Saturday, July 04, 2009

Waxman, Markey and me...

Those of you who have been reading Incoming (formerly known as John's World) for some time have been participants in my efforts to grasp the truth of the global warming debate and what our response could be.  For those who tuned in late, here are links to previous posts which illustrate the journey I have been on. (Here, here, and here)  [Note: these are collections of various posts sorted by labels like "climate", etc.  Some overlap will occur]

But the time for theorizing is over.  We are faced (or our Congresshumans are) with actually doing something. What is the right decision?

First of all, we may never know.  The time scale involved for this problem exceeds our lifetimes, and almost certainly, our attention span. I think this handicap more than any other induces paralysis by most of my fellow professionals.  In events where neither our education or experience will avail, our first instinct is to resort to skepticism.  We in agriculture have for the most part adopted a methodology of requiring guarantees and insurance for any decision. Oddly, as I have often noted, both the public and government have been happy to oblige.

But global warming requires us to commit to changes and investments that won't payoff in double digits next quarter. In fact, the truth is exactly the opposite: we are being asked to sacrifice, on a very significant scale, for the benefit of generations far in the future.

This is definitely not the pattern of our moral decisions.  In fact, all our lives most have carefully avoided looking at the legacy we will leave behind. On the whole, we have not sacrificed financially.  By eliminating the draft, we have avoided the very real possibility of sacrificing to defend our nation, unless we choose the risk personally.  Meanwhile reams have been written about our inability to let go of the dream to "have it all".

Much of the opposition to climate legislation, I think, centers on the idea of sacrifice.  Crimony, we're still trying to grasp the concept of savings - which is sacrificing consumption now for benefits later.

Lost in this self-concern is the very real possibility of ownership of the problem. GHG emissions are something we excel at and our lifestyles exult in it. Perhaps the perspective we need is not so much a noble sacrifice as finally paying for the damage we caused.

Secondly, although we throw around scientific conclusions and especially the results of computer models, few of us really grasp what these assertions mean outside the laboratory. Such common tools as mean versus median and even ℃ versus ℉ trip us up when constructing a solid logical case for our position.  The result has been rampant cherry-picking of data, and context-free statements.  In short, the science of climate change has to viewed through pretty murky waters.

Third, the confrontation between climate science and economics has been a huge battle, with economists struggling to interpret physical science and express it in terms of wealth and risks.  There is growing pushback against the yardsticks preferred by economists.

There will be no snow left on Kilimanjaro within a few years. The economic cost of that change to US GDP is zero. There will be no year-round snow left in the Himalayas in 100 years. The economic cost of that change to US GDP is tiny. There will be no Everglades in 100 years. The economic cost of that change to US GDP is marginal. There will be no Venice in 100 years. The economic cost of that change to US GDP is tiny. There will be no New Orleans in 100 years. The economic cost of that change to US GDP is extremely small.
There are two issues here. First, GDP measures income, not wealth. If your house burns down, it will most likely not change your income. Does that mean you should spend nothing to protect your house from burning down? Second, GDP only measures things that can be measured in money. But the worth of many precious things cannot be measured in money: Yellowstone National Park, the independence of one’s country from foreign rule, the existence of elephants and polar bears, clean air, the ruins of the city of Ur, the fact that humans have traveled to the moon, etc. [More]
In addition, the computer models in both arenas are imperfect, but perhaps more so in the realm of economics.  The best economic arguments against W-M may be the work of Jim Manzi.  But even so, they are not without troubling problems.

