Saturday, May 5, 2012

Climate Change Policies Cost Money

It is easy to come up with ideas of how to address climate change. Its harder to find ones that would actually work. It is harder still to find one that will work and is affordable. Governments work on ways to take our money away from us. We work on ways to prevent that. Since the public is more nimble than the government, the public almost always wins.

For instance, in 1990 Congress passed a luxury tax on things like yachts. The idea was that rich people buy yachts so this would be a good way to tax the rich. Of course, the rich are very good at avoiding things that take their money away, so they either didn't buy yachts or bought them somewhere else. In a mere two years about 100 yacht builders were hit hard and laid off thousands of workers. Tax revenues plunged. The tax finally had to be repealed in 1992 before the entire industry was decimated.

It would be nice if governments would learn from their mistakes, but they don't. The new luxury tax equivalent is climate change legislation. The idea is that a government can legislate some policy to fix climate change and we will all meekly follow along, no matter the cost. The truth is, the public will find a way to avoid the cost.

The latest example of this is in British Columbia. A carbon tax was initiated there in 2008 and was supposed to reduce BC's carbon footprint. It would start small and get bigger over time to allow industry to adjust. This was all done with the expectation that other provinces, some U.S. states and maybe the U.S. as a whole would join in with similar legislation.

Well, the others didn't join in and BC found itself the only player with this big tax on its industry, which they passed on to their customers, of course. Now, BC industry found itself at a economic disadvantage. Products from BC were too expensive and people bought more of their goods from other places. Places that didn't have a carbon tax. The effect of the BC carbon tax was to transfer carbon emissions by transferring business to other locations that did not participate in the tax. The other places got the jobs and tax revenues. BC saw their rates decrease.

British Columbia has realized what is going on is looking at repealing the tax.

All of this serves to show that solving the climate change issue is not simple, it won't be easy and it won't be cheap. Which is one of the reasons why we can't get it done. Simple economics has to be applied to any proposed policy before it is enacted. We could, in theory, replace our power plants with solar cell farms that would generate electricity during the day, store it and then release it during the night.

The problem is that it would be about three times as expensive as what we already have. Imagine poor and middle class families getting hit with a tripling of their utility bills. And, since the cost of electricity is factored into the cost of just about everything, we would see dramatic increases in prices across the board.

When we look at it in those terms, the idea just doesn't seem as attractive.

But, we need to do something. We have to find a way we can come together and make something happen. If we don't, we and our children will be in trouble.

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