It’s for real!
Or — to be more cautious — it might soon be for real!
On Thursday December 16th, 2010, California’s Air Resources Board began a cap and trade system for carbon. This system will implement the state’s law mandating that carbon emissions be reduced back to 1990 levels by 2020.
This will amount to a 15% decrease from current emissions.
The system will let greenhouse gas emitters buy and sell emission allowances. It covers everyone who emits more than 5,000 tons of carbon dioxide per year. That’s about 360 businesses, who taken together emit about 85% of the CO2.
At first these business will receive free allowances that cover most of their emissions, but as time passes, they’ll have to buy those allowances through quarterly auctions. According to the plan, there will be two phases. By 2012, all major industrial sources and utilities will be covered. By 2015, distributors of fuels and natural gas will also be included.
The chair of the Air Resources Board, Mary Nichols, gave a speech. Among other things, she said:
This program is the capstone of our climate policy, and will accelerate California’s progress toward a clean energy economy. It rewards efficiency and provides companies with the greatest flexibility to find innovative solutions that drive green jobs, clean our environment, increase our energy security and ensure that California stands ready to compete in the booming global market for clean and renewable energy.
The governor also showed up at this historic board meeting, and gave a speech.
But I can guess what you’re wondering, or at least one of the many things you should be wondering.
“How much can California do by itself?”
Luckily, California is not doing this by itself. By the time the program gets rolling in 2012, California plans to have built a framework for carbon trading with New Mexico, British Columbia, Ontario and Quebec — some of its partners in the Western Climate Initiative.
The green guys are the ‘partners’; the other guys, blue because they’re watching carefully but sadly not taking part, are the ‘observers’.
Furthermore, ten states of the US — New York, New Jersey, Delaware, Maryland and the New England states — have started up another system, the Regional Greenhouse Gas Initiative, which covers only electric utilities. They are already doing auctions.
So, while in theory it might make sense to institute carbon trading on a national basis, political realities have pushed North America down a different path, where smaller regions take the lead in groupings that may transcend national boundaries! And that is very interesting in itself.
You don’t need to be a genius to see the problem here. Unless the China bears turn out to be right and that country’s growth collapses, California could reduce its emissions of GHG to zero without substantially affecting the atmosphere.
More subtly, since uncertainty about the cost of GHG emission reduction is very high while the incremental benefit of each ton removed is fairly constant over wide ranges, a tax would be much more efficient than cap-and-trade. With the latter we are much more likely to end up with either too much reduction (if costs turn out high) or too little (if costs turn out low). That’s one reason why the guys who invented cap and trade back in the 1960s mostly oppose its use for GHG control.
Right. Of course it’s not just California, but many states and provinces in the Western Climate Initiative, that are heading toward a cap-and-trade plan for limiting carbon emissions. But your point still stands: if China and India keep pumping out more CO2, smaller regions can’t counteract that.
However, we’re facing a kind of Prisoner’s Dilemma. If we all cooperate, we can solve the problem — but each nation or region would do better by letting everyone else go first.
The U.S. government has said it won’t agree to cutting carbon emissions unless China and India do. And those countries are unlikely to do so until the U.S. does. This stalemate could easily last until the climate problem is much worse — at which point, it may be too late.
So, I think it’s very good that Europe and these U.S. states and Canadian provinces are going ahead and trying to break the logjam by doing the right thing. If they do it correctly, they’ll show that limiting carbon emissions can be done without disastrous effects. And it may be essential to have some success stories to point to before reluctant entities like the USA, China and India take any action.
That sounds plausible, but again one needs to take the political game into account. At least in the USA, it seems almost impossible to start taxing carbon. I prefer a suboptimal approach that people actually take, to an optimal one that they refuse to take.
If one were feeling cynical, one might wonder if participation would be anti-correlated with magnitude of per-capita carbon emissions. Looking at the top map here it looks like there are at least some high and medium emission states participating, which is mildly encouraging.
I think something like that is true. For example, the big coal state Pennsylvania is an observer rather than a participant of the Regional Greenhouse Gas Initiative. And while Saskatchewan is an ‘observer’ of the Western Climate Initiative, in July 2008 the governors of Saskatchewan and Alberta have called WCI’s plan a “cash grab by some of Canada’s resource-poor provinces.”
