Here’s how I think about it: you may feel free to criticize, this is meant to get people thinking, not as an implementable policy.
Draw a control volume around your business or product. If, during the creation, use, or disposal of your product or business, mass or energy crosses this boundary, you should be required to provide for any negative externalities caused by this material or energy.
Of course, as usual with this approach, the magic is all in the drawing of the boundary, but hear me out.
Under this framework, it may be a bit easier to see clearly what externalities we might wish to price. I sincerely believe that if we now shrink from this present task of properly pricing and managing these costs, human society will perish from this earth.
> Here’s how I think about it: you may feel free to criticize, this is meant to get people thinking, not as an implementable policy.
> Draw a control volume around your business or product. If, during the creation, use, or disposal of your product or business, mass or energy crosses this boundary, you should be required to provide for any negative externalities caused by this material or energy.
> Of course, as usual with this approach, the magic is all in the drawing of the boundary, but hear me out.
> Under this framework, it may be a bit easier to see clearly what externalities we might wish to price. I sincerely believe that if we now shrink from this present task of properly pricing and managing these costs, human society will perish from this earth.
Not all negative externalities demand restitution. If you make a better widget, another firm may lose market share and their stakeholders would be harmed. This obviously shouldn't require restitution.
Also, it's very hard to measure both positive and negative externalities.
Why shouldn’t all negative externalities require restitution in proportion to their harm?
I couldn’t agree more that it is difficult to measure externalities. A good place to start might be to get a quote for the cost of undoing the harm - e.g. I’ve heard as low as $93 a ton to remove carbon dioxide from the atmosphere. Seems like a reasonable starting point for discussion.
By the way I don’t think making a better widget qualifies as a negative externality.
For a more concrete widget example: self-driving cars will have negative externalities on professional drivers. I'm not sure what definition of externalities includes climate change, but not job losses.
I also think it's a bit simplistic: what if we find that the carbon energy sector is not capturing all the value of what it provides and has positive externalities that outweigh the negatives at current levels?
What do you do about systems with non-linear effects like the climate?
I think we shouldn't try and seek a general operating principle from a known hard problem that we are failing to address and is pretty different from others we face.
We should have a carbon tax, because it is a useful tool in fighting this battle, not because it is the right tool for every issue.
To paraphrase Johnny Depp: "... but that's called 'communism' and is frowned upon in most societies."
Seriously, we have all the tech to radically reduce emissions starting now. But it costs businesses money to do it, and the future benefit is distributed across all humanity, so nobody does it voluntarily. We need governments to agree to force everyone to do something that benefits society, which stands in stark contrast to market capitalism.
Putting a price tag on common resources is not communism by any form of definition. If we view things from a feudal perspective, all common resources were held by the crown. You could only get access to things by purchasing or being given a license to it. One of the things we often talk about is the tragedy of the commons. Things without an owner are gobbled up and this is precisely what's happening.
Putting a price tag on externalities is about asserting either a state wide, or even world wide ownership on some resource -- whether it be fish stocks, clean air, electromagnetic spectra, etc, etc, etc. This is completely different than a collective/shared ownership by a group of people.
Such an idea does not detract in any way from market capitalism. In fact, giving these common resources an owner who can establish a price for their use is exactly what capitalism is all about. We could even go so far as to enact economic fascism by giving ownership of these resources to "elite" companies who will be able to manage them most efficiently (also read as, "giving ownership of these resources to our friends who will be able to maintain their vast wealth and power eternally"). I only mention it since fascism is about as far from communism as you can get (unless, as is often done, you wrap around on the other side of the spectrum ;-) ).
The US has a particular view that government ownership should be kept at a minimum. This idea suffers from the problem of either tragedy of the commons (for unregulated common resources and externalities), or with monopolistic ownership of key resources by certain companies (the latter tending towards an economic fascist ideal). I think it's this idea that somebody has to own this stuff and the government is probably the best somebody to own it that's very difficult to swallow for American ideology. But that doesn't mean it can't change.
On the other hand, one understanding of the role of government in market capitalist societies would be contract enforcement and ensuring the pricing of externalities
Carbon taxes, as well as pricing of externalities, are both means by which a government would force corporations to pay. We have knowledge that it should be done, but yet we are not doing it, as this knowledge is drawn into question by charletans and pharisees who twist and turn scientific cautiousness into doubts and buts and ifs in servitude of the almighty dollar. This is the nature of market capitalist societies: those who own capital seek to protect their income, and won't let minor inconveniences like future environmental crisis stand in their way.
