Thursday, December 13, 2018

Deficit adjusted GDP

This post describes a fairly simple economic concept that can be abused for political gains.  Ignorance of the concept can be leveraged to break democracy through economic illusion:  At a bear minimum, any increase in deficits, should normally have a direct immediate increase in GDP equal to the deficit increase, but I will argue here that a 2x effect on GDP should be considered "par" or possible.  The political abuse from deficit increases is (self) praising the deficit inflictors for the GDP increase, and using deficit increases for the intentional destruction of the country for benefit to the destructors.

Scenario:  Increase GDP 100% with $20T increase in defense prices paid.
If the prices paid for military equipment were raised 30x or 40x for just a single year, then the US government would spend an extra $20T, and this number is automatically added to GDP, producing a 100% GDP increase.  (A good year for US GDP growth is 3%-4%)

The result of such policy would be no job gains in the defense industry, since more product is not being sold.  Only profit increases to those companies.  Out of gratitude (not quid pro quo since that might be illegal), defense companies would buy much of the massive debt required to finance their gifts, and political contributions would likely increase substantially.  Defense contractors would also be empowered to purchase/take-over the largest non-defense public companies.

The only effect on employment in the broader economy of this policy would be political spending resulting from increased donations, and the very low spending increases that result from stock price increases gifted to the wealthy.  Stock price increases generally trickle down to housing price increases.

The following year, when the deficit is decreased by $20T as an end to the defense contractor giveaway, there is a 50% decrease in GDP, while a permanent $600B increase in annual deficits compared to pre-policy levels, if interest rates stay at 3%.  A higher permanent increase in deficits if interest rates rise, and an ever increasing one as interest compounds.  This permanent debt servicing increase has 0 economic benefits as banks and other rich debt holders generally roll over investment profits into new paper assets.

The extra $20T in asset values (perceived as wealth) would slowly wither away if it is not put to productive investment use, and instead stays parked unproductively in paper assets.  The $600B+ in extra annual debt service will either borne by asset holders, or diminish "ordinary people"'s capacity to acquire the assets reducing their value.

As bad as defense contractor giveaway is, tax cuts for the rich have even less GDP impact
Deficits that are increased as a result of a tax cut have no direct (accounting) immediate increase in GDP.  It is only through higher spending from people, and direct real business investment (buying stocks or other companies doesn't count), that GDP and employment increases.

Furthermore, when a tax cut is a tax rate cut to businesses, it directly reduces business investment as the after tax cost of investment is increased, as is the risk of investment.

The GOP tax reform plan has most of its deficit inducing effects as a result of corporate tax cuts, and rates on the top personal incomes.  But it also reduced rates on the lowest income levels, mainly through a higher basic (standard) deduction.  Political gratitude also motivated PR stunts of bonuses.  Tax cuts and bonuses for the poor/working class do have a positive GDP impact because the poor spend all of their money/income.  Because that market spending is not all pure profit to the sellers, it supports "multiplied spending" and additional employment, before eventually terminating on top of rich individuals' and large corporations' savings hoardes.

Modelling multiplier effects

  • The poor and the government spend all that they receive.
  • The working class has low savings rates as well.  Regardless of income, if your monthly bank balance ends at the same level, then your multiplier contribution is based on your paycheck frequency.
  • Companies who channel profits into real assets or generate losses or little profits are also pass-through economic entities.
  • Companies/industries that regularly go bankrupt eventually recycle their profits into the economy.  This can be on a 10 year scale, rather than a monthly scale of working class people.  Autos, industrials, airlines, consumer goods to some extent fall into this low profitability or prone to bankruptcy category.  Can also be labelled the 1.0 economy that creates intensive employment.
  • Debt is generally neutral to the multiplier.  Pulls spending forward, allows spending greater amounts, but interest profits go to hoarders.  Defaulted debt brings money from hoarders into the economy only by destroying it but taking advantage of previous spending without repaying hoarders.
  • Insurance profits are similar to debt.  Profits from premiums go to hoarders, while claims add fuel to the economy.
  • Middle class retirement funding and home equity when it results in a small estate that funds purchases by heirs is a 30-40 year withdrawal from the economy.
  • Generational wealth can create 100s of years of economic withdrawal, and income earned by this group has most of it not affect their spending, and instead adds more years of economic withdrawal.
  • Ultra profitable companies similarly siphon off money out of the economy, on a continual process.  Payments to investors are simply transfers among hoarders.
These comments have been more in the context of withdrawal of money/spending rather than the spending multiplier which is quantifiably tracked on a macro scale as GDP divided by money supply.

Since quantitative easing after the financial crisis of `08, the multiplier has dropped to record lows.  The dominant explanation is that Federal reserve's printed QE money went to hoarders.  Money/wealth does not trickle down.

Deficit policy that can hope to break even
Policy that spends social funds such that an amount greater or equal to those funds + interest is returned as social revenue (taxes) is great policy.  High tax rates, investment incentives, working class and poverty relief, employment creation are all essential aspects to policy that can hope to break even.  Natural tax policy and basic income can effectively accomplish that social payback.  Infrastructure has the added benefit of creating something socially useful and potentially lasting.

Policy that simply grows GDP (another measure of society's income even if it does not go to the social fund ) rewarding a few hoarders with revenue and profit, funded by other hoarders who will profit from the interest on the debt cannot be calculated as a social benefit.

A formula for break even deficit policy is provided at the end of this paper.

Framework for deficit adjusted GDP analysis
As discussed in the opening section it is the change in deficits that either provide a boosting (if deficits are increasing) or contracting factor on GDP.  There are 2 analysis factors that need consideration:
  1.  How long a time frame between government spending and a multiplied impact on GDP: An increase in government spending should have an immediate impact on GDP as it is spent by the government, but any recipient of that spending can take several quarters to respend their "government gift".  A tax cut for kleptocrat hoarders will take lifetimes to be respent, but tax cuts for the working class can take less than a quarter.  Given that kleptocracy pretends its policy moves will pay for themselves through investment, a fair PAR scoring is to allow for a 1 quarter (3 months) lag between the deficit increase (that should have an immediate 1x benefit on GDP:  the initial spending itself) and the multiplied respending.
  2. Measure deficits as the accounting report, or the increase/change in total debt over the period:  The accounting measure of deficits exclude the raising of cash, and transfers to social security and other government trust funds.  The raising of cash can be needed because the executive branch has high brinkmanship games over shutting down the government with congress, and so, can only blame itself if it must mitigate risks that it is creating.  While social security funding can be blamed on past government commitments, it is within government policy whim to liquidate the fund in favour of funding basic income and ending pension ponzi schemes.  Another source of discrepancy between accounting deficits and debt levels is intentional fudging of expenses/spending and deferring them into another period.  Some of the largest issuances of debt occur the day after quarter ends.  Some military spending has been conducted off budget.  Therefore, there should be a strong preference to measure deficit changes as changes in outstanding debt instead of the accounting numbers, as the debt reflects actual cash use, and the US's detailing of public debt further allows excluding the effect of trust funds on operations.
Another substantial effect on GDP that is disconnected from economic health can come from insurance payouts related to natural disasters.  Hurricanes and forest fires result in large auto and home insurance payouts that stimulate both  of those (home and auto) industries.  Natural disasters furthermore stimulate spending from savings even though some day to day expenses and revenues are disrupted.  The net contribution to GDP is substantial, and both 2017 and 2018 have incurred significant contributions from the insurance sector.  1% of GDP in these years being attributable to public and private insurance/relief aid payouts surrounding natural disasters.

Tariffs in early/mid 2018, created a lot of economic activity as they were announced 60 days ahead of time, with a long threatened period, and so significant economic activity was pulled forward in order to trade ahead of tariff dates.

Stock and other financial asset performance does not count in GDP, but the $30T value of US stocks (close to $20T in gains over last 10 years), and the $40T bond market is a growing pool of money that could easily be used to open restaurants or machine shops if those opportunities were seen as attractive.  Properly taxing those investment gains and other policies could put the unproductive hoarde to use.  The supply side klepto-oligarch lie is proven by how little economic effect the massive store (and growth) of wealth creates.

PAR performance of deficit increases
Par is a golf term referring to a score expectation on any hole.  If you score par, you did ok.

A deficit increase that just grows GDP by that same deficit increase is a 1x multiplier.  The first section's example of simply increasing hoarding defense company profits achieves a 1x increase in GDP.  To use another golf term, surely this is a BOGEY underperformance of policy.

If a deficit increase is spent in such a way that there is a 50% respending rate of revenue (suppliers, employees, reinvestment, and taxes), with each of the respending recipients also respending at a 50% rate, then this creates a 2x multiplier (the infinite series 1 + 1/2+1/4+1/8.... = 2).  This is a good candidate for a PAR definition as boring historically professional policy can easily achieve this.  The other 50% that is not respent is kept as financial paper/cash or paid as dividends and share buybacks, or invested out of the country.    2x multiplied deficit increase is an easy candiate for PAR.

3x or more multiplier is fairly easy to achieve when deficit increases are spent on people in need who spend all of their income, or at least all of the benefit, and then subsequent recipients respend at a 50% rate.  Much higher multipliers are possible through universal basic income programs because they reduce the need for savings (ie. future UBI payments count as savings to citizens, and enable the support of safe low interest loans to people, and allows for the liquidation of retirement trust funds and public pensions).

US debt growth highlights
The US treasury publishes daily debt to the penny accounting:

From Sept 8/17 to Nov 30/18, US debt grew by over $2T, while GDP grew 1.3$T from June `17 to Oct `18.  Only $314B in intergovernmental (trust funds) debt growth since december 2016.  The rest ($1.7T) will show up as on-budget deficits soon enough.

Interest costs to the US has risen $65B in fiscal year `18 (ends in October) over `17 to $523B/year.  Average interest outstanding has risen 30 basis points to 2.52%.  Well below current market (reissuance) rates.  The near $22T in debt reissued at 2.8% will cost $616B.  3% of GDP, and 20% of government revenue.

Reasons for the high debt additions (deficits) include the tax reform bill effective for all of 2018.  The single largest debt increase ($500B) was in September 17, and was likely related to preperation for a $700B defense appropriation which passed later that year.  Hurricane relief may also have played a significant part in 4Q 2017 deficits which totalled $687B.

March and April 2018 saw $625B total deficits.  This coincides with a $1.3T spending bill with customs/ICE increases as its highlight.

Since August 2018, monthly debt increases have averaged $140B without significant spending news, other than accounting deficits remain on track to be over $1T for fiscal 2019, most likely the result of general revenue loss from tax reform.

US Deficit adjusted GDP growth


  • date and debt:  total debt retrieved for first day of month from debt to the penny site.  In billions.
  • deficit:  the increase in total debt over previous month.  Suplus negative deficit numbers are preceded with _ .
  • 3mdef:  3 month rolling deficit for current month and 2 previous.  This is used as the basis for deficit increases as it is smoother than single month changes.
  • incr:  increase/change in 3 month rolling deficit.  This is the basis for adjusting GDP as if it would be without a deficit increase.
  • GDP:  Monthly GDP interpolated from quarterly federal reserve data.  The 12 month rolling GDP at the end of the month.  In billions.  Q4 2018 GDP is assumed to be equal to Q3 GDP.  This would be reported as a 3.7% (12 month) GDP increase, and this is higher than most current professional estimates.
  • gdpinc:  The month over month increase in GDP.  Interpolation results in 3 equal increments pe quarter.
  • adjgdp:  Adjusted GDP monthly increase.  Adjusted by the deficit increase (incr column).  A 3 month rolling deficit that increases by $20B adjusts the "potential/core"/private sector GDP down by $20B.  This uses the 1x BOGEY effect on GDP.
  • cumAgdp:  Cumulative adjusted monthly increase.  Total adjusted GDP increases relative to december 2016.
  • 2xstim:  If the deficit stimulus resulted in a 2x impact on economy.  The number for each month is calculated by adding the deficit from 2 months ago into the 3 month rolling deficit (thereby double counting the 2 month prior deficit).  The 2 month prior number was chosen because it may have the most impact on monthly GDP.  A government that budgets its spending may for safety reasons issue debt 2 months ahead of spending needs. 
  • 2xgdp:  GDP adjusted by a deficit/surplus multiplied by the 2x factor in previous column.
  • cum2xgdp:  Cumulative 2x deficit adjusted GDP relative to december 2016.

Notes and conclusions:
(generously projected) Nominal GDP rose $1.7T since 2016 at the end of 2018.  $1.1T since September 2017 which is the start of the recent $2T debt ramp up.  If deficit spending were as effective as providing cronies with profits on infrastructure projects (a 1x multiplier), then the deficit adjusted GDP for the 12 months at the end of Q3 2018 is $697B and flat to 4th quarter instead of $1.1T. This would be a bit over 3% growth.

