Wednesday, April 07, 2010

one last chance to comment

From my favorite economist - Climate Economics.

16 comments:

Michael said...

As a wrap up for the class, this is a great article. Krugman makes the same arguments we have seen over and over again in class about the inefficiencies of control policies and the various benefits and costs associated with taxes versus cap and trade. Krugman does have a tone that would remind the reader of a certain economics professor at Washington and Lee University, one that has a hint of cynicism at the past actions of the governments of the world. Past mistakes are often "forgotten" but now it is time to look to the future. In the future, it must be accepted that there are negative externalities associated with climate change and that it is most efficient to use economic means to internalize the costs of these externalities. Once again, a perfect ending article for the course, one that wraps up all the concepts we have been going over time and time again.

stuttsb said...

Krugman did a good job addressing the issues with developing climate policy:
-scientific likelihood of anthropogenic global warming
-estimates of mitigation costs
-estimates of damages and adaptation costs
-uncertainty and risks about future damages from climate change
-timing of mitigation costs and damages
-global nature of greenhouse gas emissions and need for global price on emissions
-different policy options: command & control (clear limits, but likely miss least cost abatement options), pigouvian tax (captures all abatement options that cost less than paying tax, offers price certainty/ quantity uncertainty), and cap & trade (captures least cost abatement options to reduce emissions w/in limits of cap, price uncertainty/ quantity certainty)
-political palatability and feasibility of different policy options (and resulting distortions from ideal tax or cap & trade in creating legislation)
-ideal speed of emissions reductions (ramp vs. big bang)

I was surprised that Krugman suggested supplementing a market-based cap & trade policy with hard (command & control) limits on coal burning as a safeguard against potential loopholes favoring coal burning in a cap & trade policy. While this may be a concern with the current Waxman-Markey bill giving many concessions to coal industry, I think it would be preferable (and should be more politically palatable since it makes the policy less costly, and policy cost seems the biggest concern to most people). If coal industry had the choice between a direct control on burning coal and losing special treatment in a cap & trade policy, I imagine they would opt for the latter too. If we could pass a direct control on coal burning, why couldn't we just pass a closure to the loophole for coal burning?

Krugman also favors a "big bang" climate policy that quickly starts ratcheting down a cap on emissions to rapidly reduce emissions because of the non-negligible risk of much higher than expected damages from global warming and importance of taking a long view with public policy that sufficiently values the future. While Norhaus' straight cost-benefit approach determined ramp policy may undervalue the future and insufficiently account for risks of greater damage, I think Krugman neglects the much greater cost to rapidly reducing emissions. Nordhaus advises a starting price on emissions of around $30/Cton slowly increased to $200/Cton by the end of the century, while Stern advocates quickly reaching a $200/Cton price. But immediately reaching a price of $200/ton would prevent the economy from having time to adjust and find cheaper ways to reduce emissions, increasing the cost of mitigation. I probably lean closer to a "ramp" policy, perhaps a little steeper than Nordhaus suggests, keeping in mind in addition to straight cost-benefit approach that may over-discount the future, the possibility future damages will exceed expectations and the higher mitigation costs involved with faster emissions reductions.
A "big bang" policy is likely politically unrealistic because of its higher upfront cost, but hopefully a still meaningful emissions reduction policy can be adopted in the United States and by the world as a whole.

hillary said...

The article does a good job of explaining the uncertainties involved with a tax and a cap & trade approaches. I also like how he approached the debate about climate change- and sets the article up so that there was no room for debate about what is happening to our planet. He lays everything out as it is and does not embellish facts, or dramatize them. The amount of background he provides is interesting and relevant. I like how he poses different scenarios- if certain countries refuse to cooperate with reduced carbon emissions. I think the most informative aspect of the article is the amount of uncertainty. Personally, I think this uncertainty is unnerving and to a degree, scary. But it is sad that it all boils down to political will.

Stephanie Beebe said...

It is so typical that "once you filter out the noise generated by special-interest groups, you discover that there is widespread agreement among environmental economists that a market-based program to deal with the threat of climate change [...] can achieve large results at modest, though not trivial, cost." I feel like I touch on this point often in my blog responses, but the fact that politics in this country respond to the influence of interest groups has really slowed the ability for our nation to implement substantial climate change policy. At the same time, the demands of many interest groups in support of climate policy have been ignored by representatives, which is more bothersome.

It is also interesting to me that cap and trade has caught on as opposed to a Pigovian tax, when there was intially much more literature from and on Pigou. I would think that our government would prefer to collect the revenue from a tax wherein they would not have to grandfather even a few polluting firms; but, as Krugman points out, a cap system "can make passing legislation more feasible" because permits partly compensate firms for their additional costs. Even though Krugman argues a tax may be ideal for maximizing social welfare, any substantial climate change policy would be a start.

