Tuesday, April 10, 2007

"Green Investments" not Global Warming

RJ Schundler

Recently, I read an interview with Al Gore discussing "Green Investments*" as part of the solution to Global Warming. Most of what he said is valid in terms of the need for such investments. However, “Global Warming” is not the real issue. Efforts to make the case for “Global Warming” have been based on forecasts that are primarily based on scientific models of unproven accuracy. The worst case scenarios that these models are generating are highly unlikely to occur.

Therefore, we should pay more attention to what is an irrefutable fact based on widespread observance of current activity -- the people of China, Russia, India and most of Africa are increasingly using the creative power of free enterprise to improve their standard of living.
They have a perfect right to do so and we should be viewing this as a positive global development. People whose standard of living affords them ‘something valuable to lose’ are less likely to be inspired by emotional rhetoric to perform aggressive acts against others or to view them as oppressors, and they are more likely to see us as trading partners.

However, their attempts to advance will drive up the cost of oil, natural gas, coal and other resources. China and India (and the rest of the world) are already bidding up the prices. China has become one of our trading partners. This is good for us and our workers, creating more jobs and making goods in general more affordable. Knowing that their economic progress will increase the cost of our energy, we need to take action now. We must begin the process of freeing ourselves by “natural economic means” of our need for oil and other non-renewable resources.

Developing "green technology**" is one way to free us from our reliance on oil, gas, and coal, which in turn will protect and promote our standard of living. Green Technology could potentially become a major source of jobs and revenue for us. The economies throughout the world will eventually need cheap, clean energy, products that use less energy and technology that promotes energy conservation.

It is disheartening when Republicans and Democrats alike are so immersed in partisan rivalry that they are unwilling to consider seriously plans that might at first glance be viewed as unpopular – even when such plans are ultimately the sensible thing to do. It would be refreshing if both parties could speak with a united voice about the need for energy reforms, and the tax reforms that must go hand in hand to promote these new energy reforms. If we are serious about wanting to reduce our reliance on non-renewable energy, promote clean renewable energy, encourage energy conservation and advance energy technology, we need to enact BTU/Carbon taxes*** over the next five years.

With BTU taxes people will actually pay more for energy. So they will need to take home more of their earned income. To do so we need to reform our current tax system that takes too much money out of the people’s pay checks. Tax reform is an essential component of true energy reform. We could even establish graduated energy taxes for homes. Homes that use more BTUs (big houses of the wealthy) will pay a higher tax rate than smaller homes that use a minimum amount of BTUs. This would also hold true for businesses. The details would be worked out in Congress but this effort must not become an opportunity for one party to score points with their constituents at the expense of the other party and to the detriment of the overall objective of energy independence for America.

No one should expect the BTU tax revenues to fund new programs. The BTU taxes would be just replacing labor/income taxes. In the long run this would give workers all their pay to take home. It would redirect the work of CPAs from tax accounting to cost/energy accounting which is a more productive use of their talents. Also, a part of the cost of BTU taxes would be paid by foreign oil producing countries and the oil refineries. The price of oil is based on what the consumer is willing to pay. Consumers will pay only so much before they start to conserve and change their living habits , so both producers and refineries will not have as much room to increase prices since a good part of that room will now be taken up by the BTU taxes.

We will need two major types of BTU taxes. One will be levied on the end user (User BTU tax) because we want to reduce all types of energy use. The second will be levied on the energy producers (Producer BTU tax). Electric power that comes from limited resources like oil and coal would be taxed. Whereas electric power generated using "green energy" would not be taxed at its source. By repealing income/labor taxes we will make it easier for all our workers who want to work to work because they will take home what they earn. Employers would find it easier to pay their workers because no tax records would have to be processed and archived. As home owners, people could hire other people to work in their home while they go out to work if they prefer to work outside the home. These reforms would also eliminate the underground economy that attempts to avoid payroll taxes since there be no payroll taxes to avoid. A transfer of the tax burden from workers to energy users would reduce unemployment as well as promote clearer air and water since we would slowly be using cleaner energy. The current debate over global warming is just producing a lot of hot air (no matter who is right or wrong). The need to conserve energy and promote other sources of energy is very real and very urgent regardless of who is “right” about global warming. Economics laws (more demand and less supply equal higher prices) are better understood and more dependable than weather forecasts. Think what the energy demands would be if the entire population of the world lived like us? This is not to say that our standard of living is too high. Indeed we could have a higher and better standard of living if we use energy wisely (less money spent on energy means more money available to spend on something else). Nor am I saying that we can live tax free. But taxes should promote the conservation of energy and not the conservation of labor(underemployment). We should employ engineers and architects and designers to cut our taxes (by reducing energy use) and giving more productive employment to our talented CPA's.

Funds applied to energy conservation technology (like better windows) this year will continue to save energy and reduce BTU taxes year after year, resulting in long term gains for our society. Our energy needs are too important and too costly not to be addressed. It is time to change the direction of the debate from causes (global warming or not) to responses. People of good will, coming from different views and training (law, economics, engineering, science etc), can work together to identify the issues that need to be addressed and ensure that the solutions are developed with a very balanced view. But the sooner we start the better for all.

Robert J Schundler
Westfield, NJ

The Schundler Company CFO: 1973-2005
Small Business Advocate, Economist,
1995 Co-Chair of the NJ Delegation to the White House Conference on Small Business.
Former member of the NJ Small Business Development Center Advisory Board

* "Green Investments" mentioned in this essay are investments in the production of alternative energy that is not dependent on non-renewable resources like coal, oil, natural gas and atomic power as well as investments in products that conserve energy in general.
**“Green Technology” is alternative energy and products that promote the conservation of energy and also includes engineering/architectural designs that conserve energy such as houses with thicker, better insulated walls, windows that let light/heat in during the winter but keep it out during the summer etc. ***”BTU taxes are taxes on units (BTU) of energy. BTU taxes can be placed on the producers of energy from non-renewable sources (oil companies, coal companies) as well as on end users like home owners and companies that use electric power or purchase oil or natural gas for heating. “Carbon taxes” are a form of BTU taxes.