A Carbon Tax Will Not Work
Simple Economics
The global warming crowd wants taxes on carbon. Here is their logic.
Global warming is man-made.
Carbon causes global warming and man makes too much of it
Fossil fuels are the primary cause of carbon
Taxes on carbon will cause less carbon to be produced
The idea is that the opportunity costs around using carbon will be changed with a tax and people who choose to use carbon will pay for the negative externality. The global warming crowd also wants to see big changes in behavior with people consuming less energy, so they see a tax as a way to curb consumption.
It’s kind of Coasian in concept. But, it’s a bit warped. It’s pretty hard to utilize substitutes and it’s also hard for me to generate my own energy. There also isn’t a lot of bargaining power since government or quasi-government entities power the energy grid.
However, economists as distinguished as
has proposed it.Taxes are disincentives. People go to great lengths to avoid taxes of all kinds. We have had estate and wealth taxes in the United States for a century, but legacy family wealth is still passed from generation to generation. Joe Kennedy made a lot of money and his heirs have a lot of money despite the tax. Why? Because they can afford to figure out ways around it.
Businesses and people spend billions each year figuring out ways to avoid taxes. That’s why consumption taxes are the best way to incentivize and tax everyone.
Whether you are in the global warming crowd or the anti-global warming crowd you are confronted with a huge problem. You live in an on-demand knowledge innovation economy. That economy needs massive never seen before cheap energy to run efficiently.
Why won’t a carbon tax work to stop global warming? Ignore the geopolitical reasons that China and India aren’t changing anytime soon. Look to simple Economics 101.
The elasticity of demand for energy is too steep. There just are no readily available alternatives that can meet demand. In every place that green substitutes are tried, the energy grid fails. California has brownouts and high prices. Texas has had big problems by trying to utilize wind and solar in place of fossil fuels. Remember when everyone froze because the power went out?
The elasticity of supply of energy is also flatter than an on-demand information economy needs. Supply is inelastic. It is arduous to build new power plants and increase the total supply of power. It is also arduous to litter rooftops with solar energy. Hyper-expensive too.
Since the first energy crisis in the 1970s, the focus of figuring out energy problems has always come from the demand side of the problem. You have heard admonitions to “Put on a sweater and turn down the heat” or “Turn the lights off”.
Chastising and peer pressure haven’t worked and now we are in a situation where we have a cult-like group when it comes to the global warming crowd trying to dictate to everyone else what to do. The other side pushes back against the cult and finds all kinds of reasons not to bend to their will.
People do not want to do less. Humans are hard-wired to do more. It’s in our DNA. That’s why a carbon tax is a useless idea. All the tax will do is make everything more inefficient. Money generated from the tax will be redistributed by centralized government bureaucracies that seek to empower themselves over citizens. The whole thought of it turns my stomach and we know it won’t work even before we try it.
No amount of logic will appease either side.
That happens often when you try to use demand-side logic to solve problems. Demand is very tricky to predict and it is hard to control. Take it from someone who traded hogs. Much easier to figure out the supply the market was going to receive rather than how quickly it was going to be used.
Hence, to solve the problem society should focus on supply. Solve the problem with abundance, not limits.
Even if both sides were to agree on solving with abundance, there would be strong disagreement as to how. The cult would insist on solar and wind. Except, we know it doesn’t work at scale. We have hard evidence.
Solar can work at very limited and isolated scale. Put it on a house. Put it on the roof of a business. Use it to power little things. However, it’s still super expensive power because as
has shown that the density of solar power is very light compared to other power sources. I put solar on my house. The payback period is 10 years without subsidies. The expected lifetime of one solar panel is 30 years. That’s only a 20-year benefit before you have to retrofit. Disposing of solar panels is impossible.If we take a step back and understand the challenges that confront us, it might help everyone think more clearly about how to solve the problem with abundance.
Our current electrical grid is too small to sustain future innovation and the potential life-changing breakthroughs that will happen. It needs to be expanded, and quickly. Otherwise, you will see exponential increases in the cost of energy. If you think inflation is bad now, wait.
When you stop growing and innovating, you die. We don’t want to put the brakes on innovation. As
says, “It’s time to build.” It is never not time to build if you want to live. If you want to die and go the way of the dinosaur, stop.Here are four innovations that are going to help mankind leap far forward. Two are so innovative that they have the potential to change our lives more than any other innovation we have seen in human history. One can unlock efficiencies and eliminate friction in transactions. The other combined with the top three can make transportation and delivery hyper-efficient.
Electronic Vehicles
I am not going to delve into all the particulars of why these are important. I don’t want to write a book but you can go to the links. All of these technologies are huge consumers of electricity. Here is the good news. The US leads in AI private investment. If you follow the venture capital rags like I do, it will come as no surprise to you. Investment doesn’t always mean success, but more investment gives you more swings of the bat. Don’t go short the United States.
Here is quantum computing
There is only one way to solve the abundance problem while placating the global warming cult and the tribe on the other side. It is nuclear power.
As Robert Bryce and others have shown. Nuclear power is incredibly efficient when it comes to how much energy it produces per dollar invested. Given the constraints of modern society, building nuclear power plants all over the United States will give our country the electrical grid we need. That grid will give us enough headroom to innovate and see electrical prices decrease at the same time.
Nuclear power is also the greenest power source for the total economic cost.
Switching the grid to nuclear and discarding solar/wind is the right solution. We should have done it in 1970 and embracing nuclear power will also pave the way to nuclear fusion. The free market will solve that problem but it has to have the energy and incentive to get there. Without nuclear power, getting to fusion will take decades and decades.
I hate caving to them by using words like "clean" or coming up with ways to assist like a carbon tax. The best question that they wont answer is "After we spend trillions of dollars, either by collecting money as a carbon tax or transitioning to unreliable types of energy...HOW MUCH WILL IT LOWER THE EARTHS TEMP?" The whole thing is an idiotic scam.
Don’t forget geothermal. They’re using fracking industry technology for new purposes.
And while I agree carbon tax isn’t great, one area where users should pay more and more directly is for road usage. Gas taxes for ICE cars. Mileage taxes for electric vehicles. Congestion pricing for places like Manhattan.