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I'm not sure I understand. Wouldn't that mean that steel producers just end up passing on more of the cost to consumers in the form of higher prices, resulting

I'm not sure I understand. Wouldn't that mean that steel producers just end up passing on more of the cost to consumers in the form of higher prices, resulting in reduced steel consumption? It sounds like a tax would work fine. By the way, I'm working on the assumption of a carbon price applied on fossil fuels at the source, such as the Energy Innovation Act would include.

asdff 5y ago
Consumption would only be reduced for industries that have a viable alternative. Maybe you can replace steel for some applications, but not all, and for those the costs will be passed on to the consumer who will bear this tax and will have no alternative on the market.
- cwkoss 5y ago
  I think that's the point of the carbon tax. That customers will feel price pressure from their most-carbon-emitting activities and commodities is precisely the point. This will encourage finding alternatives. No demand is entirely inelastic.
  - dahfizz 5y ago
    The argument isn't that this wouldn't work, its that this would be sub-optimal. Squeezing extra tax out of poor people who have literally no alternative is not going to be a popular plan. Allowing for a hint of nuance in your public policy would incentivize switching to alternatives where possible, while also incentivizing the development and adoption of alternatives where they don't currently exist.
    - cwkoss 5y ago
      > Allowing for a hint of nuance in your public policy I am highly skeptical that is it possible for American legislation's 'nuance' to tilt a simple tax law in any direction but towards enriching the rich and powerful. I feel like carve outs would be great for lobbyists and the politicians they pay patronage to, but it would destroy the effectiveness of the carbon tax: the industries with enough political power would negotiate exemptions because "there are no economically feasible alternatives" but making carbon-expensive activity economically infeasible is the core purpose or the carbon tax. Exempting any industry in particular is just corruption.
      - dahfizz 5y ago
        I absolutely agree. I have no faith that the government would do anything other than half measures at best. I consider policy discussions like this totally theoretical/intellectual
    - NumberWangMan 5y ago
      People have thought of this--a popular kind of proposal is to return all the tax money as a dividend to everyone evenly, to ease the financial burden. I think a carbon tax with dividend actually fits the criteria you are describing pretty well.
      - dTal 5y ago
        Wouldn't this have the perverse incentive of poor people wanting large emitters to keep emitting, because it directly puts food on their table?
        NumberWangMan 5y ago
        In a sense yes, but I wouldn't call that an incentive, any more than I have an "incentive" for Chipotle to give me free burritos. I'm not the one making the decision there. The people who are doing the polluting have the right incentive, and that's what matters. If the amount of the tax were fixed, the dividend would decrease over time, but the tax gradually increases as we get better and better at doing things without emitting greenhouse gases. The eventual target being net zero carbon. Based on the tax level in the Energy Innovation Act as an example, this is predicted around 2050.
        dTal 5y ago
        Poor people can still vote. And they will vote against anything that reduces their dividend, even if means voting against things that lower emissions. As to your second point - moving the goalposts every time progress is made eliminates any incentive to improve. If you're committing to keeping the dividend the same over time, that means you need to keep the tax take the same. And if you're gonna take the same amount of money off me regardless, why should I pay attention to my emissions? In the limit case, of zero carbon, the carbon tax rate is infinite and you're taking a bunch of cash off people for nothing. Somewhere along the way, something has got to give.
