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And therefore it is unlikely that in the most severe cases this excess tax money that is sort of like being taxed on these companies is then going to be funneled into subsidies for certain individuals. So, the relative mileage that they get out of that model, even if you think that they can do it, needs to be weighed against our more direct argument about why prices increase on aggregate on their side of the house. |
Three claims: one, windfall taxes increase aggregate energy prices. two, we hasten the pace of renewable energy development and three, why this is principally unjustified. Two broad mechanisms under this argument about why they increase aggregate energy prices. The first is that this is likely going to have a highly regressive impact because under the status quo, energies are expecting a certain degree of profit. |
This shifts the expectation that they have in terms of how much profit they will make and forces energy companies to adjust importantly in four ways. One, and as much as they're being aggressively taxed, they need to find a way to make up for that money, and therefore they need to raise taxes elsewhere, i.e., in normal times. |
Two, there's an expectation, and when energy prices rise again, they will be further aggressively taxed due to the aggressive nature of this tax and the political justifications that they themselves talk about. But thirdly, do not let them get away with the soft stance. No, this is a continued increase, i.e., the windfall tax increases overcome to a significant extent. |
And what that then means is that God needs to defend this tax from going on increasingly into the future, and therefore this tax is like going to be disproportionately, I honestly, why is this likely to be bad? Because what this then means is that that creates a huge incentive to raise aggregate energy prices in order to compensate for the profit hit that you are taking under this model. |
I need the very, very high tax that their model engenders. One system that has a regressive impact. Why? Because given that individuals' demand for energy is inelastic, i.e., on both sides of this debate, you need to pay for energy. You need to do that so that like your home can function properly. People still have to pay for it. |
But what that then means is that when you pay for that energy on a higher price, you have less disposable and low-income individuals in order to spend money on things like bread that you need to feed yourself and your family. By contrast, why will prices be fair and reasonable under our side of the house? Because under our side, we enable higher degrees of stability. |
Why? Because absent a windfall tax, you know that there are going to be booms and busts in terms of the sort of like energy demand but also different exogenous effects that are happening around the globe—geopolitical conflicts or natural disasters. There are going to be some instances in which energy prices will be naturally high, other instances in which energy prices will be naturally low. |
And what that then means is that you can shape your profit model in a way where you can make the prices stable over time, i.e., cross-subsidize so that when they are higher, you can still keep the energy prices relatively low versus under their side of the house where they become significantly higher. And the reason that price stability matters is because it has less of a regressive impact on low-income individuals. |
It's easier for poor families to plan and they're not suddenly hit by sudden prices and their energy bill in the middle of the winter when a conflict is ongoing. But the second broad mechanism under this argument is that they actually ossify market power under their set of cups, i.e., the windfall tax is also likely to have a regressive impact on companies for the reason that larger companies are disproportionately likely to be able to weather this tax in the first place. |
Especially given the framing that it gave you about why this tax is likely to be very large. And what this then means is that smaller energy companies are going to struggle taking the hit from this tax. And what this then means is that they risk going out of business, especially if you're a relatively small energy company in a rural area. |
What this then means is that in as much as larger companies now have more market power, they get to price fix, i.e., make prices increasingly high. And the reason that this is likely is because larger companies know that they can gain from a significant extent versus under our side of the house when you have a higher degree of sectoral companies. |
And that is when all the benefits that we point out, i.e., not only price stability but also competition between these different companies, take in when smaller companies aren't crowded out to an unnecessary extent under the status quo. Right? And this matters for the reason that this is the most intense impact on this debate. |
Maybe teams can give you really like nebulous economic jargon about what's going to happen in this round, but the clearest impact is always going to be, will you be able to put bread on the table? Will you be able to survive the winter when your government can't do anything for you? Otherwise, and that is why we will take this today. Before I move on, CG, |
<poi> |
Given the tax is on profit, not income, regardless of if the oil is cheap for the company or expensive for the company, we're taxing their profit. So if they can inflate the prices all they want, they'll just get more tax taken off. |
</poi> |
Look, that doesn't apply to our case because still you are likely going to increase energy prices under your side of the house. |
Like, I don't see how that meaningfully engages. Secondly, windfall taxes slow the transition to renewable energy. There are existing incentives that make a green energy transition likely. The first is that mine are able to make more money under our side of the house i.e., your profit is higher. You're also able to cross-subsidize into clean energy. |
