Topic: Energy and Environment

French Folly

Following the dubious example set recently by U.S. legislators, French politicians have informally proposed slapping punitive tariffs on goods from countries who refuse to curb greenhouse gas emissions. The German State Secretary for the Environment has, quite rightly, called foul:

There are two problems – the WTO (World Trade Organization), and the signal would be that this is a new form of eco-imperialism,” Machnig said.

 ”We are closing our markets for their products, and I don’t think this is a very helpful signal for the international negotiations.”

I have a paper forthcoming on the carbon tariff issue, but in the meantime here’s a recent op-ed (written jointly with Pat Michaels) on climate change policy mis-steps.

Remembering the Good Old Days

Actress and former Miss America Vanessa Williams reminisces on NPR about the long car trips her family used to take “when gas was like 30 cents a gallon, and my parents would complain that it was going up to 35 cents.” No wonder families could take car trips then.

But wait a minute. Williams was born in 1963. So let’s say she’s remembering family trips from about 1970-75. This chart from the Department of Energy does show that retail gasoline prices were around 35 cents a gallon at the beginning of that period, going above 50 cents by 1975. But adjusted for inflation, that was more like $1.50 in 2000 dollars.

And as Jerry Taylor and Peter Van Doren show (click on the chart to enlarge), the price then was about $3.00 adjusted for inflation and changes in disposable per capita income — just about what it is now. So Williams’s memory was correct — gas was about 35 cents when her family went on trips. But the implication that those were the good old days of cheap gas isn’t quite right. In terms of the family budget, gas costs about the same now as it did then.

Julian Simon used to write about how people have been deploring the lost ”good old days” since ancient times. Sometimes he quoted the columnist and Algonquin Round Table regular  Franklin Pierce Adams: “Nothing is more responsible for the good old days than a bad memory.”

Randal O’Toole Takes on Smart Growth in the NYT

The New York Times has a long profile today of Cato’s Randal O’Toole, scourge of urban planners.

But O’Toole doesn’t fit the portrait of a corporate advocate. On visits to Capitol Hill, he blends in as a middle-aged, middle-height man in a dark suit – but his beard gives him away, its shaggy twists seemingly fitting for a forest dweller. He wears a string tie that most Americans would only recognize on Colonel Sanders. His lapel doesn’t carry the standard-issue flag pin but a bronze bust of his dog, Chip. The Belgian tervuren won it in a dog show.

O’Toole routinely hikes and bikes dozens of miles, and he proudly announces that he has never driven a car to work. Far from living on a luxurious Virginia manor, he left his last Oregon town when it added a third stoplight.

Now, from his home computer in Camp Sherman, Ore., population 300, O’Toole rails against smart-growth policies as money sponges that never calm traffic, fill seats on trains, or help the environment.

The story ends with Randal on his way to a conference in Las Vegas, which I also attended. There in the 80-degree early morning heat, he biked 50 miles each morning, on a folding bicycle that he could fit into a suitcase – and still got back to the hotel in time to fix my Powerpoint before my speech. He’s a Renaissance man.

Response to Conor Clarke, Part I

Last week Conor Clarke at The Atlantic blog , apparently as part of a running argument with Jim Manzi, raised four substantive issues with my study, “What to Do About Climate Change,” that Cato published last year. Mr. Clarke deserves a response, and I apologize for not getting to this sooner. Today, I’ll address the first part of his first comment. I’ll address the rest of his comments over the next few days.

Conor Clarke: 

(1) Goklany’s analysis does not extend beyond the 21st century. This is a problem for two reasons. First, climate change has no plans to close shop in 2100. Even if you believe GDP will be higher in 2100 with unfettered global warming than without, it’s not obvious that GDP would be higher in the year 2200 or 2300 or 3758. (This depends crucially on the rate of technological progress, and as Goklany’s paper acknowledges, that’s difficult to model.) Second, the possibility of “catastrophic” climate change events – those with low probability but extremely high cost – becomes real after 2100.

