Tag: pollution

Why Are Environmental Policy Conflicts So Intractable?

On Earth Day the op-ed pages remind me of “Groundhog Day.”  Environmentalists argue we need stricter environmental regulation.  Business interests argue such regulations reduce economic growth and cost the economy jobs.  Each also invokes “sound science” as an adjudicator of the conflict.  Environmentalists invoke “science” in the case of CO2 emissions and effects while business interests invoke “science” in the case of traditional pollution emissions.  Each year we wake up and the same movie plays out.

The scientific validity of people’s preferences plays no role in the market’s delivery of private goods.  Markets can and do supply organic lettuce regardless of whether it is really “better” for your health.  The scientific validity of people’s preferences is irrelevant.

Air- and water-quality environmental disputes are more challenging to analyze than the supply of organic lettuce for two reasons.  First, while property rights exist for lettuce, they often do not exist for air and water.   Thus, environmental politics involves continuous struggle over implicit property rights and the wealth effects that flow from such rights.  Second, both conventional air and water quality are “local” public goods (club goods) rather than private goods, thus individual differences in consumption, the primary method of reducing conflict associated with private goods, are not possible.  Instead, everyone’s varied preferences for environmental goods can only result in one jointly consumed outcome.

One possible impediment to the implementation of market-like solutions to air and water quality is that the initial ownership of property rights to air or water emissions not only has wealth but also efficiency effects.  That is those particular property rights (the right to a pristine environment) are so valuable relative to other assets that their initial allocation alters the willingness of people to pay for them and thus affects how much pollution exists.  In such cases the initial distribution is the whole ballgame because it determines the resulting air- and water- quality levels.

Indur Goklany’s Double Play in the New York Times

Indur Goklany’s great book, The Improving State of the World: Why We’re Living Longer, Healthier, More Comfortable Lives on a Cleaner Planet, has been cited this week by both John Tierney and Andrew Revkin in the New York Times.

But neither of them really says much about it. Don’t bother with the articles, just go buy the book. It’s a compelling, comprehensive case – with more than 100 charts and tables – for the case made in the title, which deserves to be bullet-pointed. It shows that the state of the world is improving because

  • We’re Living Longer,
  • Healthier,
  • More Comfortable Lives
  • on a Cleaner Planet

Check out the evidence.

Krugman and Libertarianism and Political Power

Paul Krugman has a post today titled “Why Libertarianism Doesn’t Work, Part N.” Maybe parts A-M were compelling, but it seems like there’s a big flaw in his logic today. Here’s the entire item:

Thinking about BP and the Gulf: in this old interview, Milton Friedman says that there’s no need for product safety regulation, because corporations know that if they do harm they’ll be sued.

Interviewer: So tort law takes care of a lot of this ..

Friedman: Absolutely, absolutely.

Meanwhile, in the real world:

In the wake of last month’s catastrophic Gulf Coast oil spill, Sen. Lisa Murkowski blocked a bill that would have raised the maximum liability for oil companies after a spill from a paltry $75 million to $10 billion. The Republican lawmaker said the bill, introduced by Sen. Robert Menendez (D-NJ), would have unfairly hurt smaller oil companies by raising the costs of oil production. The legislation is “not where we need to be right now” she said.

And don’t say that we just need better politicians. If libertarianism requires incorruptible politicians to work, it’s not serious.

Well, he’s got a point. Politicians do interfere in the tort system — by placing caps on liability, by stripping defendants of traditional legal defenses, and in other ways. As my colleague Aaron Powell notes, the problem here is that politicians have power that libertarians wouldn’t grant them. And:

Second, and more troubling for Krugman, is his admission that all politicians are corruptible. If that’s true (and it almost certainly is), then what does it say about Krugman’s constant calls for granting those same corruptible folks more power over our lives? Surely if Murkowski is corrupt enough to protect BP from tort damages, she’s corrupt enough to rig safety regulations in BP’s favor.

The libertarian system of markets and property rights is impeded when politicians interfere in it. But Krugman’s ideal system is that politicians should decide all questions — monetary policy, health care policy, product safety, environmental tradeoffs, you name it. Whose system is more likely to produce corrupt politicians, and more likely to fail because of them?

