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The "easy" solution is for society to imposes higher taxes on energy, particularly those forms of energy which we wish to discourage our reliance on. This woul

The "easy" solution is for society to imposes higher taxes on energy, particularly those forms of energy which we wish to discourage our reliance on. This would particularly useful in the realm of consumer purchasing decisions. Which apples required less energy, the ones shipped in from Chile, or the ones trucked over from California? There's no way as a consumer I can know that, but if taxes on certain energy forms (e.g. carbon-based) are high enough, then price becomes 1) a signal of how much energy was consumed in production and delivery, 2) a factor which discourages consumers from purchasing products which require more energy, 3) an incentive for firms to minimize their energy usage to keep costs down. Will such taxes ever be effectively implemented? Almost certainly not. For such taxes to work they would need to be high enough that consumers and firms "felt the pinch." This desired effect, however, is exactly what makes these kinds of taxes politically unfeasible, at least in America.

orangecat 16y ago
This desired effect, however, is exactly what makes these kinds of taxes politically unfeasible, at least in America. Sadly true. The other factor is that conservatives won't like them because they're taxes, and liberals won't like them because they're market-based. ("Rich people shouldn't be able to pay to pollute").
- MichaelSalib 16y ago
  I don't know any liberals that don't like carbon taxes or cap and trade regimes because they're market based. I mean, the EPA already runs a cap and trade system for some pollutants. I'd say the bigger issue is that there are some states represented by both liberal and conservative politicians that will lose under a cap and trade regime, and those politicians are going to oppose any carbon price because of that.
  - houseabsolute 16y ago
    Cap and trade is a different thing than carbon taxes. But I understand your sentiment.
  - orangecat 16y ago
    I probably overstated it, but it does seem that the left prefers cap-and-trade to carbon taxes, and they definitely prefer higher fuel economy standards to gas taxes. both liberal and conservative politicians that will lose under a cap and trade regime, and those politicians are going to oppose any carbon price because of that. Very true.
    - MichaelSalib 16y ago
      I probably overstated it, but it does seem that the left prefers cap-and-trade to carbon taxes This confuses me. I thought you were arguing that liberals dislike cap and trade regimes because they're market based, but now you seem to suggest that they prefer cap and trade regimes to carbon taxes. What am I missing? I think lefty think tanks and environmental groups do prefer cap and trade to carbon taxes but only because of implementation issues. They seem to think that more tinkering around with the tax code will not be helpful and that a cap and trade regime will have an easier time getting through Congress without getting gutted and sullied by unsavory deals than a carbon tax would. Plus, politically, calling anything a tax is a killer. And that includes policies that are revenue neutral. So they've basically decided that a crummy cap and trade regime that passes Congress is better than a good carbon tax that has no chance of getting passed. Economists generally view carbon taxes and cap and trade regimes as equivalent; there are differences but they boil down to implementation practicalities. Its like arguing over whether you should use CPython or Jython; they're mostly the same and the answer depends on a lot of gritty technical details about your deployment environment, etc. and they definitely prefer higher fuel economy standards to gas taxes. I think this reflects a belief that raising the gas tax is political suicide and completely impossible. At least, that's the sense I get from reading lefty environmental wonks.
      - orangecat 16y ago
        A carbon tax is more free market, because it just puts a price on the externality and lets the market decide how to respond. Cap and trade involves setting a limit by fiat and allocating the initial permits. Some on the left see those attributes as features, because they get to pretend to control total emissions, and help "deserving" companies. In reality I expect cap and trade would be corrupted by rent seekers to a far greater extent than a carbon tax would be. Economists generally view carbon taxes and cap and trade regimes as equivalent I agree with Greg Mankiw that cap and trade equals carbon tax plus corporate welfare: http://gregmankiw.blogspot.com/2009/05/reading-for-pigou-club_18.html http://gregmankiw.blogspot.com/2009/05/reading-for-pigou-clu... I think this reflects a belief that raising the gas tax is political suicide and completely impossible. Could be. From the conservative wonks I read there's a surprising amount of support for a higher gas tax, but you're right that it would be a hard sell to the public, compared to regulations where the costs are much easier to hide.
ars 16y ago
Of course you can tell. The one that is cheaper used less energy. Since pretty much all our energy comes from hydrocarbons it doesn't much matter. All you need is to check the price. Energy costs money, use more energy, pay more money. Your market signaling method is already there.
- jsdalton 16y ago
  Fair enough, but I'd wager that carbon-based energy is cheap enough that it accounts for only a fraction of the price of many (probably most) products. Also, producers have no incentive to utilize alternative sources of energy while carbon-based energy is so relatively inexpensive.
  - ars 16y ago
    Actually no. Energy accounts for almost 100% of the cost of everything. If you track down why does something cost money, and go all the way down, you will see that it's entirely the cost of energy, and pretty much nothing else. Instead of rewriting it here, I'll link you to a comment which I wrote that explains it: http://news.ycombinator.com/item?id=346912 http://news.ycombinator.com/item?id=346912
    - jsdalton 16y ago
      I completely understand the principle you are trying to communicate. But your assertion that "it doesn't matter" is false. Please consider the following: If it is true that energy accounts for 100% of the price of everything, then raising the price of energy via a tax absolutely would alter the price signal by increasing the price difference between products with low and high energy requirements. In overly simplified terms, imagine apples from Chile require 5kj to produce and apples from California cost 3. Imagine 1kj costs $.10. So apples from Chile costs $.50 and apples from California cost $.30. What happens if we add a $.05 tax on each kj? Apples from Chile now cost $.75, and apples from california cost $.45. Makes sense? It should also be noted that most proposals for energy taxes are on certain forms of energy, i.e. you'd levy a tax on carbon-based energy but not on solar energy. This would absolutely impact the signals sent by pricing.
ams6110 16y ago
Apples being apples, all that matters to a consumer is the retail price. If Chilean apples cost more because of an energy tax, demand will increase for California apples, raising the prices, until the two equalize.

orangecat 16y ago

This desired effect, however, is exactly what makes these kinds of taxes politically unfeasible, at least in America. Sadly true. The other factor is that conservatives won't like them because they're taxes, and liberals won't like them because they're market-based. ("Rich people shouldn't be able to pay to pollute").

