TT`s Lost in Tokyo : carbon pricing

Republicans (Sen. Lindsey Graham & others) give Dems a climate deal? In exchange for streamlining for nukes, "clean coal" subsidies, offshore drilling, carbon price ceiling & import taxes

TokyoTom — Mon, 12 Oct 2009 12:26:00 GMT

Senate Dems, who lack sufficient votes on their own to approve a cap-and-trade bill over a possible Republican fillibuster, have sought help from sympathetic Republicans, who have apparently used this leverage to broaden the bill and to extract key concessions on various issues; such concessions are sure to please a wide range of lobbying groups, and it looks like there may be a good chance that they will be sufficient to slip a cap-and-trade bill past opposition from coal-producing and -burning states.

The framework of the bi-partisan package was spelled out on Sunday, October11, in a joint NYT op-ed, "Yes We Can (Pass Climate Change Legislation)", by liberal Senator John Kerry (D-Mass.) and conservative Senator Lindsey Graham (R-SC).

While details are sketchy (and details sure to still be fought over), it looks like Pres. Obama will have, if not final legislation, then at least high prospects for a cap-and-trade bill that he can use for the negotiations that will start in a few weeks in Copenhagen (over the shape of a global climate treaty to replace the expiring Kyoto Protocol).

Excerpts from the Kerry-Graham op-ed are here (emphasis added; with a few comments in brackets):

Many Democrats insist on tough new standards for curtailing the carbon emissions that cause global warming. Many Republicans remain concerned about the cost to Americans relative to the environmental benefit and are adamant about breaking our addiction to foreign sources of oil [Republicans are so easily jerked around over "energy security"].

However, we refuse to accept the argument that the United States cannot lead the world in addressing global climate change. [but do China, India and others want to follow?] We are also convinced that we have found both a framework for climate legislation to pass Congress and the blueprint for a clean-energy future that will revitalize our economy, protect current jobs and create new ones, safeguard our national security and reduce pollution. ...

First, we agree that climate change is real and threatens our economy and national security. That is why we are advocating aggressive reductions in our emissions of the carbon gases that cause climate change. We will minimize the impact on major emitters through a market-based system that will provide both flexibility and time for big polluters to come into compliance without hindering global competitiveness or driving more jobs overseas. [cap-and-trade]

Second, while we invest in renewable energy sources like wind and solar, we must also take advantage of nuclear power, our single largest contributor of emissions-free power. Nuclear power needs to be a core component of electricity generation if we are to meet our emission reduction targets. We need to jettison cumbersome regulations that have stalled the construction of nuclear plants in favor of a streamlined permit system that maintains vigorous safeguards while allowing utilities to secure financing for more plants. We must also do more to encourage serious investment in research and development to find solutions to our nuclear waste problem.

Third, climate change legislation is an opportunity to get serious about breaking our dependence on foreign oil. For too long, we have ignored potential energy sources off our coasts and underground. Even as we increase renewable electricity generation, we must recognize that for the foreseeable future we will continue to burn fossil fuels. To meet our environmental goals, we must do this as cleanly as possible. The United States should aim to become the Saudi Arabia of clean coal. For this reason, we need to provide new financial incentives for companies that develop carbon capture and sequestration technology.

In addition, we are committed to seeking compromise on additional onshore and offshore oil and gas exploration — work that was started by a bipartisan group in the Senate last Congress. Any exploration must be conducted in an environmentally sensitive manner and protect the rights and interests of our coastal states.

Fourth, we cannot sacrifice another job to competitors overseas. China and India are among the many countries investing heavily in clean-energy technologies that will produce millions of jobs. There is no reason we should surrender our marketplace to countries that do not accept environmental standards. For this reason, we should consider a border tax on items produced in countries that avoid these standards. This is consistent with our obligations under the World Trade Organization and creates strong incentives for other countries to adopt tough environmental protections.[probably just a signal to China & India; any bill would have to leave flexibility to the Administration.]

Finally, we will develop a mechanism to protect businesses — and ultimately consumers — from increases in energy prices. The central element is the establishment of a floor and a ceiling for the cost of emission allowances. This will also safeguard important industries while they make the investments necessary to join the clean-energy era. We recognize there will be short-term transition costs associated with any climate change legislation, costs that can be eased. But we also believe strongly that the long-term gain will be enormous. ...

If Congress does not pass legislation dealing with climate change, the administration will use the Environmental Protection Agency to impose new regulations. Imposed regulations are likely to be tougher and they certainly will not include the job protections and investment incentives we are proposing.

The message to those who have stalled for years is clear: killing a Senate bill is not success; indeed, given the threat of agency regulation, those who have been content to make the legislative process grind to a halt would later come running to Congress in a panic to secure the kinds of incentives and investments we can pass today. Industry needs the certainty that comes with Congressional action.

Joe Romm on the left applauds the proposed deal (though there is sure to be disagreement about support for coal, nuclear power and offshore oil & gas exploration), and Bill Scher says "Sen. Lindsey Graham Crosses the Climate Rubicon" and thus "made a deal all but inevitable".

On the right, Michelle Malkin reports that she was right to warn about Republican turn-coats, the National Review `s Gore-haters are dispirited, and MasterResource, the coal-funded "free market" energy blog by libertarian Rob Bradley, has nothing to say.

Political scientist Roger Pielke, Jr. notes the lack of precision and suggests that Republicans now have the upper hand in negotiating the bill.

More reaction and background that readers may find useful is here:

- http://www.hillheat.com/

- CLIMATE: Nuclear language key to hitting 60 in Senate -- Lieberman (E&E Daily, 10/09/2009)

- Offshore Drilling Could Add, Subtract Support for Senate Climate Bill (NYT`s ClimateWire, October 9, 2009)

- Lindsay Graham (R-SC): “If you had a bill that would allow for responsible offshore drilling, a robust nuclear power title, I think you could get some Republican votes for a cap-and-trade system.” (Joe Romm, Climate Progress, October 8, 2009)

- Let's Try This Again: Are There GOP Senators Who Will Back The Climate Bill? (Bill Scher, Campaign for America`s Future, October 7, 2009)

- CLIMATE: Senate Dems opening to nuclear as a path to GOP support, 60 votes (E&E Daily, 10/07/2009)

- Senators link drilling with cap-and-trade (Houston Chronicle, October 6, 2009)

- Cap and Trade: Will The Senate Go For Carbon Tariffs, Too? (WSJ, October 1, 2009)

- Is Lieberman at it again? (Politico, 9/21/09)

- On the Climate Bill Fence: How Sen. Graham Got There by Bill Chameides (Dean of Duke U`s school of the environment) | Aug 27, 2009

