As the world turns...

Duncan Green has a thought-provoking, and downright frightening, post on how institutions may shape the climate change debate in the coming years.

I tend to be optimistic that this will not be the case; but more because I think technology will propel us forward, not the magnanimous actions of politicians or the scepter of international cooperation. Climate change is something we here at zzeitgeist are worried about. Let's hope Mr. Green's fiction is much stranger than the truth.

Engineering an international incident

This article is a great follow up to the post I wrote a few weeks ago. New estimates suggest that the cuts in carbon emissions that would be necessary to halt climate change are much larger than we thought. They may not be politically feasible. Policymakers need to start thinking seriously about the international implications of unilateral climate change plans like geoengineering. 

Climate change legislation

EPA moves toward climate change regulations: "This decision is a game-changer," said Rep. Ed Markey, D-Mass. "It is now no longer a choice between doing a bill or doing nothing. It is now a choice between regulation and legislation. EPA will have to act if Congress does not act."

The politics of geoengineering

In an interview this week, John Holdren, Director of the Office of Science and Technology Policy in the White House, indicated that “the Obama administration is discussing radical technologies to cool Earth's air.” They probably are talking about it, but it was a huge mistake for Holdren to mention so publicly, for three reasons.

The "radical technologies" that Holdren references are collectively known as geoengineering. In a nutshell, geoengineers propose to purposefully manipulate the environment to counteract the effects of global warming. The idea has gained traction as a relatively painless way to fight climate change without taxing carbon or raising the cost of doing business. However, there is disagreement over whether it is actually possible and whether it risks making things much worse. Modern climate science is still relatively primitive – there are many things that we simply don’t yet understand. Geoengineering is the scientific equivalent of a Hail Mary pass.

By acknowledging it as a viable option, Holdren risks undermining international negotiations on combating climate change. Currently, the best solution available to climate change is to reduce carbon emissions, most commonly through some form of cap-and-trade system. But by pricing carbon, you raise the cost of goods and services at least in the short run. This is a tough enough pill to swallow, and geoengineering gives naysayers more ammunition to lobby against it. Negotiations are going to be hard enough as is – remember that it’s been seven torturous years of Doha Round negotiations that would produce a net economic gain, and we’re still not done.

Finally, geoengineering does not eliminate international coordination challenges. As a global problem, climate change requires a global solution. There are significant collective action problems to address. But even if we decide to geoengineer our way out of this mess, these problems will remain. Who gets to pick which geoengineering scheme gets used (there are many)? What if different nations choose to go forward with different geoengineering strategies? And most importantly, who pays for it?

I am somewhat of an international cooperation sceptic, and I worry that the global community won’t reach a consensus on climate change. For that reason, President Obama really ought to be exploring every contingency plan, geoengineering included.

But he and his team need to keep it to themselves.

How green is your stimulus?

The FT has a neat interactive graphic comparing "green spending" in the major national stimulus packages. I must admit, I was a little surprised by which country has the greenest stimulus by volume.

Fool me once?

I must admit to being a somewhat lukewarm Obama supporter. I voted for the man based on my belief that his Presidency would represent a return to a thoughtful administration, open to debate among passionate and intelligent academics with equal weight given to voices, despite their ideological leanings.

When assembled, the formidable economic team validated my hopes for open and honest debate in a time when it's most certainly required. Hillary tempered my support just a little. And now this.

President-elect Barack Obama is expected to create what is sometimes called an “energy czar” to coordinate energy and environmental policy among the myriad federal agencies and lead a new National Energy Council...Browner, who’s heading the transition team’s environmental division, has likely landed the job.

I'm starting to fear that instead of real policy decisions, we will have a tepid and limp administration hampered by so many different new agencies, councils and czars that the executive branch will take longer to act than our current Congress. Maybe such a fear is irrational; granted, the man can't really do anything until January 20th, but if this is what he meant by job creation than America just got hoodwinked.

The new green economy: what role for government?

The Economist has an interesting leader this week on the perils of government-led investment in solutions to climate change. If I understand the arguments correctly, the thinking goes that there is an upside to climate change; namely, the naissance of a new and profitable green-tech industry to combat it. Millions of new “green collar” jobs will be created as money is funneled into alternative fuel and energy research and implementation. If the government subsidizes this industry, it will lock in those jobs domestically, boost the economy, and achieve policy goals like energy independence and fighting global warming.

Of course, the problem with any government-led subsidy program is the issue of picking winners. Resources are scarce, especially if you’ve seen the federal debt numbers lately. You can’t subsidize everything, and by subsidizing any particular form of alternative energy, the government is expressing its confidence in that fuel’s viability. But the government, a semi-closed organization with limited human capital and a bureaucratic (read: slow) outlook, is almost certain to be less efficient at distributing resources and picking winners than a market. That’s why we live in a market society, and that’s why communism doesn’t work (sorry, Ms Klein.)

None of this is new, but it bears repeating for two reasons. First, Mr. Obama has named energy independence as his top domestic priority behind stabilizing the financial system and the economy. Second, the financial crisis has so badly tarnished the reputation of markets that resistance against government leadership on green investment is unlikely. Thus, we may be on the cusp of a massive government-funded research program for green technology, and so we need to carefully consider the downsides of such a policy prescription. After all, the United States is still happily subsidizing corn-based ethanol, which is a terrible idea.

