Editore"s Note
Tilting at Windmills

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July 7, 2008
By: Kevin Drum

GLOBAL WARMING....A few days ago I wrote a brief post highlighting an EPA report that said new rules to reduce greenhouse gas emissions from cars might have a net economic benefit of $2 trillion. Jim Manzi pored through the footnotes and has two complaints about this.

The first and less interesting one is that the EPA boffins assumed a 3% discount rate in their calculation. Unfortunately, the question of what discount rate to use for future benefits is a raging one in the global warming debate, and not one that's really accessible to mere mortals like me. However, I'll concede that 3% might be a little low, which means the benefits here may well be overstated.

Manzi's second complaint is more intriguing:

Even more amusingly, [the report] counts the benefits attributable to the whole world, not just residents of the United States [and] estimates the total economic benefit of avoiding one ton of CO2 emissions to be $40. How much of this the U.S. portion? $1. So more than 95% of the "benefit" in this cost-benefit analysis accrues to people outside the U.S. who aren't paying the freight.

As an exercise in debating points, I get this. Most people don't realize the EPA is counting economic benefits to other countries, and human nature being what it is, will probably lose interest in the GHG rules when they learn that the entire $2 trillion (or whatever) isn't destined for American pocketbooks. It's a nice quickie rebuttal in a Crossfire kind of sense.

Still, there's a reason they call it global warming. Anything we do on the climate front is necessarily going to affect the entire world, and if we count only the benefit accruing to us personally then no action will ever seem worth pursuing. It's the tragedy of the commons, played out on the biggest commons there is.

In fact, it's even worse than that. As everyone knows, global warming is primarily caused by rich, northern economies, but the price is paid disproportionately by poor, tropical economies. Whether we spend money trying to reduce warming in the first place, or spend the money trying to adapt to warming, the bulk of the investment is going to come from the rich countries that emit GHGs and the bulk of the benefit is going to accrue to the poor countries who are most affected by it. And that's as it should be. When we talk about fighting global warming, after all, we're talking about benefitting the entire globe. The United States, as a major contributor to the problem, has an obligation to do something about it even if we only get a portion of the benefit.

Ideally, every country contributes and, eventually, every country benefits. We spend money and get 5% (or less) of the benefit because we have only 5% of the world's population. But other countries do the same and we share in those benefits. Things may or may not turn out this way, but failure is preordained if every country decides that spending money to benefit the rest of the globe is a fool's game.

UPDATE: Sorry, got my discount rate terminology mixed up. Corrected now.

Kevin Drum 3:09 PM Permalink | Trackbacks | Comments (66)

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not second

Posted by: wishIwuz2 on July 7, 2008 at 3:17 PM | PERMALINK

Either its good for us economically or its not. If it isn't, we should be using other arguments for why we need to fight global warming, not trying to use talking points based on misunderstandings.

Posted by: Sojourner on July 7, 2008 at 3:18 PM | PERMALINK

Keep in mind, the poorer countries have received tremendous benefits from the economic growth driven by cheap fossil fuels. In fact, without cheap fossil fuels, none of them would be making a transition out of poverty at all. Even though they didn't produce many of the goods (and thus didn't produce the carbon), they're just as responsible as the Western consumers in some ways. See Manzi for more on this.

Posted by: jamie on July 7, 2008 at 3:24 PM | PERMALINK

"As an exercise in debating points, I get this. Most people don't realize the EPA is counting economic benefits to other countries, and human nature being what it is, will probably lose interest in the GHG rules when they learn that the entire $2 trillion (or whatever) isn't destined for American pocketbooks. It's a nice quickie rebuttal in a Crossfire kind of sense."

A rebuttal that completely destroys your assertion that the costs imposed on the U.S. economy and citizens by adopting these new rules would be "far exceeded" by the supposed "benefits" these new rules would bring to the now "global economy".

BTW, why the hell is EPA using the alleged economic benefits to other countries as a justification of adoption of these rules? Probably because a straight up cost/benefit analysis of these rules to the US economy would not be as helpful in selling this tripe to the masses.

Posted by: on July 7, 2008 at 3:25 PM | PERMALINK

Right now the USA has the world's biggest economy (hmm, unless you count the whole Euro area as one), by far the world's strongest military, and also has a huge agricultural surplus.

Global climate change will have unpredictable consequences: when you're sitting on top of the heap, you should try pretty hard to preserve the status quo. A modest change in temperature and rainfall (together with the predictable exhaustion of aquifers) could turn the Midwest back into the
dustbowl of the 1930s. I'm not at all sure (and I don't think climate scientists are sure) that the USA, which after all has the most to lose, is so little at risk as you think.

You should also consider factors like development of wetlands which increase vulnerability to flooding. A good deal of the USA already suffers from tornados and hurricanes; there's plenty of developed populated areas on low-lying coastland
at risk from rising sea levels; and without adequate rainfall and irrigation most of California (itself one the world's largest economies) and the Southwest goes back to being
unproductive desert.

I don't mean to be unduly alarmist, but I think we should consider that things could get at least as bad as they were just 75 years ago.

