Climate Change

Four Ways of Looking at Global Warming Policy*

Rent-seeking, taxes, economic growth, or an energy revolution?

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Assume man-made global warming is a big problem. What should we do about it? The four general policies currently in play are (1) cap-and-trade; (2) carbon taxes; (3) encourage economic growth and allow richer future generations to deal with any problems; and (4) massive government-funded low carbon energy research. Of course, these policies can be mixed and matched in various ways, but all involve the invention and deployment of new low-carbon energy technologies. The first two proposals do it by raising the price of carbon-based energy relative to low-carbon energy technologies. The third one implicitly melds the two-century-long trend toward progressive decarbonization of our energy supplies with a strategy of adaptation. The fourth one aims to accelerate technological innovation by stimulating the research and engineering pipeline.

These policy alternatives came into better focus for me this past week after I participated in the Exploring Breakthroughs in Entrepreneurship and Public Policy conference sponsored by the Foundation for Research on Economics and the Environment (FREE) in Bozeman, Montana. The FREE conference concentrated chiefly on the ideas proposed in the book Break Through: From the Death of Environmentalism to the Politics of Possibility (2007) by self-described progressives Ted Nordhaus and Michael Shellenberger. The FREE conferees included Democratic Party activists, libertarian and conservative think tankers, and academicians spanning the ideological spectrum from right to left. In general, Shellenberger and Nordhaus are proponents of a crash program of government-funded low carbon energy technology research as the chief way to respond to the challenges of man-made global warming.

In June, Americans were treated to the spectacle of Congress trying to pass the Lieberman-Warner Climate Security Act, which would have established a cap-and-trade program to limit the emissions of greenhouse gases. Under a cap-and-trade scheme, the government sets an overall limit to the amount of greenhouse gases—chiefly carbon dioxide released from burning fossil fuels—that can be emitted. Under the Lieberman-Warner proposal the emissions cap would decline 70 percent by 2050. Emissions permits would be divvied up among emitters and those that can more easily reduce their emissions would have leftover permits that they can sell to companies that find it more difficult to cut. The idea is that this "market" in emissions would set a price for carbon dioxide that would encourage entrepreneurs and inventors to develop new low-carbon energy technologies.

When climate push comes to shove, politicians prefer cap-and-trade schemes. Why? Because they don't have to explicitly tell voters the bad news that they are raising the prices of electricity, natural gas, and gasoline. Senators and representatives instead cloak this mandated energy price increase in the virtuous language of the market, disguising the fact that cap-and-trade is really a hidden tax.

Issuing emissions permits is like coining money. If the denizens of Capitol Hill decide to auction the permits,it will provide a vast new revenue stream with which members of Congress can play. On the other hand, if Congress decides to give away emissions permits, members can reward favored corporate constituencies, producing all of the usual problems associated with campaign-financing and post-government service rewards. In other words, carbon cap-and-trade proposals are a magnet for rent-seekers, groups lobbying government for taxing, spending, and regulatory policies that provide financial benefits at the expense of taxpayers and consumers. Some savvy corporations are already jockeying for Congressional cap-and-trade favors.

What about carbon taxes? Many economists regard this option as the most transparent and effective policy. The idea is that such a tax would be ramped up in a predictable way over time to achieve the desired emissions reductions. Ideally, the money raised by the new carbon tax would be used to cut other taxes so as not to increase the overall tax burden. I have generally been in favor of a carbon tax because of its transparency and the possibility of reducing taxes on productive activities. However, during the FREE conference, Shellenberger and Nordhaus very persuasively argued that the very transparency of a carbon tax makes it a political non-starter. It is hard to imagine an American politician telling voters he is going to double the amount they pay for electricity, natural gas, and gasoline.

On to the third policy: encourage economic growth and future adaptation to whatever climate change happens. People have been moving from fuels with higher carbon content (wood and coal) to fuels with lower or no carbon content (natural gas or nuclear power) for the past two centuries. However, the pace of decarbonization is not moving fast enough to have much effect on whatever trajectory man-made global warming will take. The International Energy Agency projects that by 2030 overall energy demand will rise by 55 percent and 84 percent of that increase will be supplied by fossil fuels. Greenhouse gas emissions will grow by 57 percent by 2030.

How much wealth will people in 2050 have at their disposal for adapting to whatever climate change may happen? A crude estimate derived by calculating a compounded average economic growth rate of 3 percent per year from now until 2050 projects that the world's $47 trillion economy will grow to $163 trillion. Today, the global average income per capita is $7,200. In 2050, assuming 10 billion inhabitants, average income will more than double to $16,300. If efforts to slow global warming reduce economic growth rates by half of a percent, total world product would drop to $133 trillion and average incomes would be $3,000 less. One stab at determining whether or not it is worth slowing down economic growth to prevent climate change is to ask if global warming is expected cause more than $30 trillion in economic damage each year by 2050.

