Gernot Wagner: EDF Voices

Traveling to the climate march: Worth the carbon footprint?

Looks like the simmering “climate swerve” may come to a boil on September 21 in New York City for what’s billed as the People’s Climate March.

Bill McKibben called for it in the Rolling Stone magazine. Tens of thousands are slated to respond to his call, ostensibly to channel Franklin D. Roosevelt’s ghost and make world leaders “do it” - push for strong climate policies, now.

Except that it wouldn’t be the climate movement if it weren’t beset with self-doubt and second-guessing. Going to New York, you see, produces carbon dioxide emissions, the very cause of the problem. So how then can climate activists justify riding, driving or – heaven forbid – flying in the name of climate action?

We do because traveling to Manhattan, and expanding our carbon footprint in the process, may be better for the planet in the long-run than if we stayed home.

Real climate policy is what we need

Every cross-country roundtrip flight causes about a ton of carbon dioxide, per passenger. Driving emits carbon, if not quite as much. Trains do, too. Even if you bike or walk, you will need extra calories, which also come with additional carbon emissions.

A plethora of online calculators can help you decide how to minimize your own footprint. You could get positively crazy making these calculations, and some possibly have.

If you spend so much time online researching your carbon footprint that your power consumption shoots up, you may be on the wrong track.

We should all be decreasing our carbon footprint. The emphasis is on “all.” Real climate action, then, must go far beyond individual action by the committed core.

The People’s Climate March will take place on the eve of the United Nations’ Climate Summit, convened by Secretary General Ban Ki-moon on September 23, and for good reason. It’s policy that needs to change.

Coal cannot be banned, but it can be priced

The headwinds are strong, to say the least.

King Edward I banned the burning of coal in 1306, replete with the death penalty for repeat offenders. It didn’t take long for the ban to be lifted, and the coal-fueled industrial revolution has brought untold riches to many.

The coal question, in many ways, goes to the heart of the matter. Banning coal is out. It is neither possible nor necessarily desirable.

What we need is to incorporate the full societal cost of burning that coal into everyone’s private decisions.

At the moment, each ton of coal and each barrel of oil used causes more in external damage to human health and the environment than it adds in value to the economy. That doesn’t mean we should not burn any coal or any oil, but it does mean putting a price on carbon, ideally directly via carbon markets or taxes.

It means regulation. It means standards. It means tax reform. It means taking significant policy steps to restructure misguided market forces so they lead us off of the current high-carbon, low-efficiency path.

Composting counts, but it’s not enough

Going green is fine. I don’t drive, don’t eat meat, and do all sorts of other things that minimize my own carbon footprint. The climate movement is home to quite a few who go the full-on vegan, composting, skip-coffee-because-it’s-bad-for-the-climate route.

But going green is only good if it actually gets somewhere.

If you compel your in-laws to compost more and drive less - go forth and proselytize. But if this makes them ignore efforts to achieve critical policy changes, your campaign for a voluntary green lifestyle should probably stop.

Many actions needed for a climate revolution are akin to a bootstrapping problem. Building a wind turbine takes steel, which in turn takes energy. The green energy revolution then may well mean an increase in current, largely fossil-fueled energy use for the sake of decreased carbon emissions later.

The Climate March falls into the same category. Going to New York implies emissions, as do most other things we hold near and dear in our daily lives.

Participating in the march won’t change that fact overnight. But calling for real, measured climate action just might. Helping to build the momentum toward policy change is precisely what’s needed.

If you can do it while also decreasing your own footprint, so much the better. If not, choose policy change.

Bike if you can, fly if you must. By all means, go to New York on September 21.

Support carbon limits on power plants Anonymous September 18, 2014 - 09:53

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Sadly but true... :(

GGDisseny September 19, 2014 at 5:26 am

Thanks for sharing this thought provoking article,the world has to wake up.

Patrick Kamotho September 20, 2014 at 2:36 am

We need a march for the molten salt reactor to be deployed globally because they are meltdown proof, require (far) less storage and does not need natural gas backup, can have wastes reprocessing at site such that what little wastes leftover would be stored on site for only a max of 300 years.
More power than wind, solar AND all the fossil fuels ever!

Robert Bernal September 21, 2014 at 11:58 pm

Confusion exist in this planet,the remedy to climate fiasco is for entire world to minimize use of dirty energy.

Patrick Kamotho September 23, 2014 at 8:39 am Add new comment

Risky Business stands out in growing sea of climate reports

This blog post was co-authored by Jonathan Camuzeaux.

Put Republican Hank Paulson, Independent Mike Bloomberg, and Democrat Tom Steyer together, and out comes one of the more unusual – and unusually impactful – climate reports.

This year alone has seen a couple of IPCC tomes, an entry by the American Association for the Advancement of Science and the most recent U.S. National Climate Assessment.

The latest, Risky Business, stands apart for a number of reasons, and it’s timely with the nation debating proposed, first-ever limits on greenhouse gas emissions from nearly 500 power plants.

Tri-partisan coalition tackles climate change

The report is significant, first, because we have a tri-partisan group spanning George W. Bush’s treasury secretary Paulson, former mayor of New York Bloomberg, and environmentalist investor Steyer – all joining forces to get a message through.

That list of names alone should make one sit up and listen.

Last time a similar coalition came together was in the dog days of 2009, when Senators Lindsay Graham, Joe Lieberman, and John Kerry were drafting the to-date last viable (and ultimately unsuccessful) Senate climate bill.