Just look at the European carbon tax (ETS); it would have been effective if reasonably priced (50-100 EUR/tonne range), but industry successfully worked to keep the price per tonne at between 1/5th and 1/20th of what would have spurred actual emissions reduction measures, thus it has been toothless. Greenwashing is most all what remains.
I totally understand the point of view here, and likely agree to an extent, however calling the lack of a tax that has never existed before a subsidy is more than just a stretch, it’s an outright distortion.
I also am not sure that carbon taxes would hit the wealthy in a manner as disproportionate as would seem to make the author happy - everyone drives, and low income earners tend to have older, less fuel efficient cars. In the same way that has taxes are regressive, so would carbon taxes be. The wealthy can simply avoid them by buying EVs and solar panels, while low income earners would be stuck with the tab.
> calling the lack of a tax that has never existed before a subsidy is more than just a stretch, it’s an outright distortion.
This is not correct, this is simply finally accounting for the negative carbon externality. Industries pay extra for all kinds of negative externalities, and without these regulations, markets are inefficient.
That's certainly not true. In some areas of the country, yes. But carbon taxes would not be particularly regressive. And--frankly--the entire point of carbon taxes is to reduce the production of carbon dioxide. At some point you have to actually stop people from using it, whether or not it makes sense economically in the extremely near term.
In the US as well, but significantly more so globally. And climate change is a global phenomenon.
Further, the example given in the article is very accurate. If a city allowed a company to dump their trash in a landfill for free (bonus points if it's toxic trash), would that not be considered a subsidy?
In the past we didn't know that there was a cost to allowing carbon dioxide, sourced from fossil fuels, to be emitted into the air. Now we know there is a cost. The subsidy has always existed. We just didn't know it.
Assuming half your taxes goes to the DoD and half the DoD budget goes towards protecting the oil trade, gas costs about about $30 per gallon if you make $150k: (40% to fed govt x .5 x .5 ) / 1000 gallons gas per year.
The second assumption also is suspect. It is probably more correct to say that half the DoD budget goes towards protecting all trade, not just the oil trade.
Another (unstated) assumption is that oil fuels a lot more than just personal vehicle gas consumption. I don't know where that 1000 gallons of gas per year statistic comes from though.
40% in taxes to the federal government is also very high. The top marginal tax rate is 35%, and 150k isn't close to getting you into the top bracket, let alone by a significant enough factor to consider that an effective tax rate.
Don't get me wrong, I strongly believe there should be larger subsidies to alternative energy sources to counteract the externalities of fossil fuels. I just think this particular estimate is wildly misleading.
Time value of money, if you can deduct something in 2020 vs 2021 you get 1 year of interest on that deduction. Even if you don’t directly invest it, inflation make paying 2020 debts in 2021 dollars a net win.
However, a larger issue is percentage depletion makes it possible to write off more than the cost of the asset. If I buy something for X, then the sum of all of my depression should be X or less.
Accelerated Depreciation is a net win for companies. So, the shape of the curve is very much an issue worth considering.
Consider, a company buys and new car and the car’s resale value may tank the day they buy it. Further, companies regularly use things they which have a book value of zero.
An easy way to favour an industry is to allow them to write off assets faster than they're actually used up.
So while the amortization itself seems fair, many oil companies have lobbied for these types of changes, which together amount to hidden subsidies worth billions every year.
Why does accelerated depreciation help a company? (It helps that they pay less tax initially, because they can offset more revenue, but then they are left with less expenses to offset revenue later, how does it help them? Or again the explanation is time value of money?)
Also oil wells' production curve should match the depreciation curve, no? (You can extract more initially and it drops off, especially as the pressure lowers, you then have to inject extraction fluids, CO2 or brine or whatever, crack the surrounding rocks, and eventually it gets abandoned as a production well.)
Yeah, it's time value of money. There are many kinds of subsidies, including direct to consumer. If you're interested, the IEA's old reports mentioned here would be the best place to start (many countries have since cut their subsidies, so there's progress):
I'd guess there are different ways of measuring subsidies, but all of the measures for fossil fuel subsidies I could find were multi billion per year while EV subsidies were only 2 billion over the entire lifetime of the program.
