the decision by the study author to include things like congestion and road accidents is questionable... > Broader externalities associated with the use of road fuels in vehicles, such as traffic congestion, accidents, and (less importantly) road damage. Although motorists may internalize some of these costs (e.g., the average costs of road congestion, the risk of injuring themselves in single-vehicle collisions), they do not take into account other costs (e.g., their own contribution to slowing travel speeds for other road users, injury risks their driving imposes on pedestrians and other vehicle occupants). Even if you add say a carbon tax, what are the alternatives? Some people can't bike to work. Or taking public transit is not an option (especially in the US and Canada). And if you drive an electric car then you have the same problems of accidents and congestion.
- spangry 10y ago
  I agree on both your points re: the paper - the author was very upfront about the methodology and the car thing was a bit of an eyebrow raiser. Sorry if I gave the impression I was accusing the author of dishonesty: I didn't mean to suggest that. On road congestion specifically, the current 'mainstream' thinking is that variable congestion charging is probably a good way to price that externality. Weight also needs to be considered: large trucks do quite a bit more damage to roads than smaller vehicles. Unfortunately fuel taxes are a poor proxy for these kinds of externalities. That is to say, these should ideally be levied in addition to a carbon price. Singapore has variable congestion charging, but I guess it's a little easier to do if you're a small, autocratic island state. For me, a carbon tax or cap and trade system are by far the best policy responses to climate change and air pollution. Although (at least in Australia) they are rather unpopular. My observation is that people (and politicians) prefer lavish subsidies for this or that 'green' technology, because there's a greater sense you're "doing something", plus everyone hates tax. Unfortunately, direct subsidies are also horribly inefficient and almost certainly will cost far more than just pricing the externalities and letting the market figure the rest out. People seem to forget that the money being spent on these inefficient subsidies are their tax dollars, meaning the government has to cut services or raise taxes elsewhere (likely further compounding the efficiency cost of 'picking winners').
  - dmix 10y ago
    I believe we're mostly in agreement here. It's good to dig into this stuff none the less. I'm more on the libertarian side and I actually agree that federal governments should be regulating environmental policy. It's one of the few things that crosses state/provincial lines and is not well controlled by market forces. I personally haven't researched carbon tax enough to know if it's the right answer. But being in technology and startups I know that government should not be in the business of investing in green tech. At most they should make the lives easier of green tech companies and VCs by getting gov out of the way. For example, reducing capital gains tax, streamlining regulations, and reducing corporate tax on green tech companies. There have been two pretty spectacular flame outs in the Obama administration when they invested directly. One was the SV solar company and the other is the clean coal project that is billions over budget and years late. My initial concerns with the carbon tax are that it might be a negative incentive that has an overall negative effect. For example, the primary concern is big factories that pump out carbon/methane. The costs to convert to a green facility are significant. What happens in practice is that their current operation is made more expensive but on a distributed timeline. The two paths they could take: a) do nothing and pay a little extra each month in carbon tax b) invest a lot of money right now and reduce operation expenses with a renewable energy that is comparable to fossil fuels, but is cheaper overall because of the tax Everyone who has taken business accounting knows that it's better to have costs distributed over time rather than one big investment today. So I doubt this will have the intended effect in business that people hope. The costs will ultimately trickle down to the customers so I doubt the companies will feel it. Then the question is will consumers be incentivized to buy electric cars due to the carbon tax and change behaviour? Again I dont think the tax rates currently used in Canada (where I live) for carbon are significant enought to have an effect on consumers. Only for businesses watching their bottom line.

