How to curb climate change?

by on July 2, 2013 at 9:57 am in Economics, Science, Uncategorized | Permalink

Paying Canadians to keep their oil sands in the ground to curb climate change might not sound like an obvious vote winner to a cash-strapped European government.

But it makes more economic sense than people realise, according to Bård Harstad, a Norwegian academic who has just won a prestigious environmental economics prize for a provocative paper suggesting just such a move.

Mr Harstad, 40, has been awarded the Erik Kempe prize, worth SKr100,000, by the European Association of Environmental and Resource Economists for a study called “Buy Coal! A Case for Supply-Side Environmental Policy”.

The FT article is here, and you may recall an earlier MR suggestion that sealing or blowing up especially dirty fuel sources, in a Hotelling intertemporal resource extraction model, is more likely to be effective than many kinds of tax.

Nick_L July 2, 2013 at 10:10 am

How about China uses its US reserves to buy Alaska from the US, then transfers that state to Canada’s possession in exchange for carbon credits and a commitment from Canada not to continue developing the Oilsands? America would deal with its deficit, Oilsands pollution eliminated, China gets time to deal with its pollution problems, and Canada gets the delightful Mz Palin..ah, mebbe not.

Peter Schaeffer July 3, 2013 at 1:08 am

NL,

Canada’s future tar sands revenues are in the range of $180 billion per year. Is Europe willing to pay Canada $180B to leave the tar sands in the ground?

Didn’t think so.

Can Canada get $180 billion per year from Alaska… Without massive resource extraction?

Didn’t think so.

Peter Schaeffer July 3, 2013 at 1:17 am

NL,

Make that

“Canada’s future tar sands revenues are in the range of $180 billion per year. Is Europe willing to pay Canada $180B per year to leave the tar sands in the ground?”

ed_finnerty July 4, 2013 at 8:50 am

$180 B per year – huh – impossible

Nick_L July 4, 2013 at 8:04 pm

So, no merit in that idea, then? Perhaps I should have titled it ‘A fairly modest proposal’. Oh well, I’m sure the politicians can come up with something more workable. See also: http://articles.washingtonpost.com/2012-12-14/opinions/35846563_1_gas-reserves-oil-prices-alaska

Andrew' July 2, 2013 at 10:17 am

Bombing mine shafts because the pro-science boosters have completely ruled out nuclear as a viable option? Well, we need something to do with the nuclear waste we can’t figure out how to store. Might as well dirty bomb the energy sources.

Andrew July 2, 2013 at 10:31 am

I blame myself really. We obviously have no discernible energy or nuclear or solar policy because I don’t give a flip if my kid is or isn’t taught EVEN MORE evolution and environmentalism. Thus we need snake eating its tail policies like paying people in petrodollars not to dig up oil.

Bill July 2, 2013 at 10:18 am

Norway suggests that Canada keeps its oil sands in the ground by paying a high market price to Exxon so that oil will not be developed.

Saudi Arabia will also join this environmental program with Norway.

Next, the Texas Railroad Commission, responsible for suppressing oil production, will spring back to life as the Texas Environmental Protection Agency.

Peter Schaeffer July 3, 2013 at 1:09 am

B,

Life in the past… The Texas Railroad Commission (as part of the Federal Interstate Oil Compact) hasn’t restricted oil production since the 1960s.

Yancey Ward July 2, 2013 at 10:36 am

Example #1,569345 for why economist will one day hang from nooses.

j r July 2, 2013 at 10:50 am

“Hang from nooses?”

A little severe, don’t you think, Pol Plot?

Andrew' July 2, 2013 at 10:54 am

I think it’s a typo, he meant Mooses.

Yancey Ward July 2, 2013 at 12:04 pm

Do I sound Canadian to you?

Plaza July 2, 2013 at 12:59 pm

No, just a few commas short of a whole number.

libert July 2, 2013 at 3:03 pm

I believe the plural is “neese”

NK July 2, 2013 at 10:38 pm

True.

From the paper: “The novelty in my analysis is that I allow countries to trade fossil-fuel deposits before climate and trade policies are set.”