If we assume government policy is competent in directing growth, then the real/core economy would have contracted by $395B over 2016 levels by the end of 2018, and by $1T since Sept 2017, without the policy injections.  If instead we assume that the Republican government has been incompetent, then the extra growth achieved by an additional 1x multiplier (whatever effect existing policy had) would be  $1.7T (1.33T - _395B).

A basic economic point, and simpler analysis, is that with $1T/year in deficits, eliminating such an annual debt increase, with a 2x multiplier would result in a $2T drop in GDP.  About a 10% contraction.  The act of changing deficits from $500B to $1T creates a $1T economic adjustment. 5% change in GDP.

Its hard to link a debt increase to a month of economic activity.  From the data, GDP grows at around $60B/month when there are no debt increases, and the large spikes in new debt do coincide with GDP spikes.  But those spikes are well below the debt spikes.  In the 4 months leading to the end of Q2 2018, debt increased by $589B while GDP increased by $370B, but $180B+ of that GDP increase would have occurred anyway, and so $589B was spent to grow GDP only $190B.  A 0.33x multiplier, well below what (1x multiplier) can be achieved with deficit increases spent on corrupt cronyism.  Corrupt cronyism would be 3 times more stimulative than current US government policy.

The 2017 GOP tax plan
I've called that bill the destruction of America plan before.  Tax cuts for hoarders has no multiplier bonus, and therefore no benefit, to economic activity.  The $1.5T budgeted cost of the tax plan over 10 years is significantly underestimated because the deficit impact is wrongly assumed to behave like growth expanding infrastructure spending, with a delusion that the rich and profitable corporations will invest the extra profits in something productive instead of financial paper. Stimulative policy for the future is compromised by starting with an extra $4T in debt in 2020.  At 3% interest, that debt will cost $120B/year until the debt is abolished through default, and where the time frame for collapsing default is accelerated without immediate or lasting benefits.

The context of universal basic income
UBI is a refundable tax credit (equal for all) that can be structured/funded such that 90% of resident citizens receive a net tax cut, with a much larger net cash benefit to those with little income than those with more income. Unconditional Loan Income (ULI) can be a citizen-only program where a lifetime allowable loan balance can be withdrawn in annual/monthly chunks, and repayments are royalty-based portions of income like current distressed student loan arrangements, but where repayments extend future withdrawal balances, and unlike student loans, the cash from the loans can be used as pleased.  ULI is a version of UBI that is individually accountable.  Your own future success funds your past basic income.  Public-private partnerships can fund any deficit (unrepaid loans less interest earned) in the program, and they can be structured such that the central bank can hold them.

Because UBI and ULI are progressive tax cuts with largest benefits to the poorest, they can be funded with regressive-ish taxes such as a carbon taxes, flat income taxes, sales taxes (not my preference), elimination of standard deduction.  On the business side, an income tax equal to the flat personal income tax.  On the investor side (they benefit from UBI too), surtaxes on investment income while making dividends paid by businesses tax deductible to those businesses.  Replacement of payroll taxes with equivalent income taxes (but uncapped).

In the context of multiplier effects, UBI (and universal healthcare) reduces hoarding.  Individuals need to worry less about saving for their children's education, their spouse can always contribute financially to the relationship.  This encourages families and less needs to be put aside for emergencies.  The rich still exist, and hoarders will be encouraged by the spending power of people around them to invest and hire in projects designed to take those people's money.  Everyone who wants a job, or who will listen politely to generous offers requesting their help, can get a job, or pursue the same opportunities as hoarders have on their own projects, including partnering with others who all have the freedom to fail if their spent time/energy is ultimately unproductive.  All of this energy is expended freely through fair markets, that even if competitive can be more rewarding than harsh power imbalanced markets.

High tax rates and redistribution creates high multipliers on the economy (taking from hoarders to give to spenders) and encourage investment by hoarders to take money back from spenders.  Tax cuts for hoarders encourage harvesting and cost cutting, and in addition to no initial impact on GDP of the created deficits, reduce the multiplier further by accelerating collapse through more hoarding to prepare for the collapse.

Formula for break even deficit policy
Borrowing to spend may create a benefit in addition to a cost:  A bridge has commerce-building and personal time value.  It may have property appreciating value.  The value  may be monetized through user fees or property tax increases (or privatization).   Costs need to include interest on the borrowing.  Breakeven must be measured relative to social treasury, effectively meaning that an extra debt level is temporary.  Socializing cost to reward a few is a political theft.

Formula elements within context of suggested natural taxation principles and rates
  • Tax rate on productive income: 33% Personal and business tax rates equal.  Improved deductibility of business losses to encourage investment.  There are no personal deductions with basic income.  Productive income is defined as income that is (re)spent.
  • Tax rate on income that is (or likely enough) horded:  5% personal surtax on incomes over threshold ($100k, but arguably as little as $50k threhold), and 10% on investment profits.
  • Change that policy can have on the hoarding vs spending rates, and specific type proportions benefiting from policy:  Natural taxation encourages investment, basic income encourages entrepreneurship, and reduces need for savings.  Republican kleptocracy encourages hoarding and cost cutting.
  • Additional cumulative growth in dollars created by project/policy.  Can be very hard to predict.  Kleptocratic policy is certain to feign advocacy claiming high growth.  
  • Normalization to present or future value/cost.   Can depend on long term interest rates, or assume a fair safe foregoing of immediate consumption return of 5%.  Still policy can also affect interest rates.
  • Normalization for real vs nominal costs.  Inflation adjustment that affect interest rates. 

To untangle the US's tax code into productive and hoarding tax rates is difficult but can be approximated by the tax rate on GDP, capital gains tax revenues as percentage of major asset increases, and through income concentration/inequality.  Some broad notes on US finances include 6% of GDP is collected from payroll taxes, 8% from income taxes, 1% from corporate taxes, with 16% of GDP in total collected.  Corporate tax revenue is down 33% from previous year while other categories are unchanged.  While the kleptocrats frequently publicize that the top 1% pay a significant share of the income tax revenue, payroll taxes are paid only on wages and only the first 128k in wages.  A decent approximation of productive vs hoarding shares of GDP is that the 15% of payroll taxes on low and medium wages providing 6% of GDP in revenue, means that 40% of GDP goes to the productive while 60% goes to hoarders.

Under natural taxation, the long term productive tax rate is 33% of consumer and government sales, and hording tax rates of 5% surtax on wages and bonuses above $100k, and 10% on investment profits.  Consumer, government and residential construction are 85% of GDP.  Investment gains from stocks/bonds are not included in GDP.  With 2012 statistics, 56% of GDP is wages and bonuses, 27% business profits, and 17% is rents.  About 6% of 2014 households earned over $200k and 25% of all income.  Using an arbitrary guess as to the proportion of high earner's income being wages, 20% would mean that 51% of GDP is productive wages -33% tax rate, 5% is high wages (subject to 5% surtax -38% tax rate ), and 44% hoarder destined income subject to 10% surtax - 43% tax rate

In a $20T GDP economy, natural taxation raises $6.6T as base + $50B from high income surtaxes + $880B hoarding surtaxes = $7.53T.   In a $22T economy, this is $8.3T. $5T more than current revenue.  Enough to pay a basic income to 300M adult Americans of $16k/year, before any of the spectacular growth UBI provides.  A household with 2 earners of $100k each would pay a 17% effective tax rate (including $16k refund) including payroll taxes, and so effectively 10% income tax with current payroll taxes.  They would further be entitled to a 7% pay raise as their employer would no longer be penalized by having to match their payroll taxes, and so even with a 38% tax clawback on that $7k raise, and extra 4.34k after tax raise, and a 5.66% income tax rate apples-to-apples compared to current tax rates.  Furthermore, hoarders would pay $3.78T of the taxes.  All of the UBI funded by them and high earners, and not yet considering government program cuts.  The $5T in UBI funded by hoarders means $5T in higher spending (if all UBI spent) and GDP which could be split 50/50 in productive vs hoarder benefits.  At an average 38% tax rate, it means $1.8T in tax revenue, $1.8T in productive earnings and potential consumption, and $1.2T in additional after tax hoarding profits.  $3.2T of that $5T is a further increase in GDP and potential UBI and spending and additional profits to hoarders.  A 37% increase in GDP with just the rounds so far, and since all of it gets spent until it lands into a hoarder account, $7.4T in additional profits gained for $4.2T hoading taxes paid.  A very substantial benefit of UBI even to hoarders, and the calculation excludes the profits from asset/stock holdings that appreciate much more than the current earned profits.  In addition, lower crime lets hoarders park their lambo in any neighbourhood, UBI lets their kids fund their own education and projects, and their spouses fund their own divorce, and so lets other hoarders spend more of their hoarde which further enhances your personal hoarding.  Its this fact that makes the only objection to UBI the necessity of misery and a harsh environment that forces desperate submission on people because of the belief that the only way you can earn profits is from their exploitation.

Actual Formulas
The effect on GDP of a social project  where all collected tax revenue (directly related to project expenses + multiplied growth) is spent again and where the project's initial distribution between the productive and hoarders is the same as the proportion shared in broader economic spending is simply Project cost / (hoarding rate * (1 - hoarding profit taxation rate)).  For example a project costing $1 with a 40% economic hoarding rate and a 20% tax rate on hoarders will generate $3.12 in GDP (not necessarily all in one year) as long as all tax proceeds are respent.  It will also generate $3.12 in total hoarded wealth.  The lower the hoarding rate and the greater the tax on hoarding profits, the higher the multiplied benefit of a project.  When a project involves giving cronies high tax free profit margins then the project cost element in formula is replaced by proportion of project cost going to non hoarders.

When, instead tax revenue from any multiplied spending should go to repaying the deficit caused by the project then the government joins the hoarders as the drain  on the system.  2 formulas are needed.  First the multiplied GDP impact =  (after tax cost of project - hoarded portion of project) / (1 - (spending rate * (1 - tax rate on spenders)) where the after tax cost of project includes any immediate tax clawbacks on the hoarders and spenders directly benefiting from the project.  For example, if a $1.20 project will generate $0.20 in tax revenue then the after tax cost of project (and deficit increase) is $1.  If the project has no direct initial benefit to hoarders, then 1 is the numerator.  If the project offers a 50% profit margin to political cronies, then the numerator decreases to $0.50.  Multiplied GDP impact is increased with higher spending rates, lower (the inverse) hoarding rates (both initial and economy wide), and the lower the tax rate on spenders.  Increasing the tax rate on hoarding, and encouraging investment tax deductibility (both decreasing hoarding rates) is the easiest way to optimize these parameters.  Under natural taxation, there is a high business tax rate, but also 0 expected taxes paid by businesses.  They can bring tax liability to 0 by paying all profits to shareholders as dividends, or by reinvesting in growth.  They can go back past years to collect refunds on taxes paid for kept surpluses, if they dip into that surplus to pay dividends or investment.  The hoarders receiving dividends if yields are 6%-8% instead of today's typical 3%, are more likely to view dividend payments as "beer money" and increase their own spending rate.

The 2nd formula is Multiplied Tax collection =  multipied GDP impact * ((spending rate * spender tax rate) + (hoarding rate * hoarding tax rate)).  This is the tax collection from a single round of spending times the multiplied GDP impact.  The multiplied GDP impact includes any initial project spending (but would not include it if the project is a tax cut rather than a spending increase).  Maximizing tax collection is most easily done by raising the hoarding tax rate which simulatenously (and by other potential means) lowering the hoarding rate.  Some spender tax rate is also needed but raising this also lowers the multiplied GDP impact which is also a major factor (higher is better) for tax collection.

As a base example, a 60/40 split for spending/hoarding, with 15% effective tax rate on both generates  for a $1 project, a 2.04 (MGI) multiplied GDP impact with 15% initial round collection and so a 30.6% MTI (multiplied tax impact)  $0.306 of the project is recouped in eventual taxes.  The breakeven MTI excluding interest costs is $1.  The current economy spending/hoarding split is closer to 50/50 (worse), and that generates a 1.74 MGI and 26% MTI.

If a 60%-90% business tax rate, and investment incentives were applied such that the hoarding rate could be dropped to 10%, and a 43% tax rate on dividends and other hoarding income (hoarding tax rate), then with a 33% tax rate on spending (STR), $0.856 MTI is recouped.  A 15% STR, recoups 75.7% MTI.  Bringing the hoarding rate down to 20% might be the maximum possible, as most rich/persistently high income people will always have more money than they know how to spend. 20% hoarding rate, 33% STR and still 43% HTR, created recouped MTI of 75.4%.