MichaelSalib 16y ago
I don't know any liberals that don't like carbon taxes or cap and trade regimes because they're market based. I mean, the EPA already runs a cap and trade system for some pollutants. I'd say the bigger issue is that there are some states represented by both liberal and conservative politicians that will lose under a cap and trade regime, and those politicians are going to oppose any carbon price because of that.
- houseabsolute 16y ago
  Cap and trade is a different thing than carbon taxes. But I understand your sentiment.
- orangecat 16y ago
  I probably overstated it, but it does seem that the left prefers cap-and-trade to carbon taxes, and they definitely prefer higher fuel economy standards to gas taxes. both liberal and conservative politicians that will lose under a cap and trade regime, and those politicians are going to oppose any carbon price because of that. Very true.
  - MichaelSalib 16y ago
    I probably overstated it, but it does seem that the left prefers cap-and-trade to carbon taxes This confuses me. I thought you were arguing that liberals dislike cap and trade regimes because they're market based, but now you seem to suggest that they prefer cap and trade regimes to carbon taxes. What am I missing? I think lefty think tanks and environmental groups do prefer cap and trade to carbon taxes but only because of implementation issues. They seem to think that more tinkering around with the tax code will not be helpful and that a cap and trade regime will have an easier time getting through Congress without getting gutted and sullied by unsavory deals than a carbon tax would. Plus, politically, calling anything a tax is a killer. And that includes policies that are revenue neutral. So they've basically decided that a crummy cap and trade regime that passes Congress is better than a good carbon tax that has no chance of getting passed. Economists generally view carbon taxes and cap and trade regimes as equivalent; there are differences but they boil down to implementation practicalities. Its like arguing over whether you should use CPython or Jython; they're mostly the same and the answer depends on a lot of gritty technical details about your deployment environment, etc. and they definitely prefer higher fuel economy standards to gas taxes. I think this reflects a belief that raising the gas tax is political suicide and completely impossible. At least, that's the sense I get from reading lefty environmental wonks.
    - orangecat 16y ago
      A carbon tax is more free market, because it just puts a price on the externality and lets the market decide how to respond. Cap and trade involves setting a limit by fiat and allocating the initial permits. Some on the left see those attributes as features, because they get to pretend to control total emissions, and help "deserving" companies. In reality I expect cap and trade would be corrupted by rent seekers to a far greater extent than a carbon tax would be. Economists generally view carbon taxes and cap and trade regimes as equivalent I agree with Greg Mankiw that cap and trade equals carbon tax plus corporate welfare: http://gregmankiw.blogspot.com/2009/05/reading-for-pigou-club_18.html http://gregmankiw.blogspot.com/2009/05/reading-for-pigou-clu... I think this reflects a belief that raising the gas tax is political suicide and completely impossible. Could be. From the conservative wonks I read there's a surprising amount of support for a higher gas tax, but you're right that it would be a hard sell to the public, compared to regulations where the costs are much easier to hide.

ars 16y ago

Of course you can tell. The one that is cheaper used less energy. Since pretty much all our energy comes from hydrocarbons it doesn't much matter. All you need is to check the price. Energy costs money, use more energy, pay more money. Your market signaling method is already there.

jsdalton 16y ago
Fair enough, but I'd wager that carbon-based energy is cheap enough that it accounts for only a fraction of the price of many (probably most) products. Also, producers have no incentive to utilize alternative sources of energy while carbon-based energy is so relatively inexpensive.
- ars 16y ago
  Actually no. Energy accounts for almost 100% of the cost of everything. If you track down why does something cost money, and go all the way down, you will see that it's entirely the cost of energy, and pretty much nothing else. Instead of rewriting it here, I'll link you to a comment which I wrote that explains it: http://news.ycombinator.com/item?id=346912 http://news.ycombinator.com/item?id=346912
  - jsdalton 16y ago
    I completely understand the principle you are trying to communicate. But your assertion that "it doesn't matter" is false. Please consider the following: If it is true that energy accounts for 100% of the price of everything, then raising the price of energy via a tax absolutely would alter the price signal by increasing the price difference between products with low and high energy requirements. In overly simplified terms, imagine apples from Chile require 5kj to produce and apples from California cost 3. Imagine 1kj costs $.10. So apples from Chile costs $.50 and apples from California cost $.30. What happens if we add a $.05 tax on each kj? Apples from Chile now cost $.75, and apples from california cost $.45. Makes sense? It should also be noted that most proposals for energy taxes are on certain forms of energy, i.e. you'd levy a tax on carbon-based energy but not on solar energy. This would absolutely impact the signals sent by pricing.

ams6110 16y ago

Apples being apples, all that matters to a consumer is the retail price. If Chilean apples cost more because of an energy tax, demand will increase for California apples, raising the prices, until the two equalize.