- More on other senators by Bill Chameides

From a libertarian perspective, I ask other libertarians and those on the right whether it is not too late to get a leaner climate/energy bill, that would:

instead of a cap-and-trade program (that hands out emissions permits free to existing fossil fuel users, with costs being borne regressively by energy users), use upstream carbon taxes, with the revenues rebated per capita to all Americans;
allow limited use of offsets in lieu of taxes (effectiveness of eligible offsets to be insured for a period of 50 years) by Lloyd`s of London);
eliminate subsidies for all energy technologies (including ethanol and biofuels)
provide that at least half of all revenues taken in by the federal government and state government for offshore oil & gas leases and for coal leases will be paid per capita to citizens (and state residents);
allow nuclear fuel reprocessing and breeder plants, while eliminating federal insurance for nuke plants;
eliminate the grandfathering of dirty coal-burning plants under the Clean Air Act;
allow immediate tax deduction of a ll capital expenditures (eliminating multi-year amortization limits);
eliminate mandates that public utilities increase use of green, renewable fuels, in favor of the removal of antitrust protection for the grant of local monopolies (and other measure that introduce real competition into the retail power sector), and application of Commerce Clause protection to those who want to sell power out-of-state;
establishes energy efficiency targets, as opposed to mandates, with awards to category winners, and publishes results;
privatize the TVA (by distributing shares per capita to all who are served by TVA);
publish information on the locations of coal fly-ash storage sites;
make it clear that federal and state licenses for energy facilities and mines are not licenses to pollute, do not extend any immunity for actual damages caused, and do not prevent injunctions for facilities identified as causing particular damage; and
to dampen NIMBYism, establish compensation schedules for federally-licensed facilities, and encourage states to do the same (based on distance and like wind and water flow).

Ringside seat on the fight to steer the Chamber of Commerce`s climate bus

TokyoTom — Wed, 07 Oct 2009 02:37:00 GMT

On the heels of my post about Apple leaving the U.S. Chamber of Commerce, here are a few more links and excerpts for eager readers (who have been spared a longer post that vanished into the ether as pixie dust crashed Mozilla and my prior unsaved draft) (emphasis added).

1. The Chamber`s opaque policy-making mechanism on climate, and the trigger for the wave of departures from the U.S. Chamber of Commerce;

see long article at NYT:

U.S. Chamber of Commerce staff decides the trade group's climate and energy policy positions without approval from the board of directors, Nike Inc. charged as it formulated a plan to call for greater chamber openness.

Nike, which last week left the chamber's board of directors but decided to remain a chamber member, described a lack of transparency at the group that conflicts with how the chamber describes its operations. ...

"We just weren't clear in how decisions on climate and energy were being made," said Brad Figel, Nike's director of government relations. "They're not being made at the board-of-director level, because we're a member of the board of directors. We were not consulted. We're convinced that's not really where the action on climate change is being made."

The chamber reaches its positions through a "democratic process" that is "driven by members," chamber spokesman Eric Wohlschlegel said yesterday. ...

"Policy is developed and recommendations are made to the whole board," spokesman Wohlschlegel said yesterday. "It's an open and voluntary process, and it's formulated by a majority of our members that represents the broader business community's perspective and not just the interests of one sector, one energy sector ... or one sector of the economy."

He would not address Nike's statement, however, that while it had representation on the board of directors, the board did not vote on climate policy positions. Wohlschlegel would not say when the board last took a vote on its position on climate legislation. ...

"They told us these decisions were made by staff [and not pursuant to the Board`s committee system]," Figel said. He said that Nike was told that "this is a longstanding chamber policy," and that "once the policy is established, a lot of these decisions can be made at the staff level."

Last spring, Figel said, Nike told the chamber that it wanted to be consulted on climate issues. After that, he said, "there were several decisions that were made by the chamber that we weren't consulted on."

In particular, Figel said, Nike recoiled at a chamber official's call for an EPA trial similar to the Scopes Monkey Trial on evolutionary theory [regarding EPA`s steps to employ regulatory authority affirmed by a Supreme Court decision during the Bush administration].

"That's not helpful in any way," Figel said. "That put a lot of companies on edge, how they phrased that."

The statement this summer by William Kovacs, a chamber senior vice president, that the science of global warming should face a public trial similar to the Scopes Monkey Trial thrust the trade group into a new realm, [Kenneth] Green [resident scholar at the American Enterprise Institute] said.

"That was beyond the pale in terms of aggressiveness that I've seen in a trade association," Green said. "At that point, they were really inserting themselves into the political process in an extremely visible way, not just a matter of lobbying for their companies but really engaging in the bigger cultural argument. I wouldn't be surprised if that wasn't what scared some people away."

Note (from Marc Gunther at Salon in April): " Nike—along with Starbucks (SBUX), Levi Strauss, and Timberland (TBL)—helped form a green-business coalition to lobby for strong federal actions on climate. The coalition is called BICEP: Business for Innovative Climate and Energy Policy."

From blog of Marc Gunther (who is a Fortune contributing editor):

To be sure, the chamber, which calls itself “the voice of business” and spent about $62 million lobbying Congress last year, also has lots of members from the oil, coal and energy-intensive industries who oppose federal regulation of greenhouse gases. Its 122-member board includes executives from Consol Energy, Massey Energy, Peabody Energy, and the Southern Co.

The smart thing for the chamber to do would be to stay neutral—to admit that business is divided on the issue and to leave lobbying up to individual companies. Instead, some chamber officials offered up reasonable arguments against the bills pending in Congress and others went off the deep end. In a remark that was ill-advised at best and downright dumb at worst, William Kovacs, the chamber’s senior vice president for environment, technology and regulatory affairs, called for a public trial about climate science that he said would be “the Scopes monkey trial of the 21st century.”

2. Who dissents from the Chamber`s long-standing opposition to climate change legislation? (with links to statements)

Quit the Chamber: Exelon, PNM Resources, PG&E, Apple.

Quit the Chamber`s Board: Nike.

Says Chamber doesn't represent their views on climate:

- seven Board members from companies that are part of the U.S. Climate Action Partnership, a wide business coalition pushing for passage of climate legislation: Alcoa, Caterpillar, ConocoPhillips, Dow Chemical, Duke Energy, Siemens and Xerox

- General Electric, General Motors, Ford, Shell, DuPont, American Electric Power, and John Deere also support mandatory controls on greenhouse gas emissions.

- ExxonMobil favors a carbon tax (as I have noted several times).

- Entergy, a New Orleans-based utility also on the board

- General Electric,

- Johnson & Johnson,

- San Jose Chamber of Commerce.

Note: Those expressly in favor of the Chamber`s go slow approach on climate appear to be limited to coal firms Peabody Energy, Massey Energy Corp., and CONSOL Energy, and freight shipper Con-Way Inc. As noted previously, Chamber CEO Tom Donohue is closely tied to coal shipper Union Pacific.

3. In a move that shows how little the Chamber cares about the opinion and positions of its dissenting members, CEO Tom Donohue took at jab at Apple in this October 6 letter that he addressed to Apple CEO Steve Jobs in response to Apple`s announced resignation from the Chamber (with editorial comments):

Dear Mr. Jobs:

"I am sorry to learn of Apple's resignation from the U.S. Chamber of Commerce. It is unfortunate that your company didn't take the time to understand the Chamber's position on climate and forfeited the opportunity to advance a 21st century approach to climate change. [Needless, to say, Apple quit because it fully understood and was fed up with the Chamber`s actual position - unrelenting intransigence; PG&E said in its letter to the Chamber announcing its withdrawal: "Extreme rhetoric and obstructionist tactics seem to increasingly mark the Chamber's public stance on this issue."]

"The U.S. Chamber of Commerce continues to support strong federal legislation and a binding international agreement to reduce carbon emissions and address climate change. [The Chamber has no consistent expressed approach; it has opposed all federal legislation, and opposes provisions that would penalize foreign countries not adopting similar legislation. It is simply trying to put lipstick on a pig.] Furthermore, we believe that Congress should set climate change policy through legislation, rather than having the EPA apply existing environmental statutes that were not created to regulate greenhouse gas emissions. This is also the stated position of the President and Congressional leaders. [The regulatory threat exists only because the Bush administration and Republican Congress refused to act, and because the Chamber has exercised no leadership in outlining constructive legislation.]

"Your letter states that "Apple is committed to the environment and the communities in which we operate around the world." So is the Chamber but we are also committed to preserving the competitiveness and prosperity of the communities and businesses in our nation. [Particularly the competitiveness and prosperity of the Chamber members that mine, transport and burn coal.]

"While we do support legislation to address climate change [the Chamber continues to take the position that even an average 3 degrees C increase over the next century would bring net benefits], we oppose legislation such as the Waxman-Markey bill that numerous studies show will cause Americans to lose their jobs and shift greenhouse gas emissions overseas, negating potential climate benefits. An effective climate change response must include all major CO2 emitting economies, promote new technologies, emphasize efficiency, ensure affordable energy for families and businesses, and defend American jobs while returning our economy to prosperity.

"The American business community that we proudly represent is the single largest investor and innovator in clean energy solutions and remains committed to a strong economy and clean environment. ... The Chamber believes that the business community will continue to be the catalyst for reducing greenhouse gas emissions and we support efforts to tackle climate change in a way that will strengthen our economy, protect American jobs, and benefit our environment.

"Climate change is a global problem that requires a global solution. The Chamber supports an international agreement that will set realistic and achievable goals, ensure global participation, protect intellectual property rights and remove trade barriers to environmental goods and services.

"I would have hoped that Apple would have supported our efforts to improve environmental stewardship and keep Americans at work and our economy competitive. As the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region, the Chamber is leading the way to support the innovation needed to transition to a lower carbon future, including the elimination of barriers to the deployment of clean energy technologies. Supporting innovation and technology is at the very heart of our efforts to combat climate change, and we will continue to fight for an approach that embraces their merits.

"It is a shame that Apple will not be part of our efforts." [Yes; the Chamber will just have to "lead" with fewer followers, fewer resources, and less prestige. And it appears that Tom Donohue is trying to "lead" the way to even fewer Chamber members; Dale Carnegie`s "How to Win Friends and Influence People," anyone? ]

4. More ongoing insightful (if skewed) commentary on the Chamber of Commerce here by Peter Altman, "Climate Campaign Director" of the mainstream enviro group NRDC (which largely "depend on the kindness of rich people to stay afloat." Its board and major donors "come from Wall Street, corporate law firms and big companies."

5. It`s clear that we are looking not merely at a clash of preferences, but a clash of preferences over how government is used - and in whose favor. This would look like classic "rent-seeking", but for the fact that it relates to the management of an un-owned, open-access commons that affects all of us - the atmosphere and climate system - and the fact that Coasean bargaining on an international scale cannot, in any practical sense, be conducted without involving states.

Bob Murphy spins shallow "Blockbuster study" by coal lobby on cap and trade bill

TokyoTom — Fri, 02 Oct 2009 10:04:00 GMT

The coal- and utility-funded "free-market think tank" Institute of Energy Research has a just released another study that tells us the obvious about the regressive consequences of the Waxman-Markey cap-and-trade bill and the benefits likely to flow to its corporate supporters, while masking its own agenda. As an added benefit, the press release includes some one-sided and unsupportable over-statements by Bob Murphy.

A few points:

IER: "cap-and-trade would precipitate a financial windfall for well-connected special interests and politically-favored companies."

me: No dispute here. It`s perfectly fair to point out who will benefit from the cap-and-trade bills. But let`s not ignore that coal investors have long benefitted from being able to shift pollution costs to people downstream, under the perverse "rights to pollute" enabled under the Clean Air Act, and under state and federal mining licenses that allow mining firms to force out local residents.

IER: "The study ... details how shareholders, not ratepayers, will be the primary beneficiaries of cap-and-trade’s largess."

me: Sure, just like how it was shareholders in coal producers and utilities who are the primary beneficiaries of the externalities permitted by the status quo.

Bob Murphy: "[The] analysis ... illustrates just how flawed and skewed this legislation is toward rent-seeking special interests."

me: Sure, but the interest of the coal lobby is that the legislation doesn`t benefit them enough. Do coal investors care MORE about what`s good for the average Joe than do other "rent-seeking special interests"?

Bob Murphy: "secondly, and more important, [the analysis] shows that cap-and-trade, as outlined in Waxman-Markey, is nothing more than a transfer of wealth from the poorest to the richest among us."

me: Oh really? Does the analysis really conclude that Waxman-Markey does "nothing more" than transfer wealth? You mean Waxman-Markey wouldn`t actually raise prices of carbon-based energy or affect consumption and investment decisions by industry, businesses and consumers?

Bob Murphy: “These new findings should send a clear message to the American people – cap-and-trade helps the powerful and hurts the rest of us."

me: The message is fine and important. But are coal firms and investors "the rest of us", not powerful and only concerned about the average Joe, or are they trying to protect their own privileged position? Further, are there any alternatives to cap-and-trade that coal investors support, such as carbon taxes, or even undoing their favored treatment under federal clean air laws and mining laws?

Bob Murphy: And as Congress’ corporate allies receive the bulk of the benefits Waxman-Markey has to offer, our environment, along with our struggling economy, will suffer for years to come. Congress needs to get out of the business of picking winners and losers and allow the market to determine which energy and electricity sources should power our economy.”

me: Ahh yes, forgive me; I forgot that coal firms were a part of the enviro lobby! But aside from that, I agree strongly that Waxman-Markey is poor policy. Do coal investors agree with Exxon that rebated carbon taxes would keep Congress "out of the business of picking winners and losers and allow the market to determine which energy and electricity sources should power our economy”?

Thanks, IER for showing us how "political capitalism" works!