The maximum possible MTI approaches 1 as tax rates approach 100%.  Only the HTR needs to approach 100% to come close to 100% MTI, because all money/spending flows up to hoarders, and the HTR mainly determines how hoarding income gets split between hoarders and government/society.  The implication is that there is no financial only considered full breakeven from multipliers.

In the last example, if natural taxation can accomplish a 20% hoarding rate, then a 75%+ MTI is achieved.  2.15 MGI split as 0.43 higher hoarder pretax income and $1.72 higher spender pretax income.  After tax, hoarders get $0.24 and spenders get $1.15, and so broad economic improvements are achieved even without treasury break even occurring.

Previously, I considered the theoretical (joke) possibility that a government spending project could have some intrinsic value.  With a 75% MTI, the value brought by a project need only be 25% of the cost.  Current taxation policy of 26%-30% MTI, means that perceived value must be 70%+ of the cost.  For instance a bridge or airport may have the additional 25% cost funded by property taxes and justify residents appreciation the value of personal enjoyment, time savings and freedom provided by the infrastructure project, and then any increased commerce/tourism/jobs enabled by the infrastructure is tax and personal revenue above and beyond the break even level.  When the value hurdle is 70% of the cost, much fewer projects pass the rational appreciation mark.

Policy implications
  • Sales/VAT taxes are a terrible idea because they lower the spending rate.  Encourage more hoarding.  Better to raise income tax rates.  Andrew Yang is the best 2020 presidential candidate for championing UBI, but a VAT revenue approach is flawed in comparison to natural taxation.  Black market activity is best addressed through legalization of the products involved.  It brings substances/services into the taxable market.  Black market transactions are equivalent to hoarding.
  • Business and hoarding tax rate cuts are the worst possible policy direction.  The lower the business tax rate, the more incentive to cut costs and workers, and the greater incentive to avoid expansion investments and instead harvest profits (high tax rates mean high tax deductions for spending and investment).  It further lowers the value of troubled companies with accumulated losses, hastening their total shut down.  Unlike spending increases, deficits created by tax cuts do not have a direct GDP impact (no initial 1x multiplier that is added upon by further MGI).
  • A negative VAT/sales tax can be considered for goods that should be encouraged.  For example, education and renewable energy products.  If a 5% subsidy/cash back can increase private sector consumption of those goods by 10%, then with a 75% MTI, the cost of the program on original sales volume is 1.25%, but the benefit on the extra 10% is (7.5%*0.95 = 7.13%).  With just 2% higher sales from private sector a breakeven is surpassed.  MTI increases tax revenue the same for spontaneous private sector spending and investment as it does for deficit financed government spending with the added bonus of not requiring socialized costs to recoup.
  • Wealth taxes are a bad idea because they encourage leaving and decrease the money supply when emigration of wealth occurs.  There is no reason to leave if you make $1M+ where you live regardless of the tax rate.  Another feature of natural taxation is offering businesses tax refunds for local production and not taxing their export sales (negative local profit), but taxing imports at their full sales value (not allowing offshore production costs to reduce taxable profit).
  • Financial transaction taxes are a bad idea.  Even if asset speculation is entirely a hoarder activity with minimal economic value, that minimal economic value is assisting the maintenance of liquid and stable markets.  Those who make 1000 transactions per day help more than those who make 1 per day.  A very good revenue enhancement idea, in addition to the normal hoarding surtax rates part of natural taxation that encourage asset speculators to apply their talents to a "real job" instead, is an additional profit surtax on financial businesses/institutions.  5% is suggested.  These taxes have no interference in trading frequency, and there is no fairness for being taxed for selling for $1 what you bought for $1.
  • To the extent that climate catastrophe is 10+ years away, the benefits of immediate climate action are potentially enjoyed by future generations, and so inflicting an accompanying debt burden on future generations can be a fair offset to the benefit provided to the future.  A carbon tax and dividend is a revenue neutral, and best possible, and only genuinely effective, climate policy.  Due to dividend, a higher carbon tax can be politically supported.  A downside in the policy is that the dividend decreases as the private sector rapidly exterminates the fossil fuel sector, and cause less carbon taxes get collected.   One/best way to eliminate this downside is to offer a fixed dividend, essentially a part of UBI amount, that remains regardless of how much carbon tax revenue falls as a result of fossil fuel extermination.  The incurred budget deficits are justified by the current economic spending stimulated and future benefit of rapid decarbonization.  Decarbonization as rapidly as possible is a planetary benefit, and temperature targets of 1.5C or 2C are in of themselves meaningless, as are promises/commitments in the far enough future (30+years) for total decarbonization.  Atmospheric carbon is permanent. Hurricanes and forest fires are already bad enough, and current temperatures are enough to cause summer arctic soil and sea bed emissions, and to steadily melt land ice.
  • QE (money printing buy buying bonds from the rich) as has been recently practiced by central banks of US, Europe and Japan are horrible policy except for the maintenance of the financial sector and overall support for asset prices.  The beneficiaries of the increased money supply are 99%+ hoarders, as it is only the very rich who play in government bond markets due to their capital preservation features.  They don't invest their fortunes in lottery tickets.  QE provides a surefire way for the rich to get richer.  Using central bank policy to fund a portion of UBI or ULI (unconditional loan income), instead, provides similar benefits to hoarders and the financial system without directly giving the latter ownership of the increased money supply.  The banks and rich get the funds indirectly/eventually, but after it benefits spenders.  The benefits are created without socialized debt.
  • To expand on the negative VAT for education, primary and secondary education costs an average of $12k/pupil/year.  A $10k UBI per pupil and a 20% cashback/subsidy on education spending would be budget neutral for the treasury and education departments with status quo behaviour and operations.  But education can be vastly improved and personalized, and making the students/parents agents in the purchase of education.  The gifted (possibly the greatest potential for future economic contributions) and challenged can benefit from more personalized curriculums than one targeted for the average age-capabilities.  Some education success is attributable to financial stability in the home and nutrition, and a higher UBI may increase educational outcomes even if most of it is spent on non-direct-education needs.  Computers may be worth more than classrooms.  In the DC area, the average taxpayer cost per pupil is $30k/year.  Either there is a very large administration system for the school board, or outrageously high security expenditures are made.  If it is the latter, then we are paying to force students who don't want to be in school to attend, in a way to forces poor outcomes on all of the students.  Another source of education efficiencies is smaller administrative boards.  Giving parents agency lets them choose a particular education philosophy.  Lower school board expenses can directly translate into smaller class sizes for the same budget, or larger football stadiums if that is what the parents/students value.
  • A 75% MTI means that programs such as UBI (funded with surplus tax collections) cost only 1/4 of the amount distributed.  Reductions in crime and healthcare, lower hoarding rates, increased wages, stability to form families and attempt entrepreneurship all contribute to making the MTI that high or higher, but furthermore support program cuts and reallocation of government labour to a private sector demanding large increases in workers.  All of which are great quality of life improvements that make a jurisdiction a fantastic place to live in, raising property values and that taxation base.  Fulfilling conservative desires to reduce the size of government.  Multiplied surpluses can increase UBI further and reduce public debt and interest costs instead of reducing tax rates which are set to maximize MTI
  • Public healthcare is more justifiable than public education.  Giving the consumer agency in healthcare is not helpful if all of the information is provided by the healthcare provider.  The transactional layer adds a level of confusion cost time and decision that may not be of value.  At the margins, a private healthcare sector that offers supplemental options to a public base healthcare sector can provide value.  Universal healthcare has the same core justificiations as UBI.  Your lifetime anxiety levels are significantly improved if your healthcare expenses are covered, and unconditional fixed insurance payments do not count as anxiety reducing.  But, almost as important as stress reduction benefits, are cost cutting/control opportunities/benefits.  The US healthcare industry has a very high hoarding rate protected by lobbying.
Comparison to Keynes work
The Keynes multiplier formula is identical to the first formula in my formula section with the exception that hoarder/spender tax rates are distinguished, and I ignore the propensity to import.  There is no famous equation for MTI = returned tax revenue as a result of the multiplication of fiscal policy.

The case for ignoring the propensity to import:

  1. In a global economy there are no imports.
  2. A rich nation with high imports raises the standard of living in exporting which accomplishes:
  • Creates export markets for food energy and commodities (at least) and potential demand for domestic finished goods and software.
  • Gives poor people in those nations employment opportunity which prevents resentful sentiments if they were to immigrate to your heaven.
  • If your importer nation is a hedonistic heaven and the exporter nation a shithole, then the hoarder class from the shithole may want property and education services in your heaven.  There exists a massive private infrastructure opportunity to develop empty land so as to provide housing for all who want to come to your heaven, and an even better opportunity when they are rich hoarders.
These points guide appropriate housing policy that is a great departure from current terrible policy.  First, the socially optimal housing policy is one that maximizes total land value.  The simcity game formula.  A contrary force to this policy is that hoarder land owners want to maximize their/average developed property values, and doing so means opposing all other development so that those who want to move here are forced to outbid each other for the land owner's property.  Policy that is utterly devoted to hoarders who vote, while doing stupid things to appease the poor's (who vote less) misinformed concerns is what is pursued.

Gentrification, the rise in existing property values, of a neighbourhood is always a good thing for society.  One way to fight/counteract gentrification is to increase the number of stabbings, muggings, burglaries, shootouts, vermin and zombie-themed cannibalism.  These are bad things, but will decrease property values.  Affordable housing through subsidies is an expensive program that always creates a lottery where a few lucky winners who would use market housing instead are given subsidized housing, and often housing mismatched to their needs.  If they luckily get cheap housing larger than they need, this wastes the total subsidized housing stock.

The right housing policy in expensive markets is to let the private sector build to the most profitable high end demand, while the public sector overbuilds market affordable housing that is affordable because it is small and dense, with potentially shared ammenities, rather than zombie infested.  UBI is a massive enabler to expanding total property values. There is no obligation for public sector construction/activities to use "overpaid" union labour and oversight processes with heavy reporting layers.  Public sector construction could double as apprenticeship/training services that provide experience to enter private sector construction.

The point is that construction is a massive economic opportunity for expanding population, and transitioning to a renewable energy economy.

Going back to Keynes, times have changed since his work for kings and the genesis of the new deal.  There are political forces that embrace every deficit project as though it is a massive employment program in a high unemployment economy for its Keynesian effect, and use this as cover for kleptocracy.

Tuesday, March 27, 2018

The ONLY solution to preventing catastrophic climate change

High carbon taxes is the only solution to climate change because the only solution requires electrification of transportation and heating energy through renewables, and carbon taxes are required to create market driven ramp up of innovation and production in time to stave off the worst effects of global warming.

The carbon budget
The level of global warming that will occur is dependent upon cummulative CO2 (and other GHG) emissions.  An infographic outlining emission pathways to exhaust the carbon budget.
wikipedia: By Ileo - Emission paths for reaching the Paris Agreement

More recent estimates from 2014, with a live counter, estimate a remaining budget of 750gt, and 18 years until depeletion at current emmission rates.  The difference is that the former uses a 450ppm threshold while the latter uses a 530ppm atmospherice co2 equivalent saturation.

Some important overall points are:  There are 4000gt of carbon locked in fossil fuel reserves (so much of these must be abandoned).  The smallest possible additional co2 emmissions is the best emmissions amount.

A good lecture on the challenges and pessismism surrounding reaching 2C global warming targets.