by spangry 10y ago

dmix 10y ago

Is this the study you are referring to? http://www.sciencedirect.com/science/article/pii/S0305750X16304867 http://www.sciencedirect.com/science/article/pii/S0305750X16... I believe he's pretty honest about the limits of the estimations and the difficulties defining "subsidy". > While there are many caveats (discussed below) to the estimation procedures and findings, the policy implications of the paper are clear: energy subsidies are very large and their removal (which entails levying Pigouvian taxes) would generate substantial environmental, fiscal, and economic welfare gains. All of those subsidies still have an overall effect on the market prices. The external costs (accidents, gas prices) are factored in as people decide to buy cars and company financial officers always consider tax deductions or other benefits. You don't have to hand cash to a firm to significantly reduce their operating expenses. Although I do agree that the decision by the study author to include things like congestion and road accidents is questionable... > Broader externalities associated with the use of road fuels in vehicles, such as traffic congestion, accidents, and (less importantly) road damage. Although motorists may internalize some of these costs (e.g., the average costs of road congestion, the risk of injuring themselves in single-vehicle collisions), they do not take into account other costs (e.g., their own contribution to slowing travel speeds for other road users, injury risks their driving imposes on pedestrians and other vehicle occupants). Even if you add say a carbon tax, what are the alternatives? Some people can't bike to work. Or taking public transit is not an option (especially in the US and Canada). And if you drive an electric car then you have the same problems of accidents and congestion.

spangry 10y ago
I agree on both your points re: the paper - the author was very upfront about the methodology and the car thing was a bit of an eyebrow raiser. Sorry if I gave the impression I was accusing the author of dishonesty: I didn't mean to suggest that. On road congestion specifically, the current 'mainstream' thinking is that variable congestion charging is probably a good way to price that externality. Weight also needs to be considered: large trucks do quite a bit more damage to roads than smaller vehicles. Unfortunately fuel taxes are a poor proxy for these kinds of externalities. That is to say, these should ideally be levied in addition to a carbon price. Singapore has variable congestion charging, but I guess it's a little easier to do if you're a small, autocratic island state. For me, a carbon tax or cap and trade system are by far the best policy responses to climate change and air pollution. Although (at least in Australia) they are rather unpopular. My observation is that people (and politicians) prefer lavish subsidies for this or that 'green' technology, because there's a greater sense you're "doing something", plus everyone hates tax. Unfortunately, direct subsidies are also horribly inefficient and almost certainly will cost far more than just pricing the externalities and letting the market figure the rest out. People seem to forget that the money being spent on these inefficient subsidies are their tax dollars, meaning the government has to cut services or raise taxes elsewhere (likely further compounding the efficiency cost of 'picking winners').
- dmix 10y ago
  I believe we're mostly in agreement here. It's good to dig into this stuff none the less. I'm more on the libertarian side and I actually agree that federal governments should be regulating environmental policy. It's one of the few things that crosses state/provincial lines and is not well controlled by market forces. I personally haven't researched carbon tax enough to know if it's the right answer. But being in technology and startups I know that government should not be in the business of investing in green tech. At most they should make the lives easier of green tech companies and VCs by getting gov out of the way. For example, reducing capital gains tax, streamlining regulations, and reducing corporate tax on green tech companies. There have been two pretty spectacular flame outs in the Obama administration when they invested directly. One was the SV solar company and the other is the clean coal project that is billions over budget and years late. My initial concerns with the carbon tax are that it might be a negative incentive that has an overall negative effect. For example, the primary concern is big factories that pump out carbon/methane. The costs to convert to a green facility are significant. What happens in practice is that their current operation is made more expensive but on a distributed timeline. The two paths they could take: a) do nothing and pay a little extra each month in carbon tax b) invest a lot of money right now and reduce operation expenses with a renewable energy that is comparable to fossil fuels, but is cheaper overall because of the tax Everyone who has taken business accounting knows that it's better to have costs distributed over time rather than one big investment today. So I doubt this will have the intended effect in business that people hope. The costs will ultimately trickle down to the customers so I doubt the companies will feel it. Then the question is will consumers be incentivized to buy electric cars due to the carbon tax and change behaviour? Again I dont think the tax rates currently used in Canada (where I live) for carbon are significant enought to have an effect on consumers. Only for businesses watching their bottom line.