* "Political capitalism" is Rob Bradley`s term for "rent-seeking"

Confirmation bias, rent-seeking and the rush to print the latest climate science "scoop" (Lindzen-Choi)

TokyoTom — Fri, 04 Sep 2009 16:30:00 GMT

Since I`m in Tokyo and deprived of Bob Murphy`s enviable access, via talk radio, to cutting-edge climate science, I thank him using his blog to bring it to the attention of his audience (which occasionally includes me). Says Bob (emphasis added):

Chip Knappenberger explains the significance (and remaining holes to be plugged) in the recent Lindzen-Choi paper that's got talk radio in such a tizzy. The opening sentence: "MIT climate scientists Richard Lindzen and collaborator Yong-Sang Choi soon-to-be published paper (Geophysical Research Letters, American Geophysical Union) pegs the earth’s “climate sensitivity”—the degree the earth’s temperature responds to various forces of change—at a value that is about six times less than the “best estimate” put forth by the Intergovernmental Panel on Climate Change (IPCC)."

Well, well, if talk radio is covering a new article that purportedly downplays climate risks, then others who have invested time in casting doubt

I`ve blogged previously about my various conversations with Chip Knappenberger, who is employed by the self-described "advocacy" group of Pat Michaels, New Hope Environmental Services.

I went to pay a visit to his post at Rob Bradley`s pro-coal, "free market" MasterResource blog, which I have discussed on any number of occasions here - especially after Mr. Bradley unceremoniously withdrew the welcome mat for libertarian critics (yours truly) while in mid-conversation with (and without notice to) several of his guest bloggers.

I reviewed Chip`s precis of the Lindzen-Choi paper and attempted to leave comments at MasterResource, but they were "disappeared" as soon as they were posted, so I forwarded a copy of my comments by email directly to Chip, which I copy below (with minor edits):

Chip, I couldn`t resist trying to comment on your post at MR, and
checking to see if Rob still has his blog set up to automatically
exclude all of my comments. Unfortunately, he still seems to be
convinced that a principled and libertarian approach (or his clients`
needs) requires maintaining his echo chamber by excluding me.

To check the sophistication of his method, I have for the first time
just tried commenting anonymously (I have until stayed away and simply
hoped Rob would change his mind), and to my surprise the comment went
through - though it is "awaiting moderation". [update: this post has now received immoderate , "echo chamber" moderation]

I thought I would give you a head`s up on my pending comment, which I
do not expect to see published - but who knows? Strange things
sometimes happen, such as Rob quoting with approval a link to a
comment that I have made:
http://mises.org/Community/blogs/tokyotom/archive/2009/08/26/fun-with-partisanship-and-self-deception-the-climate-follies-and-rob-bradley.aspx.

My comment is below; I will wait until tomorrow before cross-posting
at my own blog.

Sincerely,

Tom

[comment left at MasterResource]
"It is too early to tell whether Lindzen and Choi’s findings will
prove to be the end-all be-all in this debate."

But it`s not too early for you, for others who act as paid mouthpieces
for fossil fuel and others who wish to avoid policy action, to trumpet
this as yet unpublished paper all over the intertubes, is it Chip?

By the way, continuing studies on the "sensitivity" of temperatures to
GHG increases should not lead us to ignore either the problem of ocean
acidification from our accelerating CO2 build-up or the very exquisite
sensitivity of the Earth`s climate and ecosystems to the 0.6 C average
temp increase that we have experience over the past 50 years
(remaining stuck at a peak for the past 10). The Arctic and temperate
zone glaciers continue to rapidly thaw, and other changes affecting
ecosystems and human livelihoods are still underway.

I note I have seen very preliminary remarks by James
Annan here, and by

Gavin Schmidt here.

"a waste of time and effort"

More directly, don`t you mean that such efforts would cost your clients money?

Sure, there are reasonable grounds to dispute practically any use of
government (though I note that Exxon and Margo Thorning of the ACCF
are both expressly advocating carbon taxes), but let`s not pretend to not

notice that those speaking most loudly in support of our radical, ongoing
planet-wide "experiment" on the affect of GHG emissions and albedo
changes are precisely the investors and firms (and their mouthpieces)
who benefit from the status quo (leaving all of these activities
unpriced), while it`s the world`s populations more generally who end
up with all of the risks.

This climate experiment and those paid to provide it cover are hardly
a "conservative" or "libertarian" enterprise.

I note that Bob Murphy is no climate expert, but simply posting blindly about something that he thinks cuts in the direct he wants; in a similar vein, Knappenberger also evidently is puffing the importance of a scientific article that is hot off the presses, but can`t be troubled to link to any articles providing additional context. (A recent blog post and comments by Steve McIntyre at Climate Audit also point out the difficulties in reaching conclusions from the new research.)

I also note, as I have previously, that not only Chip but Bob as well - when he has on his "economist for IER" (which is a coal and public utility front group that was de-funded last year by Exxon) hat - are, at least in part, being compensated to undercut climate change policy.

In this context, we all are prone to note evidence that fits into our existing world view, while discounting contrary information, such "confirmation bias" is readily apparent in the internet and radio coverage of this piece. While climate change and climate policy are certainly hot topics, it doesn`t seem to me that the so-called "skeptics" are at all taking this new study skeptically, but are instead eagerly lapping it up, assume it is good news, are are loudly trumpeting it. Now who`s fooling whom? Many "skeptics" look just like the "alarmist" "global warming cult" "believers" whom they abhor.

Unfortunately, while it`s impossible to know what Rob and Chip are actually thinking and why, it`s clear that a dangerous mix of self-deception, confirmation bias and rent-seeking permeates the tribal conflicts that we are seeing in current over the use of government, not the least in the case of climate change, which is a difficult scientific and policy issue.

A note to Joe Romm about big, bad, carbon-tax-supporting Exxon and the API

TokyoTom — Fri, 28 Aug 2009 12:58:00 GMT

Joe Romm has a post up at Climate Progress that is highly critical of the U.S. oil industry, his ire no doubt triggered by the news that the American Petroleum Institute (API) is coordinating a series of "Energy Citizen" rallies by oil industry employees that target U.S. Senators in 21 states.

Romm`s post largely focuses on past efforts by Exxon to influence the debate by emphasizing Exxon`s PAST role in funding others to cast doubt on the science of climate change - a campaign that Exxon appears to have abandoned - and the greater part of the post consists of a requote of a recent commentary by Bloomberg reporter Eric Pooley, “Exxon Works Up New Recipe for Frying the Planet“. It seems to me that neither Romm nor Pooley has done a good job of establishing a case for laying their current ire at the foot of "carbon-tax" Exxon.

I left the following comment at Romm`s blog, and look forward to his response after it slips through moderation:

Joe, I understand your suspicions of Exxon, but even as they are convenient whipping boy, they are not coal firms, which I`m sure you understand are a much greater climate threat and which are treated so favorably under Waxman-Markey.

Moreover, you and Pooley paint over your lack of substantiation with very broad brush strokes that are more fairly directed to other members of the API. Granted Exxon is a bit late, but:

- they have expressly agreed that climate risks merit mitigation policies,

- CEO Rex Tillerson has specifically advocated carbon taxes (for which he is good company with Jim Hansen, most economists - and now even Margo Thorning of the ACCF!),

- they are making substantial investments in climate research and biofuels; and

- they are not supporting the API`s fake "citizens" meetings.