> Using Yale economist and recent Nobel-prize winner William Nordhaus’s $31-per-tonne estimate of the social cost of carbon, it amounted last year to $107 billion for energy-related emissions from oil and natural gas in the U.S. Within that, emissions from transportation — the biggest source in the U.S. and the only one still growing — enjoyed a free ride worth $59 billion.
But what is the net tax/subsidy in plain monetary terms? I just did a cursory bit of Wikipedia research so I may have gotten something wrong, but the article neglected this aspect completely:
> On March 13, 2013, Terry M. Dinan, senior advisor at the Congressional Budget Office, testified before the Subcommittee on Energy of the Committee on Science, Space, and Technology in the U.S. House of Representatives that federal energy tax subsidies would cost $16.4 billion that fiscal year, broken down as follows:
> Federal fuel taxes raised $35.2 billion in Fiscal Year 2014, with $25.0 billion raised from gasoline taxes and $10.2 billion raised from taxes on diesel and special motor fuels.
That's not counting state taxes, which are even higher:
> The United States federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel... On average, as of January 2017, state and local taxes and fees add 31.04 cents to gasoline and 31.01 cents to diesel, for a total US average fuel tax of 49.44 cents per gallon for gas and 55.41 cents per gallon for diesel.
So about $80 billion in net taxes, which exceeds the estimated social cost of carbon from US auto emissions. Of course, fuel taxes go toward the maintenance of infrastructure for motor transportation, circling back and resubsidizing it, but electric vehicles enjoy the same benefits from that maintenance (as well as other subsidies for the generation of the electricity that powers them).
You have to also look at the department of energy spending on wikipedia since they do fossil fuel development, which adds an additional half billion. So 3.7 billion per year, at least. But oil companies are also some of the main beneficiaries of things like the foreign tax credit, so you have to consider that as well.
All consumers will very shortly be paying the price for the fuel that is wasted using inefficient internal combustion engines as a disincentive compared to EVs. Also, consumers could capture the CO2 upon combustion themselves or may not
ever transform the fuel they purchase into CO2 (gas leaking, etc.). Getting rid of the oil subsidies and enhancing those for non-carbon energy sources would be so much simpler and more effective than bickering over what would be the marginally least unaccountable tax for reducing the use of carbon based fuels. The day the government gets rid of subsidies for oil will be the first day I actually consider solar along with any tax rebates. This article is a written by a yuppie. Over the course of just a few weeks, a major fire can pump more carbon dioxide into the atmosphere than California’s many climate change programs can save in 12 months.
Great use of NewSpeak, but the absence of a tax is not a subsidy.
There is a pretty big subsidy for the non-Saudi companies that are part of ARAMCO, though.
The Saudis wanted a bigger slice of the pie when the company was formed, but instead of just splitting the revenue along those lines, they worked out a deal where the Saudi government would tax the non-Saudi companies to an amount that would split the pie the way they wanted it. The American companies can write off that foreign tax. So American taxpayers are subsidizing the arrangement.
There’s a reasonable argument to be made that letting you get away with something with negative externalities, which then have to be dealt with by spending public money, is effectively the same as giving you that money directly.
Only if those "negative externalities" are illegal for everyone. In this case, they're perfectly legal activities. It's not a "break" or "subsidy" just because someone's allowed to carry on a perfectly legal activity.
Look, if it is bad to use oil for fuel, then just tax it. But playing these word games is lame.
Wow, what a weak argument. If you're using this method why aren't you including carbon emissions from EVs entire manufacturing process to mining of its materials to get the true subsidy cost to society? Economists already know about negative externalities but calculating their cost is incredibly difficult. Comparing a direct subsidy to a negative externality is just laughable.
This but unironically. Yes, let's absolutely compare the total lifecycle cost of electric and IC vehicles, and price them accordingly. If you have a politically feasible proposal for this, by god, share it share it, the planet depends on it.
If not: who cares what "economists already know" about accurate pricing of externalities? The existing zero price for CO2 emissions is wildly off. Say we radically lurch in the opposite direction, setting the price of CO2 much too high (a hilariously sci-fi premise). We foolishly over-develop technologies that mitigate CO2 emissions. What a catastrophe, we learned how to suck CO2 out of the air instead of further refining fracking. We built a better world for nothing!
You assume there are no negative externalities to pricing CO2 too high? There would be a lot, including pushing more people into poverty.
I don't deny that CO2 has a cost, but the entire premise of the article is that oil is "subsidized" because of CO2 emissions, but that is just bunk. You could argue that about literally every item, ever. From manufacturing to food production, to child bearing, to breathing. If you argue that oil is subsidized because of CO2 emissions, you also have to say so ever -everything- including EV and every point of the supply chain. You might accidentally be causing people to release less CO2 and replace it with something even worse.
