As of November 1,
History has shown that whenever new energy sources have been found or developed, this development has not affected the consumption of existing sources of energy. What the development of new energy sources has done, is allow future energy demands to be satisfied by the new energy source, but it has not reduced the consumption of the earlier source of energy. So the discovery of oil has not reduced the consumption of coal. As the natural gas pipelines were developed, this development had no impact on the demand for oil. Nor has the development of nuclear energy reduced the demand for oil or natural gas. This should surprise no one. Look around. Yes, we see cars becoming more efficient, but we also see more cars. The total consumption of fuel is not going down.
If our governments want to reduce the consumption of fossil fuels, there is only one way to do it, and that is to limit the supply of such fuels. In our capitalist system, this can only be done by increasing the price. And when the price increases, we the consumers will need to bite the bullet. There can be no doubt that this price increase will come. It’s just that if the price hike comes sooner, because of government intervention, adjustments will be relatively easy. If government does not intervene soon, the price increase will come from the market place, and the necessary, inevitable adjustments will be much harder.
The price hike, when it comes, will not affect everyone equally. Those accustomed to a lifestyle of high energy consumption, will be hit harder.
So there are powerful reasons to move to a simpler lifestyle. If we consume less, we will leave a more significant legacy for our children and grandchildren. But also, the gentler, simpler our lifestyle, the less we will be impacted when the energy crunch arrives.
I like that you are a man of action, but i think your idea of artificially increasing the price of oil would have plenty of unintended consequences. Specifically, it would hurt the poor hardest in countries adopting this policy, and i think it would have very little impact on global demand, and would hurt the long term supply of alternative fuel.
ReplyDeleteFirst, given the poor spend more of their disposable income on gas and heating fuel, than the man that has 10 ferraris and spends less than 1% on fuel, the poor would be hit most.
Second, i agree that demand in Canada and the US would decrease if they implemented. However, the not taxed price in the rest of the world, would therefore decrease. As a result, countries like India and China (both of which have lower pollution standards) would consume more (and producing more pollution per gallon consumed). So in effect, we would be subsidizing their oil consumption in a less responsible way.
Third, it would likely reduce the investment in alternative energy. Today, companies like Exxon-Mobile and Shell are the largest investors in alternative energy. If they see limited large oil reserves capable of generating 30-years of oil (a typical life span for a large well) they theoretically would invest in alternative fuels. Today, they are the largest investors in these fuels, in large part because of their substantial profits. If the government decides to hurt their profits (which the above policy would do), they will have less to invest in alternative fuels. I certainly don't trust the government to fill that investment void, given their history of ineffective investment using other peoples money.
Therefore, i think there are plenty of unintended consequences to manipulating a global commodity, in a few local areas. Could we use moral pressure to convince China and India to doing the same? Doubtful.
I don't know how you manage to hold down a full time job and do the posting that you do.
ReplyDeleteI begin with the assumption that government needs to collect taxes -- I think we all agree that there are some things that government needs to do, or at least will do, whether we are right or left wing. So the question then becomes one of on what basis it should be taxing. Traditionally, it has been a poll tax, property tax, import tax, and income tax. There are some others, of course, but they have been relatively unimportant. Of the taxes listed, the reason the first two have been used is because they are easy to assess and collect, that may also be a motivation for the import tax, although mostly it is to protect certain local industry. Income tax is collected in order to create some equity. I submit that, with the possible exception of the poll tax, all of them have unintended consequences. Certainly none of them encourage desirable behavior.
Conventional wisdom would have it that the more a tax shifts the tax burden from the poor to the rich, the more "progressive" it is. To use you language, Karl, this is what the far left would advocate. By that definition, only the income tax is progressive. To my way of thinking, a progressive tax encourages desirable behavior. So a tobacco tax is progressive.
Take a firm A, currently paying a tax amount X. I dare say that if that firm is typical, most of that tax is based on profit. That being the case, the only motivation the tax will create is the hiring of more tax accountants (totally unproductive contributers to society), the hiding of profits, and the moving of profits to off shore accounts. But now, to grossly over-simplify, say that same company were paying the same amount of tax, but now it is paid on the basis of carbon use. What motivation will that create? Well, first of all it will be motivated to be less wasteful in its use of fuel, and secondly it will be motivated to look for alternatives. What's the down side to that? If government collects this tax, is it being any more intrusive than if it collects its tax on the basis of profit? And the beauty of it is that government does not bias energy efficient innovation in any direction [such as a biodiesel mandate, which to my mind is stupid and wasteful].
Of course such a tax shift would result in winners and losers, which is what has kept it from happening.
Of your points raised, I only see the second as being problematic.
The first: To keep energy prices low because we want to protect the poor is stupid! If we want to protect the poor, there are way better ways of doing that.
The second: What about other nations? I don't have the answer -- or maybe I don't have the time to tease it out now. Bottom line: I think some moral leadership here is needed. OPEC has colluded before to raise the price of oil -- very effectively. It can be done! Currently there seems to be some expectation of an agreement to limit carbon emission. It won't happen. I think a global carbon tax would have a much better chance. (But the powers that be have conspired against us, and we are talking about emission limits.)
Third: This one surprised me the most coming from you. The oil shock of the 1970s brought all sorts of innovation out of the woodwork. Solar firms were springing up all over the place. Then the price went down, and they went broke (or diversified.) If the price of oil goes up, Mr. Free Enterprizer, the motivation to innovate will be there. If the oil giants won't do it, others will (unless Mr. Obama bails out the oil companies).
On my first point of hitting the poor harder, given you wrote in your article that it would hurt those harder with higher energy consumption, i think that for all practical purposes that statement was wrong, and hence unintended. Those with higher energy consumption are wealthier on average, hence it would hit them less.
ReplyDeleteSince we agree on the second point, i will move to the third. The difference between the market increasing the price of a commodity and the government, is energy companies would profit if the market raised the price as it did in the 1970s. It increases their profits to fund other investments. Whereas if the government takes the spoils of higher prices through a tax (as you propose), it diminishes a key investor from the game - the oil companies (like it or not they are pretty central investors in the alternative energy field).
However, If we replaced the corporate income tax, with a tax on energy use, i think that could be a good thing. I think it would still keep money and incentive for the private sector to provide good solutions to improving the environment in an efficient way if it would not increase the percentage of total dollars from the private sector to the government. If abolishing income taxes (or significantly reducing) become part of your solution, i will be a supporter.
Good, good, good! To me, a shifting of the tax burden away from profit [and property ownership] to the depletion of non-renewable resources has seemed so sensible for a long time, that I fail to see why it has not attracted more interest. I am not even aware of a good book written advocating that. Which is why I am a strong advocate of a carbon tax [which would be a significant first step].
ReplyDeleteUnfortunately, the conversation in Canada has become partisan, which is another reason why I find the right/left tribalism deplorable. Prior to the last election, the liberals proposed a very modest carbon tax, saying this would be offset by a reduction in income taxes. The Tories came back, calling this a tax grab, suggesting that sure the liberals would impose the carbon tax, but any voter who thought a liberal government would follow through with reduced income tax has rocks in their heads. So instead of using this opportunity to have a rational, national debate about what taxes are best for the country, we had this partisan nonsense -- fueled, I repeat, by left/right tribalism -- and the country is poorer as a result. In this case, it was the Tories who chose to turn an important debate into a partisan issue. Political parties on the left are just as capable of irresponsible behavior.
In Canada