November 13, 2008

Can we tackle a global recession and climate change?

Posted by johnmcquaid under energy, environment, government | Tags: , , , , , , |
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We’re facing two enormous problems, one short-term, one long-term - and both demanding quick, ambitious, expensive responses. I refer of course to the precarious state of the U.S. and global economies, and to climate change. The biggest question that Barack Obama will face over the next few years is how to responsibly balance these priorities - and it’s not immediately clear they can be balanced.

The working consensus right now among the developed world’s governments is to battle global warming by raising the cost of carbon emissions. Obama has proposed a cap-and-trade system with a permit auction that will oblige power companies and other industries to pay for the privilege of pumping CO2 into the air. This will raise costs for the affected industries (though they can lower them by finding ways to cut emissions). A good portion of those costs will be passed on to the consumer.

If raising energy costs in fair economic weather is considered political suicide, what happens if you raise them - even prospectively - in the middle of a global downturn?

That will certainly be the argument marshaled by opponents, who certainly know how to lobby. It has some validity as a matter of both substance and politics. However, I’m wondering if we haven’t reached the point where those normal rules don’t - and shouldn’t - apply anymore. Cap-and-trade would raise energy costs, but not immediately; and when the program gets fully underway, the revenue it generates could be quite useful plugging holes in a federal budget running massive post-bailout deficits:

If a cap-and-trade plan were passed in 2009, it would probably take effect in 2012 or so, and the revenue stream would start small the next year and then grow every year after that. That’s perfect timing. We don’t want to raise taxes right now, but a program that guaranteed a growing revenue stream starting a few years from now would help convince investors that the current budget deficit won’t last forever.

I’m also not convinced that boosting energy costs is political poison always and everywhere. Climate is a serious global crisis and it’s time to take it seriously. Real, consequential leadership (the kind Obama aspires to) does sometimes involve calling for sacrifices, and when leaders call for it people have been known to respond.

 

August 4, 2008

Climate change: un-American

Posted by johnmcquaid under energy, environment | Tags: , , |
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I have a piece up on the Guardian site arguing that George W. Bush isn’t really the major obstacle to the United States confronting climate change - it’s the American character itself:

The great carbon debate is only just beginning in America, and it’s not clear where it will go. The US could forge a broad consensus on carbon and use it to lead the world to action on climate change. But another, more likely outcome is what we’ve seen in many high-stakes political debates here: endless talk and only incremental action.

Let’s start with the fundamentals. The US rarely follows a European model for its major government programmes – just look at healthcare. Climate change is likely to be no exception. America’s geographical isolation and its superpower ways don’t exactly equip it well for the kind of painstaking, sustained political coordination that will be required to confront global warming. Americans are used to knocking heads together, not sending bureaucrats off to calibrate our CO2 emissions with those of other nations.

Current American development patterns, predicated on wide-open spaces, mobility and SUVs, are obviously going to have to change. But it’s going to be hard to sell people on policies designed to raise energy costs even higher, as capping carbon emissions will.

Finally, the American political system is constructed in ways that allow individual interest groups to hold it hostage at the expense of the national or global interest. The combined lobbying clout of oil and coal companies, along with the large industries that emit the most CO2, dwarfs that of environmental groups – or any interest group, for that matter.

The question, then, is whether the U.S. political system can be shaken loose from its deeply-ingrained habits to address a rapidly (in generational terms anyway) deteriorating situation, and how this might be done. A lot depends on how firmly committed Bush’s successor is to doing something serious. McCain appears on a track to pull back from cap-and-trade. Obama, meanwhile, will have a lot on his plate - could he, for example, tackle both major health care reform and cap-and-trade in one term, with a recession underway to boot? My pessimistic take: it will take more pain in the form of natural disasters, droughts, and other dislocations directly traceable to climate change to raise America from its torpor - and by then it will probably too late for political action to make a big difference.

 

July 9, 2008

Incoherence, confusion from McCain

Posted by johnmcquaid under 2008 campaign | Tags: , , , , , , |
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The McCain campaign’s mounting incoherence - born of the candidate’s attempts to straddle the political center and the right, and of his apparent ignorance of the content of his own proposals - is a sight to behold.

Just in the past few days, there’s been a drumbeat of contradictory messages. McCain pledged to balance the budget by the end of his first term, but provided no details for what is a politically impossible task right now - one made all the more so by his proposed tax cuts and increases in defense spending

Then McCain denounced the pay-as-you go element of Social Security, in which today’s taxpayers pay the benefits of today’s retirees, as an “absolute disgrace.” It’s not clear why he said this - of course, if you have rising numbers of retirees and relatively few taxpayers, it’s a problem. But a “disgrace”? This is, after all, the way the program was designed and has operated for 70-plus years. The campaign’s explanation - the “disgrace” is the failure to address the coming shortfall - doesn’t really make sense. So we’re left with the impression, justified or not, that McCain somehow questions the rationale behind Social Seucirty itself.