Posted by: Richard Cownie on July 7, 2008 at 3:26 PM | PERMALINK

Not only will we have to bear such a major proportion of the worldwide costs of diminishing global warming, the benefits will only be felt by future generations. After all, what have your great grandchildren done for you.

Posted by: natural cynic on July 7, 2008 at 3:26 PM | PERMALINK

Darn it, hit the post button instead of preview. The anonymous post at 3:25 is mine.

Posted by: Chicounsel on July 7, 2008 at 3:28 PM | PERMALINK

Some of that "transition out of poverty" involves the decimation of oxygen-producing rain forests for farm land. Global warming and global economics are inter-twined (hyphenate?).

Posted by: wishIwuz2 on July 7, 2008 at 3:29 PM | PERMALINK

Shorter Jim Manzi:

What's in it for me?

Posted by: Cap'n Phealy on July 7, 2008 at 3:36 PM | PERMALINK

Um, I would think it would be obvious why the EPA is considering the global benefits of U.S. efforts to combat climate change. Namely, while other countries will benefit from our efforts to minimize global warming, we will benefit from the efforts of other countries. Thus, while we get 5% of the benefit of this proposal, we ALSO get 5% of the EU's proposal, and China's proposal, and India's proposal, and .... Thus the global perspective is appropriate.

In response to Sojourner's point: i am troubled by arguments that we should only do things that are economically good for us--that reduces human beings to financial values, and that is morally troubling to me. Too often economists have asserted the appropriateness of economics and welfare analysis to determine what we should do. With all due respect (I'm training as an economist, so I will share in receiving this beating), that is not the role of an economist. An economist should instead consider what goals society would like and find the most efficient way to meet those goals and I think you would be hard pressed to find people saying: "the goal of society is to maximize GDP". Few people care about GDP, they care about their own well-being, their family, their neighbors, and, in many cases, the world that they will be passing on to their progeny. How does that fit into economic analysis? Not very well.

That brings up the 3% discount rate--there is a great article in a recent Scientific American laying out the moral implications of using different discount rates and, in principle, I find the 3% (i.e. inflation only) discount rate to be the most morally defensible when we are considering intergenerational issues.

Posted by: Martin on July 7, 2008 at 3:43 PM | PERMALINK

people outside the U.S. who aren't paying the freight

Except when their cropland is taken out of food production to produce biofuels.

Except when, as wishIwuz2 said, their rainforests are decimated for agricultural production,

etc.

Posted by: thersites on July 7, 2008 at 3:43 PM | PERMALINK

Um, I would think it would be obvious why the EPA is considering the global benefits of U.S. efforts to combat climate change. Namely, while other countries will benefit from our efforts to minimize global warming, we will benefit from the efforts of other countries. Thus, while we get 5% of the benefit of this proposal, we ALSO get 5% of the EU's proposal, and China's proposal, and India's proposal, and .... Thus the global perspective is appropriate.

In response to Sojourner's point: i am troubled by arguments that we should only do things that are economically good for us--that reduces human beings to financial values, and that is morally troubling to me. Too often economists have asserted the appropriateness of economics and welfare analysis to determine what we should do. With all due respect (I'm training as an economist, so I will share in receiving this beating), that is not the role of an economist. An economist should instead consider what goals society would like and find the most efficient way to meet those goals and I think you would be hard pressed to find people saying: "the goal of society is to maximize GDP". Few people care about GDP, they care about their own well-being, their family, their neighbors, and, in many cases, the world that they will be passing on to their progeny. How does that fit into economic analysis? Not very well.

That brings up the 3% discount rate--there is a great article in a recent Scientific American laying out the moral implications of using different discount rates and, in principle, I find the 3% (i.e. inflation only) discount rate to be the most morally defensible when we are considering intergenerational issues.

Posted by: Martin on July 7, 2008 at 3:44 PM | PERMALINK

SO how much is Houston or Manhattan or Florida worth after sea level rises by 7 meters when Greenland goes? Does it matter if the deluge is 100 years from now? We get to choose, and our descendants will judge us by our choice.

Posted by: troglodyte on July 7, 2008 at 3:45 PM | PERMALINK

The technologies needed to phase out fossil fuel use and its associated global warming pollution -- e.g. concentrating solar thermal power plants, solar photovoltaics and wind turbines -- are going to be the drivers of the New Industrial Revolution of the 21st century. Germany, Japan and China are investing heavily in these new industries and are well on the way to becoming the world leaders in supplying the rapidly growing world market for solar and wind energy technologies, which will be the foundation of the post-fossil fuel world economy.

The death-grip of the fossil fuel industries and their bought-and-paid-for servants like Cheney, Bush, Inhofe et al, on US energy policy will ensure that the USA misses the boat and becomes an economic backwater.

Posted by: SecularAnimist on July 7, 2008 at 3:55 PM | PERMALINK

I think the real problem for most americans is the 95% of the benefit that goes to foreigners. Not only does it not directly benefit ourselves, but we don't like foreigners so instead of putting a small or zero weighting to any benefits that accrue to foreigners, we actually give them negative weighting (i.e. hurting foreigners is good, helping them is bad). This is of course never stated, but I think it is not far from the surface.