On the one hand, you have the actual science of climate change.  And although climate models are enormously complex and subject to considerable uncertainty, they're fundamentally based on physics, chemistry, and thermodynamics.  We know how much CO2 we're pumping into the atmosphere and we can project with pretty good confidence how much that's going to increase over the next century if we do nothing to stop it.  We know how the greenhouse effect works, we have pretty good historical records of how CO2 concentration correlates with global temperatures, and we have a pretty good sense of the feedback loops involved in things like melting icecaps and saturation of the ocean sinks.  Basically, our level of uncertainty is within tolerable bounds here.  And what we know is that if we do nothing, global temps are absolutely certain to rise 2°C over the next century, fairly likely to rise by 4-5°C, and at least somewhat likely to rise by 6-7°C.  The lower number would be bad but, just possibly, manageable.  You could at least make an arguable case, as Manzi does, that the cost of preventing an additional 2°C is higher than it's worth.  The two bigger numbers, however, would be catastrophic.  Unfortunately, the science increasingly suggests that these higher numbers are considerably more likely than we thought even a few years ago, and any serious cost-benefit analysis needs to address that.  Using only the lower number avoids tackling the real problem we're up against.
So that's the climate analysis in a nutshell.  On the opposite hand you have the economic analysis.  And that's simply hopeless.  An economic analysis that goes even ten or twenty years into the future is as much guesswork as anything else.  One that goes a hundred years into the future is just voodoo.  It looks like economics, but you might as well be throwing darts.  Compounded over a century, even minuscule changes in assumptions and operating parameters produce enormous changes in your conclusions, and the result is that you end up deep in the weeds arguing over tiny differences in those assumptions instead of simply admitting that they're flatly impossible to forecast.  That's good for slowing down the debate, but not much else. [More
I lean toward favoring this conclusion, as the ability to predict long-range economic activity has been remarkably imprecise in the last say, 18 months. Further, economists are rightfully reluctant to taint their analyses with imprecise, albeit shrewd political projections.

Sure, it’s just like the Iraq War. Decades of science using data freely available to all and leading to a series of rigorous, skeptical, peer-reviewed analyses suggesting that action should be taken culminating in a legislative process that has spanned several years is exactly like the rushed, abbreviated, stove-piped false intelligence fueled push to attack Iraq. Manzi is a smart guy, but this is perhaps the dumbest thing I’ve ever seen him write. Moreover, he’s simply wrong. Decadal defense spending, for instance, is something like $4 trillion. I’d guess that perhaps half of that is pure waste or unnecessary spending. And we’ve been spending like this for decades.
And I’ll reiterate again that a) the costs of the legislation are likely overstated, b) Manzi is assuming that there will be no ancillary benefits to the legislation, and c) Manzi is assuming that after this legislation is passed there is no change in global warming policy in America thereafter, ever, for the next century. I don’t have a problem with people using Manzi’s analysis as a datapoint to consider in determining how they feel about Waxman-Markey, but you’d have to check your common sense at the door to buy his interpretation of it. You’d have to assume that the uncertain costs of an unprecedented climatic shift are likely to be no big deal and well within our ability to handle, while the rather mundane use of government policy to trim a bit off of consumption in an effort to prevent us from killing hundreds of millions of people is bound to be totally debilitating. [More]
Many economists would be more favorably inclined to W-M if the very changes ag was able to insert were not there. The effort could be much better for government finances had writers of the bill stayed with the idea of making carbon reduction a real dollars-and-cents issue immediately.  This means selling permits and granting few exceptions and offsets.

