Wednesday, April 16, 2008

Conservative curbs on climate change

One sad thing about the climate change debate is that it is politically one sided. Most conservative thinkers have spend so long burying their heads in the sand that they don’t actually have any practical effective solutions. Which means that there are carbon control strategies that have not been presented. So here’s a little five point plan that uses market forces and tax cuts to achieve reductions in American CO2 emissions. It is written by an American, for an American, so the applicability to small nations may be poor.

First of all, if any progress is to be made, carbon needs to have a price. There are two main mechanisms for pricing carbon- a carbon tax, and a cap and trade system. The trouble with cap and trade is that it generally requires lots of bureaucratic oversight, and can easily be used into a special interest pork distribution network. So I reckon a carbon tax is probably the way to go, and we can always cut taxes in other areas to make sure that it remains revenue-neutral.

I reckon that the carbon tax rate should be linked to the atmospheric concentration of CO2. After all, it is atmospheric concentration, and not emission, that actually traps heat in the atmosphere. So a rate of, say, 50 cents per tonne for each ppm over 300 would be a reasonable sort of level. If we ever get back down to pre-industrial levels, the tax goes away, and the worse we alter the atmosphere, the more expensive emission becomes.

Obviously, this tax is going to cause a price increase for just about everything, so we need to cut taxes to respond. So tax cuts are point 2 So for point 2a, we cut income taxes to give everyone about $1000 bucks less tax to pay, so that they can afford the basics.

Corporations need tax relief too, but here we can be a bit creative. If we tie our corporate tax cut to basic low carbon behavior, then companies can compete to find the most efficient way to earn themselves a tax break. One way to do this is to drop the corporate income tax by 1% for every 10% of a company’s workforce that commute and works without using motorized transport. This would give companies a great incentive to restructure their work environments to reduce commuting, which causes a large portion of our transport emissions. We can give a half sized discount to workers who use only public transport, in order to smooth the transition.

For 2c, we can probably halve highway spending by cutting out pork and future plans for roads that won’t be needed in a tax environment where companies are trying to reduce communing. If we halve the highway spending, then we can halve the transport portion gasoline tax as well, which will help protect consumers from a early jolt in the gasoline price.

Of course, if a carbon tax is to work by making low carbon generation economically preferable, then we need to actually be able to build and bring that generation online in a timely fashion. So, point three is a reduction in regulations for infrastructure. One way to do this is to require state/local governments and NIMBYs to pay the carbon cost for delay sand cancellations of low carbon generating facilities. This may not prevent folks like the Kennedys from stalling wind farms, but at least they would have to fork out the carbon cost that those windmills would prevent.

Allowing planning exemption for energy efficient housing would also help companies build housing to get their commuting tax cut. And it would make it easier for builders of such housing to break into housing markets where regulations prevent effective competition.

Point 4 is that climate change is actually going to harm some people, so some of the remaining carbon tax revenue could be used to compensation, provided that a way can be found to prevent rorting.

And finally (5), imports of goods and services from economies with a lower carbon cost would have to be taxed the difference, in order to prevent lenient producers from obtaining an unfair advantage.

So, as you can see, tax cuts and emission reduction are not antithetical. Basic conservative principles of reducing oversight and regulation, providing tax incentives, and letting business solve its own problems can be applied to reducing global warming. Proscriptive bans are not required, and the left will have to find another reason to justify draconian world government by faceless UN apparatchiks.

9 comments:

Julia said...

They all seem like very reasonable proposals. I have no clue how they would get through our parliament or your native country's senate, but I am all in favour of balancing out the sticks with carrots, and if the best way of dealing with that is by removing some of the non-directional income tax sticks and replacing them with one really big climate change stick up the arse, then fair enough.

The USA commutes far too much by car. The UK commutes marginally less but still too much by car. If we all had virtual offices and work-from-home capabilities, especially those of us who are just pushing a pencil around a desk all day, our roads would be clear (so the cars on the roads would be able to actually get up to something approaching optimum fuel efficiency speed) and emissions would be reduced.

Why I am expected to be in the office all day when I receive all my data by e-mail and all my phone calls can be put through to my mobile I do not know...

Kim said...

We really need discussions like this - the basic economics makes sense. (So can you convince some conservatives that they need to stop arguing that the Free Market will recognize when there's a problem and deal with it, and if the market doesn't take care of it, there's not a problem? I've tried to explain externalities to conservatives who wanted to claim that global warming was invented in 2004 by left-wing conspirators, even though I was going to scientific talks about it in 1990...)

It is a kind of regulation, though - I'm not sure you can sell it as anti-tax and anti-regulation. It's more using economics in a sensible way to deal with a problem that otherwise will remain unnoticed until it's too late.

Maria said...

I like this plan except for all the bits about cutting taxes and reducing regulation. Can't we use revenue from a carbon tax to provide more red-tape-ridden government services?

Chuck said...

Kim, one goal of fiscal conservatives over the past decade or so has been to shift tax burden from income to consumption. A carbon tax offset by income tax cuts is a great way to do that.

Maria, without regulatory relief, renewable energy projects simply one get built. For example The Cape Wind project was supposed to start generating 4 years ago, but NIMBYism has kept it mired in regulatory limbo while running up an extra 500 million dollars in costs. While this is great for coal producers, it doesn't do the atmosphere much good.

Silver Fox said...

Chuck, I think there are some good ideas, here - thanks for getting into this subject. Isn't there already some buying and selling of carbon credits? Maybe that's what you're calling cap and trade. I'm not particularly well-informed about this; it's good to learn and hear some ideas. And I'm not pessimistic on the idea that we can't do it because of politics.

Julia (whose blogger profile won't come up on screen for some reason), virtual offices are a great idea, and working at home has been going in a lot of offices for a long time now - for example see this. There are many things, however, that can't be done either "virtually" or in an office; commuting will continue! We will just have to deal with it.

Gotta go check out a drill rig, now. (Sorry, I'll have to drive - or take a helicopter!)

Julia said...

Silver Fox (my profile should have been fixed by now!) - sure there'll always be things that have to be done in the office. But if I only had to go into the office once a fortnight that'd reduce my commuting by 90%. And anything that reduces my commuting emissions by that much is a good thing. Even a once a week visit to the office knocks 80% out. Not such a big deal when I use public transport, but I used to have to drive out of town.

And it of course only works if you spend the majority of your time stuck in front of a computer...

Stephen Smoot said...

Honestly these proposals would be extremely costly to implement because of the time and resources consumed in quantifying. Creating new taxes is not a free market solution in any event.

The United States is the most efficient producer of goods in the world. That means that we create more with less waste and pollution per unit than anyone, anywhere. Attention ought to be given to that at least as often as to consumption or pollution.

The price of gasoline is forcing consumers away from traditional gasoline engines. Clean renewable energy sources combined with clean coal technology will reduce emissions and, more importantly, make the United States less dependent upon the rest of the world for our most basic needs.

For more information on these and other political and economic ideas, go to http://phconservative.blogspot.com/

Chuck said...

Relying on clean coal is like relying on fairy dust.

Maybe, if you work your ass off, you can devise a sequestration program that will take care of cement and smelting emissions. But not today. It is still decades away. And thermal coal? The cost of air separation and the scale are just too large. It is much easier to geosequester spent fuel rods than it is carbon dioxide. So nuclear will be more cost-effective than coal.

EliRabett said...

Hi,

The problem with your plan (which I have attempted to address) is that countries that do NOT adopt a carbon tax/emission regulations get an advantage. Thus my proposal for an Emissions Added Levy to be put on all domestic and imported goods.