Category Archive for: Environment [Return to Main]

Monday, March 26, 2012

"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...

Saturday, March 24, 2012

"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.

Thursday, March 15, 2012

"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.

Wednesday, March 07, 2012

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

Temps-rising

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]...

Monday, March 05, 2012

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.

Friday, January 20, 2012

"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. ...

Tuesday, January 03, 2012

"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.

Monday, December 26, 2011

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.

Tuesday, December 13, 2011

Assessing the Climate Talks

Robert Stavins assess the Durban climate talks:

Assessing the Climate Talks — Did Durban Succeed?, by Robert Stavins: The 17th 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.

Monday, November 07, 2011

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.

Sunday, October 30, 2011

Stavins: The Promise and Problems of Pricing Carbon

Robert Stavins:

The Promise and Problems of Pricing Carbon, by Robert Stavins: Friday, October 21st 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.]

Friday, October 21, 2011

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.

Thursday, October 13, 2011

"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. ...

Thursday, September 15, 2011

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."]

Sunday, September 11, 2011

The Lack of Ice Age

Ice[via]

Monday, August 29, 2011

Paul Krugman: Republicans Against Science

The GOP's willful ignorance and anti-intellectualism is getting worse:

Republicans Against Science, by Paul Krugman, Commentary, NY Times: Jon Huntsman Jr., a former Utah governor and ambassador to China, isn’t a serious contender for the Republican presidential nomination. And that’s too bad, because Mr. Hunstman has been willing to say the unsayable about the G.O.P. — namely, that it is becoming the “anti-science party.” This is an enormously important development. And it should terrify us.
To see what Mr. Huntsman means, consider recent statements by the two men who actually are serious contenders for the G.O.P. nomination: Rick Perry and Mitt Romney.
Mr. Perry ... recently made headlines by dismissing evolution as “just a theory,” one that has “got some gaps in it” — an observation that will come as news to the vast majority of biologists. But what really got peoples’ attention was what he said about climate change: “I think there are a substantial number of scientists who have manipulated data so that they will have dollars rolling into their projects. And I think we are seeing almost weekly, or even daily, scientists are coming forward and questioning the original idea that man-made global warming is what is causing the climate to change.”
That’s a remarkable statement — or maybe the right adjective is “vile.” ... In fact, if you follow climate science at all you know that the main development over the past few years has been growing concern that projections of future climate are underestimating the likely amount of warming. ...
So how has Mr. Romney  ... responded to Mr. Perry’s challenge? In trademark fashion: By running away. In the past, Mr. Romney ... has strongly endorsed the notion that man-made climate change is a real concern. But, last week, he softened that to a statement that he thinks the world is getting hotter, but “I don’t know that” and “I don’t know if it’s mostly caused by humans.” Moral courage!
Of course, we know what’s motivating Mr. Romney’s sudden lack of conviction. According to Public Policy Polling, only 21 percent of Republican voters in Iowa believe in global warming (and only 35 percent believe in evolution). Within the G.O.P., willful ignorance has become a litmus test for candidates, one that Mr. Romney is determined to pass at all costs. ... And the deepening anti-intellectualism of the political right, both within and beyond the G.O.P., extends far beyond the issue of climate change. ...
Now, we don’t know who will win next year’s presidential election. But the odds are that one of these years the world’s greatest nation will find itself ruled by a party that is aggressively anti-science, indeed anti-knowledge. And, in a time of severe challenges — environmental, economic, and more — that’s a terrifying prospect.

Friday, August 19, 2011

Republican Attacks on the EPA

The reasons behind the recent Republican attacks on the EPA are coming into focus:

Getting ready for a wave of coal-plant shutdowns, by Brad Plumer: Over the next 18 months, the Environmental Protection Agency will finalize a flurry of new rules to curb pollution from coal-fired power plants. Mercury, smog, ozone, greenhouse gases, water intake, coal ash—it’s all getting regulated. And, not surprisingly, some lawmakers are grumbling.
Industry groups such the Edison Electric Institute, which represents investor-owned utilities, and the American Legislative Exchange Council have dubbed the coming rules “EPA’s Regulatory Train Wreck.” The regulations, they say, will cost utilities up to $129 billion and force them to retire one-fifth of coal capacity. Given that coal provides 45 percent of the country’s power, that means higher electric bills, more blackouts and fewer jobs. The doomsday scenario has alarmed Republicans in the House, who have been scrambling to block the measures. Environmental groups retort that the rules will bring sizeable public health benefits, and that industry groups have been exaggerating the costs of environmental regulations since they were first created.
So, who’s right? This month, the nonpartisan Congressional Research Service, which conducts policy research for members of Congress, has been circulating a paper that tries to calmly sort through the shouting match. ... And the upshot is that CRS is awfully skeptical of the “train wreck” predictions. ...
The CRS report doesn’t try to evaluate the costs of the new rules, noting that it will depend on site-specific factors and will vary by utility and state. ... But, the report says, industry groups have almost certainly overstated the costs. ...
The CRS report also agrees with green groups that the benefits of these new rules shouldn’t be downplayed. Those can be tricky to quantify, however. In one example, the EPA estimates that an air-transport rule to clamp down on smog-causing sulfur dioxide and nitrogen dioxide would help prevent 21,000 cases of bronchitis and 23,000 heart attacks, and save 36,000 lives. That’s $290 billion in health benefits, compared with $2.8 billion per year in costs by 2014. “In most cases,” CRS notes, “the benefits are larger.”
Granted, few would expect this report to change many minds in Congress. Just 10 days ago, Michele Bachmann was on the campaign trail promising that if she becomes president, “I guarantee you the EPA will have doors locked and lights turned off, and they will only be about conservation.” ...

There's a generous interpretation -- Republicans are ideologically opposed to regulation and this is consistent with their general philosophy. There's also an explanation that isn't as generous that involves using a call for free markets to do what's best for those who provide campaign cash.

I think it's hard to deny that there is market failure in the electricity generation industry. The externalities are pretty clear. If this was about making markets work, then the debate ought to be about how best to force firms to internalize all of the costs of production (and if some firms are unprofitable when they are forced to pay all costs, then that's the market speaking and Republicans ought to listen). Should we impose a tax of some sort? Should we rely upon market-based regulation, or is command and control better in this instance? Is this a case where the market failures are so small that any intervention would do more harm than good? Is there a case for self-regulation given the history in this industry? And so on.

But that's not how the debate is carried out. It seems to be more of a knee-jerk reflexive defense whenever supporter's interests are threatened in any way. Politicians in particular hide behind a call for free markets without ever explaining how letting markets be free to fail, and fail badly, is the best choice for society (not in every case, of course, there are certainly those who are ideologically consistent). That leads me to suspect that while there are certainly people on the right who are interested in using things like carbon taxes to overcome these market failures, we shouldn't underplay the extent to which the opposition to the EPA and to regulation more generally is driven by other factors.

Thursday, August 11, 2011

Stavins: Why Polarized Politics Paralyze Public Policy

Robert Stavins has put a lot of effort toward finding environmental policies that both Democrats and Republicans can endorse (e.g. the title of his previous post was ""). And for the most part, at least from my impression, he has remained optimistic about making progress even if it does come in frustratingly slow fits and starts.

But he seems to be giving up hope:

The Credit Downgrade and the Congress: Why Polarized Politics Paralyze Public Policy, by Robert Stavins: There’s room for debate about whether U.S. government deficits justify Standard & Poor’s downgrading last week of long-term U.S. debt, but the more important factor cited in S&P’s report is that “the effectiveness, stability, and predictability of American policymaking and political institutions have weakened…”  ...

Although these S&P judgments were intended to refer exclusively to fiscal policy, they really apply to a much broader set of issues, ranging from economic to health to environmental policies. The key reality is this: there is a widening gulf between the two political parties that is paralyzing sensible policy action.

Political Polarization
This increasing polarization between the political parties has shown up in a number of studies by political scientists... This ... disappearance of moderates ... has been taking place for three decades. The rise of the Tea Party ... is only the most recent vehicle that has continued a 30-year trend.

Why has this collapse of the middle taken place; why has party polarization increased so dramatically in the Congress over the past 30 years? In my view, three structural factors stand out.

Three Structural Factors First, there has been the increasing importance of the primary system, a consequence of the “democratization” of the nomination process that took flight in the 1970s. A small share of the electorate vote in primaries, namely those with the strongest political preferences – the most conservative Republicans and the most liberal Democrats. This self-selection greatly favors candidates from the extremes.

Second, decades of redistricting – a state prerogative guaranteed by the Constitution – has produced more and more districts that are dominated by either Republican or Democratic voters. ... Because of this, polarization has preceded at a much more rapid pace in the House than in the Senate.

Third, the increasing cost of electoral campaigns greatly favors incumbents (with the ratio of average incumbent-to-challenger financing now exceeding 10-to-1). This tends to make districts relatively safe for the party that controls the seat, thereby increasing the importance of primaries. ...

To a lesser degree, polarization has also taken place through the adaptation of sitting members of Congress as they behave more ideologically once in office. Such political conversions are due to the same pressures noted above: in order to discourage or survive primary challenges... A recent case in point is Senator John McCain, Republican of Arizona, who evolved from being a moderate ... to being a solid conservative ... in response to a primary challenge from a Tea Party candidate.

Long-Term Implications If the increasing polarization of the Congress is due to these factors, then it is difficult to be very optimistic about the prognosis in the near term for American politics. This is because it is unlikely that any of these factors will soon reverse course.

The two parties are not about to abandon the primary system to return to smoke‑filled back rooms. Likewise, no state legislature is willing to abandon its power to redistrict. And public financing of campaigns and other measures that would reduce the advantages of incumbency remain generally unpopular (among incumbents, who would – after all – need to vote for such reforms).

Other Factors? True enough, in addition to these long-term structural factors that have driven political polarization, shorter-term economic and social fluctuations have also had pronounced effects. In particular, significant economic downturns – whether the Great Depression of the 1930s or the Great Recession of the past several years – increase political polarization. ...

The Future So, it’s reasonable to anticipate – or at least to hope – that better economic times will reduce the pace of ongoing political polarization. However, in the face of the three long-term structural factors I’ve identified above – the increasing importance of primaries, continuing redistricting, and the increasing costs of electoral campaigns – it is difficult to be optimistic about the long-term prognosis for American politics. ...

Sunday, August 07, 2011

The Not Smart Enough Grid

Via Scientific American, one more quick post before another day on the road:

The too-smart-for-its-own-good grid, MIT News: In the last few years, electrical utilities have begun equipping their customers’ homes with new meters that have Internet connections and increased computational capacity. One envisioned application of these “smart meters” is to give customers real-time information about fluctuations in the price of electricity, which might encourage them to defer some energy-intensive tasks until supply is high or demand is low. Less of the energy produced from erratic renewable sources such as wind and solar would thus be wasted, and utilities would less frequently fire up backup generators, which are not only more expensive to operate but tend to be more polluting, too.
Recent work by researchers in MIT’s Laboratory for Information and Decision Systems, however, shows that this policy could backfire. If too many people set appliances to turn on, or devices to recharge, when the price of electricity crosses the same threshold, it could cause a huge spike in demand; in the worst case, that could bring down the power grid. Fortunately, in a paper presented at the last IEEE Conference on Decision and Control, the researchers also show that some relatively simple types of price controls could prevent huge swings in demand. ...
Research scientist Mardavij Roozbehani and professors Sanjoy Mitter and Munther Dahleh assumed that every consumer has a “utility function” describing how inconvenient it is for him or her to defer electricity usage. While that function will vary from person to person, individual utility functions can be pooled into a single collective function for an entire population. The researchers assumed that on average, consumers will ... try to get as much convenience for as little money as possible.
What they found was that if consumer response to price fluctuation is large enough to significantly alter patterns of energy use — and if it’s not, there’s no point in installing smart meters — then price variations well within the normal range can cause dangerous oscillations in demand. “For the system to work, supply and demand must match almost perfectly at each instant of time,” Roozbehani says. “The generators have what are called ramp constraints: They cannot ramp up their production arbitrarily fast, and they cannot ramp it down arbitrarily fast. If these oscillations become very wild, they’ll have a hard time keeping track of the demand. And that’s bad for everyone.” ...
But minimizing the risks of giving consumers real-time pricing information also diminishes the benefits. “Possibly, when you need an aggressive response from the consumers — say the wind drops — you’re not going to get it,” Roozbehani says.
One way to improve that trade-off, Roozbehani explains, would be for customers to actually give utilities information about how they would respond to different prices at different times. Utilities could then tune the prices that they pass to consumers much more precisely, to maximize responsiveness to fluctuations in the market while minimizing the risk of instability. Collecting that information would be difficult, but Roozbehani’s hunch is that the benefits would outweigh the costs. He’s currently working on expanding his model so that it factors in the value of information, to see if his hunch is right.

As noted, it shouldn't be too hard to develop a pricing system that takes care of this problem. On the last point, getting information about demand elasticities, they have the data at hand -- over time they can see how people respond to these incentives and alter prices accordingly -- so I don't see why this is a such a big stumbling block.

Thursday, July 28, 2011

"A Golden Opportunity to Please Conservatives and Liberals Alike"

Robert Stavins:

A Golden Opportunity to Please Conservatives and Liberals Alike, by Robert Stavins: ...It’s too soon to forget that a year ago the Senate abandoned its attempt to pass climate legislation that would limit CO2 emissions. In the process, conservative Republicans dubbed cap-and-trade “cap-and-tax.’’ But, as I’ve said before, regardless of what they think about climate change, conservatives should resist demonizing market-based approaches to environmental protection and reverting to pre-1980s thinking that saddled business and consumers with needless costs.
Market-based approaches to environmental protection should be lauded, not condemned, by political leaders, no matter what their party affiliation.  Otherwise, there will be severe and perverse long-term consequences for the economy, for business, and for consumers.

Wednesday, July 20, 2011

Will the Return of the Gang of Six End the Debt Ceiling Showdown?

The editors at MoneyWatch asked for a comment on the "Gang of Six" deficit reduction proposal:

Will the Return of the Gang of Six End the Debt Ceiling Showdown?: As I explain, I don't think so, but the Gang of Six proposal may help to guide the actual agreement, and the size of the immediate cuts in the proposal ($500 billion) is worrisome given the state of the economy.

Tuesday, July 12, 2011

Why Has the Reducing the Deficit Trumped Unemployment?

Why aren't politicians more concerned with the unemployed?:

Unemployment? Who Cares?: ...Why isn’t unemployment reduction front and center on the policy agenda? More specifically, why has the debate over deficit reduction shoved it aside?
Here are three possible reasons. First, unemployment is concentrated among the less educated, blacks and Hispanics who lack political or economic clout.
Second, high unemployment is not hurting overall business profits, which have soared to historic heights. ... Today, our largest corporations and richest investors are well positioned to take advantage of growing demand in emerging markets far from our shores...
Third, the jobless individuals, public employees and small-business owners who could, in theory, form a strong political coalition to support more active job creation are constantly subjected to a barrage of arguments that we should do nothing but cut government spending and hope for the best. ...
A conspicuously large repertoire of more targeted job-creation proposals could significantly lower unemployment... But political interest is low...

Friday, June 24, 2011

Wanted: Pain at the Pump

This research finds that "performance standards – such as CAFE standards – may be more inefficient than previously thought." Taxes appear to work much better:

MIT Sloan economist on “Pain at the Pump”, by Christopher Knittel , MIT Sloan: My latest research* looks at how consumers adjust to high gas prices by changing the kinds of car they buy, and the prices they pay. What launched this research was the debate around the effectiveness of a gas tax to reduce climate change...
I am not a granola environmentalist, but I do see a lot of inefficient policies out there, and as an economist that’s frustrating. And here’s the thing…
At the moment, the US relies on a variety of subsidies and “performance standards” to reduce greenhouse gas emissions from the transportation sector. On the fuel side, we have ethanol subsidies and the Renewable Fuel Standard, which is an implicit subsidy program. On the vehicle side, we have Corporate Average Fuel Economy Standards, or CAFE standards, which dictate the average fuel economy of an automaker’s annual fleet. The current standard for passenger cars is 30.2 mpg. The standard for light-trucks — a classification that also includes SUVs under 8,500 pounds — is 24.1.
On the electricity side, lawmakers also use the Energy Star program, which was created in the early 1990s, to force appliance makers to create more efficient products. ...
My research shows that performance standards – such as CAFE standards – may be more inefficient than previously thought, and that pricing instruments, such as a gas tax, would likely have a bigger impact on reducing greenhouse gas emissions.
My colleagues and I found that a jump in the price of gas causes a significant change in the kinds of cars that consumers buy and the price they pay for them. A $1 increase in the gasoline price changes the market shares of the most and least fuel-efficient new cars by +20% and -24%, respectively. Changes in gasoline prices also change the relative prices of the most fuel-efficient cars and the least fuel-efficient cars. For new cars, the relative price increase for fuel-efficient cars is $363 for a $1 increase in gas prices; for used cars it is $2839. (For comparison: a $1 increase in gas prices alters the budget of the average household by about $50 a month.)
I am not naïve, and I realize that no politician has ever been elected on a platform of: ‘I’m going to raise your gas prices,’ but by advocating alternatives, they’re promoting inefficient policies that simply hide these inflated costs. There’s a lot of resistance from consumers about the prospect of a gas or carbon tax, but I believe this is mainly because consumers are misled to believe that performance standards are cheaper.
The run-up in the price of gas in recent years has been substantial enough to make top auto executives give up their historic opposition to gasoline price taxes: some have even suggested that Congress should ... create a $4 floor for retail gasoline prices.
Mike Jackson, CEO of AutoNation, the largest U.S. dealership chain, told the Wall Street Journal: “We need more expensive gasoline to change consumer behavior. Otherwise, Americans will continue to favor big vehicles, no matter what kind of fuel-economy standards the government imposes on automakers.”
Four dollars a gallon, he added, ‘is a good start.’ Hear, hear.
* Pain at the Pump: The differential effects of gasoline prices on new and used automobile markets; Meghan R. Busse, Christopher R. Knittel, Florian Zettelmeyer; National Bureau of Economic Research; December 2009

The chance of an increase in the gasoline tax in the present political environment is zero, and that may be overly optimistic.

More generally, it's too bad that market fundamentalists who are also deficit hawks refuse to recognize that corrections of market failures through devices such as a carbon tax will make markets work better and raise revenue at the same time. The fact that these solutions are resisted by so called deficit hawks and market fundamentalists is yet another signal that this is more about ideological objections to the size of government than the deficit or the correction of significant market failures.

Wednesday, June 01, 2011

Why Not Pollution Taxes?

Brad Plumer hints at a change in the politics of a carbon tax:

If we need taxes, why not pollution taxes?, by Brad Plumer: Let's start with the obvious: Most Democrats (and, for that matter, most of the bipartisan deficit panels that are churning out endless white papers right now) agree that we can't tackle our long-term debt issues through spending cuts alone. Some sort of tax reform that raises revenue will have to get thrown into the ring. So why not do that through a tax on carbon pollution or other assorted environmental unpleasantries? After all, if we have to raise revenue, we may as well slap higher taxes on behavior we'd like to discourage (like pollution and congestion) rather than, say, labor, no?
At least in rarefied think-tank circles, that idea's gaining favor. Four of the six groups that recently sketched out deficit-reduction plans for the Peter G. Peterson Solutions Initiative ended up advocating a new carbon tax as part of their proposals — including, note, the conservative American Enterprise Institute. And here's another reason to consider a shift: According to a new IMF paper with the irresistible title, "Reforming the Tax System to Promote Environmental Objectives: An Application to Mauritius," the United States gets, by far, the lowest percentage of revenue from environmental taxation of any OECD country... [C]ompared with the rest of the world, we vastly undertax pollution. And changing this doesn't have to cripple the economy: Congress could always do things in a revenue-neutral manner, swapping in higher taxes on greenhouse gases (say) in exchange for lower payroll taxes. ... (This is different from a simple gas tax: Since a carbon tax is spread out evenly among the transportation, industrial and electric sectors, it tends to have a very modest effect on pump prices.) ...
Point is, there are plenty of options for green revenue boosters, and most of them have the advantage of boosting our overall quality of life (and nudging us away from environmental disaster) in addition to closing the deficit. They're just not getting a lot of attention at the moment. Maybe if there was some billionaire as savvy (and as obsessive) about pushing his or her pet issues into the mainstream as Peter G. Peterson has been, things might be different.

