Al Gore: Taxes...meet climate change, climate change...taxes

[Nicholas Carey]

Al Gore made a major speech at NYU Law School today on climate change. Some interesting proposals. You can read the transcript at http://thinkprogress.org/gore-nyu

Here's a couple of tidbits with a little something for everybody. First, for people concerned with human-induced climate change:
...what would a responsible approach to the climate crisis look like if we had one in America?

Well, first of all, we should start by immediately freezing CO2 emissions and then beginning sharp reductions. Merely engaging in high-minded debates about theoretical future reductions while continuing to steadily increase emissions represents a self-delusional and reckless approach. In some ways, that approach is worse than doing nothing at all, because it lulls the gullible into thinking that something is actually being done when in fact it is not.

An immediate freeze has the virtue of being clear, simple, and easy to understand. It can attract support across partisan lines as a logical starting point for the more difficult work that lies ahead.

Second, something for the "Free Marketeers" :D:
In a market economy like ours, however, every one of the solutions that I have discussed will be more effective and much easier to implement if we place a price on the CO2 pollution that is recognized in the marketplace. We need to summon the courage to use the right tools for this job.

For the last fourteen years, I have advocated the elimination of all payroll taxes — including those for social security and unemployment compensation — and the replacement of that revenue in the form of pollution taxes — principally on CO2. The overall level of taxation would remain exactly the same. It would be, in other words, a revenue neutral tax swap. But, instead of discouraging businesses from hiring more employees, it would discourage business from producing more pollution.

Global warming pollution, indeed all pollution, is now described by economists as an “externality.” This absurd label means, in essence: we don’t to keep track of this stuff so let’s pretend it doesn’t exist.
And sure enough, when it’s not recognized in the marketplace, it does make it much easier for government, business, and all the rest of us to pretend that it doesn’t exist. But what we’re pretending doesn’t exist is the stuff that is destroying the habitability of the planet. We put 70 million tons of it into the atmosphere every 24 hours and the amount is increasing day by day. Penalizing pollution instead of penalizing employment will work to reduce that pollution.

When we place a more accurate value on the consequences of the choices we make, our choices get better. At present, when business has to pay more taxes in order to hire more people, it is discouraged from hiring more people. If we change that and discourage them from creating more pollution they will reduce their pollution. Our market economy can help us solve this problem if we send it the right signals and tell ourselves the truth about the economic impact of pollution.Whaddya say?

[Dan McCosh]

It's an interesting notion. Roughly a 15% tax on all manufactured goods, as long as they are produced in the U.S. Tax exempt if they are produced overseas. Sound's good for the economy? Much as I hate to admit it, Al Gore often makes GW Bush look like a genius.

[Meerkat]

A tax on breathing? :confused:

[huisjen]

I don't see the part where foreign stuff is exempt.

Dan

[mdh]

How much cow fart tax would a farmer pay? Wouldn't he just pass the cost on down to the processor, to the consumer?

[PeterSibley]

The first step....before Gore's proposals is an international carbon trading agreement and a situation where technical innovation can make you money ,as in any other realm.Without that there will be no movement anywhere .There has to be an option for the guys who run the place to make even more money .

[Phillip Allen]

How about all those charcoal mills on Haiti?

[PeterSibley]

Irrelevant Phil ,that is carbon in current cycle , same as the cows fart ,its the the fossil stuff that's the worry .

[Phillip Allen]

Shall we tax countries with volcanos?

[PeterSibley]

Definately ....I'm Australian...more money for me when St Helens blows again.You'll wait a long time for an Australian volcano.

[peb]

Well, I am always interested in tax policy and this is really a new one. On one hand I kind of like it because payroll taxes are largely responsible for our tax system being accused of not progressive enough. Of course, the people making the accuasation blame the income tax.

On the other hand, it does seem like it could have some drastic unexpected consequences. In particular, you have to be very careful about taxes which target one industry over another, because lower taxes will cause higher returns on invested capital, so certain industries will gain an advantage that is not market driven. This is a big problem.

For example, trucking would probably take a big hit. Well, I have long held that long haul trucking is a successful industry only because of huge indirect government subsidies. And it would be better economically and environmentally if we didn't relie on it as much. So good you say?

But wait, railroads, the alternative which we should all support would probably also get hit hard. So it will be tough for them to attract the capital needed to fill the trucking gap.

Most service/high tech industries, such as software development, will get off reallt cheap. We all say good!!! We want our economy to go in that direction. Well that assumes we can continue to import everything, which means the account deficit situation will even be harder to solve under this tax system.

As for as cattle, that is a concern for me. My family is heavily involved in the cattle industry and cattle produce a LOT of methane. But we are also farmers, so maybe all that green stuff will be counted to offset it. :) :)

[Dan McCosh]

I guess you could tax imports, although I think that would run afoul of the GATT. In any case, it would amount to a general sales tax, which would be highly regressive in its economic effects. Can't see how it would affect CO2 production, however, as all businesses already conserve as much as they can to cut energy costs.

