Categories:
Energy, Environment, Resources
He would champion the Drill-Baby Carbon Tax.
On one side, there would be a national commitment to move ahead with all deliberate speed in developing the vast U.S. fossil fuel energy resources that are now technologically available. On the other side, the United States would enact a appropriate carbon tax to offset concerns over the risks of climate change.
Unfortunately, environmentalism and opposition to taxes are religious issues, not amenable to compromise.
READER COMMENTS
mick
Oct 26 2011 at 10:20am
What religious folly it is to think that raising the price of capital would decrease production.
Sonic Charmer
Oct 26 2011 at 12:32pm
Why isn’t it the notion that our policymaker betters are capable of calculating the externality due to ‘carbon’ that is the religious issue?
I am suspicious of anyone who claims to know even the sign of this externality.
Chris
Oct 26 2011 at 1:47pm
Currently policy absolutely depends on policymakers assuming they have calculated the externality. They have it calculated at zero. That is every bit as much of a choice as saying the externality is $1, or $100. I don’t understand why saying there is uncertainty on what the actual externality is therefore implies we should assume it to be zero.
Foobarista
Oct 26 2011 at 1:57pm
Solyndra lobbyists would have an easy time computing the tax: it needs to be high enough for solar/wind/whatever to work as a baseload power source. Does it matter that making energy cost this much would destroy the economy?
It’s all about Saving the Planet ™. And making sure the Right People (ie, alt-energy VC’s, not evil oil company execs) get rich.
Thucydides
Oct 26 2011 at 2:15pm
Opposition to taxes is not necessarily a religious issue. With the government consuming an ever larger share of national income, it is rational, not “religious,” to think that the line should be drawn somewhere. Exactly where to draw the line is inherently an arbitrary decision, but this should not lead to the conclusion that setting any limit is religious rather than rational.
Thucydides
Oct 26 2011 at 2:16pm
Opposition to taxes is not necessarily a religious issue. With the government consuming an ever larger share of national income, it is rational, not “religious,” to think that the line should be drawn somewhere. Exactly where to draw the line is inherently an arbitrary decision, but this should not lead to the conclusion that setting any limit is religious rather than rational.
Sonic Charmer
Oct 26 2011 at 2:41pm
I don’t understand why saying there is uncertainty on what the actual externality is therefore implies we should assume it to be zero.
Fair enough, but on policy matters, if only for practical reasons, ‘do nothing’ is the default and ‘do something’ requires an argument. The onus is on the ‘do something’ contingent.
We don’t have a specific tax on eating a banana while riding a unicycle; this is not an assertion that the externality of doing so is 0 (even though in practice it embodies that assertion); instead it’s a reflection of the fact that, for example, there’s no good argument for such a tax.
Similarly, a valid argument for Pigouvian taxes on ‘carbon’ would require an implicit assertion that you, at the very least, know the sign of externality. As stated, I do not think that you do, even if you think that you do.
Whether I’m right about that, I think Arnold is incorrect to label that view of mine ‘religious’. It is a form of skepticism. The view that you do know the sign of the externality strikes me as far more akin to religion.
Chris
Oct 26 2011 at 3:01pm
That’s simply not true. Suppose you believed with probabilty 0.9999 that the externality was $100, and with probability 0.0001 that it was -$0.01. True, the sign is “unknown”. But how could one then reasonable conclude “Well, zero looks good to me”?
Moreover, zero is not some automatic default, because your activity of burning carbon can potentially infringe on my property rights. True, it’s grossly inefficient in this case to use the traditional nuisance common law, but you have no more “right” to damage my property through carbon than I have to dump raw sewage in a river.
Eric
Oct 26 2011 at 3:12pm
Two quick points.
1) Present policy does *not* assume the externality is zero. We currently have gasoline taxes (by state), oil subsidies, domestic drilling restrictions, CAFE standards, subsidies for alternative energy research, tax credits for hybrid car purchases, etc. Some of which act in different directions. I strongly suspect that present policy assumes a noticeable negative externality (i.e. acts to prevent use of carbon based fuels).
2) I agree with other commenters that I wouldn’t trust the government to get the magnitude (or sign) of most externalities correct. Even if they did in this case (which I think they probably didn’t. I think there is about a 40% chance that a slightly warmer world is a worse one and 60% chance that it is a better one). At any rate, giving the government this power allows it to dole out favors and increase its power by crying “externality” which, in its own self-interest, it will do even when no externality exists.
Eric
Oct 26 2011 at 3:25pm
In point 1) I forgot a couple of policies that act to increase fossil fuel usage: subsidized road construction and highways between suburbs and city centers that either lack tolls or have tolls below market rates.
David Friedman
Oct 26 2011 at 3:31pm
“I don’t understand why saying there is uncertainty on what the actual externality is therefore implies we should assume it to be zero.”
There are costs to either taxing or subsidizing things, both administrative costs and costs created by the rent seeking that either policy will set off. Hence, if you don’t know whether externalities are positive or negative, there is much to be said for acting as if they were zero.
If the rent seeking point is not obvious, take a look at how many economically unjustifiable provisions, even from the point of those who support carbon taxes, were included with the cap and trade bill that got through one house of Congress some time back.
John Thacker
Oct 26 2011 at 3:45pm
Drill Baby Drill plus a Carbon Tax?
Didn’t McCain lose in 2008?
Becky Hargrove
Oct 26 2011 at 3:54pm
I don’t want to wade in too deep. However, I do want to say, good for Timothy Taylor for looking for solutions. He is a quite enjoyable teacher who if I am correct is still offering Economics courses via The Teaching Company.
Plus, Nature Magazine says that the pipeline protests “say more about the sorry state of the environmental agenda than anything else.” Where is the environmentalist who is out there promoting clean, walkable cities? I’d definitely be in your corner, as walkable cities are our best way to an eventual clean world.
Noah Yetter
Oct 26 2011 at 4:22pm
“I don’t understand why saying there is uncertainty on what the actual externality is therefore implies we should assume it to be zero.”
Because when it comes to the use of violence, inaction must always be the default course, especially in the face of uncertainty.
Sonic Charmer
Oct 26 2011 at 5:52pm
That’s simply not true. Suppose you believed with probabilty 0.9999 that the externality was $100, and with probability 0.0001 that it was -$0.01.
Feel free to mentally replace all instances of ‘believe’ with ‘believe with high probability’ in my posts, if that helps you.
Moreover, zero is not some automatic default, because your activity of burning carbon can potentially infringe on my property rights.
Even if so this is not the sort of thing that would be dealt with by a ‘carbon’ tax. It is certainly not the usual argument proferred for it. If the problem is burning ‘carbon’ (i.e. pollution), let’s address pollution. Of course, we already have, to a very large extent. In this context a ‘carbon’ tax is essentially a solution in search of a problem…
Ed Hanson
Oct 26 2011 at 5:54pm
The problem is not a religious one but a fantasy one. There is no reason that a compromise should be made to sooth the fantasy of human caused global warming and the pathetic economic consequences projected by that fantasy with a real problem with a real mitigation of getting the government out of the way to develop our fossil fuels.
No carbon tax, and yes to all the parts of drill baby.
Jeremy Connor
Oct 27 2011 at 10:35am
99% of all scientists today believe in human related global warming. I don’t see how there could be any arguing that.
Floccina
Oct 27 2011 at 12:14pm
I love it but would add a payout for those who take CO2 out of the air. It might be really cheap to do remove the co2 from the air. I have seen 2 schemes for doing that, one is biochar production the other evolved blowing air over crushed limestone.
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