Response:  First, I wouldn’t put too much stock in analyses purporting to extend out to the end of the 21st century, let alone beyond that, for numerous reasons, some of which are laid out on pp. 2-3 of the Cato study. As noted there, according to a paper commissioned for the Stern Review, “changes in socioeconomic systems cannot be projected semi-realistically for more than 5–10 years at a time.”

Second, regarding Mr. Clarke’s statement that, “Even if you believe GDP will be higher in 2100 with unfettered global warming than without, it’s not obvious that GDP would be higher in the year 2200 or 2300 or 3758,” I should note that the conclusion that net welfare for 2100 (measured by net GDP per capita) is not based on a belief.  It follows inexorably from Stern’s own analysis.

Third, despite my skepticism of long term estimates, I have, for the sake of argument, extended the calculation to 2200. See here. Once again, I used the Stern Review’s estimates, not because I think they are particularly credible (see below), but for the sake of argument. Specifically, I assumed that losses in welfare due to climate change under the IPCC’s warmest scenario would, per the Stern Review’s 95th percentile estimate, be equivalent to 35.2 percent of GDP in 2200. [Recall that Stern’s estimates account for losses due to market impacts, non-market (i.e., environmental and public health) impacts and the risk of catastrophe, so one can’t argue that only market impacts were considered.]

The results, summarized in the following figure, indicate that even if one uses the Stern Review’s inflated impact estimates under the warmest IPCC scenario, net GDP in 2200 ought to be higher in the warmest world than in cooler worlds for both developing and industrialized countries.


Source: Indur M. Goklany, “Discounting the Future,” Regulation 32: 36-40 (Spring 2009).

The costs of climate change used to develop the above figure are, most likely, overestimated because they do not properly account for increases in future adaptive capacity consistent with the level of net economic development resulting from Stern’s own estimates (as shown in the above figure).  This figure shows that even after accounting for losses in GDP per capita due to climate change – and inflating these losses – net GDP per capita in 2200 would be between 16 and 85 times higher in 2200 that it was in the baseline year (1990).  No less important, Stern’s estimate of the costs of climate change neglect secular technological change that ought to occur during the 210-year period extending from the base year (1990) to 2200. In fact, as shown here, empirical data show that for most environmental indicators that have a critical effect on human well-being, technology has, over decades-long time frames reduced impacts by one or more orders of magnitude.

As a gedanken experiment, compare technology (and civilization’s adaptive capacity) in 1799 versus 2009. How credible would a projection for 2009 have been if it didn’t account for technological change from 1799 to 2009?

I should note that some people tend to dismiss the above estimates of GDP on the grounds that it is unlikely that economic development, particularly in today’s developing countries, will be as high as indicated in the figure.  My response to this is that they are based on the very assumptions that drive the IPCC and the Stern Review’s emissions and climate change scenarios. So if one disbelieves the above GDP estimates, then one should also disbelieve the IPCC and the Stern Review’s projection for the future.

Fourth, even if analysis that appropriately accounted for increases in adaptive capacity had shown that in 2200 people would be worse off in the richest-but-warmest world than in cooler worlds, I wouldn’t get too excited just yet. Even assuming a 100-year lag time between the initiation of emission reductions and a reduction in global temperature because of a combination of the inertia of the climate system and the turnover time for the energy infrastructure, we don’t need to do anything drastic till after 2100 (=2200 minus 100 years), unless monitoring shows before then that matters are actually becoming worse (as opposing merely changing), in which case we should certainly mobilize our responses. [Note that change doesn’t necessarily equate to worsening. One has to show that a change would be for the worse.  Unfortunately, much of the climate change literature skips this crucial step.]

