Having carbon taxes fund Universal Basic Income schemes would align the fights against inequality and climate change

At least in the 1980s (I do not know of the before and after) high European taxes on gas (petrol) were defended by the need to protect the environment, while at the same time, at least in Germany and Spain, the much dirtier coal was being subsidized. And the resulting tax revenues are of course huge.

Stephen Foley writes about how investors should adapt their exposures to fossil fuels given all declarations of war against climate change. ”Even oil barons are giving up on fossil fuels”, April 4.

But the taxman needs also to adapt. If we consume less gas/petrol tax revenues will go down, so it is not farfetched to think that those hungry for tax revenues to manage, will again exploit the environmental argument to increase taxes… though they must know that puts their tax revenues on a sort of unsustainable path.

I believe though that climate change is best fought on its own merit, which means keeping the climate change profiteers, whether private or governments, at far distance.

In my own country Venezuela, as a tool to get rid of monstrously large gas subsidies, I have been proposing that all the net income the government derives from the domestic sale of gas, should be paid out in equal parts to all citizens, so as to keep the redistribution profiteers at bay.

And if the whole world did the same, using carbon taxes as a fundamental source of income to pay for a Universal Basic Income, that would not only help to increase fiscal transparency, but also beautifully align the fight against inequality with the fight against climate change.

The real oil revenue fixer is not Opec, much less American shale oil, but the European taxman.

Sir, I can’t believe you use extremely valuable influential space such as your “Comment” space to allow Alan Greenspan to opine such nonsense as the higher cost American shale oil extractor’s having taken over from Opec the power over the price of oil.

What’s wrong with him? Does he not know that the price per barrel of oil is between $50 and $60? Does he not remember that as late as March 1999, The Economist, in “The next shock?” wrote” “$10 might actually be too optimistic. We may be heading for $5”. Had oil not gone over $50, there would be no American shale oil extraction to talk about. 

But, if there is anyone who effectively has taken over the power of generating revenues from oil, which is even more important than influencing the price of oil, well that is the European taxman who by means of gas (petrol) taxes, gets way more revenue than what is paid for a barrel of non-renewable oil of any provenance.

PS. In fact Opec and American shale oil extractors have a common interest fighting the European taxman.

Should not US shale oil producers sit down with Opec to have a little conversation about mutual interest?

Sir, I refer to Roula Khalaf’s “A kingdom fit for an oil price ordeal” December 30. It refers to a battle, supposedly for market shares, between traditional oil and shale oil, in which Saudi Arabia in its own name, and fait accompli in the name of Opec, do no want to lose out one more barrel. We will see what happens.

That said to me it has been clear that even more than some weak Opec members might wish for a reduction in oil supplies that strengthens oil process, in order to help their fiscal accounts, so must most of the shale oil producers with their much higher extraction costs.

The fact is though that shale-oil extractors can probably not sit down and chat over production limits with Opec, because that would perhaps be regarded as a cartel… and we can’t have that with private companies, can we?

But at least Opec and shale oil extractors, as well as other oil sourcing countries, could have an interest to sit down and talk about what to do with all those taxmen who, for instance in Europe, by means of gas consumption taxes, are perceiving much higher revenues per barrel of oil than they are… and are of course helping to put a damper on the demand of oil...creating a demand deficiency. I mean, is not a tax collectors cartel just like any other cartel?

Perhaps the US shale oil producers should join Opec

Sir, in “A new chapter for Opec?” November 26, Anjli Raval and Neil Hume, describe Opec and the US shale oil-producers as competitors… and this though in many ways they share the same problem and perhaps would be better of as allies.

What problem? That the taxman, at least the Europeans taxman, needs, wants, and by means of taxes on gas (petrol consumption) gets more income per barrel of oil, than those who sacrifice that non-renewable resource forever.

What would the demand for oil be in Europe and other places if gas (petrol) was not such a handy product to collect taxes on? I don’t know how much higher it would be but, if I were one of those Opec ministers, I would certainly invite those shale oil producers for a little talk on shared strategies.

G8, by championing the Extractive Industries Transparency Directive, might be selling snake-oil-illusions

Sir, I refer to Vanessa Houlder’s note “Extractive Industries” June 11, where she writes about Cameron urging his G8 partners to champion the Extractive Industries Transparency Directive, June 11.

I certainly appreciate the efforts of the initiative but, as an oil-cursed citizen of a country like Venezuela, where over 97 percent of all the nations exports go directly into government coffers, I cannot but feel that selling the idea that that kind of transparency could solve our oil curse problems, is like selling snake-oil-illusions, something which can only help the ruler and his petrocrats.