Points made:
  • Climate scientists are very polite to political leaders, restrain alarmism, and permit reciprocal politeness from politicians, while maintaining business as usual policies.
  • There is a 4C real target, with a 2C promise "that cannot be explicitly acknowledged as impossible".
  • He, naively, criticizes climate report language that claims economic prosperity while cutting emissions, and favours planned economic recession... or more misguidedly, wait until low carbon energy is in place to remove recessionary forces.
  • Climate reporters/IPCC all offer insufficient and miniscule emmission reduction rates, under pressure by politicians for economic growth. (economic growth is possible with 0 fossil fuels, but unknown to lecturer) 
  • Climate reporters/IPCC/lecturer make poor assumptions about non-OECD emmissions eventually exceeding OECD emmissions.  (it will be shown that it is easiest to limit non-OECD emmissions).  Easiest to prevent emmissions from energy plants that have not been built yet.
  • All technology solutions must be given adequate ramp up time (often in error by IPCC), and some problems/projects require unprecedented scale.
  • target emmission rates by date are not a real goal.  Cummulative emmissions over next decades/centuries is what will determine global temperatures.
  • The top (20) percent of energy users are the ones that need make the largest reductions, but some misplaced expectation of shaming or internalizing his lecture is assumed to be the catalyst for behaviour change.
  • 70% decarbonization needed by 2025

The tech adoption path to minimizing emmissions (with accelerated economic growth)
  1. Electrify transportation and heating
  2. Renewable electricity generation, including decentralized rooftop solar.
  3. Use amonia, produced by electrolysis, for heating and ICE transportation fuel.
  4. energy storage such as liquid air, hydrogen/amonia production, including decentralized storage solutions.  Batteries.
  5. Intercontinental UHVDC transmission lines allow 1100kv transmission halfway accross the world (20000km) of 2c/kwh solar energy at under 50% transmission losses, and so 3c/kwh delivered cost.  14000km length (about halfway at 42* lattitude) has only 33% transmission losses.
  6. use building materials that capture co2, such as alternative cement.
The order of fossil fuel elimination should be coal, gasoline, natural gas heating, aviation fuel.  This recommended adoption path has been more recently replaced with hydrogen instead of ammonia and HVDC exports.

co2 emmission metrics by use

A car with efficiency of 25mpg, emits 0.4kg co2/mile. 40 tonnes/100k mile lifetime.

heating a southern Canadian home for the season uses 150k-250k btu per square foot per season depending on efficiency.  600 square feet/person = 90M-150M btu.  With natural gas, 4800-8000kg of co2/year.

hot water heating for 40 gallons/day/person uses 15M btu/year.  800kg of co2 with ng.

293kw/month in electricity consumption is 636kg of co2 when generated from natural gas.  1200kg from coal. (all per year)

air travel is 0.2kg/passenger/mile of co2

shipping 300kg of goods 100 miles by truck (4.5kg co2).  100kg 1000 miles by truck (14.6kg), 200kg 1000 miles by train (4.8kg), 100kg 5000 miles by ship (30.1kg), and 10kg 5000 miles by plane (66kg).  I suggest this makes a representative total per person goods transporation use.  110kg of co2.  Can triple this amount to account for transportation of input goods.

where an adult uses on average half a car (5000 miles), and 100 miles/year air travel, can round up to 12 tonnes/year.

Though the above breakdowns are needed to see the impact of carbon taxes on lifestyle components, a better estimate that accounts for industry is greenhous gas (equivalent to co2) emmissions (GHG) consumed per capita.  There is no direct consumption data, but there is production data where a guesstimate of net export related GHGs can be subtracted.

  • Canada: 18.62T co2. 20.5T ghg.  Export adjustment 5T ghg. = 15.5T ghg
  • USA; 15.56T co2. 19.5T ghg = 19.5T ghg
  • Germany: 9.47T co2.  12T ghg
  • China: 7.45T co2.  8.8T ghg.  Export adjustment 0.8T ghg = 8T ghg
  • World: 4.8T co2. 6.5T ghg.
These estimates are fairly comprehensive including agriculture, cement and other mineral refining activities.  Yet some emmissions are difficult to accountably trace to a single user:  Flared and unflared methane from oil wells can be skillfully or purposefully minimized.  Methane emmissions from cattle can be mitigated with feed choices (seeweed), or captured in balloon bags.

The importance of a carbon dividend
Distributing all of the proceeds of a carbon tax to the residents of a nation is the perfect adaptation to a low carbon economy that costs society, and its membership, nothing to do so.  Every other use of the proceeds is corruption using the climate crisis as an opportunity for preferential cronyism, and wasteful and wrongful advocacy for the "more deserving".

It costs society nothing to have a carbon dividend because if society does nothing, then the full cost of the carbon taxes is paid by the carbon dividends.  There are no additional policies needed.  Both individuals and businesses can profit by reducing their carbon consumption, such as using their carbon dividend to invest in carbon alternatives such as solar power, electric or amonia powered vehicles, and better windows, appliances and electronics.  

Carbon taxes and dividends are slightly progressive.  The rich consume and fly more and heat larger homes and have vehicles.   A carbon dividend can form the basis of basic income where even stingy versions of UBI with stingy funding for them, are supplemented to a full UBI with development fund that permits people to actualize their potential.

The carbon taxes collected to fund carbon dividends must come entirely from consumers.  Producers in a jurisdiction should not pay carbon taxes.  Instead, their products accrue carbon content, and the tax associated to their production gets paid in the jurisdiction that holds the consumer, and that helps the consumer afford the product with dividends paid to them.

The importance of scalability and pacing
A large shocking increase in carbon taxes isn't useful in that projects including increasing solar panel production by Terrawatts per year, energy storage, and UHVDC lines have long ramp up times.

Yet a certain schedule/path of increasing carbon taxes is enough to provide private capital markets with the certain profit opportunities from the capacity of projects to meet the demand and economic growth they are certain to create, and that consumers will be eager/desperate to pay for.  Its critical that the carbon tax schedule, and the inclusion categories, be permanent.  Only permanence provides the investment certainty to provide carbon alternatives.

Pacing is also important for overall UBI implementation allowing employees of conditional welfare/support agencies a few years before transition/severance, and allowing the orderly bankruptcy or adaptation of energy dead enders.

Another important factor/benefit of an increasing schedule of carbon tax rates is that since they reduce carbon use, doubling the previous year's carbon tax rate generates less than double the revenue due to the desired emmission cuts.  Scheduled increases create a stably increasing carbon dividend amount.

Proposed schedule of carbon tax rates
Prices per kg of ghg equivalent (to co2) by year for a 10 year schedule: 0.10 0.20 0.40 0.60 0.80 1.00 1.10 $1.20, with $0.10 per year subsequent increases.

This should achieve a 40% reduction in ghg/capita emissions by year 6, and an 80% reduction by year 10, with continued reductions to the minimum possible (could be 100%) within 5 years thereafter.  The $100/tonne increase every year after year 8 will help provide a constant UBI amount as carbon use is lowered.

There is probably a 3-4 year delay between this document publish date, and the implementation start, with hopefully only a 2 year delay between apparent innevitability and implementation.

The year 8 rate is $1/kg.  This translates into (using co2 only emissions in USD) a $10.60/gallon gasoline surtax.  $4000/10k mile vehicle per year.  $636 or $1200 higher annual electric bill if electricity generated from natural gas or coal.  5000 air miles costs an extra $1000.  Despite my calculation that heating per person generates up to twice the co2 of an automobile,  it appears high.  The average 2011 energy use per Canadian household (including electricity and heat) is 99.5M btu.  If all of it came from natural gas, annual household co2 consumption would amount to 5000kg.  At an average 2 person sized household, $2500/person co2 taxes.  This is a carbon tax of $0.18USD/kwh (double for coal) and $5/Therm (100CF) for heating.

An estimate of the agridustrial side of ghg emissions for Canada is 2000kg/capita each for agriculture, heavy industry, and shipping, and 1000kg for commercial electricity.  The agriculture breakdown of difficultly-accountable emissions are 61% soil management (related to nitrogen fertilizers, primarily for grains),  27% cattle-digestion (eat a lot of grain), and 4% rice production.  8 lbs of rice creates 4 pounds of ghg.  8lbs of wheat creates 1lb of ghg.  6lbs of grain/feed creates 1lb of beef, and with digestion effects, can be 1lb ghg per lb of beef (though ghg-taxes on beef would only apply to digestion effects as feed taxes would be paid by producer). Pork is 1:2.  Chicken 1:4.

A missing component is the oil and gas sector's exploitation/processing activities.  In Canada, this exceeds (by 10%) the ghg emissions from the transportation sector!  Worldwide it is 70% of transportation sector emissions.  Using the later figure and putting it all into extra taxes on transportation fuels, would bring the carbon tax on gasoline to $17, and annual operating taxes/10000 miles at $6800.

Totals in terms of high, average and low (75%-50%-25% quartile) spending levels (with 10% "gross up" of co2 to ghg conversion),  for Canada, $24000-$15500-$8000 all receiving $15500 in carbon dividends.  Both expense and income figures are in USD 40% higher than they will be in t+6 years if the expected 40% reduction in ghg emmissions are in place by the time $1/kg carbon tax and dividend rate is in place.  The actual carbon dividend would be expected to be $9500.

side note: complexity of taxing food
Livestock is a battery to the food system, useful for food security in event of droughts.  In an ammonia economy (no ghgs when combusted) it would be worthwhile for farmers to make or use black market fertilizer to avoid paying carbon taxes, and so for agriculture and oil production, it would make sense to set carbon taxes from industry/firm regulators enforcing/auditing "best practices".  Its also possible to consider setting industry wide tax rates that improve (lower) as the industry as a whole improves in its emmissions, and worth considering government subsidy for agriculture setting carbon taxes lower than the agriculture sector's emmissions.

An important issue for supply chains is that carbon taxes on intermediate inputs should be traded as a liability to the purchaser.  This avoids adding markups to the carbon tax component of input costs.  For instance, the rancher buying 8 lbs of wheat from a farmer would not pay the 1lb carbon cost.  He would accept a 1lb liability.  Additional digestive-based carbon liabilities would be passed along to the supply chain (along with original grain carbon liability) until it ends up with the supermarket who would settle it after being paid in full by the customer.

Why this will all work to reduce emmissions
If it costs $68000 (or $136000 after $2/kg rate) in extra lifetime operating costs for a honda accord, then I for sure want to buy an electric car instead.  If I am stuck with a honda accord, I for sure want to convert it to run on ammonia.  I can afford the extra $68000 because I get more than that from the dividend, but I'd prefer it in my pocket, or to have a "free" electric car, and still dividend left over.

If my electricity rates go up $0.18 ($0.30 total)/kwh (for natural gas.  double for coal), a solar system that costs $2/watt to install is equivalent to $0.06/kwh electric rate.  Battery storage solutions are currently 0.10/kwh.  Still far less than paying fossil fuel utilities.  In turn, the utilities will invest massively in renewables generation capacity in order to not be priced out of my patronage, and to convince me to delay such plans.  The utilities will want HVDC lines to desserts around the world that can provide solar energy at $0.02 or $0.03/kwh.

Investors will want to throw money at renewable energy capacity expansion, utlity projects, and research like they are marijuana stocks.  Obvious, certain, massive demand that will pay back those projects.  Because the civilization destroying alternative energy sources are priced according to their destructive impact.

At first, its likely that the cost of renewable energy goes up a bit.  More demand than supply can meet, though this also means a greater rush to supply it.  We need to ramp up to 1000TW (nameplate - 500TW or so on a 24hr/continuous scale) of new renewable power generation capacity per year.  Yet that renewables production capacity will allow expanded energy applications and even more rapidly declining prices once the replacement of existing energy production is met.  For instance, where there is overcapacity in solar production for a day, industrial uses/processes are inherently free of energy costs.

500TW in new renewables capacity every year is a very ambitious goal.  If 250TW comes from solar, that is a 1000x increase from today (double every year for 10 years).  No matter how much we fall short of the goal, THE PLAN CANNOT FAIL.  If we continue to need fossil fuels for longer than ideal, then we use them, and it costs us nothing, as the dividends pay for their use.

We'll still use some of the money to get better windows, beg to pay more taxes to improve transit (or justify entirely high rider fee funding) or get bikes.  Even if the renewable production schedule cannot be met, emissions will come down, and global temperature stabilized.

The outcome from the plan is completely market driven.  Any additional politician driven projects to enhance climate action does not delay the private sector's ability/actions to solve it.

Why no other option can work
Other than do nothing as usual, there are 2 politically opportunistic alternatives to the carbon dividend.
  1. Cap and Trade:  Hand out carbon credits to incumbent businesses and  let them pollute more and buy from those who pollute less than their allotment.  In addition to the problems of lobbying for higher caps, and lobbying for their share of credits, it only addresses the commercial sector.  It does nothing to influence consumer transportation, electric, heating spending.  Unlike carbon taxes, there is no way to affect jurisdictions that don't want to participate in the carbon credit market. 
  2. Carbon tax to fund discretionary spending:  Even when it includes a portion of the funds to help the poor deal with carbon taxes, it is an action that rewards the poor only if they stay poor.  An anti-UBI position is entirely a pro-slavery position.  One that structures a harsh world to facilitate military, police, prison opportunities for the right, but also the politics of hate, fear, and divisiveness that place undue importance on politicians power to increase harshness and reduce freedom.  A variation of this plan is "revenue neutral carbon tax":  An estimate of carbon tax revenue is used to reduce other revenue.  The problem with this approach is that there are necessarily inaccuracies in helping those affected compared to the mathematically ideal of giving the tax revenue as a consumer dividend, and there is a credibility problem that the promise will be kept long term.  Any discretionary assessment is a vulnerability ready to be politically exploited.
Its also important that carbon taxes be focused entirely on carbon consumption (not production).  Doing so, ensures interjursidictional applicability, and unilateral setting of tax rates.  The concept of carbon tax liabilities transferred in supply chain (introduced in "side note" above) does allow the tracking of taxing for local production but its taxed in the customer's jurisdiction with tax revenue going to that jurisdiction.