Just mostly idle curiosity perhaps, but who in particular are the absolute devotees of “growth”, and how is such growth defined? I consider myself a reasonably astute member of civilized, even of urban humanity, however, not only me, but the majority of my acquaintances are frankly puzzled by the preoccupation toward “growing” apparently everything from the expanse of domiciles and dwellings to the amount one can pile on a plate at restaurants and buffets.
My offhand impression of Scandinavian countries, among others, is that they are fairly stable in size of everything and seem to maintain a working equilibrium between intake and dissipation in most things that matter.
Anything to the contrary seems to me an obsessive-compulsive disorder perhaps similar to the mass “tarantella” problems in 17th century southern Italy. I hear echoes of Vance Packard from bygone years pointing out how fish fins on automobiles (or “spoilers”, nowadays) are exclusively the outcome of waking hypnotic suggestion from both commercial and intellectual advertising. Might we all hope that the “Marlboro-man” of incessant growth will someday gasp his last in the same manner as his nicotinic brother?
Interesting question! We could go to the Club for Growth website, or read the Nine simple guidelines for pro-growth tax policy issued by the American Heritage Institute. However, these guys seem more interested in reducing taxes on business than developing a detailed vision of ‘growth’ or explaining how the economy can continue to grow exponentially on a finite-sized planet.
I’m not sure. Norway has gotten rich from oil, and everyone is wondering if they’ll get addicted to that and suffer when it runs out. They seem to have done better than most oil-rich countries in handling this issue. But they’re certainly not in an equilibrium state.
What would a ‘no-growth economy’ look like? George Mobus suggests it might look a bit like a climax forest. I liked his review of Tim Jackson’s book Prosperity Without Growth: Economics for a Finite Planet.
It’s tempting to think of focus on growth as a pathology, but it’s really not clear to me that this is definitively the case rather than an unfortunate mismatch. If one were to imagine humanity in some “generalised systems context”, one might think that it’s a reasonable evolved preference to expand until there’s environmental signal that growing more is bad. The big problem is that it looks like the way things have happened on this planet there’s not very much immediate environmental signals (eg, dwindling fossil fuels, changing climate), and what there is is highly intellectual, until the point that the population is so far above the long-term carrying capacity that we’re in for a dramatic readjustment. I’ve been thinking a bit about this, and may pontificate more at some other time.
Analogously: I’m reading a lot about insomnia at the moment, and one of the things that seems to be becoming consensus is that the actual internal body clock is relatively weak and liable to drift, with “normal” rhythms being primarily the result of lots of environmental signals (patterns of physical activity, different types of light at various times, food signals, temperature signals, etc) “pushing” the body clock back into normal. If even something as simple as bodily timekeeping works by feedback, that suggests many other behaviours are based on that.
You’re certainly right, allowing that the “lack of signals” might indicate a grand failure of perception. We’re actually “extending” our resources by finding ways to use them up ever faster is the depressing material world reality, unfortunately.
The curious phenomenon my next paper in on, why we seem to trying to use efficiency to slow things down when it has always speeded them up… The “Curious Use of Stimulus for Constraint”.
George Mobus has some remarks about this in his review of Tim Jackson’s book:
Read the review for more!
I’ve tried point out how interesting it is that scientists keep assuming what you quote from George, that ecologies are collections of growth systems that are only regulated by resource limits, saying.
The source of long term resilience for uncontrolled growth systems described as being in endless conflict with each other is not explained by that.
The intellectual problem appears to be the still deeper assumption that living things are not learning as they go. What’s apparent is both that they do, that it’s critical for their survival in any number of ways, and that the ones evolution has selected to survive are the kind of learning organisms that are responsive to making trouble for each other, instead of behaving like cancer.
Why humans seem to be devoting our own intelligence to being the very best cancerous growth in nature, is indeed unclear, and relatively unexplored, but following your rule. Why there is so little cancerous growth visible in nature, though, is the real question, and fairly apparent if you ask. It would topple its own food chains right and left, and so kill its hosts.
