THE CARBON TAX:
Another futile attempt at
a free-market solution to global warming

by Joseph Green
(CV #42, August 2008)

There is a growing recognition of the seriousness of global warming. A number of methods have been suggested, or to some extent are being used, to curtail the use of fossil fuels, such as the use of solar power, wind power, better farming practices, more efficient appliances and energy-efficient housing, mass transit, etc. If climatic change is to be minimized, these and other methods must be rapidly developed, properly evaluated to see if they are suitable, and then used extensively and in a coordinated way.

This would seem to require government economic planning to deal with particular production methods, the overall structure of the economy, and people's welfare. But the neo-liberal bourgeoisie claims that such planning can be replaced by market methods. Supposedly, a slight restructuring of the marketplace will result in corporations developing and using environmentally-clean methods simply as a result of their pursuit of profit.

The carbon tax is one of the ways of restructuring the market that are being proposed. Such a tax, levied on all carbon-based fuels, is supposed to be just about all that is needed to ensure the development and use of proper environmental measures. Given this tax, the capitalists will supposedly clean up the environment with the same enthusiasm that they presently devastate it and cut wages and benefits. Provided carbon-based fuels are sufficiently expensive, they will supposedly be environmentally responsible simply out of their own financial self-interest.

. A number of major capitalist politicians are interested in or support the idea of a carbon tax. This includes Al Gore, New York Mayor Bloomberg, and even John Dingell, the Chairman of the House Committee on Energy and Commerce, who is notorious for his close ties to the auto capitalists. (1) Some of the theorists among the free-market fanatics at the conservative American Enterprise Institute back the carbon tax. (2)

Meanwhile the Green Party advocates a carbon tax in their program, thus giving a leftist coloration to this plan. And the tax has picked up support among scientists. Dr. James Hansen of NASA, a major figure among scientists warning about the danger of global warming, is another of its proponents.

The failure of carbon trading and the Kyoto Protocol

One reason for the growing interest in the carbon tax is that the deficiencies of carbon emission trading, another supposed market solution for global warming, are becoming more evident everyday. Carbon trading, or "cap and trade", as it is also called, is the main system used in the Kyoto Protocol.

With carbon trading, corporations are allowed a free hand in what methods they use for production; few things, however harmful, are directly regulated; and instead an attempt is made to control the total national amount of greenhouse gas emissions through a system of permits. Each year the government of a country sets the total amount of permits to be issued for carbon emissions (in this system, all harmful greenhouse gas emissions are measured in terms of carbon equivalents). So the total of carbon permits is supposed to be a cap on the overall national emission of greenhouse gases. These permits are handed out to various companies. If a company's carbon emissions are higher than the amount of its permits, it can either reduce its emissions, or buy spare carbon permits from other companies that have more permits than they need. Or it can buy "carbon offsets" to cover its excess emission: this means financing projects that reduce greenhouse gas emissions in other countries, countries not subject to the Kyoto limits. Each company can thus decide whether to curtail its greenhouse gas emissions, or to finance someone else curtailing their emissions, whichever is financially more advantageous to the firm. This is supposed to result in total reductions in carbon emissions being carried out at the least expense.

Carbon trading is thus supposed to provide an easy way to achieve reductions in greenhouse gases. The government supposedly doesn't have to worry about how firms lower their carbon emissions. Supposedly all one has to do is just decide on the total amount of emissions and, year by year, keep lowering the cap, or total number of permits. Let the market take care of the details. What could be easier?

In practice, however, it doesn't work. Most of the countries with carbon quotas under the Kyoto Protocol are exceeding them. And that's despite the fact that the goals for reduction of carbon emissions under Kyoto are rather modest. True, some countries are meeting their goals, but this mainly happens for special reasons that have little to do with carbon trading: for example, Eastern European countries easily met their carbon emission targets in the days when their economies were contracting due to free-market "shock therapy" after the collapse of the fake "communist" state-capitalist regimes. Moreover, carbon trading has had a number of unexpected side effects, such as helping to devastate the remaining world's rain forests through an unwise overextension of the use of biofuels, such as biodiesel made from palm oil from Indonesia. (3)

By way of contrast, a process of direct regulation was used to fight the danger of chloroflourocarbons (CFCs). Once hailed as miracle-working chemicals, CFCs turned out to be a major threat to the world's ozone layer. The Montreal Protocol to avert this threat started off in a half-hearted way, and had to be revised several times, because the capitalist governments dragged their feet at the behest of the major chemical companies. Still, it relied essentially on direct regulation of the CFCs, and it has been reasonably successful so far. The Kyoto Protocol, which centers on market methods, has been a failure.

The origin of the idea of market solutions for global warming

The idea that market solutions can replace environmental regulations is a neo-liberal innovation. It used to be taken for granted that environmental protection required restricting market forces.

Originally, in the 1960s and 1970s, when mass struggles against the poisoning of the land, air and water forced the US government to take the environment more seriously, a series of government regulations and agencies were set up. This resulted in a partial cleanup of the land, air, and water, and the correction of some workplace problems. But there was soon a neo-liberal and market fundamentalist backlash against the new regulatory agencies and the ongoing cleanups. The corporate apologists calling themselves economists claimed that the government shouldn't directly protect the environment, and it took to calling environmental regulations "command and control" systems. Instead they wanted the government to create markets in pollution permits, and allow companies to trade these permits among themselves. So long as the total number of permits was capped, these "cap and trade" programs were supposed to orient marketplace forces to cleaning up the environment. The bourgeoisie was enthusiastic about this approach, and environmental regulations were gradually gutted.

"Cap and trade" programs were put in effect for a number of problems, such as air pollution, acid rain, and leaded gasoline. This didn't entirely stop environmental cleanups, but it certainly slowed them down. (4) It wasn't just Republicans who championed this. The Clinton administration was excited about this neo-liberal approach, and pushed it hard. And indeed, it bears the most responsibility for carbon trading being enshrined in the Kyoto Protocol. Thus, although the US government has never ratified the Kyoto Protocol, Bill Clinton, Al Gore, and the American bourgeoisie played a decisive role in shaping it anyway. Meanwhile the European bourgeoisie, having been won over to the idea of carbon trading, took it up with a passion.

Today "cap and trade" programs are still the favored method of the bourgeoisie, and for the last two years Congress has been inching toward a carbon trading system. (5) But some establishment figures look to the carbon tax as a better market method than carbon trading. There is an ongoing debate between carbon traders, who still don't recognize the failure of the Kyoto approach, and carbon taxers. However, both methods being based on the same idea that the marketplace can replace direct government regulation of production, it's not surprising that some bourgeois figures back both cap and trade programs and carbon taxes. Indeed, it is quite possible that both will be implemented to some extent in the US during the next few years.

The idea of the carbon tax

The Carbon Tax Center has a website which puts forward a systematic presentation of the various arguments in favor of a carbon tax. It sees that "very large and rapid reductions in the United States' and other nations' carbon emissions are essential to reverse runaway climate change and avert resulting weather events", but it holds that higher prices for fossil fuels will suffice to achieve these reductions. (6)

It believes that a carbon tax can ensure that the price of fossil fuels rises in a "gradual" and "predictable" manner. This is to be the "central mechanism for reducing carbon emissions". These prices are supposed to discourage the use of fossil fuels, not just in cars but also in manufacturing processes or elsewhere. The idea is that the main planning involved will be the setting of the level of the carbon tax.

