Monday, August 20, 2012

Carbon-Tax Would Hobble Our Economy

In this week's McClatchy Newspaper's nationally distributed Pro-Con feature, I argue against a carbon tax, here's an excerpt:

Thanks to advanced drilling technologies and an abundance of gas from shale deposits, natural gas has accounted for more than 80 percent of new electrical generating capacity in the United States.

The share of U.S. electricity that comes from coal is forecast to fall below 40 percent this year, its lowest level since World War II, and down from 50 percent four years ago.

By the end of this decade it is likely to be near 30 percent. Now, we need to export U.S. technology for seismic imaging, hydraulic fracturing and horizontal drilling to other countries with large shale-gas deposits. Spreading advanced energy technologies globally would lower the cost of controlling emissions substantially.

By using advances in technology, we can expand the use of natural gas, nuclear power and renewable energies and achieve a substantial reduction in carbon emissions, without resorting to a carbon tax that would hobble our economy.

44 Comments:

At 8/20/2012 10:27 AM, Blogger Scott Drum said...

A carbon tax is just another way to divert resources from the most productive uses to less productive uses. Isn't that the purpose of government these days?

 
At 8/20/2012 11:22 AM, Blogger Buddy R Pacifico said...

From Professor Perry's Carbon-tax article

"Now, we need to export U.S. technology for seismic imaging, hydraulic fracturing and horizontal drilling to other countries with large shale-gas deposits. Spreading advanced energy technologies globally would lower the cost of controlling emissions substantially."

Yes, "spreading advanced technolgies globally", through exports, will have the biggest impact on "controlling emissions".

 
At 8/20/2012 1:00 PM, Blogger NormanB said...

Exxon's CEO is on record that he much prefers a direct carbon tax to the carbon trading system (i've forgotten the proper term).

 
At 8/20/2012 1:06 PM, Blogger Jon Murphy said...

carbon trading system (i've forgotten the proper term).

Cap & Trade

 
At 8/20/2012 1:26 PM, Blogger arbitrage789 said...

This comment has been removed by the author.

 
At 8/20/2012 1:28 PM, Blogger arbitrage789 said...

There many who argue that global warming is real and man-made; a portion of those genuinely believe what they're saying. But a much larger number of people simply see this global warming fearmongering as a way to justify a vast new tax, a tax which would then generate revenues for ever more government spending.

When someone says that we should all be worried about global warming, I immediately begin to wonder what their true agenda really is.

 
At 8/20/2012 1:31 PM, Blogger arbitrage789 said...

I would not be opposed to a carbon tax if it were directly imposed (without a lot of bureaucracy) and above all, were absolutely revenue-neutral, i.e., would be adequately offset with a reduction in marginal tax rates for individuals and/or corporations.

 
At 8/20/2012 1:49 PM, Blogger juandos said...

Hmmm, well let's face one basic fact with present day technology, carbon dioxide is also a measurment of productive activity on the part of humans...

So if the goal is to dampen down human productivity then a carbon tax is obviously one way to go...

"Tax something more and get less of it"...

 
At 8/20/2012 4:02 PM, Blogger bix1951 said...

I agree with arbitrage789

 
At 8/20/2012 4:54 PM, Blogger VangelV said...

While I agree with the argument against a carbon tax, you missed something when you wrote, "Thanks to advanced drilling technologies and an abundance of gas from shale deposits, natural gas has accounted for more than 80 percent of new electrical generating capacity in the United States." The reason why so much new generation comes from gas is the EPA's campaign against coal plants. If the government got out of the way more plants would produce baseload power from coal and would depend on natural gas for peak demand purposes.

 
At 8/20/2012 5:56 PM, Blogger misterjosh said...

Our economy is already hobbled by the debt our overlords have undertaken. The only question is what form that hobbling will take. A straightforward (like that's even possible from Washington) carbon tax would be preferable to cap 'n' trade, but a flat tax would be better still.

 
At 8/20/2012 6:17 PM, Blogger Hydra said...

