Author Archives: Gernot Wagner

Gross Domestic Product: Grossly incomplete, but we can fix it

By | Bio | Published: May 17, 2013

Via EDF Voices. This first appeared online in an article posted at ensia.com.

Gross Domestic Product (GDP) is broken. Robert F. Kennedy said as much in his first major presidential campaign speech. Simon Kuznets, the father of GDP, acknowledged its shortcomings. GDP is an imperfect indicator of human well-being at best, and outright misleading at worst.

Still, we shouldn’t scrap GDP and start over.

Up to a point, GDP does tell us important facts about people’s lives, livelihoods and aspirations. Living on a dollar a day is miserable no matter how you look at it.

Choking on economic growth, of course, is equally bad. There are a few simple, well-established steps we ought to take to bring GDP closer to where we should be. That, by the way, isn’t “Green GDP” or “green accounting.” It’s honest accounting.

Start with accounting for the true value of natural assets still in the ground. We don’t “produce” coal. We extract it. And the fact that the ton of coal extracted today is no longer there for the taking tomorrow should show up in our national income accounts. A ton of West Virginian coal adds about $30 to GDP. Honest bookkeeping would decrease that amount to $15. The same holds for oil, trees, water and all the other valuable natural assets that fuel our economy but are largely treated as free in our GDP accounting.

Then quickly move on to pollution. Every ton of coal, every barrel of oil causes more in external damages than it adds value to GDP. Properly measured GDP ought to reflect that fact.

In the end, policy makers should expand their horizon and look at a dashboard of indicators to get a fuller picture of the true state of the economy, society and the planet. Yet when it comes to GDP itself, the name of the game is fixing it rather than scrapping it. We know how to do that. The U.S. Bureau of Economic Analysis is at the ready. Let’s have a go at it.

See the original post on ensia.com for a perspective from Sir Partha Dasgupta, Frank Ramsey Professor Emeritus of Economics at the University of Cambridge. 

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Benefits of Clean Air and Water Dwarf Costs 10 to 1

By | Bio | Published: May 8, 2013

(This post was first published on EDF Voices.)

The Office of Management and Budget is nerd heaven: a bunch of people getting their professional kicks from analyzing federal regulation. This bean counting may sound painfully lacking in glamour, but it’s incredibly important. OMB’s annual report to Congress on the benefits and costs of all major rules adopted by most federal agencies over the past 10 years shows how efficiently, or inefficiently, those agencies are functioning.  And the conclusion is clear: the Environmental Protection Agency comes out on top.

 

Source: OMB’s “Draft 2013 Report to Congress on the Benefits and Costs of Federal Regulations"

These numbers are based on the 2013 draft report, so they could still change. But the pattern is the same as in any of theirreports from the past few years, including the final 2012 report that came out last week.

None of this is to diminish the contributions of the other government agencies, but if you are a do-gooder trying to achieve the greatest good for the greatest number of people, EPA is the place to be.

One of the driving forces behind this rule is the Mercury and Air Toxics Standards, an extraordinary achievement for clean air and public health. Because of these standards, all coal fired power plants will for the first time be required to control their emissions of toxic air pollutants — including mercury, arsenic and acid gases. Forty years after the Clean Air Act signed by Richard Nixon, twenty after the landmark Amendments signed by George H.W. Bush, we are finally getting around to regulating mercury from burning coal.

The analysis of the benefits of reducing mercury pollution demonstrates just how much we underestimate the benefits of environmental protections. For example, when it comes to reducing mercury pollution, the benefits are based on EPA’s estimates of increased wages of (higher IQ) children born to families that catch freshwater fish for their own consumption.

Think about that one for a second. Mercury is a potent neurotoxin in all its forms, but the EPA estimates do not include mercury that is inhaled or that enters our bodies through other means. And there is nothing in the estimates about the fact that mercury harms the brains of our kids, regardless of whether it influences their future earning potential.

In a sense, this analysis is the moral equivalent of arguing that we should have child labor laws because keeping kids in school makes for more productive workers later on. This kind of reasoning, alas, is  why economists are often called names unfit for a family-friendly blog. It’s the most reductionist argument you can find in favor of reducing mercury. (In fact, the bulk of the benefits that were quantified by EPA are due to inextricably connected benefits in reducing deleterious particulate pollution.)

Costs, by the way, are relatively well estimated, since businesses are all-too willing to share them. So yes, there are costs—but they are small relative to benefits. And costs, as opposed to benefits, are typically overestimates. They are largely based on current available control technologies. They don’t consider that industry may invent an entirely new and unexpected way of complying with regulations at lower cost. This happens over and over again, and it comes with a name: entrepreneurial ingenuity. Works every time.

These omissions and shortcomings on either side of the equation only stand to bolster the most important claim: benefits outweigh costs more than 10 to 1 for all major EPA regulations adopted in the past decade.

For every dollar invested, Americans get $10 worth of benefits. I’ll take that ratio any day.

Posted in Clean Air Act, Politics | Leave a comment

Follow the Plastic Bag Example, Nudge Polluters to Pay

By | Bio | Published: May 1, 2013

(This post was first published on EDF Voices.)