Posted by: bigTom on July 7, 2008 at 4:11 PM | PERMALINK

I believe that the global warming "skeptics" such as William Nordhaus (I'm using quotation marks because he isn't skeptical about the reality of global warming, just about the wisdom of most proposals to combat it) would suggest that 3% is too LOW a discount rate, not too high as Kevin Drum suggests.

Posted by: y81 on July 7, 2008 at 4:12 PM | PERMALINK

Martin: In response to Sojourner's point: i am troubled by arguments that we should only do things that are economically good for us

Please note that I did NOT say we should only do what is economically good for us. :) I said if we're going to make the argument that its good economically for us, it better be economically good for us! Reading the original post by Kevin, I assumed we would be saving trillions by investing now in fighting global warming. Apparently that was false, and the misconception given was just short of a lie and only damaging to the global warming cause.

I'm all for tackling global warming even if it ends up being economically harmful to us. I am not for magic hand-waving that pretends we'll be making lots of money out of doing so if that's not realistic.

Posted by: Sojourner on July 7, 2008 at 4:12 PM | PERMALINK

ZERO POPULATION GROWTH.

Sadly, these are 3 'forbidden' words that cannot be uttered in the US political system.

Without ZPG... we are doomed... everything else is just a stop-gap measure.

Wait... what's this? CNN shows 43% of Americans approve of religous license plates.

Crap... We ARE doomed.

Posted by: Buford on July 7, 2008 at 4:15 PM | PERMALINK

I'm curious how much better than us the gas-tax loving Europeans are going to do in the next few years.

Imagine the benefits if we had reigned in our suburban growth, invested in efficiency, and maintained local agriculture over the last decade or so. It might be more about future global competitiveness than about a few dollars.

Posted by: B on July 7, 2008 at 4:20 PM | PERMALINK

This is a perfect example of the problems that occur when costs can be externalized. The seminal treatment is Garrett Hardin's 1968 The Tragedy of The Commons

The word "tragedy" in the title is well-chosen, as you can see: when each rational economic actor can privatize profits and externalize costs onto society at large, market mechanisms fail to avert perfectly foreseeable disasters. Examples: the collapse of North Atlantic cod fishery, the Oglala aquifer, the collapse of the California salmon fishery, stream water quality before the Clean Water Act.

Posted by: joel hanes on July 7, 2008 at 4:23 PM | PERMALINK

It should be clarified: the discount rate used in these calculations is already in real terms, so 3% does not mean "just inflation." The famed economist Ramsey wrote in the 1920s that ZERO was the appropriate intergenerational discount rate.

Something like 5%, or slightly higher, seems to make the most sense for this economist. 5% is about average World GDP growth, and utility is diminishing in income. It seems reasonable to believe that our richer descendants should pay more than we do - in the interspatial, but not intertemporal, context, we just call this the rationale for progressive taxation!

Stern is a fine economist, but on this point Nordhaus wins the argument. There may be transcripts of the debates between these two on the discount rate index for those who are interested.

Posted by: cure on July 7, 2008 at 4:23 PM | PERMALINK
Either its good for us economically or its not. If it isn't, we should be using other arguments for why we need to fight global warming, not trying to use talking points based on misunderstandings.

That the global benefits of US action exceed the costs means that it is good for "us" economically. That the benefits are (as are the costs of the harmful actions curtailed) largely externalities from the perspective of the US as a single participant in the world economy is also why it is unlikely that that action will be done. Between nations, as between any other actors, where externalities are not internalized, the best decisions are not made: since the (short-term, at least) costs of our harmful actions are largely external, they are ignored in decision making, and since the marginal benefits of curtailing those harmful actions are also largely external, they too are ignored in decisionmaking (that's not really an "also", they are just different phrasings of the same thing.)

Diffuse environmental impacts have always been the most clear and easy to grasp examples of this kind of market failure.

Posted by: cmdicely on July 7, 2008 at 4:23 PM | PERMALINK
ZERO POPULATION GROWTH.

The problem with ZPG is that most things advanced as population control measures largely don't work unless they are absolutely draconian; the effective way of controlling population growth is (1) promoting overall economic growth and prosperity, (2) making sure that growth and prosperity is distributed well rather than concentrated narrowly, and (3) providing strong social security systems so that the population doesn't feel that their individual participation in the growth and prosperity is tenuous. When those factors are present in the modern world, you get low or negative population growth without any direct population control measures.

Posted by: cmdicely on July 7, 2008 at 4:29 PM | PERMALINK

Is Jim Manzi too lazy to do the math? $1 out of $40 saved is 2.5%. Of $2 trillion, that's still $50 billion in savings for the US alone (assuming the EPA's other calculations are accurate). At this point, who are we to turn down $50 billion?