Therefore, the best policy option would be to use the revenues from cap and trade or from a carbon tax to decrease the marginal tax rates of other distortionary taxes, such as the payroll tax and individual and corporate income taxes (or to reduce the deficit, which would encourage capital accumulation and help prevent future marginal rate increases). Using the revenue in that fashion would alleviate much of the economic inefficiency that would otherwise arise from cap-and-trade or a carbon tax.
The allocation of emissions permits and decisions on how to spend the revenue raised from permit auctions are sure to be legislative arguments that will not be easily resolved. However, one thing is for certain: Just as implementing a carbon tax and then giving away all of the profits from the tax to rich shareholders would be a policy that no one would support, "free permit allocation" under a cap-and-trade system should be quickly dismissed as a bizarre policy option. Don't give away the cap-and-trade permits! [More]
A body of critics also hold out for a silver bullet from technology. We've had these things appear in history of course, but two factors suggest this time it will be different.  First, we already know some things we could do to cool the Earth for instance.  The bullets would appear to be more arsenic than silver.
Technology that could redden the skies and chill the planet is available right now. Within a few years we could cool the Earth to temperatures not regularly seen since James Watt’s steam engine belched its first smoky plume in the late 18th century. And we could do it cheaply: $100 billion could reverse anthropogenic climate change entirely, and some experts suspect that a hundredth of that sum could suffice. To stop global warming the old-fashioned way, by cutting carbon emissions, would cost on the order of $1 trillion yearly. If this idea sounds unlikely, consider that President Obama’s science adviser, John Holdren, said in April that he thought the administration would consider it, “if we get desperate enough.” And if it sounds dystopian or futuristic, consider that Blade Runner was set in 2019, not long after Obama would complete a second term.
Dyson’s early geo-engineering vision addressed a central, and still daunting, problem: neither sulfur-aerosol injection nor an armada of cloud whiteners nor an array of space-shades would do much to reduce carbon-dioxide levels. As long as carbon emissions remain constant, the atmosphere will fill with more and more greenhouse gases. Blocking the sun does nothing to stop the buildup. It is not even like fighting obesity with liposuction: it’s like fighting obesity with a corset, and a diet of lard and doughnuts. Should the corset ever come off, the flab would burst out as if the corset had never been there at all. For this reason, nearly every climate scientist who spoke with me unhesitatingly advocated cutting carbon emissions over geo-engineering. [More ideas worth considering]
The second fault with hoping for a technological solution to AGW is it will likely not happen without climate legislation.  The penalties of carbon emission are what gives economic value to be pursued by entrepreneurs and inventors.

Finally, it is impossible to overestimate the degree of political leveraging underway with W-M.  On the face of it, why would any politician support a measure clearly flawed with enormous costs in the face of a highly skeptical public? I would suggest one reason is our history is laden with many such efforts that have become major contributors to our well-being as a nation.  Imperfect can work.

Conservatives are continuing to pull the Republican party towards self-immolation today, vowing to defeat the eight House GOPers who backed last week's climate change bill unless they change their votes.
Targeting those eight with the success of the climate bill is a silly and futile task, as the Huffington Post reports, given that Democratic leaders were prepared to twist more arms if fewer GOP votes materialized.
But while we note that most of the GOP climate backers had ties to the environmental community that explain their votes, it's worth pointing out what else all eight have in common: a local investment in transit. [More]
Nonetheless, a strategy of appealing to fears and poorly understood science is not without political risk itself.
But conservatives seem strangely intent on ignoring the power of markets to encourage such innovation. Right now, the emission of carbon is essentially cost-free. Putting a price on carbon would make the development of cleaner energy technologies more profitable. New technologies could be employed, not only by America, but also by China, India and the rest of the developing, polluting world. And it is an added (but not minor) benefit that American resources would no longer be transferred to Saudi princes, Russian autocrats and Venezuelan dictators.
It is perfectly legitimate to argue that the House cap-and-trade system is flawed beyond redemption -- so complex and confusing that it only benefits regulators and the lobbyists who outwit them -- and that Congress should start over with a carbon tax.
It is also legitimate to contend that, while the cap-and-trade system is flawed, it is better than inaction and necessary to spur innovation. And for eight House Republicans who took this stand at great political risk, it is not only legitimate -- it is admirable. [More]
One way to enhance the odds of passage is to load the bill with freebies for everyone.  Ag made sure we got ours, for instance.  In the end, making the leap toward sacrifice was too much for our organizational leadership despite those successes.  In my thinking, Big Ag has not improved its position by choosing this rather dithering and spineless tactic.
What I am surprised about is the agriculture industry’s indignation and opposition to the legislation. Years ago, Kansas State University carbon expert Chuck Rice told me the handwriting was on the wall for some sort of cap on carbon emissions. “It’s critical that agriculture be involved in the discussion so that farmers can participate in a carbon market,” he said.
Well, this bill actually allows farmers the ability to fully participate in a carbon offset program – in other words, to get paid for farm activities that help reduce GHG emissions.