How generous! I suppose we need a strong central government for that. Disgusting.

whatsthat July 2, 2013 at 11:00 am

How will parties negotiate the price to be paid? Is there not an incentive for moral hazard, with the buying and selling firm keeping the prices low initially, or misrepresenting the cost of emission control?

Nevertheless a very interesting paper.

Yancey Ward July 2, 2013 at 12:05 pm

Moral hazard? You mean you don’t have a tar sand oil field that needs to be bought out?

Andrew' July 2, 2013 at 12:42 pm

Specifically, the More Oil Hazard.

B.B. July 2, 2013 at 11:03 am

The guy might have more credibility if he wasn’t a citizen of one of the world’s major oil producers. Is drilling in the North Sea really cleaner and greener than Canadian tar sands? And why aren’t we talking about the vast tar sands in Venezuela? The country could use the money more than Canada, to import things like toilet paper.

The proposal doesn’t handle the hold-up problem. Countries could threaten to develop fossil fuels just to get a payoff not to develop, even though they would have never considered such development in the absence of payoff policies. Personally, I demand a payment for Norway, or I will drill in my backyard.

Wouldn’t it be easier just to use all that money to build some modern nuclear power plants?

How much would temperatures have to DROP before we conclude we need some global warming and started producing more oil? Canada is ground zero for the next ice age.

whatsthat July 2, 2013 at 1:24 pm

This is sort of what I had in mind.

Ad Nauseum July 2, 2013 at 3:17 pm

Supposedly, REFINING oil pumped from the North Sea is cleaner and greener than refining tar sand oil. So, yes, there’s a case to be made. Good point though.

Sam July 2, 2013 at 11:05 am

This makes sense as a Coasian bargain, through real life has some extra frictions. The Yasuní-ITT Initiative in Ecuador proves it can work. Though the bargain hinges too much on credibility over multiple iterations to be very stable.

x July 2, 2013 at 11:17 am

Worldwide cap and trade.

Have Canada buy credits if they want to extract oil.

x July 2, 2013 at 11:26 am

And if anyone asks how to enforce worldwide cap and trade, I have a solution.

Credibly threaten to nuke the capital cities of any transgressors.

If politicians are (correctly) deemed not credible enough, deploy fully automated submarines that periodically surface to measure pollution and automatically launch SLBMs if they detect more emissions than allowed.

Andrew' July 2, 2013 at 11:43 am

When do you want to pick up your peace prize?

libert July 2, 2013 at 3:05 pm

It worked for Kissinger!

JWatts July 2, 2013 at 4:11 pm

Can we get Arnold for the lead role in that movie? “I’ll be back.”

txslr July 2, 2013 at 6:23 pm

Or sharks with frickin’ laser beams attached to their heads!

Peter Schaeffer July 3, 2013 at 1:12 am

x,

Given that China is the number 1 GHG emitter by far, Beijing will be the number 1 target?

Bad plan. China has nukes to retaliate with.

Try harder.

Sam July 2, 2013 at 11:26 am

Future folk will be richer than current folk, so current folk shouldn’t pay anything to prevent climate change in the future.

Generally, the future can deal with its own problems. They’re not our problems, and they will be solved by far richer and knowledgable people.

Andrew' July 2, 2013 at 11:44 am

This is the question. Someone explain why scientists would possess a reliable consensus on the answer.

TallDave July 2, 2013 at 10:02 pm

I wonder when it was collectively decided we could reliably predict temperatures decades hence. Doesn’t that seem odd in retrospect? Did anyone really ever believe that before 1990? They’ve been doing projections forever, but the leap from “might” to “will” should have been of more note.

Keith July 2, 2013 at 3:08 pm

Will future folk definitely be richer than current folk?

Sam July 2, 2013 at 3:33 pm

Nothing is certain. But think of three assumptions:

1) Future folk will have more productivity, resource access and efficiency because of tech and science innovations.
2) Future folk will have less resources because of environmental degradation and unsustainable resource use.
3) There will be probable cataclysms because of tech-introduced existential risk (rogue AI, engineered pandemics, nano-risks etc.)

