=politics =government =global warming =economics
Some people keep pushing for a tax on CO2 emissions, and it never works. What they should do in response is think "maybe I don't understand what drives politicians or voters as well as I thought" and try to understand political economy better. What they actually do is to assume the politicians and plebeians just didn't hear their brilliant proposal properly, and eventually just give up.
In
general, only people who want to be elected over other goals get elected to
high-level positions, so the main motivation for politicians is generally
getting re-elected. If a politician is elected, then the current equilibrium
gets them elected, and they don't want that to change.
When new
regulations are added, it's common for them only to apply to new projects or
renovations. So, there are grandfathered chemical plants and power plants
that produce much more pollution than others, and they can't make any
changes to the plant because then a huge backlog of regulations would apply.
This is obviously suboptimal from a societal perspective, so why do
politicians keep writing regulations that way? Largely, because they don't
want to break the equilibrium that got them elected.
Similarly, it's
fairly common for big new laws (such as Obamacare) to mostly take effect
shortly after their champion leaves office. One implication is that shorter
term limits for politicians tend to lead to more big changes being made.
Cap and trade is preferred over CO2 taxes by politicians because it
doesn't immediately make industries better or worse off, and doesn't
immediately have a large impact on prices. The impacts that cause large
changes in behavior, which are what's necessary for a CO2 tax to be
effective, are exactly what make that politically unpalatable. Cap and
trade also involves smaller flows of money than a CO2 tax, which is also
politically preferable.
If you talk to some working-class
Americans about a CO2 tax, they'll often be against it, and their argument
against it often won't make sense. When those "stupid plebeians" give you
some flawed argument, it's generally an attempt at justifying the conclusion
of their intuition, which often has a good reason that they're just unable
to articulate.
Let's imagine such a conversation, but here, I'll
articulate the intuition behind the opposition.
A: The
government should tax CO2 emissions, and I'd like you to support that.
B: Will that leave me better off?
A: Not per se, it would fall
disproportionately on you, but the government can just redistribute that
money so it's about neutral for you.
B: If a guy came up to you on
the street and said, "hey, give me all your money, I'll give you the same
amount back tomorrow," what would you say?
A: That's not the same:
the government is trustworthy and individuals aren't. It's not just going to
take your money.
B: So none of it would be spent on administration?
A: Of course there are administrative costs, but we expect them to be
relatively small.
B: And everybody pays the same cost for CO2, so
it's fair?
A: Of course.
B: In practice, it sure seems like
companies lobby for exceptions. Why would I expect new taxes to be handled
any more fairly than the existing tax code, which has companies sending all
their profits to Ireland or some tiny islands?
A: CO2 taxes are too
simple to add in that kind of corruption.
B: You think evaluation of
CO2 emissions is simple? How are you going to handle imports? Is somebody
paying for CO2 emitted by wildfires in California?
A: I've been told
that it's very feasible by people I consider experts.
B: How about
CO2 offsets?
A: They improve economic efficiency, of course.
B: And who gets to decide which ones are valid? I expect companies friendly
with the regulators to get favored even if their CO2 offsets are fake. For
example, you can just say you're preserving a bunch of forest, and if some
of it gets cut down, find some more forest to say you're preserving.
A: The government simply needs to choose regulators that aren't corrupt,
then. If you vote for the candidates I support you'll get that.
B:
Yeah? It sounds to me like you're pretty dumb, so maybe I don't want to do
that.
A: If you're worried about corruption, that's a bigger problem
with subsidies to green energy than CO2 taxes.
B: I've given up on
"solving" global warming - after all, we're not going to stop China from
burning coal. But I don't mind corrupt subsidies for green energy instead of
corrupt subsidies for other things. The total corruption is mostly
proportional to the amount of money flowing through government, which is
what you want to increase.
For a grand proposal such as a substantial CO2 tax to succeed, among other prerequisites, the government must be relatively competent and its citizens must have substantial confidence in it. Luckily, the handling of COVID has really demonstrated just how trustworthy a lot of governments are.