The Carbon Tax Center doesn't worry about how to overcome the antagonism of corporate interests to environmental concerns; it is confident that business will react properly to "market correctives". It does accept some regulatory action, mainly various of the government programs currently used, such as energy efficiency standards. But it doesn't see that overall economic planning will be needed; it doesn't worry about whether vast changes will be needed in the economic infrastructure to deal with climate change as well as economic degradation, and whether this requires planning; and it doesn't pay any serious attention to what will be required to insure the welfare of the masses under these conditions. For it, the main issue is just to have proper energy pricing. This will supposedly ensure that everyone -- individuals, corporations, and the government -- will make the right decisions on everything from investment to land use, simply from financial calculation and self-interest. They write that "taxing fuels according to their carbon content will infuse these incentives [to reduce carbon emissions] at every chain of decision and action -- from individuals' choice and uses of vehicles, appliances, and housing, to businesses' choices of new product design, capital investment and facilities location, and governments' choices in regulatory policy, land use and taxation."(7)

Thus, although their carbon tax is something that the government will have to impose, it will be within the realm of that type of government measure that is compatible with the neo-liberal backlash against regulations.

Why it won't work

Naturally, higher fuel prices, whether from shortages, corporate profiteering, or a carbon tax, will inhibit the use of fossil fuels. So carbon taxes will reduce fossil fuel usage to some extent. So at first sight this looks promising.

However, the question isn't whether the carbon tax will achieve some reduction in fossil fuel use, but whether it will achieve a sufficient reduction in carbon emissions. This it won't do. The attempt to use the carbon tax as the "central mechanism" for fighting global warming will prove to be another fiasco. Let's look at the some of the reasons why:

True, some of these problems might be dealt with, at least partially, by adding on special programs or regulations as a supplement to the carbon tax. But each such addition will eliminate the apparent simplicity of the carbon tax and make it more like the complex obscurity of carbon trading. And there are just too many holes to plug.

Thus overall, the carbon tax attempts to replace the need for overall planning with a pricing mechanism, but succeeds only in preventing reasonable planning.

The problem isn't simply that the carbon tax is a tax. Taxes of various sorts have always been used by governments as part of their regulation of the economy. Taxes might be used to penalize companies that don't comply with environmental planning, or to finance government programs. But there are different types of taxes. The carbon tax isn't designed as a part of a larger plan, but as a way to avoid overall planning and economic regulation. Moreover, it is essentially a modified consumption tax disguised as a "polluters' pay" measure. The carbon tax would put the burden on the working class rather than on the large corporations and the capitalists, who are responsible for the bulk of the ongoing environmental devastation and who have the lion's share of the world's wealth.

Let's look at these issues in more detail.

-- It doesn't ensure that alternatives are available

High prices for carbon emissions are supposed to make people replace harmful products or activities with alternatives that have a smaller carbon content. This can only happen, however, if these alternatives exist.

For example, high gasoline prices can't result in people using mass transit systems that don't exist, or riding them to locations they don't reach, or at times when they do not run. There will be somewhat more use of existing systems, but even if the governments try to improve mass transit, the general insufficiency of these systems will take time to remedy. If it is left to business-as-usual and financial calculation, it will take an especially long time, as we are entering a period of economic difficulties in which governments will be cutting back on such programs rather than pouring funds into new ones.

Similarly, high energy prices point out the need for houses which are designed to minimize the need for heating and cooling. Such houses can be built, and are standard in some countries. (8) But few, if any, American houses are built that way, and people can't move into houses that don't exist. So on the whole, we are going to be stuck with the existing housing stock for quite some time. Now, some useful improvements can be made in existing houses, but beyond a certain point, retrofitting homes is likely to be an expensive proposition; so it would probably take a major government program for retrofitting to be carried out on a significant scale.

If one relies on high energy prices, then the working class will be subject to tremendous hardships for years while waiting for environmentally-friendly and feasible alternatives. As a result, many sacrifices will be forced upon the working people, and these sacrifices will be out of all proportion to any supposed environmental good that results. The high energy prices won't be a way of nudging people to buy the right product, but of destroying their livelihoods and making their lives desperate. If you can't afford gas to get to your job, you lose your job. If you can't afford to heat your house, your family goes cold. If you can't afford food, you starve. You give up any savings you may have, you give up your health plan, and you are forced to do what it takes -- whether it evades environmental regulations or not -- to feed your family.

-- It's effect on big business is ambiguous

The large recent jumps in gas prices have brought major hardship for many workers. They also threaten to drive a number of owner-operators and small enterprises out of business, such as small truckers, fishermen, and small farmers. The more gradual increase in price envisioned under the carbon tax would manifest the same type of squeeze, but more gradually. But these aren't the people who determine whether fuel-efficient alternatives exist. This depends mainly on the major corporations who dominate the economy.

And many of these corporations wouldn't be affected that much by the gradual increases envisioned under a carbon tax. Some -- such as electric and gas utilities and many manufacturers -- will simply pass on the added cost of their products to the consumers; some, such as banks and financiers of all types, are only affected indirectly by the cost of fuel; and others will, no doubt, get subsidies on the grounds that their existence is supposedly essential to the country.

The present rapid and steep increases in oil prices, corresponding to several decades of the carbon tax coming at one time, have, however, put heavy pressure on certain corporations. They are faced with making fast adjustments, and as well with the general economic slowdown which high energy prices contribute to. A number of big corporations have been in trouble for some time, and high energy prices may help push some over the edge to bankruptcy.

But how will endangered corporations react to the economic slowdown and high energy prices? Well, for years the auto companies, the airlines, and other corporations have carried out a fierce program of wage cuts, speed-up, benefit cuts, subcontracting, and workrule streamlining. There have also been mergers, take-overs, and monopolization. The hard-hit corporations will use high energy prices as a rationale to step up this process. They may also economize on energy, eliminate some extravagances, and streamline some of their operations, although even here they may do things like force workers to take risks and ruin their eyes in half-lit workplaces. They want quick results on their balance-sheet, and they will step up the pressure on their workers. They will also search for any source of cheap energy, whether it is environmentally sound or not, and they will pressure the government to make loopholes for them in environmental plans.

Thus the carbon tax won't push the large corporations into becoming the motors of environmentalism. Overall, corporations will economize more on energy in the operation of their industry, but the capitalist owners will continue to drag their feet on environmental measures. Heavy price increases, such as those at present, may panic them, because they threaten particular corporations as well as endangering the economy. But the corporations will respond to protect their individual interests, rather than backing the major changes needed to protect the environment.