Finally, what about fostering an energy technology revolution? Shellenberger and Nordhaus assert that the old "pollution paradigm" of environmentalism is played out because it frames the climate change and energy challenges "as a forced choice between poverty and environmental ruin." What we need now, they argue, is an explicitly pro-growth, pro-prosperity politics for the 21st Century. So they are advocating a ten-year $300 billion energy research program as the way to address climate change. "The goal of the program," they claim, "is to bring the price of clean energy down to the price of coal and natural gas as quickly as possible." Another advantage is that emissions from rapidly developing economies like China and India could be cut if low carbon energy can be made as cheap as fossil fuels.

As models, Shellenberger and Nordhaus pointed to government programs that funded the first transcontinental railroad, the Manhattan Project, the Interstate Highways, massive Defense Department purchases of microchips, and the Apollo moon shot. Shellenberger and Nordhaus favor a modest carbon tax which would both fund the research and encourage companies to adopt the new low carbon energy technologies. Shellenberger and Nordhaus are not alone in pushing this idea. Skeptical environmentalist and head of the Copenhagen Consensus Center Bjorn Lomborg also favors a massive government-funded energy R&D program.

At the FREE conference my role was to be the skunk at their energy research garden party by pointing out the poor record of Congress and federal bureaucrats in picking research winners and losers, e.g., the ignominious end of the Synfuels Corporation, various automobile technology fiascos, the bankruptcies of the subsidized transcontinental railroads, and so forth. In addition, I and other conference participants argued that members of Congress would be happy to fritter away $30 billion annually by earmarking it for projects in their states and districts regardless of scientific and commercial merit. Shellenberger and Nordhaus countered that I was discounting the learning that entrepreneurs gained from government-subsidized failures which led to more productive research paths later. Perhaps.

Cap-and-trade is a rent-seeking disaster, carbon taxes are a political pipe dream, and furthering economic growth and adaptation doesn't require any specific global warming policy. Is there a way to make government-funded energy research less prone to rent-seeking? American Enterprise Institute fellow Steven Hayward suggested that the bipartisan Base Realignment and Closure Commissions (BRACs) might serve as a model for insulating an energy research program from Congressional and bureaucratic meddling.

BRACs were created because whenever the Defense Department wanted to close a military base, the locals would petition their representatives and senators to prevent it. In the 1980s and 1990s, these commissions made recommendations to close nearly 100 military bases as a package on which Congress could vote only yes or no. Similarly, an energy research commission could be set up to devise a package of $30 billion annually in energy research grants for which the Congress could only vote to approve or disapprove as a whole. Would this work? The example of the National Institutes of Health (NIH)—which is supposedly insulated from political meddling—suggests caution. The NIH peer review system which annually distributes $15 billion in research grants suffers chiefly from a lack of bureaucratic imagination.

Shellenberger and Nordhaus want to dedicate the revenues from a modest carbon tax to funding their low carbon energy research scheme. As an alternative, National Center for Policy Analysis senior fellow Sterling Burnett proposed a twofer—would they support oil drilling on the outer continental shelves? Drilling could supply energy in the short to medium term while leasehold monies and royalties could be committed to low carbon energy research. Let's just say that they took Burnett's proposal under advisement.

During one of the breaks, I suggested to Nordhaus that a Machiavellian chief executive might cynically come out in favor of their proposals as a way to derail, at least temporarily, much more expensive cap-and-trade and carbon tax schemes. Which of the four policies is likely to be adopted? Given that both John McCain and Barack Obama favor cap-and-trade, get ready for an orgy of rent-seeking on Capitol Hill in '09.

*Apologies to Wallace Stevens.

Ronald Bailey is reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.

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  1. Can’t those Montanans stick to something they are good at, like forming militias?

  2. I hate to say it, but I think a Manhattan-like project seems the most viable. Hell, even at 300 billion dollars it would be cheaper than the war. And the next one. And the next one.

    It could be sold as a national security issue to Conservatives and as a global warming issue to Liberals.

  3. They solved global warming in Australia a few months ago. We just kill everyone at age 2 or 5 or whenever their carbon footprint exceeds the maximum allowable level.

  4. (4) massive government-funded low carbon energy research.

    Great, they should start here.

    Ten years and less than a billion dollars to energy independence, if it works.

  5. Can’t those Montanans stick to something they are good at, like forming militias?

    I know you did that just to get my goat.
    But you’re not getting my goat, Montag. I fucked her first, so hands off.

  6. Wow, amazing how offshore drilling keeps coming up in these conversations! Apparently, it’s the energy-policy version of ketchup — it makes everything better.

    How about the cap-and-divident plan advocated by James Hansen and others? It sucks money from the thing we don’t like and sends it back to the people, who can then make their own decisions about how to use it. It’s hard to do much rent-seeking when the rent is getting spread out over the entire population.

    As much as I’d love to send that money into a modern Manhattan Project, I’m afraid most of it would end up in boondoggles like liquid coal and ethanol — better send it back to the people before too much of it sticks to Washington.

  7. Great, they should start here.

    Ten years and less than a billion dollars to energy independence, if it works.

    Controlled fusion is only ten years away? For the bargain price of one Arleigh Burke class tin can?

    For some reason that sounds awfgully familiar.

  8. awfgully – awfully.
    Stupid fat fingers.

