Environmental Economics

I'm thinking this should be the back jacket for my bestseller?

I wonder if someone will say the same thing 100 years from now?

From Science:

Since it was discovered in 1985, the Antarctic ozone hole has been a potent symbol of humankind’s ability to cause unintended environmental harm. But now comes a glimmer of good news: The void in the ozone layer is shrinking. “It’s a big surprise,” says Susan Solomon, an atmospheric chemist at the Massachusetts Institute of Technology in Cambridge. “I didn’t think it would be this early.”

Although the hole will not close completely until midcentury at the earliest, the healing is reassuring to scientists who pushed for the Montreal Protocol. The 1987 international agreement phased out the industrial production of chlorofluorocarbons (CFCs): chlorine-containing chemicals that help trigger the destruction of stratospheric ozone, which screens out cancer-causing ultraviolet light. “You want to be sure that the actions we’ve taken have had the intended effect,” says Solomon, who led the study published online by Science this week.

And here's the money quote:

“The fact that we’ve made a global choice to do something different and the planet has responded to our choice can’t help but be uplifting,” she says.

The Key Role of Exxon in Taxing Carbon

From the Huffington Post (which I try to avoid unless they are writing something funny about Exxon*):

ExxonMobil has long maintained that it supports a carbon tax in the United States. 

For instance, here’s Suzanne McCarron, ExxonMobil vice president of public and government affairs, in the Los Angeles Times on Mar. 14: “When governments are considering policy options, ExxonMobil believes a revenue-neutral carbon tax is the most effective way to manage carbon emissions.”

Here’s Exxon’s CEO Rex Tillerson at last month’s shareholder meeting: “Our valuation of those [policy] alternatives suggests that a carbon tax is the most efficient way to implement policy design to influence behavior.”

These are not new or isolated comments. Tillerson has publicly said Exxon supports a carbon tax — which helps combat global warming by putting a price on the greenhouse gases in fuels — since 2009. He said back then that “a carbon tax strikes me as a more direct, a more transparent and a more effective approach,” compared to more cap-and-trade regulation, which creates a complex market for the right to emit greenhouse gases.

So where does the company stand now that the House of Representatives is set to vote on a non-binding resolution that rails against a carbon tax?

“We’re not commenting on the resolution,” Exxon spokesman Alan Jeffers told The Huffington Post in an email. He went on to detail the company’s long-standing support of a carbon tax and many of the policies benefits that the resolution denies exists.

In 2015, David Hasemyer and Bob Simison of Inside Climate News detailed how Exxon’s public support of a carbon tax has never been matched by a practical commitment to backing a carbon tax politically. Exxon’s reluctance to comment on the carbon tax vote in the House Friday is, at least, a continuation of that consistent strategy.

Note: Because Exxon brought/bought us the Great CVM Debate.

Is this what Mankiw meant by the "The Key Role of Conservatives in Taxing Carbon" thing?

I dislike the fact that I can't let this go but in September of 2015 I said this in response to that title of a Mankiw column: "I don't really understand how one can say that the Republican Party is where efficient climate policy will happen." And still, while I would love to be proven wrong, I don't really understand how one can even think that as the GOP's behavior towards pricing carbon has gotten significantly worse since September 2015:

House Republicans this week will vote to condemn taxes on carbon dioxide emissions, slamming the door on an idea that some members of their party have flirted with in the past.

The nonbinding resolution, sponsored by Majority Whip Steve Scalise (R-La.), lists numerous problems with a carbon tax, declaring, “It is the sense of Congress that a carbon tax would be detrimental to American families and businesses, and is not in the best interest of the United States.”

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The election-year proposal responds to years of pressure from Democrats and economists across the political spectrum who have endorsed the idea.

A carbon tax also has the backing of some conservatives, who argue it would be a simple way to reduce greenhouse gases without new regulations or more government.

Numerous think tanks, including the R Street Institute and the Niskanen Center, have been pressuring GOP lawmakers to endorse a carbon tax. The American Enterprise Institute held closed-door meetings in 2012 to get additional groups on board with little success.

But with the GOP broadly skeptical of climate change science and new taxes, Republican lawmakers have avoided endorsing a carbon tax, and the House’s resolution is meant to make clear where they stand.

via thehill.com

Here is the link to The Hill article where the U.S. House of Representatives triumphantly voted to condemn taxes on carbon dioxide emissions a few days later: http://thehill.com/policy/energy-environment/283029-house-condemns-carbon-tax.

My next birthday party just got a little happier

For a few years now we have heard about a helium shortage.  While most of us (just me?) think of helium as that fun gas that makes things float and gives us a Donald Duck voice, helium actually has some important uses.  For example, MRI's rely on helium (I'm not sure how, but they do).  So running out of helium could cause problems.  But it looks like the problem might be solved, or at least pushed off into the future for a while:

With world supplies running out, the find is a "game-changer", say geologists at Durham and Oxford universities.

Helium is used in hospitals in MRI scanners as well as in spacecraft, telescopes and radiation monitors.

Until now, the precious gas has been discovered only in small quantities during oil and gas drilling.

Using a new exploration approach, researchers found large quantities of helium within the Tanzanian East African Rift Valley.

They say resources in just one part of the Rift valley are enough to fill more than a million medical MRI scanners.

Prof Chris Ballentine, of the Department of Earth Sciences at the University of Oxford, said: "This is a game-changer for the future security of society's helium needs and similar finds in the future may not be far away."

And colleague Dr Pete Barry added: 'We can apply this same strategy to other parts of the world with a similar geological history to find new helium resources. "

 

"Volkswagen to Pay $14.7 Billion to Settle Diesel Claims in U.S."

