Environmental Economics

Signs of economic efficiency

The marginal benefits of the climate bill are not greater less than the marginal costs. My evidence: 

While most environmental groups formally supported the House bill, the road to passage proved unsettling for the movement. Friends of the Earth, Greenpeace and Public Citizen opposed the bill; members of some other groups privately berated their leaders for going along with it. ...

In other words, there is not "too much" environmental quality in the climate bill. There may be too little, but the intent is to reduce the number of permits over time. 

Climate quote of the day (and analysis)

"Can anyone honestly say that the head of an American household would not spend a dollar a day to safeguard the well being of his or her children?" Jackson asked the Senate Committee on Environment and Public Works.

Well, geezus, if you phrase it that way only a heartless son-of-a-gun would be against it ...

But the committee's top Republican Senator, James Inhofe, pointed to a July 1 poll by Rasmussen indicating that "56 percent of Americans are not willing to pay anything to fight global warming."

Oh.

So I used the google to try to find the Rasmussen poll and found this "Right-wing hack Rasmussen ...":

I've always been of the opinion that if there is an agency in charge of investigating fishy polling practices, said agency should delve into Rasmussen's weird, outlier polls that always seem to tell conservatives what they want to hear.

Now I don't know what to think!

So I pulled out my survey methods book, critically examined the Rasmussen survey questions and concluded that they aren't quite up to standards. In other words you couldn't use these to estimate the benefits of climate change mitigation for policy analysis.

But, if you did, you'd find that average annual willingness-to-pay is about $101 using the lower bound Turnbull (interpretation: while the median willingness-to-pay is less than $1, the lower bound mean is right about $100).

Further, studies that use more appropriate questions (more rigorous policy scenarios, explaining the benefits and costs, etc) might find that willingness-to-pay is, at least, a dollar a day. Here is one example: Berrens et al, JEEM, 2003.

Source: A dollar a day could keep climate change away.

Hat tip: CF

Trade with Cap'n Trade

From the Financial Times:

Senior Democrat senators said on Wednesday they would change a provision that imposes carbon taxes on imports following warnings that the clause in the House’s cap-and-trade bill could spark a global trade war.

The House’s bill contained tough provisions to impose carbon tariffs, aimed at protecting American companies’ competitiveness against imports from countries without equivalent carbon emission controls to those in the US.

...

A recent report from the WTO said that such “border tax adjustments” could in theory be made consistent with WTO rules, but trade lawyers stress that crafting such laws is likely to be very difficult in practice

The economics here are simple:  If the U.S. prices carbon domestically (through Cap and Trade), then imports have to be priced accordingly, or the world price for similar products will be lower than the domestic price.  The result will be more domestic purchases of foreign produced carbon intensive products and potentially leakage of U.S. industry to non-carbon pricing nations who potentially produce similar products with lower carbon efficiency than domestic manufacturers currently use.  This has been the U.S.'s stance in international carbon negotiations all along and the primary reason the U.S. never signed onto Kyoto.  Now, domestic carbon policy without border price adjustments puts domestic producers at a competitive disadvantage and will likely result in more imports of carbon intesive products and potentially higher carbon emissions globally. 

Guest Post: Waxman-Markey: The Devil is in the details

Jim Roumasset, Professor of Economics, University of Hawaii

Waxman-Markey: The Devil is in the details

Ever wonder what's in all those 1500 pages (including the 300 page amendment added the day of the House vote)? That's a lot of details. Here are a few items warranting further economic input.

Be careful with long term cost estimates

From KentuckyGreen.com: 

LG&E and Kentucky Utilities electricity rates would increase by about $10.50 per month for a typical home in three years, and $18 a month by 2020, under the climate change bill passed by the U.S. House of Representatives, according to company officials. ... 

The federal Environmental Protection Agency has said it would cost households $80 to $111 per year, while opponents of the bill have estimated much larger costs. The conservative Heritage Foundation says the bill "would slap the equivalent of a $4,609 tax on a family of four by 2035."

One thing about cost projections in the distance future. As history shows, income grows over time. A $40,000 income in 2010 that grows at a 2% rate would be $64,000 in 2035. It is tempting to compare long term cost projections to incomes today, because it is much easier than doing the math to figure out incomes in the future. 

All environmental economists don't strongly favor a carbon tax

From the sent items folder:

About a month ago I asked RESECON subscribers to participate in a short survey about cap-and-trade and carbon tax policy. Of the 1133 recipients of the RESECON email there were 203 responses from environmental economists. Thanks!

While I haven't yet analyzed the data, I am finally getting around to reporting the results of the penultimate question:

Considering two economic incentive-based environmental policies that could be used address climate change, which do you prefer?

Cap-and-Trade - 71
Carbon Tax - 111
Neither - 3
Don't Know - 2

Here is the bar chart: http://www.env-econ.net/images/Q%239.png

I'll get the rest of the results out ASAP.

Another economist in the Waxman-Markey camp

In "Another comment on Waxman-Markey", Charles Kolstad (co-editor of the AERE journal, Review of Environmental Economics and Policy) concludes:

Although the bill has its shortcomings, at its core it is an impressive piece of legislation. If the senate trims some of the glaring defects, then the U.S. will become the world leader in taking global warming and climate change seriously.

WSJ and Real Climate on the fuss at NCEE

This morning’s Wall Street Journal opinion section contains a lot of what one expects to see. There’s an opinion piece making a big fuss over the fake scandal at the EPA.

Hat tip: Krugman.

I'm an idiot

Find out just how BIG an idiot I really am:

The U.S. House of Representatives voted on June 26, 2009 to pass the American Clean Energy and Security Act, commonly known as the Waxman-Markey Bill. While, as of this posting, it has yet to pass the Senate, the bill promises an unprecedented and sweeping package of climate legislation, the full ramifications of which are yet to be determined.

But will the bill actually accomplish all of its purported goals? And how? What effects, short and long-term, will the bill actually have on the U.S. economy and the current path of climate change?

The Energy Collective conducted a live, interactive webcast in which energy experts and TEC blogger board members Jesse Jenkins of the Breakthrough Institute and John C. Whitehead of Appalachian State University dug into the bill and provided insight into its likely effectiveness in a number of key areas.

Listen to a recording of the discussion here:

http://theenergycollective.com/TheEnergyCollective/43961

Aw, shucks

From the inbox:

Tim and John, 

Thank you for your posts on Environmental Economics about the ACES bill. 

The Sierra Club has put together this YouTube video that thanks activists, staff and allies for their hard work getting ACES through the House and casts an eye towards the Senate.  Please feel free to post on your blog!

http://www.youtube.com/watch?v=uY4jZD8hjPQ&fmt=18