Posted by: MeLoseBrain? on July 7, 2008 at 4:32 PM | PERMALINK

3% is a little steep? I thought Manzi was arguing for a 6% discount rate with increases in the discount rate tending to lower the present value of net benefits. Now if we made that assumption of a 1.4% discount rate - we'd get higher benefits. But why are you debating a National Review type on this topic anyway?

Posted by: pgl on July 7, 2008 at 4:37 PM | PERMALINK

"..if we count only the benefit accruing to us personally then no action will ever seem worth pursuing. .."

Not true. If we endogenously balanced warmers vs normative coolers, then at least we are proportionally more efficient on the issue.

Countries who see greater harm can set up their own damage system and come after our assets in their country.


Posted by: Matt on July 7, 2008 at 4:42 PM | PERMALINK

Standard rant from me, but if you focus your attention only the cars, you're not doing what Europe does. Yes, you make the cars more efficient, but you also get people out of them (biking, walking) for short trips. This reduces CO2 emissions, has the benefit of improving health, and doesn't cost much (often requiring only a repurposed recreational bicycle, plus changes to road rules/striping to make the existing space more ped/bike friendly).

Posted by: dr2chase on July 7, 2008 at 4:44 PM | PERMALINK

If I build a darn great hogfarm, and lagoon the effluent, you probably wont like the smell downwind, but you'll enjoy the nice cheap pork I produce. If the lagoon overflows onto your property, floods your pool, soils your house, you probably will not think much about all the benefits that flowed from my high tech farming.

Similarly, as the people of Bangladesh, Pakistan, and Egypt lose a high proportion of their best agricultural land, and islanders might lose their whole country, they might expect compensation by the trillions rather than admiring the "benefits" western industrialization has brought them.

On a cost benefit analysis it is specious to continue to argue that other peoples' costs due to our behavior should not be counted. It's the same mentality that argues pollution is free.

Posted by: notthere on July 7, 2008 at 4:45 PM | PERMALINK

Simple solution: commoditize the atmosphere and charge the dirty foreigners to breathe OUR air.

Posted by: Quaker in a Basement on July 7, 2008 at 4:45 PM | PERMALINK

Seems to me that if the rest of the world benefits, and if we go back into the business of producing things the world needs, then we do reap an economic benefit.

Worked for the Marshall Plan. Of course, that was back when we made things.

Posted by: chiggins on July 7, 2008 at 4:46 PM | PERMALINK

cure wrote: "It seems reasonable to believe that our richer descendants should pay more than we do"

In a future of unmitigated anthropogenic global warming, our descendants will not be "richer".

Our descendants will be struggling for bare, miserable survival on a wasted, ruined planet that we have rendered inhospitable to life.

Posted by: SecularAnimist on July 7, 2008 at 4:47 PM | PERMALINK

Hi:

1. increase the discount rate, and you *decrease* the benefits.

So 3%, vs. Stern Review's 1%, *understates* the benefits.

If Manzini favours a lower discount rate, he is saying the benefit is *understated*.

2. of the $2 trillion in benefits, at the very least 1/4 will accrue to Americans: the US share of world GDP.

Remember if the world loses $2 trillion of GDP, Americans will lose their proportionate share-- if other people lose GDP, then so will Americans (fewer exports to those countries, and not benefiting from their production-- think how many cheap t shirts come from Bangladesh).

It's specious anyway, because the real problem with global warming is not whether we lose 1 trillion, or 5 trillion, or 20 trillion, it's whether we screw up the whole planet. completely.

it's like imputing a dollar cost to WWII. What are 25 million Russians, 6 million Poles and 6 million Jews worth? What was the dollar cost of losing those lives?

$40/tonne of abatement costs is very cheap. Very very cheap, as abatement of CO2 goes. Cheaper, in fact, than a nuclear powerplant in terms of abatement.

Posted by: Valuethinker on July 7, 2008 at 5:09 PM | PERMALINK

cost benefit analyses for federal rulemakings customarily use 0% (undiscounted), 3% and 7% discount rates

Posted by: bdbd on July 7, 2008 at 5:23 PM | PERMALINK

Even if this is true, in a world of globalized trade, what helps other countries economically helps our economy. The US directly benefits from other countries' ability to produce goods and sell them to us.

Posted by: Steve Simitzis on July 7, 2008 at 5:24 PM | PERMALINK

Several assumptions are being made which I don't think should be assumed apriori. The first is that cutting some oil consumption in one country/time will reduce the total amount of oil consumed over time. But we are in a supply constrained situation with regard to oil. If I save a gallon, it lowers the price of oil, and that allows someone else to consume the gallon. Unless this price decrease eventually feedbacks into more oil left in the ground, there is no effect on CO2 levels.

Now, aside from the effects from GW, IIRC the EPA study was looking at the benefit to the US economy, if we had enacted stricter fuel economy standards a few years back. The biggest near term benefit would have been a slight decrease in our nation economies vulnerability to declining oil availability, and the accompanying price spike. Since oil looks to be entering the era where it has ever more intense scarcity pricing quite substantial benefits would(would have) accrue from being better prepared for resource scarcity, quite apart from the GW issue. A similar case can be made for other fossil fuels, and other energy conservation measures. Natural gas, and even coal are also rapidly increasing in price, they too will soon be scarcity priced. All carbon emission reductions cost us is a slightly more rapid timetable for moving beyond fossil fuels.

