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131 comments on Is There A Painless Way To Fill The Oil Supply Gap?
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What effect would an across-the-board carbon tax have? Something that would push the price of all oil, coal, and natural gas. The tax could be "pain neutral" with corresponding decreases in other taxes... social security tax could go to zero and earned income tax credit could be significantly increased, for example.
Imported goods could be taxed according to their carbon liberation, but with a tax credit for any carbon taxes payed in the producing country. This would force major importing countries to match (or exceed) the USA carbon tax, as anything less would just be giving extra money to the USA government instead of their own.
As it stands now, the "price destruction" is going to mean huge profits to foreign nations as the USA pays more and more for fuel. A federal carbon tax means that the citizens of this country can at least gain huge tax revenue out of the gap instead of giving it to foreign nations.
Two problems.
One: Pensioners and those on a low/fixed income. Especially if they don’t already pay taxes.
What are you planning to do? Give them direct handouts? If you give them handouts equal to their carbon tax expenditure then expect them to continue to behave as before as this will be the cost neutral option to them.
Plus in a system like carbon taxes there will always be winners and losers. Poor folk that need to commute to work & can’t afford a new car will be hit much harder than Joe Stockbroker who takes the (electric) train to work in the morning.
Also bear in mind, to conserve on essentials like home heating & cooking you need dollars available for capital investment. Poor people and small income pensioners don’t have these funds available.
The second problem is that, ultimately, politicians will control the system. How much do you trust politicians. I personally trust them to ONLY act in the interests of their personal interest groups, ie. NOT me.
All you’ll end up doing is creating a massive bunfight over who gets what rebates/handouts/exemptions etc. And as usual it’ll be those minority groups that shout the loudest who’ll get them most.
No. New taxes are not the way forward. Why is it that when presented with a problem most socialists & environmentalists solution always seems to be “If it moves Tax It”?
Like many things (communism amongst them) it may seem like a good idea in theory, but in practice when faced with Human Nature, it will fail dismally to have any real effect.
Gentlemen, what we need here is some solutions, not more taxes that will benefit the politically connected.
That's pretty much all the standard rhetoric. Don't think of it as "new" taxes. Instead, it is "different" taxes. Why is this country punishing work with hefty payroll taxes? Why not punish pollution instead?
>>> One: Pensioners and those on a low/fixed income. Especially if they don’t already pay taxes. <<<
I already stated that social security taxes could be reduced/eliminated and that the earned income tax credit could be increased. Sorry that I forgot to mention that cost-of-living adjustments could be adjusted as well. The retired people--as a group--ignored the problem when it reared its head in the 1970's. They passed the problem to the young people; perhaps it is fair to pass the costs back to the old people.
As a fundamental concept, I think it is ridiculous to tax wages. Why are we punishing people for working? Contrast that with taxing people for polluting.
The energy waste I see is systemic. Only a systemic solution will curb the waste. You need to hit each and every person and each and every business for each and every action taken. You cannot micro-manage your way to efficiency.
Dismissing my arguments with some vauge handwaving sying that they’re “standard rhetoric” simply won’t stand up to public debate.
As usual you’re simply assuming that this “solution” can be imposed on people. This demonstrates a worrying lack of understanding of politics.
For the public to even remotely support this it will have to be demonstrated to be revenue neutral, and cost neutral to most people. Given that the stated aim is reduce consumption by its very nature it will penalise consumption. Most voters won’t accept this. Most voters are also deeply conservative when it comes to new ideas. They’re far too used to getting fleeced by the politicos. Most would not wish to give up a known evil (payroll taxes) in favour of something that is an unknown quantity. Plus most politicans are currently trying to sell this “idea” as an additional tax. They say them may reduce payroll tax, but no one is proposing that it, and its collection mechanisms, be abolished completely.
This simple fact leads most folk to simply assume that it is a massive revenue generation scheme for governments trying to cover pension deficits, medicare, etc etc
Second, you tend to forget the law of unintended consequences.
When people earn money and have payroll taxes deducted from them the government can take it as a given that people will want to strive to earn more and better their lot. Thus the government have a stable tax base.
If the govenments revenues are dependant on fossil fuel consumption, what happens if people cotton onto the fact that their tax bill can be massively reduced by increasing efficiency. You might find that for ideological reasons you see a huge drop in consumption coupled with a massive drop in government revenues. The government would then be forced to bring back payroll tax to make up the shortfall. This would likely be highly unpopular, especially with people who had committed to large capital expenditure programmes to increase their personal efficiency.