Now, McCain’s staffers are apparently telegraphing the idea that he will abandon cap-and-trade as his big fix for climate change. This is probably wishful thinking on the part of conservatives. But still - this is the centerpiece of McCain’s climate policy. Or is it? (Update: It still is.)

McCain’s position on Iraq also got muddled on the question of whether we will be maintaining bases in a peaceful Iraq for decades to come, or leaving much sooner at the behest of the Iraqi government.

Presidential campaigns are always semi-improvisational - they can’t just rely on position papers, and must respond to changes in the world and the political environment. But this goes well beyond semi - these are not intelligent or even opportunistic adjustments to events, but random, chaotic changes. This isn’t jazz, it’s noise. There seems to be some fundamental confusion about what McCain’s policies are or should be, and also about his underlying principles. On a practical level, you never know precisely how a candidate’s positions will be translated into actual policy - but you can get some general ideas. That doesn’t seem to be the case here. We don’t know what McCain would actually do if he becomes president. And at least right now, neither does he.

 

June 19, 2008

Can we have an impact on global warming at all? I think so.

Posted by johnmcquaid under environment/energy | Tags: , , , , , , , , |
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There’s an important debate underway about whether governments ought to - or even can - try to control carbon emissions to mitigate climate change. There are two variations on this theme. One is the “uncertainty” argument advanced by some conservatives, including the National Review’s Jim Manzi:

As far as I can see, proponents of emissions reductions will respond with four arguments: (1) inflate the analyzed costs of global warming by claiming the science actually now says things will be even worse than we previously thought, (2) inflate the analyzed costs of global warming by embedding indefensible discount rate assumptions in the black box of econometric calculations used by economists to conduct the cost-benefit analysis, (3) deflate the analyzed costs of emissions mitigation by claiming a free lunch – that there is a cost-free or low-cost way to radically reduce emissions, and/or (4) turn this into a moral crusade asserting that we have a moral duty to the poor of the world because of our past sins of emission. I have laid out responses to each of these objections: 1, 2, 3 and 4. When considered carefully, emissions mitigation proponents have no persuasive arguments.

In other words, given the unknowns here - both the scale of the problem and the costs of fixing it - we should do nothing. There are several problems with this. The first is that this is not a new argument at all. It is the MO employed by business interests and anti-big government conservatives every time action is proposed on some environmental problem: “we don’t know enough, it will bankrupt us.” This is a recipe for political paralysis - and that’s exactly the point, as Manzi’s post acknowledges. And it has been disastrous - just look at the state of fisheries, to cite a prominent example. Fishing interests managed to tie regulatory agencies in knots for years, saying we didn’t know enough to restrict fishing. Many fish populations collapsed and the fishermen went out of business.

Our experience of the past generation - the past decade especially - argues for being more proactive, not less, especially on gigantic problems. What about the notion that cap-and-trade will sink the economy? It will clearly have at least a modest impact on growth - and it should, because growth is the problem. But businesses always argue that new costs will kill them, while history shows that they usually manage to innovate and adapt.

Finally, Manzi’s argument itself has the whiff of disingenuousness, as if he started not with the goal of actually addressing a problem, but to devise a political strategy and talking points that would allow conservatives to acknowledge the reality of global warming - and thus not seem crazy - while continuing to do as little as possible. It’s situationalism, not a genuine grappling with the issues.

The other argument, advanced by Schellenberger and Nordhaus, the proprietors of the Breakthrough Institute, is that the horse is already so far out of the barn that any global agreement to cap CO2 emissions will be both bureaucratically nightmarish and outrageously expensive - and will ultimately fail:

The entire global framework for reducing carbon emissions, and indeed the entire conceptual and policy framework for addressing global warming, is a failure, based on an older paradigm of pollution control that won’t slow global warming.

At bottom, global warming is not so much a pollution regulation challenge as it is an energy development one. To understand how different this challenge is from past pollution quandaries, consider that by 2050 global energy consumption will more than double, even as we face the challenge of reducing greenhouse gas emissions by 50 percent. This transformation will not be accomplished by affixing scrubbers on smokestacks or catalytic converters on tailpipes–technical fixes that required little change to the underlying processes and technologies that they mitigated. Rather, it will require fundamental changes to the underlying technologies and fuel sources that power the global economy.

The problem with Kyoto, cap and trade, and most other policies aimed at enacting this transformation is that they focus primarily on the pollution problem, not the energy supply problem. As such, they attempt to enact the necessary transformation of the global energy economy through the indirect mechanism of pollution regulations and carbon markets, rather than through the direct deployment of new clean-energy technologies.

I’m sympathetic to these ideas - after all, they may be right. Carbon emissions are escalating, the world is changing, and there’s nothing resembling a global consensus on how to address this. Even starting now, we may never catch up; and even if we can, cap-and-trade may turn out to be unworkable. But I think the argument fails on two counts. First, global politics can change; cap-and-trade may work. It seems silly to just give up based on the experience of Kyoto, which for all intents and purposes was conceived and executed in a different era. Second, their solution is to direct massive government and private investment to technology. Surely, we need this. But if you’re skeptical about government regulation, you ought to be even more skeptical about government subsdies to private interests, which are, well, pork. In other words, our political system is not set up to dole out billions in a rational, strategic manner.