I can’t help people study the mechanisms unless they’re interested in the problem, though. I do like Tim Jackson’s proposal, but his mechanisms definitely do not remove this self-control problem from our economic ecology. He only shows equations for what the economy would be like if that happened, assuming we only need added environmental constraint to cure the problem, as if human learning followed their equations as economists typically assume.
What we need to do, to be the first complex technological society to survive that mistake anyway, is change our economy from being designed like a runaway organism into an ecology designed like an ecology. Ecologies are sustainable as systems while continuing to creatively change form and adapt, cancer free. Their learning systems use their development resources differently, and let go of investment in quantitative expansion that either strip their own resources bare… create expensive conflicts with others. They’re responsive. They find their niche.
Of course, if the solution is for people to turn their attention from quantitative to qualitative development, responding to the waste of their own development resources in investments that create dead ends all around them, some individual learning that governments could not do for us seems required…
The curious twist, though,… is that every dollar spent or earned has to be assumed to have about equal carbon footprint, the same way as it has to be assumed to have about equal energy use.
You can’t disconnect the threads of a complex system and have them still work, as if only the visible impacts counted, for example. The great majority of embodied energy for nearly all kinds of spending is to pay people, who all have widely diverse consumption habits. So, it really seems that what people see as high and low impact purchases really aren’t. They’re only high and low visible impacts, since the impacts of paying people are quite invisible. So reasoning without considering that is to say it’s the visibility of impacts that matters to you, not the reality, I think.
Sorry, can’t see that Cap ‘n Trade is anything more than an attempt to beat Berney Madoff at his own game. On top of that, what is gained? A lot of money changes hands, but “what” is gained? CO2 reduction, on paper yes, but what does this Ponzi Machine actually do to real world CO2 levels? No, you don’t start a revolution at the top of anything.
Are you familiar with how the cap and trade system dramatically reduced the levels of sulfur dioxide emitted in the US?
• Environmental defense fund, The cap and trade success story.
There are certainly problems with cap and trade, but this is an ‘evidence-based blog’, so if think you it’s bound to fail for limiting carbon emissions, it would be good to provide some evidence.
For an interesting discussion of the advantages of growth, the following book review is interesting:
The bigger issue is that all of these schemes–bans, taxes, marketable discharge rights–are aimed at making carbon-based energy more expensive to the user. Barring significant technical progress, that means making energy in general more expensive. But people don’t want more expensive energy, no matter how you package it.
Another way to look at it is that the readily accessible coal in the ground can be used to cheaply (in the colloquial sense) produce things that people want (all over the world, including very poor places). The chances that this buried treasure will not be exploited by someone somewhere are virtually nil. It’s all going to get burned until something cheaper comes along.
The states would be much better off developing a compact to adapt to a world with 900 ppm CO2. That’s where we’re headed.
Right: they’re attempts to make people pay something closer to the actual price of carbon, rather than letting them spew out CO2 for free and make other people pay the costs this will incur.
It’s similar to how we pay a sewage bill for the treatment of our wastes, instead of just dropping buckets of crap out of our window, as they did in the good old days.
I’m enough of an optimist to consider that an open question. Once, I’m sure, it seemed unthinkable that you could coax people to stop throwing their crap out the window, or cap the amount of sulfur dioxide that coal companies were allowed to spew into the air. We’ll see what happens.
The difference between sewage and CO2 is that a cheaper and more convenient alternative was provided–indoor plumbing and sewer systems. Here we are talking about reductions in both quality and cost-effectiveness. And using IPCC figures the benefits of CO2 reduction are very long-term and uncertain (not to mention invisible) relative to the benefits of not walking through streams of liquid garbage.
The funny thing is I remember economists having to drag the environmental movement kicking and screaming to solutions like the “license to pollute.” Now the zeal of the convert has set in and the former anti-market militants have taken up the idea that a market implementation of costly policy makes it magically free. It doesn’t.
As for the externality argument, the cutting edge of thought in economics has long moved beyond the reflex to tax or limit every “external” effect. Refusing to build dikes or move inland is just as much of an imposition as making the ocean rise (Coase 1960). Your ugly clothes upset me–should I try to get a tax on those styles? Or should I bear the cost of looking away? Etc. Beyond which, the distinction between “pecuniary” externalities (OK and not to be corrected) and “non-pecuniary” externalities is pretty fuzzy.