While its more important that there is a carbon tax than it is that it is properly shared through dividend, distorting the use of the carbon tax delays implementation, and the most common distortion is to provide businesses with incentives or project funding.  Taxing only at the consumption level creates no business costs.  The liability transfer model also ensures no extra costs from intermediate buyers so long as the ultimate customer is subject to carbon taxes.  This makes every member of the supply chain want to have their customers subject to carbon taxes so that they can better afford to buy their products.  So it is the carbon dividend that ensures the customer wealth to support high economic growth and business success, and ensures that carbon taxes are implemented in every jurisdiction, at the request of its suppliers.

The other alternative tried and failed is a small carbon tax used to fund clean energy and corporate tax breaks.  A small carbon tax and dividend gets attacked from the left (poverty groups) for the dividend being too small, but mainly for not going to projects they get lobbied for.  Small carbon taxes can still lead to small progress, but they are inadequate for the urgency we face, and the real political problem is that they are insufficient to produce life and lifestyle changing dividend amount, and so fail to rally the proper enthusiasm for carbon taxes.

Large vs medium carbon tax and dividend
Scott Santens writes a good article on the basic economics of a carbon tax with focus on UBI.  He is too polite towards revenue neutral policy proposals, and proposes a modest carbon tax that grows by $0.015/kg/year, that if carbon use remained unchanged, would grant $300/month in dividends in 2040.  Scott is influenced by my previous thinking of using a carbon tax just large enough to supplement program cuts that can fund a high UBI level with minimal disruptions to the tax code.

A high carbon tax and dividend costs the same nothing to society ('s public budget) as a small one.  Though it is critical that the carbon tax be entirely consumer driven, and that the carbon liabilities concept (expanded upon later) is applied so that businesses do not mark up carbon tax costs, and face no competitive disadvantage from imports or to export markets.  Advantages of large over small carbon tax
  1. Quicker behaviour change:  No business uncertainty over efficiency and adaptation/conversion measures.  No uncertainty for investment in massive capacity for emissionless alternatives.  Better incentives to avoid useless consumption of some goods.  High demand for solar panels may firm up prices, which removes the incentive to "wait till next year" when prices might drop even further.
  2. Some extermination of fossil fuel use is only possible with high carbon tax:  Converting planes to run on ammonia requires a large tax.  The alternative of a $100/flight tax is less impactful than a $300/flight tax, when ammonia conversion might increase flight costs $80-$200.  Renting spare space in a house to improve density may only be incentivized by high carbon taxes, but also the reliability of a renter that receives high carbon dividends.
  3. A higher carbon dividend is more progressive.  High spenders are taxed more than low spenders, though its only high spenders that have the freedom to choose low spending.
  4. A high carbon dividend gives everyone the power to make lifestyle choices:  If everyone is paid $6400 to not drive a gasoline powered car, everyone can use the money to make car payments on an electric car if they wish.  This is not possible with a small carbon dividend.  The rich can always afford any efficiency/alternative investment that provides a timely payback.  A high carbon dividend gives everyone that power.
  5. Quicker behaviour change is needed to mitigate feedback risks and variance in climate models.  Climate models approved by governments err on the conservative rather than alarmist side, and don't account for feedback effects we know are and will continue to happen, but cannot confidently quantify in unified models.  Acting as soon and as fast as possible gives us a buffer for further adaptive and mitigation measures over the next decades, and the buffer is absolutely essential if we hold any attachment to a future just 20 or 30 years away.
  6. A high carbon dividend (UBI) makes us all more adaptable to change in dominant industries and more easily capable of moving where the work is.
  7. A high carbon tax and dividend ends distracting discussion on revenue neutral alternatives.  Corruption from the ideal fair distribution of carbon tax revenue is more visible when the amounts involved are larger.
  8. A high carbon tax justifies the expense of auditing processes in agriculture and fossil fuel extraction and burning activities that, if carried out, significantly reduce emissions, and so can have their products' "imputed" carbon taxes reduced, and gain competitive advantage.
  9. A high carbon tax and dividend allows fully-private sector adjustments to the economy.  This frees the public sector from finding use/projects to fund with the carbon tax, and also prevents them from reducing the carbon tax if they run out of project ideas in the future.  Project funding can be pursued independently of carbon taxes as they are now.
The massive economic boost from shift to renewable economy
Replacing vehicles, windows, applicances, and electronics creates a massive amount of jobs.

Ramping up to 500TW renewables production capacity, and installing that much each year is practically a moon shot project.  An actual moonshot project collection is the creation of 30k-60k TWH (terrawatt hours) of energy storage and high voltage (long distance) transmission capacity

Among the jobs this creates are mining and associated services jobs in far greater quantity (2x to 10x) than the fossil fuel sector jobs that would be destroyed, which are similar enough to fossil fuel sector jobs that anyone with that experience that wants a job will have a better career path than they have in the dead-ender energy sector.  Though jobs in plenty of other fields will be created too.

Protect my empire of dirt
Hate and fear is the tool oligarchs control the electoral process in their favour.  Fear of losing your empire of shit job, makes you prone to side with the oligarchs and hate whatever they tell you your job fear should be based on.  Covered up in your shithole makes you blind to the opportunities of the sun and wind.

The importance of this section is to bring up the general resistance to change, and the specific blindness to opportunity experienced by scared retards.  High carbon dividends, especially if supplemented with additional basic income, is a tool that easily overcomes fear of change.  High carbon taxes make the new opportunities highly/obviously visible.  UBI makes travelling  or waiting for weeks or months hoping for a copper mining job, or installing solar capacity far less stressful in the event of losing a coal mining job than the system that has treated coal mining community for last 100 years.  Staying in Appalachia to be a goat farmer is viable under UBI too.

Nationalist economic protectionsim compatible with comparative advantage
Comparative advantage, letting production occur where it is cheapest, creates a net advantage to consumers and the supply chain (intermediate buyers) that use those products.  Exploiting other people's slavery and oppression is better than a race to the bottom that reduces consumerism and overall employment.   If slaves or robots make your tube socks and underwear, you are freed from the burden of making those for foreigners.

High carbon taxes, creates very high costs for rapid shipping methods that use fossil fuels.  This encourages production and sourcing close to the consumption centers, slow shipping any raw materials or sourcing them closer to where final goods are made and consumed.  A high carbon tax advantages workers in high consumption societies.

For those who are threatened by slaves competing for their jobs, a carbon dividend applied throughout the world helps both the fearful-dignified directly, and their foreign competitor slaves, to have the dignity and labour market bargaining power to remove the near-slavery conditions in their regional labour markets, and so reduce the competitive spread in global labour markets.  In political speak, "the deserving hard working class" obtain easier access to "paid dignified work" with UBI/carbon dividends because the labour market power balance is equalized and fair.  UBI/carbon dividends is a better solution than hatred for the politically manipulated.

The main enemy to carbon taxes
A high carbon tax is the explicit extermination of the fossil fuel industry.  This extermination, on a slower scale, is implied in the Paris agreement (just with a  32 year+ schedule), and both plans have in common at least significant enough decline in fossil fuel use that share and debt prices of the sector will decline precipitously, as both volume and price of fossil energy would decline with lower demand.  Private capital dependent companies will die off quicker than public sector ones.  Unless the Paris signatories are insincere,  and the market seems certain that they are insincere, there is no other means to reduce fossil fuel use than some carbon taxes.  Simply expanding renewable electric capacity doesn't significantly increase electric vehicle and mass transportation adoption, when the price of gasoline drops to $1/gallon due to drop in demand, that in turns makes hummers and speedboats more attractive purchases. Any successful follow through on Paris emissions targets has to involve carbon taxes.

In terms of nations, oil/natural gas producers are enemies of humanist sustainability.  Supporting dead-ender energy is a failed national strategy.  Renewable energy is cheaper even without carbon taxes.  Though its marginal without storage or transmission capability.  Just as the whale oil industry accelerated its whale extermination plan as competition for its products grew, its to be expected that politicians will be controlled to avoid the extermination of energy sectors.  The United States and Saudi Arabia are currently in such a controlled political state, and require the most persuasion to participate, but in order to be successful, there simply needs to be a sizeable nexus of carbon tax/dividend adopting nations.

The next sections will go into greater detail why the economic forces for adopting high carbon taxes and dividends outweigh the forces of corruption, but first another important corruption force.

The relevance of the war on terror and militarist evil
Note that all dead-ender (and new) energy companies are against any price reduction of energy.  

Definitive proof that the 9/11 target buildings were not selected by agents seeking to cause maximum damage to the US are that the creative energy of at least 20 people during several months of preparation would have necessarily considered nuclear power plants as targets, and unanimously understood them as more devastating to the US compared to providing Larry Silverstein with a total insurance writeoff to his bankrupting asbestos problem and the direct hit on the pentagon's audit department.  One claimed criticism of the pentagon audit department attack is that it requires very advanced piloting skills to commit the attack with a plane.  Nuclear power stations would have been easier piloting targets.  The endless budgetary windfalls created through 9-11, in concert with Saudi Arabia's aims of destabilizing its modernist oil competitors with religious fanaticism incompatible with productive oil exploitation that would compete with Saudi and US oil production, make the 9/11 attacks a "victimless crime" for its benefactors. 

One main effect of the war on terror is that it makes nuclear energy part of the dead-ender energy sector.  All recent attempts at building a US nuclear reactor have caused the operator to go bankrupt mainly due to the difficulty in implementing design regulations that call for resiliency to small plane impacts.  Regulations that are perfectly reasonable if a war on terror is an infinite reality.  Even without war resilient designs, nuclear power is uneconomical compared to renewables, though it has potential for scalable baseload power.

Another important project dependent on a world too prosperous and busy to resort to war is UHVDC intercontinental transmission lines already mentioned in this article.  The desserts of North Africa and the middle east have cheap and arguably useless land available for solar production, and with transmission lines can power east asia in their evenings and the Americas (with a connection to Brazil) in their mornings... and receive return energy at night to make Africa a prosperous energy intensive production center.

The main catalysts to end the war on terror must be the Europeans and Asians.  Rather than submit to the US for a world with expensive energy, a carbon tax and dividend shifts to lower "real" cost energy, at no net cost, while shifting wealth/income from those that waste energy to those that conserve it and shift to cheaper renewable sources.

One of the certain effects of climate change is more fighting in north Africa and the middle east.  The certainty is certain, because for those well positioned to sell weapons to the fighters, weapons and money will flow to anyone willing to rebel, and extreme droughts will leave little alternate employment opportunities.  Exactly the circumstances that fueled the Syrian conflict.  (Though this fighting is only financeable if oil continues to have value)

It doesn't matter if the US extreme nazi regime was installed by Russians.  Most Democrat politicians, even if they reject the explicit and extreme domineerance over their European colonies, still fully support the militarist weapons opportunities that are being manufactured due to climate inaction.  Rather than appease nazis inconsiderate of trade relationships with Europe, Europe should make closer ties with Russia and China, and investigate terror attacks as though the US and Saudi Arabia are a monolithic block, and presumably sponsoring them.

Europe, Russia, China, Africa are major beneficiaries of a peaceful union that allows a transcontinental electric grid, and perhaps nuclear power development, and so an internal alliance preferable to maintaining a splintered close alliance with nazis intent on maximizing global destruction opportunities.

An important reason to take an exterminating/disruptive stance against dead-ender energy is that they will block any competition, and any progress towards cheaper energy of any kind regardless of pollution or climate impacts.  Cheaper/better energy is an important humanist and tribal competitive advantage.

The utility sector
While the utility sector is typically heavily invested in fossil fuel power generation, their main interests are to maintain centralized power distribution.  They are not at all averse to adding new cheaper renewable generation.  They are heavily threatened by decentralilzed residential and commercial solar generation.

Grandiose engineering projects such as utility scale renewables, wind in general (only effective at utility scale), storage and transmission can keep utilities centralized power role over energy consumption, and so the utlity sector does not have to side with humanity's enemies, if policy supports their opportunity for centralizing power delivery, or at least maintaining relevance of centralized delivery options.

