A commenter writes:
With a carbon tax, there would be a number of second order rebound effects(People buy more fuel efficient cars, and then proceed to drive more) that could actually increase emissions in the long term.Because of this, the effects of a carbon tax on carbon production are uncertain, and the tax would have to be adjusted frequently if we were to meet any sort of international targets. Megan herself frequently posts about the wisdom of frequently changing taxes.
With a Carbon credit scheme, we not only make international carbon trading and hedging strategies far simpler, but we also have complete predictability about the effects.
1) There are no rebound effects with a tax. Rebound effects come from fuel efficiency standards. Those standards raise the price of the car, while lowering the price per mile driven. The result is that people drive more, which claws back some of the gains from fuel efficiency--estimates range from about 10% to 30%. Meanwhile, the added expense of new cars keeps older, less efficient cars on the road longer. If I recall correctly, it took about a decade for cars built under CAFE to reach half the national fleet.
2) True, but as things go, ratcheting up excise tax rates on a commodity of which we are trying to discourage consumption is pretty anodyne.
3) We don't have complete predictability about the effects of international carbon credits. If we did, they'd be a fabulous idea. As things stand, it is very unclear that they do more good than net environmental harm.
The benefit of cap and trade is that you know where you're going. The problem with cap and trade is that it is more vulnerable to gaming, and there are threshold effects. The problem with a tax is that you don't know the price you need to get to the goal you want. But the benefit is that it starts working from dollar one, and it's harder to evade by, say, purchasing dodgy offsets.
Furthermore, the commenter assumes that we actually know the optimal level of carbon. I don't think we do.
If the marginal benefits of carbon reduction are low in a given year (which is the case with a stock pollutant like CO2) and there is great uncertainty about the marginal costs of carbon reduction (which is almost certainly the case), cap-and-trade has a potentially much greater deadweight-loss than a carbon tax. This is perhaps the single strongest argument for a tax over cap-and-trade. If not for the uncertainty about compliance costs, the two methods would be functionally equivalent (though obviously they are differentially susceptible to rent-seeking / capture etc.)
I'll believe that the most alarmist of those that advocate CO2 emissions reduction are serious when they are willing to replace FICA taxes with a carbon tax. Gore actually has been willing to at least explore this path, which is the best thing I can say about him.
Global warming ended 10 years ago. The oceans are getting colder, not warmer. The antartic ice cap is growing. Ice is reforrming in the artic in all those places that Gore said it melted.
The next ice age is forecast to begin in 2020. Perhaps we should look for ways to increase CO2 levels. In any case, no long term harm can be done by waiting 5 years to see if the planet is getting colder or warmer. But plenty of short term harm, including war, can come out of fanatical reductions in carbon. After all, shouldn't we make sure that people who never had cars never get them?
I am so glad this discussion has clarified so many points of misinformation. I think we're ready to wrap up:
>Al Gore, backed by overwhelming and abundant scientific proof of global warming, advocates aggressive, market-based solution to reduce global warming to a rate that minimizes human disruption and negative effects on economic activity. BTW, these solutions would also reduce our dependence on foreign oil, reduce other forms of pollution, more rationally price externalities of fossil fuel usage, reduce our massive trade deficit and reduce our funding of islamic terrorism.
>Conclusion - he is a hypocritical, delusional hack.
>Our many naysayers on this thread, backed by their unshakeable belief set, deny that there is global warming, deny that the US has the highest per-capita consumption of fossil fuels, deny that a market-based solution would work, express frustration that the externalities cannot be perfectly priced, express indignation that unilateral action on our part would not force a similar action by both India and China, and go back to watching Fox and Friends.
>Conclusion: they are wise, pragmatic souls who recognize that if the global market framework collapses from the stress of food and fuel shortages due to climate change, at least we white folks have our nukes to protect us and our cheap Mexican labor to keep us comfortable. After all, government is powerless to ensure the common well being, so it would be wrong to try to prevent disaster. Better to take it like a man - that worked so well for Churchill and the British Empire....
Wow, thank you for the response. Please let me respond:
Rebound effects are present in any regulatory regime that does not rapidly change the effective cost of carbon. If a carbon tax raises the price of gasoline so that it is rational to buy a more efficent car, then the marginal cost of emmisions per mile decrease, and more miles will be driven. Under certain utility functions, its possible that total CO2 output increases. Its also important to remember that coal demand is more elastic then oil.