Secondly, in the UK a great many pensioners feel that they cannot afford basic heating due to the cost of gas. A great many actually CAN afford the heating, but in confusion (and a misplaced sense of saving money) they do not adequately heat their homes. Further a great many pensioners did not take the government’s offer of extra fuel benefits, as they did not want to appear to be taking from the state. With mentality like that further increases in the cost of heating will be psychologically devastating for many old people. And this is not just some abject theory. It is known fact that in the UK higher gas costs and cold winters DO increase pensioner cold related deaths.
Plus the ultimate problem lies with the way this scheme will be brought in. Anything designed and brought to fruition by a cross party political system is doomed to fail due to bartering, negotiating etc.
And then there’s the fact that the 3rd world simply won’t wear it either. Much like Koyto they’ve pointed out that they’re entitled a free pass due to historical advantage by 1st world countries.
Any attempt to impose at the border carbon taxes would in all likelihood lead to trading blocs and bilateral trade between countries not wishing to participate. The Chinese will quite happily strike bilateral deals not to impose port of entry carbon costs with anyone happy to listen. You run the risk of creating two tier world economy.
On top of this it is unlikely that you’ll ever get the whole world to agree to such a carbon tax, so it will end up being impossible (and possibly illegal if not ratified by the WTO) to impose taxes at port of entry based on CO2 emissions.
I prefer a direct handout. Much simpler. Tax all fossil fuel production/importation at a high level, and give out the tax to taxpayers as a standardized refundable tax credit. Yes, it's revenue and cost neutral - that's the prerequisite to get the ball rolling. It's also a significantly progressive tax if you consider that the rich use more energy. But it's the only way that people are going to be MOTIVATED to use less energy. We can either wait for this decision to be made for us (supply/demand or geopolitical panic to raise the price for us, and oil companies to get richer than most countries), or we can do it ourselves in preparation, and do it perdictably, slowly, steadily. With a required handout of all revenue at the end of the year back to taxpayers.
The way it works is thusly: The fact that it's revenue neutral doesn't mean it can't affect behavior. It just means that the average person doesn't see it as so much of an attack on their lifestyle. It presents them with a choice - do you want to have the newfound ability to put your kids through college, go to a fancy restaurant, build that new addition, buy a house, etc, or do you want to stay away from the filthy Bus People(and all those other choices) by using a car for all transportation? That's the decision-making process that's affected. People are handed money, and presented with a selection of choices - the fossil fuel using choice is simply priced with a bit more of its externalities(roads, police, planning, global warming, energy wars) included. People are forced to look at whether perhaps moving closer to town, insulating their house, chucking the Suburban, or installing solar panels might be a good idea. People are motivated to save money for themselves - and we give them the money to do it. Such a tax is the only acceptable way I've seen of creating a system of rational actors who are inherently lower energy in their thinking, and who aren't angry/resentful/sad about this fact.
We spend a significant amount in order that people can continue gasoline-based personal transport compared to what people actually spend on gasoline. This would merely present people with the realities of that decision on a personal level. 4 day road trip versus 7 days on a cruise ship... which is it gonna be? Right now, one of them uses more fuel per capita, and costs much less.
------------------------
You're arguing that we can't increase energy prices artificially because old people will be confused and refuse to heat their houses? I believe that the phrase I'm looking for is the skin condition on the tail wagging the entire dog. It's a bit ridiculous to base the world's energy and environmental policies on the actions of people who are mentally unfit to care for themselves.
Home heating can be vastly reduced through additional insulation - which taxing those who continue to use outdoor patio heaters can pay for.
>>> Do you really think that people will vote to increase the cost of heating and lighting their homes? <<<
Actually, yes! The vote isn't quite that simple. It's more like: Increase the cost of heating and lighting your home but also get a check for $2000 for each person in the house as a free gift from the government. You get the $2000 rebate each year. I suspect that most people think they use "less than average" amounts of energy; therefore, assuming the rebate makes the tax revenue neutral, most people could be convinced that they will get a rebate larger than their increased energy costs.
Many people were excited about the government enacting a windfall-profits tax on the oil industry. Taxing fuel could be sold as having a similar effect.
Do you really think that people will vote to increase the cost of heating and lighting their homes?
Actually, yes! The vote isn't quite that simple. It's more like: Increase the cost of heating and lighting your home but also get a check for $2000 for each person in the house as a free gift from the government. You get the $2000 rebate each year. I suspect that most people think they use "less than average" amounts of energy; therefore, assuming the rebate makes the tax revenue neutral, most people could be convinced that they will get a rebate larger than their increased energy costs.
To the extent that pensioners experience an increase in the cost of living, their incomes are hedged by the increase in pensions eg Social Security, which are indexed to CPI. This would also be true of most others on state benefits, which are mostly indexed to CPI.
So the only gap is for those whom energy is an above-CPI weighting slice of their total expenditure.
These would not, by any means, be only (or mostly) pensioners. Pensioners drive less than the average, and on balance probably have smaller homes. They consume fewer goods and services with a high carbon content.