A carbon tax expands renewable energy capacity
Traditional economic thinking puts a cap on solar capacity to 20% of our electicity demand, and wind at 40%.  This is because during peak generation, more is produced than is needed to meet demand, and so generators must pay users or other utilities to accept the extra power. Fossil fuels also have an edge in producing high heat (though solar heat is viable), even if they are more expensive for producing electricity.  Another major issue with any power generation is producing power close to where it is consumed.

A high carbon tax's main effect in disrupting renewable power generation ceilings is in opening up storage and long distance transmission as also cheaper than dead-ender energy.  Short distance transmission is made to places likely equally sunny or windy.  At current prices, wind and solar costs 3c/kwh during generation, and an extra 10c/kwh from storage.  Selling needed/generated solar at 5-6c/kwh during day, and dumping excess for 3c/kwh into storage provides a model that offers 13c/kwh for night/emergency power, and will shift consumer use during day.  With a high carbon tax, storage still offer better energy prices even at night and even for heat generation.

Yet building capacity for use during the cloudiest winter days will eventually fill any electric storage size.  Wind is a little different.  The reason for the traditional 40% capacity factor is that it bubbles up to over 100% of demand on windy days.  Any sized storage fills up even more quickly with higher wind capacity.

Intercontinental transmission is mostly useful for solar energy, and allows 500%+ of local daytime demand capacity.  Balancing energy at noon to everywhere else that is not noon.  The northern transoceanic connections also happen to be areas capable of hosting 100s of TW of wind generation, and include sites that already need ultra high voltage transmission to reach populated areas.

The most important "storage" solution is industrial processes.  Hydrogen and ammonia make  good heating and transportation fuel that can use legacy infrastructure to transport from remote production areas to populated areas.  Variable (based on power surplus) industrial production can take advantage of abundant surplus energy.  Industrial processes that can better use mechanical energy (compressing air used as stage in air liquification) instead of electric could be powered by wind.  Industrial processes that take advantage of the cold (where ample wind capacity is available) such as liquid air production or IT farms can be setup north next to wind generators.  Industrial processes that benefit from heat can be next to solar furnaces or other solar energy.  Liquid air can be shipped south to warm areas for better electric output than the input to create it.

The ultimate storage sink though is hydrogen/amonia.  Unlimited renewables makes unlimited fuel, driving down the cost of both, and permitting a high-energy-use rich global economy with 0 fossil fuel use.

1kg of hydrogen electrolyzed from water in 2014 industrial processes (optimized for volume throughput) used 50kwh of electricity.  Equivalent to the btu content of 134 CF (4 cubic meteres) of natural gas.  This NG can cost as little as $1/delivered today (though many places are close to $2), and $6 in extra carbon taxes are proposed.  The breakeven electric cost from 2c-4c/kwh (or  after carbon tax: 14c-26c/kwh), and at an expected surplus electricity price of 3c/kwh or less from renewables, causes no material change in heating prices in populated areas.

IPCC conservatism, and potential climate change effects over the next 10 years
The IPCC, whose recommendations guide the political process that led to the Paris and other climate accords, has, as far as I understand, not changed their projection for artic sea ice extent since 2007.  They project(ed) 2100 artic sea ice to be roughly that which was observed in 2016.  There have been extreme warm events in early 2018, and  sea ice continues to trend below previous records, and may reach nearly ice free conditions this year or likely by 2020, or very likely by 2025.  The official politically connected bodies still only warn of potential danger by 2040 or 2050.  The antartic sea ice is also at record lows.

For the past 50 years, where records are available, the summer temperature at the artic circle has always been constant +1C.  Ice is a global surface temperature regulator.  It prevents the artic ocean from warming the air, prevents the ocean from directly absorbing heat through sunlight, bounces the sunlight out of the atmosphere, cools the air at the surface, and even has an overall cooling effect when it melts, such that no matter how much heat energy is in the atmosphere, the surface temperature stays constant.  It will be difficult for sea ice to reform in the winter with additional heat content in the artic ocean and heavy waves, and the continued increase in global temperatures that caused ice to melt away in the first place.

It is a very conservative estimate to say that a blue water event will rapidly (within 1-5 years) bring the world above the 2C threshold  (an extra 1C) established as reasonably adaptable.  There are feedbacks from this such as a thawing permafrost releasing ghgs, already happening near +1C.  The "government approved" climate panels must address the artic sea ice reality, and the implications from it.

The justification of the high carbon dividend plan is that whether or not we have locked in global temperature increases of 2C or 10C, action to minimize any increase is preferable to just giving up.  The economic activity generated by especially mitigating future emissions (though cheaper energy options), but also adapting to survival (indoor agriculture, and indoor living) is also substantial new industry.

The banking industry
While the financial industry has a heavy reliance on the energy sector, banks have a deeper reliance on real estate and agriculture, and agricultural real estate.  The banking industry can dump their exposure to fossil fuels, and they will eventually.  Its only a matter of greed and timing the top.  Shale oil value has been reported to be a misrepresented ponzi scheme (oil well depeletion rates), and the Saudi Aramco IPO (passing in coming weeks to years) will remove the main reason to keep oil and related securities prices high.  The big, and last, investment-banking-fees-whale of the sector will have passed.

The banking sector survival is dependent on global wealth.  When global wealth falls, liabilities (held as assets by banks) do not.  The securitization/collateral model only works under isolated defaults.  The banking sector should sell their fossil fuel exposure to their dotarded clients, and then short the sector.

The fossil fuel sector will be exterminated whether through high carbon taxes, low carbon taxes, or whatever other managed policies take place.  The only question is how fast.  Banking/financial firms can either be part of the exterminated or benefit as exterminators, protecting their other assets, and raising capital to invest in successful sectors of our future.  There is too much exposure to global political action on carbon dividends to not be part of the exterminators.

Banking firms either needs to be at the forefront of exterminating dead-ender energy, or at the forefront of crashing the coastal land value market by withdrawing mortgage approvals on properties that will default due to devaluation from rising insurance premiums and sea levels and other banks' refusal to lend to neighbouring properties.

The real estate sector
Most global wealth is held as land value.  Very valuable land depends on not being flooded while having access to the ocean, and depends on a climate that permits agriculture and occasional exposure to the outdoors.  Mortgageability of land is almost as important to value as livability .

All land in Florida is worthless today, even if the consequences of climate change are only considered to be felt in 2100.  Tax increases to fund adaptation, flood insurance premium increases, and higher nuisance flooding and hurricanes will take place well before 2100.  The sad truth is that misery for those born after 2040 to our neighbours does not seem to outweigh the benefits of making an extra dollar from deregulating coal air and water pollution.

Housing values will face tipping points well before 2100.  The 2017 hurricane season was catastrophic for the carribean, but strong storms made near misses to heavily populated mainland US areas as a strong jet stream luckily sheared and weakened the storms at the last minute.  Chronically strong hurricane, drought and forest fire seasons will strain insurance prices and taxpayer patience in coming years, along with property values.  Even without an arctic blue ocean event, 300k+ and accelerating square kilometer summer losses will bring high visibility/clarity to near term inch plus annual sea level rise, and a temperature shock for drought/forest fire amplification.  The visibility of the tipping point(s) will crash property prices.  The mistake in climate models and climate planning is not accounting for the acceleration that has happened, and that will continue to accelerate.

A high carbon tax and dividend policy implemented ASAP may not prevent the personal and humanitarian tragedy of the tipping point to property values.  But it will perhaps delay the tipping point to 2050, and having 200 or 300 gigatonnes less co2 in the atmosphere, and a near 50% lower annual emissions level will/may make projects that reduce emissions further, geoengineer the planet, and capture and sequester carbon a conceivable solution to restoring land livability/value, and preventing a humanist and institutional (banking) catastrophe.

Focusing on institutional/banking concerns, there is far more benefit to exterminating energy dead enders and the dotards financing/legislating for them than in risking the irreversible wealth and property decline that will bring down the banks that align with the dead enders beyond any conceivability of bailouts.

A carbon tax and dividend structure makes banker decisions simple:  Support the obvious market winning investments that offer clearly better value, and which consumers can obviously afford.  Though there might be a temptation to corrupt support for energy dead-enders by political interference of a carbon tax and dividend implementation, but that temptation results in destruction of global wealth and population with collapse of the banking sector leading the way, and even with the slow (or slower) decline of the energy dead-enders committed to by the Paris accord, there will still be a devastation of dead-ender investments value, and devastation to the institutions that hold them.  Banker support for dead-ender energy ensures those banks to be dead-enders too.  Better to support global wealth and land values.

Every other sector of the economy
All wealth and business depends on high population and high wealth.  There is no strategic depopulation (extermination) scenario that improves the wealth/lifestyle of the survivors.  Small depopulation harms all businesses proportionally to the population decline, and drastic depopulation leads to hunter gatherer lifestyles.  As romantically simple as hunter-gathering would be, you might as well have started poor to aspire to it.  Those manufacturing and surviving a strategic depopulation won't be poor.

A carbon tax and dividend regime may increase wages paid and other business expenses, but it diverts spending away from dead-ender energy  and towards other sectors.  Massive projects and vehicle/appliance/window replacement also generate substantial jobs and income available to spend in other sectors of the economy.

Not supporting or tolerating politicians that protect dead-ender-energy and militarist businesses and implementing a high carbon tax and dividend is a benefit to every other sectors' businesses and workers.  Exterminating the dead-ender energy sector will free talented people and equipment to do non-parasitic work, and help increase global prosperity.

Tipping point visibility part 2: denial and doubt
Harm to your nieghbours children, grandchildren and the poor is a sacrifice willing to be made by baby boomers and oil industry, if it means an extra dollar today.  Denial is a convenient way to mask evil, but liberal politicians need do little more than show concern to appear less evil while avoiding any effective policy or programs.  Implementation of Paris accord targets or better involves the extermination of the dead-ender energy sector.

The tipping point for climate action, if continued inaction, will come from the financial and insurance industry.  When Warren Buffet pleads for us to buy stocks on the assurance that they will be higher 10 years from now, will the dead end energy sector be higher too?  Their financers?  Will global wealth levels tied to land be insurable and mortgageable? and will lower wealth values lower the whole market?

We've known since the 19th century that the planet is 40C degrees warmer than a rock would be at this distance from the sun, and that GHGs in our atmosphere are responsible for this.  Still, seeing temperature charts confirming warming is convincing to the layperson in a simpler way than it is for the layperson to distinguish bs from real science arguments.  From this page:

This chart both supported climate denialism, and confirms an accelerating trend.  It created doubt prior to 2014 because you could draw a line from 1998 to 2013/14 that was fairly flat, and claim a warming pause.  The chart obviously supports 1C of warming over the last 42 years, and acceleration can be seen either by noticing the 1942 or 1960 smoothed tops connecting to 2017 has a curved path below it, or noticing that a top and bottom narrow channels between 1975 and 2015 highs and lows has been broken out of from 2016 on.  When adjusting out el-nino la-nina effects, channels and temperature variance get narrower, and the breakout in 2016 is still there.  Data for 2017 and later is missing in that link, but the trend for stronger strong el-ninos and weaker weak la-ninas has 2017 and so far 2018 beat the 2016 record adjusting for el-nino.

While there are adverse effects of climate change on fisheries, agriculture and forest fires, its unclear how where and when they will get worse.  Yet the first tipping point for a financial system reaction to global warming will be the arctic's sea ice disappearance, and the inevitability of very rapid sea rise 20 years out.  That 2018 has had record low artic ice extent in a la-nina year for 90%+ of the winter, and ice previously thought to be 5m thick north of greenland (which has persisted in every summer low ice extent since satellites) vanished in February   This may not be THE tipping point, but its of concern, and doesn't take much more to confirm an ice free arctic well before the IPCC projections.  Arctic winter ice levels have been dropping/deteriorating from 2016 record low despite the fact that the northern hemisphere's temperature has not been as warm as 2016.  Planetary warming will accelerate after this, including more heat moving to the south pole, and rapid sea rise thereafter.

I do not consider it alarmist to suggest that the US gulf and eastern seaboard will be unable to get  mortgages or insurance on coastal property in 2030, and its categorically impossible to pretend that those properties will be habitable in 2100, if the oil and coal sectors are not exterminated through a high carbon tax.

Wyoming, West Virginia, and Kentucky
Wyoming has a tax on wind energy, and proposes to increase it.  The dotarded logic is that they love and want to protect coal because they have coal.  Though they also have a lot of wind, the dilemma is that politicians can only protect incumbents, because incumbents already have money with which to purchase them.

The political/democratic process works to fleece the sheep citizens by having single issue politicians representing coal mines or coal burning plants trade votes for other politicians' concerns.  Its beyond the scope of this paper to offer a fix this system, and we can resign ourselves to its continuation.  There can be a calculation that if local resources are burned, that the energy is free.  Yet, the nearly free calculation only works if the resources and burning are socially owned, and with high tax rates on the workers.  Coal in fact benefits a minority paid for by a majority.

