Higher energy taxes and transitioning costs
How can we transition from cheap to more expensive energy?
I accept that higher prices alone are certainly sufficient, if not pretty way to transition. High prices by supply failing to meet demand is one way, and equally and better, higher taxes on nonrenewable energy does the trick also, with a little more control.
However higher prices in either way cause undue hardship to those on the edge of economic viability. If we're talking businesses, like flower delivery, and costs can't be passed to customers, perhaps many such businesses will die or scale back. If we're talking people being able to drive to work or heat their homes in the winter, then there's a need for government to offer some aid.
One such aid might be like "food stamps". We could have subsidized "gas stamps" for poor people. Having subsidy is dangerous, especially if widely used by a large portion of the population, and doesn't help long term if prices keep rising. However it is more justified in canceling out high taxes, if we had them, which we don't know.
For instance, if we imposed a national $2/gallon gasoline tax ("gradually imposed", say $0.25 rise per quarter for 2 years), we could balance that by giving "gas stamps" to poor people that would offset the excise tax portion of the cost perhaps.
Equally for natural gas usage. We could raise a NG tax, while offering varied discounts for different usage - from home heating, to electricity production to industrial uses.
Perhaps free market people will gasp as such attempts to manage the market, but the reality is that any resource that is "underpriced" compared to higher priced alternatives has "monopoly power" and an unlimited incentive for unsustainable expansion. Higher prices will moderate expanding uses and give alternatives greater access to the market.
I accept it's a messy business, subjective and prone to favoritism, and as always politically will have pressure to unfairly punish and reward certain uses and users.
The airline industry for example makes it clear. The long term reality in my view is that airtraffic must be reduced as energy costs rise. This means any subsidies offered to airlines are ultimately just delaying their contractions. However even with this projected reality, I accept perhaps short term subsidies might be helpful to transitioning into the new market conditions. So fuel taxes might be reduced or delayed to avoid harming an already contracting market.
Anyway, I am happy to recognize this tool. I can encourage higher taxes, while still admitting the need for temporarily subsidizing or waiving taxes for those most harmed immediately. Such an offer will allow more meaningful reactions to be made. By that I mean if we applied higher energy taxes based on those most harmed, we'd never have the heart to move forward.
I accept that higher prices alone are certainly sufficient, if not pretty way to transition. High prices by supply failing to meet demand is one way, and equally and better, higher taxes on nonrenewable energy does the trick also, with a little more control.
However higher prices in either way cause undue hardship to those on the edge of economic viability. If we're talking businesses, like flower delivery, and costs can't be passed to customers, perhaps many such businesses will die or scale back. If we're talking people being able to drive to work or heat their homes in the winter, then there's a need for government to offer some aid.
One such aid might be like "food stamps". We could have subsidized "gas stamps" for poor people. Having subsidy is dangerous, especially if widely used by a large portion of the population, and doesn't help long term if prices keep rising. However it is more justified in canceling out high taxes, if we had them, which we don't know.
For instance, if we imposed a national $2/gallon gasoline tax ("gradually imposed", say $0.25 rise per quarter for 2 years), we could balance that by giving "gas stamps" to poor people that would offset the excise tax portion of the cost perhaps.
Equally for natural gas usage. We could raise a NG tax, while offering varied discounts for different usage - from home heating, to electricity production to industrial uses.
Perhaps free market people will gasp as such attempts to manage the market, but the reality is that any resource that is "underpriced" compared to higher priced alternatives has "monopoly power" and an unlimited incentive for unsustainable expansion. Higher prices will moderate expanding uses and give alternatives greater access to the market.
I accept it's a messy business, subjective and prone to favoritism, and as always politically will have pressure to unfairly punish and reward certain uses and users.
The airline industry for example makes it clear. The long term reality in my view is that airtraffic must be reduced as energy costs rise. This means any subsidies offered to airlines are ultimately just delaying their contractions. However even with this projected reality, I accept perhaps short term subsidies might be helpful to transitioning into the new market conditions. So fuel taxes might be reduced or delayed to avoid harming an already contracting market.
Anyway, I am happy to recognize this tool. I can encourage higher taxes, while still admitting the need for temporarily subsidizing or waiving taxes for those most harmed immediately. Such an offer will allow more meaningful reactions to be made. By that I mean if we applied higher energy taxes based on those most harmed, we'd never have the heart to move forward.
posted by Ares Olympus at 2:59 PM
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