Nudge is the best kind of book. It presents the type of head-slappingly obvious solutions to public policy problems that make you wonder why you needed a book to tell you about them in the first place. Place the veggies before the French fries in the cafeteria, and people will eat more greens. Enroll employees into retirement programs with the option of opting out rather than in and they’ll save more as a result.

Such nudges are the best kinds of policy interventions: minimum intrusion, maximum freedom of choice, maximum relative impact. But one area in which Nudge comes up short is global warming. Putting smiley faces on your electricity bill as a reward for using less electricity than your neighbor, something oPower has done with utilities around the country, helps bring down electricity use by 1 to 3%. Better than zero, but not the solution by a long shot.

That solution would be making polluters pay: putting a price on carbon dioxide through a direct cap or tax on carbon pollution. Cass Sunstein, who wrote Nudge with Richard Thaler, says as much in his latest piece on the topic. He laments the fact that we don’t seem to be able to get these kinds of taxes passed, and then adds a few items to his running list of things we can do, all under the broad heading of setting “clean-energy default rules”: Change the default printer setting to “print on front and back,” and people will. Enroll people into programs where they spend extra for clean energy (with the option of opting out), and 90% will choose to stick with the clean energy.

All these proposals represent the best of what nudges ought to be. Policymakers need to set defaults either way. So set them in the way that goes furthest toward achieving your goal. Just that there’s still a big gulf between the policies we know are necessary and what appears to be doable.

The plastic bag solution

But there is one policy that seems to bridge the gap between the type of non-intrusive nudges Sunstein champions and the type of policies he knows are ultimately necessary to do something about global warming. They’re called bag taxes.

In 2002, Ireland started charging shoppers 15 eurocents a plastic bag. The result: bag use plummeted 90 percent. That's a billion bags a year.

In 2010, Washington, D.C., began charging 5 cents per disposable bag, paper or plastic. As a result, plastic bag usedeclined 80 percent within a year by some estimates.

These fees are tiny. Compared to the $100 worth of groceries you’ll be carrying home in your bags, they might as well be zero. The point is that they are not. The fees are big enough to change the default behavior of shoppers. A few pennies (and the odd public information campaign) are all it takes to motivate shoppers to bring reusable bags to the store.

It’s quite a leap from plastic bags to carbon prices. The principle is the same: It’s the price that counts—a price that is directly connected to an action. Change the action (stop using plastic bags) and you avoid the fee. Similarly, increase the price of carbon, watch carbon pollution fall. This price-up-demand-down relationship is so well established, it’s one of the very few actual “laws” economists have. Violations are tough to find. Plastic bags and carbon certainly don’t violate this common sense principle.

Bag fees and carbon prices have this important feature in common. They don’t just nudge, they also charge consumers for the cost of their—our—actions. For carbon dioxide, there are plenty of studies that estimate the cost to society of this type of pollution. The right price for each ton of carbon dioxide would be at least about $20. Given the fact that the average American emits his body weight worth of carbon dioxide every day and a half, that comes out to about $1 per day. Double it to account for the fact that there are plenty of damages we haven’t yet incorporated in the official number, and doing something serious about global warming is still a bargain at $2 per person per day.

As an insurance policy against the worst effects of global warming, that’s tiny. Never mind how small a price, though, the politics of actually doing it are tricky, to say the least. The plastic bag lobby just isn’t as important as the fossil lobby. And bag fees can be implemented on the local level. A carbon price can’t. It requires Congressional action, a seeming oxymoron these days. Even with carbon, though, states—if not cities—can lead the way. Look no further than California and its comprehensive cap-and-trade system. It limits carbon pollution with a firm, declining cap, giving Californian businesses maximum flexibility in how to make their operations more efficient and innovate their way out of the high-carbon, low-efficiency bind. That ought to be a template for the nation.

Meanwhile, we can do a lot worse than look to plastic bag fees as a model for the kinds of policies that we know are necessary to tackle global warming. Cass Sunstein, the co-author of Nudge, and Cass Sunstein, the policy analyst calling for a price on carbon pollution, would approve.

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Four Years in the Making: The Big U.S. Climate Review

By | Bio | Published: April 16, 2013

(Note: This post was co-written with Graham McCahan and was first published on EDF Voices.)

Congress may be ignoring climate change these days, but there are laws already in place that make progress possible, right now, on this defining issue.

Take the Clean Air Act. Under it, the President has begun to use his authority – as confirmed by the U.S. Supreme Court – to regulate greenhouse gases in a serious way.

The Global Change Research Act is another, lesser known law that could have a major impact on the national understanding of what climate change is doing to our world.

Congress passed the Act in 1990 to provide for “a comprehensive and integrated United States research program which will assist the Nation and the world to understand, assess, predict, and respond to human-induced and natural processes of global change.” What that means, in part, is that the government must prepare a National Climate Assessment every four years. The next report is due out this June.

April 12 was the deadline for public comments on the draft report.

A lot has happened since the last assessment in 2009. The country has begun to experience the effects of climate change: droughts, floods, heat waves, two hundred-year storms hitting New York City within two years. The abnormal is becoming the new normal. (True, no single such event can be conclusively linked to the fact that the average American emits carbon dioxide equal to his body weight every day and a half. But that’s like saying that no single Barry Bonds homerun or Lance Armstrong Tour de France win can be linked to doping.)

This year’s quadrennial report should set the standard as an analysis of these phenomena. Thus far, the draft assessment, written by some of the nation’s leading scientists and experts, is rich in sobering data and analysis on things like extreme weather and the damage it is causing. But its consideration of the economic impacts of climate change – the enormous and rising costs — is scattershot and incomplete.

For example, the draft report shows that the 2011 Texas drought cost farmers and ranchers in that state over $5 billion. And it tells us that wastewater utilities will have to spend between $120 billion and $250 billion by 2050 to adapt their infrastructure to a changed climate. But the draft makes no attempt at a rigorous estimate of the costs of climate change, or the rising costs of inaction in the face of it.

Between now and June, this weak spot needs to be shored up by the report’s authors.

EDF, in its official comments to the National Climate Assessment, is urging that it incorporate all relevant information on the economics of climate change, whether from the federal government or the private sector. That’s the only way to get a handle on the costs that climate change is levying on each and every one of us.

Recently, for example, the independent, nonpartisan, U.S. Government Accountability Office, warned that climate change “presents a significant financial risk to the federal government” in four key areas:

1) Damage to federal property and infrastructure, and associated adaptation costs.

2) Rising costs for federal insurance programs. For instance, the federal government’s crop insurance costs have increased from an average of $3.1 billion per year from 2000 through 2006 to an average of $7.6 billion per year from 2007 through 2012; and these costs are projected to increase further.

3) Costs related to providing assistance to state and local governments to respond to local climate impacts.

4) Rising costs of climate disaster relief. For example, federal disaster declarations have increased over recent decades, and the Federal Emergency Management Agency (FEMA) obligated over $80 billion in assistance for disasters from 2004 through 2011. The growing number of disaster declarations—a record 98 in fiscal year 2011 compared with 65 in 2004—has contributed to increased federal disaster costs.

Material like that should be included in the final assessment.

The same holds true for data from the private sector. In a recent report, the world’s largest reinsurance company, Munich Re, analyzed the costs of severe weather in North America. It found that the number of natural catastrophes escalated from 1980 through 2011, as did the losses for weather-related events during the same time period – both insured and uninsured. The total losses from weather catastrophes over these three decades exceeded $1.06trillion. About half, $510 billion, were insured losses. The rest wasn’t. All of it was ultimately born by all of us – whether in increased taxes or insurance premiums, or directly out of our wallets.

The Global Change Research Act compels the government to make a definitive assessment of what climate change is doing to the nation’s health and welfare. In that spirit, the National Climate Assessment, when it is released in June, should strive to be the last word on the issue – to set the terms of the debate.  And let’s hope it also helps move our elected leaders to action.

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Why does no one in Thailand recycle, Bangkok is a polluted mess, yet everyone uses CFLs?

By | Bio | Published: March 19, 2013

Few Thais recycle, no one bikes, plastic bags are everywhere and Bangkok is afflicted by gridlock and pollution. So you might say that, in general, Thais behave more like citizens of a rapidly emerging economy than the typical Brooklyn environmentalist.

Why, then, does virtually every home use efficient compact fluorescent lights (CFLs). Americans and Europeans needed a ban on incandescent bulbs to make the switch. Not so the Thais, where you can still buy cheaper, more inefficient incandescent bulbs at the corner store.

Was it the influence of a higher authority? Thais famously revere their 85-year-old King, the world’s longest-reigning head of state, who happens to be an environmentalist.

The answer is, mostly, no.

Continue reading at EDF Voices.

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Nature: The rebound effect is overplayed

By | Bio | Published: January 23, 2013

Trying to put the rebound effect for energy efficiency in its rightful place is like playing a game of wack-a-mole. Predictably every couple of years, someone new discovers the counter-intuitive appeal of showing how more efficient energy policies may lead to more energy use. Wham! Told you there's something wrong with those clean-car standards. Well, not so fast.

Yes, the rebound effect is real. But it's also small. And what's there is actually positive! Why shouldn't people who can now afford to due to more efficient energy technologies be able to improve their lives?

Together with three co-authors (Ken Gillingham at Yale, Dave Rapson at University of California, Davis, and Matt Kotchen, currently on leave from Yale to serve as Deputy Assistant Secretary for Environment and Energy at the U.S. Treasury), I surveyed a bajillion+1 energy efficiency rebound studies. Nature then made us cut down those references to 6. We settled at 9.

We couldn't find a single study that has the rebound be above 100% or anything close to it, what's necessary to nix energy efficiency savings. The maximum number you can get is 60%, and that's already quite a stretch. Think 30% as the upper bound for actual behavioral responses. Yes, we are more efficient today than we were a hundred years ago, and we also use more energy today. But that's far from talking about the rebound effect. It's simply economic growth.

Establishing a causal link between efficiency and energy use isn't quite as simple. In the end, the rebound effect comes in four forms. Buy a more fuel-efