28 October 2009

more on oil and economic incentives

Looking at the various points brought up here.

1) This is known. This is great. This is not happening because it requires a massive number of people changing their behavior. Without incentives, that will not be happening. Even if the incentives are tangible long-term benefits in terms of cost savings for consumers because the costs for energy consumption are already very low. Simple way to encourage changes like that to happen: raise the tax and cut the subsidies on energy.
2) Bills in the Senate are generally dumb in many ways. Seems like this problem is one of the many problems of "more government" not always being a good response to a problem by imposing costs on gasoline without imposing these costs in a flat carbon tax or a Pigovian system instead of our goofy attempt to call something cap and trade.
3) This is also known. In fact, it is precisely those costs that to me require some intervention in the first place because they are known and capable of being calculated easily with commonly available economic data and environmental studies. They are costs which have already happened in many cases and haven't been paid by producers or consumers of energy (or food in the case of meat, this is also true of water rights relative to agricultural efficiency). I think this is more why you need an externality tax at all (a straight carbon tax), because it imposes property and health costs that aren't accounted for in the generation of energy. Any global warming effect is, to me, secondary, because these costs are immediate and already exist. Setting the tax is therefore easy because you can simply tab up the costs (health and environmental costs which are not yet regulated) and weight them against the benefit of cheaper energy, and include whatever costs are uncompensated (which are substantial) in the bill paid by producers and consumers of energy. That has significant benefits for the overall global warming cause in that it starts the path of conservation or conversion away from carbon.

The national security implications are a fairly weak argument (we don't get most of our oil from "our enemies", much as people like to claim), but the self-dependency or a relative interdependency involving renewable resources would be a big help over a dependency on a carbon spewing product. In fact, one such motivation to me that we should be moving away from oil: Saudi Arabia wants to have a pay-out in the event that we successfully steer developed/developing economies away from petroleum energy sources. To which I reply: fuck off. You had almost a century to build up your infrastructure and public development with petro dollars. You have squandered it. That's a "you" problem. Enjoy.
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