Tuesday, July 29, 2014

Call for "Carbon Fee" is a Call for a Tax on Human Well-Being

A recent NJ Star-Ledger letter, Carbon fee should be enacted to fight climate change by Tony Giordano, opens with this paragraph:

    Recent extreme weather events represent a telling example of how the use of carbon-based fuels (e.g. oil, natural gas, coal) that release greenhouse gases create adverse impacts for millions of people. Climate change, rising seas and increasing illness are examples of social costs because they are paid by society overall, not by producers of carbon fuels.

The writer goes on to say that the energy companies are getting "a free ride" because of the alleged "costs" that they impose on society. This is an "unfair" state of affairs, because, in "a free market," "all costs should be paid by the businesses generating them." The solution, then, is for "Policymakers [to] enact . . . a carbon fee [tax] . . . now, with a dividend returning the revenue to consumers."

I left these comments:

"Recent extreme weather events represent a telling example of how the use of carbon-based fuels (e.g. oil, natural gas, coal) that release greenhouse gases create adverse impacts for millions of people."

This is an arbitrary assertion with no connection to reality.

When has there ever NOT been extreme weather? The only difference is that today, human beings can cope with, rather than be at the mercy of, extremes because of the clean, affordable, reliable, and abundant industrial scale energy provided primarily by fossil fuels, and to a lesser extent nuclear and hydroelectric. If you're going to talk about "unpaid" costs—negative externalities—then you'll have to include unrequited benefits—positive externalities—which far exceed the "adverse impacts" of minor increases in co2 levels—if you can call co2, without which life as we know could not exist, "adverse."

Since the adoption of fossil fuel use, our environment has gotten cleaner, safer, and much more livable than it ever was. And as a consequence, the length and quality of our lives has soared to unprecedented heights. At the same time, climate-related deaths in industrialized countries have fallen 98%. A carbon tax is a tax on human well-being, a handout to greedy consumers, and another corporate welfare scheme for so-called "clean energy" producers, who will never be competitive and never, by the nature of wind and solar, be able to provide reliable, cheap, plentiful industrial-scale energy. If the "clean energy" industry is capable of being competitive on price and reliability, then let them prove it [in] a truly free market—that is, free of subsidies and unfair tax burdens on fossil fuel companies and their customers.

Typically, statists cherry-pick "externalities"—secondary effects of economic activity—to suit their own purposes, and ignore the rest. In fact, it is impossible to accurately measure "externality" effects as they relate to individual human beings. For example, I heat with oil. Considering the misery of getting through the brutally cold 2013-14 Northeast U.S. winter without central heat, I would say my wife and I were far better off with than without the oil. In a winter that often featured temperatures well below zero F., the value of that oil far exceeded the cost of a few dollars a gallon price—an excess value for which the fossil fuel companies weren't paid. The value to us of having a warm home far exceeded the cost, in terms of extra oil, of living through a possibly climate change-induced extreme cold (just to accept Giordano's premise for the sake of an argument). So in the context of the externalities argument, social benefit for us far exceeded the social cost of fossil fuels. (For a rational and balanced investigation into the issue of "externalities," I recommend Chapter 4 of Brian P. Simpson's book Markets Don't Fail.)

Giordano falls back on the old collectivist substitute for actual reality, "society," as if we are all one organic entity—apart from fossil fuel energy producers, who apparently don't rate as part of society—with no individuality. But, clearly, as a part of "society," we enjoy a large net gain, rather a loss, thanks to fossil fuels. So how do we rate a subsidy from the fossil fuel companies? Furthermore, how do you even put a dollar value on the value we gained, vs. the cost of not having, the oil? Would we have been better off having frozen to death in exchange for the oceans not rising an extra inch or two over the past century?

But, in fact, even accepting Giordano's "cost to society" argument, the consumers who buy fossil fuel energy—whether to power their cars, clean water, heat, electricity, lighting, or whatever—are not victims of that cost; they are contributors. "It takes two to tango," as the idiom goes. Consumers voluntarily purchase and benefit from fossil fuel energy. Therefor, consumers should be considered part of the "problem," not victims who should be compensated for alleged costs imposed on them (which, in any event, would be funded by them through higher prices).

Giordano's whole premise is bogus. In a free market, division of labor, money exchange economy, there is no way of calculating the dollar value of "externalities." Any attempt to impose financial "solutions" to externalities only creates victims  and freeloaders, and empowers government to violate individual rights. In fact, externalities are irrelevant. The only just and rational way to balance costs and benefits is through the pricing mechanism of the free market; the "free" signifying the cumulative voluntary choices of free individuals trading for mutual benefit and self-interest. Anyone who demands government action to override the market is merely trying to impose his choices over the choices of others.

Related Reading:

"Market Failure" to Blame for Invasion of the Polar Vortex?

Markets Don't Fail—Brian P. Simpson

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