Monday, March 23, 2009

Two Smart Guys

What do you think about these ideas?

30 comments:

Drew Moxon said...

It probably would be more difficult to pass a carbon tax in the current times. The otherside of that argument is, however, that 3 or 4 years from now would be the perfect time to pass a carbon tax. This would allow the economy to recover (therefore lessening the public's negativity toward new taxes) and it would also help shore-up the large deficit we will be running. I do agree that the climate policy talks will be a non-starter w/o China and India however. China and India already have a comparative advantage in terms of labor costs, so if they implimented a tax policy similar to that of the developed world, then the trade balance should remain relatively unchanged (to quench their fears of it making their goods more expensive).

Hilary Grosser said...

The problem with having a “global fund” to finance new technology to help poor countries combat the problem of carbon emissions is that oftentimes global organizations such as the IMF and the World Bank are at the control of the developed world. Loaning to the developing world is good in theory but bad in practice in that the string attached are usually detrimental to the growth of a developing nation. For example, they may receive a loan but then be expected to compete with large, subsidized corporations and it is simply not a fair race.
I think the most effective method would be a cap and trade system as a market for permits will develop and the optimal level of pollution is more feasibly reached. The word tax has far too great a negative connotation to introduce during the current financial climate.
While I do agree with Sachs that emissions targets should be set for the developing world as well as for the US and Europe, I do not agree that a tax is feasible at this time, but in the future when the economy has had time to recover, politicians should be able to implement a carbon tax with less of a backlash from consumers.

Ben Goetsch said...

These two experts seem to be at an advanced stage of the discussion. That is, they are not debating what type of policy is good to implement. Instead, they are trying to find practical and effective ways to implement these policies. Both seem to support a carbon tax, and the only issue is getting it through the political process. Mr. Sachs argues that the current fiscal deficit will make it more likely for lawmakers to find new sources of government revenue, like a carbon tax. Mr. de Boer does not see the tax as politically feasible.

The core concern is political participation in the discussion of climate change. They note that China needs to make hard commitments towards reducing emissions, because it is impractical for the burden of Chinese emissions to be shouldered by other large political entities like the US and European Union. Similarly, politicians in the US need to demonstrate a willingness to take effective action towards reducing emissions. If these parties do not take action on their own accord, the theories and activities of people like Sachs and de Boer are basically pointless and ineffective.

Adrianna said...

Finally it seems like people are not afraid of talking about a carbon tax as the most effective incentive to implement. I think the "global fund" is actually a good idea because it recognizes that developing countries do not have the income to be making the necessary steps towards alternative energy. As we have learned, this is a global problem, so it is important that the developing world is not left out...and that fund would do that and allow them to make steps with the rest of the world in reducing carbon emissions.

So since these two economists both recognize the importance of a tax incentive, I think its more important to address the fact that it is important that we start to change cultural norms when it comes to energy consumption. Just as smoking has started to have a stigma attached with it in society, it is necessary that we start encouraging public discussion about our energy use; its more like "peer pressure" incentive along with a tax. I think by doing this, our behavior will change in a more permanent way and will allow for sustainability, rather than just changing behaviors based on prices in the market.

Allen said...

Mr. Sachs says, "tax carbon at the source, like coal mines or oil wells, rather than taxing or capping carbon on hundreds of thousands of smaller enterprises."

What Mr. Sachs suggests surely sounds easier. I think it was Rothman who suggested measuring and taxing consumption rather than production. It is hard to have a global norm on taxation of carbon as is, and indeed taxation may be a tough sell to the voters right now. But I think that taxing consumption may help to take the emissions of production in developing countries into account as well since we consume goods from there, too.

Without a global norm on carbon taxation, maybe tariffs would be necessary to keep domestic producers relevant and carbon reducers. Taxing consumption may end up forcing industries in developing countries to also reduce emissions to make their products relevant in tariff-imposed nations. But like Drew points out, there might develop the global fear of rising prices as a result. Also, does that put developing countries at even greater risk and dependence of those overbearing global organizations, as Hilary mentioned, in reducing emissions?

BillyMurray said...

