The Logic of the Mob, Part 1: Cap and Trade
"Nothing is more unpredictable than the mob, nothing more obscure than public opinion, nothing more deceptive than the whole political system."
-Cicero
When, whether due to clever marketing, collective desire to believe, thruthiness (the highly useful Steven Colbert word for something that just feels true, regardless of whether it is true), or other influences, the mob of public opinion decides something is true it is nearly impossible to change the course of the herd.
One of those has been climate change. In modern middle/upper class sensibilities the underlying belief is that each and everyone of us carries the guilt of success wealth and a good life, and we must do something to repay that debt. We must try and make the world a better place, outside of our jobs (and thus outside of the real productivity of our lives, which really does make the world a better place). So we seek out ways in which we can save the world.
Climate change has been one of the biggest and most vocal of these. I believe in climate change. I just dont believe in what we are doing. Specifically, I think the Waxman-Markey Bill, aka. the American Clean Energy and Security Act of 2009 (ACES), is a steaming pile of crap.
First, to go over the issue in general: according to one estimate, for 2% of what the World is going to spend on overpriced energy sources, reductions in productivity through regulations, cap and trade and other such likely shenanigans over the course of this century, you could deal with the symptoms of global warming. For a little more than that you could make the world a much better place.
When we think about the terrors of global warming we rarely stop to think about what is actually so terrible about it. Really, it comes down to a few things: water levels rising and wiping out poverty-stricken areas of the globe, less rain for crops leading to famine, and more tropical diseases and such like. If we actually treated these issues rather than carbon emissions, we would solve many of the World's biggest problems for far less money. We could end world hunger, save the rainforest, rebuild Bangladesh, vaccinate, educate and irrigate Africa, and save the whales all at the same time. But somehow that does not fit in with the modern aesthetic of guilt, and so it is never discussed.
Second is the tenuous link between humans and climate change. Not going to get into this one now, but the jury is still out. Climate change is certainly happening, but we dont really know why yet (personally, I think humans are playing a role, but are likely part rather than all of the cause).
So what are we going to do about it? In the US, we have the Waxman-Markey Bill, a cap and trade system which takes the worthlessness of the EU system and brings it over here, while still imposing a secondary set of top-down measures for good measure.
I have been looking at this thing because of work, and it is best described as Crap and Trade. The effects of the bill, from CRA International (a well respected consulting firm):
• Transportation Fuel Costs - After an estimated 12 cents per gallon increase in 2015,
costs of using motor fuels are estimated to increase by 5% (23 cents per gallon) in
2030 and increase by 11% (59 cents per gallon) in 2050, relative to baseline levels.
These cost impacts consider the combined effect of changes in the market prices of
the fundamental energy commodities, the added cost of limiting carbon emissions,
and projected shifts towards a lower-carbon mix of energy sources used to fuel the
average vehicle.
• Employment – A net reduction in U.S. employment of 2.3 million to 2.7 million jobs in each year of the policy through 2030. These reductions are net of substantial gains in “green jobs.” While all regions of the country would be adversely impacted, the West, Oklahoma/Texas and the Mississippi Valley regions would be disproportionately affected.
• Wages – Declines in workers’ wages will become more severe with time. The
earnings of an average worker who remains employed would be approximately $170
less by 2015, $390 less by 2030, and $960 less by 2050, relative to baseline levels.
• Household Purchasing Power - The average American household’s annual
purchasing power is estimated to decline relative to the no carbon policy case by
$730 in 2015, by $830 in 2030, and by $940 in 2050. These changes are calculated
against 2010 income levels (the median U.S. household income in 2007 is
approximately $50,000). They would be larger if stated against projected future
baseline income levels.
• Overall Economic Activity - In 2015, gross domestic product (GDP), a commonly used
measure of total economic activity, is estimated to be 1.0% ($170 billon) below
the baseline level driven principally by declining consumption. In 2030, GDP is
estimated to be roughly 1.3% ($350 billon) below the baseline level. In 2050, GDP is
estimated to be roughly 1.5% ($730 billon) below the baseline level.
• Costs of a duplicate regulatory system – ACESA establishes both a GHG cap-andtrade
and a series of command-and-control mandates. In some cases, the
regulations may not appear to be binding; i.e., the cap might, by itself, motivate all of the actions needed to meet the standard. In these instances, the standards would waste resources on needless monitoring, measuring, enforcement, and compliance,
but they would not affect the pattern of GHG reductions. In other cases, the
standards would change the allocation of abatement resources by mandating
different choices. However, the cap sets the total GHG cutback. If the regulations
mandate more change in one area, less will take place somewhere else. Standards,
therefore, will force the economy to substitute more expensive GHG emission
decreases for decreases of the same amount that could have been made elsewhere
at lower cost.
• Wealth transfers abroad - ACESA contains provisions that will transfer wealth from
the U.S. to other nations. These include allocations of allowances to overseas
entities for international adaptation and purchases of offsets from foreign projects.
We estimate that these provisions of ACESA would result in a transfer of U.S wealth
to other countries varying from $40 billion to $60 billion per year in the years 2012
through 2030. Some possible circumstances can cause these amounts to be even
larger. The largest wealth transfers from the U.S. to other countries will be associated with purchases of international offsets. In effect, avoided deforestation becomes another U.S. import in an economy that has been struggling with a chronic structural trade deficit.
The only reason this bill is popular, and this bill will pass, is because it appeases the unjustified guilt of Americans. Are there sensible ways to cutting emissions? Yes. Are there things we should be doing to try and live lower impact lives? Yes. But this is the wrong bill, at the wrong time.
You want to really save the world and make it a better place? Than improve the global GDP per capita as fast as possible. It is the best measure of development, and the faster that we grow the global economy the better off we will be in the long run.
-Cicero
When, whether due to clever marketing, collective desire to believe, thruthiness (the highly useful Steven Colbert word for something that just feels true, regardless of whether it is true), or other influences, the mob of public opinion decides something is true it is nearly impossible to change the course of the herd.
One of those has been climate change. In modern middle/upper class sensibilities the underlying belief is that each and everyone of us carries the guilt of success wealth and a good life, and we must do something to repay that debt. We must try and make the world a better place, outside of our jobs (and thus outside of the real productivity of our lives, which really does make the world a better place). So we seek out ways in which we can save the world.
Climate change has been one of the biggest and most vocal of these. I believe in climate change. I just dont believe in what we are doing. Specifically, I think the Waxman-Markey Bill, aka. the American Clean Energy and Security Act of 2009 (ACES), is a steaming pile of crap.
First, to go over the issue in general: according to one estimate, for 2% of what the World is going to spend on overpriced energy sources, reductions in productivity through regulations, cap and trade and other such likely shenanigans over the course of this century, you could deal with the symptoms of global warming. For a little more than that you could make the world a much better place.
When we think about the terrors of global warming we rarely stop to think about what is actually so terrible about it. Really, it comes down to a few things: water levels rising and wiping out poverty-stricken areas of the globe, less rain for crops leading to famine, and more tropical diseases and such like. If we actually treated these issues rather than carbon emissions, we would solve many of the World's biggest problems for far less money. We could end world hunger, save the rainforest, rebuild Bangladesh, vaccinate, educate and irrigate Africa, and save the whales all at the same time. But somehow that does not fit in with the modern aesthetic of guilt, and so it is never discussed.
Second is the tenuous link between humans and climate change. Not going to get into this one now, but the jury is still out. Climate change is certainly happening, but we dont really know why yet (personally, I think humans are playing a role, but are likely part rather than all of the cause).
So what are we going to do about it? In the US, we have the Waxman-Markey Bill, a cap and trade system which takes the worthlessness of the EU system and brings it over here, while still imposing a secondary set of top-down measures for good measure.
I have been looking at this thing because of work, and it is best described as Crap and Trade. The effects of the bill, from CRA International (a well respected consulting firm):
• Transportation Fuel Costs - After an estimated 12 cents per gallon increase in 2015,
costs of using motor fuels are estimated to increase by 5% (23 cents per gallon) in
2030 and increase by 11% (59 cents per gallon) in 2050, relative to baseline levels.
These cost impacts consider the combined effect of changes in the market prices of
the fundamental energy commodities, the added cost of limiting carbon emissions,
and projected shifts towards a lower-carbon mix of energy sources used to fuel the
average vehicle.
• Employment – A net reduction in U.S. employment of 2.3 million to 2.7 million jobs in each year of the policy through 2030. These reductions are net of substantial gains in “green jobs.” While all regions of the country would be adversely impacted, the West, Oklahoma/Texas and the Mississippi Valley regions would be disproportionately affected.
• Wages – Declines in workers’ wages will become more severe with time. The
earnings of an average worker who remains employed would be approximately $170
less by 2015, $390 less by 2030, and $960 less by 2050, relative to baseline levels.
• Household Purchasing Power - The average American household’s annual
purchasing power is estimated to decline relative to the no carbon policy case by
$730 in 2015, by $830 in 2030, and by $940 in 2050. These changes are calculated
against 2010 income levels (the median U.S. household income in 2007 is
approximately $50,000). They would be larger if stated against projected future
baseline income levels.
• Overall Economic Activity - In 2015, gross domestic product (GDP), a commonly used
measure of total economic activity, is estimated to be 1.0% ($170 billon) below
the baseline level driven principally by declining consumption. In 2030, GDP is
estimated to be roughly 1.3% ($350 billon) below the baseline level. In 2050, GDP is
estimated to be roughly 1.5% ($730 billon) below the baseline level.
• Costs of a duplicate regulatory system – ACESA establishes both a GHG cap-andtrade
and a series of command-and-control mandates. In some cases, the
regulations may not appear to be binding; i.e., the cap might, by itself, motivate all of the actions needed to meet the standard. In these instances, the standards would waste resources on needless monitoring, measuring, enforcement, and compliance,
but they would not affect the pattern of GHG reductions. In other cases, the
standards would change the allocation of abatement resources by mandating
different choices. However, the cap sets the total GHG cutback. If the regulations
mandate more change in one area, less will take place somewhere else. Standards,
therefore, will force the economy to substitute more expensive GHG emission
decreases for decreases of the same amount that could have been made elsewhere
at lower cost.
• Wealth transfers abroad - ACESA contains provisions that will transfer wealth from
the U.S. to other nations. These include allocations of allowances to overseas
entities for international adaptation and purchases of offsets from foreign projects.
We estimate that these provisions of ACESA would result in a transfer of U.S wealth
to other countries varying from $40 billion to $60 billion per year in the years 2012
through 2030. Some possible circumstances can cause these amounts to be even
larger. The largest wealth transfers from the U.S. to other countries will be associated with purchases of international offsets. In effect, avoided deforestation becomes another U.S. import in an economy that has been struggling with a chronic structural trade deficit.
The only reason this bill is popular, and this bill will pass, is because it appeases the unjustified guilt of Americans. Are there sensible ways to cutting emissions? Yes. Are there things we should be doing to try and live lower impact lives? Yes. But this is the wrong bill, at the wrong time.
You want to really save the world and make it a better place? Than improve the global GDP per capita as fast as possible. It is the best measure of development, and the faster that we grow the global economy the better off we will be in the long run.
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