[Vision2020] "Energy Subsidies Black, Not Green" was Liberal Agenda?

[Ted Moffett]

Speaking of subsidies and regulated vs "free" markets...

While the debate on taking action to reduce CO2 emissions often centers on
dire warnings of grave economic harm from reduction schemes, if the
following data on tax breaks and subsidies for traditional fossil fuels
compared to alternative energy industries is accurate, it appears there may
be economic maneuvering room to significantly increase the percentage of
lower CO2 emitting energy sources, by altering the balance of subsidies and
tax breaks, without economic damage to the economy in total.  Also, tax
shifting, lowering income taxes while increasing taxes on fossil fuels, is
suggested as a means to stimulate alternative energy deployment, while not
damaging the overall economy

Of course other industries would displace fossil fuel industries, thus the
well funded and powerful campaign to manufacture doubt about anthropogenic
climate change, and stop legislation to address the problem.

But this is an opportunity for new US technological development and
deployment of alternative energy technology, that can be sold domestically
and in the global marketplace, creating jobs.  The "doom and gloom" economic
warnings from lobbyists seeking to block CO2 reduction efforts, are
questionable.

If Don Coombs read this, sorry for the pie chart:

Information on subsidies and tax breaks for fossil fuels compared to
alternative energy from the Environmental Law Institute at the following web
site:

http://www.eli.org/pdf/Energy_Subsidies_Black_Not_Green.pdf

>From the Earth Policy Institute, a chapter from "Plan B 3.0: Mobilizing to
Save Civilization" focusing on taxes and subsidies to address climate
change.  Tax shifting to lower taxes on labor (income taxes) and increase
taxes on fossil fuels would result in the same level of overall taxation,
not an increase, while stimulating job production in the alternative energy
sector:
http://www.earth-policy.org/index.php?/books/pb3/pb3_table_of_contents

http://www.earth-policy.org/index.php?/books/pb3/PB3ch13_ss2

A short excerpt about tax shifting:

Some 2,500 economists, including eight Nobel Prize winners in economics,
have endorsed the concept of tax shifts. Harvard economics professor N.
Gregory Mankiw wrote in *Fortune* magazine: “Cutting income taxes while
increasing gasoline taxes would lead to more rapid economic growth, less
traffic congestion, safer roads, and reduced risk of global warming—all
without jeopardizing long-term fiscal solvency. This may be the closest
thing to a free lunch that economics has to offer.” 16

--------------
 Plan B 3.0: Mobilizing to Save
Civilization<http://www.earth-policy.org/index.php?/books/pb3>
Lester R. Brown
 Chapter 13. The Great Mobilization: Shifting Taxes and Subsidies

The need for tax shifting—lowering income taxes while raising levies on
environmentally destructive activities—has been widely endorsed by
economists. For example, a tax on coal that incorporated the increased
health care costs associated with mining it and breathing polluted air, the
costs of damage from acid rain, and the costs of climate disruption would
encourage investment in clean renewable sources of energy such as wind or
solar. 4

A market that is permitted to ignore the indirect costs in pricing goods and
services is irrational, wasteful, and, in the end, self-destructive. It is
precisely what Nicholas Stern was referring to when he described the failure
to incorporate the costs of climate change in the prices of fossil fuels as
“a market failure on the greatest scale the world has ever seen.” 5

The first step in creating an honest market is to calculate indirect costs.
Perhaps the best model for this is a U.S. government study on the costs to
society of smoking cigarettes that was undertaken by the Centers for Disease
Control and Prevention (CDC). In 2006 the CDC calculated the cost to society
of smoking cigarettes, including both the cost of treating smoking-related
illnesses and the lost worker productivity from these illnesses, at $10.47
per pack. 6

This calculation provides a framework for raising taxes on cigarettes. In
Chicago, smokers now pay $3.66 per pack in state and local cigarette taxes.
New York City is not far behind at $3 per pack. At the state level, New
Jersey—which has boosted the tax in four of the last five years to a total
of $2.58—has the highest tax. Since a 10-percent price rise typically
reduces smoking by 4 percent, the health benefits of tax increases are
substantial. 7

Tax restructuring can also be used to create an honest pricing system for
ecological services. For example, forest ecologists can estimate the values
of services that trees provide, such as flood control and carbon
sequestration. Once these are determined, they can be incorporated into the
price of trees as a stumpage tax. Anyone wishing to cut a tree would have to
pay a tax equal to the value of the services provided by that tree. The
market for lumber would then be based on ecologically honest prices, prices
that would reduce tree cutting and encourage wood reuse and paper recycling.