I agree with Sachs that current measures are inadequate. Hopefully the results from Copenhagen will be much better than Kyoto. It is hard to support a global fund because of the lack of success from past funds. I wonder if it would be possible to work out a global tax that every nation pays according to their carbon emissions, including developing countries. This gives incentives for developing nations to grow more efficiently. The money from the global tax can be given entirely to the developing nations. Therefore, they will not be punished for developing, but do see incentives if they develop without polluting. Because of the tax, developed nations will find ways to cut their carbon emissions. It is the developed world duty to solve this problem since we have been polluting for the past two hundred years.

Coleman Nalley said...

I agree with Sachs in most of the things he said. I agree that the poor countries should set emission targets. They need to show a commitment to reducing their carbon emissions. I also agree that it is completely unrealistic to expect the US and Europe to spend huge amounts of money to aid a transition if these poor countries show no initiative or desire to actually reduce their emissions. As we have discussed time and time again this semester, it is the need for a carbon tax. Jack the price of gas up, people will reduce their emissions. The big question is, "is it the right time for a carbon tax?" Sachs argues that the budget deficits created by the financial bailout might actually make the carbon tax feasible... I completely disagree. We will not "grow up a bit and start talking about taxes again." No, we will freak out because of higher costs. EVERYTHING is more expensive now except gas, and that is the one thing I feel like people are clinging to. Don't get me wrong, I do believe that we need a carbon tax, but people will freak out. I kind of had a mini freak out myself because gas went up 10 cents here in Lexington. So... should we have a gas tax now...? Why not, rip it off like a band aid. In one of the previous posts on the blog, the article talked about how people were losing their jobs because no one was drilling any more in the US because there was no profit from oil. Maybe the gas tax could actually help pull us out of this recession? Who knows, try it and see.

Samantha Hogans said...

First and foremost, I think it is completely reasonable for developing nations to set carbon emissions targets. Perhaps even tapering these targets along a gradient to allow more lenience as nations develop could provide an incentive to set and reach goals for emissions - operating on the notion that even the smallest steps in the right direction are better than none. I also agree that it would be unrealistic to expect large, developed nations to contribute large amounts to a global fund to pour back into developing nations. However, the potential for a carbon tax globally seems like a more feasible option, despite the current global economy. Billy's thought about giving money from a carbon tax to developing nations struck me as similar to the carbon tax proposal in the United States that we discussed in class. By possibly creating a plan in which funds collected through a carbon tax were redistributed globally to nations in different economic brackets could create incentives for development that isn't synonymous with largescale pollution.

Further, I don't know that it's fair to assume that the global economy will be any better in three or four years than it is today. By putting off implementing necessary carbon policies on account of a poor global economy, we are only delaying a solution. Yes, the economy is bad now and it may be difficult and unpopular for nations to budget in funds to pay for carbon taxes. However, by waiting three or four years, the environment will continue to worsen, pollutants will continue to collect, and we will be even further from taking necessary measures to combat this. The more carbon that is added to the atmosphere, the more expensive it will be, on a global scale, to reduce emissions and fund relief for damages due to drastic environmental change.

Ryan Welsh said...

I think that a carbon tax could potentially be the best solution to CO2 emissions at the current time. While it may be difficult to pass at the right now, I agree with Sachs that our country may need to "grow up a bit" and start talking about taxes again soon. Additionally, I think his idea for an "upstream" tax that would tax carbon at the source would turn out to be much more effective than taxing the thousands of smaller enterprises. Nevertheless, some sort of global agreement for an initiative towards a solution needs to occur in Copenhagen at the end of this year. If an effort to stem emissions doesn't occur soon, we may get to a point where it could be too late and the global focus and funding would have to turn to how we would adapt to our vastly changing climate.

Ben Hoagland said...