Let me ask you, if the UK was in a similar position, would you settle for more transparency, or would you directly go for wrestling that excessive natural resource power out of your ruler’s hand?

By the way, in 2003 you published a letter in which I held that all European taxmen were, by means of gasoline/petrol taxes getting more revenues per barrel of oil than any country who gives up that non-renewable resource forever. And, since that is still true, even at current oil prices, I ask again why does not EITI’s call for transparency cover that?

Our bank regulators, if energy regulators, they would subsidize oil, and tax methanol and ethanol

Sir, there are two comments that I want to make in reference to Robert McFarlane’s and George Olah’s “Let the market determine the best energy sources”, March 4.

The first is that since OPEC is cast as a runaway producer cartel that distorts the market, it is again timely to remind the authors that in Europe, by means of taxes on petrol-gasoline consumption, the European taxman gets more income per barrel of oil than the OPEC members who sacrifice this non-renewable resource.

Secondly, because they argue their case so well, I would like to ask for their support on the issue of bank regulations. Currently bank regulators, by allowing banks to hold much less capital when lending to “The Infallible” than when lending to “The Risky” are, in terms of energy, subsidizing oil and taxing methanol and ethanol, and that is of course pure lunacy.

Never forget who really paid for the bonuses.

Sir, on your front page Patrick Jenkins, Brooke Masters and Francesco Guerrera reports on the “Banker’s fury at UK bonuses supertax”, December 10. Because there could be some shady collusion of interests that could want us all to ignore it, it might be convenient to remember that the real payers of those bonuses, or taxes, are the clients of the financial intermediaries. If we are going to have true fiscal transparency then perhaps the supertaxed part of the bonuses should be returned to the clients of the banks, and if so needed, taxed there.

The taxes not yet paid might remain unpaid tomorrow

Sir Gillian Tett is absolutely correct on that the rhetoric on the taxpayer footing the bill for the banking crisis is wrong in the sense that no taxpayer has yet done so, “Can today’s philanthropy fend of future bank-bashing, November 20.

But when she in that respect suggests the bankers to prepare themselves for tomorrows bank-bashing she forgets that those who really will face the possibility of some true bashing are those trying to collect those taxes. From what little stress-testing I have been able to do of the willingness of the taxpayer to pay up for this crisis, my feeling is that those taxes are going to remain uncollected.

The taxman must do better than create a cartel

Sir, Matti Vanhanen is clearly being responsible with his “Europe will need to raise taxes in harmony” June 17 and he should be lauded for not ignoring the need for higher taxes to pay for the mess, and so that we do not have to pay it all through inflation. 

Having said that though, as a taxpayer, I would beg that the search for new, better and more credible taxes, adjusted to the realities of a global economy, should be the driving force of increased fiscal revenues, and not the creation of a global taxmen cartel… or do we also need a global coalition of taxpaying citizens?

Austrian surgery or Keynesian chemotherapy?

No Sir FT should not get away answering “Is your recession really necessary? January 2009 by painting a simplistic picture of some evil Austrian forces wanting to castigate the world by dragging down the economy into the doldrums of a severe and disciplining recession and an enlightened Englishman who understood that “in a crisis, demand would not necessarily fall back to the sustainable level”. What is happening is much too serious for that.

Our current alternatives are more like having to choose between Austrian surgery and Keynesian chemotherapy. Only as an example I would much prefer to cut out all the financial fatty tissue that was created like by magic when the subprime mortgages moved up to the Triple-A world, than use a general chemotherapy that can leave us so weak with masses of public debt and that could have us fall into a final coma.

Having said that, before any type of intervention, the patient needs to recover the will to live and that depends on us being able to explain to him in a credible way the full extent of his illness and its treatment. As an economic doctor I would start telling the patient about the sacrifices he will have to make, for instance the higher taxes he will have to pay, because the whole story of stimulus packages, tax rebates and expecting rational behaviour modification from the same financial regulators that got us into this mess, sounds too much of a tall tale to inspire any sort of confidence.

If I was Obama I would in the first 100 minutes of my presidency use my political capital to announce a one dollar per gallon of gas tax. That would absolutely sting a lot but that would also help the patient to believe that there is a rational way out and that someone is willing to go down that path.

Obama could run out of time… in seconds.

Sir if Obama in the first seconds of his government is not able to tell a credible story of how the world can put a stop to the current crisis he and we could run out of the precious little time we have available to stop it from developing into something more catastrophic than a serious depression.