Global warming is hitting home

Next, Risky Business is important because it shows how climate change is hitting home. No real surprise there for anyone paying attention to globally rising temperatures, but the full report goes into much more granular details than most, focusing on impacts at county, state and regional levels.

Risky Business employs the latest econometric techniques to come up with numbers that should surprise even the most hardened climate hawks and wake up those still untouched by reality. Crop yield losses, for example, could go as high as 50 to 70 percent (!) in some Midwestern and Southern states, absent agricultural adaptation.

The report is also replete with references to heat strokes, sky-rocketing electricity demand for air conditioning, and major losses from damages to properties up and down our ever-receding coast lines.

Not precisely uplifting material, yet this report does a better job than most in laying it all out.

Financial markets can teach us a climate lesson

Finally, and perhaps most significantly, Risky Business gets the framing exactly right: Climate change is replete with deep-seated risks and uncertainties.

In spite of all that we know about the science, there’s lots more that we don’t. And none of that means that climate change isn’t bad. As the report makes clear, what we don’t know could potentially be much worse.

Climate change, in the end, is all about risk management.

Few are better equipped to face up to that reality than the trio spearheading the effort; Paulson, Bloomberg and Steyer have made their careers (and fortunes) in the financial sector. In fact, as United States Treasury secretary between 2006 and 2009, Paulson was perhaps closest of anyone to the latest, global example of what happens when risks get ignored.

We cannot – must not – ignore risk when it comes to something as global as global warming. After all, for climate, much like for financial markets, it’s not over ‘til the fat tail zings.

krives June 25, 2014 - 10:45

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All experts seem to agree that warming will cause sea levels to rise because of the polar ice caps and worlds glaciers melting. What I have not seen addressed is the impact of removing the weight of the ice caps water from the supporting land mass below it.

If I understand correctly, there are millions of tons of ice resting upon each of the polar caps. This weight is being countered by the weight of continents of the world against the tectonic plates around the world.

If the weight of the ice caps is redistributed over the surface of the worlds oceans, logic tells me that the polar land masses would be forced upward allowing continental drift to accelerate and tectonic plates to shift causing earthquakes and volcanic eruptions that would make rising sea levels and shifting weather patterns seem like nothing!

I would love to be wrong about this, but has anyone actually studied this?

Jan Rosenbaum June 25, 2014 at 4:58 pm

Hi Jan, and thanks for your comment.

Sea level is rising due to thermal expansion of warmer water, melting mountain glaciers, and melting ice sheets. You are correct in that the shrinking weight of the ice caps will also have an effect on the Earth, a phenomenon that has been studied in the scientific community.

To provide some perspective, the world is actually still recovering from the last Ice Age 10,000 years ago, when huge ice sheets covered a large portion of the Northern Hemisphere. The gradual lifting of weight off of North America, Canada, and Europe, has caused the land to rise, and it is still rising.

The rise in land is actually making the sea level rise appear less than what it actually is. Studies have shown that historical rapid changes in glacial mass loading do affect fault zones, however, with a time lag of several thousand years. So the current fault behavior is linked to past climate changes rather than current climate changes.

Another way the weight of polar ice caps affects the Earth, which may be realized in our lifetime, is by exerting their own gravitational forces that attract water around them. If the ice sheets melt, the gravitational force is lowered, and the water being pulled towards the poles will be released and redistributed in the oceans, causing sea level to rise even more in other parts of the world than it would from melting ice and warmer water alone.

Hope this helps!

Ilissa Ocko June 26, 2014 at 6:01 pm

In reply to by Jan Rosenbaum

How can I get a copy of the report?

Marsha E Bennett June 26, 2014 at 3:44 pm

Hi Marsha. You can find the report on this site: www.riskybusiness.org

Karin Rives June 26, 2014 at 5:41 pm Add new comment

Cleaner air gave Americans a $4,300 pay raise

Spend too much time with economists, and you’ll be convinced that there’s no such thing as a free lunch. Life is full of tradeoffs.

Take the Clean Air Act of 1970, for which benefits consistently trump costs to the tune of thirty to one: $30 in benefits for every dollar spent on protecting the air we breathe. This past decade alone, benefits for the average major clean air rule trumped costs to the tune of 10 to one.

This is worth remembering as opponents of the Obama administration’s Clean Power Plan to reduce carbon pollution from power plants are ramping up claims that it will gut our nation’s economy.

Ten and 30 to 1 are benefit-cost slam dunks, but they still aren’t free lunches. There are costs. They are small, and dwarfed by the benefits, but they are real. We can’t – and shouldn’t – hide that fact.

Enter the latest study courtesy of the National Bureau of Economic Research, which details the benefits and costs of the Clean Air Act of 1970.

Cleaner air, added income

In this study, Adam Isen, Maya Rossin-Slater and Reed Walker focus on total suspended particulates: smoke, soot, and dust.

That’s by far not everything the Clean Air Act has helped remove from our air. But even that narrow focus comes up with a striking conclusion: by removing these particulates from the air our children breathe, the law increases each affected child’s lifetime income by $4,300.

That’s better than a free lunch. It’s a lifetime of additional income, and it doesn’t even value the fact that reducing childhood asthma and other illnesses is good in and of itself.

Not seeing your child suffer from a preventable disease and instead breathe more easily provides clear benefits to children and their parents alike. Such social benefits aren’t included here. In true economist fashion, the study focuses on what economists do best: tallying dollars and cents of hard-earned income.

So happens, that income just went up – thanks to cleaner air.

GDP grows, too

The result won’t come as a complete surprise to those studying the full effects of the Clean Air Act. Harvard’s Dale Jorgenson projected years ago that America’s gross domestic product would be 1.5 percent higher in 2010, because of this law.