I thought that the most interesting part of this article was when de boar "argued, however, that current measures were a success because they represented necessary first steps to “building confidence” in the system, and had brought substantial private-sector involvement." I think that the confidence issue is key to combating global warming. As we have often discussed, although the Kyoto Protocol was garbage, the US signing it would have acted as a signal to the rest of the world (developed and undeveloped) that this is a serious issue in today's world and that it WILL be dealt with. I think previous posters were correct int heir criticisms of international organizations and how they develop their own agenda and bureaucracy. I think that the best idea would be for individual countries to enact their own regulation and force those regulations o their trading partners through previously existing trade agreements. Through this system, countries that are committed can affect those which are not as committed. If the US grew a backbone and said it would levy a tariff on Chinese goods that were produced with environmental standards less than our own, China would pay attention.

Christine Balistreri said...

I agree with Mr.Sachs that this is a global problem. Although Europe, especially Switzerland, is making strides towards improving the problem, they can not simply fix it themselves. Everyone needs to step up and acknowledge their commitment towards reducing emissions. Developed nations, such as the US, need to take a firm stance in order to be leaders in the situation. It may have been a wise decision at the time for the US to not sign the Koyoto Protocol, but they must demonstrate their commitment in another way now. It is also critical to get nations like India and China to make firm resolutions. Without their dedication, the progress of other nations will not be fully realized.

I agree that the carbon tax will be the better solution. Although a cap and trade policy may be more politically attractive in this economy, it in essence is as an indirect tax except in a more messy form. In today's economy, it is unlikely that a tax will be feasible. However, it seems to have the most promising results. I like the idea previously mentioned to reallocate the money generated by the tax to the developing nations (perhaps as an incentive for making commitments) or to help balance out the growing budget deficit.

Katherine Fenwick said...

I agree with Sachs when he says that current efforts internationally are minimal and that we need to focus on programs that will help the developing countries build industries that are environmentally friendly. However, this is not simply a problem that the poorer countries and China need to focus on. He states that we need to make China set emissions targets, but what we really need is for all countries to set emissions targets. This needs to be a global effort where there is a standard target all countries must meet, or pay a price. Whether it is through a tax or a cap and trade, what we really need (as we have been saying all term) is a price on carbon. We don't need to be arguing about which method to implement, the first major step is to recognize the need for a price on carbon. This price needs to be recognized globally, and will require change from all countries, not just China. Although it is a tough topic to take seriously in these economic times because we view it too pricey, the fact of the matter is if we continue on our "business as usual", the true cost will be much higher than we can afford.

Jordan Weber said...

I agree with Drew Moxon that 3-4 years from now would be an ideal time for a carbon tax. Resistance undoubtedly will be less as the economy should be fully recovered and it may help shore up some of our debt. It would be best to plan it now and institute it now so that companies have time to make the necessary changes so that they can transition into the new tax fairly easily. A tax will also help put a damper on inflation which could end up to be a pretty big problem in and of itself given the way the money supply has increased so drastically.

Will Moore said...

Developing technology to battle global climate change is, in my view, the most important and pressing issue in the quest to reduce emissions on a worldwide scale. As Kahn mentions in the text, there is no incentive to lead the charge in developing technology. If the technology is easier replicable, then the firm that developed it will bare the cost, while every other firm will reap the benefits. Patent laws often reduce this failure from occurring.

This idea can be translated into an international scenario as well. With the lack of international laws that would channel the benefits to the country that developed the technology, no country has an incentive to lead the charge in research and development. Having an international fund to address this issue would lead to a desirable level of research and development and ensure an equitable return internationally for all countries involved.

Michelle Clark said...

In terms of the global fund, while I agree with Sachs’ opinion that this is a global issue and international resources are needed, we must also acknowledge that self-preservation is “the first law of nature” and people will always be looking out for their own best interest. In the short run, developed countries risk that the aid they provide to developing countries could result in improved environments, that in turn increase the efficiency of both the direct inputs and the labor supply. As we learned in class today, this could stimulate economic growth, perhaps at levels that allow the developing countries to significantly catch up or surpass the developed countries that originally provided the aid. However, in the long run, improving the global environment and the efficiency of developing countries will most likely make the global market more efficient and productive, as a whole.

I think Billy’s idea of creating a global tax based on an individual country’s carbon emissions is very interesting because it encourages green growth, opposed to China’s reckless approach to economic growth. While it isn’t a carbon emissions requirement, everyone responds to incentives, and that seems like a pretty good one. This also allows each individual country to decide how to tax their citizens- whether it is through a blanket tax on all or a system based on consumption, as well.

