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« New Global Warming Theory | Main | Will There Be A Third One? »

Green Accounting

Al Gore and David Blood write in the Wall Street Journal today:

Our current system for accounting was principally established in the 1930s by Lord Keynes and the creation of "national accounts" (the backbone of today's gross domestic product). While this system was precise in its ability to account for capital goods, it was imprecise in its ability to account for natural and human resources because it assumed them to be limitless.

They go on to advocate environmental accounting which would favor Gore's carbon tax from Earth in the Balance. This is good public policy, but rather than showing we are "operating the Earth like it's a business in liquidation," a sensible green accounting would show laws have curbed the dirtiest polluters, disease has subsided, pesticides and herbicides have fewer side effects, beautification campaigns have made our cities prettier and our parks more accessible, and our toxic sites have been cleaned up. In short, the Earth is now the best place to live it has ever been. Before the industrial revolution there was very dirty heating and lighting fuel, poor water sanitation, air filled with animal and human waste smells, poor food sanitation, poor isolation of pathogens, poor measurement and science of environmental hazards and few resources for transportation to or improvements of parks.

Taxing petroleum and especially coal when energy prices are on an uptick is politically tone deaf. A subsidy for carbon offsets might play OK. These would harvest additional greening without the heavy hand of central planning. But if they are written right, they might cheer the glad capitalists more than the sullen environmentalists.

I do think that it is wise for space enthusiasts to support green accounting--without it, it is unlikely that space solar or He-3 will ever be economically viable (which is not to say that they will be with it).

Posted by Sam Dinkin at March 28, 2006 08:00 AM
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Comments

Sam, what about terminating the income tax (repeal the Amendment allowing such taxes) and replacing it with energy taxes?

Make it a revenue neutral swap of taxes.

Then, conservation becomes economically motivated. Want a 15 mpg truck rather than a 45 mpg car? No problem, just pay the gasoline tax.

Posted by Bill White at March 28, 2006 08:41 AM

Any time that the purpose of a tax is to change peoples' behavior, rather than simply generate revenue, you're open to all sorts of unintended consequences (one of which could be declining revenue, but this is also one of the many reasons that the current tax code is such a disaster).

Posted by Rand Simberg at March 28, 2006 08:46 AM

Revenue neutral maybe, but politically neutral no. Energy is mostly an inelastic inferior good--rich spend a smaller percent of income on energy than poor. Raising gas, heating oil and coal taxes would fall heavily on the poor. To make it work, there would need to still be an income tax that provides an income subsidy to the poor. It might still not work politically. Recall that last general election, both candidates competed to provide a $10 billion "clean coal" subsidy. We have a long way to go before anything other than government purchases of legacy emmission rights is feasible.

Posted by Sam Dinkin at March 28, 2006 08:50 AM

Rand, you are correct. My point is that taxing income may have worse consequences with respect to behavior than taxing energy consumption.

Sam is also correct, this could be quite regressive in implementation. Once possible solution would be to tax all energy use and enact an annual cash rebate to people at the bottom economic tiers of society, in lieu of food stamps, unemployment compensation and other forms of social welfare.

Posted by Bill White at March 28, 2006 08:55 AM

Raise the cost of energy, and you raise the cost of practically every other process not involving brute-force human labor. We can deal with the worst imagined case of global warming using our industry and technology.

I have a hard time believing that we'll fare as well under a decapitated economy with strictly and centrally controlled use of artificial power, even if the climate then obliges and morphs into paradise.(wood, methane, coal furnaces, internal combustion, anything that drove mankind since the industrial revolution (except nuclear) - a source of CO2)

Posted by at March 28, 2006 09:07 AM

That was me, sorry.

Posted by Aaron at March 28, 2006 09:08 AM

So, let's tax everything and then give "rebates" to people who "deserve" it...

Sounds like a (5-year) plan to me...

Posted by Big D at March 28, 2006 10:16 AM

Any time that the purpose of a tax is to change peoples' behavior, rather than simply generate revenue, you're open to all sorts of unintended consequences

Seconded. I've long believed that all preferences -- from mortgage interest to itemized deductions to tax exemption for non-profits -- should be removed from the tax code. If we want to encourage behavior (individual or corporate) via Congress, let it be by direct subsidy.

The secondary benefit would be simplification of the tax system, greater compliance and greater legitimacy/respect for it. The primary benefit would be simple honesty: putting all claims to be a "public good" on the same footing.

Posted by Monte Davis at March 28, 2006 12:10 PM

"Green accounting" is essentually "Economic Democracy" from the 80s, both are euphemisms for socialism and managed economies, the only difference is in the excuses to do it. If voters want to clean up toxic sites, make cities more beautiful and curb the dirtiest polluters, then they will do it. And have done it for the most part. I'm sorry that Mr. Dinkins thinks space enthusiasts should sign up with utopian fascists like Gore just so he can ride his space power hobby horse.

Posted by K at March 29, 2006 12:41 AM

Cap and trade is a lot less heavy handed than socialism and managed economies and has worked very well to reduce sulphur dioxide at about 10% of the predicted expense.

Buying emmissions offsets is an additional level removed from that. Capping at the current rate of growth and buying emissions rights from existing emmitters makes the program voluntary for all existing emmitters. They can ignore the program altogether if they don't increase beyond the current rate of growth.

The hobby horse is 'space settlement' and touting the greening of Earth from moving heavy industry off Earth does not require signing up for any non-voluntary measures. As New York has shown, emmissions rights can be an inducement a state offers to site new industry there so it need not even necessarily impinge on new emitters.

Posted by Sam Dinkin at March 29, 2006 07:19 AM


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