The most efficient means of restructuring the energy economy to stabilize
atmospheric CO2 levels is a carbon tax. Paid by the primary producers—the
oil or coal companies—it would permeate the entire fossil fuel energy
economy. The tax on coal would be almost double that on natural gas simply
because coal has a much higher carbon content. As noted in Chapter 11, we
propose a worldwide carbon tax of $240 per ton to be phased in at the rate
of $20 per year between 2008 and 2020. Once a schedule for phasing in the
carbon tax and reducing the tax on income is in place, the new prices can be
used by all economic decisionmakers to make more intelligent decisions. 8

For a gasoline tax, the most detailed analysis available of indirect costs
is found in The Real Price of Gasoline by the International Center for
Technology Assessment. The many indirect costs to society—including climate
change, oil industry tax breaks, oil supply protection, oil industry
subsidies, and treatment of auto exhaust-related respiratory illnesses—total
around $12 per gallon ($3.17 per liter), slightly more than the cost to
society of smoking a pack of cigarettes. If this external or social cost is
added to the roughly $3 per gallon average price of gas in the United States
in early 2007, gas would cost $15 a gallon. These are real costs. Someone
bears them. If not us, our children. Now that these costs have been
calculated, they can be used to set tax rates on gasoline, just as the CDC
analysis is being used to raise taxes on cigarettes. 9

Gasoline’s indirect costs of $12 per gallon provide a reference point for
raising taxes to where the price reflects the environmental truth. Gasoline
taxes in Italy, France, Germany, and the United Kingdom averaging $4.40 per
gallon are almost halfway there. The average U.S. gas tax of 47¢ per gallon,
scarcely one tenth that in Europe, helps explain why more gasoline is used
in the United States than in the next 20 countries combined. 10

Phasing in a gasoline tax of 40¢ per gallon per year for the next 12 years,
for a total rise of $4.80 a gallon, and offsetting it with a reduction in
income taxes would raise the U.S. gas tax to the $4–5 per gallon prevailing
today in Europe and Japan. This will still fall short of the $12 of indirect
costs currently associated with burning a gallon of gasoline, but combined
with the rising price of gasoline itself it should be enough to encourage
people to use improved public transport and motorists to buy the plug-in
hybrid cars scheduled to enter the market in 2010.

These carbon and gasoline taxes may seem high, but there is at least one
dramatic precedent. In November 1998 the U.S. tobacco industry agreed to
reimburse state governments $251 billion for the Medicare costs of treating
smoking-related illnesses—nearly $1,000 for every person in the United
States. This landmark agreement was, in effect, a retroactive tax on
cigarettes smoked in the past, one designed to cover indirect costs. To pay
this enormous bill, companies raised cigarette prices, bringing them closer
to their true costs and further discouraging smoking. 11

A carbon tax of $240 per ton of carbon by 2020 may seem steep, but it is
not. If gasoline taxes in Europe, which were designed to generate revenue
and to discourage excessive dependence on imported oil, were thought of as a
carbon tax, the $4.40 per gallon would translate into a carbon tax of $1,815
per ton. This is a staggering number, one that goes far beyond any carbon
emission tax or cap-and-trade carbon-price proposals to date. It suggests
that the official discussions of carbon prices in the range of $15 to $50 a
ton are clearly on the modest end of the possible range of prices. The high
gasoline taxes in Europe have contributed to an oil-efficient economy and to
far greater investment in high-quality public transportation over the
decades, making it less vulnerable to supply disruptions. 12