--It will come down hardest on the working class

The tax is promoted in grand terms as a way of "making the polluters pay". But it won't be the oil companies or mining companies or electric utilities or wasteful manufacturers who will really pay this tax: as we have mentioned, they will pass on the cost to the consumer. The carbon tax is not a corporate profits tax, nor a penalty payment on big oil or big coal, but will act more like a sales tax, which is generally paid by the customer. For most large corporations, it will have the same effect as anything that increases the price of the resources they use. And what is happening today with respect to high energy prices? Some corporations may collapse in the coming economic difficulties, but when the dust settles, the remaining corporations will be passing the higher costs along to the consumer. If the present increase in energy prices were due to a carbon tax, as well as to market oil prices, the result would be the same. Thus the carbon tax is basically a consumption tax, which falls most heavily on working people.

Many advocates of the carbon tax -- the Green Party, Dr. Hansen, the Carbon Tax Center, etc. -- recognize that the carbon tax, by itself, is inherently a regressive tax. For example, the Carbon Tax Center says that "The top 20% of U. S. households spend just 2. 3% of their after-tax income on gasoline; the percentage for the lowest 'quintile,' 9. 1%, is four times as high. Clearly, imposing a gasoline tax or, by implication, a carbon tax, without tax-shifting or rebating, would have a disproportionate percentage impact on lower-income families."(9)

Nevertheless the Carbon Tax Center claims that it is "a myth" that the carbon tax would be regressive. They write that "Any flat tax is regressive, but the regressivity of the carbon tax could and should be minimized or eliminated by allocating the tax revenues to benefit the less affluent."(10) Thus they argue that because they can imagine different ways in which tax rebates or other schemes might compensate for the regressive nature of the carbon tax, therefore it isn't really regressive. They seek to stop people from worrying too much about the way in which the carbon tax actually will be implemented.

For example, the Carbon Tax Center argues that the carbon tax, once collected, should be returned to the population. (Let's leave aside for later in this article the issue of whether it makes sense to collect a tax only to refund it.) They propose that it should be refunded in equal portions to everyone. They then argue that, since rich people spend more money in absolute terms on energy, even though working people spend a greater proportion of their income on energy, that the rebates will actually redistribute income in a progressive fashion. Poorer people who spend less, and therefore pay less carbon tax, will get the same refund as richer people who spend more.

But they don't ask if it's likely that at a time when social services are being cut and cut again, when "welfare as we know it" has been eliminated, when schools are deteriorating year by year, the government will engage in massive income redistribution. They don't consider at all what the workers have to do to protect themselves from how the capitalists will implement the carbon tax. Nor do they discuss the likelihood that much of the rebates and cushioning of the carbon tax that will take place will go to powerful corporations, despite the fact that they can pass the tax on. Instead the Carbon Tax Center just tries to do a good advertising job for the carbon tax.

On the other hand, they themselves don't seem too convinced that this income distribution will take place. So they suggest that the regressive nature of the carbon tax could also be eliminated by a system of "tax-shifting". This means that the government, instead of directly rebating the carbon tax, will cut other taxes to the same extent as it gets revenue from the carbon tax. They say that since these other taxes are so bad, such as "state sales taxes and federal social security check-offs", it will be progressive to shift to the carbon tax. But the carbon tax itself is a modified sales tax or value-added tax. It is quite possible that the government will use tax-shifting, but this may well be to implement the neo-liberal scheme for changing over as far as possible to sales and value-added taxes. (11)

There are other suggestions as well. The Green Party argues that the carbon tax's "regressive nature would be offset by funding public transportation, weatherization; housing and education."(12) Such programs would be important; indeed, sooner or later the environmental crisis is going to force major programs. But a worthwhile program might still be financed by a regressive tax, a tax which puts the burden on the people least able to pay. And financing these programs through the carbon tax means using a regressive method of taxation.

Moreover, the Carbon Tax Center wants it both ways: that the carbon tax makes the polluters pay, and that the tax will be refunded to the people. They do a rhetorical dance to cover over this contradiction. But if the tax is really making the polluters pay, why is it being refunded? And if the advocates of the carbon tax recognize that it's the people being taxed, doesn't that mean that they regard the people as the polluters? Does this standpoint leave the capitalists, who run the economy, off the hook? And won't it irritate the working masses, who must be the real bastion of any effective struggle against global warming?

-- Unexpected harmful effects

By raising the price of fossil fuel, the carbon tax is supposed to encourage protection of the environment. But, like all market mechanisms, it's an indirect process. While the carbon tax may be intended to be helpful, the market reacts to everything with its own logic. Thus the results of the carbon tax may not always be what is intended.

For example, if fossil fuels are taxed highly, one might hope that the result would be better efficiency in their use, and their replacement by something better. But one result might be a frantic search for trees to chop down. It will be impossible to prevent tree-poaching. Indeed, wood is not a fossil fuel, and it might be exempt from a carbon tax. It is theoretically a renewable fuel--within limits. But a major increase in the use of wood would simply accelerate the ongoing environmental catastrophe and doom the forests.

This is not hypothetical, either. We can see this type of disaster taking place today with respect to biofuels. In theory, biofuels might serve as a renewable resource. In practice, some biofuels, such as American corn ethanol, use up a lot of fossil fuel in their production. Such biofuels might be priced out of the market by a carbon tax -- and good riddance. (But you don't need the carbon tax for this: it could be accomplished more directly by abolishing subsidies for corn ethanol.) But some biofuels, such as Brazilian sugar ethanol or biodiesel made from palm oil, have a high "energy gain" -- they don't use much fossil fuel in their production. Their use would be encouraged by a carbon tax, just as their use has been encouraged by the carbon trading programs set up under the Kyoto Protocol.

The result has been an ongoing catastrophe of immense proportions. The expansion of the Brazilian cultivation of sugar cane for ethanol is playing a role in accelerating the destruction of the Brazilian cerrado (grasslands) and the Amazon rain forest. It's not the only factor hurting the Amazon; there's also logging, the expansion of soybean cultivation (in part, for the production of biodiesel), and other aspects of the rapid capitalist development of Brazil. But the vast expansion of the production of sugar ethanol is one factor bringing us closer to the possible total collapse of the Amazon forest, which would be one of the great environmental tragedies of the 21st century. Similarly, the draining of peat forests in East Asia in order to cultivate palm trees and create palm oil plantations is not only leading to the destruction of these rain forests, but is directly releasing huge amounts of carbon dioxide into the atmosphere. (13)

The problem isn't that biofuels are completely bad. They should be able to play a small but positive role in reducing carbon emissions. But this would require biofuel production to be subordinated to a system of overall economic and environmental planning. When biofuels are developed via a system of market incentives, such as provided by carbon trading, the result is that they are produced and used to excess, creating the possibility of disastrous problems. The carbon tax, just as carbon trading, would provide a market incentive for excessive production of certain biofuels.

--It is not transparent

It may seem strange that I charge the carbon tax with not being transparent, when its advocates cite its transparency as one of its sterling features, a feature that supposedly sets it apart from carbon trading. And its certainly true that the "cap and trade" schemes of dealing with pollution and carbon emissions are shrouded in obscurity. The advocates of "cap and trade" systems often resort simply to boasting how many carbon certificates or pollution certificates were traded. But what measures were taken as a result of this trading? What concretely was done to help the environment? That's another story.