Nobody sane supports volantary offsets, but as long as international credits are auctioned by national governments, most negative effects could be avoided(Assuming international compliance could be dealt with)
Uh, no, dollared, Gore is a hypocritical hack because he advocates that people reduce their carbon emissions as much as possible while he himself lives a lifestyle which includes emitting a massive amount of carbon.
Will you join me in advocating that the current tax code be repealed by Constitutional Amendment, and replaced with a tax code which makes the emission of carbon the sole taxable event? Just trying to find common ground!
Also, could you elaborate on what you mean by "gaming the system" and "dodgy offsets", in the context of fully auctioned credits? I don't see the potential, but you're most likely better read than I.
Will, carbon taxation will raise roughly 125 billion, by optimistic estimates. That wouldn't even support thelarge military that you most likely support.
Will, carbon taxation will raise roughly 125 billion, by optimistic estimates. That wouldn't even support thelarge military that you most likely support.
David, how much carbon taxation will raise is a function of how much carbon is taxed, and how people respond to it.
Won't this just puch more manufacturing off-shore? Not to China (if China joins in the scheme) but to other countries with virtually no industry? Good for them, but bad for us I guess.
Why on earth (or any other planet) would China, India or Brazil want to join such a scheme? They are working very hard to industrialize, and can't understand why they should have to do it while wearing handcuffs, when others didn't?
If the whole AGW scare turns out to be so much BS, will all the greenies and other assorted whiners and hucksters give us "deniers" a big apology and a refund?
Why even bother having a Republican party when the putative candidate seems to agree with the other party's position on almost every major issue? Does Mac the Mav really believe in this BS or is he just afraid of being mau-maued by his good buddies in the media?
Will,
Certainly, but unlike oil, Coal demand is fairly elastic. So the latter effect will mostly dominate the former as taxes are increased.
David, then you simply tax differents sources of carbon at different rates. There is nothing divinely ordained about 125 billion.
"Won't this just puch more manufacturing off-shore? Not to China (if China joins in the scheme) but to other countries with virtually no industry? Good for them, but bad for us I guess."
The only industries affected are those with very heavy energy use. Manufacturing is sometimes in that category, but for most industries, it's not terribly important.
Ore mining and processing and server farms are the only exceptions I can think of, and their ability to move is limited.
"Why on earth (or any other planet) would China, India or Brazil want to join such a scheme? They are working very hard to industrialize, and can't understand why they should have to do it while wearing handcuffs, when others didn't?"
We could directly pay them to do so. One way of doing this would be to allocate carbon credits to governments on the basis of population. Since developing countries use far less CO2 per person than developed countries, they could make a handsome profit selling credits to us.
"If the whole AGW scare turns out to be so much BS, will all the greenies and other assorted whiners and hucksters give us "deniers" a big apology and a refund?"
Would you give them an apology and refund if nothing is done, and climate change causes real harm?
If nothing is done, and the worst happens, then the world is quite a bit worse off.
If something is done, and nothing happens, then we are left with more efficient cars and energy.
The choice seems clear.
Since developing countries use far less CO2 per person than developed countries, they could make a handsome profit selling credits to us.
Oh, that won't cause any ridiculous inefficient rent-seeking behavior or encourage corruption and kleptocracy. Nor will it encourage the powerful to keep their populations mired in low-emissions poverty. No, forking over money to the third world for nothing with only one string (don't industrialize) is likely to be an unalloyed good.
People seem to drive less, but drive stupider.
Rob Lyma,
If third world regimes are auctioning their credits to the highest bidder, I don't see why they care whether the buyer is domestic or foreign. It does not lower incentives to industrialize a bit.
The main concern is that the free money could foster corruption. But frankly, I feel the die has been cast. States that could be corrupted by free money streams, already have been. The remaining states have semi-effective mechanisms of at least keeping the money out of swiss bank accounts. Faced with that, I don't see how it does any harm, and it's a great way to get the third world on board.
If third world regimes are auctioning their credits to the highest bidder, I don't see why they care whether the buyer is domestic or foreign. It does not lower incentives to industrialize a bit.