I agree that there are lots of important differences between sewage and CO2. So, it’s quite possible that our response to the first problem is not a good guide to our response to the second. For example, human waste is easy to see and smell, while CO2 is not — and the damage caused by poor disposal practices is more rapidly apparent in the former case.
In fact, I have little desire to argue with most of your points. Really just two small objections. First, it seems hard to believe that indoor plumbing and sewage systems are cheaper than collecting ones waste in a bucket and throwing it out. It would be very nice if it were cheaper. For example:
I douubt these folks are crapping out in the fields just for the view: I think it’s actually cheaper than installing a sewage system, buying a public bathroom for each village, etc.
Quite possibly it would be cheaper in the long term to introduce sewage systems, given the negative externalities that their absence produces: cholera, dysentery, etc. If you could work out the overall economic consequences of such diseases, I bet they would be quite high. And indeed, I doubt most American cities would suggest abandoning their sewage system as a useful cost-cutting measure.
But, it takes a lot of up-front investment to start a sewage system. So, a certain sort of short-term calculation would suggest that it’s better not to bother — and in fact, that is the calculation many countries have effectively done.
One other small comment:
Phrases like “drag kicking and screaming”, “zeal of the convert”, etcetera, are good for raising the emotional temperature of a discussion. They make people want to “fight back”. But there are lots of other places to have a fight. This blog is a friendly but restrained forum, somewhat cool in emotional tone, where people earn respect for presenting interesting facts rather than winning battles.
(I have a friend who used to work for Microsoft, who developed a program that could detect “flames” — argumentative rhetoric. It follows pretty standardized patterns. Besides the two phrases above, another great example is “you and your ilk”. Nobody ever says that except when they’re trying to start a fight! I have tried single-handedly to change this by saying things like “He and his ilk have introduced a wide range of new mathematical techniques in the study of…” But I don’t think it’ll catch on.)
You and your ilk are well nigh beyond the pale, sirrah!! Thou undoubtedly lovest thy ilk as thyself. Note even the Golden Rule can easily be made inflammatory, although I haven’t seen that example before. By the way, are “your ilk” ever separate from “you and”?
One of the main difficulties in properly implementing detection schema based on great examples is avoiding overlearning. More generally, classifiers are subject to overfitting. For the case of classifying stock phrases, hidebound reactionaries and self-appointed defenders of the orthodoxy tend to suppress original thinkers.
I study both n-categories and climate physics, but unfortunately my ilk don’t — not yet, anyway.
But the big question is whether I should say “Me and my ilk,” or the more formal “My ilk and I”.
For those not in the know, this is a reference to the crackpot index.
On the sewage matter, that’s what I get for using my iPad, where brevity is essential due to typing constraints. A more precise way of making the point is that the benefits to the individual of putting in indoor plumbing did not entirely depend on the behavior of far-flung others. You could get a benefit just by keeping crap away from your front door or front sidewalk and by avoiding the dumping process itself (much of which was internal to your own residence). A wealthy person or a couple of wealthy people might find it worth their while to carry less affluent “free-riders” on their block. Even at the largest scale of organization, an entire town, the gains to each resident from the proposed investment would be tangible and immediate and the entire discussion encompassed by a single polity. None of this is true for CO2.
On the rhetorical side, I and my ilk have been used to getting roasted far more heatedly than by the terms I employed and so I may have miscalculated the sensitivities here.
In defense of my civility, I did go out of my way not to question any of the central premises upon which the post is based. The world does not need another venue for debating those topics, stirring up that debate did not seem to be the intent of the blog, so I strove to be a polite guest.
Right — that, and the fact that the dangers of CO2 lie in the future, remaining open to heated debate about their very existence, seem like two huge differences.
Yes, by the time-honored method of benevolent despotism I ensure an unusually high level of civility here. Once the tone gets set, by force if necessary, most of the people who stick around are quite happy to discuss things in a friendly way, even if their opinions differ sharply.
Who is “your ilk”, by the way? Economists of some sort?