How you treat CO2 in a cap and trade method is up for debate, but again to claim oil is subsidized though CO2 emissions but EV isn't is nonsense. Lithium mining is -incredibly- dirty, batteries in landfills are -incredibly- toxic/flammable. If you think those too are a form of indirect subsidy then the EV subsidy is already high without the direct subsidy. And if you break it down to which has the biggest subsidy per kilowatt/hour, you might find they are not as far apart as you suspect...but the article doesn't measure that, so how would they know or even have the capability to write such an article?
> the social cost of carbon, it amounted last year to $107 billion for energy-related emissions from oil and natural gas in the U.S. Within that, emissions from transportation — the biggest source in the U.S. and the only one still growing — enjoyed a free ride worth $59 billion.
> The cost of the federal tax subsidy for EVs is $2 billion
OK, except the latter is an actual subsidy given directly, while the former is some made up pie-in-the-sky napkin calculation towards something we don't like.
Let's talk about the "social cost of tobacco" then. Or alcohol.
Or how about the "social cost of fast food" leading to obesity?
What about the "social cost of single motherhood?" No other social factor predicts crime and prison time nearly as well, not to mention lack of future educational achievement and lack of future economic output.
If anyone wants to play the theoretical existential threats game, I'll trade an acknowledgement of "global warming" for an acknowledgement of single motherhood.
Anyways I don't think it's sensible to compare theoretical future economic costs to real costs paid by taxpayers right now.
The temperature has increased more rapidly in the last one hundred years than we can find it has at any period we have good data for (there is some evidence that at times in the distant past it rose fairly rapidly, though we can't tell exactly how fast, but that usually coincided with massive extinction events). This has been largely caused by the release of large amounts of CO2 in accordance with very well-understood warming processes. The idea that some nebulous "natural processes" of the earth just automatically overwhelm anything we can do is totally bizarre; we are a sizable portion of the active energy production on the planet's surface at this point (obviously, we have nowhere near the effect of the sun, but the sun's radiance does not and has not changed rapidly enough to explain the changes in temperature).
Alright. Let's say I'd be willing to concede that our CO2 emissions play some part in changing the environment.
But I've also done some research, and I've found that the Earth has wonderful negative feedback mechanisms to ensure that each additional molecule of CO2 released has less overall affect then previous ones - so there's a limited and saturating nature to this phenomenon (hence why we haven't exploded or flooded terribly, etc).
Nobody is willing to discuss the nuance of saturated effects, and limited changes that we should be willing to endure so that hundreds of millions (billions) of Africans, Indians, and Chinese can get out of poverty.
And while we're at it - why are we subsidizing the paper industry, cutting down all those trees? Or the hydroelectric industry ruining aquatic life and other actual environmental concerns.
The fact is that nobody is willing to look at the trade-offs of FOSSIL FUELS and just wants to write them off as evil, "unfairly subsidized", etc. But if you took a true holistic look at the costs and benefits, you'd find that few other industries have been as positively impactful to our lives as those born from hydrocarbons. So people should think really hard before ignorantly demonizing them.
If people are wondering how I could hold a viewpoint so contrary to the Hacker News/Liberal dogma, I strongly recommend checking out the following, which can explain much more elaborately than myself: https://www.youtube.com/watch?v=EaNPBZ6BZZ8
The Earth unfortunately also has wonderful positive feedback mechanisms like releasing Methane from permafrost and lowering albedo due to reduced ice cover that can lead to runaway hothouse climates that last tens of thousands of years until geological processes sequester enough carbon to reduce the greenhouse effect sufficiently. So perhaps you should trust the conclusions of the scientists who have studied the topic for their entire careers and have been sounding the alarm since the seventies at least.
you'd probably consider me a dogmatic liberal, but i actually watched this video. even beforehand, i agreed with the moral premise -- yes, totally, our use of fossil fuels has been a boon to society, has lifted many people out of poverty, has reduced hunger, etc...
i think there are also undeniable harms as a result of our energy policy. for instance, it has enabled oppressive and murderous regimes like the saudis, and pollution associated with fossil fuels have poisoned people and ecosystems.
so, the question, i guess, is -- on balance, are we more likely to benefit or to suffer from the continued use of fossil fuels? i think you and i would probably differ in this assessment. the question is, why?
the answer probably comes down to epistemology. my tendency, in areas where i'm largely ignorant, is to defer to the consensus expert opinion. it seems like you follow a different algorithm. i'm curious, why do you believe alex epstein (who, in the linked video, says "i was not trained remotely as an energy expert") vs, say, james hansen (who probably has more relevant credentials as well as a powerful history of successful predictions)?