But, as he also hints, there's little chance of anything being done on in Congress to address climate change. Does anyone see that changing anytime soon?

Wednesday, May 18, 2011

"The True Cost of Carbon"

A reminder that, all things considered, energy costs are too low:

The True Cost of Carbon, by David Leonhardt: Michael Greenstone and Adam Looney, economists at The Hamilton Project, are releasing a new paper on the costs of American energy policy. They argue:

… our energy choices are based on the visible costs that appear on utility bills and at the gas pump. This system masks the social costs arising from those energy choices, including shorter lives, higher health care expenses, a changing climate, and weakened national security. As a result, we pay unnecessarily high costs for energy.

For example, Mr. Greenstone and Mr. Looney estimate that a coal plant must spent 3.2 cents to produce a kilowatt hour of electricity (and consumers then pay slightly more than this). This price appears to be a bargain, the economists write, but the true costs — once health costs, military costs and the like are taken into account — are more than twice high: 8.8 cents per kilowatt hour.

The paper calls for four steps that will be familiar to anyone who follows climate policy: a carbon tax or cap-and-trade system; more money for research and development; more efficient regulations; and negotiations with foreign countries over similar steps elsewhere. In the foreseeable future, all these steps all seem to be an enormous long shot. But the climate problem is not going away. ...

Describing the chances of action on climate policy as "an enormous long shot" seems optimistic in this political environment.

Monday, May 16, 2011

"Reasons to be Cheerful" about Climate Change

John Quiggin says the arrival of "peak gasoline" is good news:

Reasons to be cheerful, Part I, by John Quiggin: There are plenty of reasons to be gloomy about the prospects of stabilizing the global climate. ... But there’s also some striking good news. Most important is the arrival of ‘peak gasoline’ in the US. US gasoline consumption peaked in 2006 and was about 8 per cent below the peak in 2010. Consumption per person has fallen more than 10 per cent.

There are a couple of ways to look at this. One is in the standard economics terms of supply and demand. Given that oil production reached a plateau some time ago, and that demand from China and other developing countries is growing fast, equilibrium can only be reached if prices rise enough to limit the growth in Chinese consumption and generating an offsetting reduction in consumption elsewhere (I’m assuming little or no supply response, which seems consistent with the evidence).

We have of course seen oil prices rise substantially. The effect on demand depends on the percentage change in fuel prices and on the elasticity (a measure of responsiveness) of demand. Because the US has very low taxes on gasoline and other fuels a given change in oil prices produces a much larger percentage change in fuel price than in other developed countries. ... So, the US is the place to look for big price effects.

The big question is the elasticity of demand, that is the percentage change in demand arising from a 1 per cent change in price. In the short run, this elasticity is quite low, reflecting the fact that fuel is a small part of the running costs of a car. The short run elasticity (measured over periods less than a year) is relatively easy to estimate and is about -0.25, that is, a 1 per cent price increase will reduce demand by 0.25 per cent, and a 40 per cent increase will reduce demand by 10 per cent. That’s roughly in line with the observed outcome. However, given that factors such as income growth tend to raise demand, the observed reduction is a bit more than would have been expected with constant prices.

The long run elasticity is much higher, since in the long run people can change their driving habits, reduce their stock of cars, and choose more fuel-efficient cars. ... A sustained upward trend in prices will induce the development of energy-saving innovations... I suspect that the full long-run elasticity, including induced innovation, is near 1...

Finally, what does peak US gasoline imply about Peak Oil, which I’ll interpret as the point at which the current plateau in oil production turns into a clear, though gradual decline?

  • First, we won’t really notice it happening (except as it’s manifested as a further increase in oil prices). Rather, we’ll have to look back at the stats to identify when the decline began
  • Second, the adjustment will be a combination of many different processes (less travel altogether, less of that by car, more fuel-efficient cars) rather than one big shift
  • Third, given that oil accounts for something like a third of all CO2 emissions, the sooner Peak Oil arrives, the better.
  • Finally, oil output per person peaked in 1979. For most purposes, it’s output per person that matters. And the evidence is that, over the last 30 years, output of goods and services per person has risen substantially even as output of oil per person has fallen. That seems pretty conclusive as far as apocalyptic versions of the Peak Oil hypothesis are concerned.

See also "Good News on the Regulatory Front," by Robert Stavins. Good news or not, overall I remain pessimistic and hope that this type of thinking does not turn into an excuse to delay making the hard choices we will need to make to solve the climate change problem.

Sunday, May 15, 2011

"Shale Gas Environmental Concerns"

When I was at the Milken Global Conference, several people who had been to a session on shale-gas extraction were very excited about the possibilities. One person insisted that we'd be a net exporter of energy within a decade or so (I was skeptical). I kept asking about environmental concerns, but they were generally brushed away, or, as one person told me, the need is large enough that politicians will make sure this moves forward despite any environmental problems. However, Jim Hamilton notes that recent evidence suggests the environmental problems are larger than we thought:

Shale gas environmental concerns, by Jim Hamilton: Technological breakthroughs in methods for drilling for natural gas have opened up the possibility of vast new supplies. However, environmental concerns may turn out to be significant.
Stuart Staniford has taken a look at a study of the effects of shale-gas extraction on drinking water recently published in the Proceedings of the National Academy of Sciences. The scatter diagram below summarizes 60 drinking water wells in Pennsylvania, with distance from a natural gas well on the horizontal axis and methane concentration in the water on the vertical axis. All of the water wells with concentrations above 28 milligrams of methane per liter of water were within one kilometer of active drilling.

Shale
[click to enlarge]

Methane concentrations as a function of distance to the nearest gas well for active (closed circles, defined as within 1 km) and nonactive (open triangles, defined as grater than 1 km away) drilling areas. Source: Osborn, et. al. (2011).
Stuart also tracked down the relevance of a 28 mg/l concentration:

A dissolved methane concentration greater than 28 mg/L indicates that potentially explosive or flammable quantities of the gas are being liberated in the well and/or may be liberated in confined areas of the home.

There are potential huge investments to be contemplated to try to take advantage of the new natural gas resources, for purposes such as electrical generation by utilities, gas-powered cars and trucks, and refueling stations. But uncertainties about potential future regulation and litigation must make anyone cautious. I think it's in the interests of everyone involved to identify right away where the contamination documented above is coming from and develop regulations to minimize it. ...

Sunday, May 08, 2011

"Climate Change Stunts Growth of Global Crop Yields"

The other day, I posted a graph showing delining crop yields from Michael Roberts and wondered what is behind the growth slowdown. Here's one answer (also discussed by Michael Roberts in a follow-up post):

Cereal Killer: Climate Change Stunts Growth of Global Crop Yields, by David Biello, Scientific American: The people of the world get 75 percent of their sustenance—either directly, or indirectly as meat—from four crops: maize (corn), wheat, rice and soybeans. The world's rising population—now predicted by the United Nations to reach 10.1 billion by century's end—has been fed thanks to rising yields of all four of these crops during the past century. Humanity's predilection for burning fossil fuels, however, is now contributing to the slowing of such rising yields, cutting harvests of wheat 5.5 percent and maize 3.8 percent from what they could have been since 1980, according to a new analysis of yields.
"On a global scale, we can see pretty clearly significant changes in the weather for most places where we grow crops," explains agricultural scientist David Lobell of Stanford University's Woods Institute for the Environment, who led the analysis published in the May 6 issue of Science. "Those changes are big enough to sum up to pretty big losses for wheat and corn." ...

More troubling, further climate change is already locked in.... That means areas that have not been affected to date, such as the "corn belt" of the U.S., may soon see the same or worse impacts. ...

Tuesday, May 03, 2011

Scientific American: Seas Could Rise Up to 1.6 meters by 2100

News we should pay attention to, but won't:

Seas Could Rise Up to 1.6 meters by 2100, by Alister Doyle, Scientific American: Quickening climate change in the Arctic including a thaw of Greenland's ice could raise world sea levels by up to 1.6 meters by 2100, an international report showed on Tuesday.
Such a rise -- above most past scientific estimates -- would add to threats to coasts from Bangladesh to Florida, low-lying Pacific islands and cities from London to Shanghai. ...
"The past six years (until 2010) have been the warmest period ever recorded in the Arctic," according to the Oslo-based Arctic Monitoring and Assessment Programme (AMAP), which is backed by the eight-nation Arctic Council. ... Warming in the Arctic is happening at about twice the world average. ...
"It is worrying that the most recent science points to much higher sea level rise than we have been expecting until now," European Climate Commissioner Connie Hedegaard told Reuters.
"The study is yet another reminder of how pressing it has become to tackle climate change, although this urgency is not always evident neither in the public debate nor from the pace in the international negotiations," she said. ...
The AMAP study, drawing on work by hundreds of experts, said there were signs that warming was accelerating. It said the Arctic Ocean could be nearly ice free in summers within 30 to 40 years, earlier than projected by the IPCC. ...

