Someone who seemed to not like the idea of requiring industries to account for external costs related to production asked me what I think would happen if businesses are not allowed to make a profit. This was in response to a question about whether he thinks producers should be able to hide some of the costs of production from customers, and whether he thinks that air and water and other natural resources should benefit all people equally. [He asked the question about the effect of not allowing profit, and one about how much the proper (honest) fee would be, but ignored the questions I had put to him. (There is nothing about a pollution fee-and-dividend that implies disallowing profit, so I don't know the point of the question, other than to deflect / distract.)]
To Overly:
Why are you asking about the impact of not allowing profit? Where do you see, in a proposal for a pollution / extraction fee, a suggestion that businesses should not be 'allowed' to earn profit?
Businesses earn profit if their expenses are more than offset by their revenue. That remains true if we account for externalities. But any business that had only been able to make profit by externalizing some of its costs will face a greater challenge, if they are not making things that are essential. (If they are making essential goods or services, they will not lose customers if they raise prices, unless many of their competitors had been operating by relying less on externalizing costs, so that they are impacted to a lesser extent by the introduction of the policy to account for externalities, and therefor face less need to raise prices.)
Customers will continue to buy from those who make essential goods and services, even as the price goes up. That reflects the meaning of the word, 'essential'. People will be able to continue to buy essential goods and services, if we charge environmental impact fees and share the proceeds equally, because they will have a natural wealth stipend that more-than-compensates for the rise in price of those essentials.
Why do you suppose that accounting for externalities would mean businesses are not 'allowed' to make a profit?
Some business owners would prefer to simply pay the fee when they extract or emit, and be done with all the other regulations that are in place as a stopgap measure, to make up for the problems associated with the skewing of the market caused by the externalized costs. The other, less efficient methods of managing environmental impacts could be eliminated. (If we set emissions and extraction fees high enough, there will be no environmental problems that require government intervention.)
If we took a random poll, and we found that the amount of carbon emissions released into the atmosphere each year is, say, 15% higher than what most people think is acceptable, then a number of permits could be issued to reflect the amount of emissions that the people (most people) will endorse. These permits could be sold at auction.
We might find that people are very responsive to the change in price, after producers are made to buy the emissions and extraction permits. So, demand will fall with a minor price signal, in such a situation. (If demand for permits is low, price for permits will be low.)
If people are less responsive to price changes, the permit price will be driven higher before it has the effect identified as the target by the random poll.
The auction price of something depends on intensity of demand in relation to supply. I am not able to predict what the auction price for various kinds of permits would be. You seem to think an inability to predict the auction price affects the viability or effectiveness of, or rationale for, the fee-and-dividend system. Do you think that? Why?
Imagine taxpayers could stop their money from supporting things that offend their conscience or that appear wasteful...
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