India Explicitly Rejects Bringing Environmental Issues Into WTO

An article today in BRIDGES Weekly Trade News Digest (What? You don’t subscribe??) contains an explicit rejection by India’s trade minister of the idea that carbon border tax adjustments belong in the WTO’s agenda.  Border tax adjustments in this context refers to de facto tariffs that would “level the playing field” for domestic producers competing with foreign producers not subject to climate change policies of an equivalent rigour, also called “border carbon adjustments” or variations on that theme.

While Minister Khullar predicts that these sorts of measures will be in place in 2-3 years time, he rejects that the WTO is the forum to deal with environmental issues.

Furthermore, countries introducing such measures can expect litigation:

India and other developing countries will undoubtedly challenge the true impetus behind the [border carbon adjustment] measures.

“Such measures imposing restrictions on imports on the grounds of providing a ‘level playing field’, or maintaining the ‘competitiveness’ of the domestic industry, etc are likely to be viewed as mere protectionist measures by the developed world to block the exports of the poorer nations,” [a recent report from an Indian think-tank closely connected with the Indian government] reads. “This is because there is little empirical evidence that companies relocate to take advantage of lax pollution controls.”

The [report] argues that such unilateral trade measures will inevitably lead to tit-for-tat trade retaliation that could spiral into an all-out trade war. Such warnings have also been raised by China and several think tanks following the issue.

I’ve written before on the dangers of introducing climate change issues into the WTO (and Dan Griswold has written more broadly on why labor and environmental standards don’t mix well with the aim of freeing trade) but this is yet another firm, unequivocal warning to developed countries that their proposals (and they are still just proposals at this stage) will have consequences. Developed country politicians who insist on forcing rich-world standards on the poor world should listen carefully.

Cap ‘n Trade: The Ultimate Pork-Fest

Some naive people might have been convinced that the U.S. House voted to wreck the American economy by endorsing cap and trade because it was the only way to save the world.  But even many environmentalists had given up on the bill approved last Friday.  It is truly a monstrosity:  it would cost consumers plenty, while doing little to reduce global temperatures.

But the legislation had something far more important for legislators and special interests alike.  It was a pork-fest that wouldn’t quit.

Reports the New York Times:

As the most ambitious energy and climate-change legislation ever introduced in Congress made its way to a floor vote last Friday, it grew fat with compromises, carve-outs, concessions and out-and-out gifts intended to win the votes of wavering lawmakers and the support of powerful industries.

The deal making continued right up until the final minutes, with the bill’s co-author Representative Henry A. Waxman, Democrat of California, doling out billions of dollars in promises on the House floor to secure the final votes needed for passage.

The bill was freighted with hundreds of pages of special-interest favors, even as environmentalists lamented that its greenhouse-gas reduction targets had been whittled down.

Some of the prizes were relatively small, like the $50 million hurricane research center for a freshman lawmaker from Florida.

Others were huge and threatened to undermine the environmental goals of the bill, like a series of compromises reached with rural and farm-state members that would funnel billions of dollars in payments to agriculture and forestry interests.

Automakers, steel companies, natural gas drillers, refiners, universities and real estate agents all got in on the fast-moving action.

The biggest concessions went to utilities, which wanted assurances that they could continue to operate and build coal – burning power plants without shouldering new costs. The utilities received not only tens of billions of dollars worth of free pollution permits, but also billions for work on technology to capture carbon-dioxide emissions from coal combustion to help meet future pollution targets.

That deal, negotiated by Representative Rick Boucher, a conservative Democrat from Virginia’s coal country, won the support of the Edison Electric Institute, the utility industry lobby, and lawmakers from regions dependent on coal for electricity.

Liberal Democrats got a piece, too. Representative Bobby Rush, Democrat of Illinois, withheld his support for the bill until a last-minute accord was struck to provide nearly $1 billion for energy-related jobs and job training for low-income workers and new subsidies for making public housing more energy-efficient.

Representative Joe Barton, a Texas Republican staunchly opposed to the bill, marveled at the deal-cutting on Friday.

“It is unprecedented,” Mr. Barton said, “but at least it’s transparent.”

This shouldn’t surprise anyone who follows Washington.  Still, the degree of special interest dealing was extraordinary.  Anyone want to imagine what a health care “reform” bill is likely to look like when legislators finish with it?

Which Is Greener?

Which uses less energy and emits less pollution: a train, a bus, or a car? Advocates of rail transportation rely on the public’s willingness to take for granted the assumption that trains – whether light rail, subways, or high-speed intercity rail – are the most energy-efficient and cleanest forms of transportation. But there is plenty of evidence that this is far from true.

Rail advocates often reason like this: the average car has 1.1 people in it. Compare the BTUs or carbon emissions per passenger mile with those from a full train, and the train wins hands down.

The problem with such hypothetical examples is that the numbers are always wrong. As a recent study from the University of California (Davis) notes, the load factors are critical.

The average commuter car has 1.1 people, but even during rush hour most of the vehicles on the road are not transporting commuters. When counting all trips, the average is 1.6, and a little higher (1.7) for light trucks (pick ups, full-sized vans, and SUVs).

On the other hand, the trains are rarely full, yet they operate all day long (while your car runs only when it has someone in it who wants to go somewhere). According to the National Transit Database, in 2007 the average American subway car had 25 people in it (against a theoretical capacity of 150); the average light-rail car had 24 people (capacity 170); the average commuter-rail car had 37 people (capacity 165); and the average bus had 11 (capacity 64). In other words, our transit systems operate at about one-sixth of capacity. Even an SUV averaging 1.7 people does better than that.

When Amtrak compares its fuel economy with automobiles (see p. 19), it relies on Department of Energy data that presumes 1.6 people per car (see tables 2.13 for cars and 2.14 for Amtrak). But another Department of Energy report points out that cars in intercity travel tend to be more fully loaded – the average turns out to be 2.4 people.

“Intercity auto trips tend to [have] higher-than-average vehicle occupancy rates,” says the DOE. “On average, they are as energy-efficient as rail intercity trips.” Moreover, the report adds, “if passenger rail competes for modal share by moving to high speed service, its energy efficiency should be reduced somewhat – making overall energy savings even more problematic.”

Projections that high-speed rail will be energy-efficient assume high load factors (in the linked case, 70 percent). But with some of the routes in the Obama high-speed rail plan terminating in such relatively small cities as Eugene, Oregon; Mobile, Alabama; and Portland, Maine, load factors will often be much lower.

Even if a particular rail proposal did save a little energy in year-to-year operations, studies show that the energy cost of constructing rail lines dwarfs any annual savings. The environmental impact statement for a Portland, Oregon light-rail line found it would take 171 years of annual energy savings to repay the energy cost of construction (they built it anyway).

Public transit buses tend to be some the least energy-efficient vehicles around because agencies tend to buy really big buses (why not? The feds pay for them), and they run around empty much of the time. But private intercity buses are some of the most energy efficient vehicles because the private operators have an incentive to fill them up. A study commissioned by the American Bus Association found that intercity buses use little more than a third as much energy per passenger mile as Amtrak. (The source may seem self-serving, but DOE data estimate intercity buses are even more efficient than that–compare table 2.12 with intercity bus passenger miles in this table).

When it comes to energy consumption per passenger mile, the real waste is generated by public transit agencies and Amtrak. Instead of trying to fill seats, they are politically driven to provide service to all taxpayers, regardless of population density or demand. One of Amtrak’s unheralded high-speed (110-mph) rail lines is between Chicago and Detroit, but it carries so few people that Amtrak loses $84 per passenger (compared with an average of $37 for other short-distance corridors).

Meanwhile, transit agencies build light-rail lines to wealthy suburbs with three cars in every garage. With capacities of more than 170, the average light-rail car in Baltimore and Denver carries less than 15 people, while San Jose’s carries 16. For that we need to spend $40 million a mile on track and $3 million per railcar (vs. $300,000 for a bus)?

If we really wanted to save energy, we would privatize transit, privatize Amtrak, and sell highways to private entrepreneurs who would have an incentive to reduce the congestion that wastes nearly 3 billion gallons of fuel each year (p. 1). But of course, the real goal of the rail people is not to save energy but to reshape American lifestyles. They just can’t stand to see people enjoying the freedom of being able to go where they want, when they want to get there.

Obama’s Fuel-Economy Standards

If you like driving a big car or SUV, the good news about Obama’s new fuel-economy standards is that they won’t dictate what kind of car you will be able to buy in the future. If you want to buy a 15-mpg SUV, Detroit (or Aichi or Wolfsburg) will be free to make and sell you one.

The bad news is that the standards may make your car more expensive. Corporate Average Fuel Economy (CAFE) standards are actually calculated as the mean of gallons per mile, not miles per gallon. So, as of 2016, for every 15-mpg model made by an auto maker, that company will have to make five models of cars that can go 50 mpg in order for its fleet to meet Obama’s new target. Since bringing each new model to market can cost billions of dollars, if there are not enough people who want to buy those fuel-efficient cars to cover their design costs, the company will have to add a share of those costs to your SUV.

If you want to save energy, the good news is that Obama’s standards are more stringent than those in the Energy Independence and Security Act of 2007 – but not by much. While the 2007 law required new car fleets to average 35 mpg by 2020, Obama’s standard requires fleets to average 35.5 mpg by 2016.

The bad news is that nothing in Obama’s standard guarantees that they will actually save energy. The rule only requires that the mean fuel economy of all models, not all cars, made by a manufacturer meet the 35.5 mpg standard. Not much energy will be saved if gas guzzlers sell well and hybrids don’t.

If gas prices go up, people will buy the fuel-efficient models that auto makers are forced to make – but that would have happened anyway. If gas stays cheap, people will continue to buy fuel-inefficient cars (tempered only by having to pay extra to cover the start-up costs of models no one wants). If you believe that saving energy or reducing dependence on foreign oil is important, then you should prefer a stronger form incentive over this mandate.

The worst-cast scenario is that the new standards increase the cost of buying new cars but don’t save any energy (except to the extent that a few people can’t afford to own a car at all). The best-case scenario is that Obama’s standards result in future auto fleets that are not much different from what a free market would have produced. Considering that Honda and Toyota are now in a price war over their Insight vs. the third-generation Prius, that may be closer to the actual outcome.

The good news is that auto makers readily acquiesced to this standard, partly because they feared something worse but partly because they didn’t think it would cost much. The Obama administration estimates that the added cost of the new standard will be $1,300 per car, but that (if gasoline remains $3 per gallon) it will save drivers $500 per year. That means it could pay for itself in the long run – but only if people actually do buy more fuel-efficient cars.

The debate over the standard reminds me of the debate after Congress gave the Environmental Protection Agency the authority to regulate air quality in 1970. One faction favored of technical solutions to pollution, such as catalytic converters. The other faction argued for behavioral tools aimed at getting people to drive less.

Today, we know the behavioral solutions were a complete failure. Although many cities imposed urban-growth boundaries, built light rail, and implemented various disincentives to driving, not one can say they have reduced per-capita driving by even 1 percent.

On the other hand, the technical solutions were highly successful. Though we drive nearly three times as many miles as in 1970, total automotive air pollution has declined more than 50 percent.

There was a third faction in 1970 whose voice was almost inaudible: economists who argued that incentives would clean the air better than mandates. The mandates that were put in place only acted on new cars, and it took more than a decade (and now takes almost two decades) to turn over the American auto fleet. Properly designed incentives could have acted on all cars and cleaned the air much faster (by, for example, giving people a choice between retrofitting their cars or paying a pollution fee that was dedicated to cleaning up pollution elsewhere).

The lesson libertarians take from this is that incentives are better than mandates. But the point I like to make is that, though incentives might work better than mandates, technical solutions work far better than behavioral ones.

Despite the past failure of behavioral tools, there is a strong movement in the administration and Congress today for more behavioral controls aimed at reducing driving to save energy and greenhouse gas emissions. These behavioral tools will be expensive, they will have costly unintended consequences, and in the end they will do little to protect the environment.

I remain unpersuaded that we need to reduce greenhouse gas emissions. But if there is a political need to do so, we should at least do it in ways that cost little and provide other benefits that will help cover those costs. McKinsey & Company estimates that the United States can meet the most stringent greenhouse gas targets by investing in programs that cost no more than $50 per ton of greenhouse gas abatements. More fuel-efficient cars meet this test, says McKinsey, and will also reduce the emissions of other pollutants such as nitrogen oxides.

Meanwhile, light rail, growth boundaries, and other behavioral tools, if they save energy and reduce greenhouse gases at all, will only do so at costs of tens of thousands of dollars per ton. Though I am far from thrilled about Obama’s new policy, at least it reminds us that, for a relatively low cost, we can significantly reduce energy consumption and various pollution emissions without trying to socially engineer American lifestyles.