Results for “pollution”
168 found

Beijing notes

It is a gargantuan, imperial city, and while there is always a walking path the point of walking is not always clear.  “The Middle Kingdom does Dubai.”  There is no need to tell me about all the parts of the city which do not look like Dubai, I have seen many of them, and furthermore Dubai has such parts as well.

An iPad, plus Baidu access to Chinese characters, makes it easy to ask questions of strangers.  Hardly anyone speaks even minimal English.  It is less harried than I had expected.  The sky rarely appears, at least in late July.  The contemporary art district, 798, is worth more than one visit.  I am not interested in seeing the Great Wall.  My hotel, rather than having a “Medical Devices” conference, has a meeting on “Australian Property Holdings.”

The main problems here are the air pollution, and that no one, including taxi drivers, seems to know how to get anywhere.  The rate of change is high and many people are from the provinces, so there is a real information gap.

The main upsides stem from what scale enables.  Even if you have been to many places, Beijing will manage to astonish you.

Most of all, I am struck by how Taiwan is more Chinese than is China.

Should speed limits be higher?

Arthur van Benthem, who is on the job market from Stanford, says no:

When choosing his speed, a driver faces a trade-off between private benefits (time savings) and private costs (fuel cost and own damage and injury). Driving faster also has external costs (pollution, adverse health impacts and injury to other drivers). This paper uses large-scale speed limit increases in the western United States in 1987 and 1996 to address three related questions. First, do the social benefits of raising speed limits exceed the social (private plus external) costs? Second, do the private benefits of driving faster as a result of higher speed limits exceed the private costs? Third, could completely eliminating speed limits improve efficiency? I find that a 10 mph speed limit increase on highways leads to a 3-4 mph increase in travel speed, 9-15% more accidents, 34-60% more fatal accidents, and elevated pollutant concentrations of 14-25% (carbon monoxide), 9-16% (nitrogen oxides), 1-11% (ozone) and 9% higher fetal death rates around the affected freeways. I use these estimates to calculate private and external benefits and costs, and find that the social costs of speed limit increases are three to ten times larger than the social benefits. In contrast, many individual drivers would enjoy a net private benefit from driving faster. Privately, a value of a statistical life (VSL) of $6.0 million or less justifies driving faster, but the social planner’s VSL would have to be below $0.9 million to justify higher speed limits. The substantial difference between private and social optimal speed choices provides a strong rationale for having speed limits. Although speed limits are blunt instruments that differ from an ideal Pigovian tax on speed, it is highly unlikely that any hidden administrative costs or unforeseen behavioral adjustments could make eliminating speed limits an efficiency-improving proposition.

Robert Frank responds on Black Friday

Here is the email I received from Bob:

I enjoyed your observations about my Black Friday op-ed in Thursday’s NYT.  If you’d permit me to respond, I’d propose to post something like this:

Like Tyler, I think we needn’t worry much about consumers who elect to wait in line for hours in the hope of getting bargains.  That’s indeed wasteful, as one of the commenters pointed out.  But it’s fairly easy to drop out of that game, and some, as Tyler speculates, may actually enjoy the process.

But the arms race that’s led to longer store hours poses a more serious problem for employees, many of whom had little choice but to truncate their holiday time with family and friends.

I had a recent conversation about this issue with a friend in Ithaca who owns a wine store. Traditionally, New York State wine merchants were not allowed to do business on Sundays.  But last year that restriction was repealed, and I asked my friend how the change had affected him.

His overall sales were about the same, he told me.  The change had thus been a clear negative from his perspective, since it meant that he and his wife were no longer able to spend Sundays together with their children.  The upside was that customers who lacked the foresight to shop in advance for their Sunday wine needs could now be accommodated.  If we’re willing to discount the cost of an inconvenience suffered by those who could easily have avoided it, the costs in this case seem clearly to outweigh the benefits.

Even so, an econometrician might find it difficult to convince a skeptic that the former Sunday closing mandate was justified.  Fortunately, a definitive answer to that question isn’t required for an assessment of my tax proposal, which isn’t nearly as costly as a flat prohibition.

Arms races arise because, as Charles Darwin saw clearly, important aspects of life are graded on the curve.  It’s not how strong or fast you are that matters, but rather whether you’re faster or stronger than your direct rivals.  And for merchants, it’s not how early you open that matters, but rather how your start time compares with rivals’.  If the stakes are sufficiently high in such cases, arms races are inevitable.