Wednesday, April 06, 2011

Stiglitz: Gambling with the Planet

Joseph Stiglitz says we aren't the awesome risk managers we think we are:

Gambling with the Planet, by Joseph E. Stiglitz, Commentary, Project Syndicate: The consequences of the Japanese earthquake – especially the ongoing crisis at the Fukushima nuclear power plant – resonate grimly for observers of the American financial crash that precipitated the Great Recession. Both events provide stark lessons about risks, and about how badly markets and societies can manage them. ...
Experts in both the nuclear and finance industries assured us that new technology had all but eliminated the risk of catastrophe. Events proved them wrong: not only did the risks exist, but their consequences were so enormous that they easily erased all the supposed benefits of the systems that industry leaders promoted. ...
For the planet, there is one more risk...: global warming and climate change. ... The costs of reducing emissions pale in comparison to the possible risks the world faces. ...
In the end, those gambling in Las Vegas lose more than they gain. As a society, we are gambling – with our big banks, with our nuclear power facilities, with our planet. As in Las Vegas, the lucky few – the bankers that put our economy at risk and the owners of energy companies that put our planet at risk – may walk off with a mint. But on average and almost certainly, we as a society, like all gamblers, will lose. ...

Monday, April 04, 2011

Paul Krugman: The Truth, Still Inconvenient

Climate change denialism -- and the potentially catastrophic roadblock to action that comes with it -- hasn't gone away:

The Truth, Still Inconvenient, by Paul Krugman, Commentary, NY Times: So the joke begins like this: An economist, a lawyer and a professor of marketing walk into a room. What’s the punch line? They were three of the five “expert witnesses” Republicans called for last week’s Congressional hearing on climate science... — ...where do they find these people?
My favorite, still, was Ron Paul’s first hearing on monetary policy, in which the lead witness was someone best known for writing a book denouncing Abraham Lincoln as a “horrific tyrant” — and for advocating a new secessionist movement as the appropriate response to the “new American fascialistic state.”
The ringers (i.e., nonscientists) at last week’s hearing weren’t of quite the same caliber, but their prepared testimony still had some memorable moments. My favorite was the lawyer’s declaration that the E.P.A. can’t declare that greenhouse gas emissions are a health threat, because these emissions have been rising for a century, but public health has improved over the same period. I am not making this up.
Oh, and the marketing professor, in providing a list of past cases of “analogies to the alarm over dangerous manmade global warming” ... included problems such as acid rain and the ozone hole that have been contained precisely thanks to environmental regulation. ...
For years now, large numbers of prominent scientists have been warning, with increasing urgency, that if we continue with business as usual, the results will be very bad, perhaps catastrophic. They could be wrong. But if you’re going to assert that they are in fact wrong, you have a moral responsibility to approach the topic with high seriousness and an open mind. After all, if the scientists are right, you’ll be doing a great deal of damage.
But what we had, instead of high seriousness, was a farce: a supposedly crucial hearing stacked with people who had no business being there... [I]t’s terrifying to realize that this kind of cynical careerism — for that’s what it is — has probably ensured that we won’t do anything about climate change until catastrophe is already upon us. ...

Tuesday, March 29, 2011

Farmer on Williamson on Farmer and Kocherlakota

I asked Roger Farmer if he'd like to respond to a recent post from Stephen Williamson: (it will be helpful to read Williamson's post first):

Farmer on Williamson on Farmer and Kocherlakota: Thanks to Stephen Williamson for publicizing my work and to Mark Thoma for providing a link and invitation to respond. Stephen: in addition to the paper you cited, I just finished an empirical paper on how to explain data without the Phillips Curve, two theoretical papers on why fiscal policy works in the short run (but shouldn’t be used) two papers on rational expectations with Markov switching and a piece on stochastic overlapping generations models.
The papers you mention in your blog, by Narayana and me, were both presented at a conference in Marseilles last week with not one but two Fed Presidents in attendance: Jim Bullard also gave a paper. Jim presented work that draws on the Benhabib-Schmitt-Grohé-Uribe paper on the perils of Taylor Rules. He sees a real danger of a Japan style deflation trap happening in the U.S.. Narayana gave a paper that combines a liquidity trap model of bubbles in an overlapping generations framework with a labor market based on the idea from my 2010 book, Expectations Employment and Prices. This book provides a new paradigm that drops the wage bargaining equation from a labor contracting model and replaces it with the assumption that employment is demand determined. This is the same assumption taken up by Narayana in the paper he presented in Marseilles.
The main idea is explained very nicely by one of the anonymous commentators on Stephen’s blog , who said:
“Think of it this way. With a centralized labor market, the real wage is pinned down by the intersection of labor demand and supply. With search, the labor market need not clear: the labor supply FOC is missing, and we need to add something else to close the model. One thing to add is an explicit bargaining model that effectively pins down the wage. An alternative is to say that output is demand-determined, and that the wage is the marginal product of labor at the demand determined level of output. Then firms are on their labor demand curve, but workers are not on their labor supply curve (but the beauty of search - unemployed workers will take a job at any positive wage).”
That’s exactly right. And once there are many possible labor market equilibria, there is room to close the model by bringing back the role of market psychology. That’s what I do in my work which has room for both involuntary unemployment and animal spirits; the two cornerstones of Keynes’ General Theory that are missing from the macroeconomics that emerged from Samuelson’s interpretation of Keynes.
Stephen professes not to understand the language of aggregate demand and supply. That’s not surprising given how many different ways it’s used. My own preferred interpretation is explained in a piece I wrote for the International Journal of Economic Theory in 2008.
The idea of aggregate demand and supply makes just as much sense as the notion of a microeconomic demand and supply curve as long as one works within a framework where the variables that shift one of the curves do not simultaneously shift the other. That is clearly not true in post-Lucas rational expectations models which is why the language went out of fashion. It is true in my work.

Republicans and Environmental Progress

J.S. at Environmental Economics is astounded at "the current Republican assault on the environment":

Republicans for Environmental Progress: An Endangered Species, by J.S.: For most of modern American history, the two major political parties in America have largely agreed on the desired long-term environmental outcomes for the country: there was a consensus among Republicans and Democrats that it was a good thing to press for cleaner air and water, less toxins in the environment, biodiversity preservation, and mitigation strategies for clean energy and, mostly recently, climate change.
The disagreements were largely centered around how to achieve these outcomes, and to some extent the pace of change and the absolute targets. Democrats by and large preferred a heavier regulatory approach (i.e. “command and control”) that set specific firm-level emissions limits, prescribed permissible technologies, and set industry-wide energy and fuel efficiency standards. Republicans tended to support more market-oriented policies, with cap and trade foremost among them.
Nowadays, the arguments are no longer over the methods to achieve environmental progress, but whether we should support such progress in the first place. This situation is unprecedented. Those who believed that divided government would lead Republicans to take a more moderate and constructive role have so far been proven wrong. It is hard to imagine the situation being much worse for America’s environmental quality, which is directly linked to the quality of life for all Americans.
The modern Republican Party has absolutely no affirmative environmental agenda whatsoever, and goes so far as to contest the entire rationale for continued environmental progress. Ironically, this extremely reactionary environmental agenda is coming at a time when the ideas that Republicans once championed are now widely accepted as the best ways to structure environmental policy. ...
I have been involved in environmental policy for almost 20 years and have never seen anything like the current Republican assault on the environment. It is truly astounding. To be clear, the Republicans leading this charge against environmental progress are in no way following conservative principles―they are doing the exact opposite. ...
There is absolutely nothing “free market” about letting polluters trash the environment for free. In fact, this fits the definition of a market failure, not a well-functioning capitalist system. What the Republicans are currently practicing is crony capitalism of the worst kind: rewarding industry at the expense of the public interest and future generations.
It is the Republican rank and file who should be the most offended by these policies. Public opinion polls consistently show that both Democrats and Republicans care deeply about the environment, and support clean energy policies and strong environmental safeguards. Unfortunately, the once proud environmental ethic of the Republican Party has been snuffed out by a small group of radical Tea Party extremists who are deeply confused both about true conservative principles and the proper role of government in society. And once moderate Republicans who supported sensible environmental policies are nowhere to be seen. Until true conservatives retake the Republican Party we will be left doing little more than damage control, and the chances of a new comprehensive affirmative environmental agenda are slim to none.

Yep.

Saturday, March 12, 2011

Is Nuclear Power Still the Answer?

The embrace of nuclear power by the environmental community surprised me. About five years ago I wrote:

Lots of research says that I will overestimate the risk of events such as a core meltdown in a nuclear power plant. And I'm sure I do. But knowing and allowing for that, or trying, I still can't find a way to endorse a strong movement toward nuclear power. My hesitation to support nuclear power is not very green according to many environmentalists. But are we positive we can't find any other solutions? Should simply resign ourselves to the nuclear power age?

Here's my question. Will the events in Japan change this at all, or -- assuming in the end the radiation leaks are minimal -- will it be a testimonial to the safety of nuclear power plants (even with an unprecedented earthquake, the systems worked to prevent major radiation releases...)?

As you can probably tell from my remarks above, I hope it pushes us to develop alternative sources of energy besides nuclear. Knowing nuclear is there as a backup could have reduced to the push to innovate in other areas, and hopefully that will change. But I wouldn't bet the house on it (unless it was underwater).

Monday, February 21, 2011

“The Problem of the Commons: Still Unsettled After 100 Years”

Here's a summary of Robert Stavins' summary of his recent article in the 100th anniversary edition of the AER, "“The Problem of the Commons:  Still Unsettled After 100 Years” (I'm a proponent of the market-based approaches to regulation that he discusses):

Reflecting on a Century of Progress and Problems, by Robert Stavins: As the first decade of the twenty-first century comes to a close, the problem of the commons is more important to our lives – and more central to economics – than a century ago when the first issue of the American Economic Review appeared, with an examination by Professor Katharine Coman of Wellesley College of “Some Unsettled Problems of Irrigation” (1911).  Since that time, 100 years of remarkable economic progress have accompanied 100 years of increasingly challenging problems.
As the U.S. and other economies have grown, the carrying-capacity of the planet – in regard to natural resources and environmental quality – has become a greater concern, particularly for common-property and open-access resources.  In an article that appears in the 100th anniversary issue of the American Economic Review (AER) “The Problem of the Commons:  Still Unsettled After 100 Years” – I focus on some important, unsettled problems of the commons.
100 Years of Economic Progress and More Challenging Environmental Problems
Within the realm of natural resources, there are special challenges associated with renewable resources, which are frequently characterized by open-access.  An important example is the degradation of open-access fisheries.  Critical commons problems are also associated with environmental quality, including the ultimate commons problem of the twenty-first century – global climate change.
Small communities frequently provide modes of oversight and methods for policing their citizens, a topic about which Professor Elinor Ostrom of Indiana University has written extensively.  But as the scale of society has grown, commons problems have spread across communities and even  across nations.  In some of these cases, no over-arching authority can offer complete control, rendering commons problems more severe. ...
A key contribution of economics has been the development of market-based approaches to environmental protection, including emission taxes and tradable rights.  These have potential to address the ultimate commons problem of the twenty-first century, global climate change. [E]conomic theory – by focusing on market failures linked with incomplete systems of property rights – has made major contributions to our understanding of commons problems and the development of prudent public policies. ...
Conclusions
Although I hope you will read the full article – which is very accessible — I will summarize its conclusions here.
Problems of the commons are both more widespread and more important today than when Coman wrote about unsettled problems in the first issue of the American Economic Review 100 years ago.  A century of ... increases in income and population have ... greatly heightened pressures on the commons, particularly where there has been open access to it.
The stocks of a variety of renewable natural resources – including water, forests, fisheries, and numerous other species of plant and animal – have been depleted below socially efficient levels, principally because of poorly-defined property-right regimes.  Likewise, the same market failures of open-access – whether characterized as externalities, following A. C. Pigou (1920), or public goods, following Ronald Coase (1960) – have led to the degradation of air and water quality, inappropriate disposal of hazardous waste, depletion of stratospheric ozone, and the atmospheric accumulation of greenhouse gases linked with global climate change.
Over this same century, economics ... has gradually come to focus more and more attention on these commons problems...  Economic research within academia and think tanks has improved our understanding of the causes and consequences of excessive resource depletion and inefficient environmental degradation, and thereby has helped identify sensible policy solutions.
Conventional regulatory policies, which have not accounted for economic responses, have been excessively costly, ineffective, or even counter-productive.  The problems behind what Garrett Hardin (1968) characterized as the “tragedy of the commons” might better be described as the “failure of commons regulation.”  As our understanding of the commons has become more complex, the design of economic policy instruments has become more sophisticated.
Problems of the commons have not diminished, and the lag between understanding and action can be long.  While some commons problems have been addressed successfully, others continue to emerge.  Some – such as the threat of global climate change – are both more important and more difficult than problems of the past.
Fortunately, economics is well positioned to offer better understanding and better policies to address these ongoing challenges.  As the first decade of the twenty-first century comes to a close, natural resource and environmental economics has emerged as a productive field of our discipline and one that shows even greater promise for the future.

Tuesday, February 08, 2011

Real Environmental Justice?

Alan Blinder says a carbon is a "miraculous policy" that can cure all sorts of ills:

The Carbon Tax Miracle Cure, by Alan Blinder, Commentary, WSJ: In his State of the Union address..., President Obama called for a major technological push for cleaner energy: "the Apollo projects of our time." But when the details emerge, it is predictable that his political foes will object to the new government spending and decry the "heavy hand" of government in telling business what to do. Fortunately, there is a marvelous way to square the circle.
Under this policy approach, decision-making is left in private hands and the jobs created will be in the private sector. Furthermore, the policy would ... eventually reduce the federal budget deficit significantly. Plus, there are a few nice side effects, like reducing our trade deficit, making our economy more efficient, ameliorating global warming, and showing the world that American capitalism has not lost its edge.
What is this miraculous policy? It's called a carbon tax—really, a carbon dioxide tax—but one that starts at zero and ramps up gradually over time.
The timing is critical. With the recovery just starting—we hope—to gather steam, this is a terrible time to hit it with some big new tax. Hence, while the CO2 tax should be enacted now, it should be set at zero for 2011 and 2012. After that, it would ramp up gradually. ...
Think about what would happen. Once America's entrepreneurs and corporate executives see lucrative opportunities from carbon-saving devices and technologies, they will start investing right away—and in ways that make the most economic sense. ... Jobs follow investment, and ... many of the new jobs will be good jobs with good wages, just what America needs right now. ...
Up to now, our country has done approximately nothing to curb CO2 emissions. A stiff tax would make a world of difference. ...
I know this sounds like a pipe dream now. America has elected a Republican House of Representatives... These folks are not about to vote for a CO2 tax, even one starting at zero. ... But eventually we'll succumb to the inexorable logic of a phased-in CO2 tax. Just watch—if you're young enough to live that long.

Robert Stavins seems excited by California's approach to the problem:

Pursuing Real Environmental Justice in California, by Robert Stavins: California Governor Jerry Brown plans to move forward with the implementation of Assembly Bill 32, the Global Warming Solutions Act... Questions have been raised about the wisdom of a single state trying to address a global commons problem, but with national climate policy developments having slowed dramatically in Washington, California is now the focal point of meaningful U.S. climate policy action.
A key element of the mechanisms to be used for achieving California’s ambitious emissions reductions will be cap-and-trade, a promising approach with a successful track record, despite its recent demonization as “cap-and-tax” by conservatives and other opponents in the U.S. Congress. ... Experience has shown that cap-and-trade programs achieve emissions reductions at dramatically lower cost than conventional regulation.
Yet some groups in California have been very uneasy about the prospect of cap-and-trade. In particular, the Environmental Justice movement has opposed this approach, citing concerns that it would hurt low-income communities. ... The apprehension is not about greenhouse gases ... since these gases spread evenly around the globe... Rather, it’s about “co-pollutants,” such as nitrogen oxides, carbon monoxide, and particulates, which can be emitted alongside greenhouse gases.
Because a cap-and-trade system would reduce California’s overall greenhouse gas emissions, it would also lower the state’s emissions of co-pollutants. Still, it’s possible, though unlikely, that co-pollutant emissions would increase in a particular locality. But here it’s crucial to recognize that ... the most environmentally and economically effective way to address such pollution is to revisit existing local pollution laws and perhaps make them more stringent.
While much attention has rightly been given to the effects of potential climate policies on environmental conditions in low-income communities, it’s also important to consider their economic impacts on these communities. Reducing greenhouse gas emissions will require greater reliance on more costly energy sources and more costly appliances, vehicles and other equipment. Because low-income households devote greater shares of their income to energy and transportation costs than do higher-income households, virtually any climate policy will place relatively greater burdens on low-income households. But because cap-and-trade will minimize energy-related and other costs, it holds an important advantage in this regard over conventional regulations.
Moreover, a cap-and-trade system gives the public a tool for compensating low-income communities for the potential economic burdens: If some emission allowances are auctioned, revenues can be used to mitigate economic burdens on these communities.
All in all, cap-and-trade serves the goal of environmental justice better than the alternatives. ... Beyond helping the state meet its emissions-reduction targets at the lowest cost, it offers a promising way to reduce economic burdens on low-income and minority communities.

Any chance this will spread past California? I'm not counting on much if anything happening at the federal level.

Monday, February 07, 2011

Paul Krugman: Droughts, Floods and Food

Are we getting the "first taste" of the political and economic upheaval we'll face if we don't reduce greenhouse gas emissions?:

Droughts, Floods and Food, by Paul Krugman, Commentary, NY Times: We’re in the midst of a global food crisis — the second in three years. World food prices hit a record in January... These soaring prices have had only a modest effect on U.S. inflation, which is still low..., but they’re having a brutal impact on the world’s poor, who spend much if not most of their income on basic foodstuffs.

The consequences of this food crisis go far beyond economics. After all, the big question about uprisings against corrupt and oppressive regimes in the Middle East isn’t so much why they’re happening as why they’re happening now. And there’s little question that sky-high food prices have been an important trigger for popular rage.

So what’s behind the price spike? American right-wingers (and the Chinese) blame easy-money policies at the Federal Reserve, with at least one commentator declaring that there is “blood on Bernanke’s hands.” Meanwhile, President Nicolas Sarkozy of France blames speculators, accusing them of “extortion and pillaging.” ...

Now, to some extent soaring food prices are part of a general commodity boom... But ...  food prices lagged behind the prices of other commodities until last summer. Then the weather struck. ...

The Russian heat wave was only one of many recent extreme weather events, from dry weather in Brazil to biblical-proportion flooding in Australia, that have damaged world food production.

The question then becomes, what’s behind all this extreme weather?

To some extent we’re seeing the results of a natural phenomenon, La Niña— a periodic event in which water in the equatorial Pacific becomes cooler than normal. La Niña events have historically been associated with global food crises...

But that’s not the whole story. ... As always, you can’t attribute any one weather event to greenhouse gases. But the pattern we’re seeing, with extreme highs and extreme weather in general becoming much more common, is just what you’d expect from climate change.

The usual suspects will, of course, go wild over suggestions that global warming has something to do with the food crisis; those who insist that Ben Bernanke has blood on his hands tend to be more or less the same people who insist that the scientific consensus on climate reflects a vast leftist conspiracy.

But the evidence does, in fact, suggest that what we’re getting now is a first taste of the disruption, economic and political, that we’ll face in a warming world. And given our failure to act on greenhouse gases, there will be much more, and much worse, to come.

Thursday, February 03, 2011

Is QEII Working?

It's great that QEII seems to be working, but let's not get overexcited here. According to this FRBSF Economic Letter, the effect on unemployment will be around 1.5% (and it won't happen overnight).

By 2012, the ... program's incremental contribution is ... 700,000 jobs generated ... by the most recent phase of the program. Increased hiring lowers the unemployment rate by 1½ percentage points compared with what it would have been absent the Fed's asset purchases... Based on other simulations, providing an equivalent amount of support to real economic activity through conventional monetary policy would have required cutting the federal funds rate approximately 3 percentage points relative to baseline from early 2009 through 2012, an obvious impossibility because of the zero lower bound.

That gets us down to 8% in 2012 (Update: as Ryan Avent notes, plus any change that would have happened anyway, but see the note below). We can argue about what "working" means, but if it means reducing unemployment to acceptable levels, to repeat a point I've made again and again, this alone is not nearly enough.

