Political: A Global Warming "Denier's" Confession

[Roxanne Appleby]

. . . that means coming up with ways that people can better align their own interests with ours, such as kicking off little carbon taxes and funding carbon trading, which might make some rich people a little richer and give heavy polluters some better incentives to become more efficient.

Point of clarification: Carbon trading intrinsically makes some rich people richer, because it takes something of no value currently but only possessed by those who own certain assets (power plants, factories), and through legislative fiat gives that "thing" a monetary value. The "thing" of course is the ability to stop doing something they are already doing - burn fuel. Incidentally, this is a very "stasist" policy, since it rewards existing businesses but imposes costs on future ones.

Revenue-neutral carbon taxes don't discriminate in this fashion. They reward any and all individuals and firms for using less energy, and each one benefits in direct proportion to how much less energy he uses. If a new firm comes along that creates some alternative way to create a product by using less energy, it is rewarded just as much as an existing firm that devises a way to reduce its current energy use. Under cabon trading the existing firm would be rewarded, but the new one would actually have to pay. This example only scratches the surface of the endless number of extraordinarily perverse consequences of such a scheme.

 

[Handprints]

Point of clarification: Carbon trading intrinsically makes some rich people richer, because it takes something of no value currently but only possessed by those who own certain assets (power plants, factories), and through legislative fiat gives that "thing" a monetary value. The "thing" of course is the ability to stop doing something they are already doing - burn fuel. Incidentally, this is a very "stasist" policy, since it rewards existing businesses but imposes costs on future ones.

I've no objection to making rich people richer but that's hardly the point here, other than the fun of the shock it sometimes elicits from people who equate green issues with a chance to stick it to fat cats...

I think this question may hinge, to some extent, on what you need to do to qualify for a tradeable carbon credit.

Revenue-neutral carbon taxes don't discriminate in this fashion. They reward any and all individuals and firms for using less energy, and each one benefits in direct proportion to how much less energy he uses. If a new firm comes along that creates some alternative way to create a product by using less energy, it is rewarded just as much as an existing firm that devises a way to reduce its current energy use.

I absolutely agree: if I had none of the other extremely persuasive reasons to support a carbon tax as the first step, that would be enough.

I don't want to frame this as a "tax vs credit" argument because, if those are the choices, I'll take the tax without hesitation. I think there's more meat in a "taxes but also credits?" debate.

Under cabon trading the existing firm would be rewarded, but the new one would actually have to pay. This example only scratches the surface of the endless number of extraordinarily perverse consequences of such a scheme.

Careful design of how you qualify for a tradeable credit seems, to me at least, to be the mechanism by which one can restrict the number of predictably perverse outcomes. Having said that, naturally I'm now going to give nothing but top-of-mind suggestions.

I think you should be able to qualify for a credit if:

You're trapping carbon somewhere it's going to be held for a long time.
You're doing environmental remediation as a business (I'm not entirely sure how to create a "one kilo of mercury removed = X carbon credits" equation, but still...)
Your business makes something that uses 50% less energy than the average good it can replace (credits for sales, not patents, natch.)
Your energy generation business creates less than 50% as much carbon (including construction carbon costs) as the average generator. (There's nothing like a self-extinguishing credit to make a legislator smile...)

I wonder if setting it up along those lines makes the credits idea any more appealing to you, assuming we also have the usage tax? It seems to me that a bit of carrot will stimulate innovation and growth in some areas that the stick alone might be slower to do and I'm in favour of both speed and innovation. Also, credits might help to make (at least some) different people rich which, I'd argue, is a healthy thing.

Regards.
H