Now if I had Obama political capital to spend I would do so by telling the story of a green valley built with taxes on gas and plentiful resources given to the Nuclear Regulatory Commission so that they can work night and day on getting us the answers we need in order to develop what currently seems to be the toughest but perhaps the single best route towards energy and climate sustainability.

Let the American motorist pays 50 cents per gallon of gas for new equity in their automobile industry

Sir is Clive Crook panicking? It is hard to draw a different conclusion from his “A question of first things first” December 8. Of course we need some fiscal stimulus and of course we should not procrastinate getting it out on the street… but what is wrong about thinking on the future in terms of what the stimulus should stimulate and what not, and about how to pay for it all?.

The truth is the sooner the market gets a feel for the full circle, “this is what we spend and this is how we pay for it”, in ways that make sense, the faster it will regain the confidence it needs.

For instance I am proposing that the American motorists subscribe and pay for fresh equity in their automotive industry with 50 cents per gallon of gas, as a tax. That should help to raise more than 70 billion dollars a year to take care of the current problems of their industry and finance the green retooling they must embark on. If at the end of the exercise the equity is not worth what the motorists paid, it is still only right that those who drive should primarily carry the burden of rescuing the automobile sector.

The US tax system needs better working progressivism.

Sir I could not agree more with Martin Wolf when in “How Obama should face his vast economic challenges” November 12, he mentions “taxation of energy”. That should be as they say in the US a “slam dunk” though let us remember that even an Al Gore, a Nobel Prize winner because of is environmental friendliness, does not dare to mention such tax in the land of the cars.

What I do not agree with though is when Wolf recommends a regressive “national value added tax rather than to rely so heavily on the income tax” as I believe that the US has to create some better working progressivism in their tax system since the very hard times fiscal ahead requires massive doses of legitimacy. Do not forget that the US dollars should actually say “In God… and in the American taxpayer we trust”

Many of the consumers have had oil at $130 for decades!

Sir may I congratulate on placing the current price of oil in its true perspective saying "When oil was $10 a barrel, the idea that the stuff was running out seemed demented", "Solving the $130 oil conundrum, May 21.

It is exactly in that "dementia" during the last oil bust-boom (where you place yourself depends on whether you are an extractor or a consumer) that we find the origin of the current boom-bust, and so let us hope that a similar dementia is not present this time. This requires being sincere with the facts.

Among the little acknowledged oil facts is that for instance that the European consumer and many others have already for decades been living with oil in the $130, only that instead of the extractor getting that value it was the taxman. While oil prices were nudging down to the $10 you mention, taxmen were stealthily increasing their take...will they now reduce it?

There are carbon border taxes that do no sound that bad

Sir in the greening of globalization, January 4, you correctly speak out against carbon border taxes since these could be sheltering a new dangerous breed of protectionism. But, given that Europe and the world has to pay so much more for oil and has to see its environment so much more contaminated, just because the US does not want to restrain its consumption of gasoline/petrol perhaps a carbon border tax on US products that considers this would not be such a bad idea after all.

The US does not have to ride away in the sunset

Sir we certainly hope that anyone getting back to work on this January 2, 2007 reads the articles about America in the order you seem to suggest, first Niall Ferguson's scary "An Ottoman warning for America" and then the slightly more soothing "Prepare for a global economic downturn but not a disaster" by Wolfgang Münchau. Even so he must become extremely concerned.

I do not see things in America that bad since as life-long consultant with much workout experience I am used to immediately look for the reserve of important things that seems feasible to correct and that could generate a turn around. This particular reserve seems quite large in the US, and I am not just referring to the Iraq war.

If the US would though taxes raise their gasoline prices to European levels; put some corrections in their runaway health-sector costs; reform their bankrupting tort system; not keep over two million of their citizens in jails or prisons; accept that when the check arrives is not the best moment to sent away those who might help you pay it, like the immigrants, then we would have to conclude that the US has still a long way to go as the empire. Of course if the US can't find it in them to correct those things, it would indeed be riding away in the sunset in a The End, but then this would also not really be because of economic problems but because of something totally different.

No use in crying wolf… there are better ways

Sir Martin Wolf searching to explain why the world seems not to be responding as it should to the growing threats of climate change, places the responsibility for it with the individuals saying “if they are to tolerate radical change in the energy use, people must first be frightened and then they must be offered a easy way out”, “Why the climate change wolf is so hard to kill off” December 5.

Although this basic premise sounds right, and should be right, unfortunately it is not right, and so if we sit for that fright and that easy way out to happen, we will all chop down our last tree, just the way we did on Easter Island.

