Cambria on greenhouse reduction strategies

Ubiquitous blogosphere commenter Joe Cambria has posted a really interesting contribution on Rex Ringschott’s coal thread, suggesting a variey of greenhouse gas reduction policies as an alternative to either carbon taxes or tradeable emissions permits. Joe’s ideas deserve a thread all of their own. Here it is (I hope he doesn’t mind being pre-emptively made a guest Troppo contributor).

Carrots in place of sticks

by Joe Cambria

There is a choice of not acting in a direct way to curb emissions. Itâs not the way [many lefties] would most prefer, but we would get there far more painlessly than hitting ourselves with a tax or a trading system that would only breed cheating.

A libertarian view (not all libertarians) is that we could achieve pretty close to negligible emissions by the next 30-40 years by reducing government action in the economy that is causing mispricing.

A political left – if it was thoughtful and serious about this issue – could also tackle the issue in a similar way. Offer tax incentives for investment in nuke plants and allow accelerated depreciation allowances. Allow present coal plant operators to receive a tax write off for existing plants if they were replaced with nukes. Allow seriously attractive investment opportunities for outside investors. Go to zero tax holidays for 20 years if it were necessary. These are things that investment bankers are good at figuring out.

Offer similar concessions for new car owners that went to hybrids. Offer incentives to the car makers in the form of straight tax holidays and very attractive R&D expensing for new hybrid engines.

Ensure the savings rate goes up by offering even better deals in superannuation to ensure we raise the savings rate. Savings fuels capital spending and newer capital machinery is usually more efficient. Offer tax deals on efficiency standards for new equipment. The left is very good at micro reform. This is where they ought to focus in order to reduce emissions.

Hereâs a link that explains the use of the new light globe that would reduce power demand in a big way.

This electric car looks amazing and is supported by Silicon valley types. It could revolutionize the car industry.

A technological solution could work.

Other things:

Immediately remove height restrictions in the large cities. The most vocal nimbies are the ones who are preventing high-rise and high-rise is one of the best ways to reduce car usage. NYC is a great example of people doing away with cars for the simple reason that transport and occasional taxi use is far superior in getting around. The subway is very efficient.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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skepticlawyer
14 years ago

Good post Joe – and thanks Ken for putting it up. I think your NYC point is very good. Most New Yorkers don’t even bother with cars.

JC
JC
14 years ago

Oh jeez. Never thought it would end up here. Would have gram and typo checked it if knew.

Thanks Ken. Thanks Sl

SJ
SJ
14 years ago

It’s just incoherent right wing crap.

JC’s objective is to reduce government revenues. This week, greenhouse provides the justification. Oh, and less tax on super thrown in for good measure.

JC
JC
14 years ago

SJ

Not crap. We have an operating surplus of around $15 billion per year and have accumulated some fairly large surpluses in the past few years. If we’re using these surplsues to finance some of this turnaround in the energy sector through the tax code why would you be opposed to it? It’s not cutting revenues. I haven’t mentioned anything about cutting taxes except for super. So please explain how lowering the surplus to support a market induced change in energy use is a bad thing?

Nicholas Gruen
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Nicholas Gruen(@nicholas-gruen)
14 years ago

Firstly there’s the idea that a ‘technological solution’ is some alternative to the kind of solutions we’ll get with sensible carbon emissions pricing. Carbon pricing will help bring on all the innovations Joe is talking of IF they’re sensible things to do. If there are market failures address them. There are a few things at the margin that I have no problem with. I don’t have a problem with a tax on incandescent bulbs to get people buying the lower voltage ones. Beats me why they don’t buy more of them now since they’re already more cost effective, but if a bit of tax could help and it’s clear people are being short sighted in their purchases, I don’t have a problem.

But the idea that there should be tax breaks for specific technologies for large bits of infrastructure where investors do their sums? A tax break is like a subsidy – a loss of money for the govt and a gain for the beneficiary. Now we realised that this was a dumb way to go when we realised that telling each factory how much emissions they were allowed (according to an army of bureaucrats) was just dumb. It’s much better to cap the emissions in aggregate (better still to raise revenue by selling the cap and reducing other distorting taxes) and just let the market work out where it can best make the savings.

The hybrid car is a good example. Everyone likes the idea of them. But they’re not that efficient a way to reduce emissions. They’re very expensive and you’d achieve more by spending the additional money on planting trees. That’s precisely what would happen with a properly introduced carbon tax or emissions trading scheme. People would meet the constraint in efficient ways.

There is only one way in which this is ‘libertarian’ and that’s the opportunistic way that it starves the beast – it cuts taxes by stealth. I don’t have any problem with lower taxes, but if we do it why don’t we do it by democratic decision and efficiently, not with carbon pork barelling? [with apologies to the mixed metaphor police].