If 1) dominates, climate change is going to be handled much more cheaply in the future than prevented in the present. If 2) dominates, not so much. If 3) dominates, climate change shouldn’t matter much either way.

TallDave July 2, 2013 at 10:03 pm

Barring political calamity, yes. Productivity gains are almost never lost, except when they’re destroyed by gov’t.

gz July 3, 2013 at 10:37 am

What about demographic calamity?

gz July 3, 2013 at 10:39 am

…by which I mean, of course, people with knowledge just dying one at a time, to be replaced with recent immigrants?

Sam July 3, 2013 at 11:33 am

I think knowledge lost isn’t a strong problem, because knowledge transfer technologies will improve faster than knowledgabe people die off. But this is more conjecture on my part.

The Anti-Gnostic July 2, 2013 at 12:50 pm

Paying Canadians to keep their oil sands in the ground to curb climate change might not sound like an obvious vote winner to a cash-strapped European government.

Hell yes it’s a vote winner. You think they’re going to suggest anything like that to Libya or the Arab monarchies? Iraq? Or the author’s own Norway?

For that matter, do you think anybody agitating about “climate change” even cares about the actual problem: air pollution from burning fossil fuels? You could just ban SUVs, halt immigration, do something to stop the rivers of cars pouring into and out of cities. I’ve yet to hear anybody tell paper-pushing businesses in their energy-guzzling urban palaces to telecommute, or move to the burbs where most of their employees live.

How much fossil fuel do we burn sending El Jefe to Africa to hand out money so Africans can boost their energy consumption/carbon production? What’s the carbon footprint of having the US military all over the globe? Why do we have cities like Las Vegas in the middle of the desert and Edmonton in the middle of the tundra?

This isn’t a serious debate; it’s just jockeying over who pays money to whom.

libert July 2, 2013 at 3:10 pm

I think you’ve got it backwards. People living in apartment buildings in those “urban palaces” and commuting to work via public transportation use much less energy than people driving dozens of miles a day from the suburban McMansions that they have to pay extra to heat and cool.

The Anti-Gnostic July 2, 2013 at 3:31 pm

Cities are hotter than the surrounding landscape so more A/C for your huge glass buildings. Public transportation doesn’t run on unicorn emissions either. I”d say it’s a wash, at best; cities have a huge footprint, even beside the rivers of vehicles pouring in and out of them. In any event, nobody, not even St. Albert, is actually interested in air pollution. What they are interested in is transfer payments.

dan in philly July 2, 2013 at 1:07 pm

Pay me half of the money. You will have the same effect on GW for half to cost. That’s a rational economic argument if I’ve ever heard one.

JWatts July 2, 2013 at 4:15 pm

I’ll be willing to take 49% of the money. That’s the free market in action for you.

mulp July 2, 2013 at 1:40 pm

Better to spend money on satellites with mirrors that can focus the sun on the pipelines to further increase the temps above the 110+ degrees they experience from global warming so far so they buckle and break and catch on fire, designed, built, and launched by European space agency which will create jobs in the EU..

Andrew' July 2, 2013 at 2:34 pm

So, the cost to keep the oil in the ground is something related to the oil market price, right? Isn’t this exactly why oil rigs in Texas have sat idle in the past? Wouldn’t you prefer to compensate them with carbon ppm futures or something?

bmcburney July 2, 2013 at 3:30 pm

I find the cynicism displayed by the majority comments above very comforting. Within the next two to five years, and possibly sooner, catastrophic anthropogenic global warming will be seen as a hoax. A “well-intended” hoax to be sure, but a hoax nevertheless.

At present, there are 73 published global climate models. These 73 computer models can be understood as the mathematical expression of the “scientific consensus” on global warming. All 73 models predicted temperatures for the present in the tropical troposhere which are higher than current measured temperatures in that region. Not only all wrong but all wrong in the same direction. This is important because, among other things, theory requires that temperature increases manifest themselves first in the tropical troposhere.

Moreover, the 17 to 13 year pause in warming is reaching the point in which it will be phyisically impossible for the theory of global warming to be correct. Comments by scientist/advocates already suggest that the longest pause found in any run of any model is 17 years and only a minority of models show a “pause” of even 10 years. Unless global temperatures increase dramatically and soon, the establishment theory of catastrophic anthropogenic global warming will be falsified.

JamiNYC July 2, 2013 at 4:01 pm

+1
The main article is just “holier than thou” hot air.

The Anti-Gnostic July 2, 2013 at 4:04 pm

They’re way ahead of you on that. The terms of the debate have continually shifted from the original, now quaint-sounding “air pollution” to “global warming” to the even more incorporeal “climate change.”

This is a sure indication that the motivator for this debate is not actually the problem, it is the solution, and that solution is always transfer payments.

Air, land and water can be cleaned up. Air, land and water have been cleaned up. But climate is always changing, and that is the perfect, unfalsifiable thesis for this perennial solution in search of a problem. If temperatures increase, somebody needs to pay; if temperatures decrease, somebody needs to pay.

Thomas Sewell July 2, 2013 at 4:06 pm

Obviously, Europeans could simply buy all the available oil sands development rights available in Canada and just not develop them, if they really believed that would make a difference to some sort of global warming scenario. If they spent their own money that way, I wouldn’t even object.

But in what reality do Canadians not want the world to be a warmer place? Shouldn’t they be advocating for more GHG emissions, if they think they really make that much of a difference? I mean, when most of your country is covered in ice most of the year, surely a little warming doesn’t look so bad to you?

JWatts July 2, 2013 at 4:34 pm

Obviously, Europeans could simply buy all the available oil sands development rights available in Canada and just not develop them

+$1,000,000,000

Chip July 2, 2013 at 8:36 pm

+1

I’ve followed the global warming issue closely for 20 years, and have moved from believer to skeptic in that time. There is no evidence that human-produced CO2 is a significant driver of warming. And the models that suggested it are wrong, badly wrong.

And even if we were responsible for the slight warming between the 70s and 90s, what has been the “cost” of that to justify the trillions spent on mitigation?

You would think economists especially would be interested in cost benefit analysis.

At the end of the day the global warming movement was a political movement that exploited a very immature and obscure scientific field to further their goals. So despite the science now falling away I expect the movement to chug along for a while because the political will is as potent as ever.

Cimon Alexander July 2, 2013 at 7:23 pm

The Cathedral, despite commanding the talents of incredibly smart people (including our Mr. Cowen!), only accidentally and occasionally reaches truth.

When you are quick to oust unbelievers, errors in your doctrine tend to compound.

Cimon Alexander July 2, 2013 at 7:20 pm

I would like to point out that 18 years ago, I made a blood-sacrifice to Zeus. Since then, Global Warming has stopped. Coincidence?

http://www.economist.com/news/science-and-technology/21574461-climate-may-be-heating-up-less-response-greenhouse-gas-emissions

Less economist-speaking, more heifer throat slicing!

TallDave July 2, 2013 at 9:58 pm

Making everyone poorer is almost always a mistake.

I’m more worried about the existential threat of cooling, but fortunately there’s a plan that can address both: a fleet of space mirrors. Plus, you can solve the big problem with solar polar (too diffuse) or collect the focused light in space and use it there.

This can easily be done for less than a trilion dollars, it’s 1970s tech.

Dr. D July 2, 2013 at 11:32 pm

I think it would have been more appropriate to award Dr. Harstad the Lt. Milo Minderbender Medal in applied economics. Maybe he can rationalize the Egyptian cotton market next.

Alan July 3, 2013 at 6:02 am

Sounds like shooting yourself in the foot to make yourself buy a car to me.

athEIst July 3, 2013 at 8:51 am

That should stop the Chinese and Indians from opening a new coal-burning generator every week.

tj July 3, 2013 at 8:54 am

Why is it automatically assumed that global warming is badbadbad?

Personally, I’d rather live in a warmer world than one buried under glaciers.

Plants love warmth and CO2, the biodiversity is greater in warmer climes than cold, etc

XKCD says it well: http://xkcd.com/1225/

Floccina July 5, 2013 at 4:42 pm

Better to spend on removing co2 from the air via biochar, enhanced weathering, deep ocean iron fertilization etc.

Comments on this entry are closed.

Previous post:

Next post: