The Perils of Thumbnail-Enviro-Blogging

by Will Wilkinson on August 6, 2008

Ah, blogging. My post below was intended as, well, as a “thumbnail sketch” — “a brief outline or cursory description” — offered for critique by my commenters. It was the product of perhaps ten minutes of deliberation, laying out in stark terms the countours of a few lines of thought I have found appealing at first blush. And thanks to all the commenters for your critiques, which I value, and many of which I agree with.

That said, sigh. I am very grateful for Tyler’s link, for his broad agreement, and even for his terrifying apocalyptic imagination. But his naming the post “Will’s Theorem” implied a settled view that I do not have and a logical structure I certainly did not take any care to set out. Then my admittedly half-baked thoughts showed up on the Wall Street Journal economics blog, and then on Felix Salmon’s blog at Portfolio, where I am treated to a pretty good pummeling. Anyway,  now I feel semi-famous for a view I hold at barely better than even odds! Bittersweet.

Anyway, here are a few of Felix’s points, and some thoughts about them:

But he has no reason at all to believe that in the medium run environmental externalities are positive rather than negative. It’s entirely possible that in the medium run fossil fuels will remain cheaper than alternative energy sources, and that externalities will remain negative. It’s also entirely possible that by the time fossil fuels are so scarce that alternative energy sources are cheaper than their carbon-emitting counterparts, we will have pumped so much carbon dioxide into the atmosphere that it will be too late: environmental catastrophe will be upon us.

Will’s argument, it seems to me, seems to rely on the peculiar idea that we’ll run out of fossil fuels just in time to avert environmental catastrophe: that even if we don’t change our ways unilaterally, the finite supply of oil and coal wil force us to do so before it’s too late.

But scientifically speaking, there’s no reason to believe this. Carbon levels in the atmosphere are already too high, and they’re rising fast.

I completely agree that there is no reason to believe that coal and oil prices will happen to rise just enough, just in time to cause a seamless, universal shift to cleaner, relatively cheaper sources of energy. That is in fact silly.

I expect that what’s going to happen (what is perhaps already starting to happen) is that already very wealthy nations will try to force a shift to cleaner energy sources by manipulating relative prices — that is, by taxing carbon and subsidizing alternatives like wind, solar, biofuels, etc. At a point in the not-distant future, there will be large-scale substitution to the alternatives in these rich countries. The effect of this will be to ease demand for extractive energy sources, dramatically bringing down the price of coal and oil on the world market, making them that much more attractive to developing economies, who will then burn them in the least clean way. In effect, the rich world will be subsidizing dirty energy for the poor world. This is, I think, quite generous of us, but it’s not clear to me the result will be any net decrease in carbon emissions.

Because I am not naive about the probability of our arriving at a stable solution to the global collective action problem required to successfully impose a worldwide tax on carbon, when we arrive at the point where rich countries finally succeed in reducing the price of carbon for poor countries, it’s probably then a race of innovation against the true climate model. If the true model is the current consensus model, then we may simply be stuck with the (Nordhaus-calculated) $23 trillion dollar externality in 2100. Innovation certainly may fail to push the price of alternative energy to free (more or less) before we begin to take a big economic hit from warming. But if I could, I would bet my life savings against the predictions of the current consensus climate model. And I would also bet (rather more conjecturally) that energy will be basically free by 2050. Which may help explain where I am coming from.

Now, I have to say, I have no idea what Felix is talking about when he says that “carbon levels in the atmosphere are too high.” Too high for what? I am not aware of a net negative externality from current levels of carbon. But whatever. My point about technology was not just that technology will, in the medium-run, produce clean energy sources that will underprice oil and coal, but will also produce Nordhaus’ first-best “low cost backstop” — a technology like carbon sequestering trees that basically delivers the carbon level we want. I predict this will happen in the medium term, by which I guess I mean the next several decades. (Oh, to have a real prediction market!) If we do get it, it’s going to come from the kind of science and innovation that, as I said, “causes and is caused by” economic growth. So that’s what I mean when I say I think the medium-run environmental externality from growth is positive.

Viewing 27 Comments

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    But if I could, I would bet my life savings against the predictions of the current consensus climate model.

    This is a surprise. On what basis? (You may have explained this in other posts already...) And are you arguing against integrated economic-climatological models or are you also arguing against the basic climate models themselves?

    but will also produce Nordhaus’ first-best “low cost backstop” — a technology like carbon sequestering trees that basically delivers the carbon level we want.

