Economist's View

'The Climate Skeptics Have Already Won'

Martin Wolf:

Humanity has decided to yawn and let the real and present dangers of climate change mount. ... Judged by the world’s inaction, climate skeptics have won..., however rational it may be to seek to lower the risk of catastrophic outcomes, this is not what is happening now or seems likely to happen in the foreseeable future. ...

The attempt to shift our choices away from the ones now driving ever-rising emissions has failed. It will, for now, continue to fail. The reasons for this failure are deep-seated. Only the threat of more imminent disaster is likely to change this and, by then, it may well be too late. This is a depressing truth. It may also prove a damning failure.

As he says, it's not too late, "Unless the most apocalyptic scenario happens, humanity may be able to curb emissions and buy itself time," but the clock is running and it's hard to see how meaningful change will come about without substantial changes in the political environment. Gridlock favors the skeptics.

'The Sordid History of Cap-and-Trade'

Richard Schmalensee and Robert Stavins on how "conservatives are choosing to demonize their own market-based creation" for addressing the market failures that lead to "large-scale environmental problems":

The sordid history of Congressional acceptance and rejection of cap-and-trade: Implications for climate policy, by Richard Schmalensee and Robert N. Stavins, VoxEU.org: Not so long ago, cap-and-trade mechanisms for environmental protection were popular in Congress. Now, such mechanisms are denigrated. What happened? This column tells the sordid tale of how conservatives in Congress who once supported cap and trade now lambast climate change legislation as ‘cap-and-tax’. Ironically, conservatives are choosing to demonize their own market-based creation. The successful conservative campaign that disparaged cap-and-trade means it may now be politically impossible to promote it in the US. The good news? Elsewhere, cap and trade is now a proven, viable option for tackling large-scale environmental problems. ...

China Says It May Implement a Carbon Tax

China may implement a (modest) carbon tax:

Taxing Carbon, by Vikas Bajaj, NY Times: Long considered the biggest holdout in climate change negotiations, China said this week that the country would implement new taxes designed to curb greenhouse gas emissions. Officials in Beijing provided few details, but a report by the state-owned Xinhua news service suggested that the government is working on a relatively modest plan. ...

The Xinhua report ... did not say how big a tax the country would impose, but it pointed to a three-year-old proposal by government experts that would have levied a 10-yuan ($1.60) per ton tax on carbon in 2012 and raised it to 50-yuan ($8) a ton by 2020. Those prices are far below the $80 (500-yuan) a ton that some experts have suggested would be needed to achieve “climate stability,” and which would raise the cost of gasoline by about 70 American cents a gallon.

China’s plan will not make a serious dent in global warming, though the tax may still have some beneficial impact within the country, where air pollution is a serious problem. ...

Meanwhile, in the U.S., many members of Congress find the idea of carbon taxes totally anathema and think such taxes would wreck the economy. They might, however, want to consider a proposal promoted by Mr. Hansen that would take the money collected from carbon taxes — or carbon fees as he prefers to call them — and rebate it in full to individuals. That would help consumers pay for more expensive electricity and gasoline, while giving them an incentive to cut their use of energy and fossil fuels. It’s an elegant way to limit damage to the economy while giving people incentives to do what is right for the planet.

Contrary to what "many members of Congress" (i.e. many Republicans) claim, eliminating a market failure through a carbon tax moves the economy closer to the optimal growth path rather than further from it.

Jagdish Bhagwati Does Not Seem to Like Al Gore

Not sure where to start with this one other than to note that Jagdish Bhagwati does not seem to like Al Gore:

Futurama, by Jagdish Bhagwati: ...Al Gore ... surely succeeded beyond his wildest expectations as the author of An Inconvenient Truth. But his phenomenal success had little to do with science (which has remained somewhat controversial: many of us remember for instance the not-too-distant scare about global cooling, also from climate scientists) and much to do with the photographs of polar bears caught on drifting ice as glaciers melted. An image like that is what we all need when we push our pet agendas. Alas, none of us is so fortunate. Nor is Gore as he turns now to writing about our future. ...

The problem Gore faces in the bulk of this book therefore is that his identification of problems, and his proposed solutions, are not compelling. His erudition is considerable but is necessarily limited since he casts his net wide, and he is both unfamiliar with important issues pertinent to his analysis and also shallow in his prescriptions for remedial policies. ...

Given Gore’s justified reputation on climate change, a disappointing feature of Gore’s book is in the chapter titled “The Edge.” I agree with him that the evidence on climate change, and the contribution to it by man-made carbon emissions, is about as good as science can provide; and he is persuasive in his sketch of the scenario of the dangers that global warming, unchecked, hold for mankind. Where he fails is in the remedies that he discusses. To focus on just one issue: there is now agreement from the last meeting at Cancún on the attempted renewal of Kyoto Protocol that $100 billion be found annually to create new technologies of mitigation and adaptation to climate change. It is expected that a significant share of this will be public funds. We have the precedent that public monies should largely be used to create public good: thus the new seeds under the green revolution were publicly financed and they were available to everyone virtually for free. Should we then not expect the green technologies developed with public funds to be available for free to Mars, China, and India?

But, to my knowledge, Gore has not embraced this proposal, which would make, say, India accept more ambitious targets of carbon reduction because it would reduce the cost of doing so. I would not make the ferocious charges that Gore levels at the opponents of climate change (see page 283). But may I wonder whether the reason for Gore’s omission is that he is heavily invested in green-energy stocks and would like to see public funds to be used only for private payoffs by these firms?

The good in the book is therefore offset by the bad. But even the bad will produce good if it irritates us into thinking harder about the many issues that Gore correctly insists we must confront.

Gore's sin is not embracing a particular proposal, and it must be because "he is heavily invested in green-energy stocks?" Pretty thin charge, and pretty speculative -- I expected a more compelling complaint. (Bhagwati agress with Gore on the science, says he's persuasive, etc., and acts like the know-it-all judge of all things related to climate change, yet he tosses out the global cooling thing? There's a reason this is called the "global cooling myth.")

In another part, I was surprised to hear a call for unions:

...The problem in this world of competition among similar products is that comparative advantage is now fragile: it has a “knife-edge” quality. One day you have it; the next day you do not. Almost every entrepreneur has a rival breathing down his neck; and this need not be from China or India, with their “low wages”—what Gore frets about—but may be Poland or France or Sweden. There are three implications.

First, firms need flexibility in firing if they are to hire.

Second, we can no longer assure economic security for workers by giving them lifetime employment. The security has to be for the worker herself, unrelated to specific occupation and employment.

Third, the volatility also means that we can no longer expect firms to provide training and hence “human capital” to blue-collar workers who can be expected to leave at the next sign of trouble at their plant or firm. We therefore have to provide this human capital through efforts by unions, employers, community colleges, etc.

Gore also accepts uncritically the notion that we are doomed to greater inequality in a globalized world of trade and multinational investment. The evidence is more mixed than he reports...

I think it would only be fair to note the incentives work the other way as well. With firms willing to fire workers at the drop of a hat -- older social obligations to retain workers through tough times are largely gone -- there's no incentive for workers to invest in themselves if the human capital is unique to the particular firm. Why bother if you are unlikely to be there for very long? (That is, I don't think the problem is workers who "leave at the next sign of trouble." f course they'll leave for another opportunity if they fear they'll be fired in the near future due to the "trouble.")

Climate Policy in Obama's Second Term

I think of Robert Stavins as being on the optimistic side when it comes to action on climate change, but even he seems discouraged despite Obama's mention of this issue in his inaugural address:

The Second Term of the Obama Administration, by Robert Stavins: In his inaugural address on January 21^st, President Obama surprised many people – including me – by the intensity and the length of his comments on global climate change.  Since then, there has been a great deal of discussion in the press and in the blogosphere about what climate policy initiatives will be forthcoming from the administration in its second term. ...

Although I was certainly surprised by the strength and length of what the President said in his address, I confess that it did not change my thinking about what we should expect from the second term.  Indeed, I will stand by an interview that was published by the Harvard Kennedy School on its website five days before the inauguration (plus something I wrote in a previous essay at this blog in December, 2012).  Here it is, with a bit of editing to clarify things, and some hyperlinks inserted to help readers. ...

Q: In the Obama administration’s second term, are there openings/possibilities for compromises...?

A: It is conceivable – but in my view, unlikely – that there may be an opening for implicit (not explicit) “climate policy” through a carbon tax. At a minimum, we should ask whether the defeat of cap-and-trade in the U.S. Congress, the virtual unwillingness over the past 18 months of the Obama White House to utter the phrase “cap-and-trade” in public, and the defeat of Republican Presidential candidate Mitt Romney indicate that there is a new opening for serious consideration of a carbon-tax approach to meaningful CO₂ emissions reductions in the United States.

First of all, there surely is such an opening in the policy wonk world. Economists and others in academia, including important Republican economists such as Harvard’s Greg Mankiw and Columbia’s Glenn Hubbard, remain enthusiastic supporters of a national carbon tax. And a much-publicized meeting in July, 2012, at the American Enterprise Institute in Washington, D.C. brought together a broad spectrum of Washington groups – ranging from Public Citizen to the R Street Institute – to talk about alternative paths forward for national climate policy. Reportedly, much of the discussion focused on carbon taxes.

Clearly, this “opening” is being embraced with enthusiasm in the policy wonk world. But what about in the real political world? The good news is that a carbon tax is not “cap-and-trade.” That presumably helps with the political messaging! But if conservatives were able to tarnish cap-and-trade as “cap-and-tax,” it surely will be considerably easier to label a tax – as a tax! Also, note that President Obama’s silence extends beyond disdain for cap-and-trade per se. Rather, it covers all carbon-pricing regimes.

So as a possible new front in the climate policy wars, I remain very skeptical that an explicit carbon tax proposal will gain favor in Washington. ...

A more promising possibility – though still unlikely – is that if Republicans and Democrats join to cooperate with the Obama White House to work constructively to address the short-term and long-term budgetary deficits the U.S. government faces,... then there could be a political opening for new energy taxes, even a carbon tax. ...

Those who recall the 1993 failure of the Clinton administration’s BTU-tax proposal – with a less polarized and more cooperative Congress than today’s – will not be optimistic. ... The key group to bring on board will presumably be conservative Republicans, and it is difficult to picture them being more willing to break their Grover Norquist pledges because it’s for a carbon tax.

Here's the surprising part (to me anyway), some optimism after all:

What remains most likely to happen is what I’ve been saying for several years, namely that despite the apparent inaction by the Federal government, the official U.S. international commitment — a 17 percent reduction of CO₂ emissions below 2005 levels by the year 2020 – is nevertheless likely to be achieved!  The reason is the combination of CO₂ regulations which are now in place because of the Supreme Court decision [freeing the EPA to treat CO₂ like other pollutants under the Clean Air Act], together with five other regulations or rules on SOX [sulfur compounds], NOX [nitrogen compounds], coal fly ash, particulates, and cooling water withdrawals. All of these will have profound effects on retirement of existing coal-fired electrical generation capacity, investment in new coal, and dispatch of such electricity.

Combined with that is Assembly Bill 32 (AB 32) in the state of California, which includes a CO₂ cap-and-trade system that is more ambitious in percentage terms than Waxman-Markey was in the U.S. Congress, and which became binding on January 1, 2013. ...  In other words, there will be actions having significant implications for climate, but most will not be called “climate policy,” and all will be within the regulatory and executive order domain, not new legislation. ...

Time Is Not On Our Side

What if we actually achieve the target of limiting global warming to a 2 degree Celsius increase? We are unlikely to meet this goal -- it's looking much worse than that -- but what if we did?:

 ... It is abundantly clear that the target of a 2-degree Celsius limit to climate change was mostly derived from what seemed convenient and doable without any reference to what it really means environmentally. Two degrees is actually too much for ecosystems. Tropical coral reefs are extremely vulnerable to even brief periods of warming. .. A 2-degree world will be one without coral reefs (on which millions of human beings depend for their well-being)..., there undoubtedly will be massive extinctions and widespread ecosystem collapse. The difficulty of trying to buffer and manage change will increase exponentially with only small increments of warming.

In addition, the last time the planet was 2 degrees warmer, the oceans were four to six (perhaps eight) meters higher. We may not know how fast that will happen (although it is already occurring more rapidly than initially estimated), but the end point in sea-level rise is not in question. A major portion of humanity lives in coastal areas and small island states that will go under water. ...

More than a 2-degree increase should be unimaginable. Yet to stop at 2 degrees, global emissions have to peak in 2016. ...

Environmental change is happening rapidly and exponentially. We are out of time.

Of course, global emissions won't be anywhere near a peak in 2016.

'The Right’s Resistance to Regulation'

Peter Dizikes of MIT News:

The right’s resistance to regulation, by Peter Dizikes, MIT News Office: James Watt, who served as Secretary of the Interior from 1981 to 1983, is remembered primarily for a short, business-friendly tenure that ended with his resignation soon after an ill-judged remark about women, minorities and the disabled. And yet, as MIT professor Judith Layzer observes in her new book about environmental politics, “Open for Business,” there is good reason to regard Watt’s impact differently.

For one thing, Watt, among others on the political right, managed to cut government funding for conservation efforts. For another, he installed staff members who emphasized the development of natural resources, rather than just the protection of land. In so doing, Watt was one of many Republicans who instituted fundamental changes in U.S. environmental policy.

“I will build an institutional memory that will be here for decades,” Watt once said of his department, as Layzer recounts.

