Environmental Economics

Something to do while you celebrate (grieve) the Waxman-Markey vote

Are we excited yet?

The House is expected to return to debate on the climate bill around 1 p.m. today with three hours of debate on the Democratic proposal, as well as a half hour dedicated to a Republican alternative (pdf). Aides say they are planning on a final passage vote after 4 p.m.

Environmental Capital provides some reading material for your weekend:

For Environmental Capital’s recent coverage of the bill, check out these posts:

• EPA Sees Limited Renewable Energy Growth under Waxman-Markey
• ACES High: Waxman-Markey Heads to a Vote
• Climate Debate: Government Report Sparks Some More Outrage
• Changing Climate: Government Report Details Climate Impacts to End ‘Dithering’
• Farm State Wish List Could Hold Key to Waxman-Markey Bill
• Texas Hold ‘Em: Gov. Perry Hates Climate-Change Bill, Loves Clean Energy
• Conoco’s Mulva: Waxman-Markey ‘Unfair’ to Refiners

Here’s what others are saying:

• Waxman-Markey: Action on climate change is overdue. But is this the best we can hope for? (WaPo)
• The House and Global Warming (NYT)
• 9 damned good reasons why some U.S. environmentalists should heartily oppose Waxman-Markey (Grist)
• Waxman-Markey and 77c gasoline increases (FT)
• House Prepares For Photo Finish On Climate Change Bill (CongressDaily)
• The Renewable-Energy Scam: New legislation would force Americans to buy costlier electricity. (Nat’l Review)
• How Popular Is Cap-And-Trade? It Depends. (New Republic)
• Cap and Trade = Predatory Taxation (Weekly Standard)
• Pelosi embarks on ‘tricky business’ of passing climate bill (CS Monitor)
• The farm lobby vs. the global warming bill (LA Times)

Because you had a bad day

E-mail server down from a storm last night (Computer guy out sick today). 95 degrees and humid this morning (Air conditioner in office isn't working.  Facilities won't replace it because we are supposed to get new windows and air conditioners IN THE FALL). Transmitter for the invisible fence for our 11 month old dog blew up in a storm (Yes we shock our dog into obedience--deal with it.  Have to fax receipt to company to get replacement shipped.  Fax machine is at work.  Left receipt on the counter at home).  Drove wife's car to work yesterday to take all of the softball equipment for daughter's team to game 45 minutes away last night (Team played terrible but were showing signs of life. Rainout after 3 innings. Official game.  Counts as a loss).  Left parking permit in wife's car this morning (Need a temporary parking permit.  Department office closed today so I can't get one.  Can you guess what I'm anticipating when I get back out to my car in the parking lot?). 

UPDATE:  Monitor has some weird, creepy, blob-like water-stain looking thing creeping in from the left side (Left the computer on during the storms last night.  Did I mention our computer guy is out sick today?)

It's an honor just to be nomina...crap, who am I kidding? We got hosed!

From my snailmail box (forwarded by our esteemed nominator):

On behalf of the AAEA [Agricultural and Applied Economics Association] Awards Committee...I regret to inform you that after a very challenging deliberation process, your nominees, Tim Haab and John Whitehead, were not selected by the AAEA Awards Committee to be honored this year...

Again, thank you for taking the time to honor your colleagues with a nomination for the Quality of Communication Award...

For background, Env-Econ was nominated for the AAEA Quality of Communication award.  Take a look and judge for yourself whether we got shafted.

Macrocosmic incalescence

What's in a name? 

The problem with global warming, some environmentalists believe, is “global warming.”

The term turns people off, fostering images of shaggy-haired liberals, economic sacrifice and complex scientific disputes, according to extensive polling and focus group sessions conducted by ecoAmerica, a nonprofit environmental marketing and messaging firm in Washington.

Instead of grim warnings about global warming, the firm advises, talk about “our deteriorating atmosphere.” Drop discussions of carbon dioxide and bring up “moving away from the dirty fuels of the past.” Don’t confuse people with cap and trade; use terms like “cap and cash back” or “pollution reduction refund.”

I'll repeat myself.  We just need a cartoony mascot: Cap'n Trade.  Obviously s/he would have a green cape and in a nod to my genious idea, would have a bold EE on the chest.  Oh and be ripped.  And yes, if begged, I'm willing to serve as the model.  If I could just fix this back problem so I could work out again.

An Insider's View on Bank Bailouts

Warning: Non-environmental, but interesting nevertheless, material contained herein:

I have a few friends who could be considered 'bank executives', or at the very least, among the ranks of banking employees who mingle with high level bank executives.  Being the well-trained journalist I am,* I decided to ask some of these friends/insiders to give me their reaction to the bank bailouts and the resulting public and media reactions.  If things go well, this might be a series of posts.  If not, consider this a one-time diversion.

The first insider willing to give me some feedback is a long-time friend who works in an executive-level support position of a major U.S. bank.  In other words, he's not a banker, but he gets to play with bankers all day.  Because bank executives are not afforded the luxury of tenure or the freedom to spout off whenever and on whatever they please without fear of reprise, this insider will remain anonymous. 

Here was my initial inquiry to NotSoDeepThroat**:

Hey, I was talking with a friend over the weekend about TARP*** funds and the recent backlash against executive bonuses.  He's an exec at [unnamed bank] and one of those who would be subject to the 90% bonus tax if passed.  I thought it might be interesting to do a series of posts on 'Insiders' Reactions to the Banking Situation and Government Bailouts' or something like that. I'm wondering if you'd be willing to write a couple of non-technical paragraphs from an insider's perspective.