    So you believe that the consensus climate model is wrong, but that we will nevertheless need a "backstop" to deal with excess CO2? In other words, you believe there will be a problem to solve, but that climatologists overstate the difficulty of the problem?
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    I know it is a bit of a cliche, but invoking "Devil's advocate" before you present something half-baked is an excellent way to avoid getting pummeled when someone launches a full scale assault on your proposition(s). Just a thought.
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    There's too much half-baked garbage on the internet. Why add to it? And it wasn't half-baked. It was wrong. The statement that higher prices would move consumers to cleaner energy is upside down thinking.
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    "I am not aware of a net negative externality from current levels of carbon."

    Ocean acidification.

    Seriously, when you're in a hole, quit digging.
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    Yes, I am a complete idiot who is in fact unaware of any present human harm from decreasing alkalinity of the oceans. I'm sure you can tell me what it is?
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    More deserts
    More drought
    More wild fires
    More floods
    In general more extreme weather.

    These are predicted from climate models as a result of more carbon in the atmosphere.

    Now whether the extended drought in Australia, the wild fires in California, the 500 year floods in the midwest are evidence is arguable.

    "Ocean acidification is likely to have an ecological cascade effect right up to parts of the food web that are important to human beings, such as fish and shell fish," said Will Howard of the Antarctic Climate and Ecosystems Cooperative Research Center.

    So I really think you have to admit that higher levels of carbon is, at least, a legitimate cause for concern and that your statement may be a little bit presumptuous.
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    Hmmm...Let's see. There's this very large and incompletely understood complex system out there that humans rely on for a large number of important services. Our consumption of resources has grown to the point that large/rapid changes are occurring in that system with probable impacts to the services we rely on from that system ranging from mild to catastrophic. In your world this state of affairs constitutes no harm. Setting aside the possible impacts, isn't the uncertainty itself a negative externality? Concerning your assessment of the probabilities involved, does the concept of expected value have no relevance here?

    Are you really going to point at the science and yell "Uncertainty! We shouldn't do anything because of uncertainty!" while we dramatically convert our ecology from something that we know has worked well in the past into...who knows what? The precautionary principle would seem to be the prudent approach here, but then again, I'm arguing with someone who thinks infinite economic growth is a 50-50 proposition.

    Again, you really need to read some Herman Daly and address what he has to say about these things before you make yourself look even worse.
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    Don't worry, Will. I got this one.

    Maybe we should read some "Herman Daly." But you know what, pal? Maybe YOU ought to read Linda and Morris Tannehill's "The Market for Liberty."

    Don't mention it, Will.
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    The fact that you, random blog commenter, have never heard of Herman Daly, whose fairly illustrious career in economics was devoted to questions that bear directly upon the issue under consideration here, is hardly a devastating rebuttal of my recommendation to Will that he read some of Daly's stuff. Your use of scare quotes doesn't mean that Daly and his arguments don't exist. Why don't you run along now and let those of us who have an inkling of the bounds of the debate have a discussion, m'kay?
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    DMonteith: How long are you seriously going to carry on this fantasy that "Herman Daly" is real?
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    My understanding was that being proud of your ignorance was out of favor these days. Maybe you just didn't get the memo.
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    D: Come on, buddy. It's over. When you're in a hole, stop digging. Anyone can go to Google, type in "Herman Daly," and figure out for themselves that no such person exists, and certainly no "economist" who focused on ecology.

    Game, set, and match.

    Don't mess with the bull, because you'll get the horns.
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    It's not the horns I'm worried about. It's the stuff coming out your other end that seems to be the problem here!
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    I don't get it.
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    True, coal will still be around. But there are at least two reasons why it's far less attractive than Salmon seems to think.

    First, no one's come up with a decent coal-burning vehicle yet. I'd expect mass commercial sales of a hydrogen car far sooner than a coal car.

    Second, both coal and oil require the sorts of infrastructure permanence that many countries in the least developed parts of the world still don't have. If a solar-to-hydrogen-fuel-cell setup becomes economical, this will be far more appealing to the developing world than relying on regular deliveries of fossil fuels every few weeks. Just set up your individual, home-based or village-based power plant, and let it run.

    This isn't so fanciful, either. For just the same reason, many people in the developing world never had land-line telephones but went directly to cellular.
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    But people have invented electric cars (as well as hybrids), and ways to generate electricity with coal. Burning coal will be the cheapest way of generating AC/DC for the foreseeable future. Since it also has the most extreme externalities, market signals are not going to do the job.

