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Oliver Nettere
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Upon reading the argument about what should be the point of regulation for a proposed GHG tax I recalled a discussion we had earlier in the term how it is best to internalize the externalities associated with agriculture at the production level. This would raise the private cost curve so it was set equal to the social cost of agricultural production. The producers would pass this cost along to the consumers through higher prices of goods, a concept I found unappetizing, until you informed us that this in reality reflects the true cost of production of the resource. If someone could not longer afford the goods well then that is indicative of an entirely unrelated social problem. The proposed GHG tax would be best implemented in the upstream, along the production side, as this would immediately internalize the externalities associated with downstream combustion of fossil fuels by the consumer. By raising private costs to the producer this carbon tax would do the same thing as the agriculture example and the downstream price at the pump would see a resulting increase - an increase that had already fully incorporated the externalities associated with fossil fuel production. If someone could no longer afford to fuel up their car or heat their home then this is also indicative of social problems & would also likely lead to increased abatement by consuming less fossil fuels at a level that would be more personally affordable.
Toggle Commented Mar 31, 2016 on ECON 255 for next Thursday at Jolly Green General
This analysis of the total externalities of consuming coal was very relevant to our primary theme this semester of the divergence of social and private costs. Coal, which is relativity cheap to consume for the individual is in reality much more costly socially from all of its stages -- extraction, processing, and combustion. This divergence is something that needs to be addressed. In particular, I was interested the comparison this paper made on natural gas and coal with coal being twice as dirty as natural gas with for the same amount of BTU energy produced. I am currently in Professor Connor's Petroleum Geology class and this is something we've discussed (imagine that -- considering the divergence of social and private costs in this class...). With the recent domestic energy revolution occurring and the resulting massive increase in natural gas production natural gas has become very cheap and is now a much better alternative for electricity production than coal in the US. However, Professor Connors argued that while natural gas is much cheaper than its energy equivalent of crude oil, natural gas should be valued greater since it burns significantly cleaner than coal or crude.
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Mar 2, 2016