There is a central role for governments to play in a market society. Moving forward, there will be a leading and constructive role for government to play in the fight against climate change (please can we have a carbon tax?) However, in an ideal situation markets and government complement one another. Each has its own strengths and weaknesses. But above all else, we should strive to avoid a situation where one of these institutions usurps the role best played by the other.

(photo from montanaraven's photostream)

Warmflation

Thomas Friedman's piece in the New York Times yesterday was nothing special. In fact it amazes me how often such dribble is placed on the Op-Ed pages of major newspapers. Vague references to anecdotal experiences of climate change backed with murky statistics and little fact. Even if you're an ardent environmentalist, the cliched, opaque writing is tough to swallow.

That being said, he manages to produce one interesting thought (not original, but an opinion of Minik Thorleif Rosing, an accompanying Danish geologist).

" 'Most people will actually feel climate change delivered to them by the postman,' he explains. It will come in the form of higher water bills, because of increased droughts in some areas; higher energy bills, because the use of fossil fuels becomes prohibitive; and higher insurance and mortgage rates, because of much more violently unpredictable weather. "

Not only does this strike me as incredibly insightful and true (regardless of how much we may improve energy efficiency), but it raises an interesting question given the existing economic worries. Could the effects of climate change collude with rising commodity prices to increase, and even entrench, inflation? Some economists are already preaching the danger of entrenching inflationary expectations. And they are right to do so. Expectations of continuing inflation affects consumer behavior and could do much to offset recent actions aimed at promoting, or at least, maintaining growth.

Ben Bernanke's job is hard enough. You better believe financial organizaitons will start pricing inflation into their lending and investing practices but central bankers should not be forced to consider such subtle (and even tenuous) connections in shaping monetary policy. But if politicians do not start seriously confronting the dangers climate change poses across the board then the men at the Fed may soon find themselves with NO room left between the rock and the hard place. Whether funded with carbon or windfall taxes (let's hope not), while credit remains tight, "green subsidies" may not only save the planet, but perhaps even our dollar.

Go fly a kite?

I have to admit I am a sucker for technology, especially with regard to renewable energy. I find the science and creativity that go into such innovation captivating. If you keep up with even just the cable news at the gym, you're probably in the know about wind power, "clean coal", and of course the dreaded biofuels. Even if you're not aware of the policies that are in place or the science behind them, most of us have at least heard politicians rally about them.

At a time when all such proposals seem to be dumb, dumber, and dumbest, I'm happy to see this new technology coming out of the Netherlands (why do they always come up with the cool stuff?). Kites, people. Not only is this amazingly cool (ok I'm a dork) but amazingly simple and practical.

When former oilmen are rallying for taxpayer money that requires huge restructuring of our electricity grid, innovations like this are most welcome. Not only do they require less to implement but the maintenance costs are minimal. I've talked before about the need for renewable energy subsidies and this is the ideal type of technology for government support: it is cheap to install and will pay for itself very quickly without diverting other resources (ahem, ethanol). To tackle climate change and create a sustainable network of renewable energy will require diversification, innovation, and apparently, creative uses for common items.

Trashing gas

I'm done with expensive gasoline, thank you very little. I've sold my car and am now the proud owner of a Genuine scooter. Bad boy gets 80 miles to the gallon: traded the van for it straight up. But I'm still concerned about gas prices: more so given what they reflect about the American economy, climate change, and the status of oil. The New York Times gave me a little hope today by outlining how garbage and waste may be the wave of the future. But please, we've all heard this before...



But seriously. This technology has been around for a while (I'm dubious of the claim that it has existed for decades) but still remains far away from perfection and economic feasibility on a scale of mass production. All the more reason to continue extending subsidies to more and more types of clean technology and renewable energy. Solving this new type of energy crisis requires far more than one "savior" technology (read: ethanol) and it is wise for the government to cover all their bases. The private sector needs to jump in as well and is doing so at a breakneck pace. Perhaps this is one side of the bubble needed to cure Wall Street's hangover.

Bank failures...but not the kind you think

The world's international financial institutions have had a rough day. A new study linked the rise in tuberculosis in Eastern Europe and Russia with IMF loans to post-Soviet countries. The study comes on the heels of an internal review by the World Bank found that the Group has done a lackluster job of enforcing environmental standards in developing countries.

The first study does not imply causation, regardless of how much the NY Times wants it to, but merely an association. Though disturbing, it should not be surprising that IMF loans, which advocate government thrift (often by cutting social programs), result in a rise in disease. Government doctors lose jobs when socialized medicine is cut and disease rates go up - especially TB, which requires short term care and intensive medical supervision. But ideally, as economic growth spreads through the private sector, health care should become a social privilege available to most, if not all. Just don't tell the US government that the Washington Consensus might apply at home. 

More troubling than an obvious, though somewhat scary, epidemiological correlation is the World Bank's apparent disregard for environmental protection. Environmental safeguards may be a vanguard luxury of the US left but for developing nations nature cannot be divorced from responsible development. Water scarcity due to Bank sponsored agricultural expansion and recent food scares prove that attention must be paid to the environment to create sustainable development. Without proper institutional protection, the environment suffers, citizens of the developing world suffer, and the world suffers as climate change grows more ubiquitous.

The IFIs may be growing less relevant in a globalized world but that does not excuse such behavior. Shape up.