Why is Exxon still Public Enemy #1 for you, and not Peabody and other coals firms - and the states and US government, who are hooked on royalties?

I agree with the many economists who strongly prefer a rebated carbon tax. I would love to hear your scientific and political calculation that leads you to favor cap and trade.

Margo Thorning / ACCF to WVa. Conservative Foundation: we need a carbon tax and other policies to reduce greenhouse gas emissions

TokyoTom — Fri, 28 Aug 2009 06:07:00 GMT

Margo Thorning, Chief Economist and SVP at the influential American Council for Capital Formation (and director of research for its tax and environmental policy think tank (ACCF Center for Policy Research) and managing director of its new international affiliate, the International Council for Capital Formation) has been a persistent and vocal long-term opponent of most climate change policy, so much so that she`s got her own "ExxonSecrets FactSheet" (alongside similar ones for ACCF).

She`s also the author of widely-quoted studies of the costs of climate change legislation, and has been busy explaining the study jointly released earlier this month by ACCF and the National Association of Manufacturers that assesses the potential impact of the Waxman-Markey Bill on manufacturing, jobs, energy prices and our overall economy,

(The rollout of the study, executive summary, etc. are here; criticisms of the study`s assumption are here, here, here, here, here and here.)

All of which makes her remarks on August 25 at a "Cap and Trade Town Hall meeting" sponsored by the West Virginia Conservative Foundation (and reportedly the West Virginia Manufacturers Association as well) - to the effect that we DO need federal and global policies to reduce GHG emissions and to prepare to adapt to changes that we will be unable to forestall - even the more remarkable.

I quote below from an August 27 report of Thorning`s remarks in the online version of The State Journal (emphasis added):

Thorning believes that climate change is happening, that it is at least in part caused by human activity and that some type of policy to reduce greenhouse gas emissions is warranted.

But while climate scientists recommend keeping atmospheric concentrations of greenhouse gases below 450 parts per million to avoid the very worst effects of climate change, Thorning said it's too late for that.

"We're probably, because of China and India and developing countries, going to have to adapt to a higher level of CO2 concentrations in the atmosphere," Thorning said in an interview before the event. "We might be able to keep it to 550, but I think we better focus on adapting to a changing environment."

There is no rush in Thorning's mind.

"CO2 stays in the atmosphere 100 years," she said. "I think we can afford to take a thoughtful approach."

Congress currently is considering a cap-and-trade program that would place a cap on carbon emissions, issue permits that companies could trade in an emissions market and then ratchet the cap down over time to ensure emissions reductions.

Rather than a cap-and-trade program, Thorning advocates a carbon tax that would put a price directly on greenhouse gas emissions and would rise over time.

Now this might have startled her audience and readers here, but close observers might have noted that Thorning made a similar statement two years ago when, as I previously reported, she said in an interview that "Senator Lieberman and Warner are to be commended for their efforts to reduce greenhouse gas emissions, because I think we're all united that that's a goal we need to put a lot of resources into."

Thorning spoke further in West Virginia about why a carbon tax is preferable to cap and trade:

In general, economists say, a cap on greenhouse gas emissions gives certainty about emissions but uncertainty about the price of emissions, while a tax on the emissions gives certainty about the price but not about the quantity.

Companies need that price certainty, Thorning said, so they can make investment decisions.

A study sponsored in part by the ACCF and released earlier this month found that the program Congress is considering could reduce U.S. Gross Domestic Product between 1.8 and 2.4 percent from a baseline projection in 2030.

It did not compare the effects of a carbon tax.

Thorning also spoke of the need for revenue.

President Barack Obama initially planned to auction the cap-and-trade emissions permits and to direct some of the proceeds to the development of renewable energy sources and carbon capture and storage technology.

However, as the program has come to be structured, the permits would be given for free to emitters in at least the first decade of the program.

A tax, Thorning said, would bring in those revenues and enable the government to support the development and deployment of important technologies.

From a broader perspective, Thorning underlined the growth of emissions in China, India and other emerging economies. She champions the exchange in both directions of the most effective technologies to reduce greenhouse gas intensiveness.

She pointed to the Major Economies Initiative housed in the U.S. Department of State to foster cooperation among 17 countries that represent 85 percent of greenhouse gas emissions.

The initiative can help promote business-to-business transactions like one in which Caterpillar Inc. is turning methane captured at 60 Chinese coal mines into electricity, she said.

"So Caterpillar is making money on that, and we're suppressing a gas that's even more harmful than CO2 -- and the Chinese are getting electricity," she said. "There are about eight key areas like that that have been identified in this Major Economies Initiative."

Thorning believes that a gradually increasing U.S. carbon tax combined with international cooperation on best practices is the least economically disruptive approach to reducing greenhouse gas emissions over time.

"Remember that economic growth and stronger economies allow people to adapt to a changing environment," she said. "We have to keep our eye on the bigger picture."

h/t http://www.carbontax.org/

What else does Thorning want to see done on climate policy? In a presentation in June to the Midwest Energy and Climate Policy Conference in St. Louis, Thorning argued that practical strategies for reducing global greenhouse growth would include the following steps:

Use cost / benefit analysis before adopting policies
If U.S. puts a price on carbon emissions, a carbon tax is preferable to cap and trade
Reduce cost of U.S. energy investment through tax code improvement and incentives for non profits
Remove barriers to developing world’s access to more energy and cleaner technology by promoting economic freedom and market reforms
Increase R&D for new technologies to reduce energy intensity, capture and store carbon, and develop new energy sources
Promote nuclear power for electricity
Promote truly global solutions and consider expanding the Asia Pacific Partnership on Development with its focus on economic growth and technology transfer to other major emitters

These prescriptions expand on her November 2007 interview:

Q:So, if you were given the opportunity to sort of write your own proposal of how the U.S. should reduce emissions and not hurt itself economically, you'd go with the carbon tax?

Margo Thorning: I would go with the carbon tax and more incentives for new technology development. And I would change the U.S. tax code, because we have the slowest depreciation allowances for new energy investment of 12 countries that we compared recently. We have very high capital costs for new investment because depreciation is so slow and our effective tax rate is very high, because our corporate tax rate is the highest in the industrial world. So our companies are disadvantaged vis-à-vis our trading partners because of our tax system.

This would seem to align Thorning`s views fairly closely with those of the still-villified Exxon, which has been a generous supporter of ACCF, and whose CEO Rex Tillerson is an express advocate of carbon taxes. The nail-biting question is whether these voices are too little and too late in the game to steer the cap and trade pork train on to a more productive track.