Are you suggesting that there are domestic concentrations of capital in third-world regimes that can realistically compete with foreign investors? Isn't the absence of such things what makes them third-world to begin with?
Besides, suppose a poor state makes the far-sighted decision to give carbon credits free to any foreign company that decides to build a factory there. What happens to their capacity for growth when they eventually run out of credits? Suddenly their ability to create more jobs and prosperity is limited by the need to become a net importer of credits.
This raises the difficult question of the initial allocation of the credits; you're essentially capping the possible future industrial base of each country. How the hell are you going to do that with anything resembling fairness?
States that could be corrupted by free money streams, already have been.
You can't possibly mean this. The number of states with free money streams is very small (mostly just oil producers). Are you suggesting that currently poor states (like Burma, say) which lack such streams are so inherently upright that when a free money stream comes online, it won't suffer corruption? Riiiiiight.
(Incidently, it's "Lyman," which was of course my fault)
Will, two things: We've already addressed in ohter threads the fact that Al Gore minimizes his net carbon effect to zero. One does not have to take a vow of poverty to advocate good public policy.
Also, I am happy to consider your constitutional amendment. I just don't understand why carbon would be your exclusive basis for taxation. What about highway user fees, income, estates, property, consumption, etc.?
Dollared, we've already addressed the fact that Gore advocates that others reduce their emmissions, REGARDLESS of offsets. He isn't doing what he adovcates that others do. He's a phony.
Dollared, if carbon emissions are the scourge that many advocate, then we should take drastic action, which means making carbon emission the event which triggers taxation. This will alter behavior hugely.
lE
OK, so these are two nonserious issues meant to deflect away from the public policy discussion.
Fox on, brother.
Dave, rebound results from using an imperfect proxy for the thing you're trying to control--fuel efficiency for carbon emissions/gasoline usage, for example. A direct tax doesn't cause people to emit more than they otherwise would in an untaxed world, because the fuel efficient car is a result of the price--people are trying to hold driving constant while controlling emissions. There might be a rebound effect if you were targeting road wear, but not carbon.
We've already addressed in ohter threads the fact that Al Gore minimizes his net carbon effect to zero.
Really? Let's suppose that carbon offsets work exactly as claimed. Gore can buy them only because he's very rich. So here's the question: what is the carbon cost of all that money he has? How much CO2 was released to generate it? Has Gore really offset his lifetime emissions (and his family's lifetime emissions, for that wealth which was inherited), or just his current daily emissions? Does Gore have a massive carbon debt that he isn't paying off? Indeed, is it even possible for him, by spending all the money he has, to buy enough credits to pay that carbon debt?
If not, how can he claim to be any more virtuous than the rest of us? He isn't running a carbon deficit (which is allegedly good) only because he's already so highly carbon-leveraged.
Actually, this relates to another question of mine: assuming you drive the thing for, say, 5 years, will a Prius save enough gas to compensate for the energy needed to manufacture it? That is, is buying a Prius a net carbon gain or loss when compared to just driving whatever car you're driving now for another 5 years?
"The benefit of cap and trade is that you know where you're going. The problem with cap and trade is that it is more vulnerable to gaming, and there are threshold effects. The problem with a tax is that you don't know the price you need to get to the goal you want. But the benefit is that it starts working from dollar one, and it's harder to evade by, say, purchasing dodgy offsets."
Megan, you miss the other problem with cap and trade that bothers me most -- you know the goal you're trying to achieve, but you don't know how much it's going to cost you. I am far more uncomfortable with kneecapping this country's economy to achieve a goal we're not even sure will be effective than I am with setting a price and seeing where it goes.
I really like the CBO's explanation of cap and trade v. carbon tax. Their whole climate change series makes for interesting reading for those who like that stuff.
CBO Brief
OK, you're really not serious about the importance reducing carbon emissions, in that your first priority is to preserve the tax code. About what I expected. Look, I'm agnostic about the importance of reducing carbon emissions. I'm convinced that our tax code is hugely distortive and that it acts as a brake on economic growth. I would thus be quite willing to impose a giant tax on carbon emissions, if it were accompanied by a Consitutional repeal of the income tax, or FICA taxes, or both. When you get right down to it, however, most people advocating a dramatic reduction in carbon emissions are actually more invested in protecting the current tax code.
