The new Smoot-Hawley?

by on June 28, 2009 at 6:17 pm in Law | Permalink

The House bill contains a provision, inserted in the middle of the
night before Friday’s vote, which requires the president, starting in
2020, to impose a “border adjustment” – or tariff – on certain goods
from countries that do not act to limit their global warming emissions.
The president can waive the tariffs only if he receives explicit
permission from Congress to do so. The provision was added to secure
the votes of Rust Belt lawmakers who were wavering on the bill because
of fears of job losses in heavy industry.

Here is the story and Obama deserves praise for opposing this provision.  Here are my comments on the issue itself.  The bottom line is that Waxman-Markey, as it currently stands, would in fact be counterproductive, once the international scale of the problem is taken into account.  That we learn about this provision only now is startling enough.

I write this all as someone who a) favors a much higher price for fossil fuels, b) thinks that if micro-nutrients are a good idea they are not an alternative to addressing climate change; we could do both with positive expected long-run return, c) thinks that many people on the "Right" oppose W-M mostly because its passage would raise the status of environmentalists and others on the "Left" (but they will not admit as much), and d) thinks that our collective American incompetence in limiting emissions does not eliminate our moral obligation to address the problem.

Sadly, Ezra Klein nailed it:

Climate change is a big problem. It will eventually require a big
solution. My understanding is that the polling suggests that people
don't like it when you tell them this is a big problem and they don't
want to be convinced that they need to spend their time worrying about
something new. In fact, like kids who want to believe that they're
going to the doctor for a lollipop, they want to hear that this is an
awesome new jobs program. But it isn't an awesome new jobs program.
It's an effort to avert a catastrophe on the only planet we know how to
inhabit. I
can't see a successful respon[se] to climate change that doesn't
presuppose a majority sharing that belief.

JMK June 28, 2009 at 6:28 pm

I am a little surprised at you Tyler. The science is garbage. Now, I am a conservationist but think this global warming thing is blown way out of proportion. And I agree, to a certain extent, on the need to reduce certain pollutants in the atmosphere. But CO2 is a natural emission of humans and animals and is the primary stuff of life for all plants. There is enough evidence to suggest other causes of the recent warming, not to mention the fact that there has been little warming of note since 1998 while CO2 levels still rise.

Is it really worth laying waste to the US economy over this issue right now?

I think not.

odograph June 28, 2009 at 7:12 pm

If we tax (one way or another) coal burning in the US, we are encouraging coal burning in China. We know imported toasters and dvd players were made with power from dirty coal plants. That those plants have fewer “traditional” emissions controls is one more reason that those appliances are cheaper.

Waxman-Markey may be dumb, and this particular tariff provision may be dumb, but the atmosphere will be global regardless. Is a pattern developing that our negotiation with overseas carbon emitters must be done silently with a wink and a nod? Or are the trade implications of carbon, like carbon policy itself, something that we’d rather close our minds to?

“Don’t think of Chinese coal plants”?

John June 28, 2009 at 7:38 pm

The dearth of originality on the left is really startling. Even the Republican alternative (The Manhattan project for alternative energy) at least allows for multiple solutions which could be discovered by trial and error. WM not only will have a negligible effect on global carbon emissions, but is like 2000 pages long — and that can only mean multiple exceptions and subsidies for Democratic supporters and powerful lobbies. How about we invest (in the true sense of the word, not doublespeak for “spend”) on synthetic trees? Anyone?

John Dewey June 28, 2009 at 8:20 pm

Tyler: “thinks that many people on the “Right” oppose W-M mostly because its passage would raise the status of environmentalists and others on the “Left” (but they will not admit as much)”

Whjy do you write crap such as this? Why do you think this? Does it not occur to you that people on the “Right” might possibly believe:

1. that the science is bogus?
2. that the dangers of global warming are wildly overstated?
3. that the costs of the proposed “solution” are far, far worse than the supposed dangers?
4. that the proposed “solution” will do very litle to change the warming of the planet?

How are you so sure, Tyler Cowen, that you know what motivates those who oppose cap-and-trade? or who oppose carbon taxes?

odograph June 28, 2009 at 8:49 pm

John Dewey, I think Tyler might be right, and people on the “Right” think “the science is bogus” because believing otherwise”would raise the status of environmentalists.”

The science is solid, which is why every major scientific organization in the world is on-board. The “alternative science” is coming out of a political movement and ideology.

