Thu
Mar 1 2007
01:02 pm
Tax breaks and cleaner air at the same time
By: rikki

If you want to set market forces to work on reducing emissions, you have to make air pollution costly. It is costly in terms of human health, acid rain, haze, destabilized weather patterns and more, but these costs are borne by someone other than the polluter. To bring costs to bear on polluters, you must use artificial means to internalize the costs. A tax on emissions would serve that purpose.

The bureaucratic infrastructure for taxing air pollution already exists. Polluters as large as Eastman Kodak and as small as an auto-body paint shop have to estimate their emissions and receive a permit. We need to start taxing polluters based on their permitted output. Only holders of air pollution permits would be directly impacted.

Here is the beauty of this approach...you can cap revenues to be sure the economic impact of the tax is manageable. Arbitrarily declare you will collect $100 million in air pollution taxes, and work backwards to figure out how much that works out to per ton of emissions. Revenues can be linked to income tax reductions so the scheme is revenue-neutral and not a budget bloater, and this would alleviate economic disruptions as well.

This approach is better than aiming for a particular emissions-reduction goal, as with Kyoto or credit-trading schemes, because it keeps economic impacts in control. Just start the ball rolling and see how far the market takes it. Once polluters start paying to pollute, they will adopt cleaner technologies more readily, and there are a number of cleaner technologies already available that are only marginally more expensive than the dirty processes they replace.

Different compounds could be taxed at different rates, high rates for dangerous substances like mercury, low rates for ordinary compounds like carbon dioxide, just as long as we end free, socialized pollution.

Topics:
SayUncle's picture

I find it odd that the law

Submitted by SayUncle on Thu, 2007/03/01 - 1:15pm.

I find it odd that the law essentially lets companies pay money to break the law. Can i get a 'rob one bank for free' card?

Meanwhile, if Joe Homeowner modifies a stream on his land, he'll probably go to jail.

It's like a really bastardized version of corporate welfare.

---
SayUncle
Can't we all just get a long gun?

Number9's picture

Let's look at Global Warming...

Submitted by Number9 on Thu, 2007/03/01 - 5:18pm.

rikki has written a column in the Metro Pulse which I think will run next week. The hyperlink is included above. Both rikki and metulj have been addressing this concept for some time on KnoxViews. As has Sven.

This will be a long slog so can we agree at the beginning to keep the ad hominem attacks to a minimum?

Cap and trade was successful. The new concept of personal carbon credits is quite different from cap and trade. I have expressed skepticism about both carbon credits and carbon taxes. Part of the problem, and I don't talk about myself so save the questions, is that I have some knowledge about the enormity of what is involved in the computer modeling necessary to establish both the theory of Global Warming and man made Global Warming.

At some place in Oak Ridge scientists calculate the fallout and blast radius of a nuclear attack. They use a multitude of computers including some very powerful Crays. The number of variables are mind boggling. But yet they are a fraction of the variables needed to understand Global Climate. I have been trying to find a good example of this that I can actually use.

Here is one. It is not a difficult read and it does a good job explaining the number of variables. I do not know if Jerome J. Schmitt is owned lock, stock, and barrel by Exxon; I will leave that up to one of you to determine.

To simplify the discussion lets assume Global Warming is man made. I don't know. Maybe it is. Maybe it isn't. But to make this bearable let's assume it is man made.

What do we do?

more later...

rikki's picture

sabotage

Submitted by rikki on Thu, 2007/03/01 - 5:35pm.

The column is in this week's paper. There are 800 words there plus another 100 or two here. About three of them relate to global warming, and none of them relate to modeling complex systems. If you're just going to run off toward whatever shiny object has your attention, start your own thread and leave me out of it.

Number9's picture

calm down

Submitted by Number9 on Thu, 2007/03/01 - 5:49pm.

I was trying to frame this for KnoxView readers that are new or have not read the other posts. I did not find your column on the Internet Metro Pulse so I assumed it was not in this issue. I have not seen the dead paper version.

Your column is about solutions which is what we both agreed we wanted to discuss.

Number9's picture

rikki,

Submitted by Number9 on Thu, 2007/03/01 - 6:02pm.

I agree with your article on several counts. Especially on coal gasification. It is good in that it focuses on pollution rather than Global Warming. Showing the indirect cost of pollution advances the total cost to society issue. Which is under discussed.

Is your point that there is too little cap and trade and that the resources (money) from the cap and trade are not invested in new (actually old) technologies like coal gasification that have a carbon sequestration benefit?

rikki's picture

too little cap and trade and

Submitted by rikki on Fri, 2007/03/02 - 11:55am.

too little cap and trade and that the resources (money) from the cap and trade are not invested in new (actually old) technologies like coal gasification

That's about right. The European cap-and-trade system got off to a slow start because the EU issued too many credits, and US credit systems have been limited only to emissions increases, not total emissions, so their impact has also been minor. One disadvantage to credit schemes is that a polluter has two options with regard to emissions: reducing them or just buying credits. As you point out, this translates to slower adoption of new technologies.

With a direct tax on pollution, there is just one way to reduce the tax burden: reduce emissions. A tax (Pigovian as Amish suggests) seems simpler and more comprehensive than trading schemes. Amish, a Pigovian tax shouldn't cause a competitive disadvantage in theory, because it does not add new costs to the economy, it just realigns existing costs. In fact, as markets respond to the realignment, there should be a net decrease in costs and an overall economic boost.

By capping the dollar amount rather than the amount of pollution, it is easier to control the economic impact, and linking the pollution tax to reductions in income tax should make the proposal politically palatable. Businesses favor this sort of approach because of the predictability.

Sven's picture

The number of variables are

Submitted by Sven on Thu, 2007/03/01 - 6:18pm.

The number of variables are mind boggling.

Indeed.

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Number9's picture

back on subject,

Submitted by Number9 on Thu, 2007/03/01 - 6:56pm.

Grist magazine has an interesting article about Coal gasification.

Over in the other thread I spoke of my softening on carbon credits. I mentioned that a carbon credit for a large scale coal gasification plant would have merit and even I would go for it.

Coal gasification does have one problem. Mining. You still have to get the coal out of the ground. That is a tough problem. Even though it would create jobs many people are anti-mining.

The new pebble based nukes are similar in that while they reduce pollution and C02 a large segment of people will not support them due to the storage of the radioactive waste.

That is the long range challenge. You cannot conserve your way to energy independence when you have a growing population.

So the question is can the ideas from cap and trade be transferred to an individual basis? Is it possible?

How do you solve any of these problems without new technologies? Every new coal plant that is built without scrubbers just exacerbates the problems.

Amish's picture

What you're calling for here

Submitted by Amish on Thu, 2007/03/01 - 11:43pm.

What you're calling for here sounds similar to a Pigovian tax--useful for re-internalizing a negative externality created in production. I like the idea conceptually, because it would appear to move the nominal cost of goods closer to the actual cost. Essentially, people would have a real sense of what they're buying, by having some of the negative consequences represented in the price they pay.

Of course, what makes me nervous about the concept is that we compete in a global economy against many entities based in places where they wouldn't consider enacting such a thing. It could be economically hazardous... The curse of the early adopter. Hypothetically, tariffs and such might be able to balance it out, but I wouldn't begin to know how to to arrange all that. It would be for the folks smarter than me to sort out, I reckon.

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