Will, "I would thus be quite willing to impose a giant tax on carbon emissions," now is where we run into the rebound problem. CO2 emissions don't necessarily relate to consumption or negetive externalities. You will get really dirty and resource intesive ways to do things without emitting CO2. And that will also act like brake on the economy.
Fine, Aaron, then I might be quite willing to tax those really dirty and resource intensive ways as well.
The only industries affected are those with very heavy energy use. Manufacturing is sometimes in that category, but for most industries, it's not terribly important. Ore mining and processing and server farms are the only exceptions I can think of, and their ability to move is limited.
Ore is mined where it is found, but a very wide range of refining, processing, and raw manufacturing processes can go anywhere in the world where the lowest energy and labor costs. For that reason, many of them already have gone to China and SE Asia, although more could follow if the price differential on taxed energy here is costlier than cheap, untaxed manufacturing and transportation energy from there.
With modern communications infrastructure, server farms can also be shuffled around. Many of them are not now due to security concerns; make the costs of operating high enough, and you will offset the cost of setting up shop elsewhere and simply working around the latency delays caused by longer-distance communications and stricter encryption protocols.
Intel and Micron still maintain large-scale semiconductor fabrication facilities in the US. Chip fabs are huge energy consumers.
Another one is agriculture, which consumes large amounts of energy for crop production, agricultural processing, and food product trasportation, and more so in the western states where numerous and sometimes very large motors are used for irrigation pumping. These industries are directly affected by significant changes in energy costs, as we are already seeing.
Hundreds of thousands of automobiles, commercial/industrial vehicles, and aircraft are presently manufactured or assembled in the US, but operations could be moved elsewhere if the cost of doing business went high enough.
Finally, there is also the distributed effect whereby numerous smaller industries may not be using an enormous amount of energy at each site, but a significant increase in energy costs could drive the marginal ones out of business, producing rapid industry consolidation and a greater possibility of outsourcing.
Sounds good to me, but how long is it going to take to realize what they are.
How did the central planners figure that one out? I don't remember.
Lyman,
"Are you suggesting that there are domestic concentrations of capital in third-world regimes that can realistically compete with foreign investors? Isn't the absence of such things what makes them third-world to begin with?"
Sure there are, Brazil and India have fairly developed capital markets. Only the worst basket cases are completely devoid of rich people.
But I'm not sure what you mean by "compete". If a domestic firm can produce more profit from a carbon credit than what the auction price is, then it will be consumed domestically. If not, it will be sold internationally, to be used by someone more efficiently. I don't see any marginal disincentives to industrialization.
"Besides, suppose a poor state makes the far-sighted decision to give carbon credits free to any foreign company that decides to build a factory there. What happens to their capacity for growth when they eventually run out of credits? Suddenly their ability to create more jobs and prosperity is limited by the need to become a net importer of credits."
First, credits would be allocated and auctioned periodically in nearly every proposal I have read.
Second, it's important to note that due to Coase's theorem, the eventual carbon allocations will not depend on whoever we initially give the credits to. Initial allocations for government to auction only exist to give governments incentives to comply.
Assuming that we have international compliance, it is meaningless to talk of a country "running out of credits" . If a country foolishly decides to give the credits away(Auctioning them really is a much better move), then domestic firms can just buy more credits an international exchange.
This raises the difficult question of the initial allocation of the credits; you're essentially capping the possible future industrial base of each country. How the hell are you going to do that with anything resembling fairness?
No, as I said before, the future industrial base of a nation has pretty much nothing to do with original allocation, assuming that credits can be traded internationally.
Also, keep in mind that carbon caps do not directly impact most forms of industry. In the short run, the price of energy increases. But most industries found in the third world are not energy intensive. Moreover, energy prices will go down closer to previous levels after alternative energy capacity is increased.
You can't possibly mean this. The number of states with free money streams is very small (mostly just oil producers). Are you suggesting that currently poor states (like Burma, say) which lack such streams are so inherently upright that when a free money stream comes online, it won't suffer corruption? Riiiiiight.
Pretty much every country in the third world has large amounts of either Oil, Metal, or Diamonds(Even isolated islands have guano revenue). Burma for example, profits handsomely off of it's Natural Gas reserves.
The countries that were going to become corrupted, already have.
It depends which factor you're trying to set. If you want to set the amount of carbon irrespective of the economic damage, a cap n' trade system is best because you're setting the amount of carbon. If you want to set the amount of economic damage and see how much less carbon you get, a tax is best because you're setting the price of carbon. Is it any wonder the greens prefer one and the libertarians prefer the other?
I don't know Aaron, but I only need to know that taxing carbon emissions would be a better way to raise revenues than the current income tax code and FICA taxes.
David,
You seem to be assuming that credits will be traded on essentially private exchanges with low transaction costs. If that's the case, most of my objections vanish because Coase really can be applied.
The thing is, they won't, at least not at first. They'll be sold by governments, with attendant corruption, rent-seeking, and the highly unhealthy dynamic of a government able to fund an army without bothering to develop the country economically. And this problem will recur every time a new set of credits is allocated for auction. With all the friction that generates, Coase's zero-transaction-cost assumption doesn't hold.
Besides which, even if Coase does hold, there are big distributional effects to different allocation choices even if the net utility is the same; deciding what those effects should be is going to be impossible.
And of course, there's the problem of compliance: who enforces it and how? What's to stop a corrupt government from selling off credits for cash and then allowing domestic CO2 generation anyway?
They both seem equally stupid to me. The exception being Will's revenue neutral tax shift, with the additional caveat that that it is initially cash flow neutral as well. The income tax, etc. reduction needs to essentially match the CO2 emission tax increase for every individual and entity, otherwise there will be big consequences.
Will, I agree for the most part, but am skeptical the transition can be done well.
If you want to set the amount of carbon irrespective of the economic damage, a cap n' trade system is best because you're setting the amount of carbon
What are the proposed enforcement mechanisms behind an international cap and trade scheme? Suppose China takes its credits, sells them to well meaning Western companies, and the continues right along on its current path of industrialization. How are they sanctioned? Does the world go to war with China? Are they denied access to global markets? What keeps them (or any other country for that matter...look at the Euro's Kyoto compliance rates) from cheating? A strongly worded UN Resolution?
I'd appreciate a cap and trade proponent explaining how this is actually supposed to function.
Rob Lyman,
Your point on potential African rent seeking is valid. One solution is to have an international organisation auction the credits and then distribute the proceeds, simlar to how the EU gives out seniorage revenue to member states. But there are other solutions as well.
The distributional concerns are relevent, and there is no "right" answer. But a population approach seems fair, and would be supported by most of the world.
Enforcement issues could be dealt with by game theory. Delay payment unless an independant agency confirms compliance.
Delay payment unless an independant agency confirms compliance.
Isn't compliance a decades-long problem?
But a population approach seems fair, and would be supported by most of the world.
This means a massive upfront wealth transfer from highly productive nations to unproductive ones. Maybe it's worth it to stop global warming, I can't really say. But the incentives sure look bad.
dollared, please don't lie. Al Gore most certainly did not advocated a barrage of "market-based" plans to reduce CO2 emissions. He advocated heavy-handed micro-managing regulations with market-based ideas as a sorta-kinda afterthought. A true "market-based plan" would purely rely on methods that make CO2 emitters internalize the quotal share of the damage their emissions cause, allowing them to stop doing whatever's no longer wortwhile, rather than dictating in advance, what changes should be made, irrespective of consumer preferences.
Furthermore, don't you dare criticize use of Mexican labor until you explain your well-posed solution to the problem of why those crappy jobs are nevertheless better than anything Mexico has to offer.
I keep seeing questions leading to more questions, and more bureaucracy advocated to look into them.
Megan purports to hold this belief:
"...that we actually know the optimal level of carbon. I don't think we do."
And yet, she advocates taxing 'carbon' (by one means or another) with the express purpose of reducing its output. How does this make sense to someone who claims to understand that we don't know the 'optimal' level of carbon? (or, as I would suggest, even that there is one...) What (other than the usual ideological reasons) makes us want to reduce the output of something whose 'optimal' level we don't actually know?
Presumably Megan's answer would be: "Well, we don't know what the optimal level is exactly, but we know it's less than the current output." Says who? How does Megan McArdle, a blogger whose life has not been and will not be measurably affected one iota by the marginal increase or decrease in the output of 'carbon', think she knows that? Of course, she does not.