[uncas]

A Vat!

[ljb5]

Can't see how it would affect CO2 production, however, as all businesses already conserve as much as they can to cut energy costs.

That's only partially true, if at all.

Business don't cosnerve "as much as they can." They conserve "as much as is profitable."

Lots of businesses could conserve more, but they've simply decided that it would cost more than it would yield. It's a balancing act between expense of upgrading equipment and savings from conservation.

If you change the relative weight of the two factors, the balance point shifts.

I think this is a great proposal because it puts the true costs front-and-center where the customer can see them and make their decision based on them.

Naturally, producers would have to pass the cost on to customers --- but that's a good thing because it puts the cost into the open market where the forces of capitalism can work.

It also rewards innovation because anyone who develops a more efficient method can immediately deliver savings to their customers.

[Dan McCosh]

A Vat!


It is sort of like a VAT, but it's more like a value-not-added tax, as far as I can see.

[Milo Christensen]

Would there be tax credits for folks like me who plant trees in an effort to reduce my carbon footprint on the rest of you?

[uncas]

I hated the VAT.
Got charged almost 300.00 ( converted ) for a tent that I bought and had sent to me in the UK from the US for about 350.00

[ljb5]

Would there be tax credits for folks like me who plant trees in an effort to reduce my carbon footprint on the rest of you?

That sounds like a good idea... but you might be a little disappointed if you calculate the amount of carbon saved.

See if you can estimate how many pounds of carbon go into each tree per year. (Not counting the leaves, of course, because they fall off and decompose each year.)

[Dan McCosh]

That's only partially true, if at all.

Business don't cosnerve "as much as they can." They conserve "as much as is profitable."

Lots of businesses could conserve more, but they've simply decided that it would cost more than it would yield. It's a balancing act between expense of upgrading equipment and savings from conservation.

If you change the relative weight of the two factors, the balance point shifts.

I think this is a great proposal because it puts the true costs front-and-center where the customer can see them and make their decision based on them.

Naturally, producers would have to pass the cost on to customers --- but that's a good thing because it puts the cost into the open market where the forces of capitalism can work.

It also rewards innovation because anyone who develops a more efficient method can immediately deliver savings to their customers.

The problem with this analysis is that in most cases, when energy costs rise, the cost of increasing energy efficiency tends to rise at about the same rate as the cost of the energy saved, negating any supposed incentive. One example being the common one of the cost of fiberglass insulation vs. the heating bill. The main cost of manufacturing fiberglass is energy--hence the price rises along with the heating bill if the cost of energy goes up. Adding taxes doesn't change the relationship, as both get the taxes under the proposal. Both the fiberglass manufacturer and the homeowner already have a strong incentive to reduce their energy cost. The homeowner wants to save on his heating bill, while the insulation company wants to sell more, at higher profits--which requires minimizing his energy consumption. At the heart of things, energy and labor are what make up almost all of the cost of making things. Almost any effort to reduce costs has to be addressed to one or the other.

[Norman Bernstein]

The flaw in all these arguments (including Gore's, himself), is that the US is already on the downside of the pollution curve, when viewed over the last several decades. Environmental regulations have already done a great deal of 'good' (if you equate 'good' to a rise in efficiency and a reduction of pollution).

What's really needed isn't an acceleration of US efficiency, vis a vis pollution....

...instead, what we need to do is invent technologies to dramatically reduce CO2 emmissions.... and give them away, for free, to the Chinese and Indians!

The phenomenal growth of the third world is where the biggest pollution threats lie.

[ljb5]

The problem with this analysis is that in most cases, when energy costs rise, the cost of increasing energy efficiency tends to rise at about the same rate as the cost of the energy saved, negating any supposed incentive.

Yup, that's called 'Capitalism.'

If you have something of value (like a way to save energy), you can expect to sell it for a profit.

If it becomes more valuable (i.e. would save even more money) you can expect to sell it for even more.

Yet still, the system works.

Although the cost of insulation has risen, people still buy it -- in fact, they buy more of it when the cost of energy goes up. (Of course, the truly smart people bought it long before the cost went up. That's called 'foresight.')

Moreover, some methods to decrease consumption have no cost at all. When the price of gas goes up, lots of people just drive less. It doesn't cost anything to drive less.

It doesn't cost anything to ride your bike to work.

And when it's time to make big decisions like where to buy a house or what car to drive, it helps to think about efficiency.

It actually costs a lot less to buy a small car than to buy a big SUV.

Efficiency isn't expensive. Waste is not a capitalist ideal.

[Donn]

...instead, what we need to do is invent technologies to dramatically reduce CO2 emmissions.... and give them away, for free, to the Chinese and Indians!

The phenomenal growth of the third world is where the biggest pollution threats lie.

The technology already exists, invented, I believe, by the Eqyptians, some 3,000 years ago.

http://www.bbc.co.uk/health/images/300/condoms.jpg

[ljb5]

http://www.bbc.co.uk/health/images/300/condoms.jpg

Amen.