And that's where the reason that shareholder activists are able to make specific arguments on corporate boards, i.e., shareholder activists at PP making the persuasive argument that even if you take the short term out right now, in the long term you can invest into renewable or cleaner forms of energy or anyone and engine one going green or similar reasons. |
But a windfall tax obviously obviates this goal. Why? Because firstly, windfall taxes cut down energy profits even in primary prices relatively low. Two, you use the spare money you make during the times where you are have relative—you use the spare money that you make under our side of the house in order to reinvest into green energy, but that is much more difficult to do under their side of the house. |
But they're the—it's just harder to make the persuasive argument to adopt things like green energy to the same extent because you know that we will be continuously and continuously taxed. Even if you make more profits, you won't be able to remove the fruits of those profits, and therefore internally on corporate voice to be part of their owners to make the argument that we should invest elsewhere. |
And it's more likely that you're just going to have status quo bias and keep the existing green energy models that you have. There was an implicit response that we hear from that speaker is that you can make capital investments on renewable energy to decrease your profits so less of your money is taxed. Number one, lots of investments aren't made instantly. You need to negotiate great plans and convince other shareholders, and this isn't a decision that companies are just going to hastily make. |
But two, we explained how we better support renewable energy under our side of the house in as much as now you get direct investment; we're here based upon a speculation about what might happen. And the reason this matters is because this is able to prevent future energy price crises which preclude the debate, i.e., you're able to diversify your supply chains, step in need to raise prices isn't as high in the first place. |
But also, it means that long term, we've got a better help for the environment and reduce reliance on corn oil and natural gas supplies. Yeah, thank you. |
</lo> |
<dpm> |
Opening up we know this is a bit off the court's motion, our case doesn't depend on this OPA in upward motion. Rather, I want to explain to you why subsidization for the core and reduced price of the course will only happen on our side for two reasons. |
First of all, this policy is likely going to actually, in the real world, end up paying for subsidies for the poor because it is uniquely easy to justify. That is to say, this additional tax is taken directly from companies—companies which the public perceives and blames for having caused the harm of high prices and profiteering during a period of scarcity at the expense of everyone else. |
It is thus very, very logical that politicians have incentives to help people who are struggling by punishing those who are contributing to harm. So, therefore, it's very likely that this money will go towards subsidizing. What I also want to point out, I know it is uniquely likely going to go towards helping the poor. |
It's a very simple reason. On their side of the house, if they want to have subsidies for the poor, that is when they have to take it from the overall budget. That's when they have to tax everyone more. That's when you have to take money away from other things that the government spends on. You take money away from them to thank you from defense. You have to take the money directly away from healthcare. |
The consequence is, it is far, far easier to justify substance for the poor and far more likely that you subsidize the poor at the point when we have this tax compared to when you are cutting healthcare, when you are borrowing more and putting your children's financial future at risk, so on and so forth. The second reason why these subsidies are uniquely effective and likely on our side of the house is the idea of time. |
I have characterized these situations for you. They are unique situations, like, for example, geopolitical situations, like, for example, natural disasters which might happen. The fact that they are unique means they require ad public policy to occur to be passed by governments in that time. And on what's on their side of the house, this occurs automatically at the point where, let's say the Department of Energy determines that decision threshold has been reached. |
On their side of the house, the government actually has to pass that policy enacting this one-time subsidy. And the point when ultimately Congress and other members are dealing with so, so many dozens of different issues, like, for example, the prices itself, that is why you have gridlock. That's what it is. What it takes weeks and maybe even months to get that subsidy passed. |
To the end of the day, they are substance uniquely likely and effective because on their side, the poor will be left without energy for weeks. First of all about, oh, I talk about this idea of reducing costs, then I want to talk about the principle, which we don't think they even addressed at all. First of all, on the idea of price, they believe that, first of all, that this will have a regressive impact on price. |
I think there are a couple of responses to this, but first of all, I want to point out that as we pointed out in the model, there is a base level of profit that companies can make even if the windfall tax exists. The point is, like, there's a guaranteed level of profit that they are able to generate. The question with this is, until why they feel these companies feel the necessity to increase prices even more, because they are, like, at the very least guaranteed enough to be financially stable. |
