[Pen-l] Public Investment beats emission pricing for fast reductions

["Gar Lipow" <gar.lipow@xxxxxxxxx>]

http://gristmill.grist.org/story/2008/7/24/1491/58287

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Myth: All solutions to climate chaos raise prices
Busted: Majority of emissions cuts can come from public spending

Posted by Gar Lipow (Guest Contributor) at 1:13 PM on 25 Jul 2008

A common rap by environmental economists is "any means of cutting
emissions raises prices." Though it is used in defense of a valid
point (in the long run we will have to institute either a carbon tax
or a permit system), it is simply not true.

The vast majority of emissions cuts can come via public spending that
won't raise prices. We can subsidize efficiency improvements to
buildings, fund a conversion of most long-haul trucking to rail (
http://www.theoildrum.com/node/4301 ), and in the long run electrify
all transit and decarbonize electricity generation.

But doesn't the money for these subsidies have to come from somewhere?
Yup, but a lot these are areas where the private (as opposed to
social) gains exceed the subsidy -- meaning even if the people
receiving the subsidy end up paying for most of it from taxes, they
come out ahead. However, there is no reason the people receiving the
subsidies have to pay for most of them. Most of our military budget is
devoted to aggression rather than protecting us. We have had enormous
tax cuts for the rich from Jimmy Carter forward. We have wasteful
existing subsidies for fossil fuel and various unsustainable
practices. There is an old liberal-mocking slogan I'd like to turn
around and adapt: "Don't tax you, don't tax me, tax the fellow behind
that tree."

If you want more detail on what those means of reducing emissions are,
what they would cost, and what the benefits are, look at the
spreadsheet Jon Rynn and I have put together   (
http://gristmill.grist.org/story/2008/7/12/1798/98255 ). If you
question whether any emissions price is needed, briefly:

    * The industrial sector is too complex to capture most efficiency
opportunities except through response to price signals.
    * Emissions pricing is needed to keep rebound effects to manageable levels.
    * Emissions pricing will help "mop up" stuff that public
investment and rule-based regulation won't capture.
    * Lastly, rule-based regulation is sometimes an emission price in
itself. In many cases rule-based regulation actually saves money for
those regulated. (I've documented examples in the past.) But in many
others the cost/benefit ratios are positive only when considering
social benefits or reductions of social costs. In that case they do
increase the price of the particular goods or services affected by the
regulation, even though they save money for society as a whole. But we
can start public investments with the large number of regulations
which would save money for those regulated. Save the hardest parts for
last.
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