Suboptimal, certainly. But not really complicated. The way Washington really bleeds (my mother actually worked at DOE in renewables) is that huge quantities of money get sucked out invisibly through schemes that are too intricate for anyone to understand. It’s hard for USG to just give away money to lobbyists. It has to come up with something clever.

Pigouvian taxes are extremely ripe for all sorts of chicanery. And they are dwarfed by carbon credits, which are already a swamp of pure Third World sleaze. Note that just as Washington prefers taxes to a simple quota scheme, it prefers carbon credits to taxes. Negative selection wins again.

Suboptimal, certainly. But not really complicated. The way Washington really bleeds (my mother actually worked at DOE in renewables) is that huge quantities of money get sucked out invisibly through schemes that are too intricate for anyone to understand. It’s hard for USG to just give away money to lobbyists. It has to come up with something clever.

Pigouvian taxes are extremely ripe for all sorts of chicanery. And they are dwarfed by carbon credits, which are already a swamp of pure Third World sleaze. Note that just as Washington prefers taxes to a simple quota scheme, it prefers carbon credits to taxes. Negative selection wins again.

Of course, it relinquishes control over the (Pigou-equivalent) tax rate. Because there is no way to sample the demand curve except where it intersects, any policy must lose control over one of these numbers.

Aside from this, I think the main attraction of “oilpartheid” is that it has no obvious way to grow hair. Taxation schemes develop loopholes and turn into complexity furballs. Buying oil is just buying oil. It is relatively hard for Beltway bandits to horn in on.

And if there is no premium on domestic oil, obviously either (a) the quota is unnecessarily high, or (b) you’re done.

Of course, it relinquishes control over the (Pigou-equivalent) tax rate. Because there is no way to sample the demand curve except where it intersects, any policy must lose control over one of these numbers.

Aside from this, I think the main attraction of “oilpartheid” is that it has no obvious way to grow hair. Taxation schemes develop loopholes and turn into complexity furballs. Buying oil is just buying oil. It is relatively hard for Beltway bandits to horn in on.

And if there is no premium on domestic oil, obviously either (a) the quota is unnecessarily high, or (b) you’re done.

What you’re proposing is just about exactly equivalent to a tax. If you know how many barrels per year you want to country to consume, you can simply set the tax to the difference between the market price and the price your auction would provide. Of course, it would take a few years to adjust this right, but presumably your version would be introduced over a few years too.

One difference is that the Pigous ask that Uncle Sam reduce the income tax rate to keep his revenue constant. (You could do the same.)

A bigger one is about where this goes… in your scheme, the consumption of oil will be forever the size of the auction lot. But in a P scheme, if somebody manages to make solar/nuclear/geothermal/biofuel just a little cheaper than oil+tax, then the consumption of oil will fall off dramatically. Which is presumably good.

What you’re proposing is just about exactly equivalent to a tax. If you know how many barrels per year you want to country to consume, you can simply set the tax to the difference between the market price and the price your auction would provide. Of course, it would take a few years to adjust this right, but presumably your version would be introduced over a few years too.

One difference is that the Pigous ask that Uncle Sam reduce the income tax rate to keep his revenue constant. (You could do the same.)

A bigger one is about where this goes… in your scheme, the consumption of oil will be forever the size of the auction lot. But in a P scheme, if somebody manages to make solar/nuclear/geothermal/biofuel just a little cheaper than oil+tax, then the consumption of oil will fall off dramatically. Which is presumably good.