Second of all, I want to point out that if prices, if companies jack up prices, this means that generally companies' prices are likely to remain higher in the market for a longer period of time. And if prices remain higher, we think that is itself a situation where companies will have to be paying the windfall tax for a longer period of time. Generally, what the windfall taxes go away, they want prices to return to their normal level as soon as possible, far more on our side of the house than on their side of the house. |
And therefore, that is far more likely to look like investments to ensure that people can get more as possible. This is not right. That's responsiveness. The idea here is, what is the best profit-maximizing strategy for you as a company under the windfall tax? On their side of the house, it is to increase prices because that is when you, every additional dollar you increase price, you get that additional dollar of profit. |
But on our side, because energy demand is quite elastic, but on our side of the house, you don't want to increase the price necessarily. That's not the best strategy. By contrast, a much better strategy is to increase demand, that is, to increase capacity to have people consuming more energy instead of the same amount of energy at a higher price. |
In that sense, we massively improve the incentives of companies. On the next point, on the idea of cross-subsidization, so I think broadly what I understood from their argument is that because of this windfall tax, firms lose the ability, especially upon small burns, they lose the ability to cross-subsidize and invest in the long run in terms of things like, for example, green energy. |
I want to point out that we think firms can access the kind of money to spend on both sides of the house. Most energy companies tend to be relatively large and mature companies. They also tend to have a relatively stable revenue because everyone needs energy. This means they tend to have very, very good credit ratings. They're very, very good at borrowing. They can borrow money whenever they need it. |
The idea is what is their incentive to do? And on our side of the house, even though they probably can invest on both sides, they are far more likely to invest on our side of the house in a sense because they do not need to make as much profit during these times. They might engage in things like capital expenditure, which they can deduct against those taxes. |
Finally, on the idea of price checks, look, I want to point out that this is probably a symmetric part. And the very simple reason is that I don't think the energy situation right now is the situation where we have small companies competing against larger ones to provide you with electricity. In most cases, the energy companies have a captive market. Because you need to, like, have a huge appointment of scale to make energy work. |
Like, so generally, you only have regions with like one sole provider, maybe even two sole providers, two providers. So, in that sense, I don't think they're gonna have much competition on their side anyway. So, why do we massively reduce costs? We want in three areas. One, we have uniquely effective and likely subsidies for the poor, which substantiate the Starbucks speech. |
Second of all, we incentivize investment in terms of capital, in terms of capital expenditure being more better. And third of all, we increase the incentive for companies to focus on profit by increasing demand, not price. So, at the end of the day, we have more money going to infrastructure and again we have more about a slightly going to be going towards renewables. |
So, finally, on the principle, look, we have to explain to you that companies in nowhere form deserve this money or they don't deserve all of this money. It's too far and we explain. I'm going to explain to you why that is so crucial in my opinion, in our opinion of opening government. The government is only given so much power over the economy because it has the obligation to ensure fair outcomes in terms of who gets who. |
That is why they've never had too much power. It also has a responsibility to ensure fairness. The problem is the government could most certainly boost economic growth and overall outcomes. It could increase, for example, infrastructure and investment by policies which also increase inequality, but governments choose not to do so because they prioritize justice and fairness over maximizing outcomes and output. |
This is why, for example, inheritance tax is so high. It may be the case that having a low inheritance tax means rich people work harder, but overall, it's believed that it's unfair that people get this money that they don't deserve. We've proven that these companies do not deserve all of this additional profit because it wasn't provided by success in the market. Rather, it was either blind luck, but more importantly, profiting and exploiting the vulnerability of others. |
Energy is a necessity, and we believe that makes it unique in the sense that you can't—you simply—it's wrong for you to exploit individuals' need for energy during tough times and make so much money off their backs. So, on that basis, we're very proud to have oppose. |
</dpm> |
<dlo> |
I'll talk about three things from the speech: virtually on the principle, secondly on the prices, thirdly on investments and community energies. |
Firstly, that principle—the gut principle is that lots of these energy companies did not deserve the increase in proxy received due to exogenous factors such as faculty disasters, report and different nation attacks on it. So, there's three responses. This principle doesn't necessarily follow. Why is this true? Because what they're claiming is just that companies did not deserve this amount of profit. |
But the extension of this principle is no one deserves anything. Lots of arbitrary talents beyond what is like operating costs. So, obviously, this doesn't make sense in a huge amount of cases. It's more morally wrong how much companies for something that's relatively arbitrary. So, on the flip, it is actually worse that you are actually doing harm to companies to get a dessert like that for you to be like taking away things that they do not deserve. |
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