Thought Experiment

I've been kicking this one around for a while now:

Suppose you traveled back in time to Europe and the United States circa 1850. You explain to the political and economic elites of the time that their decision to industrialize through the use of coal and petroleum will set in motion a chain of events that will lead to widespread devastation of the Earth's climate some 200 to 250 years later. Therefore, they must seek to minimize their use of those fuels wherever possible and to develop cleaner alternatives — even if it means higher energy prices and slower economic growth. Assuming that they accepted your version of future events as true, would anybody think that you had made a credible moral claim?

Suppose you traveled to 1900? 1950?

Carbon Tariffs

So a last-minute amendment to the Waxman-Markey bill passed last Friday would require the President, by 2020, to impose a tariff on imports from countries that do not regulate their greenhouse gas emissions. Such a provision has long been controversial (see Tyler Cowen's objection, for one), but as we get closer to actually enacting climate change regulation in this country, I think a carbon tariff needs to be seriously considered.

To begin with, Paul Krugman flags some potentially game-changing news on this front:

There was some question about how the WTO would handle cap-and-trade — whether it would accept the need for carbon tariffs, if some countries (cough China cough) drag their feet, or whether it would adopt a purist free-trade rule. The answer seems to be in — the WTO is going to treat cap-and-trade the same way it treats VATs, with border taxes allowed if they can be seen as reducing distortions.

If you believe, as I do, that international negotiations over climate change can be modeled as an iterated form of the prisoner's dilemma, then a key tool for getting the major polluting countries to cooperate on reducing carbon emissions has to include both positive and negative incentives for compliance — with carbon tariffs being, obviously, a form of the latter. So the WTO ruling is, at first glance, good news.

Having said that, just because something is permissible does not mean that it is necessarily advisable. Even with the WTO's blessing, a trade war with China could easily break out if the US slaps a border tax on carbon-intensive imports. And it's not only US-China relations that we should worry about: Imagine if Waxman-Markey were to fail, support for climate change regulation collapses à la health care reform in 1994, and the EU decides to punish our recalcitrance with a carbon tariff on American exports. It'd be like the just-averted Roquefort War earlier this year, but not nearly as funny.

Some other thoughts:

• Returning to the WTO ruling, a key consideration about a carbon tariff will be one of intent: Is it meant, as Krugman suggests above (and elaborates on here), to merely prevent unfairly privileging carbon-intensive goods — in the same way that a border tax in countries with a VAT prevents unfairly privileging foreign-made goods? Or is it meant to punish non-cooperation, according to the prisoner's dilemma framework? That will likely come down to the size of the tariff: To be simply anti-distortionary, it would have to be set at a rate that restores the trade status quo prior to the implementation of climate change regulation. Of course, that implies that it would have be constantly adjusted to account for non-climate-related changes in the balance of trade. Whether that can be done, and whether the process of setting and adjusting a carbon tariff rate can avoid being abused (as a back-door to protectionism, say), is an open question.


• It goes without saying that a carbon tariff shouldn't be a measure of first resort. It would be best for the US and China to agree on a path to developing a cleaner energy regime, rather than coercing each other into doing so. I'm no China expert, but it seems that a trade war could be as bad for the Chinese as it would be for Americans: They depend on us buying their exports as much as we depend on them buying our Treasury bills.


• Following on that point, one major objection to a carbon tariff (see Cowen again) is that we cannot credibly threaten to use it. That is, one rationale for a carbon tariff is that it would function as a kind of nuclear option for climate change negotiators — a peaceable solution is more likely if the possibility of a destructive trade war looms in the background. Indeed, according to Brad Plumer at the TNR link above, the threat of a US carbon tariff may be prodding the Chinese to the bargaining table. The problem, however, is that, given the trade dynamic with China I just mentioned, can we really risk provoking a fiscal crisis over even something as portentous as climate change? The Chinese face a similar predicament, of course; despite some rumblings about moving away from dependence on the dollar, it's unlikely they can afford to do it — at least in the near term. Getting our trade deficit down to a manageable level will be just as difficult, if not more so.

Frank on Offsets

Robert Frank's op-ed on carbon offsets in the NYT (and his follow-up blog post) were really disappointing. He's an excellent economist, but his defense of offsets skirts the most important questions surrounding their use, instead focusing on comparatively trivial aspects.

Most of his argument is addressed to those who think, like the proprietors of cheatneutral.com, that buying offsets is essentially a way for people in wealthy countries to shirk their responsibility to reduce their output of carbon emissions. To an extent, this is true: the principle of common but differentiated responsibility dictates that we in the developed world need to take the lead in heading off the rise in global warming pollution — even if China, India, et al. are poised to overtake us this century (indeed, China is already there). But, as Frank rightly notes, it doesn't matter whether a ton of CO₂ is released in Shanghai or in San Francisco; so it makes sense to look for the most cost-effective means of reducing emissions — and often this means promoting clean energy projects in developing countries instead of in developed countries.