Drew Moxon said...

I don't think an international fund from carbon taxation would fly very well in most economies. If you think about how much revenue would be raised (some of Obama's administration estimated a cap and trade system would raise over $1 trillion over about 8 years...), it would be a hard sell to the American people to tell them that $1 trillion is going to foreign countries when our deficit is soaring.

Also you can't really tariff China's goods for being environmentally unfriendly. Two things would happen if you did this. First, the WTO would cry afoul and our trade agreements might start being viewed with suspicion. Secondly, China would merely refuse to keep buying treasury bills because we are hurting their trade balance. With no one to fund our deficit, we would have to significantly devalue our currency to make up for this. Neither of these things sounds like good options to me.

I think the best we can do is to instate a carbon tax in about 3 or 4 years, use it to reduce the deficit and encourage other developed countries to do the same. If, as a country, we can make people realize the problem, consumer preferences will change and more sustainable energy sources and more environmentally friendly products will be used. Many of these sources and products are produced in developing nations. Therefore, if we switch to more environmentally friendly products, since developing nations still have a comparative advantage in labor with cheaper labor and low opportunity cost, they can produce these goods, be more environmentally friendly and receive the benefits of having the U.S. as a trading partner.

Tanner Wallace said...

I understand why creating a carbon tax would be a hard political move; firms that consume carbon (basically every firm) will experience increased costs due to the increase of the price of oil, so they will resist a carbon tax. The ironic thing is that all these firms legitimately think that an artificial rise in oil prices will somehow “cheat” them. The reality is that every firm has been cheating the market, the environment, and anyone who suffers in some way (decreased health, for example) from environment degradation related to carbon emissions. This is because the price of oil never reflected the true cost of oil. The price of oil always should have been far higher; it just so happens that the firms got lucky, until now that is. But should the firms be able to justly argue that it would be unfair for the government to raise the price of oil until it reflects the real costs associated with carbon emissions? Back when gasoline was over $4 a gallon, politicians and firms did not have a say in the matter. The price was set and undisputable – Either you pay $4 or start walking down the road. Why should it be debatable now? Anyone who consumes gasoline right now is truly mooching off the environment, the destruction of which will ultimately potentially wreak havoc on human society. The costs sound real enough. People should not have to be persuaded to pay a carbon tax. It should be law.

Logan Pettigrew said...

Doesn't alot of this debate, at least economically speaking, just go back to the idea of double dividends? Economically, the oil industry operates at a market failure because costs and benefits don't equate. Revenues from a carbon tax could be used to offset labor taxes that cause a market failure in the labor market (ie under employment). This kind of progressive/forward thinking tax would seem to make the overall economy/market more efficient; while, addressing a fundamental problem in todays expanding world -- Climate Change and its effect on the world. Global economics will become insignificant if vast portions of coastlines and islands disappear under rising sea levels. At that point, GDP will no longer be an issue of discussion and mitigation will no longer be a possibility, in that case, damage control would become the "name of the game" if such an event occurred.

Tori Christmas said...

First, I think that the Clean Development Mechanism should work to intervene on the demand side in poorer countries. In other words, more developed countries should help developing countries create markets for preserving the environment. This article talks about how people will be angered by carbon taxes at this tough economic time. Rather than taxing carbon to equate marginal private costs with marginal social costs, ecotourism could be developed in poorer countries to give farmers another alternative for forests other than timber. Obviously, this strategy would have to be adjusted depending on the developing country, but I would bet that markets which increase opportunity costs for workers who are hurting the environment could be created across the board in countries that will significantly contribute to environmental degradation in the future.

I hope that Americans will be able to understand that taxes are needed to equate MSC with MPC of carbon. I support an upstream tax after doing some research online (see http://gristmill.grist.org/story/2009/1/5/2344/61071). To summarize, the author argues that "In fact, how much of the tax is born by people other than consumers turns out to be primarily determined by long-term demand elasticity in response to price. Elasticity determines how much of an emissions tax is borne by consumers vs. producers and distributors -- not whether the tax is levied upstream or down, but to what extent consumers will tend to lower demand in response to price increases." Thus, based on costs born by producers and consumers for federal gas taxes, producers and consumers would also share the burden of carbon taxes about 50/50.