But the carbon tax is subject to the same obscurity. When its advocates say that it's transparent, they presumably mean that the rate of the tax, so much tax for so much carbon content, will be known to all. But that's all ordinary people will get to know.

What measures will be taken as a result of this tax? Will corporations change their manufacturing measures? Will it be easier to find energy-efficient products or even to know how efficient they are? It will be just as hard to find these things out under the carbon tax as under carbon trading.

A major source of the opaqueness of carbon trading is that it resulted in a lot of special subsidies to individual industries, negotiated in backroom deals, and other shady exceptions. But the carbon tax will result in this too. Will the governments really allow key industries to collapse because of the carbon tax, or will they give them exemptions? Or, more likely, won't they use the excuse of preventing key industries from collapsing to give lucrative subsidies and special deals to the most influential capitalists? Of course they will. The difference between carbon trading and the carbon tax on this issue is simply between a system that hasn't yet been implemented on a wide scale, the carbon tax, and so the scandals are a matter of the future, and a system that has been around awhile.

Moreover, the very operation of the carbon tax system, even if there weren't exceptions and special subsidies, will by no means be as simple as the Carbon Tax Center envisions. For example, if you buy a product, will you know how much of its price is due to the carbon tax? No, not at all. By its very nature, the carbon tax on manufactured goods will not be assessed at the final point of sale, like the federal gasoline tax, but at various points along the way. (14) Where it is assessed also depends on whether the goods are produced in the US or imported, and ultimately also on what carbon tax has been assessed along the way on the various raw materials used in the product, on the machines used in producing the product, etc. Even a carbon tax on gasoline isn't supposed to be assessed at the final point of sale. The carbon tax may seem to be a simple idea in theory, but in operation there are a thousand little nagging problems that will arise. More on this later on.

The only way to ensure transparency in reducing carbon emissions would be to implement a system of overall economic regulation and planning. Moreover, this would have to be a new type of system, a system which doesn't guarantee the "trade secrets" of industry nor put a veil over the real workings of government administrative and regulatory bodies, but that brings their operations out into the open. This has to be fought for directly. It goes against both market measures and traditional government planning.

Such transparency is only conceivable as part of a system where the working class is brought directly into the process of environmental protection. We need a system whereby workers at the workplace verify that the corporations really carry out their environmental commitments, and don't cheat. We need a system whereby the government planning agencies have to come out from under their veil of secrecy and private deals. We need a system whereby environmental data is collected and analyzed and released to the public, for both verification and discussion. Only a fraction of this can be achieved under capitalism, because it goes against the whole system of private ownership, a system which fosters secrecy, which depends on disorganizing and suppressing the working class in order to keep it docile for exploitation, and which looks out for profit, not for the people's or the earth's well-being. Moreover, the bourgeoisie will repeatedly seek to take away whatever concessions it gives on these issues. But we have to fight to achieve as much of this as possible if we are to achieve some success in the struggle against global warming.

The working class has to be regarded not simply as a recipient of charity, who deserves a few rebates on their taxes, but as the class basis of a consistent fight for a better environment. Either transparency means that the masses play a role in planning, directing, and verifying the environmental measures, or it is just another nice-sounding slogan to cover over the unpleasant reality of the obscurity and corruption of market-based systems.

--The carbon tax and the economy

For the carbon tax to work, it must reach a level high enough to drastically reduce carbon emissions. Yet long before this, it will have to be adjusted to prevent economic problems.

The Carbon Tax Center denies that this is a problem. They downplay the economic impact of the tax, saying it really won't be that heavy, and "equates to 5-10% increases in energy prices per annum (with the percentages shrinking at the 'base' rises and as non-fossil energy assumes a larger share)."(15)

Well, let's see what this works out to. They say it could start at a level that is equivalent to only about 10 cents a gallon of gasoline, except that it would also apply to all other burning of fossil fuel. They say that this tax would "bring in roughly $55 billion a year in revenue. This equates to around $180 per U.S. resident, or $720 for a family of four."(16) But, whoops, that's just for the first year. Each year the carbon tax would increase by the equivalent of another 10 cents a gallon of gas. So the second year the tax would be the equivalent of 20 cents a gallon, raising $110 billion. The third year -- $165 billion, and so on up to almost half a trillion dollars a year by the tenth year, when it would reach -- on the average -- $7,200 per family of four. (17)

And that's just the start. How high would the tax have go to? Just as a rough rule of thumb, let's compare to what's happening in Europe. The EU (European Union) is also faced with making drastic cuts on gasoline usage and other burning of fossil fuels, even though it has long taxed gas so heavily that it costs far more than it does in the US. Presently the combination of taxes and high oil prices have led to gasoline prices for transport reaching $8 and even $9 a gallon (measured in US dollars). This history of high gas prices has definitely had an effect on European car design and energy usage, but despite that, Europe still uses far too much fossil fuel.

So, as a very rough-and-ready estimate, one might guess that a carbon tax would have to raise US gas prices to at least $8 a gallon, and even that might not suffice. This means that, assuming the economy maintains its present size, the tax would amount to $2. 2 trillion in revenue, or 15% of the present GDP. Surely a tax on this level would have heavy economic consequences. Even in Europe, high gas prices have finally resulted in severe economic pain; truckers in the UK and Spain, fishermen in France, and others threatened by financial ruin have carried out demonstrations against the high price of gas. What to do about these prices has become an urgent European issue.

So it's unlikely that the tax can simply ramp up to the required heights without causing major contortions in the economy. But the Carbon Tax Center argues that, so long as the price increases are gradual and predictable, it doesn't matter how high energy prices are, there's no problem. It argues that "What causes economic havoc isn't high energy prices or even rising prices, but price volatility."(18) So they claim. Even if this were true, they ignore two things.

First of all, price fluctuations for oil and other fuels will continue even if the carbon tax is gradual. The price of energy isn't just the tax. This year, for example, there is no carbon tax and the ordinary gas taxes have stayed the same, but gasoline prices have zoomed anyway.

But moreover, if the main way to achieve reductions in carbon emissions is through the carbon tax, then how reasonable is it to wait ten years before it even reaches the level of $1 a gallon?

But so what? The Carbon Tax Center argues that if the carbon tax isn't spent by the government, but somehow returned to the country, then it won't affect business in general. On one hand they want a carbon tax to motivate people to reduce fossil fuel emissions: essentially this means adopting a policy of pain -- reduce your fuel usage or face strong financial pressure. As they say, "carbon taxes will need to be very high to create the required price incentives."(19) But on the other hand, they claim that the carbon tax really won't have any affect on the economy, provided that the revenues from the carbon tax are given back to the people in one way or another ("revenue neutrality").

Well, if the carbon tax really were refunded or rebated in one way or another, then, on the average, people could afford to pay it, but then also it would lose much of its deterrent effect. (20) This is one of the basic contradictions of the carbon tax. And the more the advocates of the carbon tax try to evade this contradiction, the more other-worldly their plans become.