Tax shifting is not new in Europe. A four-year plan adopted in Germany in
1999 systematically shifted taxes from labor to energy. By 2003, this plan
had reduced annual CO2 emissions by 20 million tons and helped to create
approximately 250,000 additional jobs. It had also accelerated growth in the
renewable energy sector, creating some 64,000 jobs by 2006 in the wind
industry alone, a number that is projected to rise to 103,000 by 2010. 13

Between 2001 and 2006, Sweden shifted an estimated $2 billion of taxes from
income to environmentally destructive activities. Much of this shift of $500
or so per household was levied on road transport, including hikes in vehicle
and fuel taxes. Electricity is also picking up part of the shift.
Environmental tax shifting is becoming commonplace in Europe, where France,
Italy, Norway, Spain, and the United Kingdom are also using this policy
instrument. In Europe and the United States, polls indicate that at least 70
percent of voters support environmental tax reform once it is explained to
them. 14

Environmental taxes are now being used for several purposes. As noted
earlier, landfill taxes adopted by either national or local governments are
becoming more common. A number of cities are now taxing cars that enter the
city. Others are simply imposing a tax on automobile ownership. In Denmark,
the tax on the purchase of a new car exceeds the price of the car itself. A
new car that sells for $25,000 costs the buyer more than $50,000. Other
governments are moving in this direction. *New York Times* reporter Howard
French writes that Shanghai, which is being suffocated by automobiles, “has
raised the fees for car registrations every year since 2000, doubling over
that time to about $4,600 per vehicle—more than twice the city’s per capita
income.” 15

Some 2,500 economists, including eight Nobel Prize winners in economics,
have endorsed the concept of tax shifts. Harvard economics professor N.
Gregory Mankiw wrote in *Fortune* magazine: “Cutting income taxes while
increasing gasoline taxes would lead to more rapid economic growth, less
traffic congestion, safer roads, and reduced risk of global warming—all
without jeopardizing long-term fiscal solvency. This may be the closest
thing to a free lunch that economics has to offer.” 16

Cap-and-trade systems using tradable permits are sometimes an alternative to
environmental tax restructuring. The principal difference between them is
that with permits, governments set the amount of a given activity that is
allowed, such as the harvest from a fishery, and let the market set the
price of the permits as they are auctioned off. With environmental taxes, in
contrast, the price of the environmentally destructive activity is
incorporated in the tax rate, and the market determines the amount of the
activity that will occur at that price. Both economic instruments can be
used to discourage environmentally irresponsible behavior.

The use of cap-and-trade systems with marketable permits has been effective
at the national level, ranging from restricting the catch in an Australian
fishery to reducing sulfur emissions in the United States. For example, the
government of Australia, concerned about lobster overharvesting, estimated
the sustainable yield of lobsters and then issued catch permits totaling
that amount. Fishers could then bid for these permits. In effect, the
government decided how many lobsters could be taken each year and let the
market decide what the permits were worth. Since the permit trading system
was adopted in 1986, the fishery has stabilized and appears to be operating
on a sustainable basis. 17

Although tradable permits are popular in the business community, permits are
administratively more complicated and not as well understood as taxes. Edwin
Clark, former senior economist with the White House Council on Environmental
Quality, observes that tradable permits “require establishing complex
regulatory frameworks, defining the permits, establishing the rules for
trades, and preventing people from acting without permits.” In contrast to
restructuring taxes, something with which there is wide familiarity,
tradable permits are a concept not widely understood by the public, making
it more difficult to generate broad public support. 18

Each year the world’s taxpayers provide an estimated $700 billion of
subsidies for environmentally destructive activities, such as fossil fuel
burning, overpumping aquifers, clearcutting forests, and overfishing. An
Earth Council study, *Subsidizing Unsustainable Development*, observes that
“there is something unbelievable about the world spending hundreds of
billions of dollars annually to subsidize its own destruction.” 19

Iran provides a classic example of extreme subsidies when it prices oil for
internal use at one tenth the world price, strongly encouraging car
ownership and gas consumption. If its $37-billion annual subsidy were phased
out, the World Bank reports that Iran’s carbon emissions would drop by a
staggering 49 percent. This move would also strengthen the economy by
freeing up public revenues for investment in the country’s economic
development. Iran is not alone. The Bank reports that removing energy
subsidies would reduce carbon emissions in India by 14 percent, in Indonesia
by 11 percent, in Russia by 17 percent, and in Venezuela by 26 percent.
Carbon emissions could be cut in scores of countries by simply eliminating
fossil fuel subsidies. 20