The mechanism there was similar: Cleaner air makes for healthier lives, greater productivity on the job and, thus, higher income.

What distinguishes the latest study is how personal the numbers get.

If you were born into a county that complied with the Clean Air Act, your average lifetime income will have been $4,300 higher than for someone not as lucky.

By the same token, if you were born into a non-compliant area, moving to clearer skies later on made no difference. Your average lifetime income will still have taken a hit.

Some opponents of clean air regulations sometimes make the argument that while we may have dirtier air, we have the jobs and factories that more than make up for the foul air. Not so.

Having to suffer from childhood asthma is no mark of distinction in support of the greater economic good. It’s bad for health, and for the economy.

Pollute less – and strengthen the economy as a result.

krives June 5, 2014 - 10:52

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I agree, for everything we do, there is a cost. The environmental debt will have to be paid. Like Mr. Wagner wrote, "there's no free lunch."

Richard Smith June 5, 2014 at 6:19 pm

I hope that the National Bureau of Economic Research also evaluates the economic benefits of the Clean Water Act as it is at least as important as the Clean Air Act for our citizen's health.

Enviro Equipme… June 6, 2014 at 2:21 pm Add new comment

Carbon pricing vs. regulation: An economist weighs in

Ask any economist about the most efficient way to tackle climate change, and the response will be clear: put a price on carbon. Cap or tax carbon pollution, and then get out of the way. It’s the most effective policy. It’s cheap. It works.

Except for when politics gets in the way.

A price on carbon may be the obvious choice for policymakers in Beijing, Brussels and Sacramento. Yet, Washington is playing a different game.

It’s where more than three years of work on a common-sense, bipartisan energy-efficiency bill dies the Senate filibuster death because of election-year politics. And where a senator and likely presidential candidate denies climate science in the same news cycle that gave us two independent studies showing that the melting of the West Antarctic ice sheet is likely irreversible – and expected to flood large parts of his own state of Florida over the coming centuries.

When a price on carbon isn’t an option

All this political craziness limits the White House to pursue climate policy through executive action, largely via the Clean Air Act of 1970. One incarnation comes in form of long-overdue carbon pollution standards for new and existing power plants.

Are they any economist’s first choice for limiting carbon? No, but given that pricing carbon via a federal cap or tax isn’t on the table at the moment, the only relevant question now is whether carbon pollution standards are good in and of themselves. Yes, they clearly are.

Do benefits of environmental rules outweigh costs?

The Clean Air Act of 1970 and its 1990 Amendments consistently pass benefit-cost tests with flying colors.

Overall, average benefits exceed costs to the tune of 30 to 1. We can’t wish costs away, but investing $1 to get $30 makes sense in any book. (Amazingly, the latest study points to how the small costs themselves turn into direct economic benefits of well over $4,000 added to each affected child’s lifetime income due to cleaner air: less pollution; fewer sick days; more education; more income.)

These benefit-cost calculations don’t yet include carbon pollution standards, though we can already say one thing: The number crunchers at the Office of Management and Budget will make sure that benefits of any rule do, in fact, outweigh the costs.

Over the past decade, the average environmental rule enacted by two Administrations – George W. Bush and Barack Obama – has passed the benefit-cost test by more than 10 to 1. That ratio for the U.S. Environmental Protection Agency, by the way, is higher than any other government agency, including, for example, Homeland Security.

Of course, costs would be lower with a direct price on carbon. But the benefits of regulating carbon will be all the same. Each ton of carbon dioxide pollution causes at least about $40 of damages to health, ecosystems, and the economy. Overall, there are billions of tons of carbon pollution that can be removed at low, no, or even negative costs – well below the $40 or more in benefits.

Who pays? And with what consequences?

Pollution comes with a price. The only question is who pays, and with what consequences. Instead of pushing the costs onto all 300 million of us – all 7 billion, really – it’s clear that polluters can and should pay for the full costs they cause. Whether the policy of choice is carbon caps, taxes, or power plant carbon pollution standards, that principle is all the same.

krives May 15, 2014 - 02:05

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Brilliant analysis AND more importantly well communicated

Mercii !

Gary Yohe May 16, 2014 at 6:01 pm

Eight Nobel economists advocate a carbon tax, paid by fossil fuels directly to consumers, not the government. A steadily increasing carbon pollution "tax swap" will let the market make the switch to renewables as carbon fuels get increasingly more expensive than solar and wind energy. As they scale up, solar and wind get cheaper.

Products from other countries would also be taxed according to how much CO2 they emit, encouraging them to go green and Americans to buy U.S. products. Respected Republicans like George Shultz support this plan because it's market-driven, revenue-neutral, and requires no government growth or regulations. The non-partisan Citizens Climate Lobby website has the details.

Lynn Goldfarb May 20, 2014 at 12:39 pm Add new comment

When it comes to carbon, pay now or pay more later

This post also appears on ensia.com.  

Economics is largely just organized common sense, and it doesn’t get much more common sense than benefit-cost analysis. Want to decide whether to buy that apple, make that investment or pass that clean air rule? Tally up the benefits. Tally up the costs. If benefits outweigh costs, do it.

Although in many ways climate change is a problem in its own league, the same principles apply. Secretary of State John Kerry recently said, “The costs of inaction are catastrophic,” and they most likely would be. While climate change ought to be a risk management problem — an existential risk management problem on a planetary scale — that realization alone may not always be good enough. Despite the inherent risks and uncertainties, sometimes we need a specific number that we can plug into a benefit-cost analysis.