Most people want taxes raised – ie they want a government doing things that require financing. Once that’s conceded, one wants the tax system to be efficient like any other system, and that means that it shouldn’t become the play thing of special interests – but should sit in the background effecting people’s behaviour as little as possible. Joe’s ideas are to my mind the very antithesis of libertarian. They involve the government deciding that it’s better for me to buy a Prius than to buy ‘greenfleet’ credits, or have shorter showers, or ride a bicycle, or walk or make my contribution to carbon abatement some other way – like paying someone else money to economise on carbon. It’s the antithesis of libertarianism, and it’s inefficient.

It’s one star from me.

conrad
conrad
14 years ago

I completely agree with JC about the planning restrictions. Its crazy that good quality high rise accomodation in Sydney and Melbourne appears to be completely restricted to a very small number of areas despite the size of the cities. Given the immigrants that come to Australia and the fact that lots of people now live overseas in cities with such accomodation for some part of their lifes, I’m sure there must huge demand for it (Chatswood comes to mind of a good example of it). It would be good idea to fix up the taxis here too, instead of running a crazily resticted plates scheme, in which case many of us could pretty much ditch our cars. I’ll assume that won’t happen, however, as long as JHs wife owns a number of plates.

Nicholas Gruen
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Nicholas Gruen(@nicholas-gruen)
14 years ago

Ken,

“But a balanced mix of rewards and penalties, taxes and incentives, is sometyhing else entirely.”

That’s what a carbon trading or tax regime is – a balanced mix of rewards and penalties. If you abate carbon you get a (balanced) reward, and if you increase carbon emissions you get a (balanced) penalty.

Nothing else does this. If you have a tax incentive to buy hybrid cars, you don’t know how much abatement they’ll generate. And you can bet your bottom dollar that they won’t abate carbon efficiently – that there will always be a lower cost way of carbon abatement. They’ll subsidise the wife in Toorak to be parked next to hubbies’ Hummer. They may travel 3 Ks a day to Toorak village for shopping. And where the family used to go on weekend drives with the wife’s old Merc, the hybrid isn’t as comfy so they go on weekend trips in the Hummer. Now you may think this is a perverse example. It is. But the point it makes is far from perverse. ‘Balance’ sounds like a nice thing but it doesn’t mean a plethora of policies. Balance is likely to be produced simply. ‘Balance’ will be produced in this case by pricing carbon emissions. And if you don’t get the carbon abatement you want you up the price of carbon emissions.

On the European trading regime. Yes it seems at present to have fallen apart. I understand that that’s because some of the countries cheat. That very fact points to something pretty serious – something which some of us have been saying for a long time. The European’s are not goodies in greenhouse matters – rather they’re the leaders in green rhetoric and the accompanying hypocrisy.

On trading it’s true, if you can’t trust the people you’re trading with then you can’t trade with them. I’m not sure it creates much of a case for other policies. They can cheat on them too.

But none of this is very surprising. If we are to cobble together global co-operation it will be done by trying and failing and fixing the failures. It is nice to see the Europeans having paraded as goodies on greenhouse for so long having to put their money where their mouth is. We are at least now encountering the collective action problems we’ll need to encounter and surmount if we are to tackle greenhouse. So far most of the action has been rhetoric – where the Europeans have excelled. Now the rubber is meeting the road and the fact is that no-one’s prepared to do much suffering. But I’d be surprised if the European trading system isn’t cobbled back together into some kind of form.

Regarding your argument that the developed world will need to help the developing world. Well a big yes and no to that.

Firstly the ‘no’ side. Certainly the idea has got a lot of play that that it’s not fair to ask developing countries to meet the cost of carbon abatement. I’m highly sceptical of this both as a piece of rhetoric – ie a claim about what should be done, and as a piece of expediency – ie a claim about how to best achieve our goals of collective action.

Right now we’re going through water restrictions. Is anyone saying that the poor need less restriction because they’re poor? It seems barmy doesn’t it? So I think that all this stuff about how we got our industrial development for free without bearing carbon emissions constraints and the poor developing countries don’t and therefore it’s OK if they trash the planet for a bit longer while we pull up our socks. Well it doesn’t make sense. I think we should be much harder on the developing countries and expect the large ones to come in and come in now. Even if it made sense to talk about ‘us’ and ‘them’ through all the generations since the industrial revolution – which I don’t think it does – the developing countries have got something much more valuable from ‘us’ than ‘we’ had when ‘we’ pioneered the industrial revolution without abating our carbon emissions. That’s the technologies ‘we’ pioneered. And most of that technology they get for free – what they don’t get for free they get at much lower costs than ‘we’ paid for it.

On the other hand I don’t have any problem with being generous to them – though
I’d be happy to be generous to them for being poor – ie I’d expand aid to them, but not suggest that somehow they’re not responsible for their emissions.

This all comes out at a place that’s quite neat and compelling because if you ask yourself how the burden of abatement should be equitably born across the globe, you can’t go past per capita emission entitlements. Each person on the earth should have a right to emit as much as the average and the right to trade that entitlement. (I don’t mean literally – but in principle with the per capita’s aggregated through nations).