For those of us following climate legislation, this is a real boon for agriculture. Farmers might actually have a seat at the carbon offset table!
Better yet for agriculture, this legislation moves the oversight of carbon-reduction efforts by farmers from the Environmental Protection Agency (EPA) to the Department of Agriculture. Can you imagine the EPA regulating how you practice your no-till to keep carbon in the soil, or how you manage manure to reduce methane gases released into the atmosphere? The regulations would not likely be based in the reality of production agriculture.
This is the best deal that agriculture could have gotten out of the House,” says Laura Sands, a partner at environmental consulting firm The Clark Group and a member of the Ag Carbon Market Working Group. [More]
In the process, the actual legislation has become a predictably bloated package of unrelated topics, making it repugnant for even long-time supporters to embrace.
In fact, the bill also contains regulations on everything from light bulb standards to the specs on hot tubs, and it will reshape America's economy in dozens of ways that many don't realize.
Here is just one: The bill would give the federal government power over local building codes. It requires that by 2012 codes must require that new buildings be 30 percent more efficient than they would have been under current regulations. By 2016, that figure rises to 50 percent, with increases scheduled for years after that. With those targets in mind, the bill expects organizations that develop model codes for states and localities to fill in the details, creating a national code. If they don't, the bill commands the Energy Department to draft a national code itself. [More]
So why have I decided to support this nasty piece of work?  First and foremost, I believe the science behind AGW and carbon emissions. It is low practice to suggest the vast majority of climate scientists are fools and/or conspirators.  If nothing else, our scientific community has propelled us forward at a staggering rate, something that cannot be done based on faked results and anything short of the pursuit of truth.

Any effort to change the habits of energy consumption built over millenia will be awkward and excruciatingly slow, but they must begin with something. At the minimum, W-M is something.  Tom Friedman captures my position pretty well.