Thanks! You’ll see from my latest post that I’m open to the possibility you mentioned:
It bums me out, and I don’t think it helps the world to treat this as a foregone conclusion. I hope that some combination of emissions reduction and adaptation will occur — so that we might not go to 900 ppm, but only, for example, 600 or 700 or 800. But we need to ready ourselves for a wide range of possibilities — and all the likely ones, I believe, will require a large measure of adaptation.
I think you’re both largely right, and the dilemma is one requiring either resignation to hopelessness or using higher level of insight into why people think the way they do.
So many people vigorously promoting how to make nature follow their own rules when they don’t know how to check… for example, and things like that, all that ideological thinking we do. There seems to be an unusually rich variety of examples where people become convinced of their own stories for things that they continue to follow long after they stop working.
T.S.Kuhn’s finding that scientists virtually never adopt the next paradigm is an example too…
I catalog a bunch of them along with discussing our amazing exploding conservation scheme… (using productivity stimulus in the guise of “efficiency” to slow resource depletion by accelerating it..) http://www.synapse9.com/drafts/StimForConstraint.pdf
(see why I’m so jovial about it?? The reality of it is just nuts!)
Yep, that’s essentially why our society switched from looking at quantitative to qualitative measures, so they can see reducing our accelerating rates of resource depletion as sustainable source of profit…
It’s not intentional, but it does seem to mean our landing plan is to run out of fuel and crash with no power…
According to the Energy Information Administration estimates, the United States possesses 2,552 trillion cubic feet (Tcf) of potential natural gas resources–just over one century’s worth. The world’s oil reserves are 1200 billion barrels. Other fossil fuels are also projected to be plentiful.
The earth had 4.03 billion hectares of forest in 1970. It has around 4.0 billion hectares of forest today. A loss of -0.7% in 40 years.
Yet despite that small loss of forest to agriculture, and an 85% gain in population (since 1970), the average person now has more calories. In 1970, the average was 2135 calories. Today, the average person consumes 2674; a gain of 25.2%.
That’s probably related.
Oh… for policy making that is. Both the major studies of natural limits, the Club of Rome study of limits to growth and the IPCC reports on climate change use valid quantitative measures and analysis that keeps just getting reconfirmed, that our societies seem uninterested, unwilling and unable to understand or respond to… I have a research paper on that problem being published soon too, draft at http://www.synapse9.com/drafts/StimForConstraint.pdf
Again, help me out here. As economist
Don Boudreaux rightly notes, “Since the dawn of the industrial revolution in the mid-18th century, available supplies of coal, petroleum, iron ore, and most other resources have increased significantly – and, as a result, their real prices have fallen. These rising resource supplies and falling prices occurred during a time when human population increased by a factor of ten – from 700 million to nearly 7 billion today…”
In 1711, Britain’s treasurer, Robert Harley, had an extraordinary idea. He could finance Britain’s war debt by selling shares in a non-existent trading company: the South Sea Company. South America was just opening up and was imagined to be a place where silver and gold flowed as easily as water. But for the scheme to be pulled off, according to a recent Economist article, investors needed to “be persuaded to drive the stock above its par value” in order “to create wealth out of thin air.” It worked for a while. Speculation drove up the price but when negotiations with Spain faltered, the South Sea Company needed government backing to keep the party going. They went old school and bribed people close to the king. Eventually, despite the royal imprimatur, the investors discovered that the scheme contained no substance and was just hot air, and their shares’ par value equaled pond scum.
Now, California appears to have entered the market for selling…well you decide.
I could be wrong, but I see no “there” there. The investment has no portfolio. I think, just as what happened to the British South Sea Company and John Law’s Mississippi Company, investors will eventually learn that these exchange markets are simply full of hot air.
I’ve found some evidence for my first point. The attorney general of Texas recently said:
He was talking about CO2, but some jokers noted he could have been talking about something else. Then Paul Krugman weighed in with the following:
The link is sort of interesting for its parallels to our situation today. For example, a physician named Dr. John Snow argued for the necessity of
On the other side, The Economist argued that:
With sewage then as with CO2 now, the argument got entwined with the argument between those who favor the power of centralized government, and those who oppose it.
Of course the historical parallel doesn’t prove anything, but it’s interesting.