A carbon tax diverts resources from the most wasteful users of energy to the most productive users.

 
At 8/20/2012 6:21 PM, Blogger Hydra said...

Carbon dioxide is a measure of human activity. But it does not distinguish between wasteful activity and productive activity. Putting a price on co2 will sharpen that distinction.

 
At 8/20/2012 6:41 PM, Blogger Craig Howard said...

Why should we reduce carbon emissions? I'm all for expanding natural gas production, but the jury (believe it or not) is still out on the effects of carbon emissions.

 
At 8/20/2012 7:09 PM, Blogger arbitrage789 said...

Hydra,

Two separate issues: (a) total tax burden, and (b) structure of the tax burden.

I'm against an increase in the overall burden, but open-minded about the structure

 
At 8/20/2012 7:54 PM, Blogger hancke said...

VangeIV, Your are correct that the EPA campaign against coal was a factor. However their scheme did not include a plan to boost NG production or the construction of NG or nuclear plants. The EPA and Obama's magic calculator expected wind and solar to fill that gap. The energy industry had other plans.

 
At 8/20/2012 8:24 PM, Blogger Ron H. said...

"A carbon tax diverts resources from the most wasteful users of energy to the most productive users."

Nonsense. A carbon tax makes energy use more expensive and falls most heavily on those who require the most energy. There's no reason to believe that a firm using a large amount of energy is any more wasteful than a firm using a small amount, in fact it's possible he opposite is true.

 
At 8/20/2012 9:07 PM, Blogger Hydra said...

Arbitrage: yep. A carbon tax or any tax on waste does not need to mean a tax increase.

You tax something and you het less of it. Who is against taxing waste? Up to a point.

Total Cost = Production Cost + External Cost + Government Cost.

If the tax on waste is TOO high it just translates to higher production cost. Too low and it translates to higher external cost and higher government cost.

 
At 8/20/2012 9:15 PM, Blogger VangelV said...

Carbon dioxide is a measure of human activity. But it does not distinguish between wasteful activity and productive activity. Putting a price on co2 will sharpen that distinction.

No, it won't. It will hurt the very poor and will make the unproductive parasites that have destroyed the economy richer.

 
At 8/20/2012 9:17 PM, Blogger VangelV said...

Why should we reduce carbon emissions? I'm all for expanding natural gas production, but the jury (believe it or not) is still out on the effects of carbon emissions.

It isn't out. Carbon dioxide is a needed nutrients for plants, which developed and evolved during periods in which concentrations were much higher. CO2 levels lag changes in temperature trends by several hundred years, which make CO2 the effect and temperature change the cause, not the other way around.

 
At 8/20/2012 9:19 PM, Blogger VangelV said...

VangeIV, Your are correct that the EPA campaign against coal was a factor. However their scheme did not include a plan to boost NG production or the construction of NG or nuclear plants. The EPA and Obama's magic calculator expected wind and solar to fill that gap. The energy industry had other plans.

What the idiots in the government planned is not important. But their actions are. If they did not stop the construction of new coal facilities most of the baseline load would be covered by coal, not natural gas.

 
At 8/20/2012 9:27 PM, Blogger Hydra said...

Ron: it is true that higher energy use does not mean more wasteful energy use, but that does not make my statement less true.

Even if you have the most effic went plant possible, emissions still represent an internalized cost. The proper level of tax reflects those costs back on the producer.

It is a mistake to set such a tax too high, so the question of why tax carbon is a legitimate one. It is a question for which there is also a legitimate answer, something which will be denied by the emission tax naysayers.

This has become a purely political and ideological issue, and the obvious economic reality has Bern lost. Blame can go equally to both sides: those demanding a pollution free world are as unrealistic as those who believe they are free to pollute at will.

 
At 8/20/2012 9:38 PM, Blogger J Scheppers said...

I agree with Dr. Perry that a carbon tax could hobble our economy. The temporary good news is that in British Columbia, Cananda, their tax is not revenue nuetral it is acutally planned to be refund 120% of revenue this year.

