Global Warming/Climate Change Super Thread

[larry Strong]

I think your point is valid and that why I said income tax or other tax should be lowered as the carbon tax goes up. So no money disappears, the amount available for investment stays the same. But the incentive for that investment is higher.

So if you cut taxes  to kept the tax base down, which programs are you going to cut?

 

[Zarathustra]

So if you cut taxes  to kept the tax base down, which programs are you going to cut?

I wouldn't cut programs. If I collect 1$ of pollution tax I would reduce let's say income tax by 1$. Government spending would stay the same. But people would have an incentive to pollute less. (Instead of the current incentive to work less.)

If you think that in real life someone would claim the 1$ for a new program and we would never see the income tax reduction, you could very well be right. I'm not into politics or promoting Ignatieff here, I'm just discussing the theoretical benefits of a pollution tax. In theory it's a great tool I think. What use politicians would make of it, that I have doubts about too.

 

[a_majoor]

There are no theoretical benefits to a pollution or carbon tax, since it places a very large distortion in the supply/demand equation. The money which is being extracted from the consumer may change the demand curve, but since there is no corresponding benefit to the supplier, the research and development work that you believe will happen will not get done.

Having bureaucrats fund R&D through tax dollars will result in non starters like ethanol being pushed on the public, despite being a net energy sink, since the ethanol lobby is organized enough able to extract tax dollars from government. (The reason there are no ethanol plants prior to this is market forces would punish anyone foolish enough to spend private money on non competitive solutions).

This plan is a fantastic way to ensure energy shortages in the future, and I suppose if your goal is only to reduce pollution, then idle cars, factories and electrical generators will indeed fulfill your desire. I am unclear how mass unemployment and potential food shortages fit into this plan, however. Reducing income taxes by itself will put money in the productive economy, so the only effective plan is much simpler: cut government spending and income taxes.

 

[GAP]

The very last thing we need to do for Ottawa, is encourage them with new "Tax" ideas. "Tax" = to take and NOT give back.

 

[warspite]

It is time we went to the end all be all solution... nuclear reactors in cars

 

[Zarathustra]

There are no theoretical benefits to a pollution or carbon tax, since it places a very large distortion in the supply/demand equation. The money which is being extracted from the consumer may change the demand curve, but since there is no corresponding benefit to the supplier, the research and development work that you believe will happen will not get done.

I don't understand. The purpose of the tax is to create that distortion. As we say in computer science, it's not a bug, it's a feature.

The demand changes and the supplier has to adapt. Let's say gas price goes up to 3$. Everyone would switch to hybrid right away. The suppliers of car who produce the best hybrid cars would make a lot of money, those who don't adapt would die. The emissions of CO2 would go down a lot. There would be large incentive for everyone to use less gas or provide technology using less gas.

I agree with you the bureaucrats managing that money is a back idea. I want the market to find the solution, but for that I need to create a distortion of the supply/demand equation since the current equation doesn't care about pollution. Polluting is free.

 

[GAP]

Take a look at this link posted in another thread

I came across this interesting link, apologies if it has already been posted. 

http://www.youtube.com/v/ry6w3mRm-FM

I especially liked the part where the guy says that the power from the car could run your home.

 

[a_majoor]

The demand changes and the supplier has to adapt. Let's say gas price goes up to 3$. Everyone would switch to hybrid right away. The suppliers of car who produce the best hybrid cars would make a lot of money, those who don't adapt would die. The emissions of CO2 would go down a lot. There would be large incentive for everyone to use less gas or provide technology using less gas.

You are missing the supplier half of the equation, since the government gets the money, the supplier has no incentive to change the way things are done, and indeed has lots of negative incentives to pack it in and stop producing.