There is also more evidence on QEII beyond the FRBSF research. This paper by Heike Schenkelberg and Sebastion Watzka of the University of Munich finds positive effects of QE for Japan. Here's there introduction:

1 Introduction We study the real effects of Quantitative Easing (QE) in a structural VAR (SVAR) when the short-term interest rate is constrained by the Zero-Lower-Bound (ZLB). Using monthly Japanese data since 1995 - a period during which the Bank of Japan's target rate, the overnight call rate, has been very close to zero - and sign restrictions based on liquidity trap theory, we find that an increase in reserves leads to a significant 0.7 percent rise in industrial production on impact.
This rise lasts for about two years. On the other hand, our results indicate that the same shock has no effect on inflation. Thus our results provide mixed evidence on the successfulness of QE in Japan. Whilst real economic activity does seem to pick up after a QE-shock, this does not seem to affect inflation in such a way that Japan could exit its deflationary period through such a policy shock.
However, this conclusion strictly holds only under the usual caveat in SVAR- analysis that the monetary policy shock we consider must be a small one - one that is not allowed to change the policy regime or any other of the structural relations we estimate. Whilst we argue this is precisely the kind of shock that central banks currently inflict on our economies, we should be careful not to conclude that any more aggressive policy changes by central banks to escape the deflationary period of the liquidity trap are doomed to fail. ...

Finally, Bernanke said today that unemployment is still too high, inflation is still too low, QEII appears to be working (though again, what does working mean in terms of solving the big problem we face?), and that QEII will continue. (Wish I had more time to extract some of this, but I need to go find the gate for my flight, so I'll have to leave it to you.)

Update: Ryan Avent argues that a 1.5% change over such a long time period --around two years -- is, in fact, "working." Again, under my definition of what working means, this (less than 30,000 jobs per month) is far from fast enough and clearly indicates that the unemployment problem could use more help (and that help should already be in place) -- my main point. Ben Bernanke says it will be "several years" yet until unemployment returns to normal even with QEII. That is far from getting people working fast enough under any reasonable definition. Call that "working" if you like, but I don't see it that way.

Update: A few more comments from my oh so comfortable seat on the plane (writing this is supposed to take my attention away from the crying baby and the jabbing elbow next to me -- grrr -- both irritated and distracted as I try to write).

I am not saying that QEII did nothing, was worthless, anything like that. I'm just disappointed to see people patting the Fed on the back for a job well done when the Fed's actions were both far too late and far too small (why settle for 1.5% reduction in unemployment if inflation is not a worry? Why wait until after the election to do this when we knew unemployment was a problem long, long before that?). Furthermore, with the unemployment problem expected to persist for years yet, we have to worry that this optimism will translate into deficit reduction and interest rate increases that come far too early and create yet another headwind working against the millions seeking work. My reactions are partly conditioned on that worry. All along I've been arguing that the Fed could not put the unemployment rate on a satisfactory trajectory by itself, and Bernanke's comments about having years yet until unemployment returns to normal reinforces that view. Like the Fed, but even more so, Congress needed to do more than it has done, and do it much sooner. But that didn't happen. Yes, we got a bit more recently, and I am happy about that -- better than nothing -- but it's much too little and much too late relative to the optimal response.

I am very pleased that 700,000 more people will have jobs as a result of the Fed's actions in QEII (and the total QE affects were even larger, the 700,000 is only for QEII). But with millions and millions out of work still, I am not going to settle for this, say great job, pat the Fed and Congress on the back, and move on to other things (and it's important to realize the forecast for a 1.5% reduction is from model based simulations and hence there is quite a bit of uncertainty surrounding the forecast -- yet another reason not to relax just yet). It's time to keep pushing for more, we have years ahead of us before we are back to normal. If that means I'll have a hard time saying good job when perhaps it's warranted, and I will, so be it.

Ah, the cabin is a bit quieter. Yahoo.

Tuesday, January 18, 2011

"Loss of Reflectivity in the Arctic Doubles Estimate of Climate Models"

Global warming is a bigger problem than we thought -- and it was already bigger than we seem to be able to handle:

Loss of reflectivity in the Arctic doubles estimate of climate models, EurekAlert: A new analysis of the Northern Hemisphere's "albedo feedback" over a 30-year period concludes that the region's loss of reflectivity due to snow and sea ice decline is more than double what state-of-the-art climate models estimate.
The findings are important, researchers say, because they suggest that Arctic warming amplified by the loss of reflectivity could be even more significant than previously thought. ...

Saturday, January 01, 2011

"Why Cancun Trumped Copenhagen"

Robert Stavins seems happy with the progress of the recent climate talks in Cancun:

Why Cancun Trumped Copenhagen, by Robert Stavins: ...After the modest results of the climate change talks in Copenhagen a little more than a year ago, expectations were low for the follow-up negotiations in Cancun last month. ...
But a funny thing happened on the way to that much-anticipated failure: During two intense weeks of discussions..., the world’s governments quietly achieved consensus on a set of substantive steps forward. And equally important, the participants showed encouraging signs of learning to navigate through the unproductive squabbling between developed and developing countries that derailed the Copenhagen talks.
The tangible advances were noteworthy: The Cancun Agreements set emissions mitigation targets for some 80 countries, including all the major economies. That means that the world’s largest emitters, among them China, the United States, the European Union, India, and Brazil, have now signed up for targets and actions to reduce emissions by 2020.
The participating countries also agreed – for the first time in an official United Nations accord – to keep temperature increases below a global average of 2 degrees Celsius. ... The Cancun Agreements on their own are clearly not sufficient to keep temperature increases below 2 degrees Celsius, but they are a valuable step forward...
The progress was as much about changing the mindset of how to tackle climate disruption. ... That they met this challenge owes in good measure to ... the tremendous skill of Mexican Foreign Minister Patricia Espinosa in presiding over the talks.
For example, at a critical moment she took note of objections from Bolivia and a few other leftist states, and then ruled that the support of the 193 other countries meant that consensus had been achieved and the Cancun Agreements had been adopted. She pointed out that “consensus does not mean unanimity.” Compare that with Copenhagen, where the Danish prime minister allowed objections by five small countries to derail the talks.
Mexico’s adept leadership also made sure smaller countries were able to contribute fully..., avoiding the sense of exclusivity that alienated some parties in Copenhagen. ...
It’s also vital to note that China and the United States set a civil, productive tone, in contrast to the Copenhagen finger-pointing. From the sidelines in Cancun, I can vouch for the tremendous increase in openness of members of the Chinese delegation.
The acceptance of the Cancun Agreements suggests that the international community may now recognize that incremental steps in the right direction are better than acrimonious debates over unachievable targets.

With Republicans taking control of the House, I will be pleasantly surprised if we make any progress on this issue domestically (I can imagine the GOP perhaps buying into tax cuts designed to encourage investment into research in this area, but not much else).

Tuesday, December 14, 2010

"Peak Oil is Stupid"

Tim Haab at Environmental Economics:

'Peak Coaler' just doesn't have the same ring, but I bet it raises the same vitriol for stupid economists: Time for some snark:

When will production of oil and coal peak? 

Better question: Who cares? 

Betterer question:  When will oil and coal run out?

Even betterer question: When will oil and coal reserves be depleted to the point that prices adjust to make investments in renewables make economic sense without the need for goofy (laymen speak for inefficient) government policies?

After the peak, production will decline because supplies are being depleted and no new sources are to be found. ...

Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. 

Terminal Decline? A sequel to a 1990's Charlie Sheen movie?

Optimistic estimations of peak production forecast the global decline will begin by 2020 or later, and assume major investments in alternatives will occur before a crisis, without requiring major changes in the lifestyle of heavily oil-consuming nations. These models show the price of oil at first escalating and then retreating as other types of fuel and energy sources are used.

I think they just called me an optimist.

Pessimistic predictions of future oil production operate on the thesis that either the peak has already occurred, that oil production is on the cusp of the peak, or that it will occur shortly. 

Who cares?  Oh wait, I already asked that.

Must be time to update my semi-regular 'peak oil is stupid' rant.  So here goes...

I don't care when oil (OR COAL) peaks, I care when we run out, which we won't because, as production declines, prices WILL rise. As prices rise, people WILL figure out alternatives. They might not be happy alternatives. They might not be as productive alternatives. They might not support the same lifestyle to which we are accustomed. But there WILL be alternatives, forced by higher prices--and no other mechanism is that powerful. 

See, I'm an optimist.

It's the end of the world as we know it...

And I feel fine.

Tuesday, November 23, 2010

"Good riddance CCX"

Does the closing of the Chicago Climate Exchange say anything about the viability of cap and trade?:

Good riddance CCX, by Gernot Wagner: The Chicago Climate Exchange, one of the first voluntary cap-and-trade programs, is shutting down next month. That's bad news for the planet, isn't it? Just take a look at today's Wall Street Journal editorial page for an apparent confirmation. There the news is being celebrated as "cap and retreat." Check.
That should indeed be confirmation enough. Sadly, what's good for the Journal tends to be bad for the planet. ... The full editorial is behind a firewall. That's just as well. The rest is as wrong as the beginning. ...
There's also a much larger point here. The CCX was voluntary. Companies volunteered to sign up. It doesn't take a Ph.D. in economics to realize that the only companies who sign up for reasons other than marketing purposes are the ones that have allowances to sell. Those that need to buy them, stay as far away as possible.
No market can operate under these conditions. If anything, it's surprising the market held up as long as it did—no doubt due to companies' willingness to write off their participation as a marketing expense. ...

CCX did provide some valuable lessons for participants. Chief among them, how to implement such a trading system internally, how to minimize emissions and make money, and whether and how it would be different from SO2 trading...

But CCX was never meant to be anything other than a precursor for a U.S.-wide system. ...

Thursday, October 07, 2010

"Does Inequality Make People More Conservative?"

Rising inequality is associated with a shift toward conservatism for both the wealthy and the poor:

Does Inequality Make People More Conservative?, Monkey Cage: Yes, according to some new research (pdf) from Nathan Kelly and Peter Enns. They rely on a a yearly measure of “policy mood” from 1952-2006. This is an omnibus summary of the public’s ideological leaning, liberal to conservative. (See the graph and corresponding Excel file at Jim Stimson’s homepage.) They also draw on a specific measure of the public’s support for welfare. The question is whether and how both measures respond to inequality.

Their first main finding: increases in inequality are associated with a conservative shift in mood and increasing opposition to welfare. (For more on why this would be true, see this paper (pdf) by Roland Benabou.)

Their second main finding: increases in inequality are associated with a conservative shift among both the wealthy and the poor.

One natural objection: perhaps some citizens, and especially poorer citizens, just do not realize that inequality has increased. But the third main finding contradicts this: over time, the poor are actually more likely to perceive increased inequality than do the wealthy.

Kelly and Enns offer some further speculation on why, in particular, the rich and poor respond in parallel to rising inequality:

Despite the fact that parallelism is not driven by lack of information about income inequality, we think it is possible that the way information about distributional outcomes is framed is important. This idea is rooted in Gilens’s …argument is that during good economic times news stories focus on individualism (enhancing opposition to welfare) and during bad economic times stories emphasize people being down on their luck (enhancing support for welfare).

Given that rising inequality since the 1970s has been driven in large part by gains at the top of the income distribution, media frames over this period may have increasingly emphasized stories of individualism, thus generating a negative link between rising inequality and public opinion liberalism. The decline in inequality prior to the 1970s, by contrast, was driven primarily by increasing incomes at the bottom of the income distribution and may have generated stories emphasizing government’s role in education and job creation. This could explain why declining inequality up to the 1970s pushed public opinion in a liberal direction.

See the paper for some further discussion and appropriate caveats.

That explanation doesn't ring very true to me, but I don't have anything better to offer. Any ideas?

(When you are puzzled by a regression result, the tendency is to question the statistical technique or the quality of the data. So, in that tradition, the autocorrelated error structure for the regressions in Table 2 where the results are disaggregated by income could be signaling a misspecified model. For example, citing the paper they cite to justify the correction for autocorrelation, "analysts should view autocorrelation as a potential sign of improper theoretical specifcation rather than just a narrow violation of a technical assumption." If the model is, in fact, misspecified then the results cannot be trusted. I'd also prefer to see the autocorrelation corrected by adding more lags to the error correction model rather than using the Prais-Winsten estimator as in the paper -- or at least try adding more lags as an alternative -- and see if it makes a difference for the results. That's the more usual correction to the autocorrelation problem in the applications of the error-correction models I'm familiar with.)

Friday, October 01, 2010

"Current Targets for Limiting Climate Change are Unsafe"

News on the urgency of combating greenhouse gases:

Research suggests climate change target 'not safe', EurekAlert: An analysis of geological records that preserve details of the last known period of global warming has revealed 'startling' results which suggest current targets for limiting climate change are unsafe.
The study by climate change experts at the University of Exeter has important implications for international negotiators aiming to agree binding targets for future greenhouse gas emission targets.
Professor Chris Turney and Dr Richard Jones ... have reported a comprehensive study of the Last Interglacial, a period of warming some 125,000 years ago, in the latest issue of the Journal of Quaternary Science.
The results reveal the European Union target of limiting global temperature rise to less than 2°C above pre-industrial levels shouldn't be considered 'safe'. ...
Professor Turney said: "The results here are quite startling and, importantly, they suggest sea levels will rise significantly higher than anticipated and that stabilizing global average temperatures at 2˚C above pre-industrial levels may not be considered a 'safe' target as envisaged by the European Union and others. The inevitable conclusion is emission targets will have to be lowered further still."

Monday, August 23, 2010

"All-Out Geoengineering Still Would Not Stop Sea Level Rise"

Are you counting on geoengineering to solve our greenhouse gas problem?:

All-out geoengineering still would not stop sea level rise, by David Biello, Scientific American: Mimicking volcanoes by throwing particles high into the sky. Maintaining a floating armada of mirrors in space. Burning plant and other organic waste to make charcoal and burying it—or burning it as fuel and burying the CO2 emissions. Even replanting trees. All have been mooted as potential methods of "geoengineering"—"deliberate large-scale manipulation of the planetary environment," as the U.K.'s Royal Society puts it.
The goal, of course, is to cool the planet by remove heat-trapping gases in the atmosphere or reflecting sunlight away. But rising temperatures is just one impact of our seemingly limitless emission of greenhouse gases, largely carbon dioxide, into the atmosphere. Arguably a more devastating consequence would be the rise of the seas as warmer waters expand and melting icecaps fill ocean basins higher, potentially swamping nations and the estimated 150 million people living within one meter of high tide. Can geoengineering hold back that tide?
That's what scientists attempted to assess with computer models in a paper published online August 23 in Proceedings of the National Academy of Sciences. In their words, "sea level rise by 2100 will likely be 30 centimeters higher than 2000 levels despite all but the most aggressive geoengineeering." In large part, that's because the ocean has a lot of thermal inertia: it only slowly warms as a result of increasing greenhouse gas levels—and it will only slowly cool down again. ...
Perhaps the only way to reduce warming enough to minimize the rise of the oceans is an all-out effort that also includes burning biomass as fuel (either to replace coal or gasoline or both) and pairing it with CO2 capture and storage. Together, they could suck down greenhouse gas levels by 180 ppm—more than enough to bring us below pre-industrial levels. As a result, sea level rise is held to just 10 centimers by 2100, according to the author's modeling.
Such extensive geoengineering seems impractical given its economic (and environmental) cost. But interfering with the planet's carbon cycle—something we're already doing by adding so much CO2 to the atmosphere—appears to be the better bet, even if only by curbing current CO2 emissions. Otherwise, we're leaving our descendants one heck of a mess or, as the authors put it, "substituting geoengineering for greenhouse gas emission abatement or removal constitutes a conscious risk transfer to future generations."

Wednesday, July 28, 2010

"Making Sense of the Climate Issue"

Jeff Sachs:

Making Sense of the Climate Impasse, by Jeffrey D. Sachs, Commentary, Project Syndicate: All signs suggest that the planet is still hurtling headlong toward climatic disaster. ... Yet still we fail to act.

There are several reasons for this... First, the economic challenge of controlling human-induced climate change is truly complex. Human-induced climate change stems from two principal sources of emissions...: fossil-fuel use for energy and agriculture (including deforestation...). Changing the world’s energy and agricultural systems is no small matter. ... We need a practical strategy for overhauling two economic sectors that stand at the center of the global economy and involve the entire world’s population.

The second major challenge in addressing climate change is the complexity of the science... This scientific understanding is incomplete, and there remain significant uncertainties about the precise magnitudes, timing, and dangers of climate change. The general public naturally has a hard time grappling with this complexity and uncertainty, especially since the changes in climate are occurring over a timetable of decades and centuries...a

This has given rise to a third problem in addressing climate change, which stems from a combination of the economic implications of the issue and the uncertainty that surrounds it. This is reflected in the brutal, destructive campaign against climate science by powerful vested interests and ideologues, apparently aimed at creating an atmosphere of ignorance and confusion.

The Wall Street Journal, for example,... has run an aggressive editorial campaign against climate science for decades. ... Major oil companies and other big corporate interests also are playing this game... Their general approach is to exaggerate the uncertainties of climate science and to leave the impression that climate scientists are engaged in some kind of conspiracy to frighten the public. ...

If we add up these three factors – the enormous economic challenge of reducing greenhouse gases, the complexity of climate science, and deliberate campaigns to confuse the public and discredit the science – we arrive at the fourth and over-arching problem: US politicians’ unwillingness or inability to formulate a sensible climate-change policy. ...

When Barack Obama was elected US president, there was hope for progress. Yet, while it is clear that Obama would like to move forward on the issue,... special interest groups have dominated the process, and Obama has failed to make any headway.

The Obama administration should ... try ... an alternative approach. Instead of negotiating with vested interests in the backrooms of the White House and Congress, Obama should present a coherent plan to the American people ... for phasing in ... changes over time, and demonstrate that the costs would be modest compared to the enormous benefits.

Strangely, despite being a candidate of change, Obama has not taken the approach of presenting real plans of action for change. His administration is trapped more and more in the paralyzing grip of special-interest groups. Whether this is an intended outcome, so that Obama and his party can continue to mobilize large campaign contributions, or the result of poor decision-making is difficult to determine – and may reflect a bit of both.

What is clear is that we are courting disaster as a result. Nature ... is telling us that our current economic model is dangerous and self-defeating. Unless we find some real global leadership in the next few years, we will learn that lesson in the hardest ways possible.

Tuesday, July 27, 2010

"Conservatism’s Death Gusher"

This from a member of the Linguistics Department at UC Berkeley:

Conservatism’s Death Gusher, by George Lakoff, Berkeley Blog: The issue is death — death gushing at ten thousand pounds per square inch from a mile below the sea, tens of thousands of barrels of death a day. Not just death to eleven human beings. Death to sea birds, sea turtles, dolphins, fish, oyster beds, shrimp, beaches; death to the fishing industry, tourism, jobs; and death to a way of life based on the beauty and bounty of the Gulf.

Many, perhaps a majority, of the Gulf residents affected are conservatives, strong right-wing Republicans, following extremist Governors Bobby Jindal and Haley Barbour. What those conservatives are not saying, and may be incapable of seeing, is that conservatism itself is largely responsible for what happened, and that conservatism is a continuing disaster for conservatives who live along the Gulf. Conservatism is an ideology of death. ...

It was conservative laissez-faire free market ideology... Cost-benefit analysis only looks at monetary costs versus benefits, case by case, not at the risk of massive death of the kind that has been gushing out of the Gulf.  Death, in itself, even at that scale, is not a “cost.” Only an outflow of money is a “cost.” This is what follows from conservative laissez-faire market ideology, an ideology that continues to sanction death on a Gulf scale. ...

The conservative worldview says man has dominion over nature: nature is there for human monetary profit. Profit is sanctioned over the possibility of massive death and destruction in nature. Conservatives support even more dangerous drilling off the coast of Alaska and are working to repeal the President’s moratorium on deep water drilling. Nature be damned; the oil companies have a right to make money, death or no death. ...