The problem is that since the refund is made to income taxes; and whereas income is highly correlated to carbon emissions their so called tax will have virtually no effect. The question is will the provincial government give up on the taxes when carbon emissions trend with all other non-carbon taxing governments or will the government divert the revenues to sinecures.

Lest they find out the only way that carbon taxes reduce carbon emissions is if they misdirect the revenue to inefficient entrerprise that is not re-invested in real wealth.

I much prefer my ancestors thinking about means of producing wealth rather than worrying about potential negative externalities they may cause my generation. I expect future generation will feel the same as I. It is not denying (nor embracing) climate change but assessing the merits and capability to address the issues that matter.

 
At 8/20/2012 9:39 PM, Blogger Hydra said...

Yes Vange: co2 is a necessary input for plants. But that is a temporary condition: plants die and their decay releases co2. For plant to take up the amount of ( originally plant based carbon) we are releasing we would need to produce ( and bury) hundreds of thousands of times as much biomass as we presently grow.

You are an intelligent person. I can't believe you are spouting such agenda blazed drivel in the face of pretty obvious facts: we are digging up and burning fossilizd d plants faster than we are growing plants and burying them. As long as we do that, something is going to change.

 
At 8/20/2012 9:45 PM, Blogger Hydra said...

Schoppers: as far as I am concerned it has nothing to do with climate change. It is a matter of paying for what you get. Externalizing hour cost means you are essentially stealing some of your profit from whoever bears that cost, whether this generation or the next.

You do believe in paying for what you get, right?

 
At 8/20/2012 9:56 PM, Blogger VangelV said...

Yes Vange: co2 is a necessary input for plants. But that is a temporary condition: plants die and their decay releases co2. For plant to take up the amount of ( originally plant based carbon) we are releasing we would need to produce ( and bury) hundreds of thousands of times as much biomass as we presently grow.

You are confused again. Try thinking before you write.

You are an intelligent person. I can't believe you are spouting such agenda blazed drivel in the face of pretty obvious facts: we are digging up and burning fossilizd d plants faster than we are growing plants and burying them. As long as we do that, something is going to change.

Agenda? I simply state the facts. CO2 is plant food. The Earth has very low levels compared to most of its history. Plants evolved during times when CO2 levels were higher and greenhouse operators burn fossil fuels to create a high CO2 environment so that the plants can grow faster.

As for the rate of usage, it is not important because we will have to adjust to the changing supply one way or another. As I have pointed out many times, the OPEC countries have to have massive amounts of stranded natural gas that can be used to help us through the transition. There is also a great deal of coal and uranium/thorium for electricity production and plenty of room for a lifestyle adjustment to reflect any new reality. What we do not need is agendas that give idiot bureaucrats even more control over our lives than they do already.

 
At 8/20/2012 9:59 PM, Blogger Hydra said...

Total income is highly correlated, but not perfectly correlated with energy use. But individual income is a different matter. Mark Perry has correctly pointed out the relationship between per capita energy use, productivity of per capita GDP, and grooms energy use per total GDP.

Some countries use less energy per capita but they are less eefficient and use more energy ped unit of GDP. It does not follow then that taxing emissions is a direct trade off off income, unless you do not believe the maxim that when you tax something you get less of it.

 
At 8/20/2012 10:11 PM, Blogger Hydra said...

Yes co2 is a plant food. It is a fact. I agree. Utilize it is trivial. We are not producing. Excess new plants s at anywhere near the rate we are burning fossil plants. You are smart enough to see that, but you choose to focus on the trivial. Apparently in agreement with a generally conservative line of thinking which goes to promote a political position rather than a factual one.

Look, if we had an agrarian revolution that was equal in scope to the industrial one so that the waste from one was equal to the uptake of the other, then I would agree with you. That isn't the case. We are burning thousands of years of plant growth for every year's worth of growth we produce. Tb e result will be some kind of change.

 
At 8/20/2012 10:13 PM, Blogger Hydra said...