The U.S. government makes lots of regulatory decisions that have important implications for the climate. Any benefit-cost analysis of these decisions ought to include their climate impact. If a particular decision will lead to more greenhouse gas emissions — building the Keystone XL pipeline, for example — that figure ought to go on the cost side of the ledger. If the decision will lead to fewer greenhouse gas emissions — such as carbon pollution standards for power plants — that figure adds to the benefits side.

Such benefit-cost analyses require a dollar figure for the social cost of carbon pollution. The best we currently have is around $40 for each ton of carbon dioxide emitted, calculated by averaging results from the three of the most prominent and well-established climate-economic models. Uncertainties around the $40 value notwithstanding, putting in $0 is not an option. That, sadly, is what some with clear stakes in the outcome are arguing, however weak the ground they stand on.

In fact, $40 is very likely on the low end of the true cost of CO2. By definition, it only includes what is known and currently quantifiable. It doesn’t include many things we know are linked to a changing climate that aren’t so easily quantified, such as respiratory illness from increased ozone pollution, the costs of oceans turning ever more acidic and impacts on labor productivity from extreme heat. If these were factored in, the $40 figure would certainly be higher.

And the list of what’s missing in the current calculation goes on, as a recent commentary in Nature points out. For example, the models used to calculate the $40 figure are based on costs associated with higher average temperatures rather than costs of increased weather extremes. Taking extreme events seriously in the social cost calculation would increase the $40 figure further still.

We know climate change is and will be costly. How costly exactly is up for discussion, but it’s clear that we should at the very least use the $40 per ton figure in any benefit-cost analysis that involves climate impacts. That’s common sense, too.

dupham April 16, 2014 - 01:19

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Think there's no silver bullet for climate change? Think again.

This post first appeared on Forbes.com and was co-authored by Bob Litterman, a partner at Kepos Capital.

Whenever the conversation turns to climate change, someone is sure to opine that there’s no silver bullet. The issue is simply too complex to have one solution. When you focus on all the changes that need to occur to reduce greenhouse gas emissions globally it seems like a multifaceted approach is the only way forward.

Most of the world’s vexing problems share that feature. Mideast peace, nuclear non-proliferation, Eurozone stability, and plenty of other national security problems have no single right plan of attack. Some past plans might have brought us tantalizingly close to a seeming solution, but then reality started interfering once again, reconfirming the complexity of it all.

Climate change must surely be in that category. No single country, no single technology, no single approach can seemingly solve this one for us once and for all. Picking a single technology will almost inevitably end in some form of disappointment. Bureaucrats, the saying goes, ought not to try to pick winners. Leave that to venture capitalists for whom failure is a way of life. For every Apple and Facebook, there are dozens who never make it out of the garage. And clean technology doesn’t yet even have a single Apple and Facebook as the standout approach revolutionizing the field.

It turns out, though, that how you frame the issue is crucial. If you think like an engineer there are dozens of challenges. If you think like an economist, there is one. It’s guiding the ‘invisible hand’. How can you create the appropriate incentive to decrease the pollution that’s causing climate change? For that, the government need not be in the business of picking winners at all. What it should—and can—do is identify the loser that’s been clear for decades: greenhouse gas pollution. And the solution is equally clear: create incentives to reduce emissions by pricing it. If we make this one change, most other actions that are needed will follow.

That’s what the European Union has done by capping carbon emissions from its energy sector, including large industrials, covering almost half of total carbon emissions. That’s what California is doing with over 80 percent of its total global warming emissions. It’s what China is experimenting with in seven city and regional trials, including in Beijing and Shanghai. All these systems put a price on greenhouse gas pollution.

On the other side of the ledger, there are still much larger incentives to consume fossil fuels in many other countries. The International Energy Agency estimates that global subsidies are well over $500 billion. These subsidies, which incentivize emissions, sadly dwarf the paltry incentives to reduce them. Free marketeers, small government advocates, and others who dislike distorting government subsidies should be appalled at the tax money poured into fossil fuels.

There’s one simple principle that’s been around in economics for so long that no economist worth his or her degree would question the conclusion: increase the price, watch the quantity demanded go down. It’s such a universal truism that economists call it the “Law of Demand.” Generations of graduate students have estimated the effects of price on demand for anything from the generic widget to demand for car miles driven. People may be irrational at times, but one thing that we know for sure is that they respond to incentives.

Everything we know from decades of the study of human behavior would lead us to believe that carbon pollution will go down as the price on emissions increases. The only interesting question is by how much.

The prescription then for anyone seriously concerned about climate change is simple: price carbon to the point where its now unpriced damages are incorporated into the price, and get out of the way. It’s simple. It works. It’s conservative to the core.

It’s also a silver bullet solution if there ever was one.

krives February 6, 2014 - 09:40

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Reality check: Society pays for carbon pollution and that's no benefit

This open letter, co-authored by Jeremy Proville, was written in response to a New York Times article citing Dr. Roger Bezdek’s report on “The Social Costs of Carbon? No, The Social Benefits of Carbon.”

Dear Dr. Bezdek,

After seeing so many peer-reviewed studies documenting the costs of carbon pollution, it’s refreshing to encounter some out-of-the-box thinking to the contrary. You had us with your assertion that: “Even the most conservative estimates peg the social benefit of carbon-based fuels as 50 times greater than its supposed social cost.” We almost quit our jobs and joined the coal lobby. Who wouldn’t want to work so selflessly for the greater good?

Then we looked at the rest of your report. Your central argument seems to be: Cheap fuels emit carbon; cheap fuels are good; so, by the transitive property of Huh?!, carbon is good. Pithy arguments are fine, but circular ones aren’t.

