I just picked up this discussion, and apologize if someone has already addressed this
point, but I wonder how much significance we should attribute to a prediction that a
combination of sin taxes and carbon trading will be "cheaper" over the next
century than a combination of subsidies and fines.
One question worth asking is: cheaper to whom?
Because the theoretical efficiency of a market-driven decision-making system can coexist with a variety of different distributional effects. Conceivably, a system of sin taxes and carbon trades might be cheaper for the global economy as a whole, yet disproportionately burden the poorer Third World countries, or the lower classes of the developed countries, in a way that was dangerous to political stability or obnoxious to many people's moral sensibilities.
Another question might be: "cheaper" as measured by which yardsticks?
If the biological value of a species endangered by climate change could somehow be quantitied, which is doubtful in itself, are we at all certain that a market based system of CO2 controls that minimizes dollar costs would also minimize biological costs?
The same point applies to social costs. A system of CO2 controls that was cheaper in financial terms might conceivably be more costly in terms of Bengalis being flooded out of their homes, Eskimos having their caribou hunting seasons disrupted, or small business owners being driven into bankruptcy by -- say, excessive sin taxes. Whereas a more financially costly system of government subsidies for new technology development might conceivably reduce the social costs that are paid by the most vulnerable individuals or groups in a given society.
I think another question might pertain economic side effects of different ways of achieving CO2 reductions. Suppose that we would prefer to see human living standards maintained through the development of new renewable energy technologies, rather than CO2 reductions being achieved primarily through a reduction in the average living standard, a slight or not-so-slight impoverishment of people whose lifestyles now depend on cheap fossil energy.
Assuming that the development of new energy technologies is our aim, is it necessarily more cheap and efficient to go about this indirectly, through changes in prices and costs that everyone encounters in the market, rather than going about it directly, through hiring some scientists and engineers and paying them to work on some promising leads?
Surely the market-based approach, although it is acknowledged to be a very powerful and effective tool for many purposes, would involve a whole series of transaction costs and time lags in corporations and individuals responding to new price signals. And these would probably have some generally inflationary effect on the economy as a whole. Whereas direct subsidies for the further development of promising alternative technologies, if the technologies were targeted well, might avoid some of these transaction costs and time lags, and potentially be less inflationary.
[EMAIL PROTECTED] wrote:
> Well in one sense it depends on the prediction. A prediction that in
> one hundred years a combination of sin taxes and carbon trading will be
> a cheaper way to reduce emmissions than a raft of subsidies and fines.
We are certainly in agreement on this point. In fact, I don't think
it's controversial; it has a sort of straw man feeling to it.
If it isn't controversial, why is the world throwing so much money into
subsidies? It is like as if there was two products that did the same
thing and one took twice as much fuel as the other but decided to buy
some of both because both of them will help to get the job done.
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