How is demanding that people and companies pay for what they get equivalent to some mindless bureaucrat taking control of our lives?

 
At 8/20/2012 10:17 PM, Blogger Hydra said...

You do believe in a free and a fair market, right? Or do you think it is ok for some power plant to eat the paint off your car as long as the electricity is cheap?

 
At 8/20/2012 10:26 PM, Blogger Hydra said...

How does the fact that there is natural gas Change the fact that we are mining carbon and burning faster than we are capturing it and burying it? Natural gas has less carbon than coal or oil and also less energy content. The overall mass flow is pretty obvious. Eventually there will be some kind of result.

Maybe that result is so far in the future that it is sufficiently discounted as to not matter. The arbitrageurs will let us know.

 
At 8/20/2012 10:29 PM, Blogger Hydra said...

How am I confused? Do you deny that we are burning more plant equivalents than we are growing?

 
At 8/20/2012 11:06 PM, Blogger Hydra said...

I produce around 1000 tons of plant matter every year, of which I sell 300 tons and use a ton or so for myself. Of the 700 tons a tiny fraction is carbon that gets returned to the earth on a geological basis.

I use around 12 tons of petroleum every year. And I am one of a few percent that like on a farm. I imagine the carbon deficit for other people is higher than mine even if they use less fuel.

Multiply by two billion people. Do you seriously believe there will be no consequencs?

 
At 8/20/2012 11:22 PM, Blogger Hydra said...

Really, you cannot be seriously suggesting that our CO2 uptake ( and subsequent sequestration) is anything like our CO2 production from previously sequestered resources. You are too smart to believe that, particularly in the face of evidence that global CO 2 concentrations are increasing.

If you want to argue about how many years decadesor centuries before it is a problem, fine. But you cannot very well deny the direction or the rate at which we are traveling.

 
At 8/21/2012 12:20 AM, Blogger Hydra said...

I don't care what they burn ( or don't burn, in the case of dome renewables) . I found care if I have to spend $50 an acre for lime to counteract acid rain.

But at the same time, I would hate to spend the equivalent of $100 an acre in higher electric bills to prevent said posts.

Total costs equals production cost plus external cost plus government cost. Blah blah blah.

Whatever they are doing, they should be allowed to do as long as they pay the full real and identifiable. Price for it. That does not mean that any nut case, however removed from a problem should be allowed to make outrageous and unjustifiable claims.

 
At 8/21/2012 2:02 AM, Blogger Ron H. said...

"Even if you have the most effic went plant possible, emissions still represent an internalized cost. The proper level of tax reflects those costs back on the producer."

You are missing the point. First of all there is no legitimate reason to tax CO2 emissions. But if CO2 emissions are taxed, industries that use a lot of energy will suffer the most. A cement plant, electric plant, or computer chip maker will pay a much higher penalty than an attorney's office or a hospital. Efficiency has little to do with it so your initial statement about penalizing wasters is wrong.

 
At 8/21/2012 2:27 AM, Blogger Ron H. said...

"I don't care what they burn ( or don't burn, in the case of dome renewables) . I found care if I have to spend $50 an acre for lime to counteract acid rain."

As nearly as can be determined from this garbled comment you are complaining about acid rain. I would love to hear how you think a tax on CO2 will help reduce emissions of sulphur dioxide.

 
At 8/21/2012 3:38 AM, Blogger Ron H. said...

"Really, you cannot be seriously suggesting that our CO2 uptake ( and subsequent sequestration) is anything like our CO2 production from previously sequestered resources. You are too smart to believe that, particularly in the face of evidence that global CO 2 concentrations are increasing."

You may want to go back and do some homework on this stuff, as it's clear you have either forgotten a lot of it, or just never knew it.

NOAA estimates that atmospheric CO2 levels are increasing by 2ppm/yr. Some of that increase is most likely from burning fossil fuels.

You keep hinting at a global carbon cycle, but you seem fixated on only those parts that involve the burning of fossil fuels and the role of terrestrial plants. You should be aware that there are many other parts to that cycle, some short term and some long term, that circulate carbon between the atmosphere and the land and ocean.

