> I've already said I prefer auctions to handouts.
> Robin challenges us to say when were there auctions (they
> were proposed in Wisconsin, but not carried out).
I knew about the Wisconsin case, and must say I'm not surprised that
although auctions were proposed (obviously only by some) they were not
the method of distribution actually chosen. I don't know of any actual
permit program where the permits were auctioned off so the government
collected revenue. I'm asking if anyone knows of one.
> I'll
> turn it around. He insists on comparing an "ideal" tax
> system to an actually existing permit system.
I did not insist on anything like this. I already stipulated that actual
pollution taxes are almost always too low. Just like actual permit
programs almost always issue too few permits. I simply said that I don't
know of any situation in which an equivalent tax would not be better
than an equivalent permit program -- where equivalent means yielding the
same aggregate pollution reduction.
> But in the
> real world, as I have now already mentioned twice, tax
> systems are generally combined with subsidies to industry.
> Is this fine with you, Robin?
Do you mean the same companies paying pollution taxes are then given
some kind of compensatory reduction in their profits taxes, or some
other business taxes they pay? In this case it's not fine with me at all
since I can think of no reason to support corporate tax relief. Or do
you mean that companies that sequester pollutants are paid sequestration
subsidies just like companies that emit the pollutants are charged
pollution taxes? I do support this kind of subsidy. As a matter of fact
I have been talking up the idea of paying sequestration subsidies to
countries that are net carbon sequesterers [these are all third world
countries with rain forests] to go along with charging carbon taxes to
combat global warming.
> Another broader question has to do with uncertainty,
> of which there is humongous amounts on all sides on this
> issue. Robin presents us with the neoclassical textbook
> story about equating social MC and social MB, nice and
> neat, although recognizing that estimating the social costs
> of pollution is difficult. Indeed. For that matter,
> governments don't know the costs of cleanup, although the
> private sector does.
I don't want to dispute this point, but the private sector is sometimes
as clueless about their own marginal costs of pollution reduction as the
government is. Witness the amazing "no action" in the sulfur dioxide
permit market the government opened up -- which investigators attributed
to private utilities not knowing where they stood visa vis other
utilities in the cost reduction hierarchy.
If there is a broad band of
> riskiness regarding the social costs, with a threat of a
> sharp upward turn, then one would prefer to fix the
> quantity rather than the price that is controlled in order
> to guard against a catastrophe. Tradeable permits do that
> and taxes don't.
I've read this argument before. I think its 99% bull. I think its high
priced economic theoreticians who have over invested in statistical
human capital coming up with theoretical possibilities that serve the
corporate agenda -- getting people to buy into permits on supposed
"technical efficiency grounds." There is a lot of uncertainty predicting
the borderline between more normal pollution and a catastrophe. That is
the major uncertainty problem and is just as big a problem for setting
the number of permits just below catastrophe -- a lousy policy goal in
any case -- as it is setting the tax rate so that the amount of
emissions ends up just below catastrophe. But why am I preaching
catastrophe (chaos) theory to Professor Rosser?!
> Also, although the corpps don't like further quantity
> cutbacks, at least in the US right now there is strong
> public sentiment in favor of that. There is little-to-no
> public support for any tax increases. Indeed that is why
> we here probably have a mostly c and c system rather than a
> tax one. I remind everyone that for global warming a major
> needed tax would be a big hike on gasoline. But two years
> ago we saw the spectacle of Clinton and Dole competing to
> lower already ridiculously low gasoline taxes. Forget it.
I have suggested making pollution taxes attractive to the non-polluting
public by cutting regressive taxes, dollar for dollar, for every dollar
raised through pollution taxes precisely to make it more politically
viable. Clinton competing with Dole to lower gas taxes is certainly a
sign of the incredibly bankrupt political times in which we live. Just
as conceding the necessity of bribing polluting corporations to pollute
us a little less by giving them pollution permits for free is!
> BTW, one other argument for taxes not put forward by
> Robin is due to a colleague (Scott Milliman) and a former
> colleague and co-author of mine (Ray Prince) who argued in
> a much-cited JEEM 1989 paper that taxes will lead to more
> innovation in pollution control. However that result is
> subject to a lot of assumptions that may not hold.
Ole!
> Again, I have a feeling that this taxes versus permits
> debate as we have been debating it has a "rearranging deck
> chairs on the Titanic" air about it. None of this really
> deals with more deeply rooted ecological questions that get
> buried in that nice fuzzy rubric of "measuring social costs
> of pollution"...
I don't disagree with this at all. Although, I must admit I'd like to
see a market world [can't believe I said that!] where prices were
actually equal to true social costs. I bet the current market craze for
sports utility vehicles -- safari wannabees I call their owners -- would
never have gotten off the ground if gasoline cost $25 a gallon.