  9. Controlled fusion is only ten years away? For the bargain price of one Arleigh Burke class tin can?

    Dr. Bussard thought so. The scaling laws (B^4 * r^3) are basic, uncontroversial physics, the question is whether they hold up at larger sizes and higher energies or are disrupted by as yet unknown effects.

    And not just controlled, but economical too. That’s the real key here.

  10. Controlled fusion is only ten years away?

    I heard that shit in college in 1992. That’s back when they were doing controlled experiments that yielded actual fusion for something like fractions of a second.
    Next!

  11. Jamie,

    Yeah, tokamaks not only failed at that promise due to MHD instability, even if they had worked they would be uneconomical. ITER is projected at $20B now, will take 20 years to build, and will never produce a watt of useful energy.

    Bussard’s Polywell concept is very different. It’s particle acceleration rather than thermal magnetic confinement.

  12. Having read about Bussard’s Polywell reactor, as well as the claims coming out of Blacklight Power I really, really, really want to believe, but my inherent skepticism has me wondering how it’s possible that someone is building fusion reactors evidently in their garage.

    Also, Blacklight Power’s super crappy website and evidently somewhat crazy president cause me to be hesitant, too.

  13. mediageek,
    Just because something has a really fucking shitty Web site doesn’t mean it’s not important.
    Whoops. Bad example.

  14. Don’t be so quick to dismiss carbon taxes as a pipe dream. Here in British Columbia today is the first day of a comprehensive carbon tax that will raise the cost of fossil fuels while offering offsetting reductions in income tax plus a $100 per person rebate from the provincial government. Of course those that are hardest hit (rural residents without public transit options) are squawking, but no such tax will hit everyone equally. Stay tuned.

  15. Fusion power is always 10 years away…

    Sort of like flying cars are always 20 years away…

    And responsible government is always 2 years away…

    Nephilium

  16. Stop whining about global warming, start paying attention to the REAL problem: overpopulation. It needs to be reduced to 1 billion people.

  17. Massively funded projects like Manhattan, Interstate, etc. worked because they were designed as tools of warfare. So unless you can find a way to turn carbon reduction into a method of pummeling your enemies, it’s going to end up like every other shitcan government experiment.

    I like the continental shelf compromise though. That actually sounds politically feasible.

  18. Fusion power is always 10 years away…

    Actually, the joke is that fusion power is always 50 years away — and it’s still true for tokamaks. ITER has a follow-up called DEMO which would be the first to actually produce power. Guess when it would be finished?

    The great thing about Bussard’s design is that it’s probably only 10 years away from either working or being declared a dead end. And considering how relatively cheap it is, it’s a very good risk/reward ratio.

    Blacklight Power

    Blacklight Power is a running joke in physics circles. They’re proposing radically new physics with no apparent basis in reality. Polywell is good old conventional physics.

    The fusor concept isn’t even new; it’s been around since the 1950s and is closely related to TV technology. The problem was getting good enough electron confinement while limiting grid losses. Bussard believed he solved both problems.

  19. Stop whining about global warming, start paying attention to the REAL problem: overpopulation. It needs to be reduced to 1 billion people.

    Since in solidarity with the earth I assume you’ll be killing yourself immediately, my condolences to your family.

    er…you’re not going to kill them too, are you? :-()

  20. There is a fundamental problem with the billions in research strategy, which is rooted in the assumption that renewables can EVER beat subsidized coal in price. They can’t, as long as there is any reasonable-quality coal left to mine. While technology is improving, in the end, solar panels, wind turbines, lithium batteries and whatever other gadgets you want to talk about are still made out of lots of steel and silicon and other high-tech materials. And due to renewable energy’s dispersed nature, you need a lot of these gadgets. At some point, you simply run into a floor price which will only be incrementally improved over decades. Wind is near this point already. Solar will be in the not-too-distant future. In neither case will they beat subsidized coal except for in the most prime locations. They won’t lose by much, but it doesn’t take much to affect a close decision by a utility.

    That is why removing coal’s subsidies is absolutely critical…and that means either cap and trade or a carbon tax. Remove the subsidy, and renewables CAN win, even now. Combine cap-n-trade with a Hansen-like dividend, and the rent-seeking issue is solved.

    Fixing global warming will cost us a whopping 2% of GDP…or in other words, we will have to wait until 2101 to have the GDP of 2100. Booh frickin’ hoo. A small price to pay for a healthy, stable atmosphere, don’t you think?

  21. Another point I forgot to make: Renewables are no longer a research project anymore. They are overwhelmingly into the development phase, and the best thing to propel us forward is actually deploying this stuff so that it can be tested and optimized. Nothing will do that better than removing fossil fuel’s subsidies and letting the private market take care of the rest.

    I cannot believe so many libertarians are willing to defend coal and oil’s free public garbage dump subsidy.

  22. Fixing global warming will cost us a whopping 2% of GDP…or in other words, we will have to wait until 2101 to have the GDP of 2100. Booh frickin’ hoo. A small price to pay for a healthy, stable atmosphere, don’t you think?