  - asdff 5y ago
    How long it takes for the market to produce viable alternatives is an open question.
- angry_octet 5y ago
  But isn't it the point to make, e.g., steel and concrete construction include external costs? Vs, e.g. wood? Or renovating buildings instead of tearing down and rebuilding? You could also have tax paid off over time. E.g. a concrete building that lasts 60 years, vs a stick build that lasts 20. Bricks are frequently recycled, >100 year lifetime. I'm open to hearing counter-examples, i.e., where there is an external cost to not manufacturing a high CO2 cost product. The examples I've seen so far are really arguments about competition with BRICS economies, and their bizarre exemption from controls.
jsharf 5y ago
Yes, but maybe steel is more essential to society than burning natural gas. But natural gas companies make more margin so they can afford the carbon credits, meanwhile steel has tighter margins so it gets passed to the consumer. This means it might disproportionately limit the consumption of things based on how much money they make. This is all fine until construction becomes more expensive because you can’t easily get the steel you need for buildings (what if you were trying to build a clean energy power plant and. Is it’s too expensive?). Some things are essential and need protection from the free market (ex, hospitals have diesel backup generators. Those would become more expensive). You could add a government subsidy for steel, but now you’re stacking laws on top of each other and playing centrally organized government. Which doesn’t work well. The downside to having separate laws per industry is that you’ll get insane workarounds (see import tariff law). Carbon is carbon — so workarounds are easy. For example if natural gas is taxed higher than steel, you’ll have natural gas companies producing just enough steel to be qualified as steel production companies so that they get the lower rate. Or something like that. Choosing policy is tremendously difficult. We could deliberate all day. despite what I’ve said, a carbon tax is better than doing nothing, and we would be wise to start creating/increasing carbon taxes already.
- suster 5y ago
  If a) steel is more essential to society than burning natural gas and b) steel production is carbon-intensive, then an across-the-board carbon tax has two effects. 1. In the short term it makes steel more expensive. But because steel is essential, we still use it, it just costs a little more. If you're building a clean energy power plant, or making a generator for a hospital, some of the tax revenues could go to you, to make those things still affordable. 2. In the longer term, there are now huge financial incentives to either reduce the carbon consumption of steel production, or to replace steel with something which uses less carbon. Which is what you want.
  - jimmydorry 5y ago
    If we look at just steel: Your implicit assumption is that companies are willing to pay more for steel. An increase of just a single digit percent more to the price of steel is enough to be completely uncompetitive with overseas steel production, which would inevitably lead to the closing of all local manufacturing capacity of steel. Steel production is also a commodity critical to national security. Losing access to foreign steel due to war or other concerns would literally bring the country to its knees for the duration of the encounter. Shifting all local manufacturing capability overseas to where there is less regulation sounds good, until it doesn't... as we saw during the pandemic. The world would have looked a lot different today if Chinese manufacturing had closed or decreased for more than a few weeks (roughly Jan-Feb, much of which coincided with the usual Chinese New Year shutdown that is typically planned for).

