Follow the Plastic Bag Example, Nudge Polluters to Pay

By Gernot Wagner. Originally posted on EDF Voices.

Nudge is the best kind of book. It presents the type of head-slappingly obvious solutions to public policy problems that make you wonder why you needed a book to tell you about them in the first place. Place the veggies before the French fries in the cafeteria, and people will eat more greens. Enroll employees into retirement programs with the option of opting out rather than in and they’ll save more as a result.

Such nudges are the best kinds of policy interventions: minimum intrusion, maximum freedom of choice, maximum relative impact. But one area in which Nudge comes up short is global warming. Putting smiley faces on your electricity bill as a reward for using less electricity than your neighbor, something Power has done with utilities around the country, helps bring down electricity use by 1 to 3%. Better than zero, but not the solution by a long shot.

That solution would be making polluters pay: putting a price on carbon dioxide through a direct cap or tax on carbon pollution. Cass Sunstein, who wrote Nudge with Richard Thaler, says as much in his latest piece on the topic. He laments the fact that we don’t seem to be able to get these kinds of taxes passed, and then adds a few items to his running list of things we can do, all under the broad heading of setting “clean-energy default rules”: Change the default printer setting to “print on front and back,” and people will. Enroll people into programs where they spend extra for clean energy (with the option of opting out), and 90% will choose to stick with the clean energy.

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US Climate Policy: Take Five

By James Boyce. Originally posted on Triple Crisis.

For the sake of our children and our future, we must do more to combat climate change.” These words in President Obama’s State of the Union address came as music to the ears of environmentalists. Do they herald a real effort to break the climate policy impasse in Washington?

Obama urged Congress to pursue a “bipartisan, market-based solution,” citing as a model the cap-and-trade bill sponsored by Senators John McCain and Joseph Lieberman.

The McCain-Lieberman bill failed to clear the Senate in 2003. It failed again in 2005. So did two subsequent cap-and-trade bills, Lieberman-Warner in 2008 and Waxman-Markey in 2010. Any new effort to enact a national climate policy will be the fifth try.

Environmentalists blame Republicans and climate change deniers for the past defeats. But if there is to be any chance of forging a successful policy this time around, some deeper introspection is in order.

An insightful essay by Harvard political scientist Theda Skocpol offers a good starting point. Skocpol doesn’t downplay the role of fossil-fueled extremists in blocking climate legislation, but neither does she ignore the fatal weakness in the Democratic party’s past strategy: relying on insider bargains, lubricated by carbon permit giveaways to energy corporations, to get the votes needed to pass a bill.

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Clean Air for All: The Benefits of Environmental Justice

By James Boyce, University of Massachusetts at Amherst. This post first appeared on Triple Crisis.

Is environmental racism good for white folks? The answer isn’t as obvious as it might seem.

In the United States, there is plenty of evidence that African Americans, Latinos, Asian Americans and Native Americans typically face greater pollution burdens than whites, with associated health risks. So if the same total amount of pollution were spread more evenly, whites would wind up breathing dirtier air.

But would total pollution remain the same? Or would pollution decline if it was no longer disproportionately inflicted on minorities?

A recent study by a team of researchers at the University of Massachusetts, Amherst, finds that toxic air pollution from industrial facilities is a variable, not a constant, and that the total pollution load is correlated with the extent to which minorities bear higher-than-average pollution impacts.

We measure the extent of disparities in U.S. metropolitan areas by comparing the share of minorities in total exposure risks from industrial air toxics, calculated from U.S. Environmental Protection Agency data, to their share of metropolitan population. In Birmingham, Alabama, for example, minorities bear 62 percent of the air toxics exposure risk, but constitute only 31 percent of the population. Continue reading…

Beyond Reasonable Debate

By Kristen Sheeran

It appears that scare tactics, slander, and intimidation are no longer exclusively the domain of climate denialists seeking to discredit climate science research. According to the actions of Richard Tol, an economist at the University of Sussex, it would seem that these are now acceptable forms of academic debate in economics.

Tol has waged a campaign to damage the reputation of economist Frank Ackerman. Ackerman’s crime? He published a peer-reviewed technical article in a highly reputable journal (“Climate Damages in the FUND Model: A Disaggregated Analysis,” Ecological Economics, 2012.) that critiques Tol’s signature contribution to the climate economics literature – the FUND model. Since then, Tol has written to Ackerman’s employer and publishers accusing him of libel.

As a well published academic, Tol understands that disagreement is not only common, but encouraged by the academy. When you publish your work, you expect others to critique it. Sometimes you agree with the criticisms; other times you do not. But as an academic, you understand that this is how a body of knowledge evolves. It is an expected part of the process. And no academic, no matter how well accomplished, is immune to critique.