So that leaves you with an international carbon trading regime in which the developing countries have the lion’s share of the permits and in fact spend them on growing emissions, but also sell a lot of them back to the West for lots of cash. (We did something similar with Russia, giving it excess permits or ‘hot air’ with the idea that they then sold it back to the West. We should do it on a giant scale for the developing countries. Sadly the goody-goodys (goody-goodies?) of the world would rather be moralistic about it and say that they shouldn’t have to meet commitments until the West has donned the hair shirt for a while longer.)

I expect that if we ever are able to surmount the collective action problems and get some decent world action on greenhouse – that things will gradually morph in this direction where the developing countries are brought in with generous entitlements which they then sell back to the world. That’s a lot better than us going in and giving them ‘help’ with all the technologies we want to install for them. For reasons that take us back to the hybrid car example, it’s important that the developing countries adopt technologies of carbon abatement that are driven by their technical needs, not our commercial ones.

sdfc
sdfc
14 years ago

Well JC, some of what you say sounds worthwhile however pardon me for being a little sceptical but 30-40 years sounds like a figure that may well have been pulled out of someones arse.

Tax inventives to nuclear power with no mention of wind, solar, wave power etc sounds an awful a lot like picking winners to me or is that the whole point, renewables bad greenie stuff, nukes good libertarian (a confused crowd, some of whose members are not even sure what libertarian means) stuff.

Let’s hope any tax incentives are more efficient than those given to investors in vineyards.

GMB
GMB
14 years ago

CO2 emissions are good.

JC you ought not be compromising with these lunatics. They do not have the evidence.

SJ
SJ
14 years ago

In light of JC’s response, I withdraw my characterisation of his proposal as “incoherent right wing crap”.

JC Says: “I haven

Ingolf Eide
Ingolf Eide(@ingolf)
14 years ago

This isn’t an area where I’ve done much work, Nicholas, but I like your approach of setting simple, clearly defined caps or targets — preferably on a per capita basis — and then letting the invisible hand go to work.

Has to be infinitely preferable to getting bogged down in ad hoc schemes, subsidies and penalties, each of which would almost certainly spawn a host of fresh ones to correct the mistakes or capitalise on the occasional successes. Not to mention the politicking and corruption that would fester in the resulting lobbyist free for all.

Mark Hill
14 years ago

Go over to catallaxy or Quiggin’s and comment on my view that liberalisation
of industry will abate CO2 emissions without cost, but at the same time
providing a large benefit in general welfare and increased GDP growth.

Now SJ, why is nuclear “right wing” when Sweden and Finland use it
extensively?

Why are tax cuts “right wing” if Kennedy and Keating gave them out, and Reagan was criticised as a Keynesian?

Since tax cuts are generally good and nuclear energy is safe (see Sweden) I don’t know why they are terms of abuse. They are nouns.

Rex Ringschott
Rex Ringschott(@rex-ringschott)
14 years ago

Some time back, Big Gav over at the excellent, if weighty Peak Energy blog, linked to Tom Conrad

JC
JC
14 years ago

Sj

My comment about lowering taxes was meant to imply actual cuts in tax rates . I wasn’t exactly clear on that but I wasn’t actually being dishonest. Sorry for not being clearer.

In any event if behavior modification is the way to go there are worse ways to achieve these objectives than dipping in the already large surplus and attempting to modify behavior in a way that is as least painful to the little guy as possible.

Look, personally I don’t care if they trebled the cost of energy from a personal perspective. However I do care about the small guy who would end up getting hurt.

I’m trying to figure ways in how a change over is mitigated as painlessly as possible for all concerned.

In any event the government is running around with a surplus of 15 bill. We do have money to make changes without hitting the pockets through what could turn out to be another regressive tax.

If this change over does happen it will have enormous implications for the economy. We want to see as little pain as possible for all concerned.

Take a look at Mark Hill’s suggestions at the sites he said. He’s made a terrific contribution to the whole discussion.

Sacha Blumen
14 years ago

I don’t know enough on technologies and the economics of tax breaks to talk about it, except that if all the costs are known, a cap and trade scheme seems the most sensible given my very small amount of knowledge of the matter. The idea of looking at building restrictions is really interesting – I’ve wondered why there aren’t many more taller buildings in inner Sydney. You could easily have many taller buildings in the CBD, possibly combining residential and commericial, or whatever you want.

The Melbourne CBD has plenty of quite small buildings which might possibly be able to be replaced with taller ones, and there’s quite a bit of room in inner Brisbane (the residentical population of the CBD has boomed in the last few years), say in Milton, Spring Hill, Herston, Bowen Hills, Kangaroo Pt, and New Farm.

Tom N.
Tom N.
14 years ago

JOE’s PROPOSAL A LOSER

What Nick Gruen said. Basically, Joe’s piece is an exercise in picking winners. Of course, any anti-carbon technology can be encouraged if you throw enough money at it. But the question is: which one(s) should be encouraged. I’d prefer to leave that to the market, notwithstanding Joe’s undoubted expertise in the area.