I don’t see why we can’t do both: try to control carbon emissions while also greatly boosting public and private investments in alternative fuel technologies. (And, of course, the proceeds from cap-and-trade auctions can be directed to do exactly that.) We should be using all the tools at our disposal. Now.

 

June 18, 2008

McCain and carbon

Posted by johnmcquaid under 2008 campaign, environment/energy | Tags: , , , , , |
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In this ad, which is pretty good, John McCain plays up his distance from Bush on the environment:

But over the past few days, McCain keeps circling back into the Bush orbit on the environment. He declared that the “cap” in his cap-and-trade carbon proposal was not mandatory, something that will please the oil, gas and coal industries, and large industry as a whole, because it makes the entire proposal meaningless. This was a little too reminiscent of Bush’s rescinded 2000 promise to regulate CO2 emissions.

Yesterday, he came out for lifting the ban on offshore drilling, and Bush has enthusiastically climbed on board. Obviously: pushing for more oil production is inimical to a policy focused on reducing carbon emissions. It doesn’t matter where you stand on global warming or energy policy - just from the standpoint of coherence this is a bloody mess. As it usually is with McCain, we don’t know if he is playing politics with carbon and trying to reassure Republican big business that things will go on as they always have, or if he is genuinely unaware of the contradiction. Or some muddled version of both. This again points to a basic problem with McCain’s candidacy, which is that we really don’t know which diametrically opposed promises he will choose to honor if elected; he probably doesn’t know himself at this point.

 

June 2, 2008

Samuelson on cap-and-trade

Posted by johnmcquaid under environment/energy | Tags: , , , , |
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Robert Samuelson is a symptom of the dead-tree industry’s woes: one of those columnists who keeps going and going, saying the same thing over and over in slightly different ways - the Richard Cohen of economics. His attitude is grumpy, his thinking linear. Today, Samuelson makes a hash of carbon cap-and-trade programs, warning that won’t work because, essentially, the government cannot compel private industry to limit carbon emissions without causing massive economic, and political, blowback:

This is mostly make-believe. If we suppress emissions, we also suppress today’s energy sources, and because the economy needs energy, we suppress the economy. The models magically assume smooth transitions. If coal is reduced, then conservation or non-fossil-fuel sources will take its place. But in the real world, if coal-fired power plants are canceled (as many were last year), wind or nuclear won’t automatically substitute. If the supply of electricity doesn’t keep pace with demand, brownouts or blackouts will result. The models don’t predict real-world consequences. Of course, they didn’t forecast $135-a-barrel oil.

As emission cuts deepened, the danger of disruptions would mount. Population increases alone raise energy demand. From 2006 to 2030, the U.S. population will grow 22 percent (to 366 million) and the number of housing units 25 percent (to 141 million), the Energy Information Administration projects. The idea that higher fuel prices will be offset mostly by lower consumption is, at best, optimistic. The Congressional Budget Office has estimated that a 15 percent cut of emissions would raise average household energy costs by almost $1,300 a year.

Samuelson quotes some optimistic cap-and-trade rhetoric in order to knock it down, but no credible advocate has ever said this was going to be easy or smooth. And Samuelson, whose default position is skepticism toward regulation of any kind, offers no real alternative to address a brewing global environmental disaster. He suggests a carbon tax instead, which has the virtue of simplicity. But in economic terms, a carbon tax and cap-and-trade are different means to identical ends: putting a price on something that companies now do for free. So he ends up back where he started, without acknowledging it, which is that government attempts to regulate carbon will precipitate a massive economic disaster. Which is just idle, knee-jerk speculation; private industry does respond to incentives and adapt to new realities, whether created by governments or changes in material circumstances.

But I do have some sympathy for him on this point:

Meanwhile, government would expand enormously. It could sell the allowances and spend the proceeds; or it could give them away, providing a windfall to recipients. The Senate proposal does both to the tune of about $1 trillion from 2012 to 2018. Beneficiaries would include farmers, Indian tribes, new technology companies, utilities and states. Call this “environmental pork,” and it would just be a start. The program’s potential to confer subsidies and preferential treatment would stimulate a lobbying frenzy. Think of today’s farm programs — and multiply by 10.

Carbon cap-and-trade programs are, in essence, an enormous global experiment that has yet to succeed anywhere. They are complex, and our government is already terribly compromised by special interests that have a direct hand in writing legislation. It’s not clear that Congress and the executive branch can make this work w/o screwing it up. That’s the best argument for a carbon tax. But, contra Samuelson, government is the biggest and best tool we have to address climate change relatively quickly. To argue, 1980s-style, that government is always the problem simply ignores this broader reality.