French Fuel Protests And The Climate Change Discount Rate

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So, OK, the French peeps are out in the streets shouting at their betters in the government. This must be the morning then. And yet there’s an interesting idea underneath all of this. What is it that these riots can tell us about climate change? The answer being that perhaps we shouldn’t be doing anything about it?

Sure, we know why the diesel taxes were raised – in order to be a Pigou Tax against climate change from CO2 emissions. Fine. Good way to do it, the right way even. And yet les choufleurs don’t seem to be in favour of this. What does that tell us? Well, actually, it tells us that the discount rate is too high.

The protesters are known as the “gilets jaunes” (yellow vests), because they have taken to the streets wearing the high-visibility clothing that is required to be carried in every vehicle by French law. Their core complaint is a hike in diesel taxes. President Macron says his motivation for the increase is environmental, but protesters call him out of touch – particularly with non-city dwellers who rely on their cars.

The basic thing about climate change is that if we considered it as we do other human decisions then we’d do absolutely nothing about it. The costs are so far into the future the benefits of doing nothing so immediate, that that is the entirely rational thing to be doing. That’s if we use normal market interest rates – which are themselves just the way that you and me in aggregate value that present and that future.

So, in climate change, we don’t use market interest rates. We use a lower discount rate. This probably does make sense. We’re not a notably long lived species, the thought of the great grandkiddies drowning in the superheated water from the ice floes isn’t something that greatly motivates. But society will be around, the species will be – probably – so perhaps we should have that different and lower discount rate for societal or specieist decisions? Which is what we do.

If we used market interest rates in this calculation then the extra tax for climate change would be a cent per litre. Something that no one would even note. We don’t, we use lower rates, meaning that the taxes are 10 and 20 cents – extra, note, over and above normal fuel taxation – per litre.

At which point, great, we’ve solved climate change. Except, except. We’ve done this by ignoring what the people think on the matter and used the value judgements of the sort of people who write academic papers and those who set fuel taxes. And that’s not really how this democracy thing is supposed to work, is it? Instead, it’s what we the peeps say, our values, which should predominate. At which point we get the riots in the streets over the imposition of the correct climate change tax. So, obviously enough, the peeps don’t think that is the right rate for the climate change tax. And the peeps should win too.

If people riot against climate change policies and taxation then perhaps the correct climate change policy really is nothing? They are making it pretty clear that they don’t like not having climate change after all, or at least paying to not have it.

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Samarkand TonyGrope_of_Big_HornQ46peteRhoda Klapp Recent comment authors
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Rhoda Klapp
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Rhoda Klapp

Find something everybody does. Best if they HAVE to do it.

Categorise it as a sin.

Tax it.

As it reduces, tax it more to keep up the revenue.

Now you’re a pimp, living off the proceeds of sin, unable to stop.

Governments probably shouldn’t be pimps. Or pose as moral arbiters.

Grope_of_Big_Horn
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Grope_of_Big_Horn

Get rid of Air Passenger Duty and apply a tax on aviation fuel, which conveniently would be set to yield more revenue. Everyone likes taxes which are paid by some combination of people who are not you, richer than you, and difficult to avoid. All 3 if possible.

pete
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pete

But, alas, the sweaty masses are inconsistent. One moment they cheer when M. Hulot, the noted TV ecologist, finally accepts the crown of Minister of Ecology, and off he goes, closing nuclear power stations (or at least setting a timeline)- without anybody saying – ‘ere, that’s going to make electricity MUCH MUCH MORE EXPENSIVE! Then he buggers off, and some other twit gets the job. Meanwhile, the idiot gilet jaunes are threatening the financial stability of even large stores near their indulgent blockades of roundabouts (hereabouts, a major DIY store has had, in the official quote from the manager, “a… Read more »

Q46
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Q46

The problem in France is it is a tax mostly on rural communities, most of the population, because there is no alternative. If a Pigou Tax is to change behaviour, use X instead of Y, there has to be an X. 80% of electricity is from nuke, with about 10% from hydro and geothermal, so France‚Äôs CO2 emissions are mostly from motor fuels. But in the countryside there is hardly any public transport, people live spread out over large areas so it is a car drive to just about anything you want, food, goods, doctor, work and farming needs diesel.… Read more »

Samarkand Tony
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Samarkand Tony

Macron’s having trouble because of the way he did it, not because of what he did. Hasn’t he ever heard the boiling-a-frog story?