2019-02-07

Moah costs and benefits

While ATTP tries and fails to find common ground with JC, I rather liked the pic which he found over at Reducing greenhouse gas emissions helps the economy by Patrick T. Brown, PhD1. In the end, it will turn out that there's less to the picture than meets the eye, but it isn't a view I was familiar with, so worth looking.

We start from the assumption that we're on the blue dot at the moment: which is to say, we're burning as much fossil fuel as we possibly can, consistent with making a fast buck. This is obviously a heavy idealisation but I think it is in principle trueish. And from this and smoothness assumptions, we can deduce that the shape of the marginal benefit curve of extra emissions is flat at the point we're at. And therefore we can deduce that as long as the shape of the marginal costs is negative, as we'd plausibly expect, then the "optimal" emissions - if all was accounted for - would be less than they are now.

This is little different from the familiar idea that "social cost of carbon" represents an uninternalised externality consequent on FF burning, and if costed in would reduce FF burning by increasing its costs. Although what this figure does it make it clearer that adding in SCC doesn't then reduce your "optimal" emissions to zero.

If we continue with ATTPs thoughts, we come to It’s already clear that there are economic (and other) benefits to emitting less than we otherwise could. Of course, this doesn’t tell us how much less we should emit, but it does tell us that some kind of optimal pathway involves some level of emission reductions. And here we hit the problems. Firstly, indeed, this kind of schematic gives us little clue as to how big the "optimal" reductions might be - indeed they might be trivial - and the Nordhaus stuff he inlines indicate an "optimal" pathway with apparently flatlining emissions; we've already talked about whether this is plausible or not. But there's also the problem that there's no control knob on the economy marked "FF burning", other than the one we're not prepared to use, carbon taxes2. And this is a problem because you only get to quote the "optimal" results if you do it in the optimal way. If you do it in a distinctly non-optimal way by subsidies and regulation, you get a non-optimal result.

Notes


1. Don't tell anyone, but PTB credits it to Tol. Look closer; his name is even on it.

2. Or cap-n-trade, which is worse.

10 comments:

Phil Hays said...

Carbon taxes, Cap and Trade, something... something...

...and Then There's Physics said...

The reason I included the discussion about the Nordhaus paper was to suggest that it is possible to better quantify an optimal pathway (even if we might not all agree on it being optimal) and I did mention a carbon tax as one way to address this issue :-) The main point I was trying to get at was that it's hard to see how hand-waving to things like no-regrets policy will do much to actually get us onto anything that might reasonably be regarded as some kind of optimal pathway. This is certainly not an argument against dealing with the issues that these no-regrets policy are intended to deal with. However, I can't really see how these make up some kind of common ground from which one can work in order to actually do something about climate change.

Tom said...

But.. but... a carbon tax is a no-regrets policy, as long as the taxes collected are rebated.

William Connolley said...

A no-regrets policy is easily mistaken for, or morphable into, a do-nothing policy, which I think is a bad idea. A no-regrets policy amounts to just do stuff you would do anyway, which isn't a policy. As you know, I strongly support a carbon tax.

Perhaps this is a good place to say that I don't really believe in an "optimal pathway". That's the sort of language that people designing society, or reading lines off graphs use, and as a good Hayekian I don't believe in designing society. There's a line of argument in Popper somewhere, criticising the Utilitarians, who have assumed - without proof and against all the evidence - that there is a greater good that can be optimised. Popper suggests instead we should be minimising harm.

> a carbon tax is a no-regrets policy

That may depend on who you are; I don't think I'd classify it as such. Now I look - e.g. here - I find that "no regrets" is such an ill-defined concept that I cannot distinguish it from meaninglessness. Perhaps time for a post on it, either from me or ATTP. I notice that JCs testimony, while mentioning the concept, provides no detail. She does hint at some with http://thebreakthrough.org/blog/Climate_Pragmatism_web.pdf but that's a 404. FFS, is she just taking the piss?

Fortunately those nice people at Grist - who naturally enough don't like the thing - at least saved a copy for posterity.

This appears to suggest "politically feasible forms of action" - so things that happen are no-regrets, and those that don't aren't, perhaps. I'm keener on "primarily by example, not global treaty", which is correct (however, even economic no-brainers like dropping all tariff barriers to zero encounter massive opposition not only from idiot pols but also from people who really ought to know better, so I have no confidence that nations will act even n their own best interest.

Rather later on - after a variety of what to me seem non-actionable ideas - they state that Addressing public health risks associated with conventional air pollutants, including black carbon, methane, stratospheric ozone-depleting chemicals, precursors to tropospheric
ozone, and mercury... Whatever one’s view of climate change, most Americans and most nations can agree that reducing pollution at modest or no cost to the economy is the definition of “no regrets” action
. Being an ex-mathematician, I take "is the defn of" very seriously; to me that means the *only* things that are no-regrets are those listed; since CO2 isn't in the list, a carbon tax cannot be such a measure. Reducing such is a good idea, but won't do much for GW.

So, meh. I don't think they have much of use to say.

Tom said...

Well, the Bush (pere) administration came out with their own No Regrets list a long time ago and the definition has changed more than once since then.

The definition that best suits my prejudices amounts to 'stuff we should do even if climate change is a complete fraud,' and it is not an empty set. It is policy that recognizes conventional pollution as a threat to human health and fossil fuels as a resource that may be exhausted in the next century or so.