asdff 5y ago

Consumption would only be reduced for industries that have a viable alternative. Maybe you can replace steel for some applications, but not all, and for those the costs will be passed on to the consumer who will bear this tax and will have no alternative on the market.

cwkoss 5y ago
I think that's the point of the carbon tax. That customers will feel price pressure from their most-carbon-emitting activities and commodities is precisely the point. This will encourage finding alternatives. No demand is entirely inelastic.
- dahfizz 5y ago
  The argument isn't that this wouldn't work, its that this would be sub-optimal. Squeezing extra tax out of poor people who have literally no alternative is not going to be a popular plan. Allowing for a hint of nuance in your public policy would incentivize switching to alternatives where possible, while also incentivizing the development and adoption of alternatives where they don't currently exist.
  - cwkoss 5y ago
    > Allowing for a hint of nuance in your public policy I am highly skeptical that is it possible for American legislation's 'nuance' to tilt a simple tax law in any direction but towards enriching the rich and powerful. I feel like carve outs would be great for lobbyists and the politicians they pay patronage to, but it would destroy the effectiveness of the carbon tax: the industries with enough political power would negotiate exemptions because "there are no economically feasible alternatives" but making carbon-expensive activity economically infeasible is the core purpose or the carbon tax. Exempting any industry in particular is just corruption.
    - dahfizz 5y ago
      I absolutely agree. I have no faith that the government would do anything other than half measures at best. I consider policy discussions like this totally theoretical/intellectual
  - NumberWangMan 5y ago
    People have thought of this--a popular kind of proposal is to return all the tax money as a dividend to everyone evenly, to ease the financial burden. I think a carbon tax with dividend actually fits the criteria you are describing pretty well.
    - dTal 5y ago
      Wouldn't this have the perverse incentive of poor people wanting large emitters to keep emitting, because it directly puts food on their table?
      - NumberWangMan 5y ago
        In a sense yes, but I wouldn't call that an incentive, any more than I have an "incentive" for Chipotle to give me free burritos. I'm not the one making the decision there. The people who are doing the polluting have the right incentive, and that's what matters. If the amount of the tax were fixed, the dividend would decrease over time, but the tax gradually increases as we get better and better at doing things without emitting greenhouse gases. The eventual target being net zero carbon. Based on the tax level in the Energy Innovation Act as an example, this is predicted around 2050.
        dTal 5y ago
        Poor people can still vote. And they will vote against anything that reduces their dividend, even if means voting against things that lower emissions. As to your second point - moving the goalposts every time progress is made eliminates any incentive to improve. If you're committing to keeping the dividend the same over time, that means you need to keep the tax take the same. And if you're gonna take the same amount of money off me regardless, why should I pay attention to my emissions? In the limit case, of zero carbon, the carbon tax rate is infinite and you're taking a bunch of cash off people for nothing. Somewhere along the way, something has got to give.
- asdff 5y ago
  How long it takes for the market to produce viable alternatives is an open question.
angry_octet 5y ago
But isn't it the point to make, e.g., steel and concrete construction include external costs? Vs, e.g. wood? Or renovating buildings instead of tearing down and rebuilding? You could also have tax paid off over time. E.g. a concrete building that lasts 60 years, vs a stick build that lasts 20. Bricks are frequently recycled, >100 year lifetime. I'm open to hearing counter-examples, i.e., where there is an external cost to not manufacturing a high CO2 cost product. The examples I've seen so far are really arguments about competition with BRICS economies, and their bizarre exemption from controls.

jsharf 5y ago

Yes, but maybe steel is more essential to society than burning natural gas. But natural gas companies make more margin so they can afford the carbon credits, meanwhile steel has tighter margins so it gets passed to the consumer. This means it might disproportionately limit the consumption of things based on how much money they make. This is all fine until construction becomes more expensive because you can’t easily get the steel you need for buildings (what if you were trying to build a clean energy power plant and. Is it’s too expensive?). Some things are essential and need protection from the free market (ex, hospitals have diesel backup generators. Those would become more expensive). You could add a government subsidy for steel, but now you’re stacking laws on top of each other and playing centrally organized government. Which doesn’t work well. The downside to having separate laws per industry is that you’ll get insane workarounds (see import tariff law). Carbon is carbon — so workarounds are easy. For example if natural gas is taxed higher than steel, you’ll have natural gas companies producing just enough steel to be qualified as steel production companies so that they get the lower rate. Or something like that. Choosing policy is tremendously difficult. We could deliberate all day. despite what I’ve said, a carbon tax is better than doing nothing, and we would be wise to start creating/increasing carbon taxes already.

suster 5y ago
If a) steel is more essential to society than burning natural gas and b) steel production is carbon-intensive, then an across-the-board carbon tax has two effects. 1. In the short term it makes steel more expensive. But because steel is essential, we still use it, it just costs a little more. If you're building a clean energy power plant, or making a generator for a hospital, some of the tax revenues could go to you, to make those things still affordable. 2. In the longer term, there are now huge financial incentives to either reduce the carbon consumption of steel production, or to replace steel with something which uses less carbon. Which is what you want.
- jimmydorry 5y ago
  If we look at just steel: Your implicit assumption is that companies are willing to pay more for steel. An increase of just a single digit percent more to the price of steel is enough to be completely uncompetitive with overseas steel production, which would inevitably lead to the closing of all local manufacturing capacity of steel. Steel production is also a commodity critical to national security. Losing access to foreign steel due to war or other concerns would literally bring the country to its knees for the duration of the encounter. Shifting all local manufacturing capability overseas to where there is less regulation sounds good, until it doesn't... as we saw during the pandemic. The world would have looked a lot different today if Chinese manufacturing had closed or decreased for more than a few weeks (roughly Jan-Feb, much of which coincided with the usual Chinese New Year shutdown that is typically planned for).