On Bob Murphy`s narrow attack on Krugman`s support for the Waxman-Markey climate bill

TokyoTom — Fri, 12 Jun 2009 03:54:00 GMT

I just stumbled into Bob Murphy `s June 8 post at the LvMI Daily site, and submitted a few comments . As it looks like my links prevented my comments from posting, I`ve copied them here (with a few typo tweaks and links added): Bob, I didn`t realize you...(read more)

Jim Hansen on Freeman Dyson on climate change

TokyoTom — Sun, 29 Mar 2009 15:20:00 GMT

I received the following in an email from NASA climate scientist James Hansen (whom I`ve mentioned a number of times ), in connection with today`s New York Times Magazine article ( "The Civil Heretic" ) on Freeman Dyson , which is now making...(read more)

[Fixed] Exxon/Rex Tillerson: No longer willing to be "conservative" on climate risks, advocates carbon taxes and invests in carbon-lite tech

TokyoTom — Sat, 07 Mar 2009 17:47:00 GMT

[Somehow most of my excerpts of Tillerson`s speech weren`t included in my first try; there`re here this time.] It may still seem novel to some, but Exxon Mobil Corporation began throwing its weight behind carbon pricing policies more than two years ago...(read more)

Marlo Lewis/CEI at MasterResource: why a massive cap & trade program is much, much better than Jim Hansen's simple rebated carbon tax idea. Or not.

TokyoTom — Tue, 03 Mar 2009 09:49:00 GMT

Marlo Lewis of CEI has a rather schizophrenic post up at Rob Bradley 's MasterResource blog - one of my favorite "free market" fossil-fuel industry-funded sites (unlike the NRO's "Planet Gore", MasterResource actually allows...(read more)

Henry Payne/NRO and the Deal Not Taken: He's shocked, shocked that Dems won't end CAFE mileage standards

TokyoTom — Thu, 19 Feb 2009 10:41:00 GMT

Henry Payne (cartoonist at the Detroit News and commentator at NRO) has a interesting post up on Feb. 18 at NRO's enviro-bashing "Planet Gore" website: "Obama’s Washington Is the Enemy of Auto-Industry Reform ". In it, Payne...(read more)

Fat Tails Part Deux: cost-benefit analysis and climate change; Weitzman replies to Nordhaus

TokyoTom — Fri, 13 Feb 2009 10:55:00 GMT

[Note: Although the giant snakes I mentioned in my preceding post may have fat tails, I didn't want my description of the discussion between Harvard`s Martin Weitzman and Yale`s William Nordhaus of the limits of cost-benefit analysis to be overlooked...(read more)

Let`s recreate the Paleocene! Giant snakes, "fat tails", cost-benefit analysis and climate change; Weitzman replies to Nordhaus

TokyoTom — Wed, 11 Feb 2009 15:24:00 GMT

Giant snakes? What could a few colossal bones found in Colombia have to do with us now?

1. A recent paper in Nature about the discovery of several specimens of a giant snake ("Titanoboa") that lived in Latin America 60 million years ago captured attention last week, including among climate change bloggers (yes, "skeptics" too). Why? Not only because the snakes were enormous (more than 40 feet and over a ton) - making anacondas look like garter snakes - but because their size appears to tell us something about the climate about during the Paleocene. Based on existing knowledge of the size, metabolism and temperature tolerances of snakes, scientists believe that the size of the snake appears to indicate that not only was the world overall quite warm during the Paleocene (with palms growing at the poles), but that average temperatures in the tropics would have been from 3° to 5° Celsius (5° to 9° F) warmer than they are today in order for such large snakes to survive.

The period in which these snakes lived was followed a few million years later by the Paleocene - Eocene Thermal Maximum (PETM) in 56 million BC, when a pulse of CO2 and methane drove already warm temperatures sharply higher (by 5° Celsius / 9° F) in less than 10,000 years. During the PETM, CO2 levels rose to about 2000 ppm, or roughly 6 times where they are now. The PETM resulted in a massive extinction of species.

The size of the snakes and the temperatures at their time and shortly after during the PETM also tell us that climate is sensitive (on geological scales, sometimes rather short-term) to atmospheric levels of carbon and methane - and remind us that there is a "fat tail" of uncertain climate change risks posed by mankind`s ramped up efforts to release as much as possible of the CO2 that has been stored up in the form of fossil fuels, methane and limestone over millions years.

2. I have mentioned the issue of "fat tails" previously, in connection with attempts at applying cost - benefit analysis (CBA) to determine whether to tax CO2 emissions. While economists like Yale`s William Nordhaus who have applied CBA to climate policy have been saying for decades that taxing carbon makes sense on a net basis, our own Bob Murphy has criticized Nordhaus`s approach on rather narrow (and decidedly non-Austrian) grounds.

But Nordhaus has also been strongly criticized by economists such as Harvard`s Martin Weitzman, who basically argue that Nordhaus has UNDERSOLD the case for carbon pricing or that the results of such CBA imply a greater certainty of knowledge (and complacency) than is deserved. Weitzman points out basic difficulties inherent in applying CBA to policies addressing climate change, particularly where there seems to be a grave possibility that we do not understand how drastically the climate might respond to our influences. Weitzman`s comments (scheduled to appear in the February issue of The Review of Economics and Statistics) were the focus of the lead essay by Jim Manzi in Cato Unbound`s August 2008 issue, which I reviewed.

Nordhaus has since responded to Weitzman, and this time with Bob Murphy stepped in as a defender of CBA. Weitzman has now replied to Nordhaus, and has kindly permitted me to quote from the current draft of such reply. It seems that Weitzman provides a compelling statement of some the limits of CBA, as applied to climate change. It seems to me that any Austrian ought to be sympathetic to Weitzman`s criticisms of the limits of CBA.

(NB: Weitzman`s draft response is a .pdf file that I cannot upload, though I have uploaded a version convert to .txt format. I am happy to forward the .pdf to any interested readers.)

The rest of the post sets out the most salient (for a layman) of Weitzman`s key points:

"there is enormous structural uncertainty about the economics of extreme climate change, which, if not unique, is pretty rare. I will argue on intuitive grounds that the way in which this deep structural uncertainty is conceptualized and formalized should influence substantially the outcomes of any reasonable CBA (or IAM) of climate change. Further, I will argue that the seeming fact that this deep structural uncertainty does not influence substantially outcomes from the "standard" CBA hints at an implausible treatment of uncertainty."

"The pre-industrial-revolution level of atmospheric CO2 (about two centuries ago) was Normal 0 0 2 false false false MicrosoftInternetExplorer4 about280 parts per million (ppm). The ice-core data show that carbon dioxide was within a range roughly between Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈180 and Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈280 ppm during the last 800,000 years. Currently, CO2 is at Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈385 ppm, and climbing steeply. Methane was never higher than Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈750 parts per billion (ppb) in 800,000 years, but now this extremely potent GHG, which is thirty times more powerful than CO2, is at Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈1,780 ppb. The sum total of all carbon-dioxide-equivalent (CO2-e) GHGs is currently at Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈435 ppm. Even more alarming in the 800,000-year record is the rate of change of GHGs, with increases in CO2 being below (and typically well below) Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈40 ppm within any past sub-period of ten thousand years, while now CO2 has risen by Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈40 ppm in just the last quarter century.

