Two cents:

Subsidies for fossile fuels do not make them cheap. They might make some local form competitive to the international market, but their inherent value comes from simple physics. Fossile fuels are simply much more effective than renewables. This does not mean that we cannot change it, but we need a compelling alternative. Slavery, for instance, was the most efficient means of agriculture for thousands of years. We changed it, somewhat ironically, by replacing it with mechanisation, driven by fossile fuels.

Externalities are extremely hard to give a fair price. We could have a limited CO2 Budget, but that limit would be artificial. Think of a CO2 Credit currency: Who would not be tempted to increase the limit ever so slightly to generate the credits for a new school/hospital/anti-terror-drone?

So, no, I do not think markets offer a solution here. They could help, of course, but the real solution is the introduction of effectively free energy with massive-scale photovoltaics. One barrel Crude oil has an energy of around 1.8MWh and costs between $20 and $70 to produce. Thus, to overcome oil, one needs to get the price per kWh solar down between four and one dollar cent. We are about to reach that point rather soon. From there on it is game over for big oil.

> Slavery, for instance, was the most efficient means of agriculture for thousands of years. We changed it, somewhat ironically, by replacing it with mechanisation, driven by fossile fuels.

Eh? Almost nowhere transitioned directly from slavery to mechanisation. Not serfdom, even. Heavy mechanisation of agriculture was a 20th century thing.

Right. But before that mechanisation, slavery still would have been the most efficient means of production.

What makes you believe this? I don't think there's actually much evidence for it in the recent past (previous 300 years, say). Part of the reason that the British Empire was able to get rid of it with minimal fuss in the early 19th century was that it was no longer considered economically viable, and was already in a natural decline in many places.

Most of the resistance to the abolition of slavery in most places was social; it was an upheaval in the way things were done. "GDP will drop" was not, as far as I know, a major concern, nor did it generally happen.

Why do you think this? It adds additional, real costs ranging from the need to finance extensive population controls (with the ensuing social unrest) and an unreliable workforce prone to running away.

Mostly because of the seasonality of work. If I own farmland and want to harvest wheat, I need my workforce only in spring and Autumn. But then I need them 25/8, if you get what I am saying. Buying this kind of labor on a fair market is definitelyire expensive than just "owning" it.

If you count externalities then fossil fuels are not cheap. The reason why they are cheap is that you can sweep the dirt under the rug and pretend there is no problem.

"taxing externalities" and many common definitions of "free markets" are incompatible. It might be wise to use more precise terminology if you want to combine these two concepts.

I think the point GP is trying to make is that it already is not free, and it's not free in the wrong direction.

The common definitions of "free markets" typically mean a lack of regulation of what can be sold and the a lack of regulation of the prices that things are sold at. The desired outcome (supposedly) is that the price is determined by the participants, based on their knowledge of the full cost of ownership and the perception of the benefits of ownership.

But externalities have no inherent or obvious cost to market participants, either because they are so distributed that the cost per participant is ignorably small, or because the costs are distributed in time (and thus do not affect current market participants) (or both).

The cost of externalities has to be determined and that inevitably involves questions about values. As a trivial example: how much do you (or should you) value clean air? What ppm contamination is worth a dollar to you every time you purchase fuel?

This means that a "free market" with prices that include the cost of externalities must inevitably be regulated in some important sense, since the cost of externalities can only be established via the same processes used for regulation in general. And by most definitions of "free market", that is no longer a "free market".

That doesn't mean this isn't the right thing to do. It just needs better terminology to describe it.

OK, then require the externalities to be mitigated rather than priced. Then the market can find a price for mitigation.

1) who will the price/cost be billed to? 2) "free markets" operate on a 1-unit-of-currency/1-vote basis. If you want to go ahead and tell everyone that the rich will get their desired outcomes, just because, be my guest. Not sure that's the flavor of the month/year/decade/century.

Thank you for clarifying the point.

I agree. The externalities should be accounted for. Petroleum should be taxed and not subsidized.

I think the proper word for this is "market based" instead of free market. The parent wants a market based solution for climate change instead of a solution that involves the government handing out subsidies to a handful of technologies that are on a list.

> free markets

> externalities are untaxed.

??

Free markets are utterly and demonstrably unable to solve climate change.

I believe the point was that fossil fuels operate in a market where they are subsidized, which is not really free.

Politicians and legislation are purchased on the free market through lobbying. And then subsidies are merely a return on a smart investment.

I'm not actually sure if what I just wrote is parody or not. Arguments about "free markets" are always weird like that, since everybody seems to work with a different definition and they don't really seem to exist

Yea well "really" free markets don't actually exist so that distinction seems a little silly.

I mean obviously the subsidies are bad but removing them isn't going to solve much of anything by itself.

If you suddenly make using fossil fuels 10x more expensive people will switch off of them ASAP.

> If you suddenly make using fossil fuels 10x more expensive people will switch off of them ASAP.

Yea, this just isn't true. Rich people will just pay more for the same thing. Poor people will just have to pay more to even get to their jobs. It's pure laziness to put this on dogma rather than actually come up with decent policy to shape the market.