These kinds of under-the-radar changes, Layzer argues, are one of two ways conservatives have dramatically altered environmental politics since the 1970s, when environmentalists probably reached the high point of their political influence.

The other, says Layzer, an associate professor of environmental policy at MIT, is ideological and rhetorical: Conservatives have gained enormous traction by touting “the virtues of the market system and the horrors of regulation,” thus limiting public backing for stricter government-imposed controls on natural resources. By arguing that the market economy, when left alone, is effectively self-policing and morally sound, conservatives have put environmentalists on the defensive, making them tentative about arguing for environmental protections as a good in themselves. So whereas President Richard Nixon once green-lighted the Environmental Protection Agency, today’s political debates often touch on the necessity of opening further federal lands for oil exploration.

“The set of conservative ideas has really pushed the framing of issues to the point where many people today aren’t even aware of the [older] alternatives,” Layzer says. “Only if you’d been involved or lived through this history would you know it hasn’t always been thus.” ...[continue]...

The one thing I'll note is that "free market rhetoric," which is said to have played a key role in winning (or at least shifting) the battle of ideas, was the vehicle for defending other interests, e.g. business interests in having as few environmental regulations as possible. It (free markets) was not the goal in and of itself.

As to what should be done, for this reason I'm not so sure that “It really was about ideas." And you have to fight ideas with ideas.” It was also about having the political power to make the ideas heard, and to turn them into actual legislation that served the interests of the of those supporting the politicians financially. So I'd say, "It was really about using ideas to serve the interests of those who held the reins of power." Or something like that.

'Egregious in its Misuse of Data'

Jeff Sachs is unhappy with the WSJ's editorial page (and not for the first time):

Wall Street Journal: Get a Fact Checker, by Jeffrey Sachs: ...I ... want to talk about fact checking. The [Wall Street] Journal editorial board is egregious in its misuse of data. It writes what it wants without fact checking. Where is the journalistic profession to call them out?

There are two editorial pieces this weekend of note. The story on "Europe's Bankrupt Welfare State" asserts that, "the European way of welfare is bankrupt." This is easy to check. Look at European countries with large welfare states, and see how they are doing in terms of debt, deficits, unemployment, and other indicators of "bankruptcy." I do this in Table 1 here comparing the US with Europe's five leading welfare states: the Netherlands, Denmark, Norway, Sweden, and Germany. ...

Looking at Table 1..., the conclusion is simple. The European welfare states tax and spend more than the US as a percent of GDP, yet also have lower budget deficits as a share of GDP, lower debt-GDP ratios, and lower unemployment rates. Note that the government sectors of Norway and Sweden have net assets rather than net debt. Some bankruptcy!

The second comment is by editorial board member Holman Jenkins, Jr. Mr. Jenkins tries to debunk global warming by writing that "the warmest year on record globally is still 1998 and no trend has been apparent globally since then."

His claim is both false and irrelevant. It is false because most data point to more recent years as being warmer than 1998. ... The claim is also irrelevant, since 1998 was an exceptionally strong El Nino (essentially, a tilt of Pacific warm water towards the west coast of Latin America). ... Comparing subsequent years to a very strong El Nino year mixes up trends and inter-annual variability. ...

The Wall Street Journal editors have failed to notice that even the climate skeptics have come around. ...

The Wall Street Journal editorial board needs a fact checker plain and simple. It's a major paper, with excellent news coverage, and should not destroy its integrity by an editorial board that flouts the basic process of checking the facts.

Real Tree or Artificial Tree?

A bit late for most of you, but in case it comes up over the next few days:

Real Tree or Artificial Tree, by Tim Taylor: My family always had real Christmas trees when I was growing up. I've always had real trees as an adult. Living in my own little bubble, it thus came as a shock to me to learn that, of the households that have Christmas trees, over 80% use an artificial tree, according to Nielsen survey results commissioned by the American Christmas Tree Association  (which largely represents sellers of artificial trees). But in a holiday season where the focus is often on whether we are naughty or nice, what choice of tree has greater environmental impact? ...

Just Sayin': It May Already Be Too Late

Tim Haab:

Just sayin': I was thinking of writing a lengthy post about climate change denial being completely unscientific nonsense, but then geochemist and National Science Board member James Lawrence Powell wrote a post that is basically a slam-dunk of debunking. His premise was simple: If global warming isn’t real and there’s an actual scientific debate about it, that should be reflected in the scientific journals.

He looked up how many peer-reviewed scientific papers were published in professional journals about global warming, and compared the ones supporting the idea that we’re heating up compared to those that don’t. What did he find? This:

The thin red wedge.   Image credit: James Lawrence Powell

Maximillian Auffhammer at the Berkeley blog:

Doha schmoha: On Saturday (Dec. 8) another wildly unsuccessful round of climate negotiations, in Doha, Qatar, concluded with applying a band aid to solve the rapidly accelerating climate problem. The 1997 Kyoto accord was extended to 2020. If you think this is a good thing, you are severely mistaken. China, the US and the other usual suspects made no significant concessions. Further,  the climate leader — the EU — is internally in disagreement over what reductions should be agreed to. ...

While academics have proposed a number of interesting avenues for further studies of so called architectures for future agreements, time is slowly running out. It is simply too difficult to get 200+ countries to agree and then stick to a binding agreement. So what to do?

I think a simple handshake between the U.S. and China would be a good start. Each agrees to a carbon tax which is collected fairly far upstream. Any country wanting to sell its goods into the U.S. or Chinese markets could either pay a carbon tariff at the border or start charging its own equivalent carbon tax and be exempt from the tariff.

Is this going to happen? Maybe not...

But one thing is for sure: We are becoming richer as a species and we will want to consume more energy services. Unless we start pricing carbon, that energy will largely come from coal. And if that happens, limiting warming to 2 degrees is a pipe dream. In fact, it may already be too late.

'Climate Science Predictions Prove Too Conservative'

Don't say you weren't warned about the risks of climate change, though you might be able to say you weren't adequately warned:

Climate Science Predictions Prove Too Conservative, by Glenn Scherer and DailyClimate.org: Across two decades and thousands of pages of reports, the world's most authoritative voice on climate science has consistently understated the rate and intensity of climate change and the danger those impacts represent, say a growing number of studies on the topic. 

This conservative bias, say some scientists, could have significant political implications, as reports from the group – the U.N. Intergovernmental Panel on Climate Change – influence policy and planning decisions worldwide, from national governments down to local town councils.

As the latest round of United Nations climate talks in Doha wrap up this week, climate experts warn that the IPCC's failure to adequately project the threats that rising global carbon emissions represent has serious consequences: The IPCC’s overly conservative reading of the science, they say, means governments and the public could be blindsided by the rapid onset of the flooding, extreme storms, drought, and other impacts associated with catastrophic global warming. ...

A Counter Example to the 'Tragedy of the Commons'

Running late -- have a dissertation proposal defense to get to, then a final to give to my Ph.D. students -- so a quick one:

A Counter Example to the "Tragedy of the Commons", by Matthew Kahn: ...This OP-ED by Andrew Kahrl is actually quite interesting. ... For at least 20 years, I have lectured on the "tragedy of the commons" that takes place both in cities and in the oceans. Consider a smoker in a city...[numerical example]. This is a simple example of the tragedy of the commons --- this smoker unintentionally degraded the commons as he pursued his privately optimal action. The same logic applies to over-fishing in common oceans. One "solution" to this property rights issue is to privatize the commons and the owner would charge a price to allow the smoker to smoke and the smoker would only smoke if he is willing to pay this fee.

We can now evaluate Professor Kahrl's claims. He argues that the privatization of beaches in the Northeast is the reason that Hurricane Sandy caused so much damage.

He writes; "By increasing the value of shoreline property and encouraging rampant development, the trend toward privatizing formerly public space has contributed in no small measure to the damage storms like Hurricane Sandy inflict. Tidal lands that soaked up floodwaters were drained and developed. Jetties, bulkheads and sea walls were erected, hastening erosion. And sand dunes — which block rising waters but also profitable ocean views — were bulldozed." ...

Kahrl is saying that capitalism and the pursuit of aesthetic beauty nudged us to drop our guard and destroy Mother Nature's coastal defense system. .... For this claim to be true, he must assume that the tragedy of the commons would not have degraded such natural capital. This may be true.

Mother Nature is now engaging in a takings as she tries to seize coastal property from incumbent owners. I say let her win. These place based stakeholders want to use your tax dollars as funds to build a wall around them. A compromise would be for the state government to buy these properties and knock them down and revitalize the natural capital adaptation strategies that the author lists. ...

'Wreaking Havoc on the Environment with Little or No Accountability'

Jeff Sachs says "polluters must pay":

Polluters Must Pay: When BP and its drilling partners caused the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, the United States government demanded that BP finance the cleanup, compensate those who suffered damages, and pay criminal penalties for the violations that led to the disaster. BP has already committed more than $20 billion in remediation and penalties. Based on a settlement last week, BP will now pay the largest criminal penalty in US history – $4.5 billion.

The same standards for environmental cleanup need to be applied to global companies operating in poorer countries, where their power has typically been so great relative to that of governments that many act with impunity, wreaking havoc on the environment with little or no accountability. As we enter a new era of sustainable development, impunity must turn to responsibility. Polluters must pay, whether in rich or poor countries. Major companies need to accept responsibility for their actions. ...

I can't see the companies doing this voluntarily.

Climate Change and Hurricane Sandy

Is there a link between climate change and hurricane Sandy?:

Did Climate Change Cause Hurricane Sandy?, by Mark Fischetti, Scientific American: If you’ve followed the U.S. news and weather in the past 24 hours you have no doubt run across a journalist or blogger explaining why it’s difficult to say that climate change could be causing big storms like Sandy. Well, no doubt here: it is.

The hedge expressed by journalists is that many variables go into creating a big storm, so the size of Hurricane Sandy, or any specific storm, cannot be attributed to climate change. That’s true, and it’s based on good science. However, that statement does not mean that we cannot say that climate change is making storms bigger. It is doing just that—a statement also based on good science, and one that the insurance industry is embracing, by the way. (Huh? More on that in a moment.)

Scientists have long taken a similarly cautious stance, but more are starting to drop the caveat and link climate change directly to intense storms and other extreme weather events, such as the warm 2012 winter in the eastern U.S. and the frigid one in Europe at the same time. They are emboldened because researchers have gotten very good in the past decade at determining what affects the variables that create big storms. Hurricane Sandy got large because it wandered north along the U.S. coast, where ocean water is still warm this time of year, pumping energy into the swirling system. But it got even larger when a cold Jet Stream made a sharp dip southward from Canada down into the eastern U.S. The cold air, positioned against warm Atlantic air, added energy to the atmosphere and therefore to Sandy, just as it moved into that region, expanding the storm even further.

Here’s where climate change comes in. ... [more] ...

Climate Change and 'Free Drivers'

Gernot Wagner and Martin Weitzman on the "allure of geoengineering" as a solution to global warming, and the temptation for individual countries to act on their own:

Playing God: ... All it takes is a single actor willing to focus on the purported benefits to his country or her region to pull the geoengineering trigger. The task with geoengineering is to coordinate international inaction while the international community considers what steps should be taken. The fate of the planet cannot be left in the hands of one leader, one nation, one billionaire.

Fortunately, we are still many years off from the full "free driver" effect taking hold. There's some time to engage in a serious global governance debate and careful research: building coalitions, guiding countries and perhaps even individuals lest they take global matters into their own hands. In fact, that is where the discussion stands at the moment, with a governance initiative convened by the British Royal Society, the Academy of Sciences for the Developing World, and the Environmental Defense Fund, among other deliberations guiding how geoengineering research should be pursued.

With time come the "free drivers"

The clock, however, is ticking. A single dramatic climate-related event anywhere in the world - think Hurricane Katrina on steroids - could trigger the "free driver" effect. That event need not be global and it need not even be conclusively linked to global warming. A nervous leader of a frightened nation might well race past the point of debate to deployment. The "free driver" effect will all but guarantee that we will face this choice at some point.

"Free riding" and "free driving" occupy opposite poles of the spectrum of climate action: One ensures that individuals won't supply enough of a public good. The other creates an incentive to engage in potentially reckless geoengineering and supply a global bad. It's tough to say which one is more dangerous. Together, these powerful forces could push the globe to the brink.

Stavins: Cap-and-Trade, Carbon Taxes, and My Neighbor’s Lovely Lawn

Speaking of externalities associated with energy use, Robert Stavins throws cold water on "current enthusiasm about carbon taxes in the academic and broader policy-wonk community":

Cap-and-Trade, Carbon Taxes, and My Neighbor’s Lovely Lawn, by Robert Stavins: ...my conclusion in 1998 strongly favored a market-based carbon policy, but was somewhat neutral between carbon taxes and cap-and-trade. Indeed, at that time and for the subsequent eight years or so, I remained agnostic regarding what I viewed as the trade-offs between cap-and-trade and carbon taxes. What happened to change that? Three words: The Hamilton Project.

...In 2007, the Project’s leadership asked me to write a paper proposing a U.S. CO₂ cap-and-trade system. ... The Hamilton Project leaders said ... they wanted me to make the best case I could for cap-and-trade, not a balanced investigation of the two policy instruments. Someone else would be commissioned to write a proposal for a carbon tax. (That turned out to be Professor Gilbert Metcalf of Tufts University ... who did a splendid job!) Thus, I was made into an advocate for cap-and-trade. It’s as simple as that. ...

