3 ms·

If a good is taxed at its true, global, long-term rate of externality, then the externality, the damage being done, is precisely being paid for. If a little bi

If a good is taxed at its true, global, long-term rate of externality, then the externality, the damage being done, is precisely being paid for. If a little bit of CO2 pollution causes fairly quantifiable harm we can live with but a lot of CO2 pollution causes runaway global warming ending life on earth, what is it's "true, global, long-term rate of externality"? Me, with an actual degree in economics, would say there is none. Many damage effects simply can't be easily put into a simple cost function. But even if there somehow is such a rate, it seems quite likely that bureaucracies and markets "working together" can't be counted on adjust fast to be certain that price is paid.

geysersam 5y ago
Also, one product having a higher price does not mean it's more valuable in a global context. Two carbon equivalent products can be vastly different in terms of how essential they are (for the life or well-being of people). Prices may not reflect that difference because of global differences in purchasing power.
ephbit 5y ago
Climate scientists have long been calculating a remaining CO2 budget (that would prevent the worst from happening if humanity didn't go over). This gives rate of CO2 emissions as kg/s. Economists surely can come up with some number of USD to be paid for the emission of 1 kg CO2 (by looking at some economic reference numbers) that will effectively render 10,20,...,90%,99% of all different uses of CO2 emitting processes unprofitable or economically infeasible.
- joe_the_user 5y ago
  Sure, you could raise prices so much that nearly every of use CO2-emitting processes wouldn't be possible. But that might result in, say, people not being able to afford to heat their houses in the winter in cold areas of the US. I am all for alternative energy but I don't think this is an approach that would work.
  - ephbit 5y ago
    This is yet another one of these problems that repeatedly remind me of what I call continuous politics: Scenario: A painful (unpopular with citizens/businesses) political decision needs to be made that imposes a (often times financial) burden on people/businesses. Option A is to just push past political resistance and apply the burden (tax, regulation, ...) at once. This results in a minor/major shock to the involved systems. And it might lower acceptance of the politicians who decided it. Option B would be to - instead of practically imposing a brutal unit step function as in A - implement a differentiable function to "go from 0 to 1". I call this continuous politics. A physical analogy would be slowing a high velocity vehicle down to a halt because there's an insurmountable obstacle in its way. The least painful way is to simply reduce the velocity in a linear fashion. There are of course many other variants besides a linear approach. There are probably situations for which degressive or progressive functions are better. But the linear function is easy to implement and understand and people and businesses could plan for the future, if the numbers were laid out to them early. Businesses are probably better than people, though. Because they are probably less susceptible to the frog-in-slowly-heating-water effect. > I am all for alternative energy but I don't think this is an approach that would work. I think - if implemented linearly - this approach would be the least painful. All the other "approaches" will very likely effectively carry out like shocks/catastrophes with dramatically more harm done.
WalterBright 5y ago
It's not necessary to come up with a cost function. Instead, come up with a sustainable amount of CO2 emissions. Then, keep raising the carbon tax until emissions drop to that amount.
- joe_the_user 5y ago
  Well, The problem is there can be a price where some people can't drive to work but other people are still quite able to afford gas and you wind-up still not meeting the goal. As a practical matter, we need to keep using our present petroleum based system but use it's energy output to build a new economy/energy system. Raising energy prices makes people use less energy but doesn't make them use it efficiently (as mentioned, the rich can hold massive parties on their yachts while the poor are unable to get anywhere).
  - naniwaduni 5y ago
    > The problem is there can be a price where some people can't drive to work but other people are still quite able to afford gas and you wind-up still not meeting the goal. You're not charging enough. You need to charge more.
  - WalterBright 5y ago
    > but doesn't make them use it efficiently Of course it does. Gas prices greatly affect peoples' driving habits, for example. And their choice of car. Fuel prices are the single biggest factor that drives new jetliner designs, for another. > the rich can hold massive parties on their yachts Yes, and how much does that contribute to overall CO2 emissions? 0.00001%? This is what I meant when government makes such decisions for political reasons, rather than pragmatic, efficient, or effective ones.
  - ZeroGravitas 5y ago
    Did you say you had an economics degree? > Incentives matter. The most famous example in economics is the idea of the demand curve—when something gets more expensive, people buy less of it. When it gets less expensive, people buy more of it. > Some find this bedrock principle of economics hard to accept, based on introspection. “When the price of gas goes up, I still buy gasoline,” says the skeptic. Or in its more extreme form: “You need gasoline, so people will keep buying it even when it gets more expensive.” > You may still buy gasoline when it gets more expensive. But you will try and find ways to buy less. Not necessarily zero, less. > Thinking about how people respond to the incentive of the higher price opens up a world of possibility beyond the cold turkey of going without. When gasoline gets more expensive, some people car pool, some people drive at slower speeds, some try and combine multiple errands into one trip. Let the price of gasoline rise enough and be expected to stay higher for a long enough period of time and some people will buy a car that gets better mileage, move closer to work or postpone or cancel that order for the pleasure boat that takes $400 to fill its tank when gasoline is $3 a gallon. > Not everyone will do all of these things. Some people will do very few of them. But the overall effect of an increase in the price of gasoline is to discourage the purchase of gasoline.
stuaxo 5y ago
If the externality will kill off everybody and thus the economy, surely the cost should trend towards infinity.
- shukantpal 5y ago
  No, it would be the cost to negate the externality (like absorbing co2)
Veedrac 5y ago
If you have a probability function over externalities rather than a single value, then just take the expectation. If you have latency in the system, account for that in the probabilities. Refusing to set a price, or using arbitrary techniques pulled out of a hat instead, doesn't make it less hard, it just means your policies are arbitrary and uninterpretable. Any remotely sensible cost estimate where ending the world is a legitimate possibility is going to be set impressively high.
- joe_the_user 5y ago
  Any remotely sensible cost estimate where ending the world is a legitimate possibility is going to be set impressively high. My point above is that one doesn't avert the end of the world by setting prices. One averts the end of the world by making plans and issuing orders, as the OP essentially argues. That is - carbon taxes are bullshit. They and every other market-based policy have been worthless and done serious harm to humanity and the environment. Many of us can see this damage around us.
  - Tagbert 5y ago
    Have there been any significant carbon taxes implemented, though? I have only seen very mild, half-hearted measures because politicians are reluctant to annoy their constituents and their contributors. Getting them to do carbon restriction by fiat will be even harder.
    - joe_the_user 5y ago
      Have there been any significant carbon taxes implemented, though? Quite a few countries have implemented carbon taxes [1], in fact. Sure, these basically token taxes. But my point is that they couldn't be anything else - a large tax would hinder the average person's ability to function while not changing a lot of behavior. Public transit in my area is close to non-existent and I have moderate efficient car but everyone couldn't suddenly acquire a very efficient car since only so many are made per year. I rent and so I have no choice about how efficient my isolation is, etc. Changes in energy consumption require coordinated action, not individual incentives. [1]https://en.wikipedia.org/wiki/Carbon_tax#Implementation_by_country https://en.wikipedia.org/wiki/Carbon_tax#Implementation_by_c...