How hard is it to connect those dots?

Matthew June 28, 2009 at 9:07 pm

I have noticed that the longer that the temperatures have stopped rising, and indeed started to decline, the more shrill and irrational the “believers” become. . .

Matthew June 28, 2009 at 9:20 pm

Odo,

Given that climate has changed drastically throughout earth’s history, without any oil-burning by the dinosaurs, wooly mammoths or trilobites, I would say that global warming models explain too much. Natural variation is entirely able to account for any of the climate shifts we saw during the 20th century.

And, of course, during the 21st century temperatures are no longer rising, and indeed are showing some evidence of beginning to decline.

allison June 28, 2009 at 9:46 pm

i will never understand why people smart enough to post nuanced subtle technical arguments of economics in an articulate way are incapable of noticing they lack the expertise to make the same kinds of arguments in other disciplines, and yet believe and post with such authority their own grossly inaccurate representations.

is this hubris a pre req to an econ phd?

–The science is solid, which is why every major scientific organization in the world is on-board. The “alternative science” is coming out of a political movement and ideology.

Well, that’s convincing. Quite an appeal to authority. except what IS a “major scientific organization”? Funny how actual departments at actual universities don’t all have this monolith of opinion.

how about we cite testimony to congress at least, of dissenters?

http://epw.senate.gov/public/index.cfm?FuseAction=Minority.SenateReport

Here are some out-takes–3 of 400. the 400 have a broad range of views, as is common in science not yet settled. the notion of consensus in the “global warming” debate on the “yes” side is either a gross misunderstanding of science or evidence that science is not what they are pursuing.

Geologist/Geochemist Dr. Tom V. Segalstad, a professor and head of the Geological Museum at the University of Oslo and formerly an expert reviewer with the UN IPCC, expressed skepticism of climate fears in 2007. A July 7, 2007 article in Canada’s Financial Post read, “In the real world, as measurable by science, CO2 in the atmosphere and in the ocean reach a stable balance when the oceans contain 50 times as much CO2 as the atmosphere. ‘The IPCC postulates an atmospheric doubling of CO2, meaning that the oceans would need to receive 50 times more CO2 to obtain chemical equilibrium,’ explains Prof. Segalstad. ‘This total of 51 times the present amount of carbon in atmospheric CO2 exceeds the known reserves of fossil carbon– it represents more carbon than exists in all the coal, gas, and oil that we can exploit anywhere in the world.’” The article continued, “Also in the real world, Prof. Segalstad’s isotope mass balance calculations — a standard technique in science — show that if CO2 in the atmosphere had a lifetime of 50 to 200 years, as claimed by IPCC scientists, the atmosphere would necessarily have half of its current CO2 mass. Because this is a nonsensical outcome, the IPCC model postulates that half of the CO2 must be hiding somewhere, in ‘a missing sink.’ Many studies have sought this missing sink — a Holy Grail of climate science research–without success. ‘It is a search for a mythical CO2 sink to explain an immeasurable CO2 lifetime to fit a hypothetical CO2 computer model that purports to show that an impossible amount of fossil fuel burning is heating the atmosphere,’ Prof. Segalstad concludes. ‘It is all a fiction.’”

Glaciologist Nikolai Osokin of the Institute of Geography and member of the Russian Academy of Sciences dismissed alarmist climate fears of all of the world’s ice melting in a March 27, 2007 article. “The planet may rest assured,” Osokin wrote. “This hypothetical catastrophe could not take place anytime within the next thousand years,” he explained. “Today, scientists say that the melting of the permafrost has stalled, which has been proved by data obtained by meteorological stations along Russia’s Arctic coast,” Olokin added. “The (recent) period of warming was tangible, but now it may be drawing to a close. Most natural processes on the earth are cyclical, having a shorter or longer rhythm. Yet no matter how these sinusoids look, a temperature rise is inevitably followed by a decline, and vice versa.”