The other assumption is that the future will have greater per capita wealth than the present. If we look at it from the viewpoint that our current wealth largely derives from cheap energy (and other cheap commodities), most of these inputs will not soon be available in anything like current volume/price. That implies, that unless we get real clever real soon, the future could well be considerably poorer than the present.

Posted by: bigTom on July 7, 2008 at 6:05 PM | PERMALINK

Would it be imprudent to point out to Kevin, Chicocounsel, and everyone else that what we're talking about is, in fact, a draft ANPRM (Advanced Notice of Proposed Rulemaking) and not, I repeat not, a rule? In other words, EPA would have put this document in the public record to solicit critiques, comments, inputs and data to include in its consideration for a future proposed rulemaking. We can sit and bullshit over the questions raised by this document because it is raising them, not answering them. Just a thought.

Posted by: Everett on July 7, 2008 at 6:12 PM | PERMALINK

SA, you did it again at 4:17!

Posted by: slanted tom on July 7, 2008 at 6:49 PM | PERMALINK

You say that most of the economic benefits will go to poor countries. I don't believe it is so. If the sea level rises all the coastal cities will be in trouble. Would the economic damage be minor? Of course not. What would the excessive hurricanes and droughts do?

The damage would be excessive for all of us on Earth. We may even reach the point of no return, where living conditions deteriorate to the point where Earth will not support human life. Will it matter then who is rich and who is poor?

The only way to solve the global-warming problem is through cooperation. Instead of bickering about who does what, we must all work together to fight it. We are richer in knowledge and facilities; we should use our knowhow to help the poor. By helping them we are helping ourselves.

This is a tough task for us in the West who believe competition is the greatest thing since sliced bread. We must realize, however, that cooperation will work in this case, and competition will not.

Posted by: Paul Siegel on July 7, 2008 at 6:53 PM | PERMALINK

Jamie... the top producer of CO2 in the Western world is the car. How many people in poor countries even own a car, yet alone drive one as much as we do? Idiot.

Richard Cownie, I do count the Euro economy. Given the way our dollar's in the crapper, the Eurozone economy will be larger than that of the U.S. for quite some time. As for "getting bad," considering that Lake Mead could totally dry up by 2020 or so and the Colorado River hit Anasazi-era low water marks, the Desert Southwest could well be WORSE than in Dust Bowl days. Far worse.

None of the anti-union CEOs moving their companies out there ever read Ed Abbey, though.

Posted by: SocraticGadfly on July 7, 2008 at 7:01 PM | PERMALINK

Darn it, hit the post button instead of preview. The anonymous post at 3:25 is mine. Posted by: Chicounsel

Given what you wrote, this is kind of like claiming credit for farting in an elevator.

Look, dumb shit, your president's war and disastrous economic policies have done more damage to the U.S. economy than changing consumption and production patterns to combat global warming ever will. In fact, given that these changes will require the production and consumption of good and services not yet common place in today's market, it's a given that over time fighting global warming (with, perhaps, the added benefit, such as it is, of saving the human race) will have an overwhelming positive social and economic net benefit to the world.

Posted by: Jeff II on July 7, 2008 at 7:22 PM | PERMALINK

The problem with ZPG is that most things advanced as population control measures largely don't work unless they are absolutely draconian; Posted by: cmdicely

Locally, all it requires is strict immigration policies. Look at Japan today and the U.S. in about 1970.

We can make a much greater effort to help some countries, but we are under no moral obligation to "save" countries like Bangladesh, China, India, etc., etc. These countries and others have socio-religious obstacles that can't be surmounted quickly enough with greater prosperity. In fact, improved prosperity in the short-run (the thing upon which population stabilization supposedly hinges) will only exacerbate the problems we already have. China's a perfect example. The government there has already failed to keep a middle- and upper-class car culture from emerging as the economy grows, and the population growth rate is inching its way up again. And as oil heads towards $200/barrel, China's manufacturing strength, such as it is, will collapse, returning it in its entirety to the Third World nation is was prior to the 1980s.

That being said, we shouldn't make the situation worse with a continued disregard for the environment, which will effect over-populated countries more immediately than it will the U.S. We can curb our own over-consumption, but China and India are pretty much lost at this point, and we will be, too, without greater immigration control.

As idiotic as it may be, a fence at the border with Mexico may be just the first step.

Posted by: Jeff II on July 7, 2008 at 7:46 PM | PERMALINK

So much piety, so little thought.

"global warming is primarily caused by rich, northern economies"

Wrong: http://www.usatoday.com/tech/science/2007-06-20-124188869_x.htm

Through in India and you're doubly wrong. Furthermore China is building coal plants to meet future energy needs, so they are only going to get worse.

"The damage would be excessive for all of us on Earth. We may even reach the point of no return, where living conditions deteriorate to the point where Earth will not support human life. Will it matter then who is rich and who is poor?"