CO2 can serve as a proxy measurement of the status of both conventional pollution and over-consumption of a disappearing resource. As such, a carbon tax is one, and may be the optimum one, way of pricing/controlling/reducing pollution and consumption of fossil fuels.

Its advantage over other pricing mechanisms is that it extends across the range of fossil fuels, where most other measures target one only.

William Connolley said...

OK, that sounds like a reasonable defn, but what policies do you actually end up with?

A carbon tax becomes dubious under that defn, unless you want it for the we-may-run-out-one-day reason.

Tom said...

Yeah, and this is where I get in trouble with activists. A lot of No Regrets looks suspiciously like adaptation, which activists insist sit in the back of the bus while we march on to Mitigation Jerusalem. And viewed from 30,000 feet, No Regrets can look like incrementalist patches on a leaky ship.

But, back in the day I wrote that AGW would be best addressed by 50 2% solutions instead of finding the one ring to rule them all. I got quite a bit of flack for that--maybe some from you? Too lazy to go back and check...

The IPCC wrote, "One that would generate net social benefits whether or not there is climate change. No-regrets opportunities for greenhouse gas emissions reduction are defined as those options whose benefits such as reduced energy costs and reduced emissions of local/regional pollutants equal or exceed their costs to society, excluding the benefits of avoided climate change. No-regrets potential is defined as the gap between the market potential and the socio-economic potential."

The skeptic organization Competitive Enterprise Institute offered some ideas:

"A “no regrets” approach to climate change would incorporate the following policy measures, among others:

1) Remove Regulatory Barriers to Innovation: Existing regulatory programs, and many environmental regulations in particular, create obstacles to the development and deployment of emission-reducing and energy-saving technologies. Such regulations retard market-driven enhancements in efficiency and environmental performance that reduce energy use and emissions per unit of output.

2) Eliminate Energy Subsidies: Government energy subsidies distort energy markets and energy-related investment decisions without producing off-setting returns. The elimination of energy subsidies, in the United States and abroad, would result in a more efficient energy sector.

3) Deregulate Electricity Markets: Local electricity monopolies and government utility regulation are significant barriers to innovation in the energy sector. Electricity deregulation and consumer choice will create market opportunities for alternative energy sources and create further pressure for greater efficiency and innovation in the energy sector.

4) Deregulate Transportation Markets: Airline travel is a rapidly increasing source of greenhouse gas emissions, yet air travel regulations prevent airlines from flying the most cost-effective and energy-efficient routes. Allowing “free flight” could reduce per-flight energy use by as much as 17 percent. Lowering regulatory barriers to improvements in other transportation sectors, such as road construction and management, could also produce substantial emission reductions."

I have my own list, if I can find it somewhere... it included a lot of energy efficiency stuff a la Pielke fils and a lot of what I call 'pre-adaptation,' where infrastructure spending include a margin of error for climate impacts without running up the costs much. I also think work to mitigate subsidence issues is important with or without anthropogenic contributions to sea level rise.

Pretty vanilla stuff when compared to the Green New Deal, but finding 50 of them... I think that actually wins.

rconnor said...

> “Electricity deregulation and consumer choice will create market opportunities for alternative energy sources and create further pressure for greater efficiency and innovation in the energy sector.”

That’s questionable…

“In particular, funding for strategic energy R&D aimed at developing future energy supply options (eg, fusion, fission, ‘clean’ fossil energy, renewable energy) has been decreased substantially in both the public and private sectors in many of these nations. These trends are now starting to be seen in the United States as it moves towards the deregulation of the nation’s utilities. The magnitude of the reductions in support for energy R&D in the public and private sectors and the shift towards decidedly shorter-term R&D has profound implications for nations approaching deregulation”

https://www.sciencedirect.com/science/article/pii/S0301421597001663

> “yet air travel regulations prevent airlines from flying the most cost-effective and energy-efficient routes.”

Ummm, there’s pretty good (safety) reasons for that.

Tom said...

Hi rconnor,

"Ummm, there’s pretty good (safety) reasons for that."

Well there certainly were back before satellite navigation was available. I don't think I or even the CEI advocate traffic jams in the sky...

rconnor said...

> “I don't think I or even the CEI advocate traffic jams in the sky...”

Certainly. So when you account for all the legitimate safety reasons why the most “energy efficient” route may be restricted, what % savings are you left with?

There are no specifics on how current regulations stifle energy efficiency for any of the suggestions and even some of the general assumptions made don’t match reality. I provided one example of how deregulation in the energy market leads to less R&D in new generation technologies. Another example would be building and equipment design codes and standards significantly contributing to improvements in energy efficiency (estimated savings in the US of 105-293 TWh from 2010 to 2020[1]).

There’s also the common misconception that if an energy efficiency improvement saves money over the life of the product, then the market would adopt it anyways. This ignores how market actors operate in the real world (hint: they aren’t perfectly rational). In the residential market, few people do life cycle costing on equipment and are, instead, driven by upfront cost. Even in the (large) industrial market, it’s all about hitting internal payback criteria (1.5 to 2 years is common). Therefore, subsidies and incentives are crucial in influencing their decision making by reducing the incremental cost between the “base case option” and the “energy efficient option”. They also help expedite market uptake on new technologies.

But let’s be honest - that list has nothing to do with emission reductions (it even alludes to that as well with “The aforementioned policies may not significantly reduce total greenhouse-gas emissions”) and everything to do with pushing a free market ideology.

[1] http://www.edisonfoundation.net/IEE/Documents/IEE_RohmundApplianceStandardsEfficiencyCodes1209.pdf