Israel: Dr. Nathan Paldor, Professor of Dynamical Meteorology and Physical Oceanography at the Hebrew University of Jerusalem has authored almost 70 peer-reviewed studies and won several awards. “First, temperature changes, as well as rates of temperature changes (both increase and decrease) of magnitudes similar to that reported by IPCC to have occurred since the Industrial revolution (about 0.8C in 150 years or even 0.4C in the last 35 years) have occurred in Earth’s climatic history. There’s nothing special about the recent rise!”Paldor told EPW on December 4, 2007. “Second, our ability to make realizable (or even sensible) future forecasts are greatly exaggerated relied upon by the IPCC. This is true both for the numerical modeling efforts (the same models that yield abysmal 3-day forecasts are greatly simplified and run for 100 years!),” Paldor explained. “Third, the rise in atmospheric CO2 is much smaller (by about 50%) than that expected from the anthropogenic activity (burning of fossil fuels such as oil, coal and natural gas), which implies that the missing amount of CO2 is (most probably) absorbed by the ocean. The oceanic response to increasing CO2 concentration in the atmosphere might be much slower than that of the atmosphere (and is presently very poorly understood). It is quite possible that after an ‘adjustment time’ the ocean (which contains far more CO2 than the atmosphere) will simply increase its biological activity and absorb the CO2 from the atmosphere (i.e. the atmospheric CO2 concentration will decrease),” he added. “Fourth, the inventory of fossil fuels is fairly limited and in one generation we will run out of oil. Coal and natural gas might take 100-200 years but with no oil their consumption will increase so they probably won’t last as long. The real alternative that presently available to humanity is nuclear power (that can easily produce electricity for domestic and industrial usage and for transportation when our vehicles are reverted to run on electricity). The technology for this exists today and can replace our dependence on fossil fuel in a decade! This has to be made known to the general public who is unaware of the alternative for taking action to lower the anthropogenic spewing of CO2. This transformation to nuclear energy will probably rake place when oil reserves dwindle regardless of the CO2 situation,” he wrote. Paldor also noted the pressure for scientists to bow to the UN IPCC view of climate change. “Many of my colleagues with whom I spoke share these views and report on their inability to publish their skepticism in the scientific or public media,” he concluded.

dj superflat June 28, 2009 at 10:09 pm

the histrionics are crazy. so we need to do this to save the people in bangladesh, per your link, but we don’t need to send folk in africa food, medicine, etc.? there are all sorts of way less speculative things we could do right now, for way less money, that would definitely save many, many lives. but we don’t. why is climate change the cause of choice? there is no good answer (seriously, someone please try to provide one, and then explain why we aren’t doing all the cheap, concrete things we could be doing right now to save lives elsewhere). and don’t play the “we should do it all game,” because we’ve got limited resources, political impediments, etc. we should do what we know will work, brings most bang for buck.

seriously, i love your blog, but as an economist, can you for a second just try to do the cost/benefit analysis that justifies working on climate change rather than just about everything else wrong in the rest of the world?

reed hundt June 28, 2009 at 11:01 pm

With all due respect, and I love your site, your bottom line is not accurate. Counter-productive in what sense? The legislation would lead to more than 20% of our electric generation capability being converted from carbon to clean, creating more than a million jobs, taking a huge step toward energy independence, and laying the groundwork nor only for reducing our own emissions by much more than 20% but also for striking an international treaty. How is this counterproductive? I’ve lived with this process for more than a year, and to say that this long and hard-won bill is counterproductive is pretty harsh, especially if one has not read its provisions although perhaps everyone commenting has done so.

dj superflat June 28, 2009 at 11:38 pm

um, you’re saying the cost/benefit for the US is clear? in my lifetime? my kid’s lifetime? didn’t think so. but please, act like it’s obvious we should work to save “ourselves” from warming many, many years hence, when there’s lots we could be doing right now to save many, many people.

if you look back, i wasn’t making a point about the cost/benefit of GW mitigation, but about whether we should be doing other things instead (you’re also ignoring that most cost/benefit analyses thus far assume there’s no easy fix, when there may be (e.g., spewing particles in the atmosphere), science moving along as it does). you ignored the point, and i haven’t seen a good answer for why we shouldn’t focus on other things (and yes, i’ve done my homework).

joan June 29, 2009 at 12:05 am

By 2020 the science will be much clearer. If the new data available then shows the earth continuing to get warmer most countries will be cutting back on emissions so it will probaly not be a problem. If the earth has cooled or gone back to normal we will probably repeal the bill.

matt June 29, 2009 at 12:27 am

Why don’t we just send our tax money directly to China? It might be more efficient than this bureaucratic approach to making our power and heavy industry more expensive, so that we have no chance to compete, even as our wages fall.