Additonally, I do like that Krugman argues that uncertainty about the future climate change "makes the case for action stronger, not weaker." This is a similar argument to that of Shrag, whose research we discussed earlier in the semester. I agree with Krugman and Shrag in that climate proxies show that crossed thresholds have resulted in drastic climate swings in the past, which would be detrimental for human life.

Joseph Doyle said...

This article is a great way to wrap up this class. It reiterates all the main points discussed throughout the semester. This article is quite apocalyptic in nature and rightly so. We don't know the nature of change that will happen, but we do know that it is going to take place. Krugman presents a very reasonable argument for action, and also wisely points out that the data and solutions are there. It just takes political will to make this happen. It is very frightening to think that solutions to this problem are out there, but no one has the will to make them a reality. John McCain's turnaround is an example. As this and the last article both present, the evidence is there, yet people are not willing to take a subjective view of all of it. It's an anxious time we live in.

I really liked Krugman's matter of fact way of displaying all the data, and what he really thinks about all the skepticism.

James said...

I thought this article was a great end to our class. It summed up major issues we have talked about such as market inefficiencies, negative externalities, carbon tax vs. cap and trade, command and control, abatement costs etc. He also offers a rebuke to many criticisms of new environmental and market regulations- I liked how he tried to turn the conservative views of the market in favor of regulations. He came across as trying to be upfront about the facts and the "noise" used in the climate debate. Overall, I believe he did a good job explaining environmental economics in layman's terms. Hopefully, this article will serve to broaden the perspective on the climate debate.

Tess Hayden said...

I am very glad Krugman began his article stating that "it is long past time to do something about emissions of carbon dioxide and other greenhouse gases." Many of the articles posted on the blog have brought up the point that scientists have know about the problems relating to greenhouse gas emission since the early 1800s. I am still slightly shocked that the movement to lower emissions did not start until recently.

Like everyone else has said, this was a great article to sum up the course. Although ending on a more pessimistic note, I think Krugman offers an optimistic view in the sense that many of the solutions he discusses have suggested positive results, such as the Clean Air Act and cap and trade on sulfur dioxide. It was also very interesting when he was talking about the cost of action. Restricting emissions would only slow economic growth by 0.09 percentage points at the most and the current models estimating the cost of climate change tend to overestimate, not underestimate the price. After all the readings throughout the course, and especially this article, it seems like taking action to battle climate change would be happening at a faster pace. It seems that all the evidence is out there, and wasting time arguing over what to do, if climate change is actually happening, is causing more negative effects for the future.

andrewsl11 said...

Once again, Krugman has hit the nail on the head. This article did a fantastic job at wrapping up what we have been discussing for an entire term, and lays out the basic thought process of Environmental Economics in a clear and concise way. I found it promising how he referenced that the past mistakes that have been made are already made, and that the world needs to move forward as a united front. While that's easy to say as an American, getting China and India on board could prove quite difficult. Yet, allowing the United States to assume past responsibility by helping current third world nations is simply the best and most viable option that we currently have. While this article clearly was meant for people unfamiliar with the idea of Environmental Economics, it also provides insights to our class because it clearly enumerates the many ideas we have discussed over the past semester.

Frank said...

Krugman does an excellent job in this article of simplifying both economics and climate change so that the average reader can understand concepts such as negative externalities and Pigovian taxes. Through simple examples he illustrates the linkages between our harmful emissions and climate change. He explains what we know and don’t know about the subject. I thought it was an excellent argument when he gave a confidence interval for the decrease in GDP due to carbon emissions by 2050. He claims GDP will be 1-3% lower than it would be if we quit emitting these chemicals. An exact figure such as this is often difficult to find.

Jeremy said...

Good article, I always like reading Krugman. I especially enjoyed his point that conservatives always seem to believe in the "magic" in the market, but somehow doubt its ability to sort out a cap or tax. There was also a debate between a meteorologist and a climate scientist on the Colbert Report the other day. The main spiel was that meteorologist for the most part don't believe in anthropomorphic climate change. Since meteorologists can't model a ten day forecast correctly, they seem bitter and doubt the climatologists.

Chas said...

When administering a increase in the cost of carbon emissions upstream, the article mentions that the price of produce from other parts of the country or imported produce will be more expensive than local produce because of the increased transportation costs. This would increase the competitiveness of small local farmers who are currently struggling to compete with large scale industrial farms. The environmental impacts of large scale monoculture farms are far worse than the impacts of smaller, local more diverse farms. Thus an up-stream carbon tax would indirectly reduce the negative effects from large scale industrial size farms because more produce would be purchased from local more diverse farms. This would also improve the economies of many small communities. When local produce is purchased the money from that transaction stays in the community as opposed to imported produce where the money leaves the community.

Victor Silva said...