I am interested in knowing people's thoughts on how an upstream carbon tax could differently impact gas consumers/producers and power consumers/producers, since power plants face more competition.

Mary Petrulis said...

How can we ask developing countries to limit their future emissions on their own, when the reason the environment is in its current state is because of our emissions? Is this not the purpose of the Clean Development Mechanism? This is an issue of equity and we appear to be telling them to “do what I say, not what I do.”
Kahn makes the argument that the cost for these developing countries that use old, energy-inefficient technology switching to newer, cleaner energy is lower than for higher income countries. I agree with de Boer that the CDM is a “useful tool for engaging poor countries in climate change issues.” These countries are likely to become more involved, so why not get them on a “greener” track early on?
As far as a tax goes, I agree with Logan—why not use the double-divided? It seems like an appropriate time to stop taxing labor and instead, tax the “bads,” like reliance on gasoline. We often say in class that this would allow people to simply keep using gasoline at a higher price to make up for the lost income tax revenue or use the money in a different way.

Estefania McPhaul said...

I agree with Sachs on this. The "global fund" seems like an interesting idea although I wish he had provided some more details about the technicalities of it. How will you determine how much a country should give (will it be on percentages of GDP?)? Nevertheless, his underlying call for a larger scale intervention on environmental protection seems adequate. Clearly Kyoto has been ineffective in significantly reducing emissions. It is also imperative that China and India have commitments to reductions in carbon. Again, he mentions the necessity of a tax system which as we've learned is probably the most effective and simple way to start solving most of these problems. All the solutions are there, unfortunately I don't see enough consensus on these issues to expect full-on initiatives. How much longer will it take?

Will Lewis said...

A tax on carbon is the most effective way to reduce carbon emissions. I believe almost every article we have read and every lecture has led to this conclusion. It just comes down to whether or not people are willing to bear the cost, and until an overall change in taste and preferences occur, or people start bearing the real costs of climate change I do not see this happening. Governments will have to inch in to policy restricting carbon emissions. Simply for the reason that many people are strapped for cash, and any other cost or perceived cost will have them up in arms. While a drastic policy is probably what is needed, it is not politically feasible.

Scott Russell said...

I found Sachs's last argument addressed in the article particularly interesting. During a financial crisis such as this, I would think the government would refrain from further taxing, as "businesses and consumers would complain furiously at the extra cost." However, the government needs extra revenue as a result of their VERY large bailout plan. Clearly, taxes, being the government's main source of revenue, would thus be an effective way to alleviate the strain on the government's budget. Where else better to tax than on carbon. Seems to me like a two birds with one stone kind of thing. Obviously people will be concerned with the taxes, but as we've talked about numerous times in class, every benefit is met with a cost.

David Sternlicht said...

As Will and Scott said, this is a tough time for additional costs such as a carbon tax. But is it the best time? The psychological impacts of an added cost right now would probably lead to larger behavioral changes than in a time of prosperity. People would be mad, but it would result in a minimum burden on the average individual, especially if costs are borne at the coal mines.

Here's a side-note: I worked at an apartment complex this summer, and the water was metered. I'm not positive about the per-gallon cost, but per person water costs an average of $12-$15 per month. Even though it is not a significant price, it makes people aware of their consumption. The IDEA of a tax on carbon would weigh heavily, and I think behavior would change as a result.

Alexandra Caritis said...

While it is important to take into account the current economic situation, as we have discussed in class, the increased price on gas would not dramatically alter behavior on a household level. Yes, the increased price may lead to quibbling, but it ultimetely will not impead on individuals levels of consumption. The revenue generated from the tax, though, could be reallocated to combat the budget deficit or invested in new technologies. Furthemore, and most importantly, the tax would place a price on carbon making efficient allocation of carbon more likely and providing incentives for carbon sequestration.

Thais Mattos said...