If staying open longer hours is misleadingly attractive to individual merchants, the best solution is not to prohibit longer hours but rather to make them less attractive by taxing them.  My 6-6-6 tax proposal doesn’t prohibit earlier store hours on Thanksgiving.  It simply makes them less attractive to individual merchants.

Many on the Right are quick to denounce such taxes as “social engineering”–which they usually define as using the tax code “to control our behavior, steer our choices, and change the way we live our lives.”  But that’s what virtually all laws do.  Stop signs are social engineering, as are prohibitions against theft and homicide.  Laws restrict behavior because individuals often choose to behave in ways that cause harm to others.  For someone who cares about personal liberty, discouraging harmful behavior by taxing it should be far less objectionable than prohibiting it outright.

Yet many on the Right suddenly lose their ability to think clearly when confronted by proposals to tax harmful behavior.  The first message I received in response to my Black Friday op-ed, for example, came from a chaired professor of philosophy who had this to say:  “Another sad elitist call for government to butt in so as to promote your special interest.  Maybe there are those who judge the black Friday ride just right for them.  But do you care?  You just know it should be shut down and so you will empower the government to do just that.  Well, over my dead body.”

Oh, please. Perhaps this professor is among those who denounce all taxation as theft.  But mature adults realize that we have to tax SOMETHING.  Right now, we tax many useful activities.  The payroll tax, for example, discourages hiring.  The income tax discourages savings.  Every dollar we can raise by taxing activities that cause harm to others is a dollar less we must raise by taxing beneficial activities.

In my recent book, The Darwin Economy, I defend the claim that taxes on activities that cause undue harm to others could generate more than enough revenue to balance the federal budget and restore our crumbling infrastructure.  We should tax congestion, noise, and pollution.  We should tax passenger vehicles by weight.  We should replace the income tax with a more steeply progressive tax on consumption. But until we’ve done all that, no champion of liberty has any cogent reason to oppose replacing taxes on useful activities with taxes on harmful ones.

Why they call it Green Energy: The Summers/Klain/Browner Memo

The LA Times reports that Larry Summers and Timothy Geithner “raised warning flags” about the loan guarantee program for renewables long before the Solyndra bankruptcy. The article doesn’t have a lot of new information (the key players are clearly protecting themselves) but it does link to a fascinating briefing memo written for the President in October of 2010 by Summers, Ron Klain (then chief of staff to the Vice President), and energy advisor Carol Browner.

The memo says that OMB and Treasury were concerned about three problems, “double dipping” (massive government subsidies from multiple sources), lack of “skin in the game” from private investors and  “non-incremental investment,” the funding of projects which would occur even without the loan guarantee.

The memo then illustrates with one such program, the Shepherds Flat Loan guarantee. Here is the relevant portion of the memo:

The Shepherds Flat loan guarantee illustrates some of the economic and public policy issues raised by OMB and Treasury. Shepherds Flat is an 845-megawatt wind farm proposed for Oregon. This $1.9 billion project would consist of 338 GE wind turbines manufactured in South Carolina and Florida and, upon completion; it would represent the largest wind farm in the country.

The sponsor’s equity is about 11% of the project costs, and would generate an estimated return on equity of 30%.

Double dipping: The total government subsidies are about $1.2 billion.

Subsidy Type


Federal 1603 grant (equal to 30% investment tax credit)


State tax credits


Accelerated depreciation on Federal and State taxes


Value of loan guarantee


Premium paid for power from state renewable electricity standard





Skin in the game: The government would provide a significant subsidy (65+%), while the sponsor would provide little skin in the game (equity about 10%).

Non-incremental investment: This project would likely move without the loan guarantee. The economics are favorable for wind investment given tax credits and state renewable energy standards. GE signaled through Hill staff that it considered going to the private market for financing out of frustration with the review process. The return on equity is high (30%) because of tax credits, grants, and selling power at above-market rates, which suggests that the alternative of private financing would not make the project financially non-viable.

Carbon reduction benefits: If this wind power displaced power generated from sources with the average California carbon intensity, it would result in about 18 million fewer tons of CO2 emissions through 2033. Carbon reductions would have to be valued at nearly $130 per ton CO2 for the climate benefits to equal the subsidies (more than 6 times the primary estimate used by the government in evaluating rules).

