Overcoming the free rider problem

The green arrows represent the circulation of money.

Recently, a columnist syndicated in this paper wrote a polemic against Ontario’s rebate for purchasing an electric car. She cites a friend whose new $140,000 Telsa garnered almost $10,000 in taxpayer-funded rebates intended to encourage the purchase of electric cars, but claims he would have bought that car anyway. Based on this, she complains the subsidy should only apply to lower-priced (non-luxury) vehicles, and that we are being unfair to less-affluent people (among whom she includes herself, despite being a syndicated national columnist) who buy a fuel-efficient gasoline car or ride transit.

While I object to several of her lines of reasoning, not least her attempt to pit rich against poor (and class herself with the poor) to attack a program that, in practise, mostly applies to more modestly-priced cars purchased by the middle class (this rebate was the deciding factor in my own recent purchase of an electric vehicle), she is getting close to describing a real problem in our governments’ approaches to addressing climate change.

Her appeal to nationalism – Teslas are made in California, while some economy cars are manufactured in Ontario (albeit by foreign parent companies) – is another red herring. The support of the right-wing for increased free-trade deals that outlaw buy-local programs is consistent, and the purpose of a new-technology purchase rebate isn’t to reward domestic manufacturers, but to create a new market that might attract that manufacture.

Nevertheless, what she is getting at, without naming it, is the “free rider” problem of energy efficiency subsidies, which has been studied by economists. Basically, assuming we want society to adopt cleaner or more efficient technologies that are stalled by the high cost for early adopters (a chicken-and-egg problem), then it makes sense to have some kind of financial incentive to encourage people. But since energy efficiency saves money in the long run, some people will be doing it already, yet they will also apply for the incentives. Any who would have done the green thing anyway, without needing a government hand-out, are the so-called “free riders”. If there are, for example, 3 free riders for each person whose decision was affected by the incentive, then you are spending $4 of subsidy for $1 of effective change. And I agree, that is not efficient use of taxpayer money.

So what to do instead? If pundits like this columnist would actually consult with economists, they would learn that the most effective approach is a carrot-and-stick, starting with the stick. The “stick” is a higher price on energy, particularly fossil energy, which increases the savings incentive to those who upgrade or conserve. You can then use that revenue to help fund alternatives, such as transit, or you can refund it to everyone equally, to help them all pay for improvements themselves. Either way, you achieve energy savings much more effectively for the dollars raised and spent, a more fiscally responsible course.

Another approach is to offer government loan guarantees allowing people to switch to new or more efficient energy without an up-front cost, by recovering the loan out of the monthly energy savings, something government can do at a very low cost.

However, since this same columnist seems to be very much against things like using new revenue to fund better transit (despite using transit users as her proxy suffering taxpayer) or using government debt to fund anything, then I doubt she will be interested in this non-partisan economic advice. Too bad, because it is a strong solution to the problem she has identified.

An edited version of this was published as my Root Issues column in the Barrie Examiner as "No more free rides for energy efficiency program"

Erich Jacoby-Hawkins is a director of Living Green and the Robert Schalkenbach Foundation.

Carbon pricing makes sense to all but those paid to deny it

The perils of too low a carbon price.

Persistent high Liberal showings in opinion polls seem to have conservative punditry worried, as they’re already trying to discredit anything that looks like a Liberal policy a year before the next federal election.

The current target is carbon pricing, about which Liberal leader Justin Trudeau has mused. Of course, he’s not alone; carbon pricing has been a Green Party central plank for many years, and is supported by most environmentalists and mainstream economists in Canada and around the world, and even now by many oil companies themselves.

What is carbon pricing? Quite simply, it addresses our market failure, which promotes the excess extraction and burning of fossil fuels, by ensuring prices include full costs.

A key aspect of any well-functioning market economy, one which includes fair prices as a goal, is to avoid unaddressed externalities. An externality is when a transaction between two parties creates an extra benefit or harm to a third party not involved in the transaction. Externalities send wrong signals to markets.

Something that seems obvious is that you shouldn’t dump your garbage in my space without compensating me. You see this principle at work when you pay to take trash to the dump. Yet today we let people and corporations use our shared atmosphere as a free dump for fossil carbon and other pollutants. In letting them off without paying to cover the harms they create, we are in effect giving them a huge, market-distorting subsidy.

Now, I always thought conservative thinkers were against huge, market-distorting subsidies. But Canada’s political right-wing is captive to the fossil industries, so that rather than express a true conservative, market-based philosophy, they instead press for continued privileges for fossil extractors and burners. On top of that, they have been hacking away a century’s worth of prudent regulations, precautions, and basic scientific observation that serves to protect us from harms to natural systems and human health.

But back to carbon pricing, or what right-wing pundits call “a tax on everything”. It would seem that to them, burning carbon is everything. For the rest of us, huge sectors of our economy are low- or no-carbon. The value added to the economy by skilled workers is mostly carbon-free.

Even better, under most carbon pricing schemes, revenue from carbon fees is returned to the public either as tax breaks, like in British Columbia, or as a direct payment, under an equal dividend plan. Either way, the average person is actually better off, because the weight of a few carbon-intensive industries draws more fees, leaving less for the rest of us to pay.

Oh, and did I mention British Columbia? I can’t understand why these anti-carbon-price pundits always fail to mention that BC implemented a supposedly job-killing carbon tax shift 6 years ago. Since then, their government has been re-elected twice, their economy has grown faster than the national average, their greenhouse gas emissions have dropped while the nation’s have risen, while they have Canada’s lowest personal income tax rate and one of the lowest corporate taxes. To acknowledge all this carbon price success would totally undermine the pro-fossil position.

On second thought, I guess I do know why they always forget to mention it.

Published as my Root Issues column in the Barrie Examiner as "The great, ongoing carbon pricing debate"

Erich Jacoby-Hawkins is a director of Living Green and the Robert Schalkenbach Foundation.

Be a hero: get good grades and free comics!

Be a hero, kid: get good grades and free comics!

One of the things that made this past Canada Day fun for me was the release of a new comic in one of my favourite franchises – Captain Canuck. Over the years, this all-Canadian hero has taken many forms – starting with a series published in the 70s but set in a fantasy future of the 90s where Canada was a world super-power and humans were actively colonizing space and encountering hostile aliens, helped by the unearthly powers of our own maple-leaf draped superhero.

Although this series only lasted half a decade, the Captain has been “re-born” in the form of a couple of other comic characters since, wearing similar costumes as the original but getting by on bravery and skill rather than super powers. I was also helped crowd-fund an animated web series about another Captain incarnation, whose apparently substantial powers have yet to be fully explained, but whose use of non-lethal weaponry stands in stark contrast to most American action offerings.

One of my favourite things about Captain Canuck being able to interact with his creators, like funding the series or meeting character originator Richard Comely, who regularly appears at various Ontario comic stores to sign comics, do custom drawings, and interact with fans young and old. The most recent edition even features a variant blank cover where Richard can draw in your own custom image!

Mr. Comely was in Barrie just yesterday, hosted by Big B Comics, but if you missed his visit, I’m sure he’ll be back another time. Last time I was at Big B was for another reason, though – so my daughters could access the Comics for Grades promotion.

I wrote about this last year, how Big B generously gives children free comics from their extensive back catalog for each A grade on their report card, to reward academic effort and promote the joy of reading. This year, they’ve sweetened the deal, giving a comic for a full letter-grade improvement between first and second terms, even if your child didn’t make it to A. So if she got a C in science in the fall but advanced that to a B for the end of the year, she gets a free comic, too.

Summer is a great time to get outside and play superhero, but there will also be rainy days when the kids end up in front of a TV or computer or video game. How about making sure they have some exciting reading, to brighten their minds without electronic input? The Comics for Grades program continues until the end of July, so dig out those report cards and see if your children are eligible to get some free fun summer super reading at Big B. My kids have moved on from their earlier super-heroes to the worlds of Adventure Time, the Regular Show, Richie Rich, Bart Simpson, and other silly stories told in picture and prose, which just shows that there are genres to suit children of many tastes. I hope yours develop the same love of the graphic reading arts.

Published as my Root Issues column in the Barrie Examiner as "Comics can inspire children to start reading"

Erich Jacoby-Hawkins is a director of Living Green and the Robert Schalkenbach Foundation.

Ignored No More

Is this a known demonstration?

For another Canada Day we were able to celebrate all that makes our nation great. But a day later, the frustration with unresponsive political leaders returns.

Recent elections and by-elections prove many Canadians don’t even bother to vote to choose their representatives, apparently either believing undifferentiated, or feeling their vote can’t make anything better. And given that we labour under an electoral system straight out of the 19^th century, one can hardly blame them. Would Canadians tolerate 19^th century medical, communications, or transportation systems? Would we ride carriages to the polls, keeping the windows shut tight to exclude harmful disease-causing vapours, hearing the pony express arrive with the latest mail from 2 weeks ago on the other coast? 3 of these 4 systems have been updated, only one left to go!

Our system promotes politicians who are disengaged from the public, because getting elected only requires a plurality of core party support, sometimes less than a third of the votes. Despite the efforts of MPs to come across as representing everyone in the riding, woe betide those whose political philosophy differs significantly from that of the party of the elected member.

We see this when we send letters (or nowadays, emails) to our local representative, party leaders, or cabinet ministers. You may see a form response from a staffer, perhaps rubber-stamped by the office-holder; other times, nothing but silence. I regularly email our Prime Minister and leaders of opposition parties about various important issues; the latter usually respond, but I can’t recall the last time I’ve even gotten acknowledgement from the ever-growing office of the PM, staffed with hacks paid from my tax dollars.

Recently, with members of Fair Vote Simcoe, I attended the office of our local MP to discuss the misnamed Fair Elections Act. Our MP mentioned that we were the first people to express to him objections to that bill. This surprised us, as we had, only a few weeks prior, attended his office with a few dozen other citizens to hand-deliver a stack of signed petitions against that bill! Although he was in Ottawa at the time, perhaps the message wasn’t passed on?

But never fear, your actions and words, if undertaken in public, will no longer be ignored by your government. A recent missive from the Government Operations Centre was sent to all federal departments, ordering them to provide information to compile “a listing of all known demonstrations which will occur” so they can be used to build “Situational Awareness”.

So there you go. Get some friends together and bring a sign or a petition to a representative’s office, or a public square, or any other location, really. Post plans for your “demonstration” on Facebook and send an email to the relevant ministry. And then, even if you feel your elected representative is ignoring you, you can take comfort knowing that in a dark office somewhere, an anonymous intelligence analyst in Canada’s internal spying network has noted your action for future reference. Ignored no more!

Published as my Root Issues column in the Barrie Examiner as "Some simple ways to get yourself noticed by government"

Erich Jacoby-Hawkins is a director of Living Green and the Robert Schalkenbach Foundation.