Again, if you haven't realized it yet, this little bit of deception by VW was not a very smart thing to do:

Volkswagen has agreed to pay up to $14.7 billion to settle claims stemming from its diesel emissions cheating scandal, in what would be one of the largest consumer class-action settlements ever in the United States.

The proposed settlement involving the federal government and lawyers for the owners of about 475,000 Volkswagen vehicles, includes a maximum of $10.03 billion to buy back affected cars at their pre-scandal values, and additional cash compensation for the owners, according to two people briefed on the settlement’s terms.

The cash compensation offered to each car owner will range from $5,100 to $10,000. Both the buyback price and amount of the additional compensation will depend on the cars’ value before Volkswagen’s public admission last September that its supposed “clean diesel” cars had been deliberately designed to cheat on air-quality tests.

Despite the scope of the deal, which would still require the approval of the federal judge overseeing the case, the settlement would cover only a small fraction of the 11 million diesel cars worldwide — most of them in Europe — that Volkswagen has acknowledged contained the cheating software. ...

The size of the settlement would approach the $18.7 billion agreement that BP reached last year meant to resolve all federal, state and local claims against the oil giant arising from the 2010 Gulf of Mexico oil spill, which at the time was the largest civil settlement with any single entity in the nation’s history.

via www.nytimes.com

This is much higher than my back-of-the-envelope damage estimate of $1000 per car. I suppose you must pay top dollar when you are selling a differentiated product with reputational effects (I've been teaching MBA managerial economics, can you tell?).

 

A good understanding of Brexit in less than 100 words

It would be funny if it wasn't so messed up:

[Boris Johnson] suggested that Britain should take its time before entering separation proceedings with Brussels, and he gave no details about when he would want to start the process. And the vision he sketched out — of a Britain that is still in a trading bloc with Europe — seemed at best difficult to achieve, since the price of membership in the single market has always been the two things the Leave movement explicitly campaigned against: free movement of European citizens across borders and contributions to the bloc’s operating budget.

via www.nytimes.com

For example, I want a nice vacation but I don't want to pay for it. So I think that I'll vote "leave" (on a trip, get it?) and the costs will magically go away while the benefits remain. Easy!

Note: Everyone going to IIFET from places other than the UK might enjoy a price decrease.

 

Urban Dictionary word of the day: Behaving British

Definition:

The act of doing something you know you'll regret immediately after.

 

"I always knew it was a terrible idea to vote 'leave', I guess I was just behaving British."

And seriously, how will this affect the EU ETS? Did they ever think of that? No, the big stupidheads. 

 

The tail that wags the dog

This weirdness happens every time gas prices fall significantly:

Falling gas prices have made big, heavy cars fashionable again, said Michael Sivak, the director of sustainable worldwide transportation at the University of Michigan’s Transportation Research Institute. In fact, demand for trucks, S.U.V.s and vans has rebounded to historic levels after they dropped sharply in 2008, when gas was $4 a gallon.

“People have very short memories about the price of gasoline,” Dr. Sivak said.

That spells trouble for the environment. So-called light-duty vehicles, including S.U.V.s and pickups as well as cars, account for 16.2 percent of all greenhouse emissions produced in the United States, Dr. Sivak’s research shows, making them the biggest source of emissions that individuals control. ...

A preference for big cars is not going to help the country reach the goals outlined in the Paris climate accord, reached in December. To help reach those goals, average fuel economy would need to soar to at least 100 miles per gallon — most likely achievable only through widespread adoption of electric and other zero-emission cars, according to Ben Haley, a co-founder of Evolved Energy Research, a consulting firm.

President Obama has pushed for stronger federal fuel-economy rules that call for cars to average 54.5 miles per gallon by 2025; the current average is 25.4 miles per gallon.

via www.nytimes.com

I say weirdness because you would think you'd buy a car with expected gas price over the lifetime of the car, instead of the minimum gas price, as part of the decision. Even for those who a car is a short-term decision, buying big when gas prices are high and selling when gas prices are low (surplus) is a money loser too.

Blah, blah, blah: Instead of new CAFE standards, President Obama should push for a more economically efficient higher gas tax. And to prevent changes in the demand for cars (the dog) when gas prices fall (the tail), the tax could vary inversely with the baseline price. 

Hat tip: twitter

Nothing new here, eh? Falling gas prices have made big, heavy cars fashionable again https://t.co/8ZVIY8qlGP @johnwhitehead81 @tim_env_econ

— David Zetland (@aguanomics) June 26, 2016

Aguanomics: Life Plus 2 Meters

David Zetland:

Few people want to think about a grim, rather than ever-better, future (I have for awhile now), but preparation offers more protection than hope. That's why I have started a new project, Life Plus 2 Meters, that will give authors and readers the chance to explore many possible visions of life in a different world. As it says on the project's website:

These visions may bring optimistic, pessimistic, social, technical, macro, and/or micro perspectives to the discussion. There is no right way to engage this complex topic.

I invite you -- and anyone you know -- to contribute your vision to this project. It's only by exploring the numerous facets of life in a different world that we might understand what's at stake as we change our world and how we will learn to live with it.

I will be posting updates here occasionally, but I recommend that you access the site directly and/or follow the project on facebook or twitter if you want to contribute a vision or follow the discussion when I start posting contributions in September. I am hoping to get over 100 contributions from a variety of people with different training, perspectives and cultures.

Here's the page for authors and the scientific background page. Here's my sample post on flying the not-so-friendly skies.

via www.aguanomics.com