Green taxing and spending, 2006-2012.

A way forward, 2006.
Red and blue reasons for a Green tax shift, November 2007.
Carbon taxes and quotas, May 2008.
Upstream carbon permits, September 2008.
The role of renewables, May 2010.
Carbon price cooperation, December 2010.
Fuel price stabilisers in the UK, March 2011.
Energy subsidies in the UK, June 2011.
Carbon market in Europe, February 2012.
Fossil fuels in America, May 2012.
Climate conference in Durban, May 2012.

A way forward.
“Making Globalization Work”, Joseph Stiglitz.
W.W.Norton & Company 2006, and Penguin Books, 2007.

. . . Chapter 6, Saving the Planet.

The world is currently engaged in a grand experiment, studying what happens when you release carbon dioxide and certain other gases into the atmosphere in larger and larger amounts. The scientific community is fairly sure of the outcome . . . The gases act like a greenhouse, capturing solar energy in the atmosphere . . . and gradually the earth warms up.

. . . If we had access to a thousand planets, it might make sense to use one to conduct such an experiment, and if things turn out badly – as I believe this experiment will – move on to the next. But we don’t have that choice; there isn’t another planet we can move to.

. . . In 1997, more than 1,500 delegates, lobbyists, and heads of state from over 150 countries gathered in the historic Japanese city of Kyoto for the purpose of coming up with a treaty to cut greenhouse gas emissions worldwide. . . The resulting Kyoto Protocol made no immediate demands on the developing countries but called on each of the developed countries to cut back their emissions by specified amounts from 1990 levels . . . by 2012.

. . . By . . . 2005, the date it went into effect, 141 countries, accounting for 55 percent of greenhouse gas emissions, had ratified the protocol.

. . . However . . . the United States . . . used the exemption of the developing countries from the Kyoto strictures as another excuse for doing nothing.

. . . Many . . . including those in the Bush administration . . . hope . . . that somehow technology will come to the rescue. . . This may happen, but . . . the likelihood of better technologies being developed depends in part on incentives. Kyoto, with its strict limits on emissions, provides the appropriate incentives.

. . . the Kyoto Protocol . . . focuses on reduction of emissions relative to 1990: the more a country polluted in 1990, the more it is entitled to pollute in the future. . . no one has really provided a reasoned defense of the premise underlying Kyoto. . . The momentum behind the Kyoto Protocol gives us good reason to stay within that system, but I doubt that we will find an agreement acceptable to both the United States and the developing countries within the Kyoto approach.

. . . an alternative framework . . . is to have all countries of the world impose a common tax on carbon emissions . . . set high enough to achieve a global reduction in emissions equivalent to that envisaged in the common targets approach of Kyoto . . . Each country would keep the revenue it receives from the tax . . . As a result, the costs of pollution reduction are relatively small.

. . . a third alternative . . . synthesizes the distributive advantages of the common tax measure with the forcefulness of the targets approach. The big advantage of the common tax approach is that it avoids the most difficult issues of figuring out how much each country should reduce its emissions . . . We can easily estimate the resulting reductions in carbon emissions for each country . . . and use those estimates as a basis of determining appropriate targets assigned to each country. The country could, if it chose, use taxes to achieve those targets. But it could use alternative measures, like direct controls on technology . . . Any system, whether of targets or taxes or a combination of the two . . . will require enforcement – including action against countries that refuse to cooperate.

. . . Chapter 3, Making Trade Fair.

. . . Successive increases in tariffs in the late 1920s and early 1930s were thought to have played an important role in deepening the Great Depression.

. . . after World War II . . . the General Agreement on Tariffs and Trade . . . focused on liberalization of trade in manufactured goods . . . There was limited trade liberalization in the areas important for developing countries, such as agriculture and textiles.

. . . The Uruguay Round . . . of trade negotiations . . . ended with an agreement signed in . . . 1994. Under this agreement GATT . . . was replaced by the World Trade Organization, which . . . was designed to provide a faster expansion of trade agreements, reaching into new areas like services and intellectual property rights . . . Most important, for the first time there was an effective – if limited – enforcement mechanism . . . it authorized countries that had suffered injury as a result of a violation to retaliate by imposing trade restrictions on the offending country. The EU has become quite sophisticated in using this instrument . . . It draws up a long list of potential candidates for retaliation, targeting areas in which tariffs will be particularly painful . . . The threats have worked remarkably well.

. . . Chapter 5, Lifting the Resource Curse.

. . . Just as a company’s books show the depreciation of its assets, so too should a nation’s accounting framework reflect the depreciation of its scarce resources. But the most commonly used measure of output, gross domestic product, does not do this . . . even worse, the extraction of some natural resources leads to environmental degradation . . . It may cost billions to remedy the damage. . . Green net national product . . . is a measure that subtracts out not just the depreciation of capital but also the depletion of natural resources and the degradation of the environment. It focuses on the income of those within the country – excluding the profits . . . to the overseas owners.

. . . There must also be changes in accounting for deficits . . . Countries need to . . . note . . . where asset sales . . . make deficits look lower than they otherwise would be. . . and . . . should be encouraged to create stabilization funds . . . to help insulate . . . against the volatility of natural resource prices.

Red and Blue reasons for a Green tax shift.
Alison Marshall, November 2007.

Major changes are needed to avoid an environmental crisis. Tradeable carbon quotas could ensure that the necessary reductions in carbon emissions are achieved, and much more could be done with eco-taxes on environmentally damaging activities.

. . . If income taxes weren’t reduced, eco-taxes would have to be lower or government revenue would be higher. There would be less economic disturbance and public resistance to eco-taxes and quotas if the combined net government revenue from taxes, benefits, and quotas remained unchanged. But an effective Green tax switch or shift is being prevented by the widespread belief that progressive income taxes are essential for reducing inequality. (https://ammpol.wordpress.com/ubiprog).

Benefits are really negative taxes and taxes are really negative benefits, so it’s misleading to look at taxes and benefits separately. A flat tax system with a universal grant or Citizens Income gives more progressive average tax rates than a system with progressive marginal tax rates, a tax allowance, the same top tax rate and the same net revenue. (https://ammpol.wordpress.com/ammgraf). Flat (on average) eco-taxes could be better than progressive income taxes, not only for the environment, but also for reducing inequality.

An alternative way of reducing public resistance to eco-taxation might be to spend the revenue from eco-taxes and quotas on developing sustainable technology and making it available to all. This is the sort of top-down, centralised picking of winners that was in favour fifty years ago, in combination with Keynesian public debt. Wikipedia says “In . . . Keynesian economics, there is tolerance for fairly high levels of public debt to pay for public investment in lean times, which can be paid back with tax revenues that rise in the boom times”. (http://en.wikipedia.org/wiki/Government_debt). “However, with . . . the economic problems of the 1970s . . . many economies experienced high and rising unemployment, coupled with high and rising inflation. . . This stagflation meant that both expansionary (anti-recession) and contractionary (anti-inflation) policies had to be applied simultaneously, a clear impossibility. This dilemma . . . produced . . . the collapse of the Keynesian consensus”. (http://en.wikipedia.org/wiki/Keynesian_economics).

The market should be allowed to pick some of the winners. Without Government investment or subsidies Green technology would be favoured by eco-taxes and quotas anyway, because they would add environmental costs to prices. But it would not necessarily be the same Green technology.

Technological development should also enable the choice of more leisure by people who want it. A lot of paid employment is unnecessary and a waste of resources, or subsidised in the name of full employment. We should all have the aristocratic right not to work, based on effective part-ownership of land and other sustainable resources, as recipients of Citizens Incomes funded by taxes on those resources. There would still be more than enough people who wanted to work to do all the things that really do need to be done, and people on low incomes would have a greater incentive to work if they had Citizens Incomes which wouldn’t be reduced as their earned incomes increased.

Land tax should be phased in slowly, to avoid an abrupt change in land values. (https://ammpol.wordpress.com/ammlt). Also in the long term, as a sustainable economy is achieved, revenue from unsustainable eco-taxes and tradeable carbon quotas would decrease. Revenue from taxes on scarce sustainable resources such as land may be sufficient to replace the revenue from unsustainable eco-taxes and quotas. (Ashley Seager, 8 January 2007, business.guardian.co.uk).

In the short term, a shift to environmental taxes and quotas is needed urgently, and should be done right now. A sustainable tax base can be found later.

Carbon taxes and quotas.
Alison Marshall, May 2008.

Here is a international comparison of current petrol prices and taxes: The average tax per litre of unleaded petrol is 92.9p in the Netherlands, 80.5p in Britain, 73p in France, 72.7p in Germany, 48.6p in Spain, and 12.4p in the US. The average price per litre excluding tax is 36.1p in the Netherlands, 34.5p in Britain, 39.3p in France, 39.1p in Germany, 43.1p in Spain, and 30.2p in the US. (John Higginson, Metro, 29 May 2008). The taxes vary much more than the prices excluding tax.

Martin Wolf wrote that “high prices . . . will play a big part in encouraging more efficient use of this finite resource and ameliorating climate change. The current shock offers a golden opportunity to set a floor on prices, by imposing taxes on oil, fossil fuels or carbon emissions.” (Financial Times, 14 May 2008). My interpretation of this is that taxation should be aimed at stabilising prices at a high level. Taxes on consumers might be reduced while prices are surging upwards but should be increased when prices start to fall. Alternatively a market in carbon quotas would make these price adjustments automatically, with government revenue coming from auctions of the quotas. Additional taxation of fuels at source may remain appropriate at any price level, to collect some of the energy companies’ profits without affecting prices.

Upstream carbon permits.
Alison Marshall, September 2008.

Carbon permits may the best way of meeting carbon emission targets. But if emission quotas are set too high or allocated without auctions, they may, like the European Emissions Trading System, be ineffective. (www.guardian.co.uk/commentisfree/2008/sep/12/carbonemissions.climatechange).

The administration of “upstream” quotas for suppliers would be less expensive and complex than the “downstream” administration of personal carbon quotas. Richard Starkey of the Tyndall Centre for Climate Change Research wrote that “supporters of upstream trading argue that, if permits are auctioned to fossil fuel suppliers, and the auction revenue allocated equally among adults, the scheme is just as fair as personal carbon trading . . .”
(www.guardian.co.uk/commentisfree/2008/sep/10/climatechange.ethicalliving).

One alternative to emissions quotas, carbon tax, would not stop the squandering of oil by wealthy people. Another, public spending on Green technology, is an uncertain route to all of its goals: meeting carbon reduction targets, preventing fuel poverty, and avoiding an economic recession. Keynesian public spending has alternated with free-market New Right policies and both have had a history of failure as well as success. After the 1930s depression the free market was seen as the problem and Keynesian New Deal policies as the solution. After the recession of the 1970s and 1980s Keynesian policies went out of fashion, the free market came back, and history repeated itself.

The role of renewables.
31 May 2010.
http://www.camdenkiwi.org/2010/05/jeanette-fitzsimmons-in-camden/

“As we build our renewables, putting up those thousands of turbines in the North Sea, investing millions, or billions, in wave and tidal systems, and subsidising the rooftop-owning half of the country to install solar photovoltaics, are we really replacing CO2 emitting fuels, or are we just adding more generating capacity which will get absorbed by the future growth that’s so very important to our politicians?”

“It goes to the very heart of what Green politics are about, and where Green ideas differ from socialist ones and the rest of the progressive left – growth is the problem, not the solution.”

Carbon price cooperation.
Alison Marshall, December 2010.

The best way of achieving maximum cooperation, according to mathematical game theory, is the Tit for Tat strategy. You start with cooperation, then continue to cooperate if the other party responds cooperatively, but not if it doesn’t.

In other words you don’t wait until there is an agreement, you go first and then see how the other party responds.

So perhaps there should be less emphasis on international agreements such as Cancun and Kyoto, and more of a campaign for a national policy of revenue-neutral Green taxes or carbon permit auctions, with strategies for counteracting any negative effects on trade with nations that don’t have similar policies.

A Green tax shift to carbon taxes, with cuts in other taxes, would make energy-intensive goods more expensive and labour-intensive goods more affordable.

A cap-and-dividend policy, with the revenue from carbon permit auctions paid to citizens as dividends, would have the same effect.

Import bans or tariffs would be needed to prevent unfair competition from countries with lower carbon prices. Recent game theory research finds that if there is uncertainty about whether the other party is being cooperative, you should do cooperation in one interaction out of three if the other party isn’t a neighbour, and two times out of three if it is. (P. Grim, T. Kokalis, A. Tafti, and N. Kilb, “Imperfection and Cooperation”, in “Evolution of Communication in Perfect and Imperfect Worlds”, from World Futures: The Journal of General Evolution 56 (2000), www.pgrim.org/pgrim/evolution.htm).

Fuel price stabilisers.

“. . . oil companies are making unexpected profits on oil prices that are far higher than those they based their investment decisions on. . . We can introduce a fair fuel stabiliser. From tomorrow, the supplementary charge levied on oil and gas production will increase from 20 per cent to 32 per cent. . . The fuel duty escalator that adds an extra penny on top of inflation every year will be cancelled . . . for the rest of this parliament. But I don’t want important investment in the North Sea lost. So if the oil price sustains a fall below $75, and we will consult on the precise figure, we will reintroduce the escalator and reduce the new oil tax in proportion. That is how it will work. No escalator when the oil price is high. No extra tax on the profits of North Sea oil companies if the oil price falls and stays low.”
(Edited transcript of George Osborne’s Budget speech, Financial Times, 24 March 2011.)

“Investment in green energy will never be certain unless we bring some stability to the price of carbon. . . Today, we become the first country to introduce a carbon price floor for the power sector. The price will start at around £16 per tonne of carbon dioxide in 2013 and move to a target price of £30 per tonne in 2020.”
(Edited transcript of George Osborne’s Budget speech, Financial Times, 24 March 2011.)

“The establishment of a floor price for carbon . . . means British utilities burning fossil fuels will pay a fixed sum for permits to emit CO2 under the EU’s Emissions Trading Scheme. That price cannot fall now even if the market price goes down.”
(Michael McCarthy, The Independent, 24 March 2011.)

“It is important that prices for carbon-based fuels should be kept high as well as stable. There is no point focusing energy efforts on new low carbon generation alone with too little effort to reduce demand . . .”
(Scottish Environment LINK, Time to act on climate change, 2008).

“Free riding arises when countries that benefit from global abatement do not bear their share of the costs of its provision. Leakage arises when abatement actions by the cooperating countries cause emissions in other countries to increase. . . The stability of . . . countries acting to control greenhouse gases will depend on . . . punishments and rewards . . . One example . . . is the threat of a ban on trade of carbon-based fuels and products with non-cooperating countries . . . Application of border tax adjustments, such as import tariffs or export subsidies, while theoretically appropriate for reducing leakage, pose a number of practical problems.”
(“Economic Instruments” in “Technologies, Policies and Measures for Mitigating Climate Change”, IPCC technical paper, November 1996, www.gcrio.org/ipcc/techrepI/economic.html).

Energy subsidies in the UK.
Alistair Dalton, The Scotsman, 2 June 2011.

Scottish ministers have backed one of the country’s main power firms after it raised fears over the UK government’s nuclear power subsidy.

Scottish and Southern Energy chief executive Ian Marchant claimed proposals for extra Westminster support for nuclear energy could seriously damage wind and wave schemes.

. . . The UK government has proposed a new system for incentivising power plants with low carbon emissions, such as nuclear.

It would benefit generators that provided constant supplies of electricity, such as nuclear, at the expense of intermittent suppliers such as wind farms.

. . . Environmental campaigners WWF also expressed disquiet. WWF Scotland director, Dr Richard Dixon, said . . . “Support for reducing energy demand and boosting clean renewables is the only sensible policy to be following.”

. . . BACKGROUND. Support by the UK government for the power industry has so far focused on encouraging the development of renewable energy such as wind and wave power.

Under the “renewables obligation”, operators are paid subsidies for the amount of such electricity generated.

Higher rates are given to wave rather than wind power to boost investment in new technology . . .

Past government support for nuclear power was scrapped after it was privatised in the late 1980s.

The UK government is offering a financial incentive to encourage coal-fired power stations to develop technology to store carbon emissions underground.

Carbon market in Europe.
Joshua Chaffin, Financial Times, 14 February 2012.

. . . the European Union decided last month to press ahead with a plan to force foreign airlines to pay for the carbon pollution generated by each flight landing at its airports . . . The policy has succeeded in uniting much of the world – against the EU. . . Beijing last week barred its airlines from the system. Next week, the US and China will gather with more than 20 other nations in Moscow to plot a counter-strategy . . . possible retaliation could lead to a trade war.

Beneath the international uproar lurks an inconvenient truth: the carbon market, the world’s largest, and the linchpin of Europe’s effort to lead the world in the fight against global warming, is in turmoil at home.

. . . as a result of a subsequent recession and poor management, the market is saturated – and could be for years to come – with permits that give companies the right to emit carbon without penalty. That has led to a prolonged slump in the carbon price.

. . . The market has suffered other indignities in its brief history, from value added tax frauds worth billions of euros to the cybertheft of millions of permits from companies’ electronic accounts. But, because it calls into question the fundamental workings of the market itself, the price slide may be its most serious affliction.

. . . The first brush with reality came at the market’s inception. In an effort to overcome busiiness opposition, the European Commission, the EU’s executive arm, set a generous cap and allowed national governments to lavish favoured industries with free permits. In some sectors, such as electricity, companies subsequently reaped millions of euros in windfall profits by passing on the market price of the permits to customers even when they themseles paid nothing for them.

Successsive reforms have sought to clamp down on free permits. From 2013, more than half will be sold at auction, rising to 100 per cent for the power sector. Brussels, not the member states, will be running the show.

But those reforms have been undermined by a historic recession that has damped industrial activity – and carbon emissions – across the continent.

. . . If all else fails, a clause in the scheme’s bylaws mandates cutting the number of permits by 1.74 per cent each year in perpetuity, which should eventually squeeze out some of the excess.

Fossil fuels in America.
James Hansen, Director at the NASA Goddard Institute for Space Studies. 9 May 2012.
www.nytimes.com/2012/05/10/opinion/game-over-for-the-climate.html.

. . . Canada’s tar sands, deposits of sand saturated with bitumen, contain twice the amount of carbon dioxide emitted by global oil use in our entire history. If we were to fully exploit this new oil source, and continue to burn our conventional oil, gas and coal supplies, concentrations of carbon dioxide in the atmosphere eventually would reach levels higher than in the Pliocene era, more than 2.5 million years ago, when sea level was at least 50 feet higher than it is now.

. . . The global warming signal is now louder than the noise of random weather, as I predicted would happen by now in the journal Science in 1981.

. . . The earth is currently in the part of its long-term orbit cycle where temperatures would normally be cooling. But they are rising — and it’s because we are forcing them higher with fossil fuel emissions.

The concentration of carbon dioxide in the atmosphere has risen from 280 parts per million to 393 p.p.m. over the last 150 years. The tar sands contain enough carbon — 240 gigatons — to add 120 p.p.m. Tar shale, a close cousin of tar sands found mainly in the United States, contains at least an additional 300 gigatons of carbon. If we turn to these dirtiest of fuels, instead of finding ways to phase out our addiction to fossil fuels, there is no hope of keeping carbon concentrations below 500 p.p.m. — a level that would, as earth’s history shows, leave our children a climate system that is out of their control.

We need to start reducing emissions significantly, not create new ways to increase them. We should impose a gradually rising carbon fee, collected from fossil fuel companies, then distribute 100 percent of the collections to all Americans on a per-capita basis every month. . . . This market-based approach would stimulate innovation, jobs and economic growth, avoid enlarging government or having it pick winners or losers. Most Americans, except the heaviest energy users, would get more back than they paid in increased prices. Not only that, the reduction in oil use resulting from the carbon price would be nearly six times as great as the oil supply from the proposed pipeline from Canada, rendering the pipeline superfluous, according to economic models driven by a slowly rising carbon price.

But instead of placing a rising fee on carbon emissions to make fossil fuels pay their true costs, leveling the energy playing field, the world’s governments are forcing the public to subsidize fossil fuels with hundreds of billions of dollars per year. This encourages a frantic stampede to extract every fossil fuel through mountaintop removal, longwall mining, hydraulic fracturing, tar sands and tar shale extraction, and deep ocean and Arctic drilling.

. . . History has shown that the American public can rise to the challenge, but leadership is essential. The science of the situation is clear — it’s time for the politics to follow.

Climate conference in Durban.
www.nzherald.co.nz/business/news.
Peter Huck, 11 May 2012.

. . . the Durban climate conference last December . . . delegates heard sobering news from climate scientists. Nine of the 10 warmest years have occurred since 2000. Since the 1950s, each decade has been warmer than the last. Efforts to limit temperature rise to 2C – when runaway climate change could begin – are further threatened by fears that a warming world will unlock millions of tonnes of methane from melting Arctic permafrost.

. . . The high-carbon model made the West rich, and shifting to a sustainable economy is a huge ask . . . Finding the necessary funding is a daunting prospect. It is unclear how developed countries now committed to austerity will find US$100 billion . . . for a Green Climate Fund to help developing nations fight climate change, as pledged at Durban.

Further reading.
Green taxing and spending, 2013-2015.
“Environment”, ammpol.wordpress.com.

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