Some countries are already doing this. Belgium, France, and Japan have
phased out all subsidies for coal. Germany reduced its coal subsidy from
$2.8 billion in 1989 to $1.4 billion in 2002, meanwhile lowering its coal
use by 38 percent. It plans to phase out this support entirely by 2018. As
oil prices have climbed, a number of countries have greatly reduced or
eliminated subsidies that held fuel prices well below world market prices
because of the heavy fiscal cost. Among these are China, Indonesia, and
Nigeria. 21

A study by the U.K. Green Party,* Aviation’s Economic Downside*, describes
the extent of subsidies to the U.K. airline industry. The giveaway begins
with $18 billion in tax breaks, including a total exemption from the federal
tax. External or indirect costs that are not paid, such as treating illness
from breathing the air polluted by planes, the costs of climate change, and
so forth, add nearly $7.5 billion to the tab. The subsidy in the United
Kingdom totals $426 per resident. This is also an inherently regressive tax
policy simply because a part of the U.K. population cannot afford to fly,
yet they help subsidize this high-cost travel for their more affluent
compatriots. 22

While some leading industrial countries have been reducing subsidies to
fossil fuels—notably coal, the most climate-disrupting of all fuels—the
United States has increased its support for the fossil fuel and nuclear
industries. Douglas Koplow, founder of Earth Track, calculated in a 2006
study that annual U.S. federal energy subsidies have a total value to the
industry of $74 billion. Of this, the oil and gas industry gets $39 billion,
coal $8 billion, and nuclear $9 billion. At a time when there is a need to
conserve oil resources, U.S. taxpayers are subsidizing their depletion. 23

Just as there is a need for tax shifting, there is also a need for subsidy
shifting. A world facing the prospect of economically disruptive climate
change, for example, can no longer justify subsidies to expand the burning
of coal and oil. Shifting these subsidies to the development of
climate-benign energy sources such as wind, solar, biomass, and geothermal
power will help stabilize the earth’s climate. Shifting subsidies from road
construction to rail construction could increase mobility in many situations
while reducing carbon emissions. And shifting the $22 billion in annual
fishing industry subsidies, which encourage destructive overfishing, to the
creation of marine parks to regenerate fisheries would be a giant step in
restoring oceanic fisheries. 24

In a troubled world economy, where many governments are facing fiscal
deficits, these proposed tax and subsidy shifts can help balance the books,
create additional jobs, and save the economy’s eco-supports. Tax and subsidy
shifting promise energy efficiency, cuts in carbon emissions, and reductions
in environmental destruction—a win-win-win situation.
------------------------------------------
Vision2020 Post: Ted Moffett