The UK government already gives a heating grant to poor pensioners and others in cold winters. It wouldn't be impossible for the US government to do the same. Similarly countries set minimum standards of housing insulation, and have loan programmes to support those who need to upgrade to meet them.
'tax' is one way to do this. Another is tradeable permits. We might grandfather existing polluters, giving them permits, or we might use the revenues from selling those permits to reduce other taxes.
The real question is how much does one value the welfare of future generations? If we don't feel we have an obligation to do something for those generations, then we could simply say global warming is a problem for them.
Since C02 lasts in the atmosphere for 100 years or more, I think this is a difficult argument to make, but we can make it.
Valuethinker,
You are mis-informed about pensioners, at least in the UK. As a group,
they encounter far higher inflation than the CPI weighted average. This is
because a higher proportion of their total income goes on food,
heating and local council taxes than the general population. These items
have been rising sharply, and are offset in the CPI by discressionary items
like electronic gizmos, which have negative inflation.
They also tend to live in older, poorly maintained, poorly insulated and
inefficiently heated houses, often larger than they need personally, because
they do not down-size after their family grow up. This is true of my
parents, even though they are well educated and not short of money. They
do not like change, or what they see as long term investment.
The Labour government had a 'fuel poverty' programme in 1997, and
was one of the few targets they looked likely to meet, due largely to hand-outs to the poor. The energy price rises of the last 3 years has largely
undone this good work, and we once again face the prospect of large numbers of old people dying of hyperthermia, (global warming not
withstanding) or heat exhaustion (courtesy of global warming).
Leaving these people to rigours of the open market for their heat is an
option, but it is not one I would vote for. They will be the 'demand
destruction' element, at least in the UK market.
If they have a larger house than they need, and they own it, then the problem is their housing equity is illiquid.
This is not a trivial point. Vancouver for example allows retired homeowners to charge their property taxes against their estate. *they* don't need to move, whilst they live.
Property is a major fraction of retired person's assets. We just haven't constructed easy ways of unlocking that.
Over to the RPI. I haven't seen any real figures, but I suspect the problem in the UK is limited to those who are relying primarily or wholly on the state for their pensions. The old drive less, or at least drive smaller cars.
(I agree the state of the UK housing stock is a national scandal-- but that can be fixed).
As to global warming killing old people, I have first hand evidence (next door neighbour). But very, very few people in the UK have residential air conditioning: it's not going to be carbon taxes which makes their situation worse.
Doing nothing about global warming will make their children and grandchildren's lives much worse, however.
The UK has the lowest replacement ratio (state pension to average wage) in the western world: thank you Margaret Thatcher and Peter Liddle for that fiscal sleight of hand. So the problem of old age poverty in the UK is about *that* rather than the price of any one commodity per se.
You will note the Daily Mail, in all its vitriol, doesn't mention that point.
The problem is not so large that it cannot be fixed. Nor is it rational, nor economically efficient, to fail to do something about carbon emissions because one group in society will suffer disproportionately.
The increase in energy costs, a 'tax' due to market forces, which has happened to date, is larger than the proposed carbon taxes.
Oh, they own a UK house but somehow they are still poor and claim that they can't afford their heating bills? My heart bleeds for them.
Not.
Most people reading this thread probably have no idea just how expensive UK house prices have become and just how much UK houses have gone up in value over the past twenty years. If they get out of the oversized house which they no longer need and move into something more appropriate they should have at least a hundred thousand dollars in profit which they can then use to pay their heating bills with.
Sadly, there are far too many people who would rather whine about how old and poor they are and how they need handouts from the government to stay warm in winter.
The people I feel sorry for are the young families who need the space and are wondering how they can afford the payments on an enormous mortgage. Payments which will certainly be far greater than their heating bills.
The sooner that we understand that dealing with global warming is going to require modest sacrifices from everybody the sooner we will be able to make some progress on the issue.
Or expect them to reduce their energy consumption while pocketing the difference. Win/Win situation.
Because there are a limited number of levers a government has for changing how people act, and this kind of soft pressure is usually less onerous and more efficient than passing laws capping the amount of energy people can use.
Because similar taxes have been proven to work; gas in Europe is taxed at about $4/gallon, and European cars get twice the mileage that US cars do. People can still choose to drive huge SUVs (and a few do), but people's choices are biased towards more energy-efficient vehicles.
Because we haven't heard a better alternative. You got one?
One way to compensate low income folks for higher fuel taxes would be to give them the highest mileage cars available in exchange for the old low mileage cars they are stuck with now. If my situation is typical of low income folks then exchanging my 17 year old van for a Prius would cut my gasoline use in half. That way the price of gasoline could double and I could drive the same number of miles at no additional cost to me. The half-life of the current vehicle fleet is 15 years and growing. That means that our current low mileage cars and SUVs will be with us for maybe another 20 years unless assistance is provided to replace them sooner.