First off, cheap fuels are good. Or more precisely, cheap and efficient energy services are good. (Energy efficiency, of course, is good, too. Inefficiency clearly isn’t.) Cheap energy services have done wonders for the United States and the world, and they are still doing so. No one here is anti-energy; we are against ruining our planet while we are at it.

The high cost of cheap energy

Yes, the sadly still dominant fuels—by far not all—emit carbon pollution. Coal emits the most. Which is why the cost to society is so staggering. Forget carbon for a moment. Mercury poisoning from U.S. power plants alone causes everything from heart attacks to asthma to inhibiting cognitive development in children. The latter alone is responsible for estimated costs of $1.3 billion per year by knocking off IQ points in kids. All told, coal costs America $330 to 500 billion per year.

Put differently, every ton of coal—like every barrel of oil—causes more in external damages than it adds value to GDP. The costs faced by those deciding how much fossil fuel to burn are much lower than the costs faced by society.

None of that means we shouldn’t burn any coal or oil. It simply means those who profit from producing these fuels shouldn’t get a free ride on the taxpayer. Conservative estimates indicate that carbon pollution costs society about $40 per ton. And yes, that’s a cost.

Socializing the costs is not an option

As someone with a Ph.D. in economics, Dr. Bezdek, you surely understand the difference between private benefits and social costs. No one would be burning any coal if there weren’t benefits to doing so. However, the “social benefits” you ascribe to coal are anything but; in reality they are private, in the best sense of the word.

If you are the one burning coal, you benefit. If you are the one using electricity produced by burning coal, you benefit, too. To be clear, these are benefits. No one disputes that. It’s how markets work.

But markets also fail in a very important way. The bystanders who are breathing the polluted air are paying dearly. The costs, if you will, are socialized. Society—all of us—pays for them. That includes those who seemingly benefit from burning coal in the first place.

Your claim that what you call “social benefits” of coal dwarf the costs is wrong in theory and practice. In theory, because they are private benefits. As a matter of practice because these (private) benefits are very much included in the calculations that give us the social costs of coal. What you call out as the social benefits of coal use are already captured by these calculations. They are part of economic output.

Our indicators for GDP do a pretty good job capturing all these private benefits of economic activity. Where they fail is with the social costs. Hence the need to calculate the social cost of carbon pollution in the first place.

So far so bad. Then there’s this:

Plants need carbon dioxide to grow, just not too much of it

In your report, you also discuss what you call the benefits of increases in agricultural yields from the well-known carbon dioxide fertilization effect. It may surprise you to hear that the models used to calculate the cost of carbon include that effect. It turns out, they, too, in part base it on outdated science that ought to be updated.

But their science still isn’t as old as yours. For some reason, you only chose to include papers on the fertilization effect published between 1902 and 1997 (save one that is tangentially related).

For an updated perspective, try one of the most comprehensive economic analysis to date, pointing to large aggregate losses. Or try this Science article, casting serious doubt on any claims that carbon dioxide fertilization could offset the impacts on agricultural yields from climate change.

Farmers and ranchers already have a lot to endure from the effects of climate change. There’s no need to make it worse with false, outdated promises.

Coal lobby speaks, industry no longer listens

It’s for all these reasons that, to borrow the apt title to the otherwise excellent New York Times story that ran your quote: “Industry Awakens to Threat of Climate Change”. And it’s precisely why the U.S. government calculates the social cost of carbon pollution. Yes, sadly, it’s a cost, not a benefit.

To our readers: Want to get involved? The White House has issued a formal call for public comments on the way the cost of carbon figure is calculated, open through February 26. You can help by reminding our leaders in Washington that we need strong, science-based climate policies.

dupham February 4, 2014 - 09:41

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Why the cost of carbon pollution is both too high and too low

2/27/14 update: The Climate Reality Project along with partners Environmental Defense Fund, Organizing for Action and Sierra Club announced the delivery of more than 120,000 citizen comments to the White House Office of Management and Budget (OMB) in support of a strong Social Cost of Carbon (SCC).

Tell someone you are a “climate economist,” and the first thing you hear after the slightly puzzled looks subside is, “How much?” Show me the money: “How much is climate change really costing us?”

Here it is: at least $40.

That, of course, isn’t the total cost, which is in the trillions of dollars. $40 is the cost per ton of carbon dioxide pollution emitted today, and represents the financial impacts of everything climate change wreaks: higher medical bills, lost productivity at work, rising seas, and more. Every American, all 300 million of us, emit around twenty of these $40-tons per year.

The number comes from none other than the U.S. government in an effort to uncover the true cost of carbon pollution. This exercise was first conducted in 2010. It involved a dozen government agencies and departments, several dozen experts, and a fifty-page, densely crafted “technical support document,” replete with some seventy, peer-reviewed references and an even more technical appendix.

Cass Sunstein, the Harvard legal scholar of Nudge fame, who was co-leading the process for the White House at the time, recently declared himself positively surprised how the usual interest-group politics were all-but absent from the discussions throughout that process. This is how science should be done to help guide public policy.

The cost of carbon pollution is too low

The number originally reached in 2010 wasn’t $40. It was a bit more than half as much. What happened? In short, the scientific understanding of the impacts of rising seas had advanced by so much, and the peer-reviewed, economic models had finally caught up to the scientific understanding circa 2007, that a routine update of the cost of carbon number resulted in the rather dramatic increase to near $40 per ton. (There are twenty pages of additional scientific prose, if you want to know the details.)

