dagblog - Comments for "The Case for a Fossil Fuels Tax part 4"

Hal's real aim is income

Jeff — Mon, 01 Jun 2015 15:44:30 +0000

In reply to And the 1st comment by "Shade

Hal's real aim is income distribution. Reduction in fossil fuel consumption is just the ruse.

He thinks the poor use fewer fossil fuels so they will get more money back than the rich. The rich have the resources to lower their consumption should they choose...the poor don't.

And the 1st comment by "Shade

PeraclesPlease — Mon, 01 Jun 2015 14:56:20 +0000

In reply to You write: "real people will

And the 1st comment by "Shade" to that explanation explains why the "solution" will be a great problem.

And you still ignore that companies that would pay the most would then either increase prices for their customers (frequently a regressive tax yet again) and/or often find themselves burdened with extra costs vs. non-US firms that don't pay such a consumption tax. And the rich can afford to pay an additional $10K a year in gas - the poor will then get an additional $10K in tax shared rebates so they can... go drive around more and turn the heat up and buy more cars? who knows. it's a highly optimistic equation that just heavy taxation achieves specific consumption and innovation goals.

You write: "real people will

HSG — Mon, 01 Jun 2015 12:28:00 +0000

In reply to Fair enough - in some ways

You write: "real people will be paying for those higher priced fossil fuels and products like plastics and synthetics and agricultural products that depend on them. WalMart and Exxon will just pass on higher costs to consumers - what will Joe/Joesephine Sixpack do? Drive less? Higher energy costs are a regressive tax - they hit the poor much harder than the rich."

You are absolutely right and that is why in my earlier blogs in this series, I specify that all the revenues from the tax need to be rebated directly to the American public in equal shares. This will result in a progressive redistribution of wealth wherein poor, working, and middle-income Americans will on balance come out ahead since they spend less on carbon energy per capita than the rich do.

I explain the system very briefly (thank heaven for small favors) right here.

By the way, here's a quote from today's Washington Post's editorial "A good-enough plan". "Any economist will tell you that the most efficient way to reduce emissions is to put a price on them and get out of the way, allowing consumers and businesses to wring carbon out of the economy without grandiose central planning or favor to preferred interests."

Fair enough - in some ways

PeraclesPlease — Mon, 01 Jun 2015 10:13:02 +0000

In reply to Thanks PP. I oppose

Fair enough - in some ways subsidies and taxes are equivalent and fungible.

You want "artificially raise the price of fossil fuels to a point where super-normal returns can be generated from alternative energies" - but real people will be paying for those higher priced fossil fuels and products like plastics and synthetics and agricultural products that depend on them. WalMart and Exxon will just pass on higher costs to consumers - what will Joe/Joesephine Sixpack do? Drive less? Higher energy costs are a regressive tax - they hit the poor much harder than the rich.

I finally took the time to read the background article, and the main premise of "burning fossil fuels is what is harming our planet" turns out to be much slower than IPCC models claimed. This is great news, as it gives natural conversion to alternate fuels more time to work, but I'm sure it's not great news to those firmly into carbon trading and carbon caps and drastic measures *NOW*.

"So what's the answer? We must artificially raise the price of fossil fuels to a point where super-normal returns can be generated from alternative energies and technologies that reduce consumption. At that point, venture capitalists will compete to get in on promising ideas." - sadly no. From the article kicking Al Gore for only having 1 green investment:

Perhaps this 2014 60 minutes episode may help you understand why. In it they say that, "despite billions invested by the U.S. government in so-called 'cleantech' energy, Washington and Silicon Valley have little to show for it."

Khosla Ventures has been focused on alternate energy for a decade now - people with fat wallets and good intentions (yes, they exist) are already mixing investments with high hopes to try to make a better future - but that future is very hard to accelerate, and very hard to do at a profit. Note as Q did that much of the industry's success is driving in adoption *AT A LOSS* to rapidly speed our way down the learning curve and not necessarily to lower end-users' costs soon for consumer price point. This success is centers much more around *incentives* or * subsidies* without which people might just do with less.

The Innovator's Dilemma would spell this out - in some kinds of innovation, an Exxon would be well positioned to invest and innovate and it would lead the pack - that's how IBM has stayed relevant for decades - the myth that large corporates always miss the next wave is based on understanding only 1 half the equation.

In this case, the problem is that Green Energy will be fairly profitless for a decade or 2, despite the growth rate (or China will take much of that profit as its margin per worker is much much lower and its deployment revenue will be much higher than ours). So for Exxon's stockholders, the CEO is being asked to subsidize alternate energy during its profitless years, or continue making money as he knows best.

This risky and painful investment in the future is probably one for very risk-accepting VCs and governments themselves. Case in point is Germany and Denmark who are pushing this hard, as is China to lower its horrid pollution problem especially.

Based on these points, where do you see a tax on fossile fuel helping? I posted a picture of new charging stations across Europe, and while it's a nice development, it's still pathetic - fewer than 200 if I recall correct. Even in the vast US, stations are 438 with 2415 chargers. In 2012 we had 250 million registered vehicles on the road, and well over 100,000 gas stations (most with more than 1 pump).

This situation happened in radio 20 years ago, when everyone wanted to replace radio transmitters with radio over the internet, and the higher cost bracket, TV over internet - forgetting that you need internet & mobile infrastructure to deliver (unlike a single broadcast frequency). Audio's fairly easy and it finally pretty well works (but forget signal in rural areas) and the main effect of Pandora and others is to destroy the small bands themselves, not successfully deliver radio over a new medium, while satellite radio ate 1 of the 2 contenders and the joint project struggles along but finally profitable after 25 years. TV? still early days - home DSL handles now but mobile data is still iffy, especially internationally. But looks like Google will also exploit the small producers to take almost all the profits so it'll be a wasteland of high corporate profits for Apple and Google. Certainly nothing the leading incumbents at the time could have latched onto, even if they hadn't been like deer in the headlights.

This next round will be really disruptive. Elon Musk's well-positioned in space - including now military projects, electric cars and battery technology, even long-range train replacement - but even that early success is susceptible to the same kind of market change that Alta Vista and Yahoo encountered with Google's entry into the search industry. And from the other side, often innovators do the early ground work and then the large incumbents come in and take the whole market and buy the little guys. We shall see.

Thanks PP. I oppose

HSG — Sun, 31 May 2015 15:26:27 +0000

In reply to You might enjoy The Innovator

Thanks PP. I oppose subsidies. Burning fossil fuels is what is harming our planet. We should make doing so more expensive by taxing them. This will disincentivize their consumption and incentivize 1) the production and consumption of alternatives and 2) conservation.

You might enjoy The Innovator

PeraclesPlease — Sun, 31 May 2015 13:50:40 +0000

In reply to The Case for a Fossil Fuels Tax part 4

You might enjoy The Innovator's Dilemma. By increasing subsidies you increase possible profits for incumbents and new innovstors. you might want to discourage incumbents instead to make only room for new clever aggressive Young Turks. Same with the VCs - the more obvious profit, the more unmaginative investors.may be a good strategy, maybe not