NotSoDeepThroat agreed and here are his thoughts--comments welcome below:

On a related note, John and I are open to fee-based speaking engagements*

What would you get if you were to divide Larry Summers speaking fees by mine?  Let's just say mathemeticians have been trying to solve problems like this for a long time.

*Fees are negotiable, but we are willing to take less than Summers.  Crap, most of the time we have to pay people to listen to us blather.

Q: Should I be an environmental economist?

My answer is NO: I don't need any more competition.

The answer from Aguanomics is here: http://aguanomics.com/2009/03/should-i-be-environmental-economist.html

"A place to turn cod into Ph.D.'s"

If you want to take a break from today's Waxman-Markey climate bill excitement but still can't wean yourself away from cap-and-trade entirely, read Michael Lewis's take on Icelandic banking in Vanity Fair. It's a morbidly humorous take on the madness, which led a perfectly fine nation that gave us Björk on a roller-coaster ride to financial ruin.

Along the way we learn about the "charming lack of financial experience in Icelandic financial-policymaking circles," the male-dominated macho world of high finance and the combination of the two: Iceland's leaders these past few years "are the guy driving his family around in search of some familiar landmark and refusing, over his wife’s complaints, to stop and ask directions."

One regulatory lesson we can take from Iceland is how to combat overfishing:

Fishermen...are a lot like American investment bankers. Their overconfidence leads them to impoverish not just themselves but also their fishing grounds. Simply limiting the number of fish caught won’t solve the problem; it will just heighten the competition for the fish and drive down profits. The goal isn’t to get fishermen to overspend on more nets or bigger boats. The goal is to catch the maximum number of fish with minimum effort. To attain it, you need government intervention.

The solution?

[P]rivatized the fish. Each fisherman was assigned a quota, based roughly on his historical catches. ...Before each season the scientists at the Marine Research Institute would determine the total number of cod or haddock that could be caught without damaging the long-term health of the fish population; from year to year, the numbers of fish you could catch changed. But your percentage of the annual haul was fixed, and this piece of paper entitled you to it in perpetuity. Even better, if you didn’t want to fish you could sell your quota to someone who did. The quotas thus drifted into the hands of the people to whom they were of the greatest value, the best fishermen, who could extract the fish from the sea with maximum efficiency. You could also take your quota to the bank and borrow against it, and the bank had no trouble assigning a dollar value to your share of the cod pulled, without competition, from the richest cod-fishing grounds on earth. The fish had not only been privatized, they had been securitized.

Voilà: cap-and-trade for fish -- aka "Individual Transferable Quotas" -- was born. Rob Stavins provides a good summary of how the system works in his blog post this week.

It has certainly done wonders for Icelandic fisheries and for Iceland itself. Lewis surmises that:

This insight is what led Iceland to go from being one of the poorest countries in Europe circa 1900 to being one of the richest circa 2000.

Of course, it also had its problems. With all the riches from fishing, Iceland became "a place to turn cod into Ph.D.'s," who eventually figured that banking was the way to go, which led Iceland to become Ground Zero of the global financial meltdown.

Lest anyone uses this roundabout logic to blame cap and trade for Iceland's de facto bankruptcy, I'd say there are still much bigger fish to fry as we try to use the same principles to solve overfishing around the globe -- and design sensible cap-and-trade legislation to combat climate change.

Climate economics news, New York Times edition

You know something's up, if "All the News That's Fit to Print" seems to be all climate all the time. Today's New York Times contains no fewer than six articles that have climate change and climate economics as their central themes -- and that doesn't even count the Magazine cover story. A quick reader's guide:

Andy Revkin starts us out with a balanced look at climatic "tipping points": is it gradually getting worse, or should we be even more worried about sudden, unexpected changes?

Next up, some individual activism during "Earth Hour" last night, when much of Times Square, the Empire State Building and many other monuments around the world turned their lights off in a rolling, intentional, international blackout to create some "political energy."

That energy seems to be radiating straight from the White House, which announced a series of meetings among key countries to address the climate challenge globally.

While governments are debating how to set up the necessary policy frameworks to guide the world onto a low-carbon development path, even loggers are already doing their part by looking at more sustainable ways of doing business and, at the same time, "creat[ing] jobs in places accustomed to losing them."

Investors, in the meantime, should rightfully be worried what climate uncertainty means for equity returns.

Leave it to Tom Friedman to put it all together in a look at Mother Nature's Dow, which ends with the mother of all climate solutions: "'we need a price on carbon.' Polluting the atmosphere can't be free."

Amen to that.

That list doesn't include one of the cartoons in the Week in Review Section. It's funny, but it confuses weather and climate. And it doesn't include the New York Times Magazine cover story on physicist and climate skeptic Freeman Dyson. It's not as funny, but should get your blood boiling nonetheless. Dyson provides an important reminder on scientific honesty and ultimately highlights the most crucial of points in the entire climate debate: the importance of decoupling economic development from greenhouse gas emissions.

Green Jobs Stimulus

From the inbox:

State and local governments, nonprofit organizations and tribal agencies can now apply for up to an estimated $211 million in funding that will help create jobs for redevelopment nationwide and protect communities and the environment from diesel emissions. This is EPA funding available under the American Recovery and Reinvestment Act (ARRA) of 2009 that President Obama signed into law Feb. 17, 2009.