Carbonsink,

My friend. I must continue to offer up a different opinion. I believe your fears of us moving to a cheap coal based world are unfounded. Firstly, we all know that coal as with any fossil fuel it is finite, and by its very nature is already running out. I believe peak coal is not as distant as some would have us think. In fact I already see evidence of peak coal in many countries and even here in the United States the price of coal has tripled (300% increase) in just the past 24 months.

As coal becomes more and more expensive moving from 4 cents a kilowatt, toward 12 cents a kilowatt, the public is quickly seeing the true cost of a finite energy source. Also as the price moves up, more and more sustainable solutions including, wind, wave, and solar become cost competitive directly with coal power, given their renewable nature. Even in China who has a coal reserve half the size of the United States and a power system which consumes twice as much coal, they will soon hit a price wall when it comes to coal production. A day will soon come when solar is by far the cheapest to produce and the most affordable to buy. In that day we will see a truly market based and individual/community powered transformation of our society.

Again on the subject of "Tax the Bad and Rebate the Good" I must choose a different path of thought. I believe the common man is the best judge and by far the most informed when it comes to deciding what is "Good". Your example policy makes my point perfectly.

In your example let us say that you represent the central agency that in charge of distributing these tax increases and tax rebates. You have outlined your plan to promote the "good" (hybrid cars) and punish the "bad", SUV's. Now let consider the results of your noble intentioned policy. Firstly, your intended effect would take hold quickly, sales of SUV's would fall quickly to almost nothing. The only people still buying an SUV would be those who are extraordinary wealthy. Also your other intended effect would take hold quickly, sales of any hybrid would shoot through the roof, in fact given the generous tax rebate of $15,000 some hybrid's would be almost free and people would be highly inclined to purchase them even if they don't need a new car.

However now let us look at the secondary consequences. As hybrid cars are produced in huge quantities to meet the new artificial demand of having an almost free car, the car makers demand for oil will also go through the roof, since we both know that it takes almost as much oil to produce a new car as the car will use in the first 7 years of operation. In addition given the huge influx of cheap and high mileage cars the local roads and highways will need to be expanded in order to handle the new volume. The expanded road also cost a huge investment of additional oil and carbon. And where people might have decided to car pool before in their existing car in order to effectively double or triple their mileage, they are instead tricked into buying one of these "good" new hybrid cars all for themselves. So instead of increasing their mileage in their existing 30 MPG car to 120 MPG by car pooling to work with three co-workers they instead decide to buy a new 45 MPG hybrid all for themselves. They get a rebate for doing the "good" thing, they save money on gas so they don't need to car pool, and little did they know they just tripled their total oil consumption (new roads + new vehicle + old vehicle still in use). So even though you had the noble intention reducing oil consumption by tricking the people into an artificial system it is very easy to have the opposite effect.

After 5 years seeing the full effect of the new policy you decide as the central agency, "We will alter this policy to account for these unexpected secondary effects." Not so fast say the hybrid manufacturers who have hired many people to build all the new hybrids, "we think the sale of all these hybrids is a "good" thing" they say. And "if you try and alter your policy we will give our votes, PR, and contributions to the candidate that will support a "pro-hybrid" policy." "Don't you care about fuel efficiency or the environment?" they ask.

This is much the same case as with corn ethanol. At first it sounds so "good". The farmers say, "We have all this extra corn, its going to waste, we should take this worthless waste and use it to create a domestic source of fuel. We also have these extra breweries that have been shut down, we could for almost no capital investment, take this waste/surplus corn and surplus breweries and create some fuel." However operational costs are negative (EROEI negative) and there for will not compete with gasoline from petroleum. "If only the government would tax those bad things people do and give us the money we could create some good, domestic fuel and put some money in the hands of the historically poor farmers." And so a policy that was originally intended to help the poor farmers, use a waste/surplus, and create domestic fuel, has grown to such large a scale that more than 30% of all corn in the United States now goes to ethanol production. And if you try and end the tax and rebate system that has created the problem, the farmers ask, "don't you care about the environment or the poor farmers". "Whether or not it creates more energy the industry now employees too many people to change the policy or you will ruin whole communities," the farmers say. Plus you central agencies told us this was "Good" only a few years ago, and now you have changed your mind?"

Try getting elected back to the central agency position without the support of those farmers. Or in your example without the support of those manufacturers you made artificially rich.

I would contend that your pro-hybrid proposal is not a market based solution at all. By taxing one thing and rebating another you have already "picked the winner" for the market because you altered the prices artificially and have given incentives to a different behavior. If you had not interfered and prejudged the solution the common man would have stopped driving the SUV naturally (as he already is) given the sky rocketing price of fuel. And many people would decide to carpool or in other manors conserve fuel and energy in response to higher prices. Instead of buying new cars which increases the total number of fuel consuming cars on the road, and requires a large amount of oil for its production.

We all need more faith in the common man (you and me) to make the right choice. Other wise we will endlessly and futilely find our selves trying to educate and reeducate government agencies on what is "good" and what is "bad", because they're got all our money (via taxes) and we have to hope they make the right choice.

Local solutions, start with the individual.

All The Best,

David A. Johnston