In fact, waiting-and-preparing-while-we-watch (AKA watch-and-wait) makes most sense, just as it does for many problems (e.g., some cancers) where the cost of action is currently high relative to its benefit, benefits are uncertain, and technological change could relatively rapidly improve the cost-benefit ratio of controls. Within the next few decades, we should have a much better understanding of climate change and its impacts, and the cost of controls ought to decline in the future, particularly if we invest in research and development for mitigation.  In the meantime we should spend our resources on solving today’s first order problems – and climate change simply doesn’t make that list, as shown by the only exercises that have ever bothered to compare the importance of climate change relative to other global problems.  See here and here.  As is shown in the Cato paper (and elsewhere), this also ought to reduce vulnerability and increase resiliency to climate change.

In the next installment, I’ll address the second point in Mr. Clarke’s first point, namely, the fear that “the possibility of ‘catastrophic’ climate change events – those with low probability but extremely high cost – becomes real after 2100.”

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?

Charles Rangel Keeps a Cool Head

Pat Michaels and I have written an op-ed on the climate change bill due for a vote tomorrow in Congress, and our opinions on its provisions are summarized pretty well there. In short, the bill appears to offer very little in the way of reduced global warming in return for harm to the domestic economy and to international relations.

Yesterday’s New York Times energy and environment section (online) contains an article picking up on the increasingly harmful trade-related parts of the bill. Apparently the House Ways and Means Committee is trying to assert language that would make imposing carbon tariffs more likely than did the original Energy and Commerce Committee bill, bad enough that it was.

So what say you, Rep. Charles Rangel (D-NY), chairman of the House Ways and Means Committee and a powerful voice on trade?

[Rangel] downplayed the significance of his proposals. “I don’t think there will be many changes there,” he said. “There are just provisions in there that deal with trade and the poor. It’s not changes, it’s just vacuum.”

Assuming the quote was not taken out of context, for the leading House voice on trade to be so dismissive of important (if somewhat under-the-radar) provisions is irresponsible to say the least.

Washington Metro’s Problem: Too Much Money

The terrible Washington Metrorail crash that killed nine people has led to calls for more money for transit. Yet the real problem with Washington Metro, as with almost every other transit agency in this country, is that it has too much money – it just spends the money in the wrong places.

“More money” seems to be the solution to every transit issue. Is ridership down? Then transit agencies need more money to attract more riders. Is ridership up? Then agencies need more money because fares only cover a quarter of the costs.

Yet the truth is that urban transit is the most expensive form of transportation in the United States. Where the average auto user spends about 24 cents per passenger mile, transit costs more than 80 cents per passenger mile, three-fourths of which is subsidized by general taxpayers. Subsidies to auto driving average less than a penny per passenger mile. Where autos carry 85 percent of American passenger travel, transit carries about 1 percent.

When Congress began diverting highway user fees to transit in 1982, it gave transit agencies incentives to invest in high-cost transportation systems such as subways and light rail when lower-cost systems such as buses would often work just as well. Once they build the high-cost systems, the transit agencies never plan for the costs of reconstructing them, which is needed about every 30 years. The Washington Metro system, which was built as a “demonstration project” in the 1970s, is just a little ahead of the curve.

Now over 30 years old, Washington’s subways are beginning to break down. Before the recent accident, some of the symptoms were broken rails, smoke in the tunnels, and elevator and escalator outages.

Now we learn that the National Transportation Safety Board told Metro in 2006 to replace the cars that crashed on Monday because they were in danger of “telescoping,” which is what killed so many people in Monday’s accident. Also, the brakes were overdue for maintenance. Metro responded that it planned to eventually replace the obsolete cars, but didn’t have the money for it.

But it does have money to build an expensive new rail line to Tysons Corner and, eventually, Dulles Airport. Planners had originally recommended running bus-rapid transit along this route, but that wasn’t expensive enough so Metro decided to go with rails instead – at ten times the cost of the bus line.

The simple problem is that we have forgotten about the need to weigh revenues and costs. Instead, transit has become a favorite form of pork barrel and, for the slightly more idealistic, a method of social engineering, meaning a part of the Obama administration’s campaign to “coerce people out of their cars.”

That’s one more government program we can do without.