I people knew it was very dangerous to smoke, I people was never offered an easy way out, it took two years of hell, but I people did it because the opportunity costs of not quitting, namely the nagging from wife and daughters, was just too big for any macho man to endure. In similar fashion many governments have managed to come up with ways of how to impose very high petrol taxes on their voters just because the incentives of fiscal earnings were very high.

And so, what is truly needed to get results on climate change is to align the incentives and empower the agents of change. For instance if you want to reduce the use of cars in the US, which is an environmental must, let local authorities auction off public transport monopolies and thereby enlist bus manufacturers and bus drivers in the army fighting climate change.

Wives and daughters (leaders of the world)… get us working on the climate change… you like heat even less than we do.

Financial Time’s Hillary Clinton interview

Sir the following is my reaction after reading the interview of Senator Hillary Clinton, conducted by Financial Times ’s Washington bureau chief Edward Luce.

Protectionism: Full fledged competition in a globalized world would have eroded the profitability of many companies had we not awarded them the protection of intellectual property rights, and invested some serious money in making that shield mean something. Can you imagine Microsoft in a world where efficient software copiers are free to roam?

Therefore since most of labor have not been furnished similar new protections, and some old ones have in fact been taken away, it should not come as a surprise that the share of labor income as a percentage of GDP is dropping, and that this is, certainly and rightly, creating a source of conflict.

So what’s to be done? There are only two choices? Either we award to labor similar protections which would set us all on a de-globalization route, a lose-lose proposition; or we must require that the beneficiaries of intellectual property rights give back some extra of their quasi-monopoly based extra earnings to the society. As an absolute minimum, this should represent the direct cost of enforcing and defending their rights. Is this protectionism? No at all!

Review of existing trade agreements: Absolutely. In some of the US bilateral agreement some prohibitions were imposed on developing countries because at the time they were considered as appropriate, but hindsight has led to other conclusions and so these clauses need to be revisited. For instance some US trade agreements prohibit any restrictions on capital movement even though now these restrictions are deemed quite good at taking away some of the excessive volatility that the waters of the global financial oceans can have on local bathtubs.

Energy and environment: “the most important thing is getting the US focused on energy efficiency, on clean renewable energy, combating global warming on raising gas mileage etc.” Just like the recent Nobel price recipient Hillary Clinton does not have the courage of spelling out what is primarily needed to really alter the energy and environment realities in the US, namely a substantial tax on gasoline consumption.

Housing crisis: Just like the US can sometimes use a Strategic Petroleum Reserve I would suggest the government buying a large amount of the houses currently involved with subprime loans; at a price below the current outstanding mortgage; financed by the current mortgage holder; and giving the current debtor a option to repurchase his house in a couple of years at a price that would keep the tax-payer form being harmed. That’s what I would do… but then again I am no PhD and so I could be wrong

The environment needs a freed Gore

Sir in “Drafting Gore” October 15, you are absolutely right about that politics still pull a lot of weight for the Gore camp probably especially so for his closest aids. Many of us cannot wait for Al Gore to make clean break with the politics that tie his hands and so that he will at least be able to utter the word petrol-tax. It is a bit strange to say the least to see a country like Norway, and that even though an oil country applies immense taxes on the domestic consumption of petrol, because of his efforts for a better environment, awards the Nobel prize to a man that does not even mumble about the need of taxing more the consumption of petrol in the USA.

Energetic inflation possibilities

Sir, On June 28, Martin Wolfs ends his “Why the energy revolution will continue to power ahead” with an “anybody who thinks it will be easy to reduce energy consumption is simply dreaming”. He is wrong, as an economist he should know that it is a question of prices. Next to his there is an article by Francesco Giavazzi and Charles Wyplosz titled “When facts change so should central bank intentions” that verses on the oxymoronish issue of the transparency of central banks and comes in quite handy as a reminder that changed facts are most often not too transparently discussed.

As Wolf reminds us about, the average US consumer uses ten times more primary energy than an average Chinese, which set against a large economic growth rate in China and a limited increase in energy supplies should put extraordinary pressure on energy prices, as simple as that! In these circumstances, the US Fed, and the American leaders at large, should be speaking out to their fellow citizens telling them that if they do not reign in their consumption of oil, inflation will take off, they will have to raise interest rates, and then they will have to see jobs and property values all go, as simple as that! But Wolf might still be right, since expecting a central banker to acknowledge that other forces are more powerful than his and his buddies, or a leader to lead and not follow polls, well that could really be dreaming.

Francesco Giavazzi
Charles Wyplosz