    Of course, since improved efficiency is part of the solution, we might actually get to the 2100 GDP in 2095…

    Just saying.

  23. Fixing global warming will cost us a whopping 2% of GDP

    If its that cheap, and the returns are that great, then why do we need massive global government intervention into the economy to make it happen?

    Again, extraordinary claims, extraordinary proof, etc.

  24. Sorry but I’d like to say that that’s not a very well-worded sentence: “The four ways these people have derived of doing this thing.” The phrase “a way of doing something” isn’t ordinarily interrupted like that, I don’t think. Why not “The four ways of doing this thing that these people have derived.”

  25. R C Dean | July 1, 2008, 7:07pm | #

    If its that cheap, and the returns are that great, then why do we need massive global government intervention into the economy to make it happen? Again, extraordinary claims, extraordinary proof, etc.

    Renewables need no subsidies at all. They just need the subsidies removed from their competing products. Why do you defend these subsidies?

  26. Stop whining about global warming, start paying attention to the REAL problem: overpopulation. It needs to be reduced to 1 billion people.

    Dammit Joel, I wanted the more subtle “I’ll be happy to pay for YOUR sterilization”.

  27. About the only government ‘subsidy’ that renewable energies need is for government to pay carbon offsets for it;’s own greenhouse gas wastes; combined with a commitment to gradually become CO2 Neutral. That’s about as much a subsidy for renewable energies as it is for the trash collection companies. ie not much.

    I prefer voluntary carbon offsets over taxes as I can buy more offsets than I need should I so desire.

    Why does cap-n-trade need government to set the limits? Why not get a panel of climate scientists to set the limits? That’s what well run hunting ranges do, they get the biologists to set the hunting limits, and keep the politicians out.

  28. Is it seriously possible that the IPCC managed to pack its study groups with scientists who are preoccupied with the last 100 years and have paid woefully little attention to multi-century changes in the Earth’s climate (which are difficult to explain and must be further studied)? Could the unyielding focus on carbon be completely myopic and unscientific? Or is this “settled science”? Inquiring minds must know.

  29. “Could the unyielding focus on carbon be completely myopic and unscientific?”

    um the IPCC reports did cover non-carbon forcings, as well as older climate stuff. The science is settled in as much as adding greenhouse gasses to the atmosphere traps heat more heat. Carbon is a major focus, because CO2 stays as a part of the atmosphere for decades if not centuries, methane …years if not decades; wheras water-vapor imbalances precipitates within 10 days.

  30. Biomass fueled carbon neutral transportation:

    Back to the Future

  31. Gotta not forget the colon:

    Back to the Future

  32. Fixing global warming will cost us a whopping 2% of GDP…or in other words, we will have to wait until 2101 to have the GDP of 2100.

    Where in the name of all that is holy did you come up with that figure?

    If it’s a one-time 2% of GDP, which it must be to merely delay GDP one year, that’s 1 trillion dollars today. What magic use of that would fix global warming? Especially given that you think that carbonless technologies will always be more expensive than carbonful ones?

    If it costs 2% of GDP per year, then that doesn’t delay GDP one year. That squelches GDP growth year after year after year by a level four times what Bailey suggested and twice what Stern suggested. That will delay the GDP of 2100 until 2280, using Bailey’s growth rate, or until 2465, using the IPCC SRES growth rate.

    Or is this some hellish pan-century misuse of NPV? I.e., in 2100 the GDP will be 550 trillion dollars; two percent of that is 11 trillion dollars; 11 trillion dollars is the net present net cost of measures recommended by Stern or Gore. Is that it?

    A small price to pay for a healthy, stable atmosphere, don’t you think?

    Exactly what level of CO2 and/or warming meets your definition of a healthy stable atmosphere?

  33. Mark | July 2, 2008, 12:50am | #

    Is it seriously possible that the IPCC managed to pack its study groups with scientists who are preoccupied with the last 100 years and have paid woefully little attention to multi-century changes in the Earth’s climate (which are difficult to explain and must be further studied)? Could the unyielding focus on carbon be completely myopic and unscientific? Or is this “settled science”? Inquiring minds must know.

    It would be impossible not to “stack” the study groups with scientists who believe in global warming, because the number of real, credentialed climate scientists do not is trivially small, around twenty or so out of several thousand legitimate scientists. The fact that Wikipedia lists them individually should be quite telling. These same few people keep shouting really loud, and it gets amplified in the right-wing-nut echo chambers until many people, like you, think these twenty people constitute a “side” to the debate. These twenty people are nothing new – every major scientific issue has resulted in a few cranks who were wrong initially, and when the evidence came down against them, couldn’t change. They typically go to the grave with their heads still up their arse. Now that I mention it, one guy on the list died a couple months ago. You are down to 19.

  34. MikeP | July 2, 2008, 5:08am | #

    Where in the name of all that is holy did you come up with that figure?

    The Stern report. Didn’t you read it? Fighting global warming easily passes cost-benefit. Get over it. It is just not that expensive and we need to do this stuff anyway. It is just better to do it sooner than later.

    Note that I said carbonless technologies will not be cheaper than SUBSIDIZED coal. Some are already cheaper than UNSUBSIDIZED coal, and many more will be soon. That is why the cost of fighting climate change is not so high. Now would you quit defending these death-causing subsidies for once?

    The 2% is more like the first way you interpreted, not compounded as in the second (not that I trust these long-range compounding numbers…growth will not be that high in any case). We will have to invest a trillion or two in order to beat this problem in the short term, and only get a fraction of that back in short-term benefits.

    Exactly what level of CO2 and/or warming meets your definition of a healthy stable atmosphere?

    Honestly, we should stay below 400ppm, but that is moot for the moment. 450 will cause some major issues and runs a risk of catastrophe.

  35. “Exactly what level of CO2 and/or warming meets your definition of a healthy stable atmosphere?

    Honestly, we should stay below 400ppm, but that is moot for the moment. 450 will cause some major issues and runs a risk of catastrophe.”

    http://350.org/

  36. Honestly, we should stay below 400ppm, but that is moot for the moment. 450 will cause some major issues and runs a risk of catastrophe.

    Thanks for the opinion, but I was looking for the level a one-time expense equal to 2% of today’s GDP will buy.

  37. The Stern report.

    To save me the trouble of skimming the whole thing, I’ll just quote from the Summary of Conclusions

    In contrast, the costs of action – reducing greenhouse gas emissions to avoid the worst impacts of climate change – can be limited to around 1% of global GDP each year.

    …and ask how you manage to turn that into a one-time cost of 2% of GDP? Could you give me a page or chapter number?

    I also note from the summary that the level that Stern’s 1% per year buys is 550ppm CO2e That’s CO2 equivalent; we’re at 430 today. Let’s call it 500ppm of actual CO2. That’s a level above the 450 that you seem to think 2% of 2008 GDP will buy.

    Note that I said carbonless technologies will not be cheaper than SUBSIDIZED coal.

    Is this the subsidy of not having a carbon tax, or is there some other subsidy you’re talking about?

    If it’s the former, you are double counting if you don’t include it in the costs of mitigation.

  38. I couldn’t get past the first sentence. It says “Assume man-made global warming is a big problem.” Change it to the much more reasonable, “Assume that Global Warming Alarmists are going to DO SOMETHING, no matter what.” Now what can reasonable people support?

    The real goal of the Warmists is to destroy capitalism. No “reasonable” (meaning “not massively destructive”) approaches to changing the Earth’s temperature is going to appease them. The answer is clear: do not surrender the main point, like Ron Bailey did. Treat Warmism like the neurosis that it is.

  39. MikeP, you can read either Stern or the recent Copenhagen Consensus reported on heavily here at reason. Under just about any set of assumptions, fighting global warming passes cost-benefit. While GDP gets reduced a little, the non-GDP benefits like clean air, avoiding mass extinction, less disease, etc easily offset the reduced economic activity.

    Having a free public garbage dump for your mercury, NOx, CO2, radiactive waste and airborne particulates is a huge subsidy, on the order of $20 per ton of coal. Your elementary economics textbook should have taught you that the best way to deal with polluters is to make them pay the cost of the damage they are dealing. This isn’t rocket science…it is chapter two of Econ 101. Claiming “well, we just ain’t certain” doesn’t work as a cop-out, either. If we were uncertain, it is still better to take our best guess than to assume the costs should be zero, which we know is far from being correct.

  40. These twenty people are nothing new – every major scientific issue has resulted in a few cranks who were wrong initially, and when the evidence came down against them, couldn’t change.

    Huh, that’s not what I read about the history of science. I can’t make any point about flat-Earth or Earth-centered universe theories? Eugenics?

    And anyway, the theory of AGW is inherently untestable. You can’t replicate the behavior of the Earth’s climate in a lab. While there may be a chance that CO2 causes catastrophic global warming, until I see more evidence I have to believe there’s an equal chance human-generated CO2 has no effect whatsoever. I’m not a right-wing nut.

  41. you can read either Stern or the recent Copenhagen Consensus reported on heavily here at reason.

    I’ll take this to mean that your “one-time 2% of GDP gets you 450ppm CO2” is completely made up.

    Under just about any set of assumptions, fighting global warming passes cost-benefit.

    Well that depends on how hard you fight it, now, doesn’t it? A modest rising tax starting at $10 per ton CO2 might bring more benefit than cost, provided we ignore the social cost of the politics of the tax and its revenue itself. On the other hand, something more like your $54 per ton of CO2 ($20 per ton of coal) probably yields more costs than benefits.

    Your elementary economics textbook should have taught you that the best way to deal with polluters is to make them pay the cost of the damage they are dealing.

    A cost that is immediately passed into the larger economy! The fact that it is first applied to the initial polluters — or even that it may be completely warranted by morals, economics, or fairness — does not change the fact that it imposes a cost on the larger economy. That cannot be ignored simply because you feel it is the right thing to do.

    In particular, mitigating global warming by raising the cost of the cheapest energy imposes the greatest burden on the very poorest people in the world, eliminating their best opportunity to raise themselves from poverty. Those are very real costs to people who aren’t wearing top hats and twirling mustaches with glee over destroying the environment.