The amount attributed to the burning of fossil fuel is estimated at about 4% of the total annual cycle. As the atmospheric concentration of CO2 is only increasing at a small fraction of that amount, the rest is coming back out of the atmosphere at the same rate it is going in.

Learn or relearn some of this stuff so you won't keep showing your ignorance.

Some things to consider as you ponder a longer view of Earths history than just the last 50 years:

- There is no reason to believe that the level of atmospheric CO2 should remain constant over either long or short geological time periods, and in fact it hasn't.

- Over periods of 100s of millions of years it is estimated that atmospheric CO2 levels have varied from as high as 7000ppm to as low as 180ppm.

- Over those very long time periods there is no correlation between temperature and atmosphereic CO2 levels.

- In the last 600 million years, only once, during a period we know as the Carboniferous - about 300 million years ago, have atmospheric CO2 levels been as low as they are now.

 
At 8/21/2012 7:24 AM, Blogger VangelV said...

You do believe in a free and a fair market, right? Or do you think it is ok for some power plant to eat the paint off your car as long as the electricity is cheap?

But that is the point; the power plant is not eating the paint off my car. It certainly produces a lot less pollution than having individuals heat their own homes by burning the coal or firewood themselves. This is exactly the reason why a city like London has less pollution and particulates in its air today than it has for more than 300 years. And let us not forget that our own pollution levels started to fall long before the federal government thought that it was its place to interfere.

 
At 8/21/2012 7:26 AM, Blogger VangelV said...

How am I confused? Do you deny that we are burning more plant equivalents than we are growing?

Yes. The increase in biomass each year is greater than the oil and coal that we are using up. But that is not the point here. If you stopped using a car and lived in an unheated hut other countries will continue to choose to use the cheapest and best sources of energy available to them.

 
At 8/21/2012 7:29 AM, Blogger VangelV said...

I produce around 1000 tons of plant matter every year, of which I sell 300 tons and use a ton or so for myself. Of the 700 tons a tiny fraction is carbon that gets returned to the earth on a geological basis.

See that forest near your place? There are plants growing in it. And the green colour in the ocean? That is phytoplankton that grows and falls to the bottom as it dies. I have news for you; nature is a lot bigger than you are and you are not the center of the universe. How about you make decisions for yourself and let others make their own decisions.

 
At 8/21/2012 7:31 AM, Blogger VangelV said...

NOAA estimates that atmospheric CO2 levels are increasing by 2ppm/yr. Some of that increase is most likely from burning fossil fuels.

Less than 10% is due to human activity. Most of it is due to natural factors like degassing of warmer oceans due to the increase of temperatures over the past few hundred years.

 
At 8/21/2012 4:22 PM, Blogger juandos said...

"A carbon tax diverts resources from the most wasteful users of energy to the most productive users"...

Yet another hydraism headed for the Gaffers Hall of Fame...

"I don't care what they burn ( or don't burn, in the case of dome renewables) . I found care if I have to spend $50 an acre for lime to counteract acid rain.

But at the same time, I would hate to spend the equivalent of $100 an acre in higher electric bills to prevent said posts
"...

OMG!...

hydra are you a chump for every asinine liberal scam spawned over the last forty years?

 
At 8/26/2012 3:43 AM, Blogger jeppen said...

@J Scheppers: "The problem is that since the refund is made to income taxes; and whereas income is highly correlated to carbon emissions their so called tax will have virtually no effect."

That statement would yield you an F in Econ 101. A carbon tax makes carbon intensive consumption less appealing in relation to less intensive consumption. Therefore, a carbon tax of suitable size would have the desired consequences of lowering emissions.

Prof. Perry has many virtues; I appreciate his blog and use his charts in political arguments, but in this area, he's slightly disingenuous. Upping taxes on carbon and lowering taxes on labour would likely boost the economy, since fossil fuels has negative externalities that are not fully internalized, whereas labour has positive externalities.

 

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