Subsidies and green[er] fuels

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.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.

5 thoughts on “Subsidies and green[er] fuels”

  1. 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.

  2. 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.

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