Sunday, February 24, 2013

Stupid About Energy and CO2

People, and Governments, do a lot of dumb things to fool themselves into thinking they are doing something other than what they are actually doing. I've probably mentioned before how idiotic I think it is to protest against the Keystone pipeline. Preventing the pipeline from being built will not prevent the Athabasca tar sands from being exploited or reduce global carbon emissions. It will, in all likelihood, increase them by the amount of energy required to transport the oil across the ocean.

Via Marginal Revolution, Valery Karplus writes in the New York Times about the similar stupidity of CAFE standards on fuel economy. Her studies, and those of her MIT colleagues, indicate that reducing emissions through CAFE standards costs the economy at least six times as much (likely more) than a similar reduction achieved through higher energy taxes.

The way to reduce carbon emissions is to tax carbon emission (or extraction). Every other way is just a gimmick to avoid revealing the true economic cost of CO2 reduction. That applies, by the way, to the particular gimmick favored by liberal economists, like Paul Krugman: Cap and Trade. The irony, of course, is that the gimmicks increase the real cost.

Not that I believe are politicians are likely to step up to the plate on this one.

It's true that such taxes are regressive. Guess what. So are are the other gimmicks, and they are more regressive, since they cost more. Moreover, it's easy to rebate some of the taxes to low income people to overcome the regressive effect - use it to pay for their health insurance, for example. You can't do that with CAFE standards or even (conveniently) with Cap and Trade.