In principle, both carbon taxes and cap-and-trade can achieve cost-effective reductions, and – depending upon design — the distributional consequences of the two approaches can be the same. But the key difference is that political pressures on a carbon tax system will most likely lead to exemptions of sectors and firms, which reduces environmental effectiveness and drives up costs, as some low-cost emission reduction opportunities are left off the table. But political pressures on a cap-and-trade system lead to different allocations of the free allowances, which affect distribution, but not environmental effectiveness, and not cost-effectiveness.

I concluded that proponents of carbon taxes worried about the propensity of political processes under a cap-and-trade system to compensate sectors through free allowance allocations, but a carbon tax would be sensitive to the same political pressures, and should be expected to succumb in ways that are ultimately more harmful: reducing environmental achievement and driving up costs.

Of course, such positive political economy arguments look much less compelling in the wake of the defeat of cap-and-trade legislation in the U.S. Congress and its successful demonization by conservatives as “cap-and-tax.”

A Political Opening for Carbon Taxes?

Does the defeat of cap-and-trade in the U.S. Congress, the obvious unwillingness of the Obama White House to utter the phrase in public, and the outspoken opposition to cap-and-trade by Republican Presidential candidate Mitt Romney indicate that there is a new opening for serious consideration of a carbon-tax approach to meaningful CO₂ emissions reductions?

First of all, there surely is such an opening in the policy wonk world. Economists and others in academia, including important Republican economists such as Harvard’s Greg Mankiw and Columbia’s Glenn Hubbard, remain enthusiastic supporters of a national carbon tax. And a much-publicized meeting in July at the American Enterprise Institute in Washington, D.C. brought together a broad spectrum of Washington groups – ranging from Public Citizen to the R Street Institute – to talk about alternative paths forward for national climate policy. Reportedly, much of the discussion focused on carbon taxes.

Clearly, this “opening” is being embraced with enthusiasm in the policy wonk world. But what about in the real political world? The good news is that a carbon tax is not “cap-and-trade.” ... But if conservatives were able to tarnish cap-and-trade as “cap-and-tax,” it surely will be considerably easier to label a tax – as a tax! Also, note that Romney’s stated opposition and Obama’s silence extend beyond disdain for cap-and-trade per se. Rather, they cover all carbon-pricing regimes.

So as a possible new front in the climate policy wars, I remain very skeptical that an explicit carbon tax proposal will gain favor in Washington, no matter what the outcome of the election. ...

I would personally be delighted if a carbon tax were politically feasible in the United States, or were to become politically feasible in the future. But I’m forced to conclude that much of the current enthusiasm about carbon taxes in the academic and broader policy-wonk community in the wake of the defeat of cap-and-trade is – for the time being, at least – largely a manifestation of the grass looking greener across the street.

Why Aren't Politicians Talking about Climate Change?

As I'm waiting to board a plane, this surprised me -- promising to address climate change is a vote getter?:

Why Aren't Politicians Listening to Joe Romm About Climate Change?, by Chris Mooney, The Atlantic: He's been called "America's fiercest climate blogger." ... Romm has called Obama's failure to speak out about global warming, loudly and often, his "biggest communications mistake."

Now, a raft of new polls are showing that this issue has the potential to move independent and swing voters... So we stopped to chat with Romm ... about his unusual take on this subject. ...

Do you think this has always been true -- that climate change has always been a potential political winner -- or has it become more true over time?...

There's no question that the Obama team has gotten a misimpression that this is not a winning issue. And that I think is based on some rather questionable analysis done years ago, that basically said, "if you only present the doom and gloom case, you turn some people off." But nobody really does that -- nobody I know does that. ...

The polling data seems clear: This is a classic wedge issue that separates conservatives not just from progressives, but also from moderates and independents. So you know, we can spend a lot of time being puzzled about why this administration does bizarre messaging. If you talk to communications experts, many will say this administration is not great at it. You can get upset about President Obama not bringing up climate change, but this is not an administration that's good at communicating -- and this is just one of the many areas that they mistakenly downplay. ...

 

'Primetime Fox News And WSJ Editorial Climate Coverage Mostly Wrong'

Climate scientists document News Corporation's distortions on climate change:

Brenda Ekwurzel is a climate scientist with the Union of Concerned Scientists. She announced in New York City on September 21st the results of an analysis of climate change coverage at two major properties of the News Corporation, the Fox News Channel and the Wall Street Journal.

“What we found in our analysis was that a staggering 93 percent of all occurrences in the last six months in the prime time news of Fox News were misleading occurrences of climate science. Okay, for the Wall Street Journal opinion section in the last year, we found a surprising 81 percent of the occurrences were misleading. And of the accurate ones, these were all letters to the editor that were submitted in response to misrepresentations in editorials or other letters. So, a broad swath of News Corporation viewers and readership are being misled about the science.”

Wind Power

Is wind power the answer?:

Wind could meet many times world's total power demand by 2030, researchers say, EurekAlert: In a new study, researchers at Stanford University's School of Engineering and the University of Delaware developed the most sophisticated weather model available to show that not only is there plenty of wind over land and near to shore to provide half the world's power, but there is enough to exceed total demand by several times if need be...

The new paper contradicts two earlier studies that said wind potential falls far short of the aggressive goal because each turbine steals too much wind energy from other turbines, and that turbines introduce harmful climate consequences that would negate some of the positive aspects of renewable wind energy. ...

Among the most promising things the researchers learned is that there is a lot of potential in the wind — hundreds of terawatts. At some point, however, the return on building new turbines plateaus, reaching a level in which no additional energy can be extracted even with the installation of more turbines.

"Each turbine reduces the amount of energy available for others," Archer said. The reduction, however, becomes significant only when large numbers of turbines are installed, many more than would ever be needed.

"And that's the point that was very important for us to find," Archer said. ...

"We're not saying, 'Put turbines everywhere,' but we have shown that there is no fundamental barrier to obtaining half or even several times the world's all-purpose power from wind by 2030. The potential is there, if we can build enough turbines," said Jacobson.

Knowing that the potential exists, the researchers turned their attention to how many turbines would be needed to meet half the world's power demand — about 5.75 terawatts — in a 2030 clean-energy economy. ...

Archer and Jacobson showed that four million, five-megawatt turbines operating at a height of 100 meters could supply as much 7.5 terawatts of power — well more than half the world's all-purpose power demand — without significant negative affect on the climate.  ...

In terms of surface area, Jacobson and Archer would site half the four million turbines over water. The remaining two million would require a little more than one-half of one percent of the Earth's land surface — about half the area of the State of Alaska. However, virtually none of this area would be used solely for wind, but could serve dual purposes as open space, farmland, ranchland, or wildlife preserve.

Rather than put all the turbines in a single location, Archer and Jacobson say it is best and most efficient to spread out wind farms in high-wind sites across the globe — the Gobi Desert, the American plains and the Sahara for example.

"The careful siting of wind farms will minimize costs and the overall impacts of a global wind infrastructure on the environment," said Jacobson. "But, as these results suggest, the saturation of wind power availability will not limit a clean-energy economy."

[Brad Plumer has more.]

'Global Warming Has a Fairly Simple and Cheap Technical Solution'

Robert Frank:

Carbon Tax Silence, Overtaken by Events, by Robert Frank, Commentary, NY Times: ...Mitt Romney ... has been equivocal about whether rising temperatures are caused by human action. But he has been adamant that uncertainty about climate change rules out policy intervention. ...

Climatologists are the first to acknowledge that theirs is a highly uncertain science. The future might be better than they think. Then again, it might be much worse. Given that risk, policy makers must weigh the potential cost of action against the potential cost of inaction. And even a cursory look at the numbers makes a compelling case for action. ...

The good news is that we could insulate ourselves from catastrophic risk at relatively modest cost by enacting a steep carbon tax. ... A carbon tax would also serve two other goals. First, it would help balance future budgets. ... If new taxes are unavoidable, why not adopt ones that ... make the economy more efficient? By reducing harmful emissions, a carbon tax fits that description.

A second benefit would occur if a carbon tax were ... phased in gradually, only after the economy had returned to full employment. High unemployment persists in part because businesses, sitting on mountains of cash, aren’t investing it... News that a carbon tax was coming would create a stampede to develop energy-saving technologies. ...

Some people argue that a carbon tax would do little good unless it were also adopted by China and other big polluters. It’s a fair point. But access to the American market is a potent bargaining chip. The United States could ... tax imported goods in proportion to their carbon dioxide emissions if exporting countries failed to enact carbon taxes at home.

In short, global warming has a fairly simple and cheap technical solution. ...

Update: I didn't do a very good job of highlighting Robert Frank's point that we shouldn't "expect to hear much about climate change at the Republican and Democratic conventions," but "Many climate scientists ... are now pointing to evidence linking rising global temperatures to the extreme weather we’re seeing around the planet." Thus, "Extreme weather is already creating enormous human suffering, and "If the recent meteorological chaos drives home the threat of climate change and prompts action, it may ultimately be a blessing in disguise."

Our Not So Fishy Future

North American freshwater fish diversity is in decline:

North American freshwater fishes race to extinction, EurekAlert: North American freshwater fishes are going extinct at an alarming rate compared with other species, according to an article in the September issue of BioScience. The rate of extinctions increased noticeably after 1950, although it has leveled off in the past decade. The number of extinct species has grown by 25 percent since 1989.

The article, by Noel M. Burkhead of the US Geological Survey, examines North American freshwater fish extinctions from the end of the 19th Century to 2010, when there were 1213 species in the continent, or about 9 percent of the Earth's freshwater fish diversity. At least 57 North American species and subspecies, and 3 unique populations, have gone extinct since 1898, about 3.2 percent of the total. Freshwater species generally are known to suffer higher rates of extinction than terrestrial vertebrates. ...  Burkhead concludes that between 53 and 86 species of North American freshwater fishes are likely to have gone extinct by 2050, and that the rate of extinction is now at least 877 times the background extinction rate over geological time.

'U.S. Ethanol Policies Set to Reach Their Illogical Conclusion'

Why is the US selling Brazil two million gallons of ethanol at the same time it is importing more ethanol than that from Brazil?:

Running on Empty: U.S. ethanol policies set to reach their illogical conclusion, by Timothy Wise: I’m as cynical as the next policy wonk, but sometimes even I am surprised at the perverse outcomes of some of those policies. Take the bizarre scenario outlined in the new agricultural outlook report from the FAO and the OECD regarding the projected rise in ethanol trade – ethanol traded for ethanol – between the United States and Brazil. That’s right, 6.3 billion gallons a year sloshing between the world’s pre-eminent ethanol producers by 2021. And all in the name of the environment, without a single drop helping people or the planet.

Why would the United States, which now devotes 40% of its corn crop to the production of ethanol, import more than 4 billion gallons of ethanol from Brazil? And why would Brazil at the same time import a projected 2 billion gallons from the U.S.? Couldn’t we just save all those transactions costs and shipping-related greenhouse gas emissions by keeping our ethanol and cutting our projected ethanol imports from Brazil in half?

Not if your goal is to game the U.S. biofuel mandate.

The U.S. Renewable Fuel Standard, passed in 2007 and known as RFS2, includes a mandate for 36 billion gallons of renewable fuel use by 2022, with a nested set of mandates for different types of biofuels. Conventional or first-generation biofuels, such as ethanol from corn, have limited environmental benefits, with supposed reductions in greenhouse gas (GHG) emissions of about 20%. Congress wisely set the mandate such that the majority of the 36 billion-gallon mandate should be met by “advanced biofuels” with a GHG score of 50% or better in terms of reductions.

Well, advanced biofuel production in the United States isn’t going so well. ... At this point, all we produce is a whole lot of corn ethanol, and we are already nearing the technical limit of 15 billion gallons for non-advanced biofuels.

Fortunately for Brazilian ethanol producers..., the renewable fuel mandate can be met to a significant extent by the use of “other” advanced biofuels. Even though Congress was sold the RFS on the promise of energy independence, those “other biofuels” do not have to be produced in the United States. (In fact, mandating U.S. sourcing could have been subject to a WTO challenge.) Brazil’s sugarcane-based ethanol is considered advanced, with a GHG-reduction score of 50% despite widespread concerns about a range of other social and environmental impacts. ...

Under the FAO-OECD’s baseline scenario, Brazil would import 2 billion gallons of corn ethanol from the United States. Why, if it’s a major ethanol exporter and it produces more environmentally sustainable ethanol? To make up for the domestic shortfall created by its exports to the U.S., and to meet its own rising demand from its expanding fleet of flex-fuel cars. They’ll take our low-grade corn ethanol if they can get a higher price for their sugar-based equivalent.

Talk about perverse. It’s bad enough that we meet our environmental goals not through good old American know-how but by buying it from someone else. Then we turn around and sell them an environmentally inferior equivalent at a cheaper price.

In the process, another round in the food-fuel fight will be won by the fuels, with ethanol demand continuing to put upward pressure on corn prices globally. The FAO-OECD report contains strong warnings on biofuels’ impacts on food prices, and it went to press even before drought parched the U.S. corn belt. They projected stable or slightly declining prices in 2012 and forward. Instead, corn and soybean prices are hitting historic highs and the world is staring down the loaded barrels of the third major spike in commodities prices in the last five years.

Unfortunately, the powers that be seem to have learned nothing from the first two. They certainly haven’t learned that it’s still a bad idea to put food in our cars.

For more, see Wise’s coauthored report, “Resolving the Food Crisis,” and his report for ActionAid, “Biofueling Hunger.”

And beyond the "perverse" influence of the powers behind biofuels, Paul Krugman notes the corrupting influence of Big Oil and Big Coal:

VSPs of Energy: David Roberts has an interesting post about how the “experts” massively underestimated the potential for growth in renewable energy: wind and solar have grown enormously faster than the Very Serious People, energy sector, predicted circa 2000. He links this to the somewhat related tendency of the alleged experts to predict huge costs from efforts at energy conservation, huge costs that keep on not materializing.

Roberts suggests that it’s because conventionally-minded experts aren’t in touch with the potential of technologies that are (a) new and (b) distributed, representing choices by millions of players as opposed to a few big corporations.

Maybe. But I’d place more emphasis on a more cynical view: capture, both crude and subtle, by existing fossil-fuel interests (with nuclear power, another big business venture, somewhat similar).

It should be obvious that Big Oil and Big Coal have a stake in having the public believe that there is no alternative to ever more drilling, digging, and burning. And who employs, funds, and generally shapes the careers of mainstream energy “experts”? Who actually has a seat at the table when international organizations are putting together their scenarios?

It doesn’t have to be raw corruption, although there’s that too. It can instead be a matter of creating a mindset. And a lot of that mindset involves the sense that serious, hard-headed men think in terms of big extractive projects, that solar, wind, and conservation are hippie stuff — a sense that persists even in the teeth of contrary evidence.

The VSPs strike again.

"An Important Property of Cap-and-Trade"

Another quick one while I wait for a connection at the SF airport --- Robert Stavins explains the independence property for cap-and-trade systems. This property "allows equity and efficiency concerns to be separated. In particular, a government can set an overall cap of pollutant emissions (a pollution reduction goal) and leave it up to a legislature to construct a constituency in support of the program by allocating shares of the allowances to various interests, such as sectors and geographic regions, without affecting either the environmental performance of the system or its aggregate social costs":

Two Notable Events Prompt Examination of an Important Property of Cap-and-Trade, by Robert Stavins: ...In our just-published article, “The Effect of Allowance Allocations on Cap-and-Trade System Performance,” [Robert] Hahn and I ... focused on an idea that is closely related to the Coase theorem, namely, that the market equilibrium in a cap-and-trade system will be cost-effective and independent of the initial allocation of tradable rights (typically referred to as permits or allowances). That is, the overall cost of achieving a given emission reduction will be minimized, and the final allocation of permits will be independent of the initial allocation, under certain conditions (conditional upon the permits being allocated freely, i.e., not auctioned). We call this the independence property. It is closely related to a core principle of general equilibrium theory (Arrow and Debreu 1954), namely, that when markets are complete, outcomes remain efficient even after lump-sum transfers among agents.

The Practical Political Importance of the Independence Property

We were interested in the independence property because of its great political importance.  The reason why this property is of such great relevance to the practical development of public policy is that it allows equity and efficiency concerns to be separated. In particular, a government can set an overall cap of pollutant emissions (a pollution reduction goal) and leave it up to a legislature to construct a constituency in support of the program by allocating shares of the allowances to various interests, such as sectors and geographic regions, without affecting either the environmental performance of the system or its aggregate social costs.  Indeed, this property is a key reason why cap-and-trade systems have been employed and have evolved as the preferred instrument in a variety of environmental policy settings.

In Theory, Does the Property Always Hold?

Because of the importance of this property, we examined the conditions under which it is more or less likely to hold — both in theory and in practice.  In short, we found that in theory, a number of factors can lead to the independence property being violated. These are particular types of transaction costs in cap-and-trade markets; significant market power in the allowance market; uncertainty regarding the future price of allowances; conditional allowance allocations, such as output-based updating-allocation mechanisms; non-cost-minimizing behavior by firms; and specific kinds of regulatory treatment of participants in a cap-and-trade market.

In Reality, Has the Property Held?

Of course, the fact that these factors can lead to the violation of the independence property does not mean that in practice they do so in quantitatively significant ways.  Therefore, Hahn and I also carried out an empirical assessment of the independence property in past and current cap-and-trade systems: lead trading; chlorofluorocarbons (CFCs) under the Montreal Protocol; the sulfur dioxide (SO₂) allowance trading program; the Regional Clean Air Incentives Market (RECLAIM) in Southern California; eastern nitrogen oxides (NO_X) markets; the European Union Emission Trading Scheme (EU ETS); and Article 17 of the Kyoto Protocol.

I encourage you to read our article, but, a quick summary of our assessment is that we found modest support for the independence property in the seven cases we examined (but also recognized that it would surely be useful to have more empirical research in this realm).

Politicians Have Had it Right

That the independence property appears to be broadly validated provides support for the efficacy of past political judgments regarding constituency building through legislatures’ allowance allocations in cap-and-trade systems. Governments have repeatedly set the overall emissions cap and then left it up to the political process to allocate the available number of allowances among sources to build support for an initiative without reducing the system’s environmental performance or driving up its cost.

This success with environmental cap-and-trade systems should be contrasted with many other public policy proposals for which the normal course of events is that the political bargaining that is necessary to develop support reduces the effectiveness of the policy or drives up its overall cost.  So, the independence property of well-designed and implemented cap-and-trade systems is hardly something to be taken for granted.  It is of real political importance and remarkable social value.

"A Couple of Points about Climate Change"

About to travel home and only have time for quick posts (I've been gone for over four weeks, except for four days in between trips, and am anxious to get there):

Dicing With The Climate, by Paul Krugman: Via Michael Roberts, a new paper (pdf) by James Hansen and associates that helps clear up a couple of points about climate change.

The first is the relationship between extreme weather events and climate change. The normal, cautious thing is to say that there’s no way to attribute any particular event, like a heat wave in the Ukraine, to global warming — and news media have basically been bullied by this argument into rarely mentioning climate change even when reporting on extreme weather. But Hansen et al make an important point: this argument is much weaker when we’re talking about really extreme events, like temperatures more than 3 standard deviations above historical norms. Such events would almost never happen if there weren’t a rising trend in global temperatures; so when they become quite common, as they have, it’s fair to call them evidence of warming.

The second point is how we know that climate change is a bad thing — a question I sometimes get asked. The questioners wonder why the fact that, say, more of Canada becomes agriculturally viable doesn’t offset the damage in places that get too hot.

My first-pass answer is that we have a global economy that is adapted to historically normal climate — not just in terms of what is grown where, but in terms of where we locate our cities. In the long run, after a couple of centuries’ worth of urban development and infrastructure has been drowned by rising sea levels and/or made useless because previously habitable regions need to be abandoned, we might be able to reconstruct an equally productive economy; but in the long run …

But Hansen et al make a stronger point: life as we know it evolved to fit the historical range of planetary temperatures. In the long run it might be able to adapt to a changed world — but now we’re talking millions of years.

In the long run, we are all extinct.

See also: The Climate Change Tipping Point.

Climate Change Skepticism

Here's the climate change skepticism talk that had me Tweeting so furiously (abstract here):

Ivar Giaever: The Strange Case of “Global Warming”

Here's the prebuttal (the talk before this one). Near the end, Mario Molina is very direct about the next speaker -- he makes it clear that he thinks the arguments are nonsense and coming from a non-expert, the word "ashamed" is used, and so on:

Mario J. Molina: The Science and Policy of Climate Change

See also:

Photosynthesis, Biomass, Biofuels: Conversion Efficiencies and Consequences, by Hartmut Michel (he ends up recommending photovoltaic cells and batteries to power cars rather than biogas or biofuels which are much less efficient)

and:

Atmospheric Chemistry and Climate in the Anthropocene, by Paul J. Crutzen

(the last talk is a bit dry).

It's interesting to see Nobel Prize winners in physics accusing each other of engaging in religion/politics rather than science, etc., etc.  It all sounds quite familiar.

[Update: More discussion of today's session here.]

The Strange Case of 'Global Warming'???

Oh my -- am I reading this correctly? This is an abstract from one of the talks tomorrow (and I hope the science is more accurate than the date given for the talk, it should be July 2, not July 3):

The Strange Case of "Global Warming", by Ivar Giaever: Lecture: Monday, 3 July, 12.00 hrs

In 2008 I participated on a panel at the Lindau meeting discussing "Global Warming" and to prepare, I looked into the subject using the internet. I found that the general belief is that the average surface temperature over the whole earth for a whole year has increased from ~288 oK to 288.8 oK in roughly 150 years, i.e. 0.3% and that it is due to increased CO2. If this is true, it means to me that the temperature has been amazingly stable.

In the same time period the number of people has increased in the world from 1.5 billions to over 7 billions. Is it possible that all the paved roads and cut down forests have had an effect on the climate?

The American Physical Society think differently, however, as its public position is:

Emissions of greenhouse gases from human activities are changing the atmosphere in ways that affect the Earth’s climate. Greenhouse gases include carbon dioxide as well as methane, nitrous oxide and other gases. They are emitted from fossil fuel combustion and a range of industrial and agricultural processes.

The evidence is incontrovertible: Global warming is occurring. If no mitigating actions are taken, significant disruptions in the Earth’s physical and ecological systems, social systems, security and human health are likely to occur. We must reduce emissions of greenhouse gases beginning now.

I believe that nothing in science is "incontrovertible" thus, in my view, APS has become a political (or religious?) society. Consequently, I resigned from APS in the fall of 2011.

In this talk I will explain why I became concerned about the climate, and terrified by the one sided propaganda in the media, In particular I am worried about all the money wasted on alternate energies, when so many children in the world go hungry to bed.

If you still believe that global warming is occurring and that the main cause is CO2 when I have finished this talk, I urge you to argue for two things to save the world:

1. Introduction of nuclear power

2. Limit the population increase by allowing only one child/woman

Surprise! Fox News highlighted this.

This lecture is just before the one above:

The Science and Policy of Climate Change, by Mario J. Molina: Lecture: Monday, 3 July, 11.30 hrs

Climate change is the most serious environmental challenge facing society in the 21st century. The basic science is clear: the International Panel on Climate Change concluded that there is more than 90% probability that human activities are causing the observed changes in the Earth’s climate in recent decades. The average temperature of the Earth’s surface has increased so far by about 0.8 degrees Celsius since the Industrial Revolution, and the frequency of extreme weather events such as droughts, floods and intense hurricanes is also increasing, most likely as a consequence of this temperature change. There are scientific uncertainties that remain to be worked out, connected with issues such as the feedback effects of clouds and aerosols. Nevertheless, the consensus among experts is that the risk of causing dangerous changes to the climate system increases rapidly if the average temperature rises more than two or three degrees Celsius. Society faces an enormous challenge to effectively reduce greenhouse gas emissions to avoid such dangerous interference with the climate system. This goal can only be achieved by taking simultaneously measures such as significantly increasing energy efficiency in the transportation, building, industrial and other sectors, using renewable energy sources such as solar, wind, geothermal and biomass, and possibly developing and using safer nuclear energy power plants.

These are Nobel Prize winners in physics. I thought physics and its adherence to the scientific method was supposed to be free of the kinds of controversy over models, politics, etc. that plagues economics.

Have Blog, Will Travel

Short travel day by train. Next stop: Lindau, Germany for this year's Lindau Nobel Laureate Meeting dedicated to Physics.

Here's the program for the firsmorning:

09.00 Plenary Lecture Main Hall
Brian P. Schmidt: Observations, and the Standard Model of Cosmology

09.30 Plenary Lecture Main Hall
John C. Mather: Seeing Farther with New Telescopes

10.00 Plenary Lecture Main Hall
George F. Smoot: Mapping the Universe in Space and Time

11.00 Plenary Lecture Main Hall
Paul J. Crutzen: Atmospheric Chemistry and Climate in the Anthropocene

11.30
Plenary Lecture
Main Hall
Mario J. Molina
The Science and Policy of Climate Change

12.00 Plenary Lecture Main Hall
Ivar Giaever: The Strange Case of “Global Warming”

12.30 Plenary Lecture Main Hall
Hartmut Michel: Photosynthesis, Biomass, Biofuels: Conversion Efficiencies and Consequences

I'm particularly interested in the sessions on climate change.

 

Elephant Underpass

Elephant populations are becoming increasingly fragmented:

Road to Recovery?, National Geographic: An African elephant approaches an underpass beneath the busy Nanyuki-Meru road in northern Kenya...

Photograph courtesy Lewa Wildlife Conservancy

The first of its kind for elephants, the underpass will ideally provide a safe corridor for the large mammals to move throughout the Mount Kenya region (map), where highways, fences, and farmlands have split elephant populations, according to Geoffrey Chege, chief conservation officer of the Lewa Wildlife Conservancy, a Kenya-based nonprofit.

Without the underpass, animals that try to move between isolated areas often destroy fences and crops—leading to conflicts with people.

Since its completion in late 2010, the underpass has been a "tremendous success"—hundreds of elephants have been spotted walking through the corridor...

Photograph courtesy Lewa Wildlife Conservancy

At first, only adult male elephants ventured through the underpass, and then only at night.

But before long whole family groups were passing through during the day...

Image courtesy Lewa Wildlife Conservancy

Currently the region's elephant populations are divided into two isolated groups: 2,000 animals in Mount Kenya and 7,500 in the Samburu-Laikipia ecosystem, according to the Lewa Wildlife Conservancy.

The elephant underpass ... could improve the genetic health of northern Kenya elephants, since more genes will mix as the animals move into various territories and find new mates.

The corridor may also mean that elephants will move around more, reducing pressure on habitats—and possibly helping other species that use the same resources, such as the black rhinoceros, according to the conservancy. ...

Disbelief in Climate Science: Is It Stupidity?

Tim Haab:

Study rules out stupidity as a cause of disbelief in climate science*:

And the Yale research published today reveals that if Americans knew more basic science and were more proficient in technical reasoning it would still result in a gap between public and scientific consensus.

Indeed, as members of the public become more science literate and numerate, the study found, individuals belonging to opposing cultural groups become even more divided on the risks that climate change poses.

Funded by the National Science Foundation, the study was conducted by researchers associated with the Cultural Cognition Project at Yale Law School and involved a nationally representative sample of 1500 U.S. adults.

"The aim of the study was to test two hypotheses," said Dan Kahan, Elizabeth K. Dollard Professor of Law and Professor of Psychology at Yale Law School and a member of the study team. "The first attributes political controversy over climate change to the public's limited ability to comprehend science, and the second, to opposing sets of cultural values. The findings supported the second hypothesis and not the first," he said.

"Cultural cognition" is the term used to describe the process by which individuals' group values shape their perceptions of societal risks. It refers to the unconscious tendency of people to fit evidence of risk to positions that predominate in groups to which they belong.

The results of the study were consistent with previous studies that show that individuals with more egalitarian values disagree sharply with individuals who have more individualistic ones on the risks associated with nuclear power, gun possession, and the HPV vaccine for school girls.

via www.enn.com

*Unless you classify stubbornness as stupidity.

Climate Change and Political Polarization

Robert Stavins has always seemed optimistic about the potential for action on climate change, but there seems to be a shift toward a more pessimistic posture. After making the case for a market-based regulatory approach (as opposed to, for example, mandates), which is worth reading too, he says:

Can Market Forces Really be Employed to Address Climate Change?, by Robert Stavins: ...The U.S. political response to possible market-based approaches to climate policy has been and will continue to be largely a function of issues and structural factors that transcend the scope of environmental and climate policy. Because a truly meaningful climate policy – whether market-based or conventional in design – will have significant impacts on economic activity in a wide variety of sectors and in every region of the country, it is not surprising that proposals for such policies bring forth significant opposition, particularly during difficult economic times.

In addition, U.S. political polarization – which began some four decades ago and accelerated during the economic downturn – has decimated what had long been the key political constituency in Congress for environmental (and energy) action: namely, the middle, including both moderate Republicans and moderate Democrats. Whereas congressional debates about environmental and energy policy have long featured regional politics, they are now largely partisan. In this political maelstrom, the failure of cap-and-trade climate policy in the Senate in 2010 was collateral damage in a much larger political war.

Better economic times may reduce the pace – if not the direction – of political polarization. And the ongoing challenge of large federal budgetary deficits may at some point increase the political feasibility of new sources of revenue. When and if this happens, consumption taxes – as opposed to traditional taxes on income and investment – could receive heightened attention; primary among these might be energy taxes, which, depending on their design, can function as significant climate policy instruments.

Many environmental advocates would respond that a mobilizing event will surely precipitate U.S. climate policy action.  But the nature of the climate change problem itself helps explain much of the relative apathy among the U.S. public and suggests that any such mobilizing events may come “too late.”

Nearly all our major environmental laws have been passed in the wake of highly publicized environmental events or “disasters,” including the spontaneous combustion of the Cuyahoga River in Cleveland, Ohio, in 1969, and the discovery of toxic substances at Love Canal in Niagara Falls, New York, in the mid-1970s. But note that the day after the Cuyahoga River caught on fire, no article in The Cleveland Plain Dealer commented that the cause was uncertain, that rivers periodically catch on fire from natural causes. On the contrary, it was immediately apparent that the cause was waste dumped into the river by adjacent industries. A direct consequence of the observed “disaster” was, of course, the Clean Water Act of 1972.

But climate change is distinctly different. Unlike the environmental threats addressed successfully in past U.S. legislation, climate change is essentially unobservable to the general population. We observe the weather, not the climate. Until there is an obvious and sudden event – such as a loss of part of the Antarctic ice sheet leading to a dramatic sea-level rise – it is unlikely that public opinion in the United States will provide the bottom-up demand for action that inspired previous congressional action on the environment over the past forty years.

But then some of the optimism returns:

Despite this rather bleak assessment of the politics of climate change policy in the United States, it is really much too soon to speculate on what the future will hold for the use of market-based policy instruments, whether for climate change or other environmental problems.

On the one hand, it is conceivable that two decades (1988–2008) of high receptivity in U.S. politics to cap-and-trade and offset mechanisms will turn out to be no more than a relatively brief departure from a long-term trend of reliance on conventional means of regulation.

On the other hand, it is also possible that the recent tarnishing of cap-and-trade in national political dialogue will itself turn out to be a temporary departure from a long-term trend of increasing reliance on market-based environmental policy instruments. Perhaps the ongoing interest in these policy mechanisms in California (Assembly Bill 32), the Northeast (Regional Greenhouse Gas Initiative), Europe, and other countries will eventually provide a bridge to a changed political climate in Washington.

To me, one of the most frustrating elements of this is so-called market defenders in the GOP standing in the way of policies that would internalize externalities and improve how these markets function. Despite what Republican "market defenders" say, in the end distribution -- who gets what -- is more important than efficiency for this group. They talk about efficiency, growth, blah, blah, blah, but in the end protecting the ability of supporters to earn high profits in finance, energy -- wherever -- carries the day over regulations that could make these markets work better.

"Game Over for the Climate"

I think it would be faid to say that James Hanson is not a tar sands advocate:

Game Over for the Climate, by James Hansen, Commentary, New York Times: Global warming isn’t a prediction. It is happening. That is why I was so troubled to read a recent interview with President Obama ... in which he said that Canada would exploit the oil in its vast tar sands reserves “regardless of what we do.”

If Canada proceeds, and we do nothing, it will be game over for the climate..., concentrations of carbon dioxide in the atmosphere eventually would reach levels higher than in the Pliocene era, more than 2.5 million years ago, when sea level was at least 50 feet higher than it is now. ... Sea levels would rise and destroy coastal cities. Global temperatures would become intolerable. Twenty to 50 percent of the planet’s species would be driven to extinction. Civilization would be at risk.

That is the long-term outlook. But near-term, things will be bad enough. Over the next several decades, the Western United States and the semi-arid region from North Dakota to Texas will develop semi-permanent drought... Economic losses would be incalculable. ...

If this sounds apocalyptic, it is. This is why we need to reduce emissions dramatically. President Obama has the power not only to deny tar sands oil additional access to Gulf Coast refining,... but also to encourage economic incentives to leave tar sands and other dirty fuels in the ground. ...

We should impose a gradually rising carbon fee,... then distribute 100 percent of the collections to all Americans ... every month. The government would not get a penny. ... Not only that, the reduction in oil use resulting from the carbon price would be nearly six times as great as the oil supply from the proposed pipeline from Canada, rendering the pipeline superfluous...

But instead..., the world’s governments are forcing the public to subsidize fossil fuels with hundreds of billions of dollars per year. ...

President Obama speaks of a “planet in peril,” but he does not provide the leadership needed to change the world’s course. ... The science of the situation is clear — it’s time for the politics to follow. ... Every major national science academy in the world has reported that global warming is real, caused mostly by humans, and requires urgent action. The cost of acting goes far higher the longer we wait — we can’t wait any longer to avoid the worst and be judged immoral by coming generations.

The Clean Water Act Worked

Pollution levels off the California coast have dropped significantly since the passage of the Clean Water Act (i.e., contra Repulicans, government is not always the problem):

First evaluation of the Clean Water Act's effects on coastal waters reveals major successes, EurekAlert: Landmark legislation helped clean up LA's coastal waters over the past 40 years, study indicates

Levels of copper, cadmium, lead and other metals in Southern California's coastal waters have plummeted over the past four decades, according to new research from USC.

Samples taken off the coast reveal that the waters have seen a 100-fold decrease in lead and a 400-fold decrease in copper and cadmium. Concentrations of metals in the surface waters off Los Angeles are now comparable to levels found in surface waters along a remote stretch of Mexico's Baja Peninsula.

Sergio Sañudo-Wilhelmy, who led the research team, attributed the cleaner water to sewage treatment regulations that were part of the Clean Water Act of 1972 and to the phase-out of leaded gasoline in the 1970s and 1980s. ...

Lower Growth Can Be Better Than Higher Growth

Whenever the subject of carbon taxes is raised, the inevitable response from the political right is that such a tax would lower economic growth and employment, and therefore we shouldn't do this (the "it will kill growth and jobs" objection is a standard reply to policies the right doesn't like). Lower growth is, of course, worse than higher growth.

But that's not necessarily true. If firms are allowed to pass some of the costs of production to others in the form of externalities, then it's likely that firms will grow faster than is optimal when all costs are internalized. If we force these firms to internalize the costs of production -- to pay the full costs of production, including in pollution/environmental costs -- then instead of moving away from the optimal growth path to a lower, suboptimal path, we would be moving from higher than optimal growth toward the optimum. More is not better when more depends upon being able to pass environmental costs costs off to others.

Links for 2012-04-08

• Monetary Mandate Mischief - Paul Krugman
• Welfare Limits Left Poor Adrift as Recession Hit - NYTimes.com
• Causal realism and historical explanation - UnderstandingSociety
• The Ex Ante Game Versus the Interim Game - Leisure of the Theory Class
• Service export sophistication and economic growth - Vox EU
• America's hall of mirrors recovery - Robert Reich

"Why Gas Prices Are Out of Any President’s Control"

One more quick one from the airport -- Richard Thaler attempts to nudge people away from the idea that the president can control gas prices (and he calls for an increase in the gas tax):

Why Gas Prices Are Out of Any President’s Control, by Richard Thaler, Commentary, NY Times: Everyone knows it’s dangerous to ingest gasoline or to inhale its fumes. But I am starting to believe that merely thinking about the price of gasoline can damage cognitive processing. Thus I may be risking some of my precious few remaining brain cells by writing about that topic.

Here is a one-item test to see whether you are guilty of cloudy thinking about gas prices: Do you believe that they are something a president can control? Many Americans believe that the answer is yes, but any respectable economist will tell you that the answer is no.

Consider a recent poll of a panel of economists conducted by the University of Chicago Booth School of Business, where I teach. ... The 41 panel members were asked whether they agreed with the following statement: “Changes in U.S. gasoline prices over the past 10 years have predominantly been due to market factors rather than U.S. federal economic or energy policies.”

Not a single member of the panel disagreed with the statement.

Here is why: Oil is a global market in which America is a big consumer but a small supplier. ...[continue reading]...

"Global Warming Close to Becoming Irreversible"

The skeptics have decided that evidence isn't really evidence -- it's a grand conspiracy of thousands to fool the public -- so no amount of evidence will matter. Nevertheless, this is worth noting:

Global Warming Close to Becoming Irreversible, by Nina Chestney, Scientific American: The world is close to reaching tipping points that will make it irreversibly hotter ... scientists warned on Monday. ... As emissions grow,... the world is close to reaching thresholds beyond which the effects on the global climate will be irreversible ...

For ice sheets - huge refrigerators that slow down the warming of the planet - the tipping point has probably already been passed...

Most climate estimates agree the Amazon rainforest will get drier as the planet warms. Mass tree deaths caused by drought have raised fears it is on the verge of a tipping point, when it will stop absorbing emissions and add to them instead. Around 1.6 billion tons of carbon were lost in 2005 from the rainforest and 2.2 billion tons in 2010, which has undone about 10 years of carbon sink activity...

One of the most worrying and unknown thresholds is the Siberian permafrost, which stores frozen carbon in the soil away from the atmosphere. ... In a worst case scenario, 30 to 63 billion tons of carbon a year could be released by 2040, rising to 232 to 380 billion tons by 2100. This compares to around 10 billion tons of CO2 released by fossil fuel use each year.

Increased CO2 in the atmosphere has also turned oceans more acidic as they absorb it. In the past 200 years, ocean acidification has happened at a speed not seen for around 60 million years...

"What Should Trade Negotiators Negotiate About?"

Robert Skidelsky:

...The target of all versions of fair trade is “free trade,” and the most damaging attacks on FAIRTRADE have come from free traders. In Unfair Trade, a pamphlet published in 2008 by the Adam Smith Institute, Mark Sidwell argues that FAIRTRADE keeps uncompetitive farmers on the land, holding back diversification and mechanization. According to Sidwell, the FAIRTRADE scheme turns developing countries into low-profit, labor-intensive agrarian ghettos, denying future generations the chance of a better life.

This is without considering the effect that FAIRTRADE has on the poorest people in these countries – not farmers but casual laborers – who are excluded from the scheme by its expensive regulations and labor standards. In other words, FAIRTRADE protects farmers against their rivals and against agricultural laborers.

Consumers, Sidwell argues, are also being duped. Only a tiny proportion – as little as 1% – of the premium that we pay for a FAIRTRADE chocolate bar will ever make it to cocoa producers. Nor is FAIRTRADE necessarily a guarantee of quality: because producers get a minimum price for fair-trade goods, they sell the best of their crop on the open market.

But, despite its shaky economics, the fair-trade movement should not be despised. While cynics say that its only achievement is to make consumers feel better about their purchases – rather like buying indulgences in the old Catholic Church – this is to sell fair trade short. In fact, the movement represents a spark of protest against mindless consumerism, grass-roots resistance against an impersonal logic, and an expression of communal activism.

That justification will not convince economists, who prefer a dryer sort of reasoning. But it is not out of place to remind ourselves that economists and bureaucrats need not always have things their own way.

Not sure how much time I'll have -- I'm traveling today and have to meet a deadline along the way -- so let me turn the conversation over to someone who might know a bit about this topic, Paul Krugman:

What Should Trade Negotiators Negotiate About? A Review Essay, by Paul Krugman: If economists ruled the world, there would be no need for a World Trade Organization. The economist's case for free trade is essentially a unilateral case - that is, it says that a country serves its own interests by pursuing free trade regardless of what other countries may do. Or as Frederic Bastiat put it, it makes no more sense to be protectionist because other countries have tariffs than it would to block up our harbors because other countries have rocky coasts. So if our theories really held sway, there would be no need for trade treaties: global free trade would emerge spontaneously from the unrestricted pursuit of national interest. (Students of international trade theory know that there is actually a theoretical caveat to this statement: large countries have an incentive to limit imports - and exports - to improve their terms of trade, even if it is in their collective interest to refrain from doing so. This "optimal tariff" argument, however, plays almost no role in real-world disputes over trade policy.)

Fortunately or unfortunately, however, the world is not ruled by economists. The compelling economic case for unilateral free trade carries hardly any weight among people who really matter. If we nonetheless have a fairly liberal world trading system, it is only because countries have been persuaded to open their markets in return for comparable market-opening on the part of their trading partners. Never mind that the "concessions" trade negotiators are so proud of wresting from other nations are almost always actions these nations should have taken in their own interest anyway; in practice countries seem willing to do themselves good only if others promise to do the same.

But in that case why should the tits we demand in return for our tats consist only of trade liberalization? Why not demand that other countries match us, not only in what they do at the border, but in internal policies? This question has been asked with increasing force in the last few years. In particular, environmental advocates and supporters of the labor movement have sought with growing intensity to expand the obligations of WTO members beyond the conventional rules on trade policy, making adherence to international environmental and labor standards part of the required package; meanwhile, business groups have sought to require a "level playing field" in terms of competition policy and domestic taxation. Depending on your point of view, the idea that there must be global harmonization of standards on employment, environment, and taxation is either the logical next step in global trade negotiations or a dangerous overstepping of boundaries that threatens to undermine all the progress we have made so far.

In 1992 Columbia's Jagdish Bhagwati (one of the world's leading international trade economists) and Robert E. Hudec (an experienced trade lawyer and former official now teaching at Minnesota) brought together an impressive group of legal and economic experts in a three-year research project intended to address the new demands for an enlarged scope of trade negotiations. Fair Trade and Harmonization: Prerequisites for Free Trade? (Cambridge MA: MIT Press, 1996) is the result of that project. This massive two-volume collection of papers is unavoidably a bit repetitious. One also wonders why only economists and lawyers were involved - what happened to the political scientists? (More on that later). But the volumes contain a number of first-rate papers and offer a valuable overview of the debate.

In this essay I will not try to offer a comprehensive review of the papers; in particular I will give short shrift to those on competition and tax policy. Nor will I try to deal with the quite different question of how much coordination of technical standards - e.g. health regulations on food (remember the Eurosausage!), or safety regulations on consumer durables - is essential if countries are to achieve "deep integration". Instead, I will try to sort through what seem to be the main issues raised by new demands for international labor and environmental standards..

The economics and politics of free trade

In a way, the most interesting paper in the Bhagwati-Hudec volumes is interesting precisely because the author seems not to understand the logic of the economic case for free trade - and in his incomprehension reveals the dilemmas that practical free traders face. Brian Alexander Langille, a Canadian lawyer, points out correctly that domestic policies such as subsidies and regulations may influence a country's international trade just as surely as explicit trade policies such as tariffs and import quotas. Why then, he asks, should trade negotiations stop with policies explicitly applied at the border? He seems to view this as a deep problem with economic theory, referring repeatedly to the "rabbit hole" into which free traders have fallen.

But the problem free traders face is not that their theory has dropped them into Wonderland, but that political pragmatism requires them to imagine themselves on the wrong side of the looking glass. There is no inconsistency or ambiguity in the economic case for free trade; but policy-oriented economists must deal with a world that does not understand or accept that case. Anyone who has tried to make sense of international trade negotiations eventually realizes that they can only be understood by realizing that they are a game scored according to mercantilist rules, in which an increase in exports - no matter how expensive to produce in terms of other opportunities foregone - is a victory, and an increase in imports - no matter how many resources it releases for other uses - is a defeat. The implicit mercantilist theory that underlies trade negotiations does not make sense on any level, indeed is inconsistent with simple adding-up constraints; but it nonetheless governs actual policy. The economist who wants to influence that policy, as opposed to merely jeering at its foolishness, must not forget that the economic theory underlying trade negotiations is nonsense - but he must also be willing to think as the negotiators think, accepting for the sake of argument their view of the world.

What Langille fails to understand, then, is that serious free-traders have never accepted as valid economics the demand that our trade liberalization be matched by comparable market-opening abroad; and so they are not being inconsistent in rejecting demands for an extension of such reciprocity to domestic standards. If economists are sometimes indulgent toward the mercantilist language of trade negotiations, it is not because they have accepted its intellectual legitimacy but either because they have grown weary of saying the obvious or because they have found that in practice this particular set of bad ideas has led to pretty good results.

One way to answer the demand for harmonization of standards, then, is to go back to basics. The fundamental logic of free trade can be stated a number of different ways, but one particularly useful version - the one that James Mill stated even before Ricardo - is to say that international trade is really just a production technique, a way to produce importables indirectly by first producing exportables, then exchanging them. There will be gains to be had from this technique as long as world relative prices differ from domestic opportunity costs - regardless of the source of that difference. That is, it does not matter from the point of view of the national gains from trade whether other countries have different relative prices because they have different resources, different technologies, different tastes, different labor laws, or different environmental standards. All that matters is that they be different - then we can gain from trading with them.

This way of looking at things, among its other virtues, offers an en passant refutation of the instinctive feeling of most non-economists that a country that imposes strong environmental or labor standards will necessarily experience difficulties when it trades with other countries that are not equally high-minded. The point is that all that matters for the gains from trade are the prices at which you trade - it makes absolutely no difference what forces lie behind those prices. Suppose your country has been cheerfully exporting airplanes and importing clothing in return, believing that the comparative advantage of your trading partners in clothing is "fairly" earned through exceptional productive efficiency. Then one day an investigative journalist, hot in pursuit of Kathie Lee Gifford, reveals that the clothing is actually produced in 60-cent-an-hour sweatshops that foul the local air and water. (If they hurt the global environment, say by damaging the ozone layer, that is another matter - but that is not the issue).You may be outraged; but the beneficial trade you thought you had yesterday has not become any less economically beneficial to your country now that you know that it is based on these objectionable practices. Perhaps you want to impose your standards on these matters, but this has nothing to do with trade per se - and there are worse things in the world than low wages and local pollution to excite our moral indignation.

This back-to-basics case for rejecting calls for harmonization of standards is elaborated in two of the papers in Volume 1 of Bhagwati-Hudec: a discussion of environmental standards by Bhagwati and T.N. Srinivasan, and a discussion of labor standards by Drusilla Brown, Alan Deardorff, and Robert Stern. In each case the central theme is that neither the ability of a country to impose such standards nor its benefits from so doing depend in any important way on whether other countries do the same; so why not leave countries free to choose?

Bhagwati and Srinivasan also raise two other arguments on behalf of a laissez-faire approach to standards, arguments echoed by several other authors in the volume. The first is that nations may legitimately have different ideas about what is a reasonable standard. (The authors quote one environmentalist who asserts that "geopolitical boundaries should not override the word of God who directed Noah" to preserve all species, then drily note that "as two Hindus .. we find this moral argument culture-specific"). Moreover, even nations that share the same values will typically choose different standards if they have different incomes: advanced-country standards for environmental quality and labor relations may look like expensive luxuries to a very poor nation. Second, to the extent that nations for whatever reason choose different environmental standards, this difference, like any difference in preferences, actually offers not a reason to shun international trade but an extra opportunity to gain from such trade. It is very difficult to be more explicit about this without being misrepresented as an enemy of the environment - an excerpt from the entirely sensible memo along these lines that Lawrence Summers signed but did not write at the World Bank a few years ago is reprinted in my copy of The 776 Stupidest Things Ever Said - so it is left as an exercise for readers.

The back-to-basics argument against harmonization of standards, then, is completely consistent and persuasive. And yet it is also somehow unsatisfying. Perhaps the problem is that we know all too well how little success economists have had in convincing policymakers of the case for unilateral free trade. Why, then, should we imagine that restating that case yet again will be an effective argument against the advocates of international harmonization of standards? Confronted with the failure of the public to buy the classical case for free trade, and unwilling simply to preach the truth to each other, trade economists have traditionally followed one of two paths. Some try to give the skeptics the benefit of the doubt, attempting to find coherent models that make sense of their concerns. Others try to make sense not of the skeptics' ideas but their motives, attempting to seek guidance from models of political economy. The same two paths are followed in these volumes, with several papers following each approach.

Second-best considerations and the "race to the bottom"

The general theory of the second best tells us that if incentives are distorted in some markets, and for some reason these distortions cannot be directly addressed, policies in other markets should in principle take the distortions into account. For example, environmental economists have become sensitized to the likely interactions between pollution fees - designed to correct one distortion of incentives - with other taxes, which have nothing to do with environmental issues but which, because they distort incentives to work, save, and invest may crucially affect the welfare evaluation of any given environmental policy.

There is a long history of protectionist arguments along second-best lines. (Among Jagdish Bhagwati's seminal contributions to international trade theory was, in fact, his work showing that many critiques of free trade are really second-best arguments - and that the first-best response rarely involves protection). Here's an easy one: suppose that an industry generates negative environmental externalities that are not properly priced, and that international trade leads to an expansion of that industry in your country. Then that trade may indeed reduce national welfare (although of course trade may equally well have the opposite effect: it may cause your country to move out of "dirty" into "clean" industries, and thereby lead to large welfare gains). However, the advocates of international environmental and labor standards seem to be offering a more subtle argument. They seem to be claiming that an environmental (or labor) policy that would raise welfare in a closed economy - or that would raise world welfare if implemented by all countries simultaneously - will reduce national welfare if implemented unilaterally. Thus the independent actions of national governments in the absence of international standards on these issues can lead to a "race to the bottom", with global standards far too lax.

What sort of model might justify this fear? In an extremely clear paper in Volume 1, John D. Wilson gives the issue his (second) best shot, showing that international competition for capital - in a world in which the social return to capital exceeds its private return, for example due to capital taxation - could do the trick. Other things being the same, tighter environmental or labor regulation will presumably decrease the rate of return on investments, and thus any country which has a pre-existing tendency to attract too little capital will have an incentive to avoid such regulations; whereas a collective, international decision to impose higher standards would not lead to capital flight, since the capital would have nowhere to go.

Is this a clinching argument? Not necessarily. For one thing, like all second-best arguments it is very sensitive to tweaking of its assumptions. As Wilson points out, capital importation may have adverse as well as positive effects, especially from the point of view of an environment-conscious country. In that case a positive rate of taxation is appropriate - and if the actual rate of taxation is too low, countries may adopt excessively strong environmental standards in a "race to the top". If this seems implausible, Wilson reminds us of the NIMBY (not in my backyard) phenomenon in which no local jurisdiction is willing to be the site for facilities the public collectively needs to locate somewhere.

Even if you regard a race to the bottom as more likely than one to the top, there is still the question of whether such second-best arguments are really very important. This is doubtful, especially where environmental standards are concerned. The alleged impact of such standards on firms' location decisions looms large in the demands of activists who want these standards harmonized. But the chapter by Arik Levinson, surveying the evidence, finds little reason to think that international differences in these standards actually have much effect on the global allocation of capital.

So while it is possible to devise second-best models that offer some justification for demands for harmonization of standards, these models - on the evidence of this collection, at any rate - do not seem particularly convincing. The classical case for laissez-faire on national economic policies is surely not precisely right, but it does not seem wrong enough to warrant the heat now being generated over the issue of harmonization. Simply pointing this out, however, while important, does not make the phenomenon go away. So it is at least equally important to try to understand the political impulse behind demands for harmonization, and in particular to ask whether the political economy of standard-setting offers some indirect rationale for insisting on harmonization of such standards.

The political economy of standards

Consider - as Brown, Deardorff, and Stern do - a single industry, small enough to be analyzed using partial equilibrium, in which a country is considering imposing a new environmental or labor regulation that will raise production costs. As they point out, if the costs of the regulation are less than the social costs imposed by the industry in its absence, then it is worth doing regardless of whether other countries follow suit. But the distribution of gains between producers and consumers does depend on whether the action is unilateral or coordinated. If one country imposes a costly regulation while others do not, the world price will remain unchanged and all of the burden will fall on producers; if many countries impose the regulation, world prices will rise and some of the burden will be shifted to consumers.

So what? Well, it is a fact of life, presumably rooted in the public-goods character of political action, that trade policy tends to place a much higher weight on producers than on consumers. So even though the national welfare case for the regulation is not weakened at all by the fact that the good is traded, the practical political calculus of getting the regulation implemented could quite possibly depend on whether other countries agree to do the same. This suggests an alternative version of the "race to the bottom" story. The problem, one might argue, is not that countries have an incentive to set standards too low in a trading world. Rather, it is that politicians, who respond to the demands of special-interest groups, have such an incentive. And one might argue that this failure of the political market, rather than distortions in goods or factor markets, is what justifies demands for international harmonization of standards.

An environmentalist or defender of workers' rights might also make a related argument. He or she might say "You know that countries aren't in a zero-sum competition, and I know that they aren't, but the public and the politicians think they are - and industry lobbies consistently use that misconception as an argument against standards that we ought to have. So we need to set those standards internationally in order to neutralize that bogus but effective political ploy". It is very difficult for trade economists to reject this line of argument on principle. After all, it is very close to the reason why free-traders who know that the economic case for liberal trade is essentially unilateral are nonetheless usually staunch defenders of the GATT: trade negotiations may be based on a false theory, but by setting exporters as counterweights to producers facing import competition they nonetheless are politically crucial to maintaining more or less free trade. That is, the true purpose of international negotiations is arguably not to protect us from unfair foreign competition, but to protect us from ourselves. (When the United States recently imposed utterly indefensible restrictions on Mexican tomato exports, an Administration official remarked off the record that Florida has a lot of electoral votes while Mexico has none. The economically correct rebuttal to this sort of thing is to point out that the other 49 states contain a lot of pizza lovers; the politically effective answer is to subject US-Mexican trade to a set of rules and arbitration procedures in which the Mexicans do too have a vote).

While one cannot dismiss such political-economy arguments as foolish, however, the problem is to know where to stop. Here is where it would have been useful to hear from some political scientists, who might be able to tell us more about when international negotiations over standards are likely to improve domestic policies, and when they are likely simply to serve as a cover for protectionist motives. But while I would have liked to see an analysis from that point of view, much of the legal analysis that occupies Volume 2 of the Bhagwati-Hudec books does shed light on the problem.

Standards and the rule of law

Economists pronounce on legal matters at their peril: law, even international trade law, is a discipline all its own, with a jargon just as impenetrable to us as ours is to them. Let me therefore tread cautiously in interpreting the arguments here. As I understand it, the problem involved in defining the limits of fair trade is not too different from that of defining the limits of free speech. Take it as a given that countries can do things that are perceived to be economically harmful to other countries - it does not necessarily matter whether this perception is correct. Which of these things can realistically be prohibited, and which should be tolerated? The answer is a matter of degree. The fellow at the next table who insists on talking loudly to his partner about marketing is annoying, but one cannot reasonably ask the law to do anything about him; the person who shouts "Fire" in a crowded theater is something else again.

Where does one draw the line in international economic relations? The prevailing principle of international law derives from the 17th-century Peace of Westphalia, which ended the Thirty Years' War by establishing the rule that states may do whatever they like (such as imposing the sovereign's religion) within their borders - only external relations are the proper concern of the international community. By this principle labor law, or environmental policies that do not spill across borders, should be off limits.

Now in practice we do not always honor the principle of the hard-shell Westphalian state. We are sometimes willing to impose sanctions or even invade to protect human rights. Even in trade negotiations it is an understood principle that if a country de facto undoes its trade concessions with domestic policies - for example, offsetting a tariff cut with an equal production subsidy - it is considered to have failed to honor its agreement. But while borders are fuzzier in legal practice than they are on a map, the basic structure of trade negotiations is still basically Westphalian. The demand for harmonization of standards is, in effect, a demand that this should change.

We have seen that the strictly economic case for that demand is fairly weak, but there may be a stronger case on grounds of political economy. But what do the legal experts say? The general answer, as I understand it, is that they don't think it is a good idea. A lucid chapter by Frieder Rousseler grants that the political argument for harmonization has some force, but concludes that to give in to it would open up too wide a range of potential complaints, much the same as would happen if I were allowed to sue people whose words annoy rather than actually slander me. Other authors, such as Virginia Leary and Robert Hudec himself, seem to have a similar point of view, suggesting only that nations might want to enter into specific environmental and labor agreements that would then be enforced by the same institutions that enforce trade agreements. (One essay, however, a piece by Daniel Gifford and Mitsuo Matsushita on competition policy, seems more economistic than the economists: it argues that the international acceptability of competition policies should be judged on whether they seem likely, or at least motivated by the desire, to enhance efficiency).

To an economist, at least, the legal case here seems fairly similar to the economic case for trade negotiations. We have a purist principle: unilateral free trade, the Westphalian state. We recognize based on experience that it is useful to compromise that principle a bit, so that we work with mercantilists rather than simply castigating them and allow a bit of international meddling in internal affairs. But while a bit of pragmatism is allowed, the principle remains there; and it is not a good idea to stray too far. On the evidence of these volumes, then, the demand for harmonization is by and large ill-founded both in economics and in law; realistic political economy requires that we give it some credence, but not too much. Unfortunately, that will surely not make the issue go away. Expect many more, equally massive volumes to come.

"What's Wrong with Climate Change Economics?"

John Whitehead defends environmental economists:

What's wrong with climate change economics?, Environmental Economics: Er, nothing? Joe Romm:

Last week economist William Nordhaus slammed global warming deniers and explained that the cost of delaying action is $4 Trillion. As I wrote, Nordhaus’s blunt piece — “Why the Global Warming Skeptics Are Wrong” – is worth reading because, like most mainstream climate economists, he is no climate hawk.

A key reason for that, I believe, is a chronic low-balling of future temperature rise and hence future climate impacts and hence future climate damages by the mainstream economic profession. Nordhaus’s piece proves that point.  In his argument on why CO2 is a pollutant and negative externality—”a byproduct of economic activity that causes damages to innocent bystanders”– he writes:

The question here is whether emissions of CO2 and other greenhouse gases will cause net damages, now and in the future. This question has been studied extensively. The most recent thorough survey by the leading scholar in this field, Richard Tol, finds a wide range of damages, particularly if warming is greater than 2 degrees Centigrade. ...

That highlighted sentence may strike some of you as a bit strange. After all, the chances that warming would be less than 2°C have been pretty small for quite some time even with aggressive action and essentially nonexistent without it. ...

[delete rant about economists ignoring more recent climate science]

The mainstream economics community has a long way to go to catch up to the reality of emissions trends and climate science.

According to the USEPA, the 2007 IPCC says:

The average surface temperature of the Earth is likely to increase by 2 to 11.5°F (1.1-6.4°C) by the end of the 21st century, relative to 1980-1990, with a best estimate of 3.2 to 7.2°F (1.8-4.0°C) ...

So, in the excerpt, Nordhaus seems to be saying that, even in a best-case scenario (2 degrees C), climate change will be bad. That seems like a reasonable thing to say to me. But in fact, Nordhaus later says this:

Restrictions on CO2 emissions large enough to bend downward the temperature curve from its current trajectory to a maximum of 2 or 3 degrees Centigrade would have large economic effects on many businesses.

Nordhaus says that only with climate policy will the temperature trend fall to what Joe Romm accuses climate economists of claiming is the business-as-usual trend.

Me thinks Joe Romm hates economists too much.

Nordhaus: Why the Global Warming Skeptics Are Wrong

William Nordhaus takes on the climate skeptics:

...I have identified six key issues..., and I provide commentary about their substance and accuracy. They are:

• Is the planet in fact warming?
• Are human influences an important contributor to warming?
• Is carbon dioxide a pollutant?
• Are we seeing a regime of fear for skeptical climate scientists?
• Are the views of mainstream climate scientists driven primarily by the desire for financial gain?
• Is it true that more carbon dioxide and additional warming will be beneficial?

As I will indicate below, on each of these questions, the sixteen scientists provide incorrect or misleading answers. ,,,. I will describe their mistakes and explain the findings of current climate science and economics.

1. The first claim is that the planet is not warming. More precisely, “Perhaps the most inconvenient fact is the lack of global warming for well over 10 years now.”

It is easy to get lost in the tiniest details here. Most people will benefit from stepping back and looking at the record of actual temperature measurements. The figure below shows data from 1880 to 2011 on global mean temperature averaged from three different sources.2 We do not need any complicated statistical analysis to see that temperatures are rising, and furthermore that they are higher in the last decade than they were in earlier decades.3

One of the reasons that drawing conclusions on temperature trends is tricky is that the historical temperature series is highly volatile, as can be seen in the figure. The presence of short-term volatility requires looking at long-term trends. ...

The finding that global temperatures are rising over the last century-plus is one of the most robust findings of climate science and statistics. ...[continue reading]...

The Benefits of a Gas Tax

MIT energy economist Christopher Knittel says a gas tax would pay for itself, or nearly so, with the benefits the tax would bring:

Fuel for thought, by Peter Dizikes, MIT News Office: ...Christopher Knittel ... is the William Barton Rogers Professor of Energy Economics at the MIT Sloan School of Management...

Knittel’s research addresses a clutch of practical and linked questions: How much progress have automakers made on fuel efficiency? (More than you might think.) How do car owners respond when fuel prices rise? (They really do ditch their gas-guzzlers.) How large are the collateral health benefits of removing dirty vehicles from the nation’s fleet? (Very large.) ...

One of his papers, “Automobiles on Steroids,” recently published in the American Economic Review, examines technological progress in the auto industry. From 1980 through 2006, the fuel efficiency of America’s vehicles has increased by just 15 percent — at first glance, a lethargic rate of improvement. But as Knittel points out, cars’ average horsepower has roughly doubled since then, and average curb weight of those vehicles rose 26 percent... Adjusting for these changes, fuel economy has actually increased by 60 percent since 1980, but as Knittel observes, “most of that technological progress has gone into [compensating for] weight and horsepower.”

On the stagnation of overall fuel efficiency since 1980, Knittel adds, “It’s no fault of the manufacturers and consumers. Firms are going to give consumers what they want, and if gas prices are low, consumers are going to want big, fast cars. If you’re going to blame anyone, it’s the policymakers for not creating the incentive structure for putting that technological progress into fuel economy.”

Pain at the pump

Cars and light trucks produce about 15 percent of U.S. greenhouse gases. The best policy for reducing energy consumption from those sources, Knittel believes, would be higher fuel prices. “That would incentivize all the things we want,” Knittel says. “When gas prices go up, people shift to more fuel-efficient cars, they drive fewer miles, and insofar as there are lower-carbon-intensive fuels out there, people shift to them. They get rid of their clunkers faster.”

That’s not just an assumption; Knittel has studied the responses of auto owners nationwide to rising gas prices from 1999 to 2008 in another research paper, “Pain at the Pump,” co-authored with Meghan Busse and Florian Zettelmeyer of Northwestern University. The researchers found that with each $1 rise in the price of gas, purchases of highly fuel-efficient autos increase 21 percent, while purchases of gas-guzzling vehicles drop 27 percent.

A shift to newer, more fuel-efficient vehicles would actually help people in another way, besides releasing fewer greenhouse gases: It would reduce the amount of harmful local pollution in the air, as Knittel detailed in a paper written with Ryan Sandler of U.C. Davis, based on a study of California from 1998 to 2008. “When gas prices go up, you’re getting bigger mileage reductions from cars that are worse in terms of these pollutants,” Knittel observes.

That produces significant health benefits beyond the problems associated with climate change. “We’re talking about asthma attacks and respiratory problems,” he adds. “This isn’t just a matter of helping the world two generations from now. You can point to this and say, ‘Here is a more immediate, salient reason for a gas tax.’” According to Knittel and Sandler, 70 percent of the costs of a gas tax of $1 per gallon could be recouped by immediate health benefits from reduced pollution. Other possible benefits from the tax — reductions in climate change, traffic congestion and accidents — could make it a net winner for people in economic terms alone.

But will politicians ever impose higher gas prices on a financially stretched public? A variety of powerful lobbying interests in Washington oppose such a move — and Knittel knows hardball when he sees it. Indeed, Knittel is examining the financial rewards industries reap from their lobbying efforts in some of his current research. Still, he does retain a sense of optimism. “The idealistic academic in me says that the more you broadcast the truth, the more likely it will be to win out,” Knittel says. “But we’ll see.”

See also Ryan Avent who comments on related research.

"Fracking Would Emit Large Quantities of Greenhouse Gases"

Another reason to be suspicious of fracking:

Fracking Would Emit Large Quantities of Greenhouse Gases, by Mark Fischetti, Scientific American: Add methane emissions to the growing list of environmental risks posed by fracking.

Opposition to the hydraulic fracturing of deep shales to release natural gas rose sharply last year over worries that the large volumes of chemical-laden water used in the operations could contaminate drinking water. Then, in early January, earthquakes in Ohio were blamed on the disposal of that water in deep underground structures. Yesterday, two Cornell University professors said at a press conference that fracking releases large amounts of natural gas, which consists mostly of methane, directly into the atmosphere—much more than previously thought. ...

Molecule for molecule, methane traps 20 to 25 times more heat in the atmosphere than does carbon dioxide. The effect dissipates faster, however: airborne methane remains in the atmosphere for about 12 years before being scrubbed out by ongoing chemical reactions, whereas CO2 lasts 30 to 95 years. Nevertheless, recent data from the two Cornell scientists and others indicate that within the next 20 years, methane will contribute 44 percent of the greenhouse gas load produced by the U.S. Of that portion, 17 percent will come from all natural gas operations. ...

"Climate Change – Our Real Bequest to Future Generations"

Dean Baker:

Climate change – our real bequest to future generations, Commentary, by Dean Baker: It is remarkable how efforts to reduce the government deficit/debt are often portrayed as a generational issue, while efforts to reduce global warming are almost never framed in this way. ...

Seeing the debt as an issue between generations is wrong in almost every dimension. The ... debt is not money that our children and grandchildren will be paying to someone else. It is money that they will be paying to themselves. ...

Of course, some of this debt will be owned by foreigners. ... However, the foreign ownership of US financial assets, including government debt, is determined by our trade deficit, not our budget deficit.

Those who proclaim themselves concerned that our grandchildren will be stuck making huge payments to ... foreigners should be focused on reducing the value of the dollar. A more competitively priced dollar will be the key to ... reducing the outflow of dollars each year that are used to buy up US financial assets.

The main factor that will determine the economic wellbeing of our children and grandchildren will be ... the quality of the capital and infrastructure we pass onto them, along with the level of education we give them, the state of technical knowledge we achieve, and the state of the natural environment.

If we cut the deficit by making spending cuts ... in these areas, we will be making our children worse-off... Of course, leaving their parents unemployed for long periods of time will not improve our children's wellbeing either.

If the deficit has little to with the wellbeing of our children and grandchildren, global warming has everything to do with it. ... Global warming threatens to do far more damage to the wellbeing of future generations than the social security and Medicare benefits going to baby-boomers, no matter how much the deficit hawks try to twist the numbers to claim otherwise.

Paul Krugman: Springtime for Toxics

The EPA's new rules on mercury and other airborne toxics should produce large benefits -- if they can survive opposition from the GOP:

Springtime for Toxics, by Paul Krugman, Commentary, NY Times: Here’s what I wanted for Christmas: something that would make us both healthier and richer. And since I was just making a wish, why not ask that Americans get smarter, too?

Surprise: I got my wish, in the form of new Environmental Protection Agency standards on mercury and air toxics for power plants. ...

As far as I can tell, even opponents of environmental regulation admit that mercury is nasty stuff. It’s a potent neurotoxicant... The E.P.A. explains: “Methylmercury exposure is a particular concern for women of childbearing age, unborn babies and young children, because studies have linked high levels of methylmercury to damage to the developing nervous system, which can impair children’s ability to think and learn.”

That sort of sounds like something we should regulate, doesn’t it?

The new rules would also have the effect of reducing fine particle pollution, which is a known source of many health problems... The ... payoff to the new rules is huge: up to $90 billion a year in benefits compared with around $10 billion a year of costs in the form of slightly higher electricity prices. ...

And it’s a deal Republicans very much want to kill.

With everything else that has been going on in U.S. politics recently, the G.O.P.’s radical anti-environmental turn hasn’t gotten the attention it deserves. ... And I’m not exaggerating: during the fight over the debt ceiling, Republicans tried to attach riders that ... would essentially have blocked the E.P.A. and the Interior Department from doing their jobs. ...

More generally, whenever you hear dire predictions about the effects of pollution regulation, you should know that special interests always make such predictions, and are always wrong. For example, power companies claimed that rules on acid rain would disrupt electricity supply and lead to soaring rates; none of that happened, and the acid rain program has become a shining example of how environmentalism and economic growth can go hand in hand.

But again, never mind: mindless opposition to “job killing” regulations is now part of what it means to be a Republican. And I have to admit that this puts something of a damper on my mood: the E.P.A. has just done a very good thing, but if a Republican — any Republican — wins next year’s election, he or she will surely try to undo this good work.

Still, for now at least, those who care about the health of their fellow citizens, and especially of the nation’s children, have something to celebrate.

Assessing the Climate Talks

Robert Stavins assess the Durban climate talks:

Assessing the Climate Talks — Did Durban Succeed?, by Robert Stavins: The 17^th Conference of the Parties (COP-17) of the United Nations Framework Convention on Climate Change (UNFCCC) adjourned on Sunday, a day and a half after its scheduled close, and in the process once again pulled a rabbit out of the hat by saving the talks from complete collapse (which appeared possible just a few days earlier).  But was this a success?

The Durban Outcome in a Nutshell

The outcome of COP-17 includes three major elements:  some potentially important elaborations on various components of the Cancun Agreements; a second five-year commitment period for the Kyoto Protocol; and (read this carefully) a non-binding agreement to reach an agreement by 2015 that will bring all countries under the same legal regime by 2020.

Is This a Success?

If by “success” in Durban, one means solving the climate problem, the answer is obviously “not close.”

Indeed, if by “success” one meant just putting the world on a path to solve the climate problem, the answer would still have to be “no.”

But, I’ve argued previously – including in my pre-Durban essay last month – that such definitions of success are fundamentally inappropriate for judging the international negotiations on the exceptionally challenging, long-term problem of global climate change.

The key question, at this point, is whether the Durban outcome has put the world in a place and on a trajectory whereby it is more likely than it was previously to establish a sound foundation for meaningful long-term action.

I don’t think the answer to that question is at all obvious, but having read carefully the agreements that were reached in Durban, and having reflected on their collective implications for meaningful long-term action, I am inclined to focus on “the half-full glass of water.”  My conclusion is that the talks – as a result of last-minute negotiations – advanced international discussions in a positive direction and have increased the likelihood of meaningful long-term action.  Why do I say this? ...[continue]...

Climate change legislation has all but dropped of the radar in the US political arena.

Paul Krugman: Here Comes the Sun

Who doesn't like solar energy?:

Here Comes the Sun, by Paul Krugman, Commentary, NY Times: ...We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power. If that surprises you,... blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives.

Speaking of propaganda..., let’s talk briefly about hydraulic fracturing, aka fracking.

Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that ... contaminates drinking water; there is reason to suspect ... that it also contaminates groundwater; and the heavy trucking ... inflicts major damage on roads.

Economics 101 tells us that an industry ... should be required to “internalize” those costs... Yet ... the industry and its defenders demand ... that it be let off the hook... Why? Because we need that energy! ...

So it’s worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. ...

And now for ... the success story you haven’t heard about.

These days, mention solar power and you’ll probably hear cries of “Solyndra!” Republicans have tried to make the failed solar panel company ... a symbol of government waste — although claims of a major scandal are nonsense...

But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. ... If the downward trend continues — and if anything it seems to be accelerating — we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal. ...

But will our political system delay the energy transformation now within reach?

Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.

So what you need to know is that nothing you hear from these people is true. Fracking is not a dream come true; solar is now cost-effective. Here comes the sun, if we’re willing to let it in.

Stavins: The Promise and Problems of Pricing Carbon

Robert Stavins:

The Promise and Problems of Pricing Carbon, by Robert Stavins: Friday, October 21^st was a significant day for climate change policy worldwide and for the use of market-based approaches to environmental protection, but it went largely unnoticed across the country and around the world, outside, that is, of the State of California.  On that day, the California Air Resources Board voted unanimously to adopt formally the nation’s most comprehensive cap-and-trade system, intended to provide financial incentives to firms to reduce the state’s greenhouse gas (GHG) emissions, notably carbon dioxide (CO₂) emissions, to their 1990 level by the year 2020...  Compliance will begin in 2013, eventually covering 85% of the state’s emissions.

This policy for the world’s eighth-largest economy is more ambitious than the much heralded (and much derided) Federal policy proposal – H.R. 2454, the Waxman-Markey bill – that was passed by the U.S. House of Representatives in June of 2009, and then died in the U.S. Senate the following year.  With a likely multi-year hiatus on significant climate policy action in Washington now in place, California’s system – which will probably link with similar cap-and-trade systems being developed in Ontario, Quebec, and possibly British Columbia – will itself become the focal point of what may evolve to be the “North American Climate Initiative.” ...

What Lies in the Future?

...Because a truly meaningful climate policy – whether market-based or conventional in design – will have significant impacts on economic activity in a wide variety of sectors and in every region of a country, proposals for these policies inevitably bring forth significant opposition, particularly during difficult economic times.

In the United States, political polarization – which began some four decades ago, and accelerated during the economic downturn – has decimated what had long been the key political constituency in the Congress for environmental action, namely, the middle, including both moderate Republicans and moderate Democrats.  Whereas Congressional debates about environmental and energy policy had long featured regional politics, they are now fully and simply partisan.  In this political maelstrom, the failure of cap-and-trade climate policy in the U.S. Senate in 2010 was essentially collateral damage in a much larger political war.

It is possible that better economic times will reduce the pace – if not the direction – of political polarization.  It is also possible that the ongoing challenge of large budgetary deficits in many countries will increase the political feasibility of new sources of revenue.  When and if this happens, consumption taxes (as opposed to traditional taxes on income and investment) could receive heightened attention, and primary among these might be energy taxes, which can be significant climate policy instruments, depending upon their design.

That said, it is probably too soon to predict what the future will hold for the use of market-based policy instruments for climate change.  Perhaps the two decades we have experienced of relatively high receptivity in the United States, Europe, and other parts of the world to cap-and-trade and offset mechanisms will turn out to be no more than a relatively brief departure from a long-term trend of reliance on conventional means of regulation.  It is also possible, however, that the recent tarnishing of cap-and-trade in U.S. political dialogue will itself turn out to be a temporary departure from a long-term trend of increasing reliance on market-based environmental policy instruments.  It is much too soon to say.

[There's much more on this in the original post.]

Paul Krugman: Party of Pollution

As I said the other day, the GOP's jobs proposals amount to picking something that they (or the people who finance their campaigns) don't like — the EPA, Dodd-Frank, health care legislation, Sarbanes-Oxley, etc. — and then finding some way to argue that eliminating it will create jobs:

Party of Pollution, by Paul Krugman, Commentary, NY Times: Last month President Obama finally unveiled a serious economic stimulus plan — far short of what I’d like to see, but a step in the right direction. Republicans, predictably, have blocked it. ...

So what is the G.O.P. jobs plan? The answer, in large part, is to allow more pollution. ... Both Rick Perry and Mitt Romney have ... put weakened environmental protection at the core of their economic proposals, as have Senate Republicans. Mr. Perry has put out a specific number — 1.2 million jobs — that appears to be based on a study released by the American Petroleum Institute ... claiming favorable employment effects from removing restrictions on oil and gas extraction. The same study lies behind the claims of Senate Republicans.

But does this oil-industry-backed study actually make a serious case for weaker environmental protection as a job-creation strategy? No.

Part of the problem is that the study relies heavily on an assumed “multiplier” effect, in which every new job in energy leads indirectly to the creation of 2.5 jobs elsewhere. Republicans, you may recall, were scornful of claims that government aid that helps avoid layoffs of schoolteachers also indirectly helps save jobs in the private sector. But I guess the laws of economics change when it’s an oil company rather than a school district doing the hiring.

Moreover,... the big numbers in the report are projections for late this decade. The report predicts fewer than 200,000 jobs next year, and fewer than 700,000 even by 2015. You might want to compare these numbers with ... the 14 million Americans currently unemployed, and the one million to two million jobs that independent estimates suggest the Obama plan would create, not in the distant future, but in 2012. ...

More pollution, then, isn’t the route to full employment. But is there a longer-term economic case for less environmental protection? No. ... The important thing to understand is that ... pollution ... does real, measurable damage, especially to human health. ...

How big are these damages? A new study by researchers at Yale and Middlebury College ... estimates ... that there are a number of industries inflicting environmental damage that’s worth more than the sum of the wages they pay and the profits they earn — which means, in effect, that they destroy value rather than creating it. ...

Republicans, of course, have strong incentives to claim otherwise: the big value-destroying industries are concentrated in the energy and natural resources sector, which overwhelmingly donates to the G.O.P. But the reality is that more pollution wouldn’t solve our jobs problem. All it would do is make us poorer and sicker.

"Innuendo, Half Truths, Misdirection, and Utter Non-Sequiturs"

I think it would be fair to say that Jeff Sachs is unhappy with Rupert Murdoch, and for good reason:

The Murdoch Legacy, by Jeffrey Sachs: At age 80, Rupert Murdoch will be long gone in coming decades when the planet is grappling with greatly intensified climate change. ...

I mention this because Murdoch's paper, the Wall Street Journal, again last week performed its usual disservice by publishing an extremely misleading opinion piece on climate change in the banner location of the paper (Robert Bryce, "Five Truths About Climate Change," October 6). That column is not merely an opinion piece among a range of various opinions. It is part of that paper's steady drumbeat of opposition to action on climate change. And the Journal teams up in this with Murdoch's other propaganda outlet, Fox News.

The real problem with the Journal is this. The Journal's business coverage outside of the opinion pages is important and difficult to replicate (and this is still true even as the professional reporters apparently are facing more intrusions from the Murdoch minions). Excellent reporting draws eyes to the Murdoch propaganda and misinformation on the opinion pages.

In this particular column, the writer, Robert Bryce, purports to tell us five truths about climate change to reach the conclusion that we shouldn't care about carbon emissions. The column is a study in innuendo, half truths,... misdirection..., and utter non-sequiturs. Its purpose is to dissuade us from action on carbon dioxide. ...

Murdoch's News Corporation, the owner of the Wall Street Journal and Fox News, is the opposite of a true news corporation. It is news as in Orwell's newspeak. Its major role is to peddle corporate propaganda, frighten politicians, and make lots of money. In those roles it has been successful. ...

Weekly Initial Unemployment Claims increased to 428,000

From Calculated Risk:

The DOL reports:

In the week ending September 10, the advance figure for seasonally adjusted initial claims was 428,000, an increase of 11,000 from the previous week's revised figure of 417,000. The 4-week moving average was 419,500, an increase of 4,000 from the previous week's revised average of 415,500.

The following graph shows the 4-week moving average of weekly claims since January 2000:

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased this week to 419,500.

The 4-week average has been increasing recently and this is the highest level since early July.

Usually we hear all the reasons why special factors -- weather, strikes, etc. -- can explain the elevated numbers, and policymakers nod their heads and promise good times are just around the corner. I wonder if this time will be different.

[Also from CR: Industrial Production increased 0.2% in August, Capacity Utilization increases slightly, but "After the fairly rapid increase last year, increases in industrial production and capacity utilization have slowed recently."]

The Lack of Ice Age

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