Thus, anthropogenic activity has elevated atmospheric CO2 and CH4 to levels extraordinarily far outside their natural range - and at a stupendously rapid rate. The scale and speed of recent GHG increases makes predictions of future climate change highly uncertain. There is no analogue for anything like this happening in the past geological record. Therefore, we do not really know with much confidence what will happen next."

"To keep atmospheric CO2 levels at twice pre-industrial-revolution levels would require not just stable but sharply declining emissions within a few decades from now. Forecasting ahead a century or two, the levels of atmospheric GHGs that may ultimately be attained (unless drastic measures are undertaken) have likely not existed for tens of millions of years and the rate of change will likely be unique on a time scale of hundreds of millions of years.

Remarkably, the "standard"CBA of climate change takes essentially no account of the extraordinary magnitude of the scale and speed of these unprecedented changes in GHGs - and the extraordinary uncertainties they create for any believable economic analysis of climate change. Perhaps even more astonishing is the fact that the "policy ramp" of gradually tightening emissions, which emerges from the "standard" CBA, attains stabilization at levels of CO2-e GHGs that approach Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈700 ppm. The "standard" CBA [of Nordhaus] thus recommends imposing an impulse or shock to the Earth's system by geologically-instantaneously jolting atmospheric stocks of GHGs up to Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈21/2 times their highest past level over the last 800,000 years - without even mentioning what an unprecedented planetary experiment such an "optimal" policy would entail."

"So-called "climate sensitivity" (hereafter denoted S1) is a key macro-indicator of the eventual temperature response to GHG changes. Climate sensitivity is defined as the global average surface warming following a doubling of carbon dioxide concentrations. ... the median upper 5% probability level over all 22 climate-sensitivity studies cited in IPCC-AR4 (2007) is 6.4° C - and this stylized fact alone is telling. Glancing at Table 9.3 and Box 10.2 of IPCC-AR4, it is apparent that the upper tails of these 22 PDFs tend to be sufficiently long and heavy with probability that one is allowed from a simplistically-aggregated PDF of these 22 studies the rough approximation P[S1>10° C] Normal 0 0 2 false false false MicrosoftInternetExplorer4 ≈1%. The actual empirical reason why these upper tails are long and heavy with probability dovetails nicely with the theory of my paper: inductive knowledge is always useful, of course, but simultaneously it is limited in what it can tell us about extreme events outside the range of experience - in which case one is forced back onto depending more than one might wish upon the prior PDF, which of necessity is largely subjective and relatively diffuse. As a recent Science commentary put it: "Once the world has warmed by 4° C, conditions will be so different from anything we can observe today (and still more different from the last ice age) that it is inherently hard to say where the warming will stop."

"Exhibit C" concerns possibly disastrous releases over the long run of bad-feedback components of the carbon cycle that are currently omitted from most general circulation models. The chief worry here is a significant supplementary component that conceptually should be added on to climate sensitivity S1. This omitted component concerns the potentially powerful self-amplification potential of greenhouse warming due to heat-induced releases of sequestered carbon. ... Over the long run, a CH4 outgassing-amplifier process could potentially precipitate a cataclysmic strong-positive-feedback warming. This real physical basis for a highly unsure but truly catastrophic scenario is my Exhibit C in the case that conventional CBAs and IAMs do not adequately cover the deep structural uncertainties associated with possible climate-change disasters. Other examples of an actual real physical basis for a catastrophic outcome could be cited, but this one will do here. The real physical possibility of endogenous heat-triggered releases at high temperatures of the enormous amounts of naturally-sequestered GHGs is a good example of indirect carbon-cycle feedback effects that I think should be included in the abstract interpretation of a concept of "climate sensitivity" that is relevant here. What matters for the economics of climate change is the reduced-form relationship between atmospheric stocks of anthropogenically-injected CO2-e GHGs and temperature change. ... When fed into an economic analysis, the great open-ended uncertainty about eventual mean planetary temperature change cascades into yet-much-greater yet-much-more-open-ended uncertainty about eventual changes in welfare."

"Exhibit D" concerns what I view as an unusually cavalier treatment of damages or disutilities from extreme temperature changes. The "standard" CBA treats high-temperature damages by a rather passive extrapolation of whatever specification is assumed (typically arbitrarily) to be the low-temperature "damages function." ... Seemingly minor changes in the specification of high-temperature damages can dramatically alter the gradualist policy ramp outcomes recommended by the "standard" CBA. Such fragility of policy to postulated forms of disutility functions are my Exhibit D in making the case that the "standard" CBA does not adequately cope with deep structural uncertainty - here structural uncertainty about the specification of damages."

"An experiment without precedent is being performed on planet Earth by subjecting the world to the shock of a geologically-instantaneous injection of massive amounts of GHGs. Yet the "standard" CBA seems almost oblivious to the extraordinarily uncertain consequences of catastrophic climate change."

"Almost nothing in our world has a probability of exactly zero or exactly one. What is worrisome is not the fact that extreme tails are long per se
(reflecting the fact that a meaningful upper bound on disutility does not exist), but that they are fat (with probability density). The critical question is how fast does the probability of a catastrophe decline relative to the welfare impact of the catastrophe. Other things being equal, a thin-tailed PDF is of less concern because the probability of the bad event declines exponentially (or faster). A fat-tailed distribution, where the probability declines polynomially, can be much more worrisome. ... To put a sharp point on this seemingly abstract issue, the thin-tailed PDFs that Nordhaus requires implicitly to support his gradualist "policy ramp" conclusions have some theoretical tendency to morph into being fat tailed when he admits that he is fuzzy about the functional forms or structural parameters of his assumed thin-tailed PDFs - at least for high temperatures. ... When one combines fat tails in the PDF of the logarithm of welfare-equivalent consumption with a utility function that is sensitive to high damages from extreme temperatures, it will tend to make the willingness to pay (WTP) to avoid extreme climate changes very large."

"Presumably the PDF in the bad fat tail is thinned, or even truncated, perhaps from considerations akin to what lies behind the value of a statistical life (VSL). (After all, we would not pay an infinite amount to eliminate altogether the fat tail of climate-change catastrophes.) Alas, in whatever way the bad fat tail is thinned or truncated, a CBA based upon it remains highly sensitive to the details of the thinning or truncation mechanism, because the disutility of extreme climate change has "essentially" unlimited liability. In this sense climate change is unique (or at least very rare) because the conclusions from a CBA for such an unlimited-liability situation have some built-in tendency to be non-robust to assumed tail fatness."

"Reasonable attempts to constrict the fatness of the "bad" tail can still leave us with uncomfortably big numbers, whose exact value depends non-robustly upon artificial constraints, functional forms, or parameters that we really do not understand. The only legitimate way to avoid this potential problem is when there exists strong a priori knowledge that restrains the extent of total damages. If a particular type of idiosyncratic uncertainty affects only one small part of an individual's or a society's overall portfolio of assets, exposure is naturally limited to that specific component and bad-tail fatness is not such a paramount concern. However, some very few but very important real-world situations have potentially unlimited exposure due to structural uncertainty about their potentially open-ended catastrophic reach. Climate change potentially affects the whole worldwide portfolio of utility by threatening to drive all of planetary welfare to disastrously low levels in the most extreme scenarios."