In my view, the Summers/Klain/Browner analysis was a damning indictment of the Shepherds Flat project. The taxpayers were expected to fund by far the largest share of the bills and also of the risk and in return they weren’t getting many benefits in terms of reduced pollution. In contrast, Caithness Energy and GE Energy Financial Services, the corporations behind the project, weren’t taking much risk but they stood to profit handsomely. I guess that is why they call it “green” energy.

In short, the Shepherds Flat project was corporate welfare masquerading under an environmental rainbow.

So are you surprised to learn that shortly after the memo was written the Shepherd Flats loan guarantee of $1.3 billion was approved? Of course not; no doubt you also saw that the memo authors were careful to inform the President that the “338 GE wind turbines” were to be “manufactured in South Carolina and Florida.” Corporate welfare meet politicized investment.

In the Solyndra case just about everything went wrong, including bankruptcy and possible malfeasance. Caithness Energy and GE Energy Financial Services are unlikely to go bankrupt and malfeasance is not at issue. As a result, this loan guarantee and the hundreds of millions of dollars in other subsidies that made this project possible are unlikely to create an uproar. Nevertheless, the real scandal is not what happens when everything goes wrong but how these programs work when everything goes right.

Government is raising the value of a life

The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.

The Food and Drug Administration declared that life was worth $7.9 million last year, up from $5 million in 2008, in proposing warning labels on cigarette packages featuring images of cancer victims.

The article is here.  If the goal is to give current people what they want, arguably this makes sense and perhaps it does not go far enough.  Death is…BAD.  If the goal is to maximize real gdp per capita, or most other macroeconomic indicators, it makes sense to value human life at replacement cost (and here) and this policy change does not make sense.  I'm not arguing for either standard and indeed I think they both lead to absurdities.  Instead the point is this: theoretical ordinal welfare economics and applied welfare economics, as represented by wealth measures, do not coincide as much as many economists like to think.  This gap becomes increasingly important as health care and safety provision increase, relative to the size of the economy as a whole.

What the Chinese have done is to neglect health care investments (until very recently) and basically maximize gdp growth.  They wanted to have fewer people anyway, so why spend money to keep ailing people around?  We find this horrible when presented in such explicit terms, and yet we admire their achievement of the end of growth maximization.

My favorite things Egypt

1. Novel: I like all of the Mahfouz I have read, but the Cairo Trilogy is the obvious pick.  Here is a very useful list of someone's favorite Egyptian authors and novels.

2. Musical CD: The Music of Islam, vol.1: Al-Qahirah, Classical Music of Cairo, Egypt.  The opening sweep of this is a stunner, and it shows both the Islamic and European influences on Egyptian music.  Musicians of the Nile are a good group, there is Hamza El Din, and there is plenty of rai.  What else?  I can't say I actually enjoy listening to Um Kalthoum, but her voice and phrasing are impressive.

3. Non-fiction book, about: Max Rodenbeck, Cairo: The City Victorious.  Few cities have a book this good.  There is also Dream Palace of the Arabs and Tom Segev's 1967.  Which again is the really good book on the 1973 War?

4. Movie, set in: Cairo Time.  This recent Canadian film avoids cliche, brings modern Cairo to life, and is an alternative to many schlocky (but sometimes good) alternatives, such as The Mummy, Death on the Nile, Exodus, Raiders of the Lost Ark, and so on.  There is Agora.  Egyptian cinema surely has masterpieces but I do not know them.  If you're wondering, for books, I could not finish Norman Mailer's Ancient Evenings.

5. Favorite food: I was impressed by the seafood restaurants on the promenade in Alexandria.  Food in Cairo did not thrill me, though I never had a bad meal there.

6. Philosopher: Must I say Plotinus?  I don't find him especially readable.

7. City: I enjoyed Alexandria, but I can't say I liked Cairo beyond the museum (much better than any Egyptian collection outside of Egypt) and the major mosques.  The Sphinx bored me.  The air pollution prevented me from walking for more than an hour and there was cement, cement. and more cement.  The ride between Cairo and Alexandria was one of the ugliest, most uninspiring journeys of my life.  The Egyptians were nice to me but I never had the sense that anything beautiful was being done with the country.  Let's hope that changes.

