4 ms·

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

by 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.
- hx87 10y ago
  There's also c), finance b) with a loan/bond issue using the savings from not doing a) to finance the payments.
- spangry 10y ago
  This is the interesting part: ideally the costs would trickle down to consumers. The other half to a carbon tax policy, or the government auctioning permits in a cap and trade system, is that the revenue raised would ideally be handed back to individuals through increases in welfare payments and tax cuts. This probably sounds a bit pointless. Why take with one hand and give with the other? Because of substitution effects. By making carbon intensive goods and services relatively more expensive, consumers at the margins will substitute away to less carbon intensive products. In other words, you're relying on the substitution effect rather than the income effect for a carbon price to do its magic. This is going to sound cynical, but I feel it's much safer to rely on the behavioural effects of direct financial incentives rather than the belief that individuals will make ethical choices in service to the common good. One important caveat: I'm only 'talking the theory' here. It would be interesting to see if all this theory has been empirically validated (I honestly haven't looked). I'd imagine there's a bunch of studies examining the effects of carbon pricing in (mostly) European countries, but I can't certain about that. I might have a hunt around on the weekend (unless anyone here has some good references)...

by spangry 10y ago

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.

hx87 10y ago
There's also c), finance b) with a loan/bond issue using the savings from not doing a) to finance the payments.
spangry 10y ago
This is the interesting part: ideally the costs would trickle down to consumers. The other half to a carbon tax policy, or the government auctioning permits in a cap and trade system, is that the revenue raised would ideally be handed back to individuals through increases in welfare payments and tax cuts. This probably sounds a bit pointless. Why take with one hand and give with the other? Because of substitution effects. By making carbon intensive goods and services relatively more expensive, consumers at the margins will substitute away to less carbon intensive products. In other words, you're relying on the substitution effect rather than the income effect for a carbon price to do its magic. This is going to sound cynical, but I feel it's much safer to rely on the behavioural effects of direct financial incentives rather than the belief that individuals will make ethical choices in service to the common good. One important caveat: I'm only 'talking the theory' here. It would be interesting to see if all this theory has been empirically validated (I honestly haven't looked). I'd imagine there's a bunch of studies examining the effects of carbon pricing in (mostly) European countries, but I can't certain about that. I might have a hunt around on the weekend (unless anyone here has some good references)...