These states can still join a carbon tax and dividend alliance/association despite the fact that its sheep would push for policies to use less coal, and may use black market energy.  But carbon dividends would be very popular in a state that tries to maximize carbon production.  Accepting a carbon tax would mean receiving recognition/credit for efficiency measures when exporting energy, thereby making it possible to export coal derived energy.  Clean coal with sequestration costs an extra $0.05/kwh.  For people not controlled by coal interests that makes it worth avoiding, but under a carbon tax of $0.36/kwh, and 90% saved emissions, the voluntary implementation of CCS by utilities would price its energy over $0.27/kwh less than if it did not implement clean coal tech.  It makes energy exports possible, uses more coal per energy produced, and creates more work at the utility plants, in a political environment committed to loving coal and coal workers.

If coal (and NG) retains a use as emergency power worldwide, CCS gets implemented privately and voluntarily with a high carbon tax.  Though CCS implementation requires guaranteed energy price/volume purchases over a long period, and/or, capital cost upgrade reimbursement (by taxpayers) if CCS coal energy gets abandoned.  But for societies committed to loving coal, committing to long term expense of CCS purchase agreements is committing to that love.

"Trade wars are easy to win"
As mentioned earlier, high carbon taxes encourage local production of everything, and cheaper transportation of bulk materials for local processing/finishing. 

US led trade tariffs on steel are a reaction to global overcapacity, yet tariffs only increase global overcapacity.  Carbon taxes on the other hand not only would use high local steel and aluminium capacity to make replacement vehicles and appliances, but high global metals capacity is essential to global security and building the generation, storage and transmission infrastructure needed to fight climate change.

The dotardedness behind the US instigating trade wars would also contort in agony over adopting solar energy if solar tech and development is controlled by China.  US Tariffs on solar panels earlier this year is one of the world's greatest setbacks in ramping up production capacity.  This ties back into the politics of keeping energy prices high for the benefit of utility centralization models, and the dead ender energy sector, and is behind oppressive policies for selected middle east countries and Venezuela.

If a country offered the US cheaper oil or other energy, should they be punished for dumping?  The dotards would even if cheaper and efficient energy is a direct benefit to people and businesses.

High carbon taxes improving local metal fabrication output, would have the same benefit for local solar production.  There are much more jobs in deployment of solar energy than there are in production as well.

A trade war is easy to lose when the instigator loses sight of its significant weaknesses.  Reliance on sovereign creditors and  the global banking system's support for dubious fiscal and monetary policy.  And where reelection of the nazi regime with approval ratings below 40% depends on retaliations not timed for voters to see more optimistic alternatives.  But a perfectly valid alternative to tariff retaliations is ignoring the US.  A world made poorer by tariffs is more competitive trading with each other and less concerned with keeping the US solvent, including US corporate crown jewels moving additional production away.  Tariffs don't just make foreign goods more expensive.  Its an excuse for domestic suppliers to raise prices.

"Carbon liabilities" and variable carbon taxes accross jurisdictions
For business to business sales, the carbon tax does not get paid by the purchasor in cash.  Instead, it is paid by taking a (deferred) liability to the government at a tax rate based on the product sold.

The liability is to a "generic" government.  As the product moves accross jurisdictional borders the "owed to" counterparty government of the liability changes in full if the tax rates are the same.  If the liability is not transferred to a customer, then it is owed (say) 1 year (or tax filing deadline 1 year after upcomming) after it was first issued.

Either a blockchain or accounting software upgrades needs to be in place to ease tracking.  A carbon liability record includes carbon amount, tax rate, government owed, liability holder, and date due.

When a sale takes place in another jurisdiction with a different carbon tax rate, if the tax rate is higher or lower, the full liability is owed at the new tax rate to the new jurisdiction.  This is to offer a level playing  field in the consumption market between low and high carbon tax source markets.  When a source country does not follow the carbon tax accounting rules, the destination country may use any prejudice of the source country's environmental care to impute an amount of carbon in the product, and attach a carbon liability accordingly.

This means that there is no profit margin built on top of carbon costs (and so prices to end consumer not driven up by the presence of middle men), and there is no cost disadvantage from carbon taxes for exporters.  Large exporters would be able to satisfy regulators that inputs are traceable to exported goods.  So, not only is there no cost to consumers and local economy from carbon tax and dividend, with the carbon liabilities system there is no cost to exporters, and so no valid objection for unilateral adoption of carbon tax and dividends.  Without being a consumer only tax with escape for exporters, even small $0.01/kg carbon tax have dead ender energy politicize their lamentations over carbon taxes.

Some other details include the philosophy that carbon dividends are for residents.  Air travel between 2 jurisdictions would likely split the carbon tax paid between the two, though goods shipping would pay the destination's carbon tax.  People travelling away from home, might forfeit main residency carbon dividend, but receive one locally for the period they are staying.  This accounting can simply be done between jurisdictions based on time of entry/exit, where the amount received from principal residence jurisdiction is adjusted up or down by the jurisdictional transfer payments that take place.

Evading carbon taxes
The streets of Philadelphia might be filled with the particulates of the homeless if they are allowed to cut and burn trees for warmth to avoid paying carbon taxes.  This concern is non-existent with a high carbon dividend and/or UBI supplement because it allows the homeless to escape homelessness, and conform to social norms.  Wood stoves probably should be taxed based on the implied wood fuel use.  Store bought firewood would have carbon taxes.  It would remain illegal to chop down city trees.  Again, high carbon dividends would lead to a universal dignity level that doesn't make pilfering city trees for firewood a practical problem

A main evasion strategy is black market goods.  This is impractical for oil which needs to be refined (at large traceable scale), and natural gas which is useful because of the distribution infrastructure, though propane/methane tanks might be a hassle endured with high carbon taxes.  Meat can be sold on black market.  Grain not so much.  Campers will be able to get away with burning kindle without paying tax.  The large industrial scale economy will be taxed and unable to avoid these.  "Larger small businesses" would fail to cause significant impact (or avoid trying) if the activities were policed.

Vertical integration is a means to avoid paying carbon taxes.  Dig your own coal to make your own steel to make oil rigs to get your own oil to power your steel making too make tractors to grow your own grain to feed your own cows.  Doing this at large scale involves large conglomerate corporations, and policed rules to not let large corporations use black market/back door transfers can effectively prevent carbon tax evasion.  At a small scale, there is no tax applied on the food you grow for yourself.

Some vertical integration avoidance is feasible.  The grain and cattle integration could be combated with beef raised in Nebraska (where comparative advantage would recommend using all land for grain instead of cattle), might have an implied minimum carbon liabilities based on implied grain feed.

But some "cheating" behaviour can be beneficial.  Generic app-driven multi task robots that would drive larger scale vertical/multi-application automation is needed/helpful for building out the mega projects needed for renewable electricity infrastructure.  Capturing methane emissions from cows, and then using that as carbon tax free energy creates less harmful atmospheric emissions than letting cows belch directly to the atmosphere.

High intensity carbon capture and sequestration projects not realistic
The Paris climate accord targets propose meeting carbon budget needs by modestly slow reductions in emissions in the next 3 decades followed by gigantic large scale carbon capture and sequestration projects relying on technology, carbon sucking fairy godmothers, we are unlikely to develop.  Projects need to remove 10 gigatons of carbon per year, and the IPCC's favorite (possibly because it has mistakenly assessed a partial economic return far below the cost, while other alternatives have no economic return) is burning biomass for energy and capturing the emissions.  Unless the IPCC is implying strategic depopuplation, one of the major problems with this scheme is the competition with food production.

A major reason to implement high carbon tax and dividend is speeding up emission reductions such that any capture and sequestration effort is a backup plan used to restore climate to more ideal conditions after likely overshoot, to rely on just modest and feasible carbon capture programs, and to extend the time frame for extreme capture strategies, if they are needed, by several decades.

A promising (on paper) high intensity carbon dioxide sequestration possibility is placing it in peridotite rock formations.  The described process would also use discarded dead-ender energy equipment.

Ways to enhance moderate private and public carbon sequestration
While the price paid for captured carbon delivered to the government cannot be as high as the carbon tax due to the cost of burying it, a more important reason to not pay a high price for "random" carbon is that it provides an incentive to produce it just to sell it.

Government monitored capture systems primarily in the energy sector can offer the full tax price of carbon if the sequestration process is also audited.  The trade of carbon liabilities can also play a prominent role in audited private sector assistance for carbon capture and sequestration.

I have high hopes for liquid air as a mass energy storage method.  The process of liquifying air to -190C passes through the process of making dry ice (frozen co2) at -76C, and all relies on 18th century technology, and abundant materials.  Encapsulating dry ice in plastic is a perfectly reasonable practice in a high carbon tax world, and one that with a carbon price, may make such energy storage of greater overall efficiency/profitability/benefit than alternatives.

Paying a price for "discharging carbon liabilities" equal to the carbon tax less disposal/burial and auditing costs is a perfectly reasonable approach to helping meet climate goals, but a small issue is who pays.  "Retiring" a carbon liability reduces the carbon dividend for the society administered by the retiring jurisdiction.  For energy (production/storage) related capture, its easy to take the emission offsets (carbon liabilities) from traceable consumers.  The consumers avoided carbon tax, and so don't have their carbon dividend increased.

One relatively low scale carbon capture method involves crushing basalt rock, and then spreading it out on the ground.  Usefully, this can be spread on farm land.  But the work of crushing it is unrelated to the farmer.  Giving a farmer sandbags of crushed basalt does not spread it out for them.  He may use the bags to make a fort if they are free.  If an auditable agency spreads the basalt on fields, paying for the entire process, even with high carbon tax, may have higher costs than the carbon it captures.  If the entire process cost the same as emitting the carbon, and paid by the farmer, the net food price is the same as if they emitted the same as before, but their customers don't receive the equivalent carbon dividend.  A project even more removed from consumers is fracking special rocks in shallow oceans to prep them for rapid carbonization.

Paying for general carbon capture programs should come from the global beneficiaries to carbon limits.   This can be proportional with property values and banking relationships at risk, where risk is proportional to mid latitude farmland, and ocean frontage.  The projects should also be considered qualified charities, and the concept of "strategic charity" could consider extra tax credits for financially supporting these charities.   Basically, the funding should come outside of the carbon tax regime when no significant direct benefit to consumers' carbon tax bill is realized by carbon reduction actions.

Fudged carbon pricing
Undertaxing the carbon emissions of the food sector makes sense on the basis that everyone needs to eat and be healthy, and so undertaxing food makes the carbon tax more progressive (less stressful on poor), that there are no easy immediate paths to reducing such emissions, and that food security is enhanced by allowing for overproduction.  Managed/socialized food industry practices might be more appropriate to manage that sector's impact on carbon balance, though rewarded by lower carbon pricing of their food for good practices is still an essential tool in shaping those practices.

Overtaxing jet travel might be justifiable in that it is a service for the relatively rich, but not overtaxing it, in some circumstances, is justifiable in that there are few alternatives for transoceanic travel (until ammonia economy).  On net, overtaxing would have the benefit of reducing use and better funding carbon dividends.

Under/Over taxing refers to an adjustment to the base carbon emissions tax.  At the beginning of this paper, I offered an annual carbon tax increase schedule based on adaptability timing.  Each product category can have their own tax rate schedule.  Another reason to undertax food, or use a slow schedule is that an auditing infrastructure to permit accounting for lower emission practices will take time to develop.

The carbon dividend is still total carbon taxes collected divided by people receiving it.  Counting children as "half a person" is fair.

Carbon dividend and basic income
Another major reason for a high carbon tax proposal that grants a dividend of USD$10000 to residents is that the dividend is sufficient, by itself, to end homelessness, even if that dividend is not compeletely equal to a tax funded UBI since there are some cost of living (carbon tax) related offsets.

I used to advocate for a $4000 carbon tax/dividend, as that amount was sufficient with minimal tax reform, to support program eliminations permitted by (and funding) total cash distributions of $16k/year in Canada.  While $10k is significantly more, carbon tax revenue will/should drop drastically each year. Removing welfare, unemployment insurance, public pensions, retirement support, post secondary student support, use clawbacks to fund public affordable housing, can consider public-private partnerships for children's education, and use life loans to further support students, business creation, and lower tax rates.  A high carbon tax will reduce singe occupant gas-powered vehicles on the road.  A benefit to both rich drivers and tax payer funded road expansion budgets.    The economic growth from UBI and removal of programs would pay for it, even as carbon tax revenue drops.

