Wednesday, February 24, 2010

Will The EPA Drop The Ball On Regulating Carbon Emissions?

Mark Thoma at Economist's View links to a set of comments by Frank Ackerman on proposed regulations by the EPA to limit carbon emissions. Central to those regs are estimates of the social costs of carbon emissions, and Ackerman accurately points out that EPA economists seem to be leaning to pricing those costs at around $5-6 a ton, which would translate into about a nickel for a gallon of gas, pretty inconsequential. It would appear that these low numbers are due to their only looking at peer-reviewed articles for sources and thus not the Stern Report, using Nordhaus's old DICE model, using ridiculously high discount rates of around 3-5%, and all but ignoring the problem of catastrophic risk of runaway warming as argued by Martin Weitzman. This becomes unpleasantly important as it seems increasingly unlikely that the Senate will pass any sort of cap and trade bill on carbon emissions (or anything else related to climate change), leaving this action by the EPA that was mandated by court rulings as about all that may be done any time soon by the US government about this issue. What an embarrassing scandal. One does not know whether to laugh or cry (probably both).

4 comments:

Jimbo said...

Meanwhile, the GOP is trying to make the case that even the minimal regulation of CO2 will have disastrous consequences for the economy and some states are seeking to have EPA regulations not applicable to their jurisdictions. Not sure they can actually do this but nowadays the rule of law is rather under assault from many forces.

Nobody Special said...

Is there a good reference article that sums up the cost of proposed policy responses to ALL KNOWN low-probability catastrophic events in addition to climate change -- e.g. EMPs, asteroid bombardment, low-yield nuclear weapons, dirty bombs?

I suspect that a tremendous share of world GDP would be required to address all of them. So which ones do we address, and why?

TheTrucker said...

Anonymous Nobody Special said...

"Is there a good reference article that sums up the cost of proposed policy responses to ALL KNOWN low-probability catastrophic events in addition to climate change -- e.g. EMPs, asteroid bombardment, low-yield nuclear weapons, dirty bombs?"

We do what science dictates.

A tax on carbon refunded as a quarterly "stimulus" shaped like the "stimulus" checks in early 2008 is the best policy. Anyone that claims that such a tax and rebate policy harms the economy is a moron or a liar or both. That tax will ultimately fall on the owners of carbon. Owners contribute NOTHING to an economy. The alternatives (produced energy such as biofuels, wind, and solar) will get a boost.

Any takers????

gordon said...

Those who always preferred a carbon tax to cap-and-trade are, I suppose, pleased. If they think along the same lines that Prof. Krugman does when he talks about health care, they should be ecstatic (As with health care, you can start small then improve the system later).

As far as rebates are concerned, will everybody get the same rebate? Or will lower-income people get more and higher-income people get less? Is there a reason why you prefer rebates over reduction in other taxes (which several advocates of carbon taxes have suggested)?