Now, if only we had a president who would allow us to advocate such a policy.

[Dan McCosh]

The flaw in all these arguments (including Gore's, himself), is that the US is already on the downside of the pollution curve, when viewed over the last several decades. Environmental regulations have already done a great deal of 'good' (if you equate 'good' to a rise in efficiency and a reduction of pollution).

What's really needed isn't an acceleration of US efficiency, vis a vis pollution....

...instead, what we need to do is invent technologies to dramatically reduce CO2 emmissions.... and give them away, for free, to the Chinese and Indians!

The phenomenal growth of the third world is where the biggest pollution threats lie.


I don't think there has been any reduction in C02 emissions in the US in the past few decades. There is a lot of confusion about the recent use of "pollution" and "emissions" as adjectives for C02 formation. "Pollution" used to imply mainly toxic byproducts--there has been a dramatic reductionin those. "Emissions" were the regulated polutants, such as CO, NOx, HC, etc., in car exhaust. C02 has long been considered benign, or even benificial, hence isn't usually in the "reduced pollution" statistics. The consumption of energy, most of it based on C02 producing combustion, is a reflection of the economic growth in the third world, and clean-burning processes don't change this.

[Norman Bernstein]

I don't think there has been any reduction in C02 emissions in the US in the past few decades. There is a lot of confusion about the recent use of "pollution" and "emissions" as adjectives for C02 formation. "Pollution" used to imply mainly toxic byproducts--there has been a dramatic reductionin those. "Emissions" were the regulated polutants, such as CO, NOx, HC, etc., in car exhaust. C02 has long been considered benign, or even benificial, hence isn't usually in the "reduced pollution" statistics. The consumption of energy, most of it based on C02 producing combustion, is a reflection of the economic growth in the third world, and clean-burning processes don't change this.

Good clarification, Dan, and I stand 'ammended' (if not corrected) on the terminology.

However, I wasn't necessarily referring to 'clean burning' processes.... solar and wind technology could potentially replace 'burning' processes.

[George Roberts]

Do we tax the oil production or the oil consumption? It is much easier to tax the carbon as it comes out of the gournd.

Do we tax or limit the production of CO2 or the consumption of products that produced CO2? Supply side v demand side is a classic tax argument.

The whole issue is foolish.

[PeterSibley]

Do we tax the oil production or the oil consumption? It is much easier to tax the carbon as it comes out of the gournd.

Do we tax or limit the production of CO2 or the consumption of products that produced CO2? Supply side v demand side is a classic tax argument.

The whole issue is foolish.

Your alternative ?

[ljb5]

Do we tax the oil production or the oil consumption? It is much easier to tax the carbon as it comes out of the gournd.

It doesn't make a huge difference which end of the equation you tax.
If you tax the production side, the producers will raise the price and pass the extra costs along to the consumers.

Ideally, a free market regulates best when the costs are directly linked to the behavior that you're trying to regulate.

For example, if you want to discourage smoking, you should tax cigarettes, not cigarette lighters, ashtrays or smoking jackets.

The important thing is that the costs enter the free market where market forces can act on them. The consumers are free to decide which products to buy and everyone has an incentive to be more efficient and less wasteful.

[Paul Pless]

Sorry for taking this up so late in the game but...
Is this bull**** line from the same guy who invented the internet?


For the last fourteen years, I have advocated the elimination of all payroll taxes — including those for social security and unemployment compensation
Eight of those 14 years he was Clinton's veep and pretty muched toed the party line (all vice presidents toe the party line). I don't remember ever hearing of this from him before.

[ljb5]

Eight of those 14 years he was Clinton's veep and pretty muched toed the party line (all vice presidents toe the party line). I don't remember ever hearing of this from him before.

Hmmm. I think you've got a point.

Maybe there's a difference between 'advocating' for something and actually putting forth a proposal to do it.

I don't remember him ever actually proposing this plan, but perhaps it was part of his long-term goals for tax reform. It would be a very radical change, and it wouldn't be appropriate to do it all at once. Probably phase it in over several years to allow companies to make the necessary changes in accounting and such.

Probably start out with a few years of tax incentives for efficiency and conservation followed by a few years of tradeable tax credits, then a gradual reduction of payroll taxes.

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By the way Paul, as an aside: here's the truth behind the 'Al Gore Invented the Internet' story. (http://archive.salon.com/tech/col/rose/2000/10/05/gore_internet/print.html)

[Dan McCosh]

The Ben Franklinesque homilies aside, the "plan" seems to demonstrate a basic ignorance of its likely impact. The taxes proposed are roughly equivalent to 40% of the current total federal income, levied exclusively against a sector that is basic to that portion of the economy that produces materials, products and food. That kind of tax shift would be incredibly regressive, not to mention the probablity that it would incur a massive depression making the late 1970s seem benign. If the point is energy policy, it's a good idea to start understanding that riding a bicycle or not isn't what's at stake.