Why? Because, for all its flaws, this bill is the first comprehensive attempt by America to mitigate climate change by putting a price on carbon emissions. Rejecting this bill would have been read in the world as America voting against the reality and urgency of climate change and would have undermined clean energy initiatives everywhere.
More important, my gut tells me that if the U.S. government puts a price on carbon, even a weak one, it will usher in a new mind-set among consumers, investors, farmers, innovators and entrepreneurs that in time will make a big difference — much like the first warnings that cigarettes could cause cancer. The morning after that warning no one ever looked at smoking the same again.
Ditto if this bill passes. Henceforth, every investment decision made in America — about how homes are built, products manufactured or electricity generated — will look for the least-cost low-carbon option. And weaving carbon emissions into every business decision will drive innovation and deployment of clean technologies to a whole new level and make energy efficiency much more affordable. That ain’t beanbag. [More]
Moreover, W-M could be the first of many international building blocks, addressing the complaint of non-participation by China and India.
My impression is that Mr Obama is anxious to do something about climate change, yet realises that America can't halt the process of warming by itself; it must have agreement on emission reductions from basically all of the world's large economies. So perhaps the very imperfect Waxman-Markey bill is best seen as a means to push forward a global agreement on emissions. I have previously argued that carbon tariffs would be counterproductive, but it's difficult for those of us without the full complement of diplomatic tools available to the American government to know for sure. My sense is that wise men might have been willing to tolerate a lot of congressional horse-trading and weakening of the bill so long as it seemed likely to facilitate climate negotiations at Copenhagen and beyond. But those wise men may change their position if the included tariff provision undermines its utility as an international bargaining chip.The extent to which the administration pushes Congress to remove this provision—and the language and ultimata it does or does not deploy—may tell us a lot about the good this bill can do in generating real progress on emission reductions. [More]
The trade provisions are bad news, and I hope the Senate can clean the bill up.  But one huge reason I have struggled to affirmative side of W-M is the growing realization it represents the of the next great technology race.  Right now we are not even in the game.
On energy, a disturbing factlet. (And obviously not the only disturbing observation on the energy-and-climate front.) I heard three people separately observe that when it comes to future sources of "clean" energy, there is not a single field in which U.S. companies are the technical or market leaders. One person gave an informal ranking of the leaders this way:
   Solar-powered electricity (ie, photo-voltaic systems): Norway, Japan, China
   Solar-thermal systems (for heating water or buildings) Spain the leader in getting systems deployed
   Wind power: Holland, Denmark, China
   Geothermal power: nobody
   Nuclear power ("clean" in the carbon-footprint sense): France, Japan
   CCS, "Carbon capture and sequestration" (stripping out CO2 and burying it): Norway, Australia, Canada. [More]
This is the reward to leadership - selling the world the next generation of energy technology. This will not occur without a clear signal to investors and researchers we are serious about changing our energy policy.
But here's what I think is the overriding reason to support W-M despite its flaws: even if it's weak, and even if the rest of the world doesn't join in immediately, it starts to align incentives in the United States
in favor of inventing and deploying green technologies.  (Ditto for the ETS cap-and-trade system in Europe.)  And that's critically important: it's in the advanced economies of the world that new green technologies will be invented.  And it's in the advanced economies of the world that existing green technologies will be proven to work on a wide scale.  Once that happens — once the technologies are proven and economies of scale start to bring down their costs — the rest of the world will start to adopt them too.  W-M, in its final form, may not be a strong bill, but by raising the price of carbon even a little bit, it makes the development and deployment of green tech far more likely in the United States, and therefore, far more likely on a global basis too.
And that's critically important.  Conservation and efficiency and cutting back are all necessary parts of addressing climate change, but human nature being what it is, that's never going to be enough.  We're going to have to invent entire new technologies as well.  W-M makes that more likely, and that's why it needs to be passed.  Warts and all. [More]
Finally, but not least important, W-M offers to me an effort to revive the morale of our nation - a tiny step toward setting aside our immediate desires and owning up to externalities we are passing on with almost malicious unconcern. It is an effort to address a problem, not deny it.  It is a chance to sacrifice for the future.

In short, it is an opportunity to rediscover all those aspects of our nation that many feel slipping away: a can-do mindset and an unabashed desire for ever-nobler goals; an iron commitment to generations unborn; a chance to demonstrate how a fractious and imperfect political system and a diverse culture can do big things. Like always we will recalculate our path as we go, but fixing a goal and direction could add purpose to a culture foundering in self-doubt.


Anonymous said...

John, this is one tree-mendous long post. Do you really expect us 'Markins to think this hard? Actually, I applaud you for appealing to the angels of our better nature.(Lincoln) A little self sacrifice is good for the soul. Have a patriotic, good, and safe independence day.

Anonymous said...

John, the one question I have for you is this: How rotten does legislation for the reduction of carbon emissions or income inequality has to be for you to be against it? I am not saying that these problems do not exist or not need to be addressed. (Fwiw, I would have a piglovian carbon tax paid back towards payroll taxes.) I am saying that some cures can be very counterproductive and worse than the problems themselves. Let us not rush in pell-mell into "having to do something" that we lay waste to many of the things we do right.

Anonymous said...

John, We knowhow you spent part of your 4th. Do you recall learing about the ice bridge across the Bering Strait which allowed for the migration of people and animals between what is now Russia and Alaska? Closer to home as you know from the study of soil formation much of the Midwest ws covered by glaciers which extended down to Central MO area. The ice bridge and glaciers were gone long before the widespread use of fossil fuels. The facts indicate that GW is nothing new. Comment?

Anonymous said...