Do you seriously believe this? Truly and seriously? Can you point to a single reputable source that argues that global warming will make earth unlivable?

"Stern is a fine economist, but on this point Nordhaus wins the argument. "

Damn straight. As I recall Stern also assumed something contradictory about the costs to future generations: that each dollar's worth of costs would be as significant to them as it was to us, though they will be far richer. A Guardian column on the Stern report examined these contradictions in depth.

Posted by: Adam on July 7, 2008 at 7:55 PM | PERMALINK

* : )

Posted by: mhr on July 7, 2008 at 7:56 PM | PERMALINK

Great post Kevin!

Posted by: Jesse on July 7, 2008 at 8:04 PM | PERMALINK

We are wasting energy trading overseas with poor countries like Africa,vietnamn(sic), Mexico.

We weren't until the price of oil nearly doubled in the last five years (see: comparative advantage).

(Psst. BTW, Africa is a continent. Perfect example of how the Rethugs have succeeded in destroying public education.)

The democrates (sic) stated this at there up coming pres.convention.They bought only local products to save energy.So they need to put there money were there mouth is! Posted by: zap Louisiana

Jesus! It's after 5PM here, I want to be drinking what he's drinking! Kevin, you've got to start some sort of Most Incoherent Post of the Day Award.

Posted by: Jeff II on July 7, 2008 at 8:23 PM | PERMALINK

3% is not low. That is the standard first cut assumption, that is actually a little high for riskless rate.

Posted by: 3% is not low. on July 7, 2008 at 8:25 PM | PERMALINK

Also, in reference to some comments above, I don't understand why Nordaus is so often quoted as a global warming skeptic. He estimates the potential gloabal damage in the trillions and advocates a carbon tax. His analysis and recommendations are very easy to find on his internet homepage at Yale:


The Challenge of Global Warming:
Economic Models and Environmental Policy
William Nordhaus

http://nordhaus.econ.yale.edu/dice_mss_072407_all.pdf

Conclusion of the paper is below.

“ We suggest that a hybrid approach might help combine the strengths of both quantity and price approaches. An example of a hybrid plan would be a cap-and-trade system combined with a base carbon tax and a safety-valve available at a penalty price. For example, the initial carbon tax might be $30 per ton carbon with safety-valve purchases of additional permits available at a 50 percent premium.

The major message about policy instruments is the following: As policy makers search for more effective and efficient ways to slow dangerous
climatic change, they should consider the possibility that price-type approaches like harmonized taxes on carbon are powerful tools for
coordinating policies and slowing global warming.


-----

The summary message of this study is that climate change is a complex phenomenon, subject to great uncertainty, with changes in our kowledge occurring virtually daily. Climate change is unlikely to be catastrophic in the
near term, but it has the potential for serious damages in the long run. There are big economic stakes in designing efficient approaches. The total discounted economic damages with no abatement are in the order of $23 trillion. These damages can be significantly reduced with well-designed policies, but poorly designed ones, like the current Kyoto Protocol, are
unlikely to make a dent in the damages, will have substantial costs, and may cool enthusiasms for more efficient approaches. Similarly, overly ambitious projects are likely to be full of exemptions, loopholes, and compromises, and
may cause more economic damage than benefit.
In the author’s view, the best approach is one that gradually introduces restraints on carbon emissions. One particularly efficient approach is
internationally harmonized carbon taxes – ones that quickly become global and universal in scope and harmonized in effect. A sure and steady increase in harmonized carbon taxes may not have the swashbuckling romance of a
crash program, but it is also less likely to be smashed on the rocks of political opposition and compromise. Slow, steady, universal, redictable, and boring – those are probably the secrets to success for policies to combat global warming."

Posted by: Nordhaus and global warming on July 7, 2008 at 8:36 PM | PERMALINK

Jeff II: Population growth is even worse than you mentioned. I believe it's the official or semi-official position of all major political parties in India to practice "population war" against China until India is the larger nation.

In our world of nearly 7 million people, words do not even exist to describe that level of stupidity.

On how to deal with the CO2 problem, rather than cap-and-trade, I favor Hansen’s carbon tax idea, only taken one step further past electric utilities to appliances, houses, etc.

Posted by: SocraticGadfly on July 7, 2008 at 9:23 PM | PERMALINK

And speaking of climate:

Bertha now a Category 3. past

Posted by: SocraticGadfly on July 7, 2008 at 9:35 PM | PERMALINK

Adam>Do you seriously believe this? Truly and seriously? Can you point to a single reputable source that argues that global warming will make earth unlivable?

Yes. This is a reasonable thing to believe, it just doesn't *sound* reasonable to us yet, because we're spoiled as hell. Read some climate history and paleontology, specifically more recent work on our genetic bottlenecks.

Fact: Humanity spent most of its existence on the bare edge of survival. Our genetic diversity level does *not* say we're a successful species; it indicates a niche species with an effective genetic population of only about 10,000 people, with several bottlenecks (die offs) to or below the 1000 individual level. We were not demigods of the animal world, we were whooping cranes for a very long time even though we were "modern" in brain and body.