China is playing us for fools. If we really want CO2 reduction, we do need the tariffs to get China to play along. However, there is no way CO2 reduction is worth the costs of a trade war. “Cap and No Trade” is really going to hurt.

Why don’t we just remain in recession with little or no economic growth? That seems likely to hold down emissions.

Andrew June 29, 2009 at 4:24 am

I don’t give a crap about environmentalists’ status, except that if they have more status they get more stuff passed into law. They are NIMBYs among other things. They create sprawl with the other laws they favor. I don’t know if that’s what Tyler means, but it’s not exactly what he’s saying.

It seems to me that the only justification for the climate change alarmism is the ignorance that we don’t know how bad things could get. Well, if we don’t know, then we don’t have very good models, do we? And if we don’t have good models, then that doesn’t justify knowingly destroying the economy out of fear and ignorance, does it?

Until the government rolls out a plug-in car fueled completely by solar, then we know the government doesn’t have anything to do with the solution, short of stopping subsidizing fossil fuels and restricting sugar imports, blocking nuclear, etc. etc., which are libertarian positions and have always been.

The only justification economically minded people can come up with is that we need high costs to encourage alternatives. While true, this is true in equilibrium. You also need time to develop new technologies. And, the time may or may not be exactly the same with a marginally higher cost that reduces growth and the division of labor that fuels research and development. Warren Buffett stole my line recently when he said you can’t make a baby in 1 month using 9 women.

VangelV June 29, 2009 at 8:24 am

The science actually shows that there is no problem. If you look at the raw surface data there is no warming since the 1930s and the satellite data shows that the warming trend since 1980, which was caused by the shift of the PDO into a warm phase, reversed when the PDO flipped back into its cool phase.

I am surprised that you are falling for the scam. And if you want to pay more for fossil fuels you are always free to do so.

Vehical Driver June 29, 2009 at 9:17 am

Why do these discussions always ignore nuclear power?

We can eliminate all our CO2 emissions, and have cheaper and cleaner energy than we do now, using existing technology that already has been proven on a large scale.

Isn’t it really kind of dumb to be debating possibly economy-destroying environmental policy that might reduce CO2 emissions by 10-20% (yeah, right!), when in fact we can reduce it nearly 100%, with no long term trade off?

The fact is, there is zero commitment to fighting climate change whatsoever, especially among the Global Warming Alarmists. Perhaps all the Global Warming Alarmists should spend less time debating with “deniers” (or rather, making ad-hominem attacks on skeptics), and instead spend more time explaining why they are exploiting the issue to promote the same old protectionist, central-planning, socialist policies?

David Shor June 29, 2009 at 10:48 am

Vehical Driver,

The point of a cap’n’trade system is to establish a market price for carbon, so that everyone involved has an incentive to conserve. By making coal more expensive, it would make nuclear power a better relative investment, causing the capital markets to invest more in nuclear power. This is a much more “market-based” approach that yields better results than the republican supported “Build a huge round number of nuclear power plants!!!”, which is more reminiscent of Maoist-China era central planning than anything else.

If you would step away from partisan dog whistles for a second, you would see that it’s actually the Republicans who literally want to determine the precise nature of our electricity market by legislative dictate.

The problem is, that there is indeed a trade-off to building so many nuclear power plants: They pose an absolutely huge capital expense. The republican plan to construct 100 nuclear power plants has been estimated to cost around 1 trillion dollars. Maybe it might be better to only spend say, 100 billion dollars on nuclear plants and 200 billion on home insulation, and achieve the same CO2 emissions for a third of the cost. Under a Cap’n’Trade system, the market will find the most economically efficient way to meet a given CO2 emissions target.

John Dewey June 29, 2009 at 11:59 am

Well, David Shor, let’s look at just one of those costs you listed: flooding.

According to The Yale Forum on Climate Change & The Media, IPCC mean warming scenario projected that sea levels would rise 8 to 18 inches by the end of the 21st century:

“In its recent Fourth Assessment Report, the Intergovernmental Panel on Climate Change (IPCC) estimated that sea levels will rise between 0.26 and 0.59 meters (0.85 to 1.94 feet) in the high warming scenario and between 0.21 and 0.48 meters (0.69 to 1.57 feet) in the mean warming scenario by the decade from 2090-2099.”