  42. MikeP | July 2, 2008, 6:48pm | #

    I’ll take this to mean that your “one-time 2% of GDP gets you 450ppm CO2” is completely made up.

    Mike, GDP will be 1-2% less, more or less, every year. Which means that we only have to slow down by a few months in order to solve this problem. It is not a one-time cost…the costs and benefits are spread out over centuries, but by just about every serious calculation that has been done, the benefits exceed the cost.

    Well that depends on how hard you fight it, now, doesn’t it? A modest rising tax starting at $10 per ton CO2 might bring more benefit than cost, provided we ignore the social cost of the politics of the tax and its revenue itself. On the other hand, something more like your $54 per ton of CO2 ($20 per ton of coal) probably yields more costs than benefits.

    Of course it is possible to pass a tax that is too high, and even one that is so high that costs exceed benefit. But the likelyhood of that is fairly small. Most analysis I have seen indicate a CO2 tax of ~$30/ton as a midpoint, but would still offer positive returns up to at least fifty and much possibly higher. And that $30 figure does not include particulates, NOx, mercury, and radioactive isotopes that also are being spewed out coal smoke stacks, the toxic lakes that surround those vaunted shale-to-oil facilities in Alberta, or the down-stream havoc and general eyesores wreaked by coal mines. Adding those in easily pushes it toward $50/ton and possibly much higher. No political viable tax has any significant chance of being so high as to flip the cost-benefit negative.

    A cost that is immediately passed into the larger economy! The fact that it is first applied to the initial polluters — or even that it may be completely warranted by morals, economics, or fairness — does not change the fact that it imposes a cost on the larger economy.

    I agree. But some things are worth sacrificing a bit of cheap Chinese crap for.

    That cannot be ignored simply because you feel it is the right thing to do.

    I am not ignoring it. I am simply saying that numerous analyses have found these costs to be smaller than the benefits which are not included in GDP, such as stable ecosystems, calmer weather, avoiding mass extinction, etc.

    In particular, mitigating global warming by raising the cost of the cheapest energy imposes the greatest burden on the very poorest people in the world, eliminating their best opportunity to raise themselves from poverty. Those are very real costs to people who aren’t wearing top hats and twirling mustaches with glee over destroying the environment.

    The best thing for developing countries to do is get it right the first time, rather than build a coal plant which is going to be obsolete long before its expected lifetime is up and will be far more expensive to run in the future than it is now. If we have to pay a bit to help them along, it is a small price to pay.


  43. Mark | July 2, 2008, 6:20pm | #

    And anyway, the theory of AGW is inherently untestable. You can’t replicate the behavior of the Earth’s climate in a lab.

    True, but this issue is common among a large number of sciences, from astronomy to economics.

    While there may be a chance that CO2 causes catastrophic global warming

    First, even a chance of catastrophe justifies action. You DO insure your home or apartment against the .005% chance that it burns down this year, don’t you? Second, the chances that it will be bad but not catastrophic are fairly high. You need to protect against this as well.

    until I see more evidence I have to believe there’s an equal chance human-generated CO2 has no effect whatsoever. I’m not a right-wing nut.

    Why an equal chance, when the science indicates 95% or more? Actually, even the most crackpot of crackpots don’t deny that CO2 will cause some warming. It will, according to 200-year old physics that anyone who makes it to sophomore level college chemistry or physics should understand. The question is how much positive feedback there will be. Since positive feedback is hard to model, there is quite a bit of uncertainty. But it is one step short of ludicrious to assume there won’t be positive feedback, given that we know and can model numerous types of feedback, have observed it, and it has happened numerous times in the geologic record.

  44. Most analysis I have seen indicate a CO2 tax of ~$30/ton as a midpoint, but would still offer positive returns up to at least fifty and much possibly higher.

    Haven’t we done this before?

    Per the IPCC AR4 Summary for Policymakers [PDF]

    Peer-reviewed estimates of the social cost of carbon in 2005 average US$12 per tonne of CO2, but the range from 100 estimates is large (-$3 to $95/tCO2).

    Last time you said that your $30 was per ton of carbon. Is that still the case?

  45. The question is how much positive feedback there will be. Since positive feedback is hard to model, there is quite a bit of uncertainty. But it is one step short of ludicrious to assume there won’t be positive feedback, given that we know and can model numerous types of feedback, have observed it, and it has happened numerous times in the geologic record.

    Another question is how much negative feedback there will be. Since negative feedback is hard to model, there is quite a bit of uncertainty. But it is one step short of ludicrious to assume there won’t be negative feedback, given that we know and can model numerous types of feedback, have observed it, and it has happened numerous times in the geologic record.

  46. Another question is how much negative feedback there will be. Since negative feedback is hard to model, there is quite a bit of uncertainty. But it is one step short of ludicrious to assume there won’t be negative feedback, given that we know and can model numerous types of feedback, have observed it, and it has happened numerous times in the geologic record.

