Crawl Across the Ocean

Sunday, June 10, 2007

Why? I'll Tell You Why

Andrew Coyne talks about government manipulating prices (e.g. via a carbon tax) in order to achieve reductions in greenhouse gas emissions:

"Somewhere between now and 2050, we may get it through our heads that global warming, as serious a challenge as it may present, is not fundamentally different from the everyday problem of scarcity, the predominant concern of economics since its founding."

...we could just leave it to prices. I mean it when I say that scarcity is no less urgent a problem than climate change, and requires the same universal social commitment to frugality that is now urged upon us in the name of carbon neutrality. And in fact that is exactly what prices extract from us. No matter where we go or what we do, in any sale or purchase we make, prices are there, forcing us to economize in our use of scarce resources -- in effect, to take account of the needs of others, whether we wish to or not.

Prices are the remorseless regulators of a market economy, incorruptible and inescapable, with a reach that the most totalitarian-minded gauleiter could only envy. And they work: where prices are left to do their job, shortages are unknown. We have enlisted them to good effect against scarcity, so much so that we are hardly even aware of it. Why will we not do the same for global warming?"

Unfortunately, just when he gets to the interesting question, Coyne finishes his column. I'm sure he has a world length restriction and maybe answering this question will be the subject of a future column, but in case not, here are some of the reasons why we aren't yet tackling greenhouse gas emissions by manipulating prices:

First of all, Coyne is clearly (as is his intention, I'm sure) glossing over the most obvious difference between allowing a market to set prices and having government intervene to change the prices which are set in the market, which is what he is (sort of) proposing. But aside from that, what are the reasons why government won't introduce some sort of market mechanism (emissions quotas, carbon tax, etc.)?

1) There is a portion of the population which does not believe global warming is real / or that it is caused by humans / or that there is anything that can be done about it / or that there is anything that can be done without 'destroying' the economy.

2) There is a large number of people who instinctively distrust the use of 'market' solutions to problems the market has so far failed to solve on its own. Even worse, there is very little overlap between the first group of people who deny the problem is real and the second group who deny that market-based measures (government manipulation of pricing signals) can/will work.

3) Disconnect between actions and consequences

There are multiple disconnects at work here. First, there is the basic disconnect that the burden of global warming falls with little connection to the emission of the gases themselves. Canadians, for example, are among the greatest emitters of Greenhouse gases in the world, while the people of Bangladesh are among the smallest. Yet poor, low-elevation Bangladeshis likely face a much greater impact from the problem than Canadians do.

Second, there is the temporal disconnect. Our actions now affect future generations more than they affect us.

Third, there is the complexity disconnect. Because the climate is so complex, it is difficult to ever point a finger and say that hurricane X, flood Y or drought Z was a direct result of global warming / climate change. More and more bad things will happen but in many cases you'll never now for sure which ones would have happened anyway and which ones are a result of global warming.

4) Collective Action Problem with too many actors

Global warming is a yes, global, problem, but the largest actors capable of reaching an agreement on taking action are individual nations. With 150+ countries in the world, many of which have only a tenuous authority in their own country and many more of which are authoritarian regimes with little interest in global problems, reaching a global agreement is difficult. Additional complications such as negotiations over allowances for population growth, export of energy, purchasing of energy credits, creation of carbon sinks and so on makes agreement even more difficult.

But for one country to take action while others do nothing is for that country to place itself at a competitive disadvantage vs. those other countries (in theory anyway).

5) Inequality

There is a large group of people in the developed world who are unwilling to take any action to reduce their own emissions unless those who already have emissions 90% smaller than theirs take the same action (the 'what about China and India' crowd).

These people generally oppose any deal in which India and China don't set emissions targets based on their current per capita emissions, but refusing to take action unless these countries to agree to freeze their emissions at 1/10 the levels of the developed world is tantamount to rejecting action altogether.

6) Vested interests

Presumably more headway would have been made by now if not for the effort of those such as Exxon Mobil and all the other people with a vested interest in the status quo.

7) Selfishness, Greed, Ignorance, etc.

Self-explanatory. Some majority of the population claims to believe that global warming is a serious problem but how many would vote for higher gas taxes?

8) Regionalism

While the rest were problems that apply everywhere, this one is somewhat specific to Canada. Jeffrey Simpson had a column in the Globe the other day talking about why it is tougher for Canada to meet country-level emissions targets than it is for many other countries, but he left out this one.

In a weak federation where the region which has the highest and fastest growing emissions is also still bitter about some energy industry related event that happened a generation ago, bringing in new rules of any kind to limit emissions is always going to be tougher.

So now you know why the government hasn't yet implemented something like a carbon tax to help solve global warming. Does that help?


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    By Anonymous Anonymous, at 5:30 AM  

  • An excellent and complete list. I tried to think of others but I can't think of anything of consequence.

    Based on my own list, which was a subset of yours, I concluded that there will be no real substantial change in human behavior. China, India and the developing world will race as fast as possible to a developed world lifestyle with the obvious impacts on consumption of resources and emissions. The developed world will tenaciously resist any decline in material lifestyle ( ie consumption levels, choice or increased inconvenience ).

    This was a very depressing conclusion.

    After some time I've acclimatized ( sorry, couldn't resist ) and, while I still find it depressing I'm more inclined to think: it is what it is.

    The world is going to do what the world is going to do. The only thing I have any real control over are my own actions. It seems to me that the only reasonable conclusion to come to is that one should take the actions they can without compromising themselves or the capacity of their kids to be 'successful' and the let the world do what it's going to do.

    I think this comment could apply equally to the next post as well.

    By Blogger KevinG, at 9:01 AM  

  • As you say, it is what it is. Still, it's a fine line between getting depressed and tuning out altogether, one I find difficult to walk most of the time.

    By Blogger Declan, at 7:22 PM  

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