Max B. Sawicky wrote:
>
> Replies to Perelman, Schneiderman, Hahnel, Meyer, Proyect
>
> Farmer Perelman said:
>
> > Emissions trading is a crock. If you want to give polluction
> > credits, why not give everybody an equal credit instead of rewarding
> > people for historical patterns of pollution?
>
> This is not AT ALL the way permits would work.
It is not the way that corporations and corporation collaborationist
environmental groups would have them work. But they certainly could
"work" this way -- and if this was the policy it would have the same
effect on the environment as giving away permits to corporate polluters
for free and it would be MUCH, MUCH more equitable.
>
> I made a limited statement (below) and Hahnel has dropped
> a thirty-pound treatise on my head.
All I sent were 3 short paragraphs of email. But a hard copy of the
treatise explaining the logic of pollution permits, taxes, and
regulations is in the mail.
But in re: Perelman's
> 'crock' I should confess I think tradable permits are a good
> idea in principle.
>
> > Max B. Sawicky wrote:
> > >
> > > > > If government gives away emissions permits, then clearly
> > > > > corporations do not benefit as a group, since one firm's
> > > > > sale is another's purchase. If the government sells them,
> > > > > corporations are net losers in the aggregate.
>
> Hahnel says:
>
> > For every tradable pollution permit policy in which the government sells
> > the permits there is an "equivalent" pollution tax policy that yields
> > the exact same outcomes: same overall reduction in pollution, same
> > individual reductions for each polluter, same overall cost of reduction
> > to polluters as a whole, same individual cost of reduction to each
> > polluter, same gain in government revenue (from permits sales in one
> > case, from taxes paid in the other). EXCEPT...
>
> I agree there is a tax equivalent that yields the same aggregate
> result for pollution but I can't see how it is possible for a
> uniform tax to yield the same distribution of costs over firms, and
> therefore the same aggregate cost.
I'm sorry you can't see it, but it does. Hint: How much does a permit
sell for in a tradable permit policy? Answer, a uniform market price for
the permit. If the uniform tax rate per unit of emission is the same as
the uniform market price for a permit to issue one unit of the pollutant
then the decision the polluter has to make -- pay the tax or buy the
permit, vs. reduce emissions -- is exactly the same.
Alternatively, there is a
> cost-equivalent tax in aggregate with a necessarily different
> pollution outcome.
>
> The reason is that permit trading can discriminate among firms and
> taxes can't. So I'm missing something or Robin is wrong.
Let's go with option "A" rather than "B" since I teach this stuff for a
living -- and the entire professional community of environmental
economists agrees with me on this one.
What you're missing is that a uniform emissions tax "discriminates among
firms" in the same way a tradable permit system does: Firms with high
costs of pollution reduction will buy permits and continue to pollute,
or pay the tax and continue to pollute. Firms with low costs of
pollution reduction will not buy either permits or pay the tax for
polluting. Instead they will reduce their pollution as long as the cost
of reduction is lower than the price of the permit or tax. It isn't that
the tax or permit price discriminates among firms buy being different
for different firms. It's that firms with different reduction costs
behave differently in response to the same economic stimulous -- the
firms discriminate amongst themselves, so to speak.
>
> > One must assume that the permit market is competitive and functions
> > perfectly smoothly finding its theoretical equilibrium infintely
> > quickly, etc. etc. -- the usual convenient and unrealistic assumptions,
> > where no such assumptions are necessary for the pollution tax to be
> > efficient.
>
> In the abstract this is correct but it imposes too great
> a practical burden on permits and neglects any comparable
> problem with taxes (e.g., evasion, avoidance, politically-
> based distortions).
Evasion, avoidance, and politically-based distortions are EXACTLY AS
DIFFICULT FOR A PERMIT PROGRAM AS FOR A TAX PROGRAM. Anyone who cheats
on paying a pollution tax could cheat on buying a permit -- monitoring
and punishment problems ARE IDENTICAL.
I know that the mainstream environmental policy community talks about
these things as if there were different practical problems for permit
and taxing policies -- but it is a classic case of mainstream bull shit.
Many in the mainstream don't know any better, but spout this common
NON-wisdom. Those who know better don't say it themselves, but do not
bother to correct those who do. Since the LIE serves the powers that be,
everyone goes along with it. It is our job not to.
>
> > The above means there is always a pollution tax policy that is equal to
> > or superior to any permit policy on purely technical grounds.
>
> As I said, I don't see it. That doesn't mean I am
> against the tax and only for permits. I'm for whatever
> we can get.
>
> > When the government gives away permits to polluting corporations they
> > implicitly award legal ownership of the environment to polluters rather
> > than pollution victims. They make a summary judgement entirely in favor
> > of polluters regarding the last remaining common property resource (and
> > therefore still disputed property) on the planet. When the government
> > gives away pollution permits to corporations it is like the
> > government giving away not only the right of way land to the
> > railroads in the 19th century, but all of the land within a thousand
> > miles of either side of the track they lay. Except in this case we
> > don't even get a railroad track!
>
> If they give away few enough permits and enforce
> their use effectively, you can get all the pollution reduction you
> want.
That is true, and I never said it was not. It is also true that if you
raise pollution taxes high enough (the analogue to your printing up few
enough permits -- whether you give them away or sell them is irrelevant
to this point, so why don't you drop it here) I can get all the
pollution reduction I want AND DO IT MUCH MORE FAIRLY.
The reason corporations like permits is precisely because it does award
them a large, and valuable property right, when they are given out for
free -- which is the common practice so far. It is not the common
practice because it makes any more logical sense than selling them. It
is the common practice because corporations have lots of influence on
actual policy, and also because outfits like the Environmental Defense
Fund go along with it. Why would the EDF go along with a corporate give
away, you ask? Because the EDF is all Green and no Red -- to put it in
terms you mentioned appealed to you. Assume the EDF has one goal only:
maximum pollution reduction. They can win less opposition from
corporations by giving them a prize (free pollution permits) for going
along with the pollution reduction program. EDF thinks this translates
into getting corporations to go along with fewer permits (EDF's only
goal was my assumption above) -- if the permits are given to polluters
for free, rather than making them buy them.
We Reds shouldn't like the fact that the working-taxpaying stiff is
getting stiffed in the distributional effects of permit give aways.
That's why we should support taxes rather than permits given free to
polluting corporations. If it must come down to this, better an alliance
between environmentalists and tax reformers -- those crazy conservatives
who just want to reduce taxes -- than between environmentalists and
corporations. Pollution taxes used to reduce other taxes (payroll sounds
great to me, sales, property are pretty regressive too -- I wouldn't
want reduce the income tax since it's the only progressive tax left) is
less of an unholy alliance than one with corporations -- which is what
current EDF strategy amounts to.
>
> The right to which you allude amounts to a redistribution
> of wealth. This raises the question, are permits a likely
> instrument for redistribution of wealth? I would say no.
> If permits cut pollution, that's good enough. I'm just a
> tree-huggin' fool.
And if so, you should join EDF right away. But drop your "RED" card off
before you get on the elevator up to the EDF corporate suites.
[A note to those who don't know and love Max: Max is "red" first and
"green" only second -- and only if it does not conflict with being
"red." Therefore, I assume he has made a rather simple analytical
mistake regarding the operation of pollution taxes and free permits.
Since Max is also thick skinned and has corrected many of us when we
were confused about an issue, I, for one, don't feel the need to make
this public education of Max Sawicky particularly polite.]
There is a sense in which permit give aways coincides with one interest
workers do have -- keeping their jobs. Pollution taxes reduce polluting
corporations' profits more than permit give aways do -- for the
equivalent amount of pollution reduction. If this means they will employ
fewer workers, one might reason workers have an interest in opposing
pollution taxes and favoring free permits. But the same reasoning
implies that workers should oppose corporate profit taxes -- which
reduce profits and therefore also cost jobs. For that matter, it implies
that workers should oppose wage increases since that also lowers profits
and presumably costs jobs. I'm not sure how many of these positions "Red
Max" wants to latch onto.
>
> > Pollution permit give-away programs have NO technical or efficiency
> > advantages over pollution taxes, may be technically inferior (due to
> > realistic probabilities of market failure), and are the worst imaginable
> > policy on equity grounds.
>
> How do permits compare to a VAT, a 'green' VAT, or a carbon
> tax, all much more imaginable as policies advanced in the name of
> environmentalism?
Why is it that the best policy -- emissions taxes -- are magically the
only policy that is UNimaginable? Hum... Maybe this is why I've been a
radical for 30 plus years, so I am not clueless about the answer to this
question.
(That is my answer to why I don't want to discuss second and third and
fourth best solutions.)
>
> > When governments do not collect pollution taxes (or sell permits), but
> > instead give permits away for free to polluters -- model citizens that
> > they have proven to be -- and therefore collect other taxes from other
> > people to finance government programs, just who do you think they
> > collect those taxes from? Last I heard the common working stiff not only
> > held a job but paid more than his/er share in taxes as well!
>
> If pollution taxes currently amounted to more than a bucket
> of spit one would be more interested in the ramifications of
> switching from taxes to permits.
Pollution taxes will never amount to more than a bucket of spit if
radicals can't even explain to fellow radicals why pollution permits are
a crock -- to quote the sysop -- and explain why the EDF support for
free distribution of tradable permits is corporate collaborationism at
its worst.