For that matter, the tax and cost of energy aside, if fossil fuel usage really is cut to a mere fraction of what it is today, as must happen if we are to effectively fight global warming, this will have major economic consequences by itself. For example, the oil industry will be cut to a fraction of itself. There will be major changes in transport. Millions upon millions of people will face changing their jobs, and almost everyone will see changes in how they move around the country. It doesn't matter how the reduction in fossil fuel usage is obtained, whether from a carbon tax or some other means, these or other changes will take place. Can it really be expected that if only these changes are gradual enough, everything will take care of itself, and there won't be need for overall economic planning to allow people to get through these changes unscathed? Yet that's what the Carbon Tax Center implicitly assumes in all its scenarios of the future.

--Carbon emissions aren't the only environmental problem

The carbon tax plan also assumes that reducing carbon emissions is the only major environmental task facing us. But this isn't even true with respect to avoiding global warming. Reducing carbon emissions is an urgent and pressing task, but it is not the only one. Aside for global warming, we face a multitude of problems such as protecting the world's forests and wetlands, ensuring biodiversity, protecting the oceans and ensuring the survival of fish and other sea life, cutting down the rampant pollution that has resulted from neo-liberal globalization, and dealing with the exhaustion of aquifers and other fresh water sources. All these problems are made worse by the climatic changes that have already begun, but none of these problems can be solved simply by reducing carbon emissions. Nor do we have the luxury of waiting until global warming is solved to deal with these issues.

Can one imagine that these problems will be solved by separate forest taxes, fish taxes, water taxes, food taxes, and so on? The entire environmental regulatory apparatus can be changed into one big financial accounting office, in which taxes are assessed and refunded, and these problems will just get worse. There is only one environment, and all these environmental problems are simply aspects of a single problem. There has to be a coordinated economic plan.

How can a tax be a market method?

For all these reasons, the carbon tax won't be any better than carbon trading. But that still leaves one question. Why would such a tax be called a market method? It's fairly widely recognized that carbon trading, which involves the setting up of artificial markets in carbon emissions permits, is a market method. By way of contrast, taxes are government measures, no?

But market methods often involve some government action. The World Trade Organization, for instance, works through agreements negotiated between various governments. These free trade treaties are as complex as any others; an extensive bureaucracy is built up to enforce them, complete with secret trade tribunals; and the most powerful countries impose their interpretations on the rest of the world. This is government action, but it's government action in favor of allowing the powerful multinational corporations free run to exploit the world.

Right from the beginning of capitalism, the marketplace has always been related to political institutions. This was why economics was originally called "political economy"; it was concerned with judging and prescribing the policies to be followed by governments. And to this day, capitalists may demand the maximum freedom from government interference to buy and sell what they choose, but they want contracts enforced, worker resistance suppressed, and the maintenance of "law and order".

When market measures fail, the neo-liberal and marketplace fanatics note that the government was involved in the market measures, and then declare that it wasn't really the market that failed. For example, energy deregulation was promoted as a way to provide cheap and abundant power by eliminating the state regulatory boards that estimated and provided for future power needs, but instead it threw the states on the mercy of the energy markets. The utilities that marketed power to people were to become, not generators of electricity, but middlemen who bought power from elsewhere. When this system began to fail spectacularly, as in the California energy crisis of 2000-2001 as well as in subsequent sharp price increases in state after state, most bourgeois politicians, Democrats and Republicans, still clung to deregulation. The neo-liberals propagated the myth that deregulation hadn't failed, oh no, there supposedly just hadn't been enough deregulation.

In reality, to judge whether something is a market method takes more than asking if there is any government role to it. In carbon trading, the government sets up a market in carbon permits: it issues the carbon permits for the purpose of creating a new market. Although this is an artificial market, in that the government has to create it, it is still a market. And when decisions concerning environmental measures are left to this market, that is a market method of environmentalism. It was consciously developed as an alternative to direct government environmental regulations.

And so is the carbon tax, when it is taken as the main way to enforce reductions in carbon emissions. This is why it has support from some quite conservative economists at the free-market Heritage Foundation. This is why it is backed by people such as Al Gore, who advocate "using market capitalism as an ally". And its relation to market fundamentalism can also be seen in a number of the arguments made in its favor, such as those concerning true cost pricing, revenue neutrality, the supposed simplicity of the tax, and the use of purely financial calculations to judge environmental issues. Let's take a brief look at these things.

The search for true cost pricing

One of the fundamental ideas underlying the carbon tax, that makes it plausible to many of its supporters, is that things should be priced at their true social cost. The price of products usually doesn't include anything to cover the environmental damage caused by their production or by their use. This is supposed to be the cause of our environmental problems. If fossil fuels were priced at their true cost, then -- so the idea goes -- the market itself would ensure a proper reduction in the use of fossil fuels. The role of the carbon tax is, therefore, to increase the price of fossil fuels until they reach their true cost.

Many of the people who hold this view believe that it strikes hard at neo-liberalism. Yet at heart, the idea of the true cost harmonizes nicely with today's dominant market fundamentalism. They are both based on the idea that markets can be made to work, and differ only on how to assist the market.

The idea that the real value of a thing is its price is something that springs from our everyday experience with buying and selling at the market. This experience makes financial value appear as the real worth of a product. And if one pays too much for something, one is cheated; similarly if one sells for too low a price. These experiences make it appear that the deviation of prices from real values is the source of all one's troubles.

But environmental values can't be reduced to a single number, a price, whether a true social price or the usual market price. Prices mix everything together in a single dollar figure. A real product takes so much of this and that to produce; and so much labor to produce; results in so much waste that must be disposed off; and may serve this or that purpose. The only way to seriously measure these things is to keep track of each one separately: how much steel was used, how much energy; how much water; now much labor; how much land must be set aside; how much greenhouse gases are created? how much toxic waste? And so forth. Once you mix all these things together into a single dollar figure, it can no longer give a true picture of any one of them. The resulting figure is mainly useful for buying and selling, and for seeing what profits each individual capitalist.

Thus it is a futile task to try to make a single number reflect the "true social cost". If a tax makes the final cost reflect one aspect of production better, it will distort the measure of some other aspect. (21)

In reality, prices reflect only something's role in the marketplace, not any other type of "value". For example, it is a common experience that a cheaper product may be better and more suited to one's purpose than a more expensive one, so marketplace value is not the same as commonsense value. And when production is carried out according to the marketplace, with prices as the highest arbiter, it eventually leads to environmental devastation. This is because marketplace production is production that is carried out, to a greater or lesser extent, without an overall plan. Even when it produces something that might be of value, like biofuels, it manages to make a mess of it. Capitalists produce what serves their individual interests; and they produce it in the way that serves their interest; and the interests of society as a whole aren't their concern. No matter how one modifies prices, the corporations and businesses are concerned only with their profits. The "invisible hand" of Adam Smith thus still rules; it still doesn't care about the environment; and it will still end up ravaging the environment.

To put it briefly, environmental planning does require that one take into account the true costs of producing things, but these costs cannot be reduced to a price, even a "true price".