But as Brad Plumer points out, the real problem with offsets isn't one of morality or distribution of responsibility, but of simple logistics: To date, offsets providers have done a rather poor job at quality control, i.e., making sure that offsets are funding actual emissions reductions, not wasting money on projects that would have happened anyway. Frank mentions in passing that more stringent standards are gaining ground; however, there's reason to believe that better standards could act as a bottleneck for the expansion of the offsets market.

Then there's the question of whether offset programs, as currently designed, are an effective way to fund emissions reductions in the first place. It may make more sense to do something like just giving money to developing countries to finance clean energy development, as Daniel Hall notes here and here. After all, what developing countries, in general, are looking for is a clear path to economic development; which, they fear, restrictions on carbon emissions would hamper.

Is China Ready for a Climate Deal?

There’s been a lot of theatrics over Waxman-Markey in this country. But in a sense, it’s really a sideshow: If we don’t get the major developing countries — China in particular — to commit to reducing their carbon emissions, any effort to prevent catastrophic warming of the planet will be futile. That’s why negotiations between the US and China on reducing emissions are probably the most important thing shaping our planet’s future right now.

So what, exactly, is going on? Hard to say. The good news is, it seems China and the US are in talks about what to do about climate change, and that a mutual agreement to reduce emissions before the Copenhagen conference is a possibility. The bad news is, according to the Wall Street Journal, is that we may not want to hear what Beijing has to say:

China just upped the ante in its demands of what the West should do—calling for ridiculously ambitious emissions reductions over the next decade as a pre-condition for joining the club. The Waxman-Markey bill in its original form would have fallen well short of Chinese demands; in the compromise version, near-term emissions cuts are even more modest.

Specifically, China is asking for developed countries to reduce carbon emissions by 40% below 1990 levels by 2020. To put that in perspective, the European Union has pledged to reduce their emissions by 20% in that time frame, and 30% if the rest of the developed world joins them. And Waxman-Markey? Well, according to the World Resources Institute, the cap-and-trade system would only reduce US emissions by one percent. Even if you add in the other provisions of the bill, it would bump the level of reductions up to 23 percent, at best.

So why is China making such a demand? To begin with, look at the phrasing in their press release:

A shared vision for long-term cooperative action is to enable the full, effective and sustained implementation of the UNFCCC [United Nations Framework Convention on Climate Change] to achieve its ultimate objective. Such a vision should be guided by the ultimate objective of the UNFCCC and the principle of common but differentiated responsibilities and the principle of equity. Since the UNFCCC has clearly defined the ultimate objective to address climate change, the overriding task for the international community is to implement concrete actions. The goal for long-term cooperative action should be a comprehensive one, consisting of sustainable development, mitigation, adaptation, financing and technology. In terms of mitigation, developed countries as a whole shall, as their mid-term targets, reduce their GHG emissions by at least 40% below their 1990 level by 2020.

That phrase, "common but differentiated responsibilities," is the linchpin to both the argument that the developed world should make drastic cuts in their emissions and that developing countries, including China, should not be legally bound to make any reductions at all. Basically, while all countries have a responsibility to protect the environment, developed countries — in view of their much greater wealth and that much of their wealth was gained through exploitation of developing countries’ resources — should do more to halt environmental degradation than the rest. This is especially the case with climate change, as the carbon emissions of Western countries over the last century are to blame for most of the warming that this planet has experienced to date. It is, of course, incredible to think that developing countries should place constraints on their fossil fuel consumption when developed countries won’t do the same; moreover, given that developing countries are more vulnerable to the effects of climate change, it stands to reason that developed countries should do what they can to prevent undue harm as a result. This includes not only cutting their own carbon emissions to avoid devastating levels of warming, but also financial assistance to developing countries to both develop clean sources of energy and adapt as much as possible to that climate change which is unavoidable at this point.

Now, it would be one thing for, say, Vietnam to make this argument; it’s a poor country, at risk of losing much of their farmland to global warming-induced sea level rise, and should not be denied the chance to develop their economy because of the actions of Westerners. But the argument begins to fall apart when applied to an economic behemoth like China, which, frankly, is now as much as part of the climate problem as the West. True, on a per capita basis, the Chinese are still fairly poor, on par with Albanians, but at some point it makes no sense to group all developing countries under the same rubric. Unfortunately, the international climate regime still only divides the world into developing and developed countries; creating a third category for prosperous, but still developing, countries, with a level of responsibilities in between those of the poorest and the richest countries, would bring things more into line with reality.

