Robin Hahnel wrote:
>
> I doubt you mean "non-tradable" in the above, since non tradable permits
> are the equivalent of regulations (that most now call "command and
> control."
No, I mean non-tradeable. Non-tradeable permits are not the same as regulation
if they
are sold to the highest bidder. If in a given area you allow a thousand units
of a
certain type of pollutant this month, then anyone in the area can bid for each
of
those thousand units at the beginning of the one month period. The thousand
highest
bids gain the right to pollute. No trades, no transfers, no refunds. (Actually
the
highest thousand bids above a floor set to equal the best estimate of what the
proper
pollution tax should be. Any permit not salable at at least that rate will not
be
sold.)
> The efficiency issue that is usually never mentioned, is how many
> pollution permits are "efficient" to issue? The analagous question for
> pollution taxes is, how high a pollution tax is "efficient"? The truth
> is there is only one way to answer either of these questions. One must
> come up with an estimate of the social costs of pollution. There are a
> host of procedures used to do this -- none of them very good. One thing
> that should be remembered is that none of the so-called "market based"
> methods such as hedonic regression and travel cost studies can possibly
> capture what are called the "existence value" or "option value" people
> place on the environment. So "market based" methodologies for estimating
> the social costs of pollution (and therefore the social benefits of
> pollution reduction) will inherently underestimate those costs and
> benefits. Once we have the best estimate of the social cost of the
> pollution we can come up with, we simply set the pollution tax equal to
> the marginal social cost of pollution. That will yield the efficient
> overall level of pollution reduction, and achieve that reduction at the
> lowest social cost. With permits, one has to use trial and error. You
> issue some number of permits and wait to see what price they sell at. If
> the price is lower than your best estimate of the marginal social cost
> of pollution, then you issued too many permits and need to issue fewer.
> If the market price for permits is higher than your estimate of the
> social cost of pollution, you have issued too few permits and need to
> issue more. Once you have got the right number of permits out there so
> the market price of permits is equal to your estimate of the marginal
> social cost of pollution, your permit program will yield the efficient
> overall level of pollution reduction, and achieve that reduction at the
> lowest social cost ASSUMING NO MALFUNCTIONING IN THE PERMIT MARKET.
>
I think you are relying too much on theoretical models here. In real capitalism,
greens can estimate much more easily what level of pollution reduction they wish
to
achieve (in the case where the goal is not zero) than they can determine what
price
will result in reductions to that level. The object, at least under capitalism ,
is
not to achieve some optimum level of pollution. (As you say, the level of
pollution
is almost certain to be too high, and the price paid by polluters is almost
certain
to be too small.) The goal is to reduce pollution as much as possible, and make
polluters pay as dearly per unit of pollution as possible. This yields an
answer to
both the question of the proper level of a pollution tax under capitalism (as
high as
possible) and the proper number of Nontradeable permits (as low as possible).
In a good society, no doubt your green taxes would be the ideal -- though even
there
I would like to see some sort of built in bias to ensure lower levels of
pollution
than might be considered economically optimum.
>
> Regarding equity: Pollution taxes make polluters pay for the damage they
> inflict on the rest of us. How that payment is distributed between
> producers and consumers will depend on the elasticities of supply and
> demand for the products whose production and/or consumption cause the
> pollution. How the cost is distributed between employers and employees
> on the producers' side will depend on how much of the cost to producers
> comes out of wages and how much comes out of profits -- which I prefer
> to think of in terms of bargaining power and mainstreamers reduce to
> relative elasticities of the supply of and demand for labor. No doubt
> the distributive effects of pollution taxes are not optimal from the
> perspective of equity. Hence the need to combine pollution taxes with
> changes in other parts of the tax system that will make the overall
> outcome more equitable -- i.e. progressive.
>
> For an "equivalent" permit program, IF THE PERMITS ARE AUCTIONED OFF BY
> THE GOVERNMENT THE EQUITY RESULTS ARE EXACTLY THE SAME AS FOR THE
> POLLUTION TAX.
> But if the permits are given away for free, in addition
> to all the above equity implications, there is a one-time windfall
> benefit awarded to polluters. If effect, the polluters are awarded the
> market value of the environment! Then, after this massive corporate
> rip-off, the exact same costs of reducing pollution are distributed in
> the exact same way among producers, consumers, employers and employees
> as in the case of a tax or auctioned permit policy. Since no permit
> program to date [that is a challenge to the pen-l information system!]
> has auctioned off permits, but instead every permit program to date has
> handed them out mostly free, on some sort of basis -- usually the
> "grandfather system" of giving more to the "grandfathers" who polluted
> more in the past -- ALL PERMIT PROGRAMS TO DATE HAVE BEEN MUCH MORE
> INEQUITABLE THAN AN EQUIVALENT TAX WOULD HAVE BEEN.
>
> On ideological grounds, I prefer to say to polluters: "If you damage the
> environment and thereby the rest of us, you have to make a payment to
> the public equal to the amount of the dammage you cause." This is what a
> pollution tax says, in ideological terms. I would rather not say: "You
> can buy the right to damage the environment and thereby the rest of us."
> This is what permits say, in ideological terms.
Fair enough. Then call what I am proposing green taxes with rationing, or green
taxes
plus regulation.
>
>
> Please don't tell me the two are really the same -- I've already
> admitted that above. Ideology is just that -- ideology. It is the mental
> trappings on the reality. Equivalent auctioned permits and emissions
> taxes have the same effect, in reality, but this doesn't mean they
> suggest the same ideological trappings. I prefer the trappings that go
> with taxes to those that go with permits -- and think most
> environmentalists agree with me.
>
> On practical grounds: If it is true that we cannot get pollution taxes
> nearly as high as the marginal social cost of pollution -- which is the
> efficient pollution tax -- [and I concede that we cannot these days];
> then it will also be true that we cannot get the number of pollution
> permits issued to be nearly as low as the efficient level of overall
> pollution reduction calls for. What EDF types are counting on is that if
> the rest of us agree to pay the polluting corporations a mammoth side
> payment bribe [side payment because it has nothing to do with the
> pollution policy per se] in the form of awarding them the market value
> of the environment by issuing pollution permits to them free, then they
> will be less hostile to reducing the number of permits. Less hostile,
> that is, than they would be to increasing pollution taxes. I'm sure that
> is true, but I'm one of those types who have always said: "There is some
> shit I will not eat!"
>
> Besides. Republicans and corporations don't keep their promises. Once
> they get their gift -- free permits -- they'll go back to maximum
> opposition to reductions in the number of pollution permits. It's the
> "thank you, fuck you" strategy that always serves them so well --
> especially with EDF types around to play sucker and make suckers of the
> rest of us to boot.
Since I do not support free permits -- no problem. But the ideological argument
is convincing. Call them green taxes; it is a better way to put it. But make
them green taxes with some sort of ceiling. Don't rely on price alone.
>
> > Perhaps for professional
> > economists this is a simple problem.
>
> No way. But note you have to do the same study to know how many, or how
> few permits to issue!
No, it seems to me that you have to know how much pollution you want to allow
BEFORE you begin to figure out the social cost of unit of pollution. That is, I
do not believe environmentalist should do a lot of studies along the lines of
"this pollutant will kill a 1000 people -- but generates 25 billion in economic
activity so therefore it is worth it"; the tolerable level of a pollutant is the
level at which it is harmless to human life, low risk to human health, and not
threatening to ecosystem or ecological subsystem. I don't see that as a
primarily economic study. The question of what pollution tax will reduce the
pollution to that level should be done only after that is determined -- and it
case this second study is wrong, some sort of ceiling should
be imposed in addition to the green tax. As I said, your argument against the
word "permit" is a convincing one. So call it a ration, or a regulation, or
perhaps simply a ceiling. In fact your ideological argument is so convincing
that "tax" also seems too mild and neutral a word to describe what is a very
small down payment on a tremendous environmental debt.