On 12/2/09, Andy Boyd <moscowrecycling at turbonet.com> wrote:
>
> Roger,
> It may seem ridiculous but everyone says 'free market' and it's a fraud.
> The reason one would aspire to a free market is because it would regulate
> itself regarding supply and demand.  Take the paper industry, economically,
> paper is cheaper to make from hemp but we place regulations (industrial
> hemp
> is illegal) and supply subsidies to these corporations to keep the price of
> paper from wood cheaper than hemp that is produced legally in other
> countries.  This is one example of thousands.  Certainly anyone is allowed
> to engage in a business of ones choosing but depending on the business the
> cards are not close to fair or free.  The farmer that gets fined by
> Monsanto
> when a genetically modified plant shows up in their field even though they
> don't use Monsanto GMO products is another case and point.  The market and
> regulators don't treat them fairly.  A free market could actually help some
> of our environmental 'situations'. If we in the United States had to pay a
> true market value for food, wood or petroleum products for example, many of
> the alternative products out 'there' would end up being the same price or
> cheaper, altering our purchasing habits.  Ahh, so much to criticize.
> And yes, truth in advertising would be great but even if you try to
> prosecute these inaccuracies, the cards are stacked against the average
> citizen.
> that's enought for me today.
> Andy Boyd
> Manager/Education Coordinator
> Moscow Recycling
> 208 882 0590
> ----- Original Message -----
> From: "lfalen" <lfalen at turbonet.com>
> To: "Andy Boyd" <moscowrecycling at turbonet.com>; "Gier, Nicholas"
> <NGIER at uidaho.edu>; "Kenneth Marcy" <kmmos1 at verizon.net>;
> <vision2020 at moscow.com>
> Sent: Wednesday, December 02, 2009 12:27 PM
> Subject: Re: [Vision2020] Liberal Agenda?
>
>
> > Andy
> > You are being a little ridiculous. You should know what I ment. It is the
> > right t engage in a business of your choosing, To make a profit and to go
> > broke. The government does not need to make a profit and is therefore
> > inefficient. Some regulation is needed, a totally open market with no
> > holds bared would not protect the citizenry  from fraud or other abuses.
> > On the whole though there are to many regulations. In some cases ther
> > should be more. There should be more regulation on truth in advertising
> in
> > the health food supplement industry. Some Herbal supplements are very
> > helpful, some are worthless and some are down right dangerous.
> > Roger
> > -----Original message-----
> > From: "Andy Boyd" moscowrecycling at turbonet.com
> > Date: Mon, 30 Nov 2009 13:08:07 -0800
> > To: "lfalen" lfalen at turbonet.com, "Gier, Nicholas" NGIER at uidaho.edu,
> > "Kenneth Marcy" kmmos1 at verizon.net, vision2020 at moscow.com
> > Subject: Re: [Vision2020] Liberal Agenda?
> >
> >> I have yet to see this 'free market" to which you refer.  Might you give
> >> an
> >> example where markets are free?
> >> Andy Boyd
> >> Manager/Education Coordinator
> >> Moscow Recycling
> >> 208 882 0590
> >> ----- Original Message -----
> >> From: "lfalen" <lfalen at turbonet.com>
> >> To: "Andy Boyd" <moscowrecycling at turbonet.com>; "Gier, Nicholas"
> >> <NGIER at uidaho.edu>; "Kenneth Marcy" <kmmos1 at verizon.net>;
> >> <vision2020 at moscow.com>
> >> Sent: Monday, November 30, 2009 12:00 PM
> >> Subject: Re: [Vision2020] Liberal Agenda?
> >>
> >>
> >> > No. Capitalism as embodied in the free market system allows one to
> >> > freely
> >> > engage in any legal business they see fit. The  role of government
> >> > should
> >> > be see that businesses do not deceive the public or engage in unfair
> >> > business practices.
> >> > Roger
> >> > -----Original message-----
> >> > From: "Andy Boyd" moscowrecycling at turbonet.com
> >> > Date: Mon, 30 Nov 2009 12:37:26 -0800
> >> > To: "lfalen" lfalen at turbonet.com, "Gier, Nicholas" NGIER at uidaho.edu,
> >> > "Kenneth Marcy" kmmos1 at verizon.net, vision2020 at moscow.com
> >> > Subject: Re: [Vision2020] Liberal Agenda?
> >> >
> >> >> Couldn't you argue that capitalism is a form of behavior control,
> >> >> turning
> >> >> us
> >> >> all into good little consumers, all occuring in the last 50 years?