Good article as usual. The Krugman article is, in my opinion, the perfect representation of our course. Every issue about carbon emissions addressed in class by professor Casey was treated by Krugman in its article. Likewise, the major conclusion was the same that I suppose we got in class: the carbon emissions control depends on the politicians will. I think that his last quote was remarkable: "If it does, the economic analysis will be ready. We know how to limit greenhouse-gas emissions. We have a good sense of the costs — and they’re manageable. All we need now is the political will."
After this course several conclusions could be taken, as well as several strategies of economics analyzes over environmental issues. Above all, the carbon emissions ones. And, maybe due to its importance, it is the major aim of ruler so far. The lobby is the problem. According to Krugman, the market and the economists know how to mitigate this problem but the economists alone cannot do anything. Interesting to see the standpoint of another economist and see that his opinion is so optimistic and so close of the major conclusions of our course.

Rosemary said...

I like that this article sums up many of the highlights of class discussion in laymen’s terms. I sent it to a family member who still doubts that global warming exists. However, I think the issues surrounding coal are especially interesting. Just today, I saw two cars in the deck with “Coal is King” bumper stickers.
A semester-long concentration on market failures is discouraging, especially considering that the best solution (for efficiency’s sake) is getting people to agree to pay more for the things they’ve enjoyed at a relatively low price for decades. Detrimental world-wide disruptions in global climate seem guaranteed given skeptics’ protests, apathy, and the strength of special interest groups.
The people with the authority to set change in motion are in the government, and Krugman recognizes that. However, instead of giving up hope or caustically criticizing the powers that be, he preaches patience. In the future he envisions that economists will be called upon to advise the implantation of policy to mitigate the damages of global warming and “the economic analysis will be ready. We know how to limit greenhouse-gas emissions. We have a good sense of the costs — and they’re manageable. All we need now is the political will.”

Caroline said...

This blog pretty much covers everything we have talked about in our class regarding global climate change. One idea that I found interesting was a carbon tariff. We have read a lot about carbon taxes vs a cap-and-trade system, and while the carbon tariff is a tax it is one that works against countries who aren't emitting the socially optimal level of carbon, which is a very interesting idea that carbon could be monitored through monitoring the trading of goods produced in a "dirty" way. This could, as Krugman argues, provide countries with a great incentive to reduce their carbon emissions, perhaps more so than a straight-up carbon tax or international cap-and-trade system, especially since many countries are resistant to setting up these systems. This system would probably only work if multiple countries supported enforcing the tariff; if the US acted alone it would probably be ineffectual and would just end up hurting US trade.

Katie Bean said...

This article provided a very good overview of the economics of (lessening) climate change and is very relevant to our course. It highlights the detrimental effects of negative externalities and the importance of market-based approaches, such as taxes on carbon and cap-and-trade, to solving such problems. Krugman asserts that the planet is warming and the uncertainty of consequences of climate change make the case for action stronger rather than weaker. He supports his point that the 1 to 3% decrease of gross world product is likely overstated and provides an example of the cap-and-trade system to diminish acid rain which came in below expected costs to support his point. He touches on the importance of the involvement of the whole world to lessening climate change. Ecosystems may not be highly adaptable, and the risk of catastrophe should motivate action on carbon emissions reduction. I found this point especially interesting and important as Daniel Schrag stated that we are performing an experiment on our planet that has never been undertaken, and that we do not know where threshold points that could lead to irreversible damage and disaster lie. Whether “climate policy ramp” or “climate policy big bang” legislation goes into effect must be battled out in the political arena, but Krugman makes it clear that something must be done.

Ellie said...

This article was a great conclusion to the class as it summed up everything we have focused on through out the semester. It successfully and clearly explained the basics of environmental economics and gave a simple overview explaining important topics we covered such as negative externalities, Pigovian taxes, the differences between cap and trade systems vs. taxes, etc. One of my favorite parts was when Krugman came out and stated his three points about the state of the scientific debate. One, the planet is warming, two, climate models predicted this well in advance, even getting the magnitude of the temperature rise roughly right, three, “models based on this research indicate that if we continue adding greenhouse gases to the atmosphere as we have, we will eventually face drastic changes in the climate.”

Krugman later continues by expanding on another one of our reoccurring themes; climate change is global and there must be a universal attempt to reduce climate emissions. Krugman explains, “for those who think that taking action is essential, the right question is how to persude China and other emerging nations to participate in emissions limits. He uses the metaphors of “Carrots” (positive inducements) as well as “sticks” (carbon tariffs) to provide possible solutions for this global problem.

Krugman ends this article with the powerful statement, “there has to be a real chance that political support for action on climate change will revive. If it does, the economic analysis will be ready. We know how to limit green-house gas emissions. We have a good sense of the costs- and they’re manageable. All we need now is the political will.” This is a very effective ending, because it points out that we have a lot of the important information and new technology, now we just need to make that next step and change our behavior. Our country can have endless debates of future changes we need to make or policies to implement, but unless we take action now, global climate change will continuously escalate.