I think the *median* car age is 9 years.
The average car about a year younger.
So the fleet turns over (90% scrapped) about every 14 years.
Your general point is a good argument for CAFE. Whatever the price of oil in 15 years time, by mandating a higher average fuel economy now, we get that fuel economy then for all drivers, not only those who can afford more fuel efficient cars.
The US could achieve a 20-30% increase in average fuel economy simply by switching to diesel engines (you have to adjust for the 13% higher energy content of diesel fuel). Half of the new cars sold in Europe are diesel (but we have compromised on air quality standards to achieve that, however the latest diesel technologies do meet US air quality standards).
A similar argument applies to air conditioners and other appliances. Many consumers are not sensitive to the cost of electricity for their appliances, but these appliances will often wind up, eventually, in the hands of the poorest consumers.
As the article pointed out, biggest part of the solution is demand destruction -- alternatives will not fill the gap. Demand destruction has to proceed in away that stakeholders agree that it is a legitimate and fair process otherwise people will not take part in an orderly demand destruction process. Demand destruction will occur regardless and if it is not orderly it will be disorderly. People will feel that their lives will be threatened and that their privileges will be threaten. People will take what they think will be their narrow self-oriented view of what is just and fair into their own hands. This will likely mean significant disruption in civil society.
It is not just the poor who do not have access to resources that will have an interest in this. It will also be the middle class and the well off. The well off, will not be able to walk in the streets, will have to protect their privileges with violence and live behind walls. The middle class may have to walk in the streets but they will have to do this with trepidation. They may want to carry fire-arms to make themselves feel safer.
The only solution to orderly demand destruction, if one accepts the premise that civil society must be preserved, is one which is viewed as legitimate and fair to the greatest part of our socities. We have to reach a common acceptable solution. I understand that government interventionism is going to raise a lot of headache because it is the practice of government to act for their constituents, but to label any government intervention as communistic won't get you pass perceptual road blocks. Libertarian positions certainly will not solve the problem if you accept orderly demand destruction. If you are willing to accept disorderly demand destruction then that is a valid option.
I think that the best way to find a solution is to analyse the problem as a tragedy of the commons problem. Without any social compact on how to access the resources in the commons there will be a free for all grab. Who ever gets the resource first depletes it first or whoever has the most muscle power pushes the other away and takes it away from the others. But these are not necessarily winning strategies.
There might be others who think they have adequate power to challenge you for the common resources and will attempt that. Or there are others which may have no hope and decide to take suicidal retribution and destroy the whole resource. Suicidal retribution may seem pointless to those have control of the resource, but social-evlolutionary research are finding that retribution (not necessarily suicidal retribution) is an adpative mechanism that helps societies enforce community and fair play -- it is an inherent part of human character to aid in the solution of communal problem (e.g. it is worth it to accept pain to yourself in the act of apply retribution if you can teach the perceived offender not to do the offence again in the future -- or elimate him. We likely not get rid of this for tens of thousands of years because it is an adaptive strategy. )
If a social compact is to be workable, it has to be enforcable -- as Thomas Hobbes said "A covenant without the sword is but mere words." As much as libertarians would like to get rid of government, this sword of government is necessary. We might, though, be able to structure the compact in a way that the sword remains without giving the sword holder more privileges than necessary.
There have been many workable solutions to the tragedy of the commons. It just seems that they have not been used much, most likely because some privleged interest did not want them in place. Tradeable quotas seems such a solution-- something like that has been done for the Maine lobster fishery and it seems to be working well.
If you can't use your quota, you can sell it. Other's pay you to use your share of the commons. The government exists then to enforce the quota, not to take away the wealth in the resource. This way of doing things requires that people in general first see a windfall resource as a common good and that seeing a resource as such is the first step in finding a workable solution. Many people have a vested interest in not seeing windfall resources as a common good -- and that is the tragedy of the tragedy of the commons.
Actually the typical 'socialist' and 'environmentalist' answer is to regulate the solution.
It's capitalists like me who see a major problem that can only be solved at a reasonable cost by applying market solutions that use market forces.
CO2 emission is perhaps the greatest negative externality that human beings have ever produced.
Free market economics tells you that if you have an unpriced externality, you have a problem, and a distortion of the market solution.
My parents are on fixed income. Their natural gas bill just went up. Do you hear them squirming? I don't. They get by, with or without my help. And since they have my support, they won't even have a financial downside. To me the additional $20 or 30 per month is not a big deal.
So if your elderly parents have a problem, it is probably because YOU are too cheap to help them.