Revenue neutrality

Another feature of the carbon tax is that most of its advocates insist on "revenue neutrality". This means that all the tax collected by the government must be returned to the population. It's not that each individual would get back what they had paid. That would be impossible. How could one even know how much carbon tax was included in the price of bread, movies, houses and so forth that one bought? So each individual might get back more or less than what they had actually paid, and given the chauvinism and racism of the bourgeoisie, undocumented workers might receive nothing back at all. But overall, all the money must be returned, whether through rebates or tax-shifting.

It's not only the Carbon Tax Center that insists on this. Even the Green Party calls for "Revenue neutrality in tax changes: we are not proposing a bigger overall role for government . . . "(22) This is a loyalty oath to the bourgeoisie, a slogan to reassure them of neo-liberal orthodoxy. And it is a betrayal of the environment. At a time when government agencies dealing with environmental issues and social welfare have been cut to the bone, and even schools are deteriorating shamefully year after year, the advocates of the carbon tax are afraid of more government funding.

The supposed simplicity of the carbon tax

The irony is that "small government" always means that, while social programs will be cut, other parts of the apparatus will grow. In fact, the carbon tax itself wouldn't be that easy for the government to administer.

The advocates of the carbon tax claim it's very simple, just a matter of setting the rate of taxation of carbon emissions. In fact, in practice there will be one problem after another.

  •  The Carbon Tax Center tells us that "to the extent that carbon is included in a product such as plastic but not burned, that carbon will not be taxed". (23) So it wouldn't be so simple as simply taxing such things as oil, coal, and gas; the tax would depend on how the oil, coal, and gas is used.
  • The Carbon Tax Center would also refund the tax for carbon that is sequestered below ground. This would require inspection of various installations (or simply accepting the word of the corporations involved, a reprise of one of the scandals of carbon trading).
  • The US imports many products, and they would have to be treated differently than domestically manufactured products. To avoid double taxation, the government would have to see whether they had already been subject to the carbon tax abroad and, if so, to what extent.
  • The carbon tax has to be returned to ensure "revenue neutrality". This raises a number of problems. And it is even more difficult if many products are imported: if they are taxed abroad, it's a foreign government that has received the revenue.
  • The method of refunding the tax has to be arranged so as to avoid the regressive nature of the tax. True, in practice this is likely to be easily resolved by allowing the tax to be regressive.
  • If the idea is to achieve gradual and predictable rises in the price of fossil fuel, the carbon tax will have to be adjusted in accordance with the rise and fall of the base price of fossil fuels.
  • If there is an attempt to let people know how much carbon tax they are paying when they buy various products, then this will have to be calculated, and it's not an easy matter.
  • Wood is a problem for the carbon tax. If it isn't subject to the tax, then the carbon tax might result in a rush to chop down trees. If it is taxed, then there is the problem of whether different uses of wood will be taxed differently, depending on whether the wood is burned or used for building materials or paper or discarded as waste. Also, if it is taxed, will rebates be given for planting and growing trees? And if so, isn't this a sort of "carbon offset", which will give rise to some of the same problems that exist with offsets in carbon trading?
  • There will have to some way to cushion the impact on people who are excessively impacted by the tax, such as independent truckers and people who drive especially long distances to work.
  • There will have to be a struggle against large corporations claiming to be excessively impacted by the tax and demanding subsidies.
  • And it is also admitted by its more serious advocates that the carbon tax will, after all, have to be supplemented by additional measures, such as energy-efficiency standards for houses, cars, and appliances. Thus, after all this effort to avoid government regulations, they will have to be implemented anyway.
  • Market lunacy: the use of financial calculation to answer material questions

    To see whether it's likely that the carbon tax will work, the Carbon Tax Center creates a "model" of the economy, that is to say, it refers to financial spreadsheets. They supposedly show how far the carbon tax will reduce carbon emissions from different economic sectors, how far it will affect the economy, how much revenue it will generate, etc.

    Yet how can these things be calculated without knowing what new methods of power generation, and of industrial production generally, will be put into operation; the effect of the presently-occurring climate changes on the economy and the needs these changes generate, such as for finding new sources of water; the attitude of different classes to the on-going environmental plans; etc. ?

    But the spreadsheets don't deal with these things. For that matter, how it is possible that the physical reality of climate change can only be estimated within broad limits, but the spreadsheets are supposed to give precise figures for the financial consequences of every environmental policy?

    Well, it turns that this is because these financial models and their spreadsheets don't consider what material changes will take place in the economy at all. Underneath their outward complexity, they are based on financial assumptions of the crudest and most simplistic nature. For example, a crucial assumption is that such and such an increase in the price of fossil fuels always results in the same percentage decrease in the use of fossil fuels. This is the so-called "elasticity" of fossil fuel usage with respect to fossil fuel price. Supposedly the elasticity doesn't vary as circumstances change, but remains the same year after year. Thus one can supposedly ignore what changes are taking place in technology, or even economic and political developments, since whatever takes place, the elasticity will stay the same. All one has to do is guess this magic figure, perhaps by observing what happens during price increases in one particular year.

    So these financial models predict the future with a few financial indices: elasticities, inherent rates of growth, and the size of the carbon tax. In this way, they pretend to give a realistic judgement of the effect of different government policies. But they are entirely based on the absurd assumption that the basic numerical indices are constant over the years.

    Well, let's look more closely at the elasticity of fuel use. Consider what happens to miles driven when gasoline prices go up. If a family is doing fairly well, at first they may continue to drive as before, and take economies elsewhere. Thus, at this point, the family's elasticity of gasoline usage is zero. With an additional price increase, the family may cut back on optional driving, resulting in a nice-looking figure for elasticity. But eventually, all the easy cutbacks are made, and the main driving is for essentials, such as getting to work or school. At this point, it is essential to the family to keep buying gasoline no matter what other economies have to be made, so the elasticity goes back to zero. Indeed, it is conceivable that, for some families, at a certain point the miles driven will actually increase when the price of gas goes up. For example, if the price is so high that the family can no longer afford its past purchases of gasoline, its members may have to seek additional jobs, which they may have to drive to. So much for the constant elasticity. (24)

    Indeed, the miles driven by the family may depend even more sharply on other things than prices, such as whether there is a really good public transit system or where jobs and schools are located. And experience already shows that a rise in price may have several different effects on public transit systems. For example, this year some places in the US have increased the frequency of buses and trains, while other areas, going into financial crisis, have actually cut back on public transit.

    Perhaps it may be argued that these different possibilities average out when one considers, not one family, but the entire population of a region. And indeed, it might be possible to obtain the average elasticity, at a certain moment in time, for a certain geographical area, at least provided gas prices don't change too much. But this average elasticity would generally vary from area to area, and year to year.

    Thus these financial models of the carbon tax are just market lunacy: the delusion that the entire world behaves like interest-bearing investments, with the rate of interest replaced by the elasticity. (25) Economists are used to interest-bearing bonds and other financial instruments paying a certain return; you don't have to know what type of company has issued it to calculate that return; and they apply the same thinking to carbon emissions.