I quite agree that the parallel between sewage systems and CO2 remediation is strained. See my earlier comments. Most of these differences make the sewage system significantly more technically, economically, and politically desirable than CO2 remediation.
I notice that no one has taken up the earlier point I made due to Coase: The mere existence of an unpriced negative spillover effect from one individual to others does not imply that economic efficiency calls for regulating or discouraging the spillover. Those affected by the spillover could equally well make adjustments to their activities (adaptation) and these adjustments might maximize total welfare.
I bring this Coasean point up not because economic efficiency is the only value but because John keeps citing the (Pigouvian) externality argument as ironclad proof that CO2 emissions are currently underpriced. But the simple Pigouvian argument is wrong, or at least badly incomplete. Worse, the non-economic-efficiency impacts of Pigouvian regulatory policy can be severe, especially in terms of giving political and bureaucratic leaders power to control and regulate the everyday lives of putatively free citizens, increasing rent-seeking and crony capitalist tendencies in the economy, etc. No classical liberal could be sanguine about such a regime.
The example I gave earlier is quite serious. Does the externality of ugliness in clothing or physiognomy justify Pigouvian remediation? If not, why not? What about the noxious ideas of others, which indeed might cause great harm? Why shouldn’t their expression also be subject to regulation? Personally, I think that people who damage the communicative efficiency of the English language by failing to properly maintain the distinction between “disinterested” and “uninterested” or between “raising the question” and “begging the question” cause real harm to other writers and speakers. Perhaps we can have a Usage Regulatory Commission that assesses fines for such offenses.
I didn’t say I had an ‘ironclad proof’ of anything, nor did I think it. I agree that:
So, one needs to examine these things case by case.
I don’t have time this morning to work out a detailed cost-benefit analysis in the case of global warming. I do believe that such an analysis would show that a mixture of Coasean adaptation and Pigouvian taxation is optimal. But I don’t claim to have a proof of this fact. Indeed it seems quite hard to prove anything about public policy.
(By the way, as a mathematician, I hear people proving things all the time, and they never say they have an ‘ironclad’ proof: there’s no need for this hyperbole. Indeed, the whole idea of wrapping a proof in iron is quite curious — where did that come from? So if anyone said they had an ‘ironclad’ proof of something, I’d instantly become suspicious. A quick glance at Google suggests that term ‘ironclad proof’ is usually used in situations where the statement being ‘proved’ is somewhere between controversial and false.)
@ John Baez
So you’re saying because we have more to eat, that we have used more land and material? Or am I missing your point?
You’re saying we’re expanding at the waistline? Cute.
I don’t really understand why you brought up the increase in American’s caloric intake in the first place. But since you said “please expand“, I felt like noting that our expanding waistlines are probably related to this increase.
If the average American really consumes 2674 kilocalories a day, that’s pretty scary, since it seems that the recommended allowance only exceeds this for males aged 15-18 – everyone else should be eating less.
Hi John, I apologize for seemingly raising a caloric issue.
My desire was for you to expand on your note that we were experiencing “accelerating rates of resource depletion.”
As I noted, our non-renewable resources, such as natural gas, are increasing. I’m not seeing “accelerating rates of resource depletion” but quite the opposite. So, I would like to know which resources you can quote the statistics as rapidly diminishing.
Again, I apologize for the confusion.
Now I see why I was so confused. I never said anything here about “accelerating rates of resource depletion.” But I see that Phil Henshaw did. So, your conversation is with him.
Does anyone know where I could find a list of the 360 businesses, who taken together emit about 85% of the CO2?
I spent 15 minutes looking for such a list, and didn’t find one. A lot of news reports mention “360 businesses”, but no signs of an actual list. You’d think there might be one here:
• California Air Resources Board, Cap and Trade.
but I haven’t seen one. Lots of good information on how this plan will work, though!
Well, the real reason some businesses generate more CO2 pollution than others is that they’re the ones delivering the services we pay them for, at the lowest $ cost. So, it’s the demand for energy services that drives our still growing CO2 pollution. It’s not that businesses offer to provide the service, but our buying it and sending the message to multiply it by doing so.
The thing we should be really worrying about is our ever growing demand for converting resources into goods and services. Our economy is designed to remain stable only for conditions of ever growing supply and demand.