    The libertarian war on elementary price theory continues.
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    DMonteith,

    It seems as though you're writing like Will claimed that there are no harmful effects to humans from current levels of carbon. But he claimed that he is not aware of a NET negative externality from current levels of carbon. I assume (given my almost non-existent knowledge of economics) that these aren't equivalent claims. I imagine you disagree with his actual claim. But, just so you know, you don't seem to be addressing it very directly.
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    Any system that accounts the Exxon Valdez disaster as a net positive (which was, in fact, factored as a net contributor to GDP growth) is frankly useless as a guide to costs and benefits. The evidence that our consumption is unsustainable, from oceanic dead zones to Russian caviar to oil to global warming to topsoil loss to desertification and fresh water supply issues, is overwhelming. But Will takes the fact that it fails to show up in our econometrics as proof that the evidence is flawed, not the metrics.

    I'm sure that Will and I would agree that price can be a good aggregator of information, but it does not follow that a lack of a price is equivalent to a lack of information.
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    > Now, I have to say, I have no idea what Felix is talking about when
    > he says that “carbon levels in the atmosphere are too high.” Too
    > high for what? I am not aware of a net negative externality from current
    > levels of carbon.

    Er, yeah, this is digging deeper. A large amount of further change is already "baked in," as climate scientists like to say. The effects of CO2 in the atmosphere work on longish cycles. I understand that you aren't personally being harmed right now, but that's just not a very meaningful way of looking at the problem. I grasp the broader points you're making, but they really do seem to be predicated on a weak understanding of the current and future consequences of increased CO2 levels.
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    Will: "If we do get it [free or almost-free energy], it’s going to come from the kind of science and innovation that, as I said, “causes and is caused by” economic growth."

    I'll stipulate to that.

    But your assumption (unstated here) is that investments in energy alternatives will result in slower growth (hence a later arrival of free energy).

    But, "I am not aware of a net negative" growth impact from alternative-energy investments. Or--since Europe has been growing as fast the US for decades, despite 33% higher taxes--any net negative growth impact from carbon taxes and rebates/incentives.

    As with the current level of carbon dioxide, there are positive and negative influences, and our current models can't really say what the net economic influence is.

    Remove that assumption, and the syllogism collapses.
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    When the U.S. needed technology to build an atomic weapon, Franklin D. Roosevelt sequestered the most brilliant nuclear physicists in the desert until the project was completed under the Truman administration in 1946.

    When the U.S. needed to put a man on the moon (so that we could stick a flag in moon dust, presumably), John F. Kennedy sequestered the most brilliant astro physicists until they came up with something that could be moved to a state with a lot of electoral votes. Eisenhower actually started NASA--as well as the national highway system--but that's a discussion for a different day.

    Where is the leadership for a solution to the energy problem? I guess parceling out tons of money to environmental whackos or cottage-based entrepreneurs a little at a time is somehow better than just starting up a government "project" to solve the problem.

    Admittedly, I hate government projects. But isn't this one of the few things a Federal government could actually do with some efficiency?

    First, define the problem: "Develop an unlimited, no- or low-cost energy source capable of integrating into the existing electric grid."

    Oh, yeah... we have nuclear energy. We just can't use it because of perceived externalities that don't really exist.

    Define another problem: "Develop an unlimited, no-or low-cost energy source capable of powering transport vehicles."

    Perhaps the key here is to redefine transportation. If we could just find a way to bend space (using technology derived from the large hadron collider coming up to speed this month), we could create a method of dropping the Illy cappucino machine into the n-space converter and sending it to 1100 Swallow Street in Blistering Bay, Georgia... or wherever.

    Sound silly? So did cooking food with microwaves... which came out of the "put a man on the moon" project.

    The point is, there will continue to be technological advances that make our high externality energy resources obsolete (much like whale oil, which involves goring an ox... I mean killing a whale). Perhaps Will could, in fact, make the statement that we will solve the problem as we approach the logical conclusion of the alternatives. We do it time and again throughout history when confronted with the proper stimulus. Annihilation at the hands of our enemies used to be the big government-promoted stimulus. Now we're facing global cooling (1971), global warming, (2005 forward), ocean alkalinity/acidity (previous post).

    My only modification to all this is that we need a REAL problem that creates externalities rather than all the hoo-haw from doomsday prophets. Only when there is a REAL, quantifiable (rather than projectable) externality can we adequately determine the level of response.

    And the free market does that pretty well outside of military preparedness issues such as those sparking the Manhattan Project and NASA.
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