    I am not assuming negative feedbacks don’t exist. Unfortunately, they are fewer in number and smaller and slower in effect than the positive feedbacks, according to scientists. A typical quote:

    “The main concern is that the more we look, the more positive feedbacks we find,” says Olivier Boucher, a climate scientist at the Met Office. “That’s not the case when it comes to negative feedbacks. There seems to be far fewer of them.” The sentiment is echoed by Chris Rapley, the director of the British Antarctic Survey in Cambridge: “When we look at the list of all the feedbacks in the climate, the list of positive feedbacks is worryingly long – a lot longer than the negative feedbacks. To be honest, it’s a wonder that the climate has remained so stable.”

    Several negative effects are included in the standard models used by the IPCC. Off the top of my head, I can think of two:

    1: Increased photosynthesis due to higher CO2 levels. This one is slow but will gradually increase the rate CO2 is pulled out of the atmosphere, if we don’t muck it up. This will have a generally positive impact on crop production, but will probably be offset by increased issues with weeds and the increases in floods and droughts.

    2: Albedo effects. These consist of both positive effects (melting sea ice) and negative effects (changes in cloud cover). Overall it is estimated a net positive

  47. MikeP | July 2, 2008, 7:31pm | #

    Last time you said that your $30 was per ton of carbon. Is that still the case?

    CO2. If I said carbon, it was a mistake and I appologize.

    Now, back to your mis-leading quote from the IPCC report…haven’t we done this before?

    If you were to finish reading the paragraph you quoted from you would find

    Aggregate estimates of costs mask significant differences in impacts
    across sectors, regions and populations and very likely underestimate damage costs because they cannot include many nonquantifiable impacts.

    In other words, the IPCC is saying that the $12/tCO2 average is crap, because of garbage in, garbage out. Some of the older studies failed to include many difficult-to-measure costs of global warming (such as species loss, for example), and therefore are artifically low. In addition, new information on ice loss in Antarctica and the Artic are much more ominous than the data up through 2004 that was included in the latest IPCC report. Therefore, the estimates of sea-level rise are now known to be low and therefore the damages underestimated.

  48. MikeP asked:
    [i]”Is this the subsidy of not having a carbon tax, or is there some other subsidy you’re talking about?”[/i]

    a brief google search reveals various articles and papers which give the feel to me that the fossil fuel subsidies are not simply a matter of being allowed to dump CO2 into the air.

    But rather these are market protections, cash grants, guaranteed loans etc worth worldwide over $200 billion dollars, maybe as much as $20 billion in the U.S. alone.

    Comparatively, renewable energies get an order of magnitude less in equivalent subsidies.

  49. But rather these are market protections, cash grants, guaranteed loans etc worth worldwide over $200 billion dollars, maybe as much as $20 billion in the U.S. alone.

    And those of course should be eliminated.

    We cannot ask our progeny a century hence if they would rather live with a third less warming or a third less GDP. But we can sure as hell ask the taxpayers and consumers of today if they would rather be forced to pay for something or choose to pay for it — and we can clearly recognize the overall economic gains of the latter as well.

  50. In other words, the IPCC is saying that the $12/tCO2 average is crap, because of garbage in, garbage out.

    So when the AR4 Summary says in the very next paragraph…

    Limited and early analytical results from integrated analyses of the costs and benefits of mitigation indicate that they are broadly comparable in magnitude, but do not as yet permit an unambiguous determination of an emissions pathway or stabilisation level where benefits exceed costs.

    …where in the AR4 do we find the undoing of that clear language that would allow your statement…

    Of course it is possible to pass a tax that is too high, and even one that is so high that costs exceed benefit. But the likelyhood of that is fairly small.

    …to be right?

  51. Chad, you need to think this issue through.

    The best thing for developing countries to do is get it right the first time, rather than build a coal plant which is going to be obsolete long before its expected lifetime is up and will be far more expensive to run in the future than it is now. If we have to pay a bit to help them along, it is a small price to pay.

    See what you just did there? You made a judgment about coal plants irrespective of their CO2 output. Why would you need to do that to prove your point?

    will be far more expensive to run in the future than it is now… Where did you get that from? Even accounting for rising operational costs, perhaps coal is a cheaper source of energy than anything else out there? (China’s bringing two coal plants online per week)

    Why an equal chance, when the science indicates 95% or more?
    I thought it was 90% but who’s counting?

    I’m not convinced that the science is not fatally flawed. Not convinced enough to accept the largest tax increase in history, the largest government intervention in our economy since the NRA, on a theory which has not been met with nearly enough scientific rigor.

    Actually, even the most crackpot of crackpots don’t deny that CO2 will cause some warming. It will, according to 200-year old physics that anyone who makes it to sophomore level college chemistry or physics should understand.
    I never denied the science of the greenhouse effect, I am suggesting that the greenhouse effect is a small part of what drives the Earth’s climate, and CO2 is one of the smallest factors driving the greenhouse effect. Don’t talk down to me.

    The question is how much positive feedback there will be. Since positive feedback is hard to model, there is quite a bit of uncertainty. Guess what, everything is hard to model. I am not convinced that climate models employed by the IPCC are not fatally flawed by ‘data mining’, adjusting temperature data one way or the other, failing to account for numerous forces affecting the Earth’s climate, and so on. There is nothing ‘double-blind’ about the research being done here. Doesn’t that seem a little fishy to you?

