Negative externalities should be taxed, so companies optimize for "green" by default.
Companies will not accept a carbon tax unless it is applied fairly.
Having the accounting in place increases trust in the fairness of the system. Also it will enable a more fertile ground for political discussion, as more information will be available.
Finally, if the problem is rephrased as "companies effectively receiving state-support to exploit the planet", it will make the problem more urgent.
That's what tariffs are for.
If I rear your car I have to pay the damage. If I pollute air, land and oceans... it's free.
People even dismiss the idea with "pollution is inevitable".
(A permit auction does not suffer from these problems)
Taxing the externalities also suggests we know how to measure how bad they are in some quantitative way and it is commonly accepted knowledge that the political process can implement in a law. Both of those assumptions are incorrect.
I'm basically arguing for 'tax them because we don't like this specific type of pollution' rather than trying to generalise into vague language. The generalisation doesn't hold.
Even if all the people supplying me with stuff were allowed to use fossil fuels, my lifestyle would still crater. I benefit hugely from being in a world where everyone around me has cheap access to energy.
My purchasing decisions are not responsible for the advanced and comfortable world I live in - which happens to be built on coal, oil and gas. I must be benefiting from externalities from fossil fuels.
Your thought experiment about banning fossil fuels doesn't tell us anything about externalities. An externality is when part of the cost or benefit of a thing is borne by someone with no control over it. This is bad because it means that the market will produce an amount of usage that isn't optimal. If the net externalities are negative, the market will use too much. If they're positive, the market will not use enough.
The fact that a blanket ban would leave you worse off only tells us that the optimal amount of fossil fuel usage isn't zero and that the current amount of usage is better. It doesn't tell us whether current usage is optimal or, if non-optimal, whether it's too high or too low.
For an example of something with positive externalities, consider public roads. Consider the road between me and the local grocery store. This road benefits me and the store. If I were responsible for building and maintaining it, I'd probably make it a minimal one-lane dirt track, because that would suffice for me, and the added expense of more lanes and more durable surface wouldn't pay off for me. But thousands of other people benefit from this road as well, and the total benefit to everyone makes it well worth building a wider, paved road. Left purely to the market, that road would be a narrow dirt track. Thankfully, the government steps in and builds a proper road, then captures the positive externality through taxes.
Another way to handle it would be to make it a private road and charge everyone for access. Transaction costs make this impractical, but if we could handwave those away and have efficient micro-transactions for road usage, that would get rid of the positive externality and give us efficient road use and construction without government intervention.
There's nothing like this for fossil fuels. People pay for the stuff based on how much they use. Other people pay those people based on the benefit they bring. The benefits are already captured. Subsidizing fossil fuels would increase the amount that gets used, which would be farther from the optimal usage than where we are currently. We currently use fossil fuels at a level above the optimal, because individuals deciding how much fuel to use aren't bearing the full costs of using it.
There's no indication that anything like that is at play with fossil fuels.
If we blanket banned fossil fuels tomorrow; there would be a few billion dollars in losses to the producers. That would be the ... I don't recall what the opposite of an externality is. Internality, say. The extrenalities would be the collapse of a bunch of things that depend on fossil fuels, like cheap transport.
Slightly pithier: fossil fuels currently have massive subsidies --- from all the people who pay for them! It's just that that isn't what `subsidy' is usually taken to mean.
If the cost of a sea level rise destroying a small island nation is a negative externality, then enabling population growth in a large city (without food riots) is a positive externality. An extrenality is just an impact that goes beyond the immediate buyer and seller; most of the value chain is an externality to a fossil fuel provider who was to be targeted by this hypothetical tax.
The argument in essence is that cheap abundant energy always has a bigger positive impact than a first order approximation would suggest. Pretty much the entire industrial revolution was a long chain of "wow, coal is enabling stuff we never imagined" that was certainly not value being directly captured in the buying and selling the miners were doing. The oil & coal companies aren't capturing very much of the value vs what is created.
I mean, seriously, nobody can argue that fossil fuels haven't enabled civilisation to move from the 1800s to 2019. In a very practical sense they are the enabler of everything we have; there wouldn't be any positive externalities without them. Fossil fuels, crops, wood, iron & a few other metals are the setup materials for all of it.
[0] https://en.wikipedia.org/wiki/Haber_process#Economic_and_env...
My line is that we should either use the cheapest energy (before any government efforts to pick a winner) or nuclear as the most technically excellent energy source.
> it includes costs but not benefits
This is completely illogical because the benefits have always been included and nothing can change that other than a complete ban of fossil fuels.
So far, that doesn't seem to be more than an assertion!?
> People should find a better one.
So ... because people supposedly justify taxing only the negative externalities by claiming that they are taxing all externalities, they should find a better justification for taxing only the negative externalities (but keep ignoring the positive externalities)?
> We've never used fossil fuels because people have a political love of fossil fuels;
Another assertion?
> we use them because they enable great works.
So? How is this rather uncontroversial statement relevant to the question of whether taxing externalities is a good idea and of whether positive externalities are being and/or should be considered when doing so?
> My line is that we should either use the cheapest energy (before any government efforts to pick a winner)
Does that translate into plain English as "we should ignore all costs that third parties have to pay when determining which energy source is the cheapest"? And if so, would you also say that, say, industry in general should use the cheapest materials and the cheapest equipment, where we also ignore all the costs that third parties have to pay when determining which materials and equipment are cheapest (such as healthcare costs for poisoned/injured/disabled workers or people living close to the factories ...)? Because workplace safety standards or environmental protections are "the government picking a winner"?
> or nuclear as the most technically excellent energy source.
So ... you suggest that we should use the cheapest source, except for nuclear, which we should use regardless whether it is the cheapesst, because you have decided that it is the most technically excellent energy source?
We're on track for 4-6 degrees of warming over the next century, and nothing says it will stop there. Fossil fuel based civilization is all for naught. There is no "outrageous amount of good", quite the opposite. Every benefit is trivial when held up against the disaster we are creating.
Before fossil fuels we were able to go hundreds of thousands of years without crashing the earth's life support systems.
Notions of good and evil change dramatically when you internalize the full scope of the climate emergency.
Ideally you want to return the collected tax money back into the economy through a general tax cut/subsidy. This way you incentivize good behaviour (carbon emission minimization) but limit impact on the economy. Most economists favour this approach.
The problem is environmentalist and progressives will not support this scheme because they would rather take the collected tax money and redirect it to their pet causes. This is what happend with Washington's Initiative 732 [1] - and why ENVIRONMENTAL groups brought it down (because fuck helping the environment if socialism doesn't come along for the ride)
There is insanity going on in progressive circles that is completely detrimental to fighting climate change that dwarfs conservative denialism.
You return the fee directly back to the people. In fact there’s a bill in Congress proposing exactly that and it’s overwhelming supported by progressives.
Worse, once you start relying on this revenue, and this revenue goes down (as people use less carbon) - you're going to get yourself in trouble.
Maybe good economic policy should examine both ends of the wealth transfer: is it good that we take money from eg. big oil, and meanwhile also good that we put the money in the govt. budget? But most political talking points are one sided: “X should pay” or “Y should get paid.”