An important benefit of carbon dividends and UBI are the health and criminal management budgetary savings, and as important, the avoidance of victimization and stress directly related to the misery and desperation associated with poverty.  Reduction in suicide, terrorism, and rampages has significant human value, and a direct result of creating a less stressful world.

The only valid objection to UBI is a personal value in the structures (public and private) that grant permission to survive being empowered by a harsh society made desperate for those permissions.  UBI instead creates wealth, and offers more opportunities that are easier to pursue through fair labour markets and an environment enabling permissionless creation of our own work.

Yet despite my recommendations, societies will choose their own carbon dividend and UBI rates.  One advantage of some supplemental UBI amount is providing a fixed carbon dividend (including UBI) for budgetary certainty of citizens. ie. carbon taxes contribute part of the funding for UBI that is higher than just the collected carbon taxes.

The most important reason for a high carbon tax and dividend of those listed in the high vs medium section above is #4:  That the poor can make the same lifestyle adaptations as the rich.  This in fact may appear to be reason to accelerate the ramp up schedule for carbon taxes, but its really a reason to accelerate the ramp up of the dividend portion ahead of the tax portion... with UBI.

The friction to universal adoption among nations for high carbon taxes
Lets assume that carbon tax and dividend is not an equally easy sell for every nation.  That dotarded blindness could come from these sources:
  1. Climate stress will provide an environment rich for weapons sales to suppress/oppress those harmed by climate stress.
  2. Resources owned/controlled by a society "should be" seen as free, and those profiting from their exploitation "should be" protected ahead of both consumer preferences for cheaper energy, and social harm caused by climate stress
  3. Freeloading off the rest of the world's climate harm reduction efforts while denying/delaying/studying what to do instead of a carbon tax and dividend.
  4. Freeloading by adopting a low carbon tax to minimize local disruption and adaptation.
To the first point, the dominant geopolitical alliance of the future can only be one focused on the primary global security issue which is climate habitability.  An actor transparently agitating for misery, chaos and conflict can only rally opposition and be treated as a nazi pariah.  Future climate accords, as minimum agreed standards, should insist on  carbon tax/dividends, and should make ratification a condition for UN and OECD membership.  NATO should also make climate hospitability directly related to global security commitments and non-agitation-behaviour clauses either a condition for membership, or where false flag agitations are properly investigated, reimbursement of allies support expenses for militarist murder a condition for future good standing membership.

To the 2nd point, an imaginable geopolitical fault line would group oil producing nations in an axis vs an alliance of non-producing countries.  The extermination of dead-ender energy requires low fossil fuel prices (and a carbon tax).  Where the alliance would drive the price of fossil fuels down by not demanding as much, production would favour the lowest cost producers such that even those with fossil reserves might need to import fuel.  A prosperity disparity between a carbon dividend receiving alliance and the axis shitholes would grow.  Exports from axis to alliance would pay carbon taxes.  Exports from alliance to axis would not.  

Regarding the 3rd and 4th options, the 4th option seems better.  By cooperating with the alliance, even with a low carbon tax, and a commitment to burn every drop god has blessed them with, audited capturing/sequestering fuel emissions, production emissions, and agricultural reforms would result in lower carbon taxes for those nations' exports compared to the alliance assuming the worst case production behaviour of inputs and manufacturing.  The strong political cronyism in favour of these industries can justify the waste in subsidizing clean goal and gas through energy security and resiliency arguments.

Geopolitical path to saving the planet, by adopting carbon tax and dividend.
China and Europe produce minimal oil.  North Africa to south west Asia have ideal solar and wind sites.  China has a production lead in solar production.  Germany/EU are leaders in wind and UHVDC transformers.  Interconnecting Afro-Eurasia would be the world's greatest project investment employing and enriching the region for the next 20 to 50 years.  These infrastructure projects are more important than the belt and road initiative, though they are related in influence/foreign investment/development, and should get European finance buy-in.  It may be enough by iteself to save the planet.

A carbon dividend will further ensure the Afro-Eurasia regional dominance, regional harmony and peace.  All Northern Hemisphere oil powers have great wind sites, technology assets, and great benefit from transmission lines, and so tremendous opportunities and gains from joining into (and grid-connecting through the great wind resources of eastern Russia and Aleutian islands) the Afro-Eurasia prosperity plan.

Bombing and war would be the only way to prevent Afro-Eurasian prosperity.  Seems like a dumb move when sharing in that prosperity is the alternative, and the war path leads to decline in global wealth and banking system in addition to global humanitarian catastrophe.

The good news regarding the potential for Saudi-US manufactured war against the usual suspects is that it's only possible with continued global enthusiasm for oil that sustains high oil prices and volume.  If Saudi Arabia has no funding to buy the terrorizing of its neighbours, then the militarism doesn't happen.  Grid connections through Spain and Kazakhstan can bypass the middle east in order to bankrupt the kingdoms, before integrating their great solar and wind resources into the Afro-Eurasian prosperity region.  In fact, threatening to go through Spain and Kazakhstan as primary routes may be enough to get Saudi Arabia to partner in the great solar infrastructure for the major continent, and to desist on its destabilizing influence on the world.

There is plenty of energy in renewables, and the production and distribution infrastructure to exploit it will make the world rich, as well as  everyone who contributes to the needed projects.  Geopolitics should worry less about controlling and limiting others' energy, and assuring that they have an early role in maintaining a habitable and prosperous planet.  Land, money, technology, engineering are all great assets to contribute and obtain returns.

Non-OECD adoption of renewable energy
To address Kevin Anderson's (video at top) defeatist concerns regarding expected OECD fossil fuel use, I'll first note that OECD excludes China and India.  India has fewer overall renewable resources than China, but still very practical solar opportunities.  It certainly would be in its self interest to participate in financing the much cheaper solar interconnection of Afro-Eurasia project than expensive and over-polluting coal energy option.  

For the rest of the third world, for centralized energy that competes with coal, the fact that everyone of these nations sits between Australia, South Africa or Chile/Argentina (who all have excellent renewable resources, and high consumption demand) and high consuming northern nations, and all have excellent solar resources themselves.  All of these countries could host utility scale solar projects that have close interconnection points to the transcontinental grid that lets them export power.  Even without any carbon taxes, near equatorial countries are on the front lines of global warming death zones.  It would be unreasonable to resort to coal, and the energy would be unexportable anyway.  With high carbon taxes, there's no economic consideration for coal anyway.

At the undeveloped village level, solar is the best individualist or communal microgrid option.  The cost is well worth saving the firewood gathering time of even the poorest individuals.

So, non-OECD emissions are dependent upon storage and transmission access much like the rest of the world.

City/regional driven carbon tax and dividend plan
Cities do not produce or benefit from production of fossil fuels and tend to be annoyed by the pollution.  Carbon taxes at the city level must solve the suburban and exurban leach problem.  An essential part of the solution is a carbon dividend paid with the carbon tax proceeds.  It means no one is penalized for the cost of their home climate control, and that is the first step to bringing the suburbs on board.  Where suburbs and exhurbs have less density, they can better take advantage of solar panels, and escape the tax while still benefiting from the dividend.

The primary leeching opportunity is to fill up on gas outside the jurisdiction, and then pollute your city with it.  The answer to the leeches is to have a toll to enter the city/region.  Every gasoline powered vehicle crossing into the city pays a carbon tax equal to a full tank of gas in their vehicle.  One relatively easy way to administer this is to photo license plates, but it will still be an aggravating policy for those affected.  But everyone who is aggravated by this can simply vote to join into the carbon dividend region.  The only people who would oppose this are the gas station operators close to the regional border.

Businesses that sell goods outside the regional border would use the carbon liability system, where energy and imported inputs (if carbon-taxable) are refundable (or payment delayed as originally described) for the portion of goods they sell outside the region.  Imports into the region (from a non-taxed region) would not only pay the shipping taxes on carbon (based on that full tank of gas for the vehicle), but pay carbon taxes based on the dirtiest energy from the source region.  These policies encourage businesses from other regions to push for carbon tax and divdend at home such that the carbon efficiencies they implement can be reflected in the carbon taxes their export customers pay, and also encourage the more rapid extermination of coal energy.

This grassroots approach can be very effective.  Similar to the EU or China or Afro-Eurasia, it does require just one "nexus" city to get rolling, and lead by example.  It would lead to  significant immigration and economic activity: Solar installations, ammonia plants, ammonia conversion of vehicles (though being a pioneer lets you sell used vehicles to the losers, while there is still a market), new vehicles, and building of housing for new residents.  It may make sense for carbon-dividend-rich residents to be enthusiastic about tax funded projects such as public transit, though the private sector can also simply fund these through user/rider fees that can be high, but very competitive compared to gas guzzling.

Private and public coordination of energy projects and bitcoin mining
Most energy projects today, involve the public sector, and especially for renewables, a fixed power purchase agreement.  Coordination between an energy plant and transmission lines is important since both are useless without completion of the other.  The energy plant also wants assurance that its customer will buy all of its power.  Hence, power purchase agreements.  High carbon taxes are essential in motivating utilities to accept EPAs from producers.  Without high carbon taxes, might as well keep coal plants the utility often has a financial interest in, around.

The EPA and transmission line connections makes energy projects slow to implement.  Planning and money allocation by the utility drives the construction timing.  This paper proposes several difficult to coordinate additional complexities such as industrial processes and storage linked to renewable energy plants, and transnational HVDC transmission and trade relationships.

Bitcoin miners are small light boxes that transform electricity into money (digital cryptocurrency) and heat.  Bitcoin is permissionless money, and it enables permissionless energy generation.  An energy provider can use bitcoin miners to fund completion of their project's scale (from partial energy generation capacity), and can build or complete an energy generation project before industrial users or transmission lines are started.  Once industrial/storage/transmission sinks come online, the generator can then sell its bitcoin miners, or transfer them to a new constructing project.  With minimal storage, bitcoin miners are useable with variable/intermittent power sources.

UHVDC transmission lines require scale to justify the higher expense compared to ordinary transmission lines (which still require some relative (smaller) scale to justify connection).  Industrial processes that produce 1 truckload per day or per hour of ammonia are large scale projects that need a big chunk of energy.  Bitcoin miners are small scale devices that use up one household fuse worth of energy, but they allow energy generators to build out supply ahead of demand sinks being completed.

A high, much more than a low, carbon tax allows for solar and wind capacity to be deployed without the need for coordination of timelines with the projects that use or distribute that energy (through bitcoin miners).  This means fast deployment, and then faster "real useful" sinks for the electricity supply than if coordination was required.  Bitcoin mining can importantly eliminate the required floor price that generators bid for on projects, and so instead of just 1 of 20 bidders bidding under 3 cents for a solar project getting approved, they can all just go ahead and build.

Turnkey solutions for ammonia production could replace bitcoin miners.  But these require large scale production capacity, and are not as easy to sell or move if "real" supply sinks come on board for the produced energy... though they can be a permanent part of any energy project using all excess energy production, and added in chunks as sufficient chunks of "baseline" (cloudy/relatively calm wind) energy production scale is added.

Working with energy companies and governments on the extermination of dead end energy
Large private and public oil interests, especially if they don't invest in new exploration, drilling and pipelines, have good cashflow from existing operations.  These are fundamentally engineering and geology companies and have the talent and resources to contribute non parasitically to humanity.

The lack of future oil development will likely cause short term increase in the price of oil, and so help fund humanity-useful projects should they wish as a firm to survive, and be tolerated.  Either way though, their workers will have ample opportunities as the world builds the needed major infrastructure.

Part of adopting the high carbon tax and dividend solution to climate change should include excusing oil companies from climate change liabilities that are the subject of current lawsuits.

Government assistance to accelerate renewables capacity and infrastructure can include paying for plants in their countries, even though the sector's profitability is assured with high carbon taxes.  The assistance would provide multinational expansion of renewables/infrastructure engineering firms that should accelerate their output capacity.  Governments shouldn't be shy about requesting a profit share for such assistance, and it should not be paid from the carbon tax/dividend budget.

Next IPCC led climate accords must

  • recognize a pace to exterminate fossil fuel based energy sector.
  • abandon BECCS as a likely eventually viable solution.  
  • recognize high carbon taxes are needed to achieve any reasonable climate targets
  • recognize that carbon dividends are essential for allowing the population to adapt to new technology, and to accept the carbon taxes.
  • assess means of global/long range electricity transmission for supply to meet energy demand where it is needed.
  • assess the prospects of an ammonia economy.
  • assess likely pace of arctic sea ice melting away, and any accelerating impact once it does.
  • assess a baseline co2 and ghg content to product categories.