Bangladesh can adapt to an 18 inch rise in sea levels over a century.

anne June 29, 2009 at 12:55 pm

We’ve been happily devouring magical thinking about the bank bailouts for months. Case in point? Commentary and debate at NewDeal2.0, http://www.newdeal20.org

So why should climate change be any different?

David Shor June 29, 2009 at 2:30 pm

Joh Dewey,

“Bangladesh can adapt to an 18 inch rise in sea levels over a century.”

Bangladesh is both densely populated and low-lying. “adapting” to an 18 inch rise in sea level will involve 17% of the country falling underwater and over 20 million people losing their homes…

Billare June 29, 2009 at 3:30 pm

How on Earth did Americans manage to avert the infamous HORSE MANURE CRISIS choking the streets of New York and other urban cities at the beginning of the 20th century without a plan? Magic from liberalism, of course.

kurt9 June 29, 2009 at 4:47 pm

These discussions ignore nuclear power because of the enormous regulatory hurtles involved with bringing new plants on line. These same hurtles make it nearly impossible for any of the new designs (MSR, IFR, pebble-bed) to be approved for construction. Thus, nuclear power is unlikely to be expanded before 2020.

Asia, on the other hand, is very much into nuclear power with many new build outs planned in the near future.

John Dewey June 29, 2009 at 5:26 pm

david shor: “”adapting” to an 18 inch rise in sea level will involve 17% of the country falling underwater and over 20 million people losing their homes…”

Do you have any links to support your assertion that 20 million people live in homes that would be uninhabitable if seas rose 18 inches? I’ve been looking for statistics such as this and found none.

People in my home state of Louisiana have been inhabiting homes on stilts for several centuries.

Consider the Netherlands:

“Approximately 27 percent of the Netherlands is actually below sea level. This area is home to over 60 percent of the country’s population of 15.8 million people.

Barkley Rosser June 29, 2009 at 9:14 pm

Oh, getting back to the original post, I finally read the paper and saw that this tariff proposal is not due to kick in
until 2020. I would prefer it not be in there, but this is not nearly as bad as the initial reports that left that
important detail out.

assman June 29, 2009 at 11:59 pm

“The point of a cap’n’trade system is to establish a market price for carbon, so that everyone involved has an incentive to conserve. By making coal more expensive, it would make nuclear power a better relative investment, causing the capital markets to invest more in nuclear power. This is a much more “market-based” approach that yields better results than the republican supported “Build a huge round number of nuclear power plants!!!”, which is more reminiscent of Maoist-China era central planning than anything else.”

I agree but I think a tax is better because its far easier to implement. And of course I continue to believe in telecommuting which is vastly underutilized mostly due to cultural reasons not economic or technical ones.

That said there is a simple reason I oppose any action on global warming namely I think the science is utter crap. But then I think most science is utter crap and I am generally surprised at how credulous the media and popular culture is.

Barry June 30, 2009 at 11:08 am

allison: “i will never understand why people smart enough to post nuanced subtle technical arguments of economics in an articulate way are incapable of noticing they lack the expertise to make the same kinds of arguments in other disciplines, and yet believe and post with such authority their own grossly inaccurate representations.

is this hubris a pre req to an econ phd? ”

Frankly, I doubt that 5% of the commenters here have an econ bachelor’s, let alone graduate work. And people like Thomas Sowell and Gregory Mankiw have full-time jobs demonstrating that a high level of skill in economics is no evidence in favor of being able to think logically.

Of course, that’s only when thinking logically is *against* their political positions.

Odd, that.

Props for your good post. It won’t convince too many, but it does eliminate their excuse of ignorance.

adina July 1, 2009 at 1:27 am

I don’t think that realization of an activist’s cause necessarily advances his status. When the unwashed masses finally agree with you, your cause is no longer avante-garde or daring. Your protests are not as exciting. Unless, perhaps, people can identify you as the one “who knew all along.” But how many people are priveleged enough to be placed in that category? And how many people would become activists for such belated and uncertain benefits of signaling? I think that activists join a cause because 1) Sincerity (they truly care and believe in it) or 2) Relatively SHORT-TERM signaling, without excessive thought about potentially enhanced status if others eventually accept the cause.
Thus, I don’t think your belief about why conservatives oppose action on global warming makes sense. Are people’s social statuses really going to be raised all that much? For those chasing after social status, I think that, now that climate change is a popular cause, their relative social status has only gone down.
(However, I do think that global warming denialists are dead wrong, whatever their motivations).

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