Rich people have money, but they aren't stupid: why would they throw their money away on nonrenewable energy when they can just switch to something cheaper?

> Rich people have money, but they aren't stupid: why would they throw their money away on nonrenewable energy when they can just switch to something cheaper?

What alternative is there to a private jet or a yacht? No, you have to get the fear of prison (or worse) in them to get them to act in a socially rational manner.

To begin with, private jets and yachts are a trivial proportion of carbon emissions, so they're not really what matters.

But to actually answer your question, battery-electric yachts or aviation powered by biofuels.

Sure, but it's rather indicative of larger use of carbon emitting technology. Neither of your suggested replacements actually exist in any meaningful way, and virtually every investment comes with significant CO2 emissions.

Battery-electric yachts and biofuels aren't popular because they're more expensive, not because there is any technological barrier to their existence. Make them the less expensive option and market demand for them increases.

Or, we could just make yachts illegal.

Free markets are good at minimizing cost. Currently, emitting CO₂ has no cost, so the market has no incentive to solve climate change.

Not true. If we neutralize externalities the free market will make progress in climate change. Especially because solar and wind are already cheaper than fossil fuels. Probably won't be fast enough, but I don't think that is the same as utterly and demonstrably unable to solve climate change.

You're conflating (dis)incentives with price discovery.

A lot of people seem to think free markets -> anarchy, which is a complete straw man. Prominent Libertarian economists such as Friedman[1] support governments dealing with externalities generally, and the carbon tax specifically.

If all you know about X is the totemic version reverberating through anti-X echo chambers, you probably don't understand X.

[1] https://www.forbes.com/sites/jeffmcmahon/2014/10/12/what-wou...

> A lot of people seem to think free markets -> anarchy, which is a complete straw man.

In American political discourse, this is exactly how the "free market" is defined by the political establishment. Taxing externalities is very unpopular among Republican and Libertarian politicians (Gary Johnson flirted with the idea of a carbon tax, but quickly withdrew support) and is relatively popular among Democrats and the Green Party. Which parties are the ones people associate with free markets?

You can hem and haw about appropriate use of the term "free market" all you want, but calling colloquial usage a "straw man" is disingenuous.

You're confusing the terms with the politics.

There is a party which is anti-regulation because its constituents are business owners who incur the cost of it. But they incur the cost of both inefficient wasteful regulation and any legitimate pricing of externalities, so they oppose both. One is free markets and the other one isn't.

Just because politicians representing oil producers support both "free markets" and subsidies for oil companies doesn't mean subsidies for oil companies are a component of free markets. It just means that politicians are hypocrites.

I don't see how I'm confusing the terms. Republican and Libertarian politicians will tell you that the carbon tax (and other forms of taxing externalities) is antithetical to the "free market", and my point was you can't, in good faith, claim "straw man" when someone uses the term that most non-economists in America use.

I also never claimed that subsidies were a component of the free market nor did I claim any politicians think so. I believe that's an actual straw man :)

> my point was you can't, in good faith, claim "straw man" when someone uses the term that most non-economists in America use.

The term for what you're doing is called weak man. It's finding some idiot or hypocrite in the world who is actually advancing the weak position so you can claim it isn't a straw man, and then knocking that down instead of addressing the stronger version being advanced by someone else.

> I also never claimed that subsidies were a component of the free market nor did I claim any politicians think so. I believe that's an actual straw man :)

That's an argument. If "free market" means what anybody who says they're for free markets says they want, that would imply that "free market" means oil subsidies. Which is clearly absurd, ergo so was your claim.

> It's finding some idiot or hypocrite in the world who is actually advancing the weak position

That doesn't really work when my argument is that it's the colloquial usage--not just a handful of "idiots".

> If "free market" means what anybody who says they're for free markets says they want, that would imply that "free market" means oil subsidies.

That's an absurd reduction, but that is how language works. This clearly isn't a productive conversation. Have a good evening.

I think the exact point that was energy production is a massively skewed, un-free market.

I think GP is saying that if companies had to cover the cost of externalities (impractical, how do you measure and price this?) a free market model could work. This is the basis for the carbon tax as I understand it.

"fair market" might be a better phrase.

Spherical frictionless cows in a vacuum are unable to move.

There's always thumbs on the scale. Grandparent is proposing to remove some thumbs (fossil fuel subsidies).

Pigovian taxes are fairly popular among people who consider free markets to be valuable. This is because they retain $free = "can discover prices and conduct trade freely", a more valuable property than $free = "utterly free of any and all governance", which, like real communism, has never been tried.

Solar and wind are highly subsidized as well.

Just look at German electricity prices.

Keep in mind that the subsidy for oil might be "accounting for the entire world's economy collapsing in the future due to climate change".

Agree with this and I would argue that subsidies can be a good thing. In a perfect world (which does not exist) I think subsidies for old power generation would have left long ago and as soon as new tech came out they could be applied to it.

obviously this varies country by country, and strongly depends on local climate.It's very poor argumentation in that sense. One should actually present numbers, not point fingers circumstantially.