This entire debate is premised on the idea that "we" want to "discourage consumption" of carbon-related commodities, and that this will incur "benefits". I don't accept that I have any interest whatsoever in spending tax money on discouraging consumption of these commodities, nor do I think doing so would lead to any measurable "benefits" for myself or anyone else.
Except, of course, the financial sector which is just drooling over the prospect of the rent-seeking opportunity of being able to trade these fictitious government-created thingies.
Person, you are making two excellent points. However, please unpack the assumptions as you move in.
1. Why insist that the only "market-based plan" is *required* to "purely rely on methods that make CO2 emitters internalize their quotal share of the damages.."? That is setting an impossible bar. Sometimes (usually) you cannot accurately price externalities, and almost always you have the problem that those people who suffer the externalities cannot be "bought off." Oddly enough, nobody in lower Manhattan, consent to being flooded, despite that being a haven of market purity. So a cap-and-trade solution addresses the majority of the problem on the control side, with other mandates to take care of no-brainers (eliminating indandescent light bulbs for example). We don't have the time or the resources for perfection.
2. Why do I have to solve Mexico's problems to enforce my country's laws? Again, you have imposed free market purity on a dirty world.
Yes, it would be easier if there were no motive to cross the border, and by all means, I will work to support redistribution of wealth and elimination of corruption and oligarchy in Mexico so their people can live free and prosper. But I don't have to ignore laws and borders to come up with a solution to cynical lack of enforcement of our laws.
David Shor attempts the following (pseudo) cost-benefit comparison:
If nothing is done, and the worst happens, then the world is quite a bit worse off.
If something is done, and nothing happens, then we are left with more efficient cars and energy.
The choice seems clear.
Er, no it doesn't. First, you compare the "worst" case scenario to a scenario where "nothing" (noteworthy) happens. What are the relative probabilities of these scenarios? It matters. Of course, the "worst happening" is a low-probability event. "Nothing" noteworthy happening is a high-likelihood event. An actual cost-benefit analysis would weight accordingly.
Second, how much will those "more efficient cars and energy" end up costing us? And if those are good things, is there a cheaper way to get them? Again, an actual cost-benefeit analysis would contemplate this.
Finally, you completely ignore the possibility that we "do something" and the "worst" happens anyway. In other words, you fail to take into account the extent to which this scheme will actually help and tacitly assume that "doing something" will necessarily avoid the "worst" case when that is not necessarily true. What if global warming is real, and a 5 degree temperature rise is coming, and this cap-and-trade/tax scheme will 'help', by reducing that warming by... 0.1 degrees? What is the actual tradeoff between the cost of the tax and the 'degrees reduced'? You have no idea. For all you know, the relevant comparison might not be 'we do nothing and the worst happens' v. 'we do something and get efficient cars'; it might be 'we do nothing and the worst happens' v. 'we do something and the worst happens and we poured billions down the drain for nothing'. You left that out. An actual cost-benefit comparison would not.
Yours was not an actual cost-benefit comparison, of course.
The primary advantage of cap & trade is the flexibility it provides to reduce emissions at the lowest possible cost, by allowing those who can reduce emissions at the lowest cost to do so and sell any additional allowances at a market price to those for whom the market price is lower than the emissions reduction cost.
This concept is antithetical to politicians and regulators, as well as to environmental activists, because is is not necessarily a lose-lose game. It does not usually produce uniform suffering; and, it offers the opportunity for some participants to reduce emissions at low cost and then further lower their costs by selling surplus allowances.
The big challenge with cap & trade is knowing, at the beginning, what the ultimate cap level will be, so that all of the participants can optimize their investment strategies. Environmental activists are far more interested in pain maximization and emissions minimization than economic optimization.
However, the ultimate killer for cap & trade is the fact that any surplus revenues end up in the hands of participants, rather than taxing authorities. totally unacceptable!
The primary advantage of cap & trade is the flexibility it provides to reduce emissions at the lowest possible cost, by allowing those who can reduce emissions at the lowest cost to do so and sell any additional allowances at a market price to those for whom the market price is lower than the emissions reduction cost.
This concept is antithetical to politicians and regulators, as well as to environmental activists, because is is not necessarily a lose-lose game. It does not usually produce uniform suffering; and, it offers the opportunity for some participants to reduce emissions at low cost and then further lower their costs by selling surplus allowances.
