thegreekdog wrote:Metsfanmax wrote: Also, it is a fool's errand to suggest that deregulation of the energy industry is possible to the extent that you suggest.
I don't disagree with this.
Metsfanmax wrote:Much better to trade poor government policy (command-and-control) for smarter government policy (clear price signal).
I do, however, disagree with this.
While I agree that deregulation of the energy industry likely will not have the desired effect for many years, I also do not foresee smarter government policy occuring (unless we can somehow get rid of rent-seeking, which we won't).
Rent-seeking does not have a one-size-fits-all effect. Some policies are much more prone to rent-seeking than others. Command-and-control and cap-and-trade are particularly vulnerable in this regard. For example, with the latter an examination of the Waxman-Markey bill displays a veritable Christmas tree of emissions allowance giveaways to various companies, which largely would have negated the effectiveness by not making it cost as much to emit greenhouse gases. A carbon tax is much less susceptible because basically the only thing you can do is lobby for an exemption for your company. The tax would still apply to everyone else, meaning that it has the desired effect with the price signal it establishes. So smarter government policy that we citizens lobby for can (and perhaps should) weigh susceptibility to rent-seeking in selecting a policy, and the carbon tax wins out there too. But anyway, I obviously don't support full deregulation of the energy industry, because that will not achieve the desired effect of reducing emissions.
BBS wrote:Another point is that if you do away with freer pricing, then you'll get less accurate appraisals of the net present values of investments. E.g. with monopoly ratebases for utility companies, they get rewarded to simply investing in more plants--even though idle capacity at peak demand is increasing (thus is wasteful). The government policies induce greater waste because the government policies control prices.
This is just an argument for why some price signals are worse policy than others. As long as you continue to avoid discussing the actual policy in question, your points only serve to strengthen why we should be altering government policy to a different approach.
I have yet to read (and you've yet to give me) an article discussing costs and benefits in regard to climate change. This lack of fuller understanding reflects to me an unscientific agenda driven mainly by irrational fear (or overestimated costs which aren't weighted down by benefits). Climate change is a problem, but its implications seem to have been poorly understood and most likely highly exaggerated.
There's plenty of understanding out there; it doesn't reflect the state of everyone else's knowledge that you haven't found the information you want. The IPCC has a whole working group dedicated to understanding the impacts of climate change, and the
costs associated with it. The reason you can't find much on the comparative benefits regarding climate change is that there really aren't any net benefits to it, as far as we can tell, not because people are hiding them. Notice that even that guy from the Cato panel, in his slide on "the positives," only comments on how new technologies may reduce the future impact and that wealthier countries have a better ability to adapt.
It's basic economic theory which holds for other goods that are less regulated. If you'd care to read more about it, then let me know, and they'll provide even more detail. Whichever mix of sources of energy is cheapest to produce will tend to be the most profitable one. If you take away the subsidies and regulated profits of the energy industry, then the current sources of fossil fuel will not appear as cheap as they are. The current prices are the result of such state intervention; remove it and you'd get greater innovation, greater efficiency (THUS LESS WASTE, not sure why I have to keep typing that), lower prices, and higher quality. The final price is a matter of speculation and it'll depend on the degree of competition--from permaculture industry to the various types of energy industries.
The essential reason why your analysis doesn't solve the problem is that inefficiency is
not the primary driver of pollution. Reducing efficiency and waste effects would help, and I support regulation (or deregulation) that achieves this. The primary driver of the greenhouse gas emission is the massive demand for fossil fuels, which is directly related to the price. We can drive a big dent in reduction by efficiency gains, both at the consumer and producer level, but that cannot be the only strategy if we want to avoid the two degree warming target. Also you claim that prices would increase if we decreased regulation because of removal of subsidies, but you're ignoring that we also drive up the price now substantially with other policies (existing energy taxes and climate regulations).
Additionally, most of your analysis focuses on electricity generation but transportation and heating fuels also play a huge role in greenhouse gas emissions.
It won't be revenue-neutral (and this is a nirvana fallacy on your part). Why would government go through the trouble of passing something and not getting rewarded for it? They wouldn't pass it, so you'd have to circumvent the government, thus crony capitalism, by insisting on limited government in such matters.
Besides, passing a tax on that industry can easily be overcome by their lobbying organizations, which will redirect revenues to the taxed industry's coffers, thereby resulting in hardly any effect from the carbon tax. That's been the general story of taxation and regulation, so I fail to see your expectations as being realistic. The only way to prevent that is to deprive the federal government of so much power.
It's a failure of the citizenry to view the government as some distinct apparatus that we have no control over when it comes to making specific policy. As soon as we take that stance, all of the impacts you describe become reality. I demand better policy from my government, and you'll never get it if you don't ask for it. So I am asking for it. I can't guarantee that the carbon tax we implement will be revenue-neutral, but that doesn't mean it's a net-bad idea. Based on previous Congressional discussions, it is likely that some portion would get redirected into subsidy for renewable energy (though some Republicans have said that they would only vote for the bill if it was completely revenue-neutral, and I hope they stick to that instead of letting the Democrats run them over on this). Even if government kept 100% of the revenue, it's the price signal that's the main effect. The dividend part is intended to make this easier on American households to adjust to the increased price.
Again, my point stands, the government cannot better foresee and react to the long-term problems than the market. You have yet to explain this. Just saying, "carbon neutral tax" explains nothing about government being able to estimate the total social cost at various prices.
Yes, and I am not asking the government to react to long-term problems. That's the market's job, as I did in fact already state. But the conditions need to exist for the reaction, and they do not currently exist because the price of fossil fuels is artificially low compared to what it ought to be.
How do you know that the prices of final goods should reflect such long-term costs? Aren't you forgetting about the role that prices of the inputs play? Do the prices of the inputs vary in their inclusion of long-term costs compared to the prices of final goods?
Those prices for the inputs would vary, if the inclusion of the long-term costs were factored in. But they are not, which is why negative externalities are possible.