That said, the US needs to do more than what is proposed under Waxman-Markey; although, as mentioned above, the whole bill would result in roughly the same carbon emissions reductions as what the EU has promised. And indeed, the EU needs as much prodding on this matter as we do. By the same token, however, so do the Chinese.

#2 The Great Wall of China originally uploaded to Flickr by emms76.

Waxman-Markey: Better than Nothing

Count me on the side of Krugman, Romm, and Roberts in supporting Waxman-Markey, even in its current watered-down version (and which just recently passed out of the House Energy and Commerce Committee). Of course, it would be better, as a matter of distributive justice, if the permits in the cap-and-trade system were all auctioned off and the revenue rebated back to individuals.* And of course, it would be better if the use of carbon offsets were kept to a bare minimum. That said, the fact that W-M establishes a price on global warming pollution for the first time in American history is something to be celebrated; and the clean energy provisions that make up the majority of the bill will do a lot to move our economy away from reliance on fossil fuels.

Despite all that, there’s no denying that W-M has been watered down, to the detriment of trying to keep the planet from warming to dangerous levels. And given that W-M, as written, would have rather meager effects on planetary warming (Jim Manzi, for one, claims it would only reduce global average temperatures by 0.1º C by 2100), what is the virtue of enacting it? The answer, I think, is twofold: the US would have a stronger position going into negotiations with China and the other major developing countries at the Copenhagen conference in December; and by putting in place the basic mechanisms for reducing carbon emissions now, they can more easily be strengthened, tweaked, etc., down the road. Of course, it’s impossible to say if W-M will actually help accomplish these goals — Suppose the Chinese balk in agreeing to reduce their emissions? Suppose the Republicans regain power while still committed to denialism about climate change? — but it seems to me that progress will not be made by waiting around for a perfect bill. Indeed, I think that once the US commits to reducing carbon emissions, the scare stories that dominate much of the climate change debate in this country will lose much of their force, and making stronger reductions won’t seem so impossible to many. Now if only W-M survives in its current form though the other House committees, a floor vote, and the Senate…

* Though see this report which argues that the allocation scheme of W-M will prevent utilities from reaping windfall profits, as they did in Europe during the first phase of its cap-and-trade system.

Unemployment Blogging: Or, The Double Dip Recession

So my job at EPC, which I feared at the time I was hired would not be permanent, was in fact not permanent. On top of that, I threw my back out last Friday and have spent much of the last week on a sofa with an icepack. (I was getting better until today, when I had a rather severe relapse; I'm writing this from a guest bed in my parents' house.) In short, I'm not having a very good time right now.

I'm not quite as scared as I was during my last spell of unemployment, when I had been applying to jobs for about a year, getting nowhere, and then having even the meager cashier job I had taken away from me. On the other hand, as my last job was a contract position, I have no recourse to unemployment benefits this time. So I will have to use what savings I have amassed very wisely. I sincerely hope that I will be able to stand on my own two feet soon -- both figuratively and literally.

UNCLOS vs. The Senate

Via Scott Paul, some encouraging news on the Law of the Sea Convention (or UNCLOS):

Senate Foreign Relations Chairman John Kerry (D-Mass.) is crafting a strategy to ratify the long-stalled Law of the Sea Treaty this year -- a move that ocean and foreign policy experts say is increasingly important as climate change reshapes the Arctic.

Kerry said this week that he is working to find time for a hearing and votes on the treaty, which governs navigation, fishing, economic development and environmental standards on the open seas.

UNCLOS has been in Senatorial limbo for about 15 years, so it's encouraging to hear that Sen. Kerry is leading a charge to finally ratify it. On the other hand, it seemed like the treaty had a good shot back in 2007, and in 2004 -- my understanding is that it had the votes for ratification even back then. And yet, nothing has happened. I could understand why the Republicans sat on the issue when they had the majority, given their captivity to the far right and its hatred of multilateralism. But why, with the Democrats in charge, there's been no movement whatever on the treaty, is a mystery.

On the other hand, it may not be such a mystery, given how the Senate works. Norm Ornstein recently wrote about how the abuse of the Senate's rules has made even overwhelmingly popular legislation nearly impossible to pass. I don't know if this has been the case, but I suspect that fear of someone like James Inhofe bringing Senate business to a halt has been a major factor in the lack of action on UNCLOS. The Greenwire article mentions that finding time on the Senate calendar is a big question for moving ratification forward; but it seems to me that the Senate leadership could find the time if they wanted to have a vote. In other words, I fear that ratification opponents care a lot more about stopping it than supporters do about passing it. Again, this is speculation on my part -- one other factor could be that the Republican Senators who have said they support ratification might cave under right-wing pressure. Fortunately, this time around ratification requires only eight GOP votes, at least.