How will everyone switch to a hybrid "right away" when they only exist in limited numbers and are very costly to produce? The manufacturers will not have any real incentive to build them, consumers will have less money available to buy them and investors will be a bit cash strapped to support any company which is willing to step up to the plate. The real rational adaption to a tax induced price spike would be to reduce the use of hydrocarbon fuels, but since fuel use underpins the industrial economy, high intensity agriculture, the production of medicine, chemicals, synthetic materials etc. there are consequences i.e. many medicines will become unaffordable, fewer crops can be grown and harvested or transported to market, public and private transit will become prohibitively expensive. Suppliers will be reluctant to step up since their customer base has been drastically narrowed, investment funds will be highly limited and they will fear arbitrary government fiat should they be successful in meeting the needs of the consumers.

In the end, your arguments sound a lot like the ones being advanced in the United States against Wal-Mart. Despite abundant empirical evidence that Wal-Mart is a net benefit to producers, consumers and employees, there exists a strong sentiment among the limosine liberal crowd that somehow Wal-Mart is bad for the consumers, producers and employees, and that the government should impose some sort of controls on the company. The extra costs that will lead to higher prices to customers, the layoff of employees and potential economic hardships of companies in Wal Mart's supply chain are blithely discounted, despite the very real hardships that would result.

The study of economics is very edifying, and I would suggest you look up the works of  Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, Ludwig von Mises, Friedrich Hayek, Murray Rothbard, Israel Kirzner, George Reisman, and Hans-Hermann Hoppe, who can explain these concepts in far greater breadth and depth than I can.

 

[begbie]

The study of economics is very edifying, and I would suggest you look up the works of  Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, Ludwig von Mises, Friedrich Hayek, Murray Rothbard, Israel Kirzner, George Reisman, and Hans-Hermann Hoppe, who can explain these concepts in far greater breadth and depth than I can.

Of course, most of these works, if not all of them, fall in what economists call the 'Austrian' school of economics.  However, there are many other schools of economic thought out there that differ; sometimes dramatically.  The Austrian school falls very much in line with most Libertarian thinking (as I know it).  Hands-off government thinking and let the market handle everything.  But there are atleast 6 other schools of thought.  All of which is complicated and not for the faint of heart. There's a reason why its considered a social science and not a pure science like physics... there is just no consensus to be had among economists.  There's an old joke about a priest, an engineer, and an economist being stranded on an island.  To make a long joke, short, it's the economist who is the punch line.

This thread has been going back and forth over the merits of using fiscal policy to address a problem that is environment, industrial, and energy related.  No credible person would suggest that we all give up our current way of life.  Such an adjustment would not be bloodless and it's senseless to suggest that it would be (I once heard Jeffry Sachs say this).  So how do we address this problem without jeopardizing the status quo (economically speaking)?  My belief, and it's been touched upon in this tread, is that it's technology related.  Modifying our means of production through technological innovation is the way to go.

So I say forget trying to change consumer behaviour, it's not going to work.  During the nasty heat wave we suffered in Ontario through July, I had my air conditioner on.  Only a few weeks ago I got my hydro bill for the summer to date and it was a mere 20 bucks more than usual.  That's not enough to get me to change my behaviour and I'd bet that most people would feel the same way.  20 bucks is 20 bucks but for me personally, it was money well spent so that I could sleep comfortably at night.  Unless you want to jack up the price of energy to levels where it would change consumer behaviour, nothing would change.  Besides, that's politically unfeasible.  No politician would jack up the price of energy like that.  It's not an option. 

 

[Zarathustra]

Modifying our means of production through technological innovation is the way to go.

I agree. But I think an artificial incentive for this is needed. There's no incentive to reduce pollution now because polluting is free. We could make it illegal, but I prefer a tax because it's more flexible.

Your point that a tax would need to be so high that it would be political suicide is valid. I think we will fail to reduce CO2 emissions. We like comfort, we dislike change, we all blame someone else for global warming, and it only works if a large portion of the population does it. I agree that a politician would have a hard time getting elected with a serious plan to cut down emissions.

But if we wanted to succeed, I think a tax would be a great tool.