It appears that all of the proper channels to facilitate a healthy and productive academic debate have been pursued – and then some. The article was subject to peer-review prior to publication. Ecological Economics then published a commentary by Tol and Anthoff and a reply by Ackerman and Munitz. It even published an editor’s letter on the controversy. Why then, is Tol still trying to silence a legitimate academic debate?

A statement of support has been signed by Terry Barker, Stephen DeCanio, Paul Ekins, Duncan Foley, Michael Hanemann, Julie Nelson, William Nordhaus, Robert Pollin, J. Barkley Rosser, Juliet Schor, and dozens of other economists. It affirms that the Ackerman-Munitz article is a legitimate, peer-reviewed publication making a valuable contribution to the economics of climate change, and urges scholars to pursue criticisms of each other’s work through normal channels of academic debate. If you are an economist who agrees with this statement, Ackerman invites you to add your signature (e-mail frankackerman12 at

In the interest of full disclosure, Ackerman is a founding member of E3 Network. He blogged about the FUND model on Real Climate Economics back in 2011 We also published Tol’s response to that blog post.

Why E3 Economists Should Think About Cities

By Noah Enelow

The world is urbanizing, and fast. In 2008, the size of the world’s urban population passed that of the world’s rural population: the majority of humans now live in cities or urban areas. The implications of this profound shift for the global economy, and the discipline of economics, have not yet been fully explored. Economists concerned about the well-being of people and planet should take this opportunity to set the terms of the discussion.

What role do cities play in the development of economies? The short answer: a very large one. Cities are the major sources of technological, economic and social innovations, and the seedbed for societies’ complex divisions of labor. Influential urban theorist Jane Jacobs argues against the dominant perception that cities arose from prosperous agrarian regions; rather, the growth of highly productive agriculture developed through cities, in which the tools and techniques that made rural agriculture possible were designed and developed.

After over a century of ignoring cities, the economics profession is beginning to come around; today, urban economics is a growth discipline. Most of today’s urban economic theorizing aims to explain the productivity advantages of large cities, taking inspiration from Alfred Marshall’s observations of external economies of scale. This line of research identifies the ways in which knowledge spillovers lead to fast adoption of new technologies, and agglomeration economies lead to lower production costs. A recent article in The Economist attributed the U.S.’s high income relative to Western Europe to its comparatively large cities.

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US Coal Export Strategy: The Saudi Arabia of Coal

By Frank Ackerman. This post appeared first on TripleCrisis.

The United States has been called “the Saudi Arabia of coal” since the energy crises of the 1970s; politicians of both parties have embraced this metaphor. It’s certainly true that both countries have more fossil fuel reserves than they can use for decades to come, located in their remote, empty regions; we call ours Wyoming.

Fossil fuel exports are also becoming a potential growth sector of the American economy. As in Saudi Arabia, energy export earnings can be used to pay for high-technology imports from more advanced economies. (And the parallels don’t stop there: does energy production somehow go along with politics based on fundamentalist religion, committed to restricting the lives of women? Let’s leave that for another day; today’s topic is economics.)

Coal use in the United States – almost exclusively for electricity production – is declining, thanks to competition from natural gas and wind power, along with stricter environmental regulation. This might seem like good news for the environment, but to the coal industry, it’s a looming disaster that can only be prevented by increased exports. Five new coal export terminals have been proposed in Oregon and Washington, leading to intense battles over the local and global impacts of increased coal shipments.

At the same time, the huge recent increase in natural gas production, due to fracking of shale, means, according to the Wall Street Journal, that “Energy companies are racing to export natural gas from the U.S.” Even in oil, increases in production in both Texas and North Dakota have led to proposals to export both crude and refined products – despite the continuing massive imports of oil nationwide. Continue reading…

Geoengineering: Don’t Ignore Economics and Governance

By Gernot Wagner Ph.D. Economist, Environmental Defense Fund

How serious is global warming? Here’s one indication: the first rogue entrepreneurs have begun testing the waters on geoengineering, as Naomi Klein laments in her must-read New York Times op-ed.

Sadly, Klein misses two important points.

First, it’s not a question of if but when humanity will be compelled to use geoengineering, unless we change course on our climate policies (or lack thereof). Second, all of this calls for more research and a clear, comprehensive governance effort on the part of governments and serious scientists – not a ban of geoengineering that we cannot and will not adhere to. (See point number one.)

Saying that we ought not to tinker with the planet on a grand scale – by attempting to create an artificial sun shield, for example – won’t make it so. Humanity got into this mess thanks to what economists call the “free rider” effect. All seven billion of us are free riders on the planet, contributing to global warming in various ways but paying nothing toward the damage it causes. No wonder it’s so hard to pass a sensible cap or tax on carbon pollution. Who wants to pay for something that they’re used to doing for free – never mind that it comes at great cost to those around them?

It gets worse: Turns out the same economic forces pushing us to do too little on the pollution front are pushing us toward a quick, cheap fix – a plan B.