> >> >> Andy Boyd
> >> >> Manager/Education Coordinator
> >> >> Moscow Recycling
> >> >> 208 882 0590
> >> >> ----- Original Message -----
> >> >> From: "lfalen" <lfalen at turbonet.com>
> >> >> To: "Gier, Nicholas" <NGIER at uidaho.edu>; "Kenneth Marcy"
> >> >> <kmmos1 at verizon.net>; <vision2020 at moscow.com>
> >> >> Sent: Monday, November 30, 2009 10:49 AM
> >> >> Subject: Re: [Vision2020] Liberal Agenda?
> >> >>
> >> >>
> >> >> > Nick
> >> >> > I think that your definition is correct and would be in line with
> >> >> > that
> >> >> > of
> >> >> > John Stuart Mill. To be liberal should mean that one allows for the
> >> >> > behavior of others to be different from their own, even though they
> >> >> > may
> >> >> > not like it. This is why I use the term leftist to identify those
> >> >> > who
> >> >> > want
> >> >> > the state to control of our behavior.  They are anything but
> >> >> > liberal,
> >> >> > Some
> >> >> > of those on the far right want to do the same.
> >> >> > Roger
> >> >> > -----Original message-----
> >> >> > From: "Gier, Nicholas" NGIER at uidaho.edu
> >> >> > Date: Wed, 25 Nov 2009 13:10:48 -0800
> >> >> > To: "Kenneth Marcy" kmmos1 at verizon.net,  vision2020 at moscow.com
> >> >> > Subject: Re: [Vision2020] Liberal Agenda?
> >> >> >
> >> >> >> Greetings Visionaries:
> >> >> >>
> >> >> >> I'm on a futile crusade to bring everyone back to the original
> >> >> >> meaning
> >> >> >> of
> >> >> >> the word "liberal," from the Latin word "liberalis," meaning
> >> >> >> "pertaining
> >> >> >> to a free person," the "liberi" as opposed to the "servi," the
> >> >> >> "serfs"
> >> >> >> who were not free.
> >> >> >>
> >> >> >> The genius of the American and French Revolutions was the
> >> >> >> declaration
> >> >> >> that we are all free with inalienable rights to life, liberty, and
> >> >> >> the
> >> >> >> pursuit of happiness. The "servi" no longer exist.
> >> >> >>
> >> >> >> For more read my column "We Are All Liberals--Well, Almost All."
> >> >> >> (www.class.uidaho.edu/ngier/liberalism.htm) The exceptions are
> >> >> >> people
> >> >> >> such as Doug Wilson and his sordid gang of Paleo-Conservatives.
> >> >> >>
> >> >> >> May you all have a very Liberal Thanksgiving,
> >> >> >>
> >> >> >> Nick Gier
> >> >> >>
> >> >> >>
> >> >> >> -----Original Message-----
> >> >> >> From: vision2020-bounces at moscow.com on behalf of Kenneth Marcy
> >> >> >> Sent: Wed 11/25/2009 9:27 AM
> >> >> >> To: vision2020 at moscow.com
> >> >> >> Subject: Re: [Vision2020] Liberal Agenda?
> >> >> >>
> >> >> >> On Tuesday 24 November 2009 18:43:03 John Pool wrote:
> >> >> >> > I'm confused. Just what *is* a liberal agenda? Is it something
> >> >> >> > that
> >> >> >> > all liberals have to agree on, or just some? Does it have to be
> a
> >> >> >> > majority, or can it be less than that? What happens if a
> moderate
> >> >> >> > or centrist seeks the same end? Does that make her/him a liberal
> >> >> >> > automatically? I'd like some clarification here.
> >> >> >>
> >> >> >> When the phrase "liberal agenda" is used, usually it is a
> >> >> >> pejorative
> >> >> >> reference by someone talking against whatever is perceived to be
> >> >> >> undesirable about the matters to which they refer. The phrase has
> >> >> >> developed into a shorthand ad hominem argument against whatever
> >> >> >> policy the (conservative) speaker opposes.
> >> >> >>
> >> >> >> Liberal is a relative term that needs a reference points in time
> >> >> >> and
> >> >> >> place, culture and subject, and policy status quo vis-à-vis
> someone
> >> >> >> observing. To use it without such referents may be diversionary
> and
> >> >> >> counterproductive toward effective discussion, which may be the
> >> >> >> desired effect.
> >> >> >>
> >> >> >> I suspect actual liberals just dispense with using the term in
> >> >> >> favor
> >> >> >> of something more specific, such as legislative agenda or party
> >> >> >> platform. On the other hand, in the case of Thanksgiving, a
> >> >> >> well-set
> >> >> >> table and congenial guests make the agenda and the event the same.
> >> >> >> Happy Holiday.
> >> >> >>
> >> >> >>
> >> >> >> Ken
> >> >> >>
> >> >> >>
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