geysersam 5y ago

Also, one product having a higher price does not mean it's more valuable in a global context. Two carbon equivalent products can be vastly different in terms of how essential they are (for the life or well-being of people). Prices may not reflect that difference because of global differences in purchasing power.

ephbit 5y ago

Climate scientists have long been calculating a remaining CO2 budget (that would prevent the worst from happening if humanity didn't go over). This gives rate of CO2 emissions as kg/s. Economists surely can come up with some number of USD to be paid for the emission of 1 kg CO2 (by looking at some economic reference numbers) that will effectively render 10,20,...,90%,99% of all different uses of CO2 emitting processes unprofitable or economically infeasible.

joe_the_user 5y ago
Sure, you could raise prices so much that nearly every of use CO2-emitting processes wouldn't be possible. But that might result in, say, people not being able to afford to heat their houses in the winter in cold areas of the US. I am all for alternative energy but I don't think this is an approach that would work.
- ephbit 5y ago
  This is yet another one of these problems that repeatedly remind me of what I call continuous politics: Scenario: A painful (unpopular with citizens/businesses) political decision needs to be made that imposes a (often times financial) burden on people/businesses. Option A is to just push past political resistance and apply the burden (tax, regulation, ...) at once. This results in a minor/major shock to the involved systems. And it might lower acceptance of the politicians who decided it. Option B would be to - instead of practically imposing a brutal unit step function as in A - implement a differentiable function to "go from 0 to 1". I call this continuous politics. A physical analogy would be slowing a high velocity vehicle down to a halt because there's an insurmountable obstacle in its way. The least painful way is to simply reduce the velocity in a linear fashion. There are of course many other variants besides a linear approach. There are probably situations for which degressive or progressive functions are better. But the linear function is easy to implement and understand and people and businesses could plan for the future, if the numbers were laid out to them early. Businesses are probably better than people, though. Because they are probably less susceptible to the frog-in-slowly-heating-water effect. > I am all for alternative energy but I don't think this is an approach that would work. I think - if implemented linearly - this approach would be the least painful. All the other "approaches" will very likely effectively carry out like shocks/catastrophes with dramatically more harm done.

