Gernot Wagner's Blog, page 13

The economic case for environmental rules

In recent months, some in Congress have been waging a whole-scale war against the Environmental Protection Agency. By now it has reached comical dimensions, with three separate bills aimed at preventing a so-called EPA "dust rule" that has never even existed.

The spectacle would indeed be funny, if it wasn't deadly serious. Republicans in Congress and in the GOP presidential debates are seeking to defund an already cash-strapped EPA under the pretense of caring about the federal deficit and are trying to hamper the agency by arguing that its rules hurt the economy.

Quite to the contrary. We have 40 years of data to show that a cleaner environment goes hand in hand with solid economic growth.

Harvard Professor Dale W. Jorgenson, one of the deans of macroeconomic modeling who has been honing his model of the U.S. economy for decades, calculates that gross domestic product in 2010 was 1.5 percent higher because of the Clean Air Act of 1970. It turns out that protecting children from foul air leads to more productive adult workers.

That's the moral equivalent of arguing for child labor laws by saying that keeping kids in school will increase their earnings as adults. But even this reductionist argument, focused only on a narrow definition of dollars and cents, works to show the benefits of cleaner air.

Overall, benefits of the 1970 Clean Air Act exceed costs by a factor of 30 to 1. The 1990 Clean Air Act Amendments match that ratio: $1 of investments led to $30 in benefits—fewer children sick or dying, more productive workers, and healthier environs.

In a 2010 analysis of rules passed in the prior decade, the non-partisan Office of Management and Budget calculated benefits-to-cost ratios across various government agencies. The EPA came out on top with the highest ratios by far, with benefits from its regulations exceeding costs by an average of more than 10 to 1. If you care about well-functioning, free markets, the EPA would be the last federal agency you'd want to cut.

None of this is magic. It's something much more mundane: honest accounting.

Continue reading at Yale Environment 360.

Like nuclear nonproliferation and the abolition of slavery

Global warming has characteristics that make it unique among most public policy problems. Its effects are more global, more long-term, and more uncertain than most. That triple whammy makes sensible national and global policy exceedingly difficult. But that shouldn't stop us to look for analogies and cues from other seemingly intractable problems.

Nuclear disarmament is one. The analogy isn't perfect, but there's a lot to be said to avoid the current UNFCCC-focused mindset and bubble of international climate talks.

Perhaps an even better analogy is the abolition of slavery. Marc Davidson has written the seminal paper on the topic, drawing parallels in reactionary argumentation in U.S. congressional debates between abolition and the Kyoto Protocol. Some of the parallels are readily apparent: the debates "revolve around 'energy resources' considered vital to the economy and pivotal to everyday life"; true costs are shipped off to others who have no vote in the political process; and, first and foremost, deep-seeded resistance to social change.

Direct parallels in "reactionary rhetoric" are even more striking. In both cases, you have duly elected Representatives arguing how what is clearly bad is, in fact, good (no, slaves weren't better off as slaves, and no, global warming isn't good for the planet), how change would bring economic ruin (wrong then as it is now), or how social change would hit other groups (women then, the poor now; newsflash: global warming hits the poor the most).

There may well be another parallel at work here, as Christian Azar points out in Makten över klimatet, a successful Swedish book, soon to be translated into English: "Slavery in the British colonies was abolished in 1833, effective five years later. The slave owners, not the slaves, were compensated for their losses."

No trash, plenty of logo

No trash bins in this establishment.

All you'll find is delicious, $5-a-scoop ice cream and a choice between organic and paper waste baskets. Grom's "plastic" spoons turn out to be plant-based. Makes you feel a lot better about tasting your way through a few flavors.

Too bad the plastic cover for your hot chocolate cup is in fact plastic. Good thing there's a trash bin outside on the sidewalk. Just don't disturb the recycling fun inside.

Build a cocoon around your kid, just don't open the window

My wife and I have no car, no TV, and a no-screens policy around our 8-month-old. We carry him around in an organic cotton wrap. His favorite toys are wood, his baby soap is plant-based, his only pacifier is his left thumb. He has yet to taste baby formula, food from a jar, or anything heated in a microwave. His bottles are BPA-free, and any plastic or chemical around him is also sold in Europe with its much stricter toxics policy. In short, we do everything in our power to keep our firstborn happy and healthy.

Yet none of that matters once we open our doors or windows and let in deceptively clean-looking but polluted air.