I agree that the efforts to diminish greenhouse gases emissions should be bigger and global. But everything that involves global benefits and local costs is hard to manage.
The developed countries are responsible for the current situation, but the developing countries will be also responsible for future changes, so all countries should change the behavior as soon as possible.
China is polluting a lot and there is no incentive to diminish these emissions, because it doesn’t have an emission target.
And I believe that Clean Development Mechanism is a great tool, but it should be used more. If the poor countries are developing their economies, it should be in a more sustainable way, using cleaner energy. It is better than develop using pollutant fuels, which degrade the environment and then these countries would need a lot of money to improve the environment quality again.

Zac White said...

We all agree that climate change is a global problem. Yeah, developed countries are responsible for what happened in the past but the greater problem is going to affect every country, developed or developing. The main issue to me is figuring out a way to get countries on board. The best way, i think, is to create an efficient, low cost plan to cut emissions so people can see that it is feasible.

As for the tax, its definitely a “hard political sell,” and definitely burdensome to tax the smaller enterprises. I disagree with the belief that a tax in these economic times would make the country "grow up". A carbon tax would just be another thing on the plates of struggling companies. Taxing now to me seems like kicking companies while they are down.

Robert said...

Jeffrey Sachs suggests that an “upstream” carbon tax would be a more efficient means of internalizing the externality. In a practical sense, I agree with his suggestion. But, unfortunately, this probably cannot be instituted in reality. The larger enterprises of coal and oil will not accept this tax, as it forces them to shoulder the burden of the tax almost completely alone. They are much more political organized and can afford to lobby against any political action towards such an upstream tax. Smaller enterprises and individuals, on the other hand, have less incentive to organize and less money to fund lobbying efforts. While in practice, the upstream tax is a great idea, I’m afraid it will be met with overwhelming opposition if it enters the political arena.

Stephanie Hardiman said...

I agree with whoever was earlier talking about the social stigma of smoking. Obviously we're not at that point yet when it comes to carbon emissions, but I think huge strides have been made just in our lifetimes in that direction. It's hard to change cultural outlooks on things, but ultimately it has to come first. All we need too do is get a majority of Congress to think this way and we're on our way to a tax.

Just a few days ago, over a dollar per pack tax was levied on cigarettes. And just in the past few days, people have been moving in droves to drug stores to buy nicotine patches. Apparently a lot of people wanted to quit and this tax was a huge incentive to do so.

There's a lot of companies that I think WANT to do the right thing and cut carbon emissions because they DO realize it hurts the environment. But they don't have the incentive to do so. And a tax would do that. The current cigarette market is a perfect example.

In addition to a nicotine addiction, I think America has a carbon-emission addiction. And a tax can break that.

(Anyone ever seen "The America President"?--Annette Benning, Michael Douglas, Michael J. Fox? It's a classic, but anyways the subplot is about a lobbyist trying to get her bill passed to lower carbon emissions by 20%. I'm too ignorant to know how accurate the lobbying process is portrayed, but it's interesting nonetheless.)

Garrott McClintock said...

Although this class is focused on what would be the best economic possibilities to fix our environmental problems, I do not believe we can overlook the political feasibility of the main two plans we see offered in this article. Goetsch says that politicians must take action or "smart guys" bantering like this will have no point, but the politicians are responsible to us for their actions. The US public and companies within the US market are not ready to support a direct tax. I do not think they will be ready in 3 or 4 years as Moxon suggests either. Frankly, no company will be willing to pay extra money that they already are not required to pay. Even a popular president like Obama will not be able to push through a direct gas tax under the premise that we need to "grow up" and endure a tax. The public must first be educated, exposed to environmental propaganda, or otherwise brainwashed so they can think about supporting a fee for their carbon output. Then, a tax might be practical.
Otherwise we can attempt to pass the cap and trade bill, which can be sold as giving new jobs to the public. Although it is not as simple as the direct tax, it is much more likely to pass. The big companies upstream who pay for large portions of campaigns will not be effected as much, thus it may pass by them. The general public will not be effected as much because each company will be paying to offset their carbon, and the individual companies will have a chance to make money off the system as well through investment. Again, I think the cap and trade is the most practical system available to us to pass through Congress that will still have a mediating effect on our carbon emissions.