  52. MikeP | July 3, 2008, 1:57am | #

    Limited and early analytical results from integrated analyses of the costs and benefits of mitigation indicate that they are broadly comparable in magnitude, but do not as yet permit an unambiguous determination of an emissions pathway or stabilisation level where benefits exceed costs.

    Scientific speak for “we are not 100% absolutely certain but pretty close”, which should have been obvious. I am sure this was put in for political reasons. My statement that we could, therefore, get it wrong but the odds are small are perfectly consistent. At $12/tCO2, those odds are virtually nil. Indeed, we would likely be missing low on CO2 alone, before counting the other externalities of coal and oil burning and extraction.

    Why are you willing to be certainly wrong on one side in order to avoid a small chance of being wrong the other?

  53. “(China’s bringing two coal plants online per week”

    China’s Coal Industry is heavily subsidized, far more so than in the U.S. Thus the rapid raid of coal plant building.

  54. Scientific speak for “we are not 100% absolutely certain but pretty close”, which should have been obvious.

    Really? Everywhere else they try to convey that impression they manage to find a place for an italicized “very likely“.

    I am sure this was put in for political reasons.

    You are, are you? I defer to the IPCC reports on the science of global warming. Is it so much to ask for some deference to them on the economics of global warming and its mitigation?

    Why are you willing to be certainly wrong on one side in order to avoid a small chance of being wrong the other?

    The most recent monograph on the economics of global warming (William Nordhaus, 2008) finds that virtually every proposed mitigation scheme costs more than it benefits and that today’s social cost of CO2 is $9/tCO2.

    There is nothing certainly wrong about this at all and every indication that being aggressive will cost more than it will benefit.

  55. If I’m a libertarian, it is definitely what I would call a truly “old-fashioned” one — I believe in self-sufficiency as the most important factor in solving anything, including global warming.

    I saw a documentary a couple of years ago that featured a fellow that drove a Humvee. I believe he lived(s) in Sacramento – but I’m not sure. He is one of those fellows who collect all the unused vegetable oil that restaurants discard. He stated that even with the Humvee coverted to use this stuff, he couldn’t burn enough of it up, and was going to have to find some other way (apparently he had agreements with a lot of restaurants!). He should probably convert a diesel generator to vege oil and get his house electricity that way. In any case, I would think that despite the co2 released during the oil burning, it would be counteracted somewhat by the absorption of co2 by the plants that produce the oil. At least the used cooking oil isn’t wasted by being put in landfills.

    Of course, if governments simply took the rational step of mandating that restaurants store their used oil, whether to give or sell to enterprising enthusiasts, then the disposal of oil, as well as energy shortages, could both be partially addressed. As it is now, they simply mandate that the oil mustn’t be poured down drains.

    Similarly, in most cities and states, it is illegal to give away the unused food from salad bars and the like. Thus, methane gas makers and burners, as well as composters, are cheated out of a free fuel source. In addition, restaurants have to pay the garbage folks a premium to “safely” get rid of their uneaten food.

    Laws in some states have come into effect that severely limit or prevent individuals from making their own bio-diesel, or try to tax per gallon the amount people make(!).

    And, this being a libertarian forum, everyone knows about the prohibitions on individuals making their alcohol. If those weren’t around, maybe a lot more people would have started their own stills a long time ago. And without prohibitions on cannabis, oil from the seeds might have taken off.

    Another relevant factor are building codes. It is often difficult in many states to do the “green” thing, as building codes and inspectors can give any “new” technology a hard time (like straw bale houses, which many ignorant building inspectors still think are “experimental,” when in fact they’ve been around more than century.)

    Lastly, there’s a lot of talk about using bicycles, which would be great if there were any bike paths. If either liberals or conservatives had heeded Bill Buckley back in the sixties when he ran for mayor of New York, and was advocating elevated bike ways during his campaign, maybe we wouldn’t be gridlocked in fuel wasting cars, and not be a nation of “fat pigs” either (or we could at least be a nation of fat pigs with stronger legs!).

    Of course, even now (2008), with all the raving about going “green,” no one anywhere (including New York) is advocating elevated bike ways.

    So, to me, most politicians (and their supporters) are (as usual) just bullshitting.

  56. Ron, I don`t buy the argument that carbon taxes – if rebated – are not politically viable. Rather, it is cap and trade, with its giveaways, creation of mega-bureaucracies and price hikes that directly hit consumers that is not politically sustainable.

    Have you reviewed recently the case that many across industry and across the politcal spectrum are making for fully rebated carbon taxes, that recycle revenues per capita to citizens (this is progress and puts money right back in consumers pockets, while still incentivizing shifts in behavior)?

    I`ve summarized here the most recent commentary and analysis http://mises.org/Community/blogs/tokyotom/archive/2008/06/28/top-demagogues-jim-hansen-florida-power-exxon-aei-margo-thoring-major-economists-george-will-prefer-rebated-carbon-taxes.aspx

    TT

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