WalterBright 5y ago

It's not necessary to come up with a cost function. Instead, come up with a sustainable amount of CO2 emissions. Then, keep raising the carbon tax until emissions drop to that amount.

joe_the_user 5y ago
Well, The problem is there can be a price where some people can't drive to work but other people are still quite able to afford gas and you wind-up still not meeting the goal. As a practical matter, we need to keep using our present petroleum based system but use it's energy output to build a new economy/energy system. Raising energy prices makes people use less energy but doesn't make them use it efficiently (as mentioned, the rich can hold massive parties on their yachts while the poor are unable to get anywhere).
- naniwaduni 5y ago
  > The problem is there can be a price where some people can't drive to work but other people are still quite able to afford gas and you wind-up still not meeting the goal. You're not charging enough. You need to charge more.
- WalterBright 5y ago
  > but doesn't make them use it efficiently Of course it does. Gas prices greatly affect peoples' driving habits, for example. And their choice of car. Fuel prices are the single biggest factor that drives new jetliner designs, for another. > the rich can hold massive parties on their yachts Yes, and how much does that contribute to overall CO2 emissions? 0.00001%? This is what I meant when government makes such decisions for political reasons, rather than pragmatic, efficient, or effective ones.
- ZeroGravitas 5y ago
  Did you say you had an economics degree? > Incentives matter. The most famous example in economics is the idea of the demand curve—when something gets more expensive, people buy less of it. When it gets less expensive, people buy more of it. > Some find this bedrock principle of economics hard to accept, based on introspection. “When the price of gas goes up, I still buy gasoline,” says the skeptic. Or in its more extreme form: “You need gasoline, so people will keep buying it even when it gets more expensive.” > You may still buy gasoline when it gets more expensive. But you will try and find ways to buy less. Not necessarily zero, less. > Thinking about how people respond to the incentive of the higher price opens up a world of possibility beyond the cold turkey of going without. When gasoline gets more expensive, some people car pool, some people drive at slower speeds, some try and combine multiple errands into one trip. Let the price of gasoline rise enough and be expected to stay higher for a long enough period of time and some people will buy a car that gets better mileage, move closer to work or postpone or cancel that order for the pleasure boat that takes $400 to fill its tank when gasoline is $3 a gallon. > Not everyone will do all of these things. Some people will do very few of them. But the overall effect of an increase in the price of gasoline is to discourage the purchase of gasoline.

stuaxo 5y ago

If the externality will kill off everybody and thus the economy, surely the cost should trend towards infinity.

shukantpal 5y ago
No, it would be the cost to negate the externality (like absorbing co2)

Veedrac 5y ago

If you have a probability function over externalities rather than a single value, then just take the expectation. If you have latency in the system, account for that in the probabilities. Refusing to set a price, or using arbitrary techniques pulled out of a hat instead, doesn't make it less hard, it just means your policies are arbitrary and uninterpretable. Any remotely sensible cost estimate where ending the world is a legitimate possibility is going to be set impressively high.

joe_the_user 5y ago
Any remotely sensible cost estimate where ending the world is a legitimate possibility is going to be set impressively high. My point above is that one doesn't avert the end of the world by setting prices. One averts the end of the world by making plans and issuing orders, as the OP essentially argues. That is - carbon taxes are bullshit. They and every other market-based policy have been worthless and done serious harm to humanity and the environment. Many of us can see this damage around us.
- Tagbert 5y ago
  Have there been any significant carbon taxes implemented, though? I have only seen very mild, half-hearted measures because politicians are reluctant to annoy their constituents and their contributors. Getting them to do carbon restriction by fiat will be even harder.
  - joe_the_user 5y ago
    Have there been any significant carbon taxes implemented, though? Quite a few countries have implemented carbon taxes [1], in fact. Sure, these basically token taxes. But my point is that they couldn't be anything else - a large tax would hinder the average person's ability to function while not changing a lot of behavior. Public transit in my area is close to non-existent and I have moderate efficient car but everyone couldn't suddenly acquire a very efficient car since only so many are made per year. I rent and so I have no choice about how efficient my isolation is, etc. Changes in energy consumption require coordinated action, not individual incentives. [1]https://en.wikipedia.org/wiki/Carbon_tax#Implementation_by_country https://en.wikipedia.org/wiki/Carbon_tax#Implementation_by_c...