This was primarily due to climate shifts prior to the holocene; basically the climate was kicking the sh!t out of us. The critical recent change that allowed us to start agriculture and stop being a marginal species was not in our heads, it wasn't the ice retreating, it was that the climate stopped *shifting* so much. Go wiki a long term climate graph.

It wouldn't happen all at once, but it's plausible that if the climate become unstable we would gradually lose our very prideful high technology level that allows to to believe we are exempt from such things. It has happened before to other dominant civilizations, many times.

Imagine as the climate shifts are resources are more limited, the poorer parts of the world die off, in a series of famines and failed states that wouldn't individually stand out in the news at the time. A century later agriculture is damn hard everywhere; the breadbasket of the USA has tapped out its aquifers, population is in steep long term decline everywhere. High tech super-competence requires scale and surplus; we could lose that easily in the process.

A few hundred years later it just gets harder and harder; we're clearly in an after-the-fall scenario, but without fanfare or anything so quick as to be movie-worthy. With the concentrated, easy ores and energy sources gone and economy-of-scale gone, we can't climb back up. Ever.

With a widely spread marginal population, with an unstable climate, we're back in the scenario of a marginal specialized species that barely survives the rare (1/25k year) big volcanic eruption or other globally bad year. Sooner or later, the dice roll against us and we don't make it through a bottleneck.

There are lots of us now. That has not always been true, even with the same brains. Most of our history is as a species teetering on the edge of extinction. Don't be so arrogant to believe we can't wind up back there.

Posted by: Bruce the Canuck on July 7, 2008 at 10:12 PM | PERMALINK

To really hammer on this, imagine our species as a student in their final year at college, having built up gigantic student loans, who instead of working hard is partying, fighting, and hung over.

This century is our final exam. If we pass we get a great life, if we fail we're stuck bankrupt working at the 7-11 for eternity. We've already used up all our credit, those easy concentrated resources. We've f###ked up royally for decades now, and there is only this one chance left.

Posted by: Bruce the Canuck on July 7, 2008 at 10:28 PM | PERMALINK

Kevin deserves some credit for pointing out Manzi's criticism, but the substance of Kevin's new post merely changed from naive ignorance of economics and misunderstanding of the report to naive views about how we should suffer so the rest of the world benefits.

This is the actual clown suit that Manzi put on Kevin about what Kevin thought was a "supressed" EPA study:

"Why didn’t the State Department sponsor this, as it sounds like the most generous foreign aid program in history? The EPA wants us to raise the price of gas so that we can help people not yet born all over the world with a problem that might develop several decades from now."

[Brian, you have overlooked signing several of your posts today, but I am not too busy right now so I will go back and do that for you. Try to remember in the future, I don't usually have time to fix your oversights. --Mod]

Posted by: brian on July 7, 2008 at 10:33 PM | PERMALINK

Bruce:

Damn good analogy there.

Posted by: SocraticGadfly on July 7, 2008 at 10:44 PM | PERMALINK

Why would anyone think "there is only this one chance left?"

Or think that the Chinese, Indians and other growing countries are going to give up the automobile and other fossil fuel powered luxuries that we have enjoyed for the past 100 years? Anyone think they are going to do so because politician Al Gore spreads a bunch of lies and exagerations about the theory of "global warming" as he travels the world in private planes, SUV's and fuels his mansion in Tennessee?

[Brian, you have overlooked signing several of your posts today, but I am not too busy right now so I will go back and do that for you. Try to remember in the future, I don't usually have time to fix your oversights. --Mod]

Posted by: brian on July 7, 2008 at 11:12 PM | PERMALINK

because politician Al Gore spreads a bunch of lies and exagerations

"Criticizing Al Gore: When You Absolutely, Postively Have No Substantive Argument Whatsoever to Explain the Opinions of Millions of Scientists but Nevertheless Feel Compelled to Bark."

Posted by: trex on July 7, 2008 at 11:39 PM | PERMALINK

>Why would anyone think "there is only this one chance left?"

When we started to industrialize, the ores we used to do so were high grade, the oil and coal was close to the surface. This is no longer true. The remaining resources take high tech and large scales to recover.

Therefore if we ever suffer a partial collapse, it will be very hard to rebuild an industrial society.

Re the xenophobic comments and ascribing of widely studied scientific theories to a single media personality, I think you're watching too much Fake News.

The Indians and Chinese certainly won't change if we don't first. As you said, they are copying us as their example of what success looks like, right down to a moon landing stunt. To some extent we define what success is.

So let me ask you this: Do you believe the USA leads the developed world? If so, why are you afraid to show leadership?

Posted by: Bruce the Canuck on July 7, 2008 at 11:49 PM | PERMALINK

Wow, a new form of voodoo economics. The more we spend on alternatives to cheap fuels, the more money we make.

