I’ve published an exquisitely reasoned and balanced discussion – OK, a rant – on subsidies and by extension, minimum fuel content requirements and their whole inefficient, rent-peddling, heavy-handed, intrusive ilk, pant pant pant, in the SF Chronicle this morning. It pleads for a carbon charge:
What we should be doing, instead of the current incredibly complex and ill-targeted package of subsidy programs, is to charge for using the Earth’s limited ability to accept carbon dioxide in the air. A carbon charge (which analysts say should increase gas prices anywhere from a nickel to as much as $1.50 a gallon) would make gasoline, oil, coal and natural gas reflect their true cost. It would make ethanol or biodiesel much more expensive if manufactured with coal, and somewhat more if manufactured with natural gas, than those fuels made with minimal fossil fuels — which is how it should be. And it would set in motion a cascade of adjustments through the economy that wouldn’t have to be coercive (like the current federal fuel economy standards for cars) and wouldn’t have the very expensive errors inevitable with subsidies and regulations.
Haha! Your first line (okay, first 11 words) is funny as hell.
A carbon tax may work, but I’m skeptical. We need a Manhattan-type project to develop sustainable energy sources
You need to balance the market effects. Money raised from the tax should go into a reasearch/operations fund to take care of the effluent. Not into a general fund. Then you get the market oriented consumer side causing a rebalancing of priorities, distributed through all channels, AND the clearly demarcated funds also provide an incentive to solve the problem.
Politicians will want it to go into the general fund, because they like spending money. THAT is the weakness of this idea. Done right you attack the problem on many fronts, as from the consumer side you cause all kinds of efficiens to pile up due to a cost re-balancing, AND you provide research incentives for solutions to the problem.
Using the price model in an intelligent way.
Yes indeed, tax carbon. But don’t hypothecate the money. There’s no link to how much it would be optimal to tax carbon (the cost of the externalities) and how much should be invested in alternatives. And you’d really want the investments to be decided by the political process? Change the price structure, sure. But revenue neutral over the whole budget. Let the market react to that changed price structure.
Yes indeed, tax carbon. But don’t hypothecate the money. There’s no link to how much it would be optimal to tax carbon (the cost of the externalities) and how much should be invested in alternatives. And you’d really want the investments to be decided by the political process? Change the price structure, sure. But revenue neutral over the whole budget. Let the market react to that changed price structure.