 

[Zarathustra]

How will everyone switch to a hybrid "right away" when they only exist in limited numbers and are very costly to produce? The manufacturers will not have any real incentive to build them, consumers will have less money available to buy them

The price of hybrid would go up, profit on hybrid motors would be higher than regular motors, and here's your manufacturer incentive. Consummer would have the same money if taxes were lowered elsewhere.

The real rational adaption to a tax induced price spike would be to reduce the use of hydrocarbon fuels, but since fuel use underpins the industrial economy (...) there are consequences

This reduction is exactly what I'm trying to achieve. I agree that there would be consequences. What I propose is less efficient than free market. Since I distorted the supply/demand equation the ressource allocation is less efficient and wealth is reduced. Just like in your example about Walmart.

Where we differ I think is that I'm willing to accept those consequences while you and exsemjingo are not. I'm willing to accept them because of the unknown threats of global warming and because we will run out of oil anyway. Also, I foresee less negative consequence than you. Maybe I'm wrong. But life now is so easy, I'm totally willing to give green technologies a try. Let's rock the boat and see what happens. Honestly, I just see this as a big challenge for our brightest minds. Problem solving at its best. For those working on the transition, it will be great fun !
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[Brad Sallows]

Strictly speaking, we're never going to run out of oil.  It'll just become too expensive to burn.  I don't imagine for a second that 400 million people in the US and Canada alone are just going to collectively throw up their hands and wail because they can't afford to drive a hydrocarbon-fueled car anymore.  People will try alternatives as thresholds of tolerance for expense are reached, and the successes will be emulated.

 

[a_majoor]

Strictly speaking, we're never going to run out of oil.  It'll just become too expensive to burn.  I don't imagine for a second that 400 million people in the US and Canada alone are just going to collectively throw up their hands and wail because they can't afford to drive a hydrocarbon-fueled car anymore.  People will try alternatives as thresholds of tolerance for expense are reached, and the successes will be emulated.

Brad is just stating in simple terms what I am trying to get at empirically: people will change their behavior and the market will adjust.

Radical changes and enforced adoption of "green" technologies will lead to huge inefficiencies and the destruction of taxpayer wealth. The last time this sort of thing was tried in a big way was the adoption of nuclear energy; we now have massive plants which cost billions to refurbish, and left Ontario with @ 30 billion dollars in "stranded" debt, but there is no alternative since not only is the sunk cost so vast but something like 40% of Ontario's energy budget comes from nuclear generators. No rational market would have ever allowed such a state of affairs to exist, government regulation and subsidy did.

The price of hybrid would go up, profit on hybrid motors would be higher than regular motors, and here's your manufacturer incentive. Consummer would have the same money if taxes were lowered elsewhere.
{/quote]

Hybrids are a clever marketing ploy. The US government provided $800 million dollars the the "Big Three" to create hybrid cars, the most practical offering by Chrysler was a five passenger sedan which cost @$70,000 and was the equivalent to a $20,000 Intrepid. Toyota and Honda aggressively promote their hybrids, but actually make very few, since it is estimated each car is sold at a $20,000 loss to the company (a Prius costs @ $36,000 new here, so it tracks the US experience fairly closely). There are niche markets where a hybrid makes sense (military and security vehicles come to mind, since they require lots of on board electricity and may need to move silently for short distances), but those customers are willing to pay for the special features.

Of course, most of these works, if not all of them, fall in what economists call the 'Austrian' school of economics.  However, there are many other schools of economic thought out there that differ; sometimes dramatically.  The Austrian school falls very much in line with most Libertarian thinking (as I know it).  Hands-off government thinking and let the market handle everything.  But there are at least 6 other schools of thought. 

Since Marxists and Keynesian's have been discredited in the "real world", we are left with variations of classical economics (Adam Smith; The Wealth of Nations). I find the Austrian school tracks fairly well with the real world, not to mention the use of ordinal metrics which makes it easier to understand for the math challenged like me  .