Enter the Strangelovian world of geoengineering – tinkering with the whole planet. It comes in two distinct flavors: Continue reading…

Congratulations to Al Roth on Nobel Prize in Economics

E3 Network offers its warm congratulations to Ecotrust collaborator and friend Alvin Roth, Stanford Professor of Economics and co-recipient (with Lloyd Shapely) of this year’s Nobel Prize in Economics. Roth is honored for his contributions to the field of market design and his innovative use of economic theory and tools to solve real world problems.

In 2007, Roth hosted a two-day Ecotrust workshop at Harvard on market design for fisheries quota programs and other market-based incentives for fisheries management. The workshop and accompanying working paper contributed to a greater understanding of the unique features of markets in the fisheries sector; how market design principles can help alleviate market deficiencies in the fisheries sector; and how market mechanisms in fisheries could operate and how benefits would accrue to participants. The workshop forged the basis for recommendations for improving fisheries management across the US. Roth went on to advise the Cape Cod Fisheries Trust on solving design problems related to the Cape Cod scallop and ground fish fisheries, while  Ecotrust convened a blue-ribbon panel of experts (including 2009 Nobel Prize winner Elinor Ostrom) to advance the development and implementation of catch share programs to better benefit fishing communities.

Cleaning the Air While Cooling the Planet

By James Boyce and Manuel Pastor. Cross-posted on Triple Crisis.

There is good news and bad news about the clean energy transition. The good news is that half the new electric generating capacity installed worldwide in 2008-2010 was renewable. The bad news is that half wasn’t.

To avoid rapid global warming and its attendant human and economic risks, we need to accelerate the transition. We need to do more than slower growth in the use of fossil fuels: we need to cut their use substantially. This will require significantly ramped up investments worldwide in energy efficiency and clean energy.

One way to encourage this investment is to base public policies on the full range of benefits from reduced burning of fossil fuels – not only global benefits from reduced greenhouse gas emissions, but also local benefits from reduced emissions of particulates, nitrogen oxides, sulfur dioxide, carbon monoxide, mercury, benzene, and other toxic pollutants.

In the European Union, research has shown that the clean air benefits alone are sufficient to justify investments in energy efficiency and renewables. “The welfare effects of climate policy seem to be positive,” a 2006 report for the Netherlands Environmental Agency concluded, “even when the long-term benefits of avoided climate impacts are not taken into account.”

The clean air co-benefits of climate policy may be even greater elsewhere, in countries with less stringent air pollution controls than Europe. In a recent study we cite World Bank data indicating that in the United States the human health damages from particulate emissions are six times higher per ton of carbon dioxide than the average for Germany, France and the United Kingdom. In China, the ratio is more than ten times higher. Continue reading…

Don’t Pay Polluters

Originally posted to Triple Crisis.

A little known greenhouse gas called HFC-23 made the news recently. Also called fluoroform, it’s a waste gas generated in the manufacture of refrigerants. Compared to carbon dioxide (CO2), HFC-23 is a minor greenhouse gas. Pound-for-pound, however, it traps more than 10,000 times as much heat.

The UN’s Clean Development Mechanism (CDM), set up under the Kyoto accord as a way for industrialized countries to “offset” their own CO2 emissions by paying for comparable actions in developing countries, counts destruction of one pound of HFC-23 as equivalent to prevention of 11,700 pounds of CO2 emissions.

The CDM pays large sums to coolant manufacturers in India, China and elsewhere to destroy the HFC-23 they produce. Indeed, these payments have become the largest single item in the CDM budget: this year, HFC-23 disposal is getting 50% more CDM money than wind power and 100 times more than solar energy.

The rub is that paying firms not to pollute gives rise to a perverse incentive. A firm that threatens to pollute more gets paid more. So manufacturers have upped their production of the refrigerants (themselves greenhouse gases, albeit less potent ones), in order to produce more HFC-23, so they can then get paid to destroy it.

It’s a great example of what economists E. K. Hunt and Ralph d’Arge once called capitalism’s “invisible foot”: when polluters are paid to clean up pollution, they create more of it, as if guided by an evil twin of Adam Smith’s invisible hand. Today some firms make half their total profits from HFC-23 disposal payments.

People living near the coolant factories don’t do as well. In the state of Gujarat in western India, residents of an adjacent village complain of skin rashes, birth defects, and damages to crops caused by a noxious fog that burns the eyes and lungs.

The European Union has halted further HFC-23 payments, prompting firms to threaten to release the gas into the atmosphere. A scientist at the Environmental Investigation Agency, which opposes the pollution subsidies, put the matter baldly: Attempting to force countries into squandering billions on fake offsets that actually increase production of greenhouse gases,” he said, “is extortion.”

The HFC-23 fiasco offers three crucial lessons for climate policy. Continue reading…