"Conclusions from CBA [are] more fuzzy than we might prefer, because they are dependent on essentially arbitrary decisions about how the fat tails are expressed and about how the damages from high temperatures are specified. I would make a strong distinction between thin-tailed CBA, where there is no reason in principle that outcomes should not be robust, and fat-tailed CBA, where even in principle outcomes are highly sensitive to functional forms and parameter values. For ordinary run-of-the-mill limited exposure or thin-tailed situations, there is at least the underlying theoretical reassurance that finite-cutoff-based CBA might (at least in principle) be an arbitrarily-close approximation to something that is accurate and objective. In fat-tailed unlimited exposure situations, by contrast, there is no such theoretical assurance underpinning the arbitrary cutoffs or attenuations - and therefore CBA outcomes have a theoretical tendency to be sensitive to fragile assumptions about the likelihood of extreme impacts and how much disutility they cause."

"My target is not CBA in general, but the particular false precision conveyed by the misplaced concreteness of the "standard" CBA of climate change. By all means plug in tail probabilities, plug in disutilities of high impacts, plug in rates of pure time preference, and so forth, and then see what emerges empirically. Only please do not be surprised when outcomes from fat-tailed CBA are fragile to specifications concerning catastrophic extremes. The extraordinary magnitude of the deep structural uncertainties involved in climate-change CBA, and the implied limitations that prevent CBA from reaching robust conclusions, are highly frustrating for most economists, and in my view may even push some into a state of denial. After all, economists make a living from plugging rough numbers into simple models and reaching specific conclusions (more or less) on the basis of these numbers. What are we supposed to tell policy makers and politicians if our conclusions are ambiguous and fragile?"

"It is threatening for economists to have to admit that the structural uncertainties and unlimited liabilities of climate change run so deep that gung-ho "can do economics may be up against limits on the ability of quantitative analysis to give robust advice in such a grey area. But if this is the way things are with the economics of climate change, then this is the way things are - and non-robustness to subjective assumptions is an inconvenient truth to be lived with rather than a fact to be denied or evaded just because it looks less scientifcally objective in CBA. In my opinion, we economists need to admit to the policy makers, the politicians, and the public that CBA of climate change is unusual in being especially fuzzy because it depends especially sensitively on what is subjectively assumed about the high-temperature damages function, along with subjective judgements about the fatness of the extreme tails and/or where they have effectively been cut off. Policy makers and the public will just have to deal with the idea that CBA of climate change is less crisp (maybe I should say even less crisp) than CBAs of more conventional situations."

"The moral of the dismal theorem is that under extreme uncertainty, seemingly casual decisions about functional forms, parameter values, and tail thickness may be dominant. We economists should not pursue a narrow, superficially precise, analysis by blowing away the low-probability high-impact catastrophic scenarios as if this is a necessary price we must pay for the worthy goal of giving crisp advice. An artificial infatuation with precision is likely to make our analysis go seriously askew and to undermine the credibility of what we say by effectively marginalizing the very possibilities that make climate change grave in the first place."

"The issue of how to deal with the deep structural uncertainties in climate change would be completely different and immensely simpler if systemic inertias (like the time required for the system to naturally remove extra atmospheric CO2) were short (as is the case for SO2; particulates, and many other airborne pollutants). Then an important part of an optimal strategy would presumably be along the lines of "wait and see. With strong reversibility, an optimal climate-change policy should logically involve (among other elements) waiting to see how far out on the bad fat tail the planet will end up, followed by midcourse corrections if we seem to be headed for a disaster. This is the ultimate backstop rebuttal of DT given by some critics of fat-tailed reasoning, including Nordhaus. Alas, the problem of climate change is characterized everywhere by immensely long inertias - in atmospheric CO2 removal times, in the capacity of the oceans to absorb heat (as well as CO2), and in many other relevant physical and biological processes. Therefore, it is an open question whether or not we could learn enough in sufficient time to make politically feasible midcourse corrections. When the critics are gambling on this midcourse-correction learning mechanism to undercut the message of DT, they are relying more on an article of faith than on any kind of evidence-based scientific argument.

"I think the actual scientific facts behind the alleged feasibility of "wait and seepolicies are, if anything, additional evidence for the importance of fat-tailed irreversible uncertainty about ultimate climate change.

"The relevance of "wait and seepolicies is an important unresolved issue, which in principle could decide the debate between me and Nordhaus, but my own take right now would be that the built-in pipeline inertias are so great that if and when we detect that we are heading for unacceptable climate change, it will likely prove too late to do anything much about it for centuries to come thereafter (except, possibly, for lowering temperatures by geoengineering the atmosphere to reflect back incoming solar radiation). In any event, I see this whole "wait and see" issue as yet another component of fat-tailed uncertainty - rather than being a reliable backstop strategy for dealing with excessive CO2 in the atmosphere.

Nordhaus states that there are so many low-probability catastrophic-impact scenarios around that 'if we accept the Dismal Theorem, we would probably dissolve in a sea of anxiety at the prospect of the infinity of infinitely bad outcomes.' This is rhetorical excess and, more to the point here, it is fallacious. Most of the examples Nordhaus gives have such miniscule thin-tailed probabilities that they can be written off."

"Nordhaus summarizes his critique with the idea there are indeed deep uncertainties about virtually every aspect of the natural and social sciences of climate change - but these uncertainties can only be resolved by continued careful analysis of data and theories. I heartily endorse his constructive attitude about the necessity of further research targeted toward a goal of resolving as much of the uncertainty as it is humanly possible to resolve. I would just add that we should also recognize the reality that, for now and perhaps for some time to come, the sheer magnitude of the deep structural uncertainties, and the way we express them in our models, will likely dominate plausible applications of CBA to the economics of climate change."

(emphasis added)

Update from Rob Bradley: My BOOKS prove that I`m a free-marketer! (That`s why I`m free to boost fossil fuels and bash enviros on my blogs!)

TokyoTom — Sat, 07 Feb 2009 09:55:00 GMT

I noted in a previous post that Rob Bradley , CEO of the Institute for Energy Research and lead blogger at MasterResource , has cheered on big coal and bashed what he calls "Malthusian anti-energy crusaders", but ignoring while he does so the...(read more)

Rob Bradley cheers on coal, but are all those who want to better manage commons and environmental impacts "Malthusian" idiots, or only in the case of coal?

TokyoTom — Thu, 05 Feb 2009 07:54:00 GMT

Rob Bradley has a new post up at MasterResource , cheering on big (and now "clean") coal, which has apparently received assurances from the Obama administration - after being bad-mouthed by NASA scientist Jim Hansen , Steven Chu and Obama himself...(read more)