In other words, we had been seriously underestimating the cost of climate change all along. That’s the exact opposite of what you hear from those who want to ignore the problem, and the $40 itself is still woefully conservative. Some large companies, including the likes of Exxon, are voluntarily using a higher price internally for their capital investment decisions.

And everything we know about the science points to the fact that the $40 figure has nowhere to go but up. The more we know, the higher the costs. And even what we don’t know pushes the costs higher still.

Howard Shelanski, Sunstein’s successor as the administrator of the Office of Information and Regulatory Affairs (OIRA, pronounced “oh-eye-ruh”), has since presided over a further update of the official number. In fact, this one didn’t incorporate any of the latest science. It was simply a minor technical correction of the prior update, resulting in a $1 revision downward. (The precise number is now $37, though I still say $40 at cocktail parties, to avoid a false sense of precision. Yes, that’s what a climate economist talks about at cocktail parties.)

And once again, it all demonstrated just how science ought to be done: Sometimes it advances because newer and better, peer-reviewed publications become available. Sometimes it advances because someone discovers and fixes a small mathematical error.

Your input is needed

While announcing the correction, Shelanski added another layer of transparency and an opportunity for further refinements of the numbers: a formal call for public comments on the way the cost of carbon figure is calculated, open through February 26.

We are taking this opportunity seriously. EDF, together with our partners at the Natural Resource Defense Council, New York University School of Law’s Institute for Policy Integrity, and the Union of Concerned Scientists, is submitting formal, technical comments in support of the administration’s use of the cost of carbon pollution number as well as recommending further revisions to reflect the latest science.

The bottom line, as economists like to put it, is that carbon pollution costs society a lot of money. So as the technical experts trade scientific papers, you can help by reminding our leaders in Washington that we need strong, science-based climate policies.

Update (on January 24th): The official comment period just was extended for another month, through February 26th. More time to show your support.

dupham January 23, 2014 - 09:21

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Have the deniers won?
*Occupywallstreet now does not even mention CO2 in its list of demands because of the bank-funded and corporate run carbon trading stock markets ruled by politicians.

*Canada killed Y2Kyoto with a freely elected climate change denying prime minister and nobody cared, especially the millions of scientists warning us of unstoppable warming (a comet hit).

The only way to shut down the denier machine now is to urge science to agree on something beyond just "could be" otherwise we are doomed.

mememine69 January 23, 2014 at 9:49 am

People are not socially aware. We all have to do an environmental policy if we win the match to the greenhouse effect.

Paul January 23, 2014 at 11:03 am

We need a real economist to figure out if $37 or $40 per ton of CO2 will hamper the economic growth NEEDED to actually transition away from FF's. Instead of a costly (and beneficial to gov't recipients) tax scheme that "everybody" will oppose (even I), why don't you just do the right thing and promote ALL forms of clean energy generation.

We need the advanced machine automation of AT LEAST 100,000 square miles of solar and MILLIONS of wind turbines and, of course, the EFFICIENT utility scale batteries necessary to store that. But we need that to be quite literally DIRT cheap. There is NO other way to do renewables in a world where the developing nations REQUIRE FIVE TIMES what we use today in order to have a decent standard of living, you know, running water, toilets, clean food, electricity, sewers system, schools, etc, etc.

I do believe that it is still MUCH cheaper to instead, simply scale up nuclear. We must LEARN about the best reactor designs. LFTR and the IFR are melt down PROOF because they are inherently safe, that is, they are walk away safe! Now, I know that although these have been proven to the demonstration level (decades ago), it may take a few years to re-develop them to actual "reduce global carbon emissions status".

Common sense states that more powerful source will be intrinsically cheaper than diffuse AND intermittent ones. Therefore, unless we can have autonomous machines build the 1 or 2% of the Earh's land space over with solar and wind, we MUST DEMAND the nuclear option. Only LEU is required to save the hydrocarbons.

Only France has ever been successful at actually reducing emissions. All other countries using solar and wind has still increased emissions because solar and wind (so far) has not been able to keep up with even trivial demand (much less a base load demand).

I suggest everybody delve into such energy awareness (and DEMAND the scientific solutions) before they dream up silly laws that can in themselves, prevent fossil fueled depletion into an over heated biosphere ;)

Robert Bernal January 23, 2014 at 11:03 am

Your organization says "we need strong science based solutions". Ok, before I criticize, I want to acknowledge the good work EDF does for the environment (thanks). Now, just what do YOU think is the scientific way to replace fossil fuels in a growing world which will need ~5x the current global net power production?
Please respond to fireofenergy@gmail.com if you wish.

Thank you,
Robert Bernal - clean energy awareness advocate

Robert Bernal January 23, 2014 at 11:08 am

I think that the issue of carbon pollution is a puppet handlers subject to divert the most powerful self-interest of those who want to control humanity .... 're unhappy ...

Karina Castro January 24, 2014 at 10:55 am Add new comment

Gross Domestic Product: Grossly incomplete, but we can fix it

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This first appeared online in an article posted at ensia.com.

Gross Domestic Product (GDP) is broken. Robert F. Kennedy said as much in his first major presidential campaign speech. Simon Kuznets, the father of GDP, acknowledged its shortcomings. GDP is an imperfect indicator of human well-being at best, and outright misleading at worst.

Still, we shouldn’t scrap GDP and start over.

Up to a point, GDP does tell us important facts about people’s lives, livelihoods and aspirations. Living on a dollar a day is miserable no matter how you look at it.

Choking on economic growth, of course, is equally bad. There are a few simple, well-established steps we ought to take to bring GDP closer to where we should be. That, by the way, isn’t “Green GDP” or “green accounting.” It’s honest accounting.

Start with accounting for the true value of natural assets still in the ground. We don’t “produce” coal. We extract it. And the fact that the ton of coal extracted today is no longer there for the taking tomorrow should show up in our national income accounts. A ton of West Virginian coal adds about $30 to GDP. Honest bookkeeping would decrease that amount to $15. The same holds for oil, trees, water and all the other valuable natural assets that fuel our economy but are largely treated as free in our GDP accounting.

Then quickly move on to pollution. Every ton of coal, every barrel of oil causes more in external damages than it adds value to GDP. Properly measured GDP ought to reflect that fact.

In the end, policy makers should expand their horizon and look at a dashboard of indicators to get a fuller picture of the true state of the economy, society and the planet. Yet when it comes to GDP itself, the name of the game is fixing it rather than scrapping it. We know how to do that. The U.S. Bureau of Economic Analysis is at the ready. Let’s have a go at it.

See the original post on ensia.com for a perspective from Sir Partha Dasgupta, Frank Ramsey Professor Emeritus of Economics at the University of Cambridge. 

devAdmin May 17, 2013 - 10:05

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Some actually intriguing іnfo , nіcely written
and bгoadly speakіng user pleasant.

Haircuttingtec… May 21, 2013 at 3:44 am

What do you mean by accounting? If we state the true price of what an item sells for?

collin olsen January 3, 2019 at 12:19 am Add new comment

It’s Official: $1 Invested in EPA Yields $10 in Benefits

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The Office of Management and Budget is nerd heaven: a bunch of people getting their professional kicks from analyzing federal regulation. This bean counting may sound painfully lacking in glamour, but it’s incredibly important. OMB’s annual report to Congress on the benefits and costs of all major rules adopted by most federal agencies over the past 10 years shows how efficiently, or inefficiently, those agencies are functioning.  And the conclusion is clear: the Environmental Protection Agency comes out on top.

Source: OMB’s “Draft 2013 Report to Congress on the Benefits and Costs of Federal Regulations”

These numbers are based on the 2013 draft report, so they could still change. But the pattern is the same as in any of their reports from the past few years, including the final 2012 report that came out last week.

None of this is to diminish the contributions of the other government agencies, but if you are a do-gooder trying to achieve the greatest good for the greatest number of people, EPA is the place to be.

One of the driving forces behind this rule is the Mercury and Air Toxics Standards, an extraordinary achievement for clean air and public health. Because of these standards, all coal fired power plants will for the first time be required to control their emissions of toxic air pollutants — including mercury, arsenic and acid gases. Forty years after the Clean Air Act signed by Richard Nixon, twenty after the landmark Amendments signed by George H.W. Bush, we are finally getting around to regulating mercury from burning coal.

The analysis of the benefits of reducing mercury pollution demonstrates just how much we underestimate the benefits of environmental protections. For example, when it comes to reducing mercury pollution, the benefits are based on EPA’s estimates of increased wages of (higher IQ) children born to families that catch freshwater fish for their own consumption.

Think about that one for a second. Mercury is a potent neurotoxin in all its forms, but the EPA estimates do not include mercury that is inhaled or that enters our bodies through other means. And there is nothing in the estimates about the fact that mercury harms the brains of our kids, regardless of whether it influences their future earning potential.

In a sense, this analysis is the moral equivalent of arguing that we should have child labor laws because keeping kids in school makes for more productive workers later on. This kind of reasoning, alas, is  why economists are often called names unfit for a family-friendly blog. It’s the most reductionist argument you can find in favor of reducing mercury. (In fact, the bulk of the benefits that were quantified by EPA are due to inextricably connected benefits in reducing deleterious particulate pollution.)

Costs, by the way, are relatively well estimated, since businesses are all-too willing to share them. So yes, there are costs—but they are small relative to benefits. And costs, as opposed to benefits, are typically overestimates. They are largely based on current available control technologies. They don’t consider that industry may invent an entirely new and unexpected way of complying with regulations at lower cost. This happens over and over again, and it comes with a name: entrepreneurial ingenuity. Works every time.

These omissions and shortcomings on either side of the equation only stand to bolster the most important claim: benefits outweigh costs more than 10 to 1 for all major EPA regulations adopted in the past decade.

For every dollar invested, Americans get $10 worth of benefits. I’ll take that ratio any day.

devAdmin May 8, 2013 - 09:27

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What a crock! Estimating the increase in children's IQ and tie that to dollars earned as a result.
There is no facts or data only speculation as to whether there is any decrease in their IQ to begin with. Pure Hog Wash.

Jerry King May 9, 2013 at 5:15 pm Add new comment

 

katerha/http://www.flickr.com/photos/katerha/4359906568/">flickr

Nudge is the best kind of book. It presents the type of head-slappingly obvious solutions to public policy problems that make you wonder why you needed a book to tell you about them in the first place. Place the veggies before the French fries in the cafeteria, and people will eat more greens. Enroll employees into retirement programs with the option of opting out rather than in and they’ll save more as a result.

Such nudges are the best kinds of policy interventions: minimum intrusion, maximum freedom of choice, maximum relative impact. But one area in which Nudge comes up short is global warming. Putting smiley faces on your electricity bill as a reward for using less electricity than your neighbor, something oPower has done with utilities around the country, helps bring down electricity use by 1 to 3%. Better than zero, but not the solution by a long shot.

