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Another View on Global Warming -Parts One & Two
(The following is part two of a a two part article on climate change. Part one defined the problem, and part two offers a solution>)
by Charlie Bodenstab
Part two: The highly complex problem is the critical need to get people to minimize their use of energy derived from burning fossil fuels. It’s immaterial whether you believe that this is needed to minimize global warming or that it simply makes sense as responsible “caretakers” of our planet.This problem is begging for solutions but let’s talk about what won’t work and what has not worked so far. The first thing that won’t work is intensive micromanaging of the solution by specific government regulations on a point-by-point basis. Our reliance on vehicle mileage standards, subsidies of renewable energy sources, and government penalties of various types has more frequently than not yielded either marginal results or unintended adverse consequences.
Vehicle mileage requirements have been undercut by political intervention to reclassify certain large cars as trucks and to delay the tougher standards year after year. Subsidies to favor ethanol has had a shattering impact on the whole corn based agricultural system with prices spiking in the most unexpected places combined with the new realization that ethanol from corn doesn’t even meet it’s original objective. And the latest little surprise is that the rather silly pull-forward of daylight savings time isn’t having any impact on energy use.
One of the most damaging aspects of these unsuccessful government policies is that they are never rescinded, but perpetually remain in operation, thus causing disruption of the economy and misallocation of resources.
The other solution of “moral persuasion”, while very noble, is at best only marginally effective. Endless forums, seminars, articles, and TV programs urge a wide range of actions that individuals can take to minimize energy use. These efforts help and do motivate a certain segment of the county to act, but it is a modest contribution compared to the task at hand. Let’s face it. We tend to do what we like as long as there are no direct consequences.
You have a right now to ask, “O.K. wise guy, you have beat down all the solutions to date, where is this ”simple solution” that is going to rescue us from our dilemma?”
As a “pragmatic libertarian” I am usually leery of any government program. Only the government however has the scope and power to create the change needed for the total social good, and breaking our heavy reliance on fossil fuels is one of those cases, but not via the type of micro- meddling mentioned earlier.
The solution is to exploit the free market system that has been, and continues to be, the mechanism by which we optimize the flow and use of resources throughout our society. In fact, it works so well we tend to take it for granted and are almost unaware of its continuous operation.
We need to enact a single but comprehensive body of legislation that insures that the price of products derived from fossil fuels is significantly increased and will never go back down. The concept is often called a “carbon tax”, but the key point is to create a pricing structure that motivates people in the direction of making continuous day-to-day decisions that favor fossil fuel savings.
The law should cover all forms of fossil fuel use, but for discussion purposes, let’s focus on gasoline, which we all deal with every day. The legislation should establish a tax on oil such that gasoline will never fall below $3.00 a gallon, adjusted for inflation, and in fact, over the next two years the cost will go up to $4.00 in small quarterly increments. No backing off, no reconsiderations.
Once this policy was clearly understood and no future cost reduction could be expected, there would be an infinite series of energy saving decisions throughout our society by single individuals, businesses, utilities, etc. Individuals and institutions would take innumerable actions that would optimize their particular energy situation that no government policy or regulations could ever hope to match.
Knowing that the price will never drop again will give assurances that long-term decisions such as purchasing a car, or a business preparing to spend millions on an alternative energy facility will not be undercut in the future. Frankly, it started to happen back during the shortages of the 70’s with dramatic short term effect, but then the cost of oil dropped and we went back to “business a usual”.
You could then rescind all the complex regulations and incentives such as mandated fuel efficiency, subsidized purchase of hybrids and alternative energy uses, etc. Adam Smith’s “invisible hand” would drive our practices in exactly the direction needed. Once it was clear that oil, for example, would never go below $80 a barrel, all these energy alternatives would automatically become viable. If these alternatives can’t compete with oil at that price it means that they are highly marginal by definition, and should not survive.
The new price structure would also drive innumerable more obscure energy tradeoff decisions that no legislation could ever anticipate or cope with. A 60-mile, each way, automobile commuter, for example, would have to decide whether to purchase a min-car, find a partner to share the ride, move, or get a new job closer to home.
As another benefit, reduced oil consumption would drastically drop demand, thereby reducing the wellhead price of oil and thus deprive the unsavory rulers of the Middle East and South America their treasure chests with which to do mischief. Just think if we’d had the political guts to enact this legislation in the mid-1970s.
We have to recognize that the high cost of fuel would fall disproportionately on lower income groups, which must be mitigated. This can be accomplished by feeding back the enormous resulting tax revenues to the lower income groups via elimination of the wage tax or some similar policy. The details are not all that difficult. The key however, is not to directly tie the payments to offset the fuel cost increases. The economic energy tradeoffs by individuals and groups must not be interfered with.
We have shown recently that our society can live with this level of fuel cost without significant economic consequences. Additionally, a recent national survey indicated that the American public would support such a tax policy if it were tied to the awareness that it could eliminate our dependency on Middle East oil and help the environment. Note, the survey indicated public support without even the benefit of a strong political leader championing the cause and explaining it in detail.
We are not talking about an increase in overall taxes, but rather taxing things that hurt the environment, but rewarding “work” via elimination of the wage tax or some of the income tax burden. Now that has a nice rational sound, doesn’t it?
Interestingly, this concept allows us as individuals to make a major personal contribution. We need to badger our political leaders with messages urging this course of action and let them know that it is not “political suicide” to embrace this solution. Please do it!
by Charlie Bodenstab
The global warming debate has given rise to two camps; One denies human activity as a significant factor in the current warming cycle. The other camp dogmatically says that we have mega problems directly due to human activity via CO2 emissions that will have catastrophic consequences unless we take drastic action now. I have a serious problem with both groups.
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