Of course people care about the tradeoffs of fossil fuel consumption. If they didn't we wouldn't be in the position we are. However:
(1) Even ignoring global warming, fossil fuels are a large but ultimately limited source of free energy; if we wait until they run out or get too expensive before transitioning to a more sustainable energy grid, we may not be able to make the transition at all. If we do not restrict prices artificially, we are just delaying the inevitable; after the prices go up enough, fossil fuels won't be profitable to extract and we will more or less be out. We had better be ready for that moment.
(2) There's no reason to think that the Earth's feedback systems will kick in in time to prevent major damage to the Earth's ecosystem (including a mass extinction event, the acidification of the oceans leading to the destruction of large amounts of the planet's biome, and the desertification of much of the Earth's habitable land). If it happens (as seems likely to at least some extent, since by many accounts it's already started), it won't even be the first time that chemical changes to the atmosphere due to living organisms caused something like that. People aren't worried (for the most part) about a Venus scenario, they're worried about making the planet far less hospitable to humans and displacing or killing billions of people.
(3) (Almost) nobody is suggesting we return to a pre-industrial agrarian economy; that's a total strawman. People are saying that what's happening right now (an increase in fossil fuel usage) is totally insane. In order to even have a chance of avoiding some of the effects from (2), we (especially first-world countries) need to be making dramatic cuts in fossil fuel usage, and investing a large portion of our GDP into building infrastructure for renewables--particularly large-scale storage which makes wholesale replacement of fossil fuel power plants feasible without forcing us to give up 24-7 power. The fact that we have fossil fuels available right now (particularly oil) makes large-scale construction tasks like this far easier than it would be if we wait. Instead, people (including you) are arguing against any disincentives whatsoever for wasting them on trivial things like energy production.
(4) For new power in developing countries without the expectation of continuous access to electricity, renewables (particularly solar) are already the cheaper option even without subsidies, with solar in particular representing most new growth in electricity consumption in those countries in recent years. On the flip side, developing countries and the poor (especially developing countries in hot climates) are going to be among those hurt the most by both warming temperatures and increasing energy prices; people without access to consistent power, air conditioners, or proper ventilation will have little choice but to migrate. Moreover, the existing dependence on fossil fuels in those countries often makes them beholden to one or more wealthy "benefactors", which can exploit them to extract essentially whatever economic or legal concessions they want. Most of those countries (especially those in Africa, which has plentiful sunlight and will be among the worst-hurt continents by warming temperatures) will benefit far more from joint investment in renewable infrastructure than they will from relying on coal, gas, and oil shipments from other countries, especially when they become scarce.
I don't think fossil fuels are evil. I don't even think fossil fuel companies are evil (entirely, anyway). But we have to stop living in a fantasy world where we have unlimited resources, can always defer action until it's "naturally" economically profitable, and the effects of each country's decisions can remain isolated to that country. If you really believe that modern energized life is great (and I do), our current strategy of clinging to our current energy infrastructure and energy consumption habits until it's too late doesn't make any sense.
Single motherhood leads to something worse than a mass extinction event? Seriously? Could you maybe add some arguments so that I can try to understand how you could possible come to that conclusion?
I agree that men who abandon their children should be aggressively pursued by the state to remedy the situation of single motherhood. That's your point, right?
Because only men are to blame for children out of wedlock? I've got news for you - women make choices too. They choose as well to partake in risky behaviors. They choose to act in ways that cast serious doubt in a man's paternity, destroying his incentive to stick around.
Obviously someone has not had enough experience in human relations, particularly in places where the government will subsidize poor behavior.
Draw a control volume around your business or product. If, during the creation, use, or disposal of your product or business, mass or energy crosses this boundary, you should be required to provide for any negative externalities caused by this material or energy.
Of course, as usual with this approach, the magic is all in the drawing of the boundary, but hear me out.
Under this framework, it may be a bit easier to see clearly what externalities we might wish to price. I sincerely believe that if we now shrink from this present task of properly pricing and managing these costs, human society will perish from this earth.