That solution would be making polluters pay: putting a price on carbon dioxide through a direct cap or tax on carbon pollution. Cass Sunstein, who wrote Nudge with Richard Thaler, says as much in his latest piece on the topic. He laments the fact that we don’t seem to be able to get these kinds of taxes passed, and then adds a few items to his running list of things we can do, all under the broad heading of setting “clean-energy default rules”: Change the default printer setting to “print on front and back,” and people will. Enroll people into programs where they spend extra for clean energy (with the option of opting out), and 90% will choose to stick with the clean energy.

All these proposals represent the best of what nudges ought to be. Policymakers need to set defaults either way. So set them in the way that goes furthest toward achieving your goal. Just that there’s still a big gulf between the policies we know are necessary and what appears to be doable.

The plastic bag solution

But there is one policy that seems to bridge the gap between the type of non-intrusive nudges Sunstein champions and the type of policies he knows are ultimately necessary to do something about global warming. They’re called bag taxes.

In 2002, Ireland started charging shoppers 15 eurocents a plastic bag. The result: bag use plummeted 90 percent. That's a billion bags a year.

In 2010, Washington, D.C., began charging 5 cents per disposable bag, paper or plastic. As a result, plastic bag use declined 80 percent within a year by some estimates.

These fees are tiny. Compared to the $100 worth of groceries you’ll be carrying home in your bags, they might as well be zero. The point is that they are not. The fees are big enough to change the default behavior of shoppers. A few pennies (and the odd public information campaign) are all it takes to motivate shoppers to bring reusable bags to the store.

It’s quite a leap from plastic bags to carbon prices. The principle is the same: It’s the price that counts—a price that is directly connected to an action. Change the action (stop using plastic bags) and you avoid the fee. Similarly, increase the price of carbon, watch carbon pollution fall. This price-up-demand-down relationship is so well established, it’s one of the very few actual “laws” economists have. Violations are tough to find. Plastic bags and carbon certainly don’t violate this common sense principle.

Bag fees and carbon prices have this important feature in common. They don’t just nudge, they also charge consumers for the cost of their—our—actions. For carbon dioxide, there are plenty of studies that estimate the cost to society of this type of pollution. The right price for each ton of carbon dioxide would be at least about $20. Given the fact that the average American emits his body weight worth of carbon dioxide every day and a half, that comes out to about $1 per day. Double it to account for the fact that there are plenty of damages we haven’t yet incorporated in the official number, and doing something serious about global warming is still a bargain at $2 per person per day.

As an insurance policy against the worst effects of global warming, that’s tiny. Never mind how small a price, though, the politics of actually doing it are tricky, to say the least. The plastic bag lobby just isn’t as important as the fossil lobby. And bag fees can be implemented on the local level. A carbon price can’t. It requires Congressional action, a seeming oxymoron these days. Even with carbon, though, states—if not cities—can lead the way. Look no further than California and its comprehensive cap-and-trade system. It limits carbon pollution with a firm, declining cap, giving Californian businesses maximum flexibility in how to make their operations more efficient and innovate their way out of the high-carbon, low-efficiency bind. That ought to be a template for the nation.

Meanwhile, we can do a lot worse than look to plastic bag fees as a model for the kinds of policies that we know are necessary to tackle global warming. Cass Sunstein, the co-author of Nudge, and Cass Sunstein, the policy analyst calling for a price on carbon pollution, would approve.

Blog Category for Navigation: Economics

All the colors of the traffic rainbow

Image by Fabio Achilli/http://www.flickr.com/photos/travelourplanet/7997180314/">Flickr

As an economist, I travel with a lot of intellectual baggage. It's tough, wherever I am,  not to look around and wonder if people are behaving in an economically rational way.

Recently, I spent a month in Thailand. While there, I was struck by how ordinary Thais simultaneously embraced and ignored environmentalism.

On the one hand, few Thais recycle, no one bikes, plastic bags are everywhere and Bangkok is afflicted by gridlock and pollution. So you might say that, in general, Thais behave more like citizens of a rapidly emerging economy than the typical Brooklyn environmentalist.

Why, then, does virtually every home use efficient compact fluorescent lights (CFLs). Americans and Europeans needed a ban on incandescent bulbs to make the switch. Not so the Thais, where you can still buy cheaper, more inefficient incandescent bulbs at the corner store.

Was it the influence of a higher authority? Thais famously revere their 85-year-old King, the world’s longest-reigning head of state, who happens to be an environmentalist.

The answer is, mostly,  no.

The King’s example may have played some role, but economic incentives,  the economist in me is happy to report, played a much bigger one. Faced with the prospect of either building a new power plant or encouraging Thais to conserve electricity, the state-owned utility opted for the latter. CFLs received heavy subsidies, aided by a public information campaign.

So it turns out that Thais aren’t different from anyone else in the world. Give them the right incentives to use cleaner bulbs, and they’ll do it.

But give them incentives to buy cars instead of taking mass transit, and they’ll do that, too. The central government offers first-time car buyers generous tax incentives, so, yes, more Thais are buying cars. And not just thanks to tax incentives. In Bangkok, buses are packed and slow, and the elevated rail system, which is already operating at full capacity, is limited in its reach and is anyway a luxury many can’t afford. The truth is, you can’t get where you want to go without a car.

The result of these multiple incentives is predictable: a city seized by gridlock and serious air pollution –but whose inhabitants light their homes in the most environmentally friendly way.

The moral of this story is that it’s fine to appeal to the better nature of people – as the Thai King does to his people. But in the end, Thais, like everyone else, need the right economic incentives to reduce their carbon footprint.

Blog Category for Navigation: Economics