John, As a farmer but several decades past an economist and modeller I find the reliance on the models difficult to reconcile with the lack of robustness of the models.

When factors in these models such as humidity (clouds) or ocean mixing (water is the dominant greenhouse gas in our atmosphere) can be varied by small percentages of the scientifically accepted range and give dramatically different temperature outcomes both up and down equally, I don't see their value in predicting outcomes. As an aside, these models are valuable in indicating the justification for research expenditure and the areas where research is most needed.

At meetings I have attended with the authors of these models in Australia all of the above is readily acknowledged as is a wish to avoid responsibility for the purposes their models are used.

Finally, the limiting of the discussion of the negative effects these greenhouse gas pricing schemes to industry sectors in advanced economies, is distressing. Any reduction in incomes in less developed counties from the trade, international assistance or pricing effects of these schemes results in starvation and death, far undervalued in the economists measures of national income or wealth.

Aussie farmer

Anonymous said...


Have to agree with all the previous commenters.

I really do enjoy reading (most of) what you write. This post, however, was a disappointment.

John Phipps said...

Thanks to all for the comments:

Your objections are, I believe, all discussed in the links and previous posts.

I am not a self-appointed spokesmodel for this legislation, I am a farmer trying to explain my position. Please check with the experts to which I link for the sources for my conclusions.

As this precess unfolds I will doubtless post on developments I think pertinent.

Brandon said...

"we are being asked to sacrifice, on a very significant scale, for the benefit of generations far in the future."

-wrong. We are being asked to sacrifice for the benefit of a contemporary generation. More specifically for a baby boomer, self-assured, condescending group of legislators with money laden pockets. They think that we are too incapable of adapting to our naturally occurring warming and cooling cycles, and are positioning themselves and their business cronies to cash in. Meanwhile we will cripple our own economy "sacrificing for future generations" that will be subject to foreign countries that ignored the hoax of the decade, and grew their own economies.

Anonymous said...

Is this also an apology for George Bush? Did he not blow off the Europeans in some big climate meeting a few years ago? We are so sorry, Uncle Albert.

WVaAgEconomist said...

John,what I see severely lacking in all the discussion is the impact of other countries. China and India pump far, far more CO2 into the air then the US does today (remember the Olympics??). Both China and India have recently adamantly proclaimed that they will NOT reduce emissions, ANY. Do we take on a prohibitive cost, a cost likely more than the benefit, and a sacrifice even beyond our present US good-high quality air standards, to make a comittment that will have little global impact within the context of other nations' lack of reduction? And this is in light of the most recent data that shows global climate temperature has actually DECREASED over the past 10 years - NOT increased. I think to take on something as big as Cap&Trade now is just strangling ourselves while the rest of the world pollutes us into oblivion (potentially, not presently). The US's high air quality of today is already an example for the rest of the world to strive for, and if they did, GHG omissions would not be an issue threatening to cost us billions of dollars!

ND Farmer said...

To WvaAgEconomist,
Sorry but you make to much common sense. I must remind you that Rep Collin Peterson, House Ag Chair, recently stated that Dr Carlin, a PHD in Economics with EPA, has "No Standing" in his findings that were buried by Obama and EPA Chief Lisa Jackson. His statement was that Carlin lacks any technical experience....(even though his undergrad degree is in Physics).
But feel assured that the head of IPCC (the UN's voice on global warming) can be trusted. But then again, maybe see the chair of the IPCC is also an Economist..........

WVaAgEconomist said...

To ND Farmer,
..... as if any sensible person would put any "standing" in what a Congressional Representative would say (remember, they approve spending bills for $400 toliet seats!! in Bills they don't read!!), not to mention the UN. I'll stick to making my case based on common sense, actual facts, and good old economics such as those that say the farmer whose corn production costs at $4.00/bu loses money when he sells it at $3.50, rather than on the politically motivated "standing" inside the belt-way or in Manhattan. But, of course, I know that an ND Farmer like you already knows that.