ttcmm’s Recent Comments

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  Additive reductions only certain with carbon tax

  Your analysis of certainty is one-sided. Like the silliest of backward-looking economic models, it assumes economic growth, even we learn that U.S. GDP fell 3.8% and Chinese electricity output fell 6% year-over-year last quarter. At a time when positive growth cannot be taken for granted, why confine the issue of certainty to the ability to set firm caps. Firm caps may be meaningless in the event that the economy continues to contract. In that case, cap-and-trade would allow business-as-usual emissions. The price of carbon would fall to zero -- and indeed it is well on its way in Europe -- removing any incentive for emissions reductions beyond business-as-usual.

  By contrast, a carbon tax would maintain incentives to reduce emissions whether the economy is growing or contracting.

  This to me is the most potent advantage of a carbon tax, yet out of fear of the ramifications of suggesting the prospect negative growth, or to hew to the conventions of USCAP-driven political debate, no policy analysts care to address it. That's a shame, because as green advocates we are missing an opportunity to expand key economic issues relevant to the question cap-and-trade versus carbon tax, rather than try to demonstrate to industry representatives that we understand their models and account for their concerns. Meanwhile, nobody knows better than they do where business-as-usual emissions will be in the next few years.On Carbon tax is better on merits, cap-and-traders trade away political advantages posted 9 months, 4 weeks ago 18 Responses

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  Joining the link party

  Thank you for the links. Advocates of public investment in clean energy can rest assured that resistance will fade in the face of plummeting private demand for everything else. Beyond near-term employment, our long-term goal will plainly become an infrastructure of energy abundance, too-cheap-to-meter redux, so that, economically, fossil fuels will never again hold us back and, environmentally, we can hope for the best (e.g. that permafrost doesn't do us in).

  That said, we still want to minimize the fiscal threat of public investment, don't we? So when the topic of cap-and-trade versus carbon tax comes up, my thoughts turn not just to which will be more effective at reducing emissions, but which will help the most to pay for public investment in clean energy, or residential electricity for seniors, or a missile defense system, or some such part of our exploding federal "budget." Since fiscal policy is what bothers the holdouts on clean energy, then green advocates may as well involve it in their consideration of carbon pricing.

  There are other points of contention between cap-and-trade and a carbon tax, and though on balance I favor a carbon tax based on those other points, I'd suggest to an undecided that as long as we're running an absurd deficit with taxes from the financial sector liable be to elusive for several years, it's better to have polluters pay as significantly as possible directly into the public coffers, without bankers and brokerages skimming off the top, or no money whatsoever paid for unneeded credits. My original intention was to supplement the author's argument with another reason why cap-and-trade advocates often come off as either disingenuous or fanciful.

  Now that I'm the only commenter not to link to anything, I'll note that New York's $2 million of proceeds from the 2008 RGGI auction are sufficient to fund not quite two weeks of the NYC Metropolitan Transportation Authority's 2009 deficit. While proceeds from the 2009 RGGI auction may be higher, I'd wager that the MTA's 2010 deficit will be, too.

  Again, I appreciate the links, and the hard work that went into the research.On Will carbon cap-and-trade be the next Ponzi scheme? posted 11 months ago 21 Responses

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  Elasticity, etc.

  Thank you for pointing me to your work on elasticity, Gar. While I do think relevant inputs (such as income) have changed meaningfully, my main point is that in the event that emissions continue to fall regardless of carbon pricing -- fewer vehicle miles traveled, lower factory output, etc. -- cap-and-trade would be incapable of taking advantage of elasticity. Federal policymakers are simply not going to set a cap that accommodates or otherwise hints at a prolonged economic downturn. Thus, if that scenario does play out, we may as well get ADDITIVE emissions reductions from a carbon tax.

  Another commenter, Jon, wrote that we should focus on building what we need. I agree, and anyway, we're clearly heading in that direction. Outside of Wal-Mart, government business has become the only business in town. However, direct government expenditures have the same fiscal effects as subsidies, and it is those fiscal effects that concern me.

  And color me conservative, but direct expenditures are dangerous tools. Municipal solar on every roof may prove wasteful. Why not geothermal under every lawn instead? The cost difference is significant, and policymakers are at this stage are not informed enough to choose cost-effectively between technologies.

  Again, since we are going to spend money to support employment and transform our energy infrastructure, let's have polluters pay for it to the extent they're able. If it's politically, or morally, difficult to raise the price of gas o cash-strapped commuters, let's at least shrink the pre-determined profit margins of regulated utilities. And let's do so with a carbon tax, since utilities and other major polluters on top of demand trends won't pay much at auction for carbon credits likely to expire worthless.On Will carbon cap-and-trade be the next Ponzi scheme? posted 11 months ago 21 Responses

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  ttcmm

  I would like to witness an advocate of cap-and-trade guarantee, or even predict, that any cap which emerges from the federal policymaking process will not be missed by actual emissions significantly on the LOW side for at least several years due to economically-driven demand destruction.

  The price of EU emissions credits in just the past three months has nearly halved, and with it, the incentive to pursue emissions through innovation. In a shrinking economy, cap-and-trade risks settling for business as usual. Anyone who recognizes the possibility of prolonged economic contraction, and at the same time acknowledges that we need to reduce emissions as dramatically as possible -- meaning below, in all likelihood, where the targets of federal policymakers -- should not advocate cap-and-trade. That person should instead aim to wring whatever elasticity can be wrung from fossil fuel consumption ABOVE AND BEYOND business as usual during a downturn.

  And as for elasticity, Gar Lipow is too breezy by half in stating that the long-term elasticity of "lowering emissions" at -0.5. Forget that the figure is uncited; assuming it is based on historical data from a flush economy characterized by cheap energy, in which profit margins allow, in fact encourage, people to travel far and often and factories to make big things in abundance, then the figure on elasticity is obsolete. Again, this is to suggest, not a doomsday scenario, but a trend to which the EU emissions system has already begun to react.

  So what should one cite if not long-term elasticity of -0.5 and other historically derived figures? Better to cite nothing all. Better to focus instead on the enormous uncertainty in the economy and, therefore, with respect to emissions, and to advocate policies that offer high expected values of emissions reductions in a range of economic scenarios. In other words, for a carbon tax instead of cap-and-trade.

  I do agree with Gar Lipow that carbon pricing need not -- and maybe should not -- be the centerpiece of a transformative energy policy. But why should it not be more politically "palatable" to hasten development of green alternatives using revenue-generating carbon pricing rather than revenue-draining subsidies? Methinks we green advocates have come to see subsidies as good, and their opponents bad, simply because green technologies happen to be the near-term beneficiaries. We haven't ceased to be taxpayers just because our favored representatives control the purse strings. Let's not be squeamish about taking what we can from polluters, and sparing future generations that much plus interest.On Will carbon cap-and-trade be the next Ponzi scheme? posted 11 months ago 21 Responses