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Carbon and tax neutrality

by Frank Schnittger Sat Nov 14th, 2009 at 05:55:44 PM EST

Cross-posted from climatechange.thinkaboutit.eu

The purpose of carbon taxes is to shift consumption from carbon based to sustainable sources, not to act as another revenue source for Governments seeking to fund bank bail-outs and other unpopular policies.  We must not allow the climate change issue to be hijacked by Governments intent on using any excuse to raise revenue for other purposes - because otherwise Climate Change will become just another issue in the mix of left-right politics as usual.  There is no reason why the promotion of carbon neutrality should not also be tax neutral, with revenues from taxes on carbon consumption being used to fund the promotion of cheaper and more widespread availability of sustainable energy, products and services.

It's not as if voters aren't already sceptical enough of what climate change is really all about...

Global warming is not our fault, say most voters in Times poll - Times Online

Less than half the population believes that human activity is to blame for global warming, according to an exclusive poll for The Times.

The revelation that ministers have failed in their campaign to persuade the public that the greenhouse effect is a serious threat requiring urgent action will make uncomfortable reading for the Government as it prepares for next month's climate change summit in Copenhagen.

Only 41 per cent accept as an established scientific fact that global warming is taking place and is largely man-made. Almost a third (32 per cent) believe that the link is not yet proved; 8 per cent say that it is environmentalist propaganda to blame man and 15 per cent say that the world is not warming.

Tory voters are more likely to doubt the scientific evidence that man is to blame. Only 38 per cent accept it, compared with 45 per cent of Labour supporters and 47 per cent of Liberal Democrat voters.

The high level of scepticism underlines the difficulty the Government will have in persuading the public to accept higher green taxes to help to meet Britain's legally binding targets to cut carbon emissions by 34 per cent by 2020 and 80 per cent by 2050.

The recession appears to have made tackling climate change less of a priority for many people. Only just over a quarter (28 per cent) think that it is happening and is "far and away the most serious problem we face as a country and internationally", while just over half (51 per cent) think it is "a serious problem, but other problems are more serious".


Vicky Pope, head of climate change advice at the Met Office, said that growing awareness of the scale of the problem appeared to be resulting in people taking refuge in denial.

"Being confronted with the possibility of higher energy bills, wind farms down the road and new nuclear power stations encourages people to question everything about climate change," she said. "There is a resistance to change and some people see the problem being used as an excuse to charge them more taxes."

It's amazing how people can self-rationalise themselves out of uncomfortable truths and find somebody or something else to blame.  It's environmentalists or politicians on the make; an excuse for more taxes; and in any case, what can be more important than jobs at a time of recession and high unemployment?

All politics is local, and it also tends to be very short term in its focus.  How do you persuade people to think 5, 10, 20 years down the road when they are concerned about their job or security now?  Individual personal advantage will always trump the collectively long term good even when there is generalised agreement on what would constitute a good long term policy.  Or will it?

I was struck by how 86% of Danish Windmills are owned by local wind farm cooperatives with hundreds of thousands of local shareholders - thus overcoming both the NIMBY factor, and ensuring that the majority of the population has a stake in such development.

Putting the primary focus on carbon taxes associates the Climate Change issue with partisan issues such as higher taxes generally, the level and quality of state expenditure, and state "interference" with personal "freedom". Of course many on the left do not have such a problem with those issues, but we do not want Climate Change to become exclusively a left wing issue.

So perhaps proposals to enhance carbon neutrality should also seek to be tax neutral, and any money raised by carbon taxes used directly to fund the reduction of the price of electricity created by sustainable sources.  Taxes may well have to be raised to fund the fall-out from the financial crisis - but let us not allow our politicians to use the Climate Change issue to provide political cover for the inevitable unpopularity those taxes will give rise to.

Climate change and carbon taxes are not some cash cow to fund the depredations of our financial industries and the havoc they have created in our economies. If we allow that linkage to develop, Climate Change will come to be seen by many as just one more global conspiracy to squeeze the little guy while the bankers and high rollers go off scot free.

... the first is the above - a Pure Green tax is just trying to reflect into the market price third party costs or higher-priority (that is, life support) constraints. And so adopting a general revenue tax is a mistake - indeed, since it means that the economies of countries with more pro-active governments face steeper contractionary effects from regressive taxation than less pro-active governments, adopting a general revenue tax rather than a Pure Green tax is hobbling aggressive policies to avoid disaster.

And the second point is that we have such a screwed up public finance system that there are massive numbers of projects that are long-term investments in economic growth that we could just do them, except we deficit finance pure government consumption and have written the rules to tie our hands for deficit financing real investment.

So diverting some, eg, Carbon Fees to financing investment in reducing carbon emissions is a very appealing prospect.

However, provided we adopt a sufficiently progressive revenue redistribution, one dividing line would be "neutral or progressive on 80% of the population", allowing those at in the top 20%, who are disproportional beneficiaries of past free rides on the ecosystem and fellow citizens, to be the source of net investment in CO2 emission reduction investments.

Obviously a very net progressive redistribution is a simple Social Dividend, an equal amount of the redistribution pool to each citizen.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Nov 15th, 2009 at 09:01:53 PM EST
I think that unitisation (essentially monetisation) of energy is the optimal approach via the simple mechanism of enabling energy producers to issue Units redeemable in payment for energy supplied.

Then a carbon levy may be applied to all carbon energy (fuel) transactions which would create a fund of fiat currency which is denominated in energy. This fund would then be available - through interest-free 'Energy Loans' denominated in energy - for investment in renewable energy (Mega Watts)  and energy savings (Nega Watts).

It is then possible to pay an Energy Dividend in Units which are redeemable against energy supplied, but will also have a value in exchange for anything else eg accommodation, food, electric cars from Norway and so on.

This presentation to the Energy Institute's Scottish branch went down really well last week.

For me, the most interesting thing about the Unitisation approach is the way that it can be used by producer nations to reduce profligate use of energy. This is achievable by increasing prices to global market levels, and then avoiding bloody revolution by compensating the population with Units. While they could still use these in payment for profligate energy use, they would be more and more likely - as energy increases in value globally over time - to conserve Units and exchange them for other value.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Nov 16th, 2009 at 05:33:08 AM EST
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