We can attempt to build a protective cocoon around our child and do so with fervor, but national policy—or the lack thereof—nixes all attempts to making a difference as parents. As soon as we breathe, or drink water, or do most anything else for that matter, we are connected to the planet and everyone else around us.

It's one thing to put your child in the safest possible car seat. It's quite another to learn that infant mortality goes up near highways. City streets aren't much better, with all the idling cars. The gunk and soot from tailpipes and smokestacks alike cause allergies, asthma, hypertension, and all sorts of other ills.

It even starts before birth. Call me a crazed environmentalist, but I draw a line when it comes to pollutants in my kid's amniotic fluid. I don't like my son to be born pre-polluted. Yet there is little I can do individually, as long as coal plants are spewing mercury into the air.

That goes for local air and water pollution as much as for an even bigger problem with potentially much more severe consequences for any of our children. A ton of carbon dioxide pollution emitted today causes at least $20 worth of damage in our lifetime. The average American emits 20 of these tons a year. That's quite a debt burden we are leaving our children. Sadly, much of it is virtually irreversible. We can bail out banks and entire countries. Bailing out the planet is a much scarier proposition.

The only way to tackle almost any kind of pollution is to become an engaged citizen and demand that polluters pay for the damage they cause.

It's policy, not individual action, that makes all the difference here. Buy organic, buy local, do all the right things. But the best way to protect your child is first and foremost to vote.

From "Moms Clean Air Force".

Keystone delay dismay

The controversial Keystone XL pipeline bringing oil from Canadian tar sands to U.S. consumers will not be built for at least another year. There's now a chance that it will never be built. If you care about the future of the planet, that's a reason to celebrate. Is it not?

Perhaps not, for three reasons:

First, the decision whether or not to build the pipeline was simply delayed until after the election. Tapping into the same tar sand reserves twelve months later would still mean almost the same amount of global warming pollution in the atmosphere over time.

Second, this may yet turn out to be a Pyrrhic victory for greens. As Michael Levi points out, the climate argument alone didn't persuade the administration to decide against the pipeline. It was Nebraskan not-in-my-backyard thinking that did the trick. Now environmentalists are celebrating. When the same NIMBY thinking scuttles clean energy developments, most will cry foul (and rightfully so).

Third, and perhaps most important, the decision was about the pipeline, not about the tar sands themselves. They are still sitting there for the tapping. It will be more difficult to do so without a direct pipeline, but there are surely others who will gladly pay for some heavy crude. We ship oil from the Persian Gulf to the Gulf of Mexico. Why not send it from Canada to, say, China? And even the U.S. is still in the running. We now send oil from Cushing, Oklahoma, up to Chicago. There's still the option on the table to reverse the pipeline and send oil on down.

It all just shows that the only way to truly get off oil is by pricing pollution, not by blocking single pipelines, however symbolic they may be.

Cold, Hard Economics

We can't solve global warming because I fucking changed light bulbs in my house. It's because of something collective.

That quote, by the way, is courtesy of Barrack Obama. More in my Foreign Policy article.

Australia's landmark legislation will put price on carbon pollution, create world’s second-largest carbon-price system

By Gernot Wagner

By Jennifer Andreassen, originally posted on our Climate Talks blog.

As expected, Australia’s upper house of Parliament voted yesterday to adopt a carbon price, which will compel Australia’s largest polluters, beginning July 1, 2012, to pay for their carbon pollution.

Australia will have the largest carbon-price system in the world outside Europe's, after its upper house approved the Clean Energy Future package of bills Nov. 8. The package of bills aims to cut emissions from coal-dependent Australia 80% by 2050 from 2000 levels.

The legislation’s passage will give Australia, which has the highest per capita emissions of any developed country in the world and uses even more coal than the United States, the largest carbon-price system in the world outside of the European Union. (That is, the largest outside the EU until California’s program takes effect in January 2013; California last month approved the largest, first-ever economy-wide carbon market in North America, which could eventually link to other sub-national, national and regional markets around the world.)

EDF applauds Australia on its leadership on the vitally important problem of climate change. This vote is another indication that more and more countries around the world – with the U.S. being a notable exception – are taking climate change seriously. The legislation also backs Australia’s international commitment to reduce emissions by between 5 and 25 per cent by 2020 from 2000 levels.

The Clean Energy Future Package

The Clean Energy Future package is made up of 18 bills that will assign a price to carbon starting July 1, 2012 and cut Australia’s emissions 5% below 2000 levels by 2020 (though the target can be strengthened based on science or international action), and 80% below 2000 levels by 2050.

Australia’s 400-500 largest emitters will be covered by the carbon price, which will take the form of a fixed price (starting at A$23 per metric ton) for the first three years, and shift to a carbon market emissions trading system in 2015.

As we mentioned when Australia’s lower house passed the clean energy legislation on October 11, the Clean Energy Future package will shift Australia’s energy towards cleaner and renewable sources by:

Placing a price on carbon.
Creating a market-based system with plans to link it with ‘credible international carbon markets or emissions trading schemes in other countries’ – like New Zealand and Europe – after 2015.
Giving a big boost to renewable energy research and development and deployment through a new $10 billion financing vehicle, the “Clean Energy Finance Corporation.”

(The Southern Cross Climate Coalition has some more details on the legislation in its analysis, as does Natural Resources Defense Council’s Jake Schmidt in his post Congrats Australia! Law passed which will require mandatory carbon pollution reductions for major polluters.)

Climate groups in Australia welcomed the passage of the laws, as did:

Australian Prime Minister Julia Gillard, who told reporters:

Today we have made history. … This is about what's right for the nation's future.

Deutsche Bank Australia carbon analyst Tim Jordan, who said:

This is a very positive step for the global effort on climate change. It shows that the world's most emissions-intensive advanced economy is prepared to use a market mechanism to cut carbon emissions in a low-cost way.

CEO of The Climate Institute John Connor, who said:

This is a vital cog in Australia's pollution reduction machinery with the potential to help cut around 1 billion tonnes of carbon pollution from the atmosphere between next year and 2020.

This vote means Australia now brings greater credibility going into international climate negotiations starting later this month in South Africa. It also puts wind in the sails of other jurisdictions about to introduce, or considering, emissions trading schemes which similarly price and limit carbon pollution.

The G20 Cannes Action Plan for Growth and Jobs even highlights the Australian legislation as an example of how members will “enhance competition and reduce distortions” in its plan to create “sustained, broad-based reforms to boost confidence, raise global output and create jobs.”

What’s next for Australia

Now, the Government moves into implementation mode, which means it will take to:

Establishing new institutions, including the Climate Change Authority (to recommend on future emissions targets); the Clean Energy Finance Corporation; and the Clean Energy Regulatory to oversee the market;
Finalizing contracts next year to close 2000 MW of brown coal power generation;
Working with New Zealand and EU officials on linking schemes after 2015.

Linkages to international carbon markets that are built into the system will also see Australia become a key player in the international offset market.

And Australian officials will be able to hold their heads high at the UN climate conference in Durban at the end of this year, as they promote their joint proposal with Norway for a roadmap to a 2015 global climate treaty.

Australia's landmark legislation will put price on carbon pollution, create world's second-largest carbon-price system

By Jennifer Andreassen, originally posted on our Climate Talks blog.

As expected, Australia's upper house of Parliament voted yesterday to adopt a carbon price, which will compel Australia's largest polluters, beginning July 1, 2012, to pay for their carbon pollution.

Australia will have the largest carbon-price system in the world outside Europe's, after its upper house approved the Clean Energy Future package of bills Nov. 8. The package of bills aims to cut emissions from coal-dependent Australia 80% by 2050 from 2000 levels.

The legislation's passage will give Australia, which has the highest per capita emissions of any developed country in the world and uses even more coal than the United States, the largest carbon-price system in the world outside of the European Union. (That is, the largest outside the EU until California's program takes effect in January 2013; California last month approved the largest, first-ever economy-wide carbon market in North America, which could eventually link to other sub-national, national and regional markets around the world.)

EDF applauds Australia on its leadership on the vitally important problem of climate change. This vote is another indication that more and more countries around the world – with the U.S. being a notable exception – are taking climate change seriously. The legislation also backs Australia's international commitment to reduce emissions by between 5 and 25 per cent by 2020 from 2000 levels.

The Clean Energy Future Package

The Clean Energy Future package is made up of 18 bills that will assign a price to carbon starting July 1, 2012 and cut Australia's emissions 5% below 2000 levels by 2020 (though the target can be strengthened based on science or international action), and 80% below 2000 levels by 2050.

Australia's 400-500 largest emitters will be covered by the carbon price, which will take the form of a fixed price (starting at A$23 per metric ton) for the first three years, and shift to a carbon market emissions trading system in 2015.

As we mentioned when Australia's lower house passed the clean energy legislation on October 11, the Clean Energy Future package will shift Australia's energy towards cleaner and renewable sources by:

Placing a price on carbon.
Creating a market-based system with plans to link it with 'credible international carbon markets or emissions trading schemes in other countries' – like New Zealand and Europe – after 2015.
Giving a big boost to renewable energy research and development and deployment through a new $10 billion financing vehicle, the "Clean Energy Finance Corporation."

(The Southern Cross Climate Coalition has some more details on the legislation in its analysis, as does Natural Resources Defense Council's Jake Schmidt in his post Congrats Australia! Law passed which will require mandatory carbon pollution reductions for major polluters.)

Climate groups in Australia welcomed the passage of the laws, as did:

Australian Prime Minister Julia Gillard, who told reporters:

Today we have made history. … This is about what's right for the nation's future.

Deutsche Bank Australia carbon analyst Tim Jordan, who said:

This is a very positive step for the global effort on climate change. It shows that the world's most emissions-intensive advanced economy is prepared to use a market mechanism to cut carbon emissions in a low-cost way.

CEO of The Climate Institute John Connor, who said:

This is a vital cog in Australia's pollution reduction machinery with the potential to help cut around 1 billion tonnes of carbon pollution from the atmosphere between next year and 2020.

This vote means Australia now brings greater credibility going into international climate negotiations starting later this month in South Africa. It also puts wind in the sails of other jurisdictions about to introduce, or considering, emissions trading schemes which similarly price and limit carbon pollution.

The G20 Cannes Action Plan for Growth and Jobs even highlights the Australian legislation as an example of how members will "enhance competition and reduce distortions" in its plan to create "sustained, broad-based reforms to boost confidence, raise global output and create jobs."

What's next for Australia

Now, the Government moves into implementation mode, which means it will take to:

Establishing new institutions, including the Climate Change Authority (to recommend on future emissions targets); the Clean Energy Finance Corporation; and the Clean Energy Regulatory to oversee the market;
Finalizing contracts next year to close 2000 MW of brown coal power generation;
Working with New Zealand and EU officials on linking schemes after 2015.

Linkages to international carbon markets that are built into the system will also see Australia become a key player in the international offset market.

And Australian officials will be able to hold their heads high at the UN climate conference in Durban at the end of this year, as they promote their joint proposal with Norway for a roadmap to a 2015 global climate treaty.

If Australia can do it

Australia, the world's biggest coal exporter and by most measures the world's most emissions-intensive industrialized country, officially passed its carbon price law. (The law met its most important hurdle in the lower house last month. Now it's all but official after a vote in the upper house.)

The Australians seem to be doing many things right here. Lower-income households are more than compensated for the costs, but the law still creates the right incentives for most everyone. Most importantly, it follows rule #1: you pay for your own pollution.

This step may also be another indication of the theory that climate change does indeed need to hit home to want to do something about it. You just need to read title and subtitle of this excellent piece by Jeff Goodell to know what's at stake: "Climate Change and the End of Australia—Want to know what global warming has in store for us? Just go to Australia, where rivers are drying up, reefs are dying, and fires and floods are ravaging the continent"

20 chilly homes of carbon dioxide per year

Americans emit around 20 tons of carbon dioxide per year. Europeans emit 10. The global average is at around 4.

These are striking numbers, but they don't mean much to most of us.

What's a ton of CO2? Does it matter if it's short or metric?

Weight, of course, is the right way to think about it. If you burn a log of wood, you will be left with some ash and a lot of hot air. Where did the rest of the log go? It's floating around above you in form of carbon dioxide and various other forms of gunk.

So how much is a ton of CO2 exactly?

Using some standard assumptions, a ton of CO2 comes out to around 16,000 cubic feet at 32 degrees Fahrenheit.

That's about the size of the average American home with 2,500 square feet of living space. That times twenty is the volume each of us fills year after year: 20 chilly homes of carbon dioxide.

(It's also a much better answer than the one I gave when asked about it at the Carnegie Council. Thank you, Mischa Woods and Conrad Shultz, for the pointers.)