Posted by: Luther on July 8, 2008 at 1:19 AM | PERMALINK

Socratic:

I believe that it's decidedly not the official or "semi-official" policy in India to practice "population war." Furthermore, if it were, it would be irrelevant. The Indian population (Gandhi's famous 700,000 villages) has proven remarkably resistant to government threats and suasion on the issue of population: neither Mrs. Gandhi nor free birth control did anything to slow the birth rate in the 1960s and 1970s, and the invention of a "China threat" would do nothing to increase a birth rate that's been falling for the past decade. These are socially and culturally driven trends, for the most part.

Jeff II is "sort of right" about Japan, except for the fact that immigration-averse Japan of the early 20th century saw fairly rapid population growth. So, obviously, closed borders alone arent's the story... and in fact, the Japanese government wants their population to increase. As is the case in India, the government's wishes are irrelevant, and stupid policies like financial incentives for women who have more than two children have made not a bit of difference.

I believe it's the official or semi-official position of all major political parties in India to practice "population war" against China until India is the larger nation.
Posted by: SocraticGadfly on July 7, 2008 at 9:23 PM |

Posted by: keith on July 8, 2008 at 5:45 AM | PERMALINK

Luther wrote: "The more we spend on alternatives to cheap fuels, the more money we make."

That's the reason that venture capitalists are pouring money into wind and solar energy technologies -- about $71 billion in private investment worldwide in 2007 alone, according to WorldWatch Institute.

Posted by: SecularAnimist on July 8, 2008 at 11:16 AM | PERMALINK

Or think that the Chinese, Indians and other growing countries are going to give up the automobile and other fossil fuel powered luxuries that we have enjoyed for the past 100 years?

When fuel becomes sufficiently expensive, yes.
$4/gallon gas clearly persuaded some Americans to drive less. $6-$10/gallon fuel in Europe persuades quite a few of them to drive less.

Posted by: dr2chase on July 8, 2008 at 11:50 AM | PERMALINK

[Persistent trolling deleted. Remind me again how Ben Franklin defined insanity?]

Posted by: mhr on July 8, 2008 at 1:09 PM | PERMALINK

I for one would humbly request that meathead republican's post be allowed to remain as a delightful example of how deranged he / she / it has become.

Posted by: Gregory on July 8, 2008 at 1:31 PM | PERMALINK

@Bruce the Canuck

"Our genetic diversity level does *not* say we're a successful species; it indicates a niche species with an effective genetic population of only about 10,000 people, with several bottlenecks (die offs) to or below the 1000 individual level."

I suspect you're referring to the recent paper suggesting that humanity was at one time reduced to several thousand individuals. How this relates to the rest of your argument is unclear. I can't imagine you are suggesting that global carrying capacity is 10,000 people. That would be stupid.

"It wouldn't happen all at once, but it's plausible that if the climate become unstable we would gradually lose our very prideful high technology level that allows to to believe we are exempt from such things. It has happened before to other dominant civilizations, many times."

How? This is the crux of the problem. If you assume this then you've assumed your conclusion. If you don't assume this then you have to justify your argument. What is your mechanism: how does an increase in average global temperature lead to the collapse of civilization?

You claim agriculture, and agriculture is certainly the new bugaboo of the collapse cultists, but you haven't done anything more than assume it will collapse. Considering how much meat the developed world eats, there is a massive amount of squandered agricultural capacity. If yields truly plummeted, and the price of basic food skyrocketed, then meat would become extremely expensive and we'd eat less of it. A new equilibrium would be reached.

The fact is, most societies are extremely resilient. Granted, Jared Diamond managed to find a few that weren't (I'm assuming you've read Collapse). But if you look at his examples, they were all isolated pre-industrial civilizations on marginal land, crucially dependent on one or two production factors for survival. He also made no attempt to research how often societies encounter supply shocks like the ones he describes and successfully adapt.

I just don't think you understand how friggin rich post-industrial societies are.


Posted by: on July 8, 2008 at 1:39 PM | PERMALINK

>What is your mechanism: how does an increase in average global temperature lead to the collapse of civilization?
>I just don't think you understand how friggin rich post-industrial societies are.

Do you eat? Did the materials in the goods you buy come from somewhere?

We are not post-industrial. There's a post-industrial layer, supported by an industrial layer, all supported by an agricultural layer. "Post industrial" is a north american fiction held by middle-managers of the global economy who believe food comes from a store.

We're still totally dependent on agriculture. Prior to agriculture the carrying capacity of the earth was low, and populations were vulnerable.

Agriculture is dependent on a stable climate, or we'd have developed it prior to the current interglacial period. The key fact about the period prior to 10k ago isn't that there were ice sheets, its that the climate shifted frequently and violently.

Posted by: Bruce the Canuck on July 8, 2008 at 5:10 PM | PERMALINK

Just how dense and uninformed are you??? Bruce has explained the mechanism and it's fairly intuitive anyway. A little slow? Need a little more help grasping the concept? Why don't you let those alarmist liberals at the Pentagon explain it to you.

Posted by: trex on July 8, 2008 at 5:54 PM | PERMALINK

You could consider that the person/country which burns the gas gets 100% of the benefits, but exports 98% of the costs. A great deal if you can get it.

Posted by: tomj on July 9, 2008 at 1:52 AM | PERMALINK




 

 

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