Getting back to the original question of the thread, Ignatieff is simply playing on people's general ignorance of economics, and particularly the Canadian public tendency to embrace "stateist" solutions and discount direct and indirect losses attributable to government interventions (particularly since past governments have become experts in playing shell games to pass costs and losses to others, and can always pull out the anti American card to distract the public when required).

 

[Zarathustra]

Brad is just stating in simple terms what I am trying to get at empirically: people will change their behavior and the market will adjust.

Yes, they will change their behavior because the price will go up, not because their behavior pollutes. That's why I propose to artificial set a price on pollution, to create market incentives for the people to change their behavior.

Radical changes and enforced adoption of "green" technologies will lead to huge inefficiencies and the destruction of taxpayer wealth. The last time this sort of thing was tried in a big way was the adoption of nuclear energy;

That's why I want a market solution, not a government solution. And don't want Ignatieff or others to decide what technologies we should use and what we shouldn't use anymore. I want the people to decide, based on their priorities, and I want companies competing with different technologies so that the best solutions can emerge. That why I propose a tax, it's flexible.

Anyway, I think we have discussed this enough. There's no need for us to agree on these since we have no power over it. But it was a nice talk, I love arguing over economics. And let's hope there will not really be wars over this.

 

[larry Strong]

Well there might be wars over it, however I seriously believe the wars of the future will be fought over fresh water!!


http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20060830/tofino_water_060830/20060830?hub=TopStories

 

[a_majoor]

Larry, don't forget that water is heavy and inert; you need lots of hydrocarbon energy to either distill it in place or transport naturally occuring fresh water to places where it is scarce! (That includes building pipelines or cannals, or shipping it around in supertankers....)

Yes indeed, it is still all about the oil.........

 

[larry Strong]

Larry, don't forget that water is heavy and inert; you need lots of hydrocarbon energy to either distill it in place or transport naturally occurring fresh water to places where it is scarce! (That includes building pipelines or canals, or shipping it around in supertankers....)

Yes indeed, it is still all about the oil.........

And the Oildrilling industry better stay busy until I retire

 

[exsemjingo]

Anyway, I think we have discussed this enough. There's no need for us to agree on these since we have no power over it. But it was a nice talk, I love arguing over economics. And let's hope there will not really be wars over this.

I agree.  Let's get back to slamming Ignatieff and the Liberal party he wishes to lead.  Does anyone have any new material about him for discussion?  Macleans had an article on his leadership; that should be good for some tangents. 
I won't go into detail just now, since I want to re-read it first, but my first impression is that he either loves his lofty platitudes too much, or has serious megalomaniac tendencies.

 

[Zarathustra]

I agree.  Let's get back to slamming Ignatieff and the Liberal party he wishes to lead. 

*lol* Why do you dislike him so much ? In Quebec he's not very well known. Well, he's totally unknown actually... *lol*

I worry more about Bob Rae. I'm afraid he will spend spend spend.

 

[Osotogari]

From a policy standpoint, the Liberal party of Canada's view (and for that matter CBC and MacLean's view as well) of the country is the sum total of surface area than can be seen by the observation deck of the CN Tower in Toronto.  Toronto likes the Kyoto accord, even though it would do nothing to reduce the number of smog days in that city, so that's why we were stuck with it.  The sooner it's gone the better.  I don't know what would be a good replacement but there's no point in syphoning off billions that could be used eleswhere. 

Depsite it's lofty goals, the Kyoto accord is nothing other than a wealth transfer scheme.  The fact that Russia, China, and India, are excluded and qualify as "developing" is ludicrous.  It is nothing more than an attempt by inefficient and/or corrupt states to extort or guilt money out of us. 

As an Albertan old enough to remember the ravages of the uber-Marxist Trudeau's NEP, Ignatieff's policies would be disastrous for the Canadian economy and unity as well.  It shows Ignatieff's complete lack of understanding of how the econcomy of the country operates, and verifies why the Libs are beneath the contempt of anyone who pays taxes, much less anyone who's ever worn the uniform.

A pox on all their houses and those of anyone stupid to vote for them in future.