    Moreover, it's not just the Carbon Tax Center that predicts the future in this peculiar way. It's how neo-liberals in general make pronouncements about the costs and benefits of environmental measures. It's done by neo-liberal economists like Prof. William Nordhaus, whose recent book A Question of Balance: Weighing the Options on Global Warming Policies confidently balances the costs and benefits of taking measures to avert global warming. It's even done by the Intergovernmental Panel on Climate Change, when it departs from its careful consideration of the science of global warming and looks into what is to be done about it. These calculations are based on ignoring the material factors and extrapolating financial indices on the basis that the future will simply be like the past. The spreadsheets may allow one to try different numbers for the rate of the carbon tax, the various types of elasticities, and the inherent rate of economic growth; but they assume these can be extrapolated for years, decades, or even a century or more. So no matter how complex the model, it's actually financial fantasy.

    The need for environmental planning

    The market methods of environmentalism show that the bourgeoisie, for all its new talk about environmental concern, still puts its pocketbook before the environment. Neither the carbon tax nor carbon trading can avert the threat of global warming. They both are based on the idea of avoiding overall planning.

    But the environmental crisis shows major decisions can't be left to the corporations, on pain of the earth becoming unlivable. There needs to be overall planning if the amount of carbon emissions is going to be cut. Moreover, there needs to be planning concerning land use, the preservation of fresh water supplies, the health of the oceans, rebuilding the infrastructure, provision for environmental refugees, and a variety of other pressing concerns.

    This planning can't be reduced to giving financial incentives to companies to do better. Market forces have devastated the environment; they seek profit, not the good of all. Thus governmental planning and regulation is going to be needed. It must be based on direct consideration of the material needs of humanity, and of the material threats facing the environment.

    But today's governments are capitalist governments. Their planning has always been for the sake of capitalist profits, while every step of environmental progress comes up against one or the other private ownership interest. Thus, as long as capitalism exists, we will only be able to achieve mass participation and effective planning by way of exception. This means that the environment will always be at risk while capitalism exists. But it also means that the struggle to preserve a livable environment and deal with the effects of global warming will be part of the class struggle. It will help organize the working class, and encourage the rise of a new revolutionary movement for socialism.

    Thus the fate of the environmental planning is bound up with how far the masses can be drawn into it, both in insisting on effective measures and in enforcing them against capitalist interests. Such planning must integrate measures for the environment with protection for the livelihood of the masses in the face of the coming environmental and economic changes. The carbon tax is designed to avoid such planning, and it will suffer the same fiasco as carbon trading. <>

    Notes

    (1) Rep. Dingell has put aside his proposal for a carbon tax for the time being, citing high gas prices and the economic turndown. (Return to text)

    (2) See "Climate Change: Caps vs. Taxes" by Kenneth P. Green, Steven F. Hayward, and Kevin A. Hassett, June 1, 2007, available at www.aei.org/publications/filter.all,pubID.26286/pub-detail.asp. (Text)

    (3) For a more extended discussion of carbon trading and the failure of the Kyoto Protocol, see "The coming of the environmental crisis, the failure of the free market, and the fear of a carbon dictatorship" in the January 2007 issue of Communist Voice (available at www.communistvoice.org/39cKyoto.html). For a discussion of the biofuel disaster, see the sections on Kyoto and biofuels in "Al Gore's Nobel Peace Prize and the fiascos of corporate environmentalism" in the Feb. 20, 2008 issue of Communist Voice (available at www.communistvoice.org/41cAlGore.html). (Text)

    (4) With respect to acid rain and leaded gasoline, see, for example, Gar Lipow's article "Emissions trading: A mixed record, with plenty of failures/Regulations work better" at gristmill.grist.org/story/2007/2/18/205116/813. (Text)

    (5) See "Industries Allied to Cap Carbon Differ on the Details" by Jay Mouawad in the New York Times, June 2, 2008. (Text)

    (6) See www.carbontax.org. (Text)

    (7) See "Why a carbon tax?" at www.carbontax.org/introduction/. (Text)

    (8) Indeed, in some countries it is illegal to build any other type of house. According to the British journalist George Monbiot, "Houses which met the building codes in Norway and Sweden use around one quarter of the energy of houses meeting the standards in England and Wales. In fact, the building regulations in Sweden were tougher in 1978 than they are in Britain today. In Germany the air tightness standard -- which determines how leaky a house is allowed to be -- is three times as stringent as the standard in Britain. " (Monbiot, HEAT: How to stop the planet from burning, Ch. 4, p. 66) (Text)

    (9) See "Pricing carbon efficiently and equitably: Myths: Myth #1. New Taxes on carbon emissions or energy will hurt the poor and middle class" at www.carbontax.org/myths/. Emphasis added on "four times as high"; emphasis as in the original on "without tax-shifting or rebating". (Text)

    (10) "FAQs:12. Would taxing carbon be regressive?" at www.carbontax.org/faq/. (Text)

    (11) One might well be uneasy at the Carbon Tax Center's reference to eliminating the Social Security tax. At a time when the neo-liberals want to eliminate Social Security entirely, it's somewhat doubtful that the present Social Security tax would be replaced by a more progressive system of funding. (Text)

    (12) Green Party Platform Summary, 2004, Section IV. Economic Sustainability. E. True Cost Pricing and Tax Fairness, p. 42. (Text)

    (13) See the discussion of biofuels in "Al Gore's Nobel Prize and the fiascos of corporate environmentalism", Communist Voice, February 2008 (www. communistvoice.org/41cAlGore.html). (Text)

    (14) The Carbon Tax Center suggests "to tax fuels as far upstream as practicable, i.e., at the point where possession of the carbon-bearing fuel passes from the 'producer' (e.g. , coal mine; oil wellhead or tanker; gas wellhead) to the immediate next entity in the supply chain (e.g., coal shipper or utility; oil refiner or importer; natural gas pipeline). Presumably, each such transfer will be codified in a contract, or at least a bill of lading, specifying the attributes of the fuel." (www.carbontax.org/issues/implementing-carbon-taxes/) The cost of this tax is then passed on to the next company involved in the supply chain and the manufacturing chain and the retail chain. And the Carbon Tax Center has good reason for suggesting this method of operation. it would create a multitude of difficulties for the carbon tax to be levied in any other way.