A great many self-identified conservatives are actually what I’ve called “biconceptuals,” who have both conservative and progressive worldviews, but on different issues. They actually share a progressive view of nature: they love the beauty and appreciate the bounty of the Gulf, as it was before the Death Gusher. They want to save the environment of the Gulf and the way of life as it was. But shift the issue to the culpability of laissez-faire markets, the absolute right to profit from nature and profit-maximizing corporate practices, and their conservative worldview is activated. They will not be able to see the causal role of conservatism itself in the Death Gusher, and in the conservative ideology of greed and death that has given us the global warming disaster we now face worldwide.

Incidentally, there are bi-conceptual Democrats who share the conservative view of the market. Their views have led to many of President Obama’s problems with Democrats in Congress.

Finally, there is what progressive Democrats see as a contradiction: conservative advocates of smaller and weaker government and critics of governmental power trying to pin the Death Gusher Disaster on Obama for not having and using enough government power to prevent or lessen the disaster — even though the government has no capacity to plug oil wells.

The contradiction is logical, from a progressive point of view, but not from a conservative point of view. The highest value in the conservative universe is to preserve, defend, and extend conservatism itself. Anything that helps, or fails to harm, Obama contradicts this highest principle, since Obama’s deepest values on the whole fundamentally contradict conservative values. Conservatives, on principle, cannot let a major opportunity to criticize Obama go by. Of course, it also helps conservatives politically.

Those who are not held captive by the conservative worldview should be able to recognize the causal role of conservatism in the Death Gusher in the Gulf. Many progressives do, but keep it to themselves.

Progressives have been much too kind to conservatives on this matter. They have largely accepted the Bad Actor Frame, criticizing BP but not the whole industry and its practices. No one should be drilling miles under the sea, where oil comes out at 10,000 pounds per square inch. No matter how much profit is involved.

Conservatism gushes death — and not only in the Gulf of Mexico.

I think there are two different ways to characterize market fundamentalism, a distinction I tried to get at in Markets are Not Magic. One is the belief that markets have desirable properties when the right conditions are in place (i.e. the conditions that ensure that markets are competitive). I think it would be fair to say that most economists hold the belief that markets function well under the proper conditions (and note that the markets described above clearly do not satisfy these conditions).

The second type of market fundamentalism is the belief that markets perform best when government is involved the least -- the less government the better -- and this includes the belief that market failures will self-correct. Markets will take care of any problems an their own, so government intervention is not required.

Almost all economists recognize that there are some market failures that must be corrected by government intervention, the disagreement is over their prevalence. Some economists see widespread and costly market failures, and that government can intervene effectively to overcome them. Thus, an active, interventionist government is required to ensure that markets are functioning correctly. More libertarian types tend to both see fewer market failures and, more importantly, believe that government is not very effective in intervening to correct problems. It's only very large, very obvious cases where government can help, and those are far and few between. Some never see them at all.

So I would characterize the problem slightly differently. It wasn't market fundamentalism per se, it was the wrong type of market fundamentalism. There was too much of the second type, and not enough of the first. That is, those who believe that markets function poorly when there are substantial deviations from ideal market conditions and that government is needed to correct these problems lost the ideological battle several decades ago to those who believe in the second type of market fundamentalism -- one that minimizes government involvement in the economy. We see this in the gulf, we see this in the financial crash, and we see it in other areas of the economy as both economic and political power has been concentrated in fewer and fewer hands. And there has been little, if any resistance from regulators charged with ensuring that markets are free from the problems that can result from such concentrations.

I want government to intervene as little as possible, but the movement in this direction that began in the 1970s has gone too far. I thought the financial crisis would change this, that public and professional opinion would move back toward a more interventionist posture, and that the problems in the gulf would reinforce the change. But the tide hasn't turned as much as I expected. Perhaps this power is entrenched to a degree where it will be a long and difficult battle to reverse it, and it was too much to expect that things would change dramatically in such a short period of time. But it's still disappointing.

Monday, July 26, 2010

Paul Krugman: Who Cooked the Planet?

Why did climate change legislation fail?:

Who Cooked the Planet?, by Paul Krugman, Commentary, NY Times: Never say that the gods lack a sense of humor. I bet they’re still chuckling on Olympus over the decision to make the first half of 2010 — the year in which all hope of action to limit climate change died — the hottest such stretch on record. ...
So why didn’t climate-change legislation get through the Senate? Let’s talk first about what didn’t cause the failure, because there have been many attempts to blame the wrong people.
First of all, we didn’t fail to act because of legitimate doubts about the science. Every piece of valid evidence ... points to a continuing, and quite possibly accelerating, rise in global temperatures.
Nor is this evidence tainted by scientific misbehavior. You’ve probably heard about the accusations leveled against climate researchers —... “Climategate,” and so on. What you may not have heard, because it has received much less publicity, is that every one of these supposed scandals was eventually unmasked as a fraud concocted by opponents of climate action...
Did reasonable concerns about the economic impact of climate legislation block action? No. ... All serious estimates suggest that we could phase in limits on greenhouse gas emissions with at most a small impact on the economy’s growth rate.
So it wasn’t the science, the scientists, or the economics that killed action on climate change. What was it?
The answer is, the usual suspects: greed and cowardice.
If you want to understand opposition to climate action, follow the money. The economy as a whole wouldn’t be significantly hurt if we put a price on carbon, but certain industries — above all, the coal and oil industries — would. And those industries have mounted a huge disinformation campaign to protect their bottom lines.
Look at the scientists who question the consensus on climate change; look at the organizations pushing fake scandals; look at the think tanks claiming that any effort to limit emissions would cripple the economy. Again and again, you’ll find that they’re on the receiving end of a pipeline of funding that starts with big energy companies, like Exxon Mobil, which has spent tens of millions of dollars promoting climate-change denial, or Koch Industries, which has been sponsoring anti-environmental organizations for two decades.
Or look at the politicians who have been most vociferously opposed to climate action. Where do they get much of their campaign money? You already know the answer.
By itself, however, greed wouldn’t have triumphed. It needed the aid of cowardice — above all, the cowardice of politicians who know how big a threat global warming poses, who supported action in the past, but who deserted their posts at the crucial moment.
There are a number of such climate cowards, but let me single out one in particular: Senator John McCain.
There was a time when Mr. McCain was considered a friend of the environment. Back in 2003 he burnished his maverick image by co-sponsoring legislation that would have created a cap-and-trade system for greenhouse gas emissions. He reaffirmed support for such a system during his presidential campaign, and things might look very different now if he had continued to back climate action once his opponent was in the White House. But he didn’t — and it’s hard to see his switch as anything other than the act of a man willing to sacrifice his principles, and humanity’s future, for the sake of a few years added to his political career.
Alas, Mr. McCain wasn’t alone; and there will be no climate bill. Greed, aided by cowardice, has triumphed. And the whole world will pay the price.

Saturday, July 24, 2010

Why is the Obama Administration Blaming Environmentalists for Its Failures?

Michael Perelman is puzzled by the administration's attempt to blame environmentalists for the failure of climate change legislation:

 Politico reports that the Obama folk blame the Greens for the failure of its energy bill because it was THEIR responsibility to lobby...  So, here is the story: misinformed Greens voted for Obama for change, but the change was that it was the responsibility of the Greens to create the change.
Of course, the White House needs a strong grassroots movement to fight powerful interests, but it also has the responsibility to lead that movement rather than make deals with those whom the grass roots people oppose. ...

Here's the part of the story linked above the raised Michael's ire:

...The blame game has already begun. One exasperated administration official on Thursday lambasted the environmentalists – led by the Environmental Defense Fund – for failing to effectively lobby GOP senators. “They didn’t deliver a single Republican,” the official told Politico. “They spent like $100 million and they weren’t able to get a single Republican convert on the bill.”

But many say it was Obama who didn’t do enough to make the climate bill a big enough priority, allowing other monster big-ticket items like the economic stimulus, health care and Wall Street reform to suck up all the oxygen and leaving environmentalists grasping for straws too late in the game – well past the expiration date for other big accomplishments during the 111th Congress.

“The absence of direct, intense presidential leadership doomed this process,” said Eric Pooley... Going back to Day One, Obama never turned his campaign proposals into formal legislative text, leaving lawmakers to shoulder the load. And when Obama spoke publicly about the issue, it was only with a vague call for “comprehensive energy and climate” measures that did little to help win votes. ...

The leadership from the administration on climate change has been about as effective as its leadership on additional stimulus and job creation. At least they aren't blaming the unemployed for their failure to lobby effectively for a jobs bill. It's not possible to give the administration a passing grade for effort in either case, let alone for results.

In fairness, this is one official speaking, I don't think the administration more generally is pushing the line that the failure of climate change legislation is due to lack of effective lobbying by environmental groups. I suppose it can be argued that these groups couldn't even move the administration to effective action, but I doubt that's an argument the administration will want to make. In any case, it has more to do with the administration's misguided notion that bipartisan, centrist victories will be anything more than Pyrrhic – if they can get them at all –  than it does with lack of attempts from the left to get the administration to pursue these objectives.

Thursday, July 22, 2010

Receding Glaciers of the Greater Himalaya

[I was going to post this yesterday, but Brad's post disappeared while I was doing this, so I decided to wait. It's back now. I should have also noted that Brad's post has excerpts from David Leonhardt's Overcome by Heat and Inertia discussing the options and prospects for climate change legislation.]

Brad DeLong shows changes in the Qori Kalis Glacier, Quelccaya Ice Cap, Peru between 1978 and 2002. Here's another example:

Tibet2
Tibet1

Kyetrak Glacier in Tibet in 1921 and 2009

Here are two more:

West

West Rongbuk Glacier, Northern Slope of Mt. Everest, in 1921 and 2008

East

East Rongbuk Glacier, Northern Slope of Mt. Everest, in 1921 and 2008

And for even more, see the interactive, comparative photography, and video links here.