Saturday, March 10, 2007

Kling on Energy Subsidies

Last week in Environmental and Natural Resource Economics, we were looking at worldwide effects. That of course included global warming. One of the papers dealt with whether or not buying carbon offsets really decreases greenhouse gases or not.

This week we’re moving on to Energy Production and Use. One question is whether or not we should subsidize renewable energy production.

As luck would have it, Arnold Kling has a new article that looks at both of those topics.

Some snippets:

The public policy goal of those who worry about carbon emissions is for people to consume less bad energy. Whether people consume more good energy is beside the point. Trying to get other people to consume more good energy so that you can consume more bad energy is feeble-minded…

For some people, the notions of good energy and bad energy are based on concerns with terrorism rather than concerns with global warming. Dirty coal would be bad energy for a global warming alarmist, but it would be good energy for someone who hates many of the major oil producers…

Emission entitlements are a tax and subsidy scheme. Once the entitlements have been doled out, in order to emit more pollution than your entitlement, your company will have to buy entitlements from another company. The entitlements will have a market price. That market price will become a tax on firms that exceed their pollution entitlement and a subsidy to firms that decrease theirs.

Once again, the economic logic supports a tax without a subsidy…

Lots of good stuff.

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