The big challenge with cap & trade is knowing, at the beginning, what the ultimate cap level will be, so that all of the participants can optimize their investment strategies. Environmental activists are far more interested in pain maximization and emissions minimization than economic optimization.
However, the ultimate killer for cap & trade is the fact that any surplus revenues end up in the hands of participants, rather than taxing authorities. Totally unacceptable!
Thank you Sonic Charmer,
I would love to do an actual expected value calculation, but none of the relevant probabilities are available to us. Climate Scientists seem to, on the large part, agree that the risks are high, and I defer to their judgment.
Especially since most estimates I've seen of compliance costs are relatively trivial in comparison to GDP.
I would love to do an actual expected value calculation, but none of the relevant probabilities are available to us.
Exactly. Thank you.
Climate Scientists seem to, on the large part, agree that the risks are high, and I defer to their judgment.
If Climate Scientists make such declarations, that is strange and irresponsible of them. While they of course are presumptively qualified to provide us with state of the art knowledge regarding what their models say the e.g. global mean temperature is likely to be under such-and-such scenario, they are most certainly not qualified to sound forth on the "risks" (to humanity) that such-and-such temperature would bring for us. In other words a Climate Scientist might be able to say "the GMT will rise by X degrees" (though, having worked on climate models, I have my doubts about even that), but generally cannot say what that will mean - what will be the effects? Will it be good or bad? To whom and in what distribution? Climate Scientists sounding forth on those questions are way out of their field, and to 'defer' to them is folly.
Especially since most estimates I've seen of compliance costs are relatively trivial in comparison to GDP.
Compliance costs with my alien-invasion-prevention scheme are relatively trivial in comparison with GDP. You'll sign on therefore, I presume.
Ed Reid
The primary advantage of cap & trade is the flexibility it provides to reduce emissions at the lowest possible cost,
That is indeed its primary advantage over a tax, and in fact its primary argument in favor overall. Thus, to people who do not buy that (all else being equal) 'reducing carbon emissions' per se is necessarily a desirable goal worth spending a single marginal dollar of public money on, neither cap and trade nor (obviously) an excise tax is left with any merits whatsoever.
Thats correct, the "Do Anything" approach ignores the fact that it has costs, won't help, may make things worse. It ignores the benefits of doing nothing (i.e. more research, adapting, etc), which are more resources, more technology being better planned before large amounts of resources are comitted, etc.
Should 'the worst happen' costs will be a relatively smaller part of a much bigger economy.
See more thoughts on dealing with uncertainty.
You would think, but in fact if you think about it, the price does the same job that the permits do--as it rises, the people who need the carbon least cut back, reducing demand and moderating the price, while those who have to pay, do.
Sonic Charmer,
What the AGW "acclaimers" won't tell us YET is that the "cap" must ultimately be ZERO, which leaves precious little to "trade".
What we hear now is just: "humma humma humma".
If we'd all join in the singing of Kumbaya with them instead, then they could tell us, eventually.
How and where is the CO2 going to be counted? And who will be in charge?
To also seeming essentially like shifting from a fiat monetary system toward a carbon standardized system. It makes a bit more sense than gold, but will it in the future?
This essentially seems like you are asking to switch from fiat based money toward CO2 based. Again this has the same problems of management and accounting as a cap and trade. Someone has to decide theses things.
Well.
1. Al Gore does *not* buy carbon credits. He gets them *free* as a perk because he's partial owner of several such "carbon credit" companies.
2. It's interesting that all of this discussion is from the point of view of affluent mid to lower staters. Because if you're living on a fixed income in Maine the this whole carbon tax/credit nonsense is going to kill you next winter.
3. The "science" of AGW is not proven. IPCC has already several times revised downward their predictions about how warm the world is supposed to get.
4. The basis for AGW are computer models that are incapable of accurately modeling clouds, thickness of the atmosphere, the oceans, CO2 impact on cloud formation, cosmic ray influence on atmospheric water vapor, etc.
I.e. a total crock.
5. Higher atmospheric carbon dioxide is actually very beneficial to plant growth as it allows the plant to grow faster, healthier and with less water use. Thus putting many arid and semi-arid areas of the world potentially into play for agriculture.