    But the result is that the final consumer doesn't see how much tax has been levied, as naturally this consumer doesn't see the contracts or bills of lading which have the tax; nor, for most products, does the consumer know the amounts of fossil fuel used up during the various stages of producing, supplying, and retailing the product that has been purchased. Thus the consumer has no way to find out how much of the price paid goes to the carbon tax, or to verify any claims that the corporations may want to make about how much carbon tax they paid. (Text)

    (15) "Myths: Myth #4. Heavy fuel taxes will wreck the economy." (www.carbontax.org/myths/) (Text)

    (16) "FAQs: Frequently Asked Questions and Answers about Carbon Taxes and the Carbon Tax Center: 14. How much revenue would carbon taxes generate?" at www.carbontax.org/faq/. (Text)

    (17) Actually, fossil fuel usage would presumably decline as the tax increases, so that the total size of the tax on that fuel would be less. But here I am just trying to give a ballpark estimate. Nothing else is really possible, as the effects of the tax would be quite varied. (Text)

    (18) See "Myths:Myth#4> heavy fuel taxes will wreck the economy. " at www.carbontax.org/myths." (Text)

    (19) "FAQs: 17: "How high should carbon taxes go? How fast should they climb?" (Text)

    (20) The plan isn't that each individual gets back from the government what they have paid. This would be hard to accomplish for a number of reasons. But the idea is that the entire revenue from the carbon tax is rebated to the population as a whole according to some formula, such as an equal division. The result is that some individuals would get back more than they paid, and others less. But on the average, the tax is rebated. This means that the amount of tax you get back isn't directly dependent on how much tax you paid. Thus, the advocates of the carbon tax conclude, there will be an incentive to make money off the deal by using less gasoline and buying less goods; the result would be you pay less carbon tax (because you consume less), and yet you get a big rebate. You thus make money from the carbon tax. Indeed, this would apparently redistribute money to the poorer section of the population, that consumes less. It might not work out so neatly in practice, however. For example, in the present political atmosphere, it's unlikely that refunds would be made to the millions of undocumented workers. And it's financially difficult for people living on the edge to wait patiently for their refund. (Text)

    (21) Some people think that the dollar (or other financial figure) can't reflect the true social cost of a product, but it can be measured in labor-hours. In a series of three articles I argue against this, holding that the labor-hour is not the natural unit of socialist calculation. I seek to demonstrate that no single numerical unit of measurement, whether dollars or labor-hours or anything else, can serve as a natural or true unit of economic calculation. Any such unit would, just as monetary prices do, mix together in a single figure different properties of a thing. Therefore it cannot serve as a natural or true system of economic calculation.

    It might, at first, seem impossible to carry out economic calculation at all without assigning products a value consisting of a single number, but in fact other methods of calculation have already been devised and used to a certain extent. During times of stress in war-time, even Western capitalist countries have resorted to a certain amount of material planning, although their purpose was to keep up the war production needed for mass slaughter. And these methods were also used to guide the post-World War II recovery in Western Europe. Of course, capitalist countries minimize their use of such methods, as they minimize the use of planning in general. When they do plan, they use planning as a way to maintain capitalist profits and supremacy, not in the interests of the entire population. And in the examples I cited, they also didn't bother to keep track of environmental issues. But the method of material planning can be easily extended to deal with some environmental issues, while financial planning necessarily obscures the environmental impact of a product.

    With regard to material planning, see especially the section "One, two, three, many natural units (the method of material balances)" in "Labor money and socialist planning (part one)", Communist Voice, Nov. 2000, at www.communistvoice.org/25cLaborHour", and the section "The environment and things of zero labor content" in part two of the series, in Communist Voice, May 2001, at www.communistvoice.org/26cLaborHour2.html. (Text)

    (22) "Summary of the Platform for the Green Party of the United States: From the Party Platform Adopted at the National Nominating Convention, Milwaukee, Wisconsin, June 2004", Ch. IV. "Economic Sustainability", Section E. "True Cost Pricing and Tax Fairness", p. 42. This occurs in the paragraph that also discuss the carbon tax. (Text)

    (23) "Introduction: What's a Carbon Tax?" at www.carbontax.org/introduction/. (Text)

    (24) There are a number of other factors, besides those I have considered above for the sake of illustration, that will affect the number of miles driven by a family. But taking account of them wouldn't help one show that there is a constant elasticity; instead, it would just underline how much the reliance on a figure for elasticity hides what goes on in the real world. For example, there is the possibility of carpooling. No doubt high gas prices will encourage people to look into carpooling. But there's a limit to how much carpooling can be done, and it would hardly be realistic to assume that if an increase of $1/gallon in gas prices would result in x amount of carpooling, then an increase of $2/gallon would result in 2x of carpooling, and so on.

    Generally speaking, in the world of mechanical things, so long as one is dealing with small changes, it often -- but not always -- happens that quantitative change does take place in a linear way. That is to say, if something calls forth some result, twice as much of the same thing will cause twice the result. Things are rarely so simple with phenomena involving people, and yet this is what is implicitly assumed when one makes use of a constant elasticity. In any case, even in the natural world, with substantial changes, such linearity breaks down. The more so in the world of people. So it's not surprising that predictions of human events based on linearity are notorious for going ludicrously wrong. Among other things, with small changes, one can often assume that everything else -- besides a single factor such as the price of a product -- remains the same. But with large changes, everything else rarely stays the same, and a number of unexpected feedbacks (or, to put it another way, dialectical relationships) are likely to strongly affect the outcome.

    Now, to deal with global warming, one needs, not small changes in carbon emissions, but dramatic reductions; and the financial spreadsheets are being applied, not to short periods of time, but to decades. The result is simply mindless extrapolation. It would be laughed out of court in serious natural science, and it shouldn't be accepted in environmental planning. (Text)

    (25) This is another form of what Marx calls "the fetishism of commodities". (See Capital, vol. I, Ch. 1, Sec 4 "The fetishism of commodities and the secret thereof". ) What happens is that the financial worth of something takes on a life of its own; moreover, it overshadows the material qualities of a product. As this delusion holds one in snare, it isn't the weight, shape, design, or composition of a thing which is important, but how much it costs, its price, that's what it's really worth. The value or financial measure of a thing seems to be the real, material, solid, reliable aspect of a product, the thing which is the motor which can even generate more value from itself, or which can by itself accomplish any wonder including reducing carbon emissions, while the material properties of a thing fade away into insignificance and irrelevance, as does also any consideration of how these products are used or produced by actual people.

    To those under the spell of this way of thinking, price and value aren't social conventions, albeit not arbitrary ones but ones determined with complete predictability by the predominance of buying and selling and exchange in capitalist life. No, price and value are supposed to be the inherent properties of objects. In this fantastic, upside-down world, which is the world of the marketplace and the stock market, "the productions of the human brain [value, price--ed.] appear as independent beings endowed with life", while workers, material objects, and the environment appear as lifeless shadows. Thus, in current financial modeling and bourgeois economics, financial indices such as "elasticity" take on a life of their own, separate from any consideration about what types of production or machinery or environmental planning are required to produce things with less carbon emissions.

    But the environmental crisis will force us to think in terms of the material qualities of objects, on pain of extreme hardship or even extinction. The atmosphere doesn't give a damn about the price or value of fossil fuels; it reacts to the physical properties of various gases and the total amount of greenhouse gases in the air. Our survival can't be ensured by even the largest quantities of financial value registered in the computers of banks and stock markets; it depends on whether we can maintain a pleasant environment and continue to produce sufficient food, housing, clothing, machinery, etc. True, so long as capitalism exists, one can't produce food, housing, or clothing without money; but without actual, physical food, housing, clothing etc. , all the money in the world means nothing. It is the material goods, and our knowledge and ability to manipulate the world and produce the goods we need, which are primary; it is financial value which is only a transient social convention. The primary needs of humanity will sooner or later revolt against the financial shell which currently holds us in thrall. And then there will be an end to capitalist domination and, eventually, to the marketplace itself. (Text)


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