8. Opera, about: Philip Glass, Akhnaten.  But wait, there's also Aida, with Callas.  And there's Handel's Israel in Egypt.  Handel set a lot of his operas in Egypt, including Berenice and Giulio Cesare.

Diane Rehm is Egyptian-American but I don't know her show.  The new biography of Cleopatra is smooth but the narratives made me suspicious.  Was Euclid Egyptian?

Peter Leeson’s new gypsies paper

The link is here, here is the abstract:

Gypsies believe the lower half of the human body is invisibly polluted, that supernatural defilement is physically contagious, and that non-Gypsies are spiritually toxic. I argue that Gypsies use these beliefs, which on the surface regulate their invisible world, to regulate their visible one. They use superstition to create and enforce law and order. Gypsies do this in three ways. First, they make worldly crimes supernatural ones, leveraging fear of the latter to prevent the former. Second, they marshal the belief that spiritual pollution is contagious to incentivize collective punishment of antisocial behavior. Third, they recruit the belief that non-Gypsies are supernatural cesspools to augment such punishment. Gypsies use superstition to substitute for traditional institutions of law and order. Their bizarre belief system is an efficient institutional response to the constraints they face on their choice of mechanisms of social control.

Steve Levitt blogged the paper here.  Relative to Peter, I am much more likely to find social institutions inefficient.  I think individual decisions are often inefficient for behavioral reasons and furthermore individual norms often produce bad or dysfunctional outcomes when multiplied at the social level.  Historically, most of human history has been lived under conditions of extreme poverty and misery, a warning sign of potential inefficiency.

I don't have any personal opinion about gypsies (about whom I know little), but just from reading Peter's paper (or abstract) I thought he should have called it "Why gypsies are inefficient."  I received the impression that a more efficient set of gypsy norms would do more to encourage integration and education, especially when gypsies live in wealthier, freer countries.  I don't doubt that some of the norms are partially functional, relative to the poverty, but some of the norms also seem to support the poverty.

I was unable to find data on gypsy per capita income or rates of assimilation, but I was searching only in English.  Do any of you know?

Oil Spills, Tort Law and Libertarianism

Here is Paul Krugman's Nth reason why libertarianism doesn't work:

Thinking about BP and the Gulf: in this old interview,
Milton Friedman says that there’s no need for product safety
regulation, because corporations know that if they do harm they’ll be

Interviewer: So tort law takes care of a lot of this ..

Friedman: Absolutely, absolutely.

Meanwhile, in the real world:

In the wake of last month’s catastrophic Gulf Coast oil
spill, Sen. Lisa Murkowski blocked a bill that would have raised the
maximum liability for oil companies after a spill from a paltry $75
million to $10 billion. The Republican lawmaker said the bill,
introduced by Sen. Robert Menendez (D-NJ), would have unfairly hurt
smaller oil companies by raising the costs of oil production. The
legislation is “not where we need to be right now” she said.

And don’t say that we just need better politicians. If
libertarianism requires incorruptible politicians to work, it’s not

In other words, libertarianism can't work because government sucks. I am tempted to comment further on this creative line of reasoning but that is unnecessary since Paul has misunderstood the facts of the matter.

The Oil Pollution Act of 1990 (OPA), which is the law that caps liability for economic damages at $75 million, does not override state law or common law remedies in tort (click on the link and search for common law or see here).  Thus, Milton Friedman's preferred remedy for corporate negligence, tort law, continues to operate and there is no doubt that BPs potential liability under common law alone would be in the billions of dollars. 

Thus, Paul now has only (N-1) reasons why libertarianism doesn't work.

Moreover, Paul has actually been too unkind to government, a defect it falls upon me (!) to correct.  The point of the OPA was not to limit tort law but to supplement it.

Tort law, as traditionally understood, could only be used to recover damages to people and property rather than force firms to pay cleanup costs per se.  Thus, in the OPA as I read it–and take the details with a grain of salt since I'm not a lawyer–there is no limit on cleanup costs.  Moreover, the OPA makes the offender strictly liable for cleanup costs which means that if these costs are proven the offender must pay them regardless (there are a few defenses, such as an act of war, but they are unlikely to apply).  The offender is also strictly liable for up to $75 million in economic damages above and beyond cleanup costs.  Thus the $75 million is simply a cap on the strictly liable damages, the damages that if proven BP has to pay regardless.  But there is no limit, even under the OPA, on economic damages in the event that BP failed to follow regulations or is otherwise shown to be negligent (same as under common law). 

Where should you wish to visit in a hurry?

Here is the reader request:

A friend remarked that on his trip to Cuba, the inclusion of modern buses imported from China had started to erode the charm of the vintage car culture we associate with the island. This is one factor, among many (including the possibility of the embargo being stopped), that made her travel to the island before it changed too much.

What other countries (or cities) are undergoing signficant change and will be presumably very different in a few years from now? Which ones would you travel to if you had the chance now before they underwent that change?

Here is my list of places to visit in a hurry:

1. Cuba

2. Bali, Laos, and Cambodia, which are all losing traditional culture.

3. Any wildlife or game reserve.

4. Yemen (maybe too late already?)

5. Tibet and possibly Bhutan

I can't bring myself to put North Korea on that list.

Here is my list of places which will only get better to visit:

1. China (air pollution will diminish, reading MR might become easier)

2. India (pollution will diminish, sanitation will improve)

3. Greece (someday will be cheaper)

4. Canada, New Zealand, and Australia: they don't have much old stuff anyway and what they do have will be preserved.  The U.S., in contrast, was interesting in the 1950s (or the 1920s) in a way these places were not and many aspects of that period are being lost. 

What suggestions do you have?  Iraq definitely belongs to one list or the other, we just don't know which.

The world’s 25 dirtiest cities

Here is the article, here is the top of the list:

1, Baku, Azerbaijan

2. Dhaka, Bangladesh

3. Antananarivo, Madagascar

4. Port-au-Prince (pre-quake?  I believe they are now uncontested #1 or will be soon.)

5. Mexico City

Most of the rest are in Africa.  If I did the ranking, Mexico City would do much better than number five, since air pollution isn't as bad as the lack of sanitation in cities such as Conakry (a mere #19).  And why does Bangui (CAR) get such an idyllic photo?  Nor does Google offer up any nasty photos of the place.

Hat tip goes to the essential Rachel Strohm, Twitter feed here.

Assorted links

1. Reprogramming predators, and maybe a pan-species welfare state too.

2. The six great fantasy novels?

3. Forum on the new Robert Pozen book on the financial crisis.

4. Do you wish to hear the other side?  Here is George Selgin's case for deflation, now on-line and free.

5. Ezra and Mark Bittman, the behavioral economics of Thanksgiving.  And here, with Dan Ariely.

6. Pollution is moving to Asia; good maps.

6. Future deficits are worrisome.  James Hamilton: "Is it possible that some time within the next five years, the U.S.
Treasury will run an auction in which there are not enough bids to roll
over the debt? My answer is yes."

Conniptions from me on urban economics

Matt Yglesias, picking up from Ryan Avent, writes:

…some libertarian economists at George Mason University go so far as to
laud America’s large houses and plentiful parking specifically as
evidence of the superiority of America’s free market economic policy,
blissfully unaware that in the United States pervasive regulation
requires the construction of bigger houses and more parking spaces than
the market would provide.

Matt refers to:

…the kind of libertarians who one would expect to go into conniptions if
Fairfax County, Virginia were to propose a stringent rent control law seem surprisingly blasé
about the vast array of land use restrictions that infringe economic
liberty in that county and most other American jurisdictions.

Just for the record, I'd like to add my conniptions on the issue:

1. I would not have brought the U.S. down the path of water subsidies, many of which are pro-suburban.  (Admitted they are not always easy to repeal.)

2. I think pollution externalities should be priced in Pigouvian fashion; this would penalize many suburban developments.

3. I oppose the widening of Route 7 at Tysons Corner and I expect a disaster from the current plans.

4. I favor school choice and charter schools, which would make many U.S. cities livable again for couples with children.

5. I would price many roads for congestion, although as Bryan points out this could either help or hurt cars as a mode of transport.

6. I would allow U.S. cities to become much taller, thereby accommodating more residents.  I would weaken many urban building codes in the interests of a greener America.

7. I much preferred the time when I lived near a gas station and a 7-11.

Maybe Matt and Ryan are picking on Bryan Caplan rather than me but I suspect Bryan would agree with most of this list, maybe all of it.

If I don't throw conniptions on these issues more often, it is because I regard them as unlikely or in some cases they are simply not issues I follow closely.  Fairfax County zoning has such strong political support, most of all from the wealthy Democrats who supported Obama but from Republicans too.  If you find anyone in Fairfax screaming about the horrors of zoning, that person is likely to be a libertarian and not a blase one.  Or maybe they are a Best Buy shareholder.

But today is the day of conniptions.  I truly wish that Fairfax County were more like central Arlington or for that matter Falls Church City and I curse those who have made it otherwise.

Here is a picture of The Conniptions.  Don't forget them.  They are mine!  My conniptions.

Fairfax, by the way, did have rent control before 1973.  Oddly, my main post on rent control is a chat with Tyrone, who of course favors the idea.

My preferred exile

A loyal MR reader requests the following:

If you were exiled from the United States and had to go live semi-permanently in some other country, which country would you choose?

Another reader asks:

Let's say you had enough cash (would 10 million do it?) and needed to disappear. Where would you go? Option one, you only spoke English. Option two, you could endow yourself with any language(s) you wished.

Secondary question: would 10 mil be enough?

$10 million would be enough, thank you.  Toronto or even London would be obvious choices but then it's not interesting so let's restrict it to the non-English speaking world.  And I'm assuming the choice is for me alone, otherwise it boils down to how altruistic I am.

I pick either Berlin or Cologne, the latter for its central location in Europe.  In either city there would be plenty of art and music, lots of smart people to talk to, access to other good locales, and the near-certainty of public order, yet with bearable winters and good health care.  The key question between the two would be whether I need my Germany to be on the Rhein and conquered by Romans. 

Germany may seem like an odd choice but I prefer northern Europe yet don't want a small country or a very cold country and England is out by assumption.  The Mediterranean world would not be grundlegend enough for me, not for permanent residence.

Buenos Aires and Mexico City would be tempting, and more fun than Deutschland on any given day, yet I couldn't bring myself to pull the trigger on either one.  I can't stay up late (B.A.) and I don't like horrible air pollution (D.F.).  As much as I enjoy seeing the children and the families, the Spanish-speaking world is best to roam through. 

Asia has too much population density for my taste.

Would I really rather live in Braunschweig than Barcelona?

Carbon tax vs. labor tax

I used to think that a revenue-neutral carbon tax would, in addition to its effects on climate, have superior allocative properties over a tax on labor or capital income.  "Why not tax pollution rather than productive activity?" or something like that.

It turns out I was (mostly) wrong.  I read this passage yesterday and said to myself "Duh!"  A tax on carbon, by raising the prices of goods and services, also lowers the real wage and discourages labor supply (holding constant its effect on climate), just as an income tax does:

However, this does not necessarily mean that revenue-neutral CO2 taxes, or auctioned allowance systems, produce a “double dividend” by reducing the costs of the broader tax system in addition to slowing climate change. There is a counteracting, “tax-interaction” effect (e.g., Goulder 1995). Specifically, the (policy-induced) increase in energy prices drives up the general price level, which reduces real factor returns, and thereby (slightly) reduces factor supply and efficiency. Most analytical and numerical analyses find that the tax-interaction effect exceeds the revenue-recycling effect, implying no double dividend, and that abatement costs are actually higher due to the presence of preexisting tax distortions. A rough rule of thumb from these models is that the costs of revenue-neutral emissions taxes are about 15 percent greater than the direct cost due to interactions with prior tax distortions, implying the optimal tax is 15 percent lower than the Pigouvian tax (e.g., Bovenberg and Goulder 2002).  However, the cost increase is far more substantial for policies that do not exploit the revenue-recycling effect (i.e., cap-and-trade with free allowance allocation or CO2 taxes with revenues not used to increase economic
efficiency). According to cost mark-up formulas derived in Goulder et al. (1999), the increase exceeds 100 percent when the emissions reduction is below 30 percent.

I'm not sure this should be a major factor in one's assessment of a carbon tax, but I hear this analytic error quite often, so I thought it was worth a post.  (I should add I don't understand their qualifying point about revenue-recycling at the end of the excerpt and as I read it I don't think it is correct; an income effect which offsets a substitution effect does not eliminate the distortion from the latter.)  The source paper, which is interesting on the economics of climate change more generally, is here.