Articles by Gar Lipow

Empirical data and theory both show that emissions taxes get passed to consumers

Sean asks, "If you put a price on GHG emissions, will it raise the cost of energy?" and answers, "Mostly, no." I wish he were right, because I really dislike carbon taxes and was only gradually convinced to support them by overwhelming evidence.

But pretty much every empirical study that has ever been done about sales tax and other broad-based taxes on gross revenue shows that such costs do get passed along.

Output-based carbon regulations ignore critical types of efficiency

"Output-based standards" are getting credit around here as a politically impractical but sensible proposal. David described them as "relentlessly efficient."

I'm sure relentless efficiency was the intent, but in fact it is very much a way of picking winners, of rewarding one particular type of efficiency at expense of others. The idea is that within industries, a standard will be set for maximum emissions per useful BTU delivered. So if you are heating tomatoes as part of making tomato paste, the standard would apply to your emissions per BTU used to raise the temperature of a tomato. The problem is that while this rewards delivering those BTUs more efficiently, it does not reward heating the tomatoes less, perhaps by substituting a filtering process for some of the heating.

When I brought this up in comments, Sean argued that the second method still rewards by lowering fuel bills. But then, so does the first. If delivering BTUs more efficiently needs an incentive over and above fuel saving, then so does finding a way to use fewer BTUs in the first place.

Perpetual montion does not work any better in economics than it does in technology

In David Roberts' post on the carbon policy dilemma, David defines an "efficient" carbon policy as follows:

First, in a given sector, you set up a system that transfers capital directly from those over-emitting to those reducing emissions, in an agnostic fashion -- that is, preferencing no particular set of technologies or practices. A ton of CO2 ought to be worth the same no matter how it is emitted or prevented, and there should be no net loss of capital in the sector (as there would be if the feds took the revenue and spent it on other things). Second, you remove existing regulatory barriers to that capital flow. As long as capital continues flowing from emitters to savers, you've got a perpetual economic motion machine.

My guess is the use of a perpetual motion machine as a metaphor was a message from David's subconscious, because it is impossible to set up a mechanism where the transfer "to" is as efficient and automatic as the transfer "from."

Why secondary carbon markets should be minimized in climate legislation

It is fine and necessary to put a price on carbon, via either a carbon tax or 100 percent auctioned cap-and-trade permits. But in the latter case, when those permits are not sold directly to polluters but are released into a secondary market (either via auctioning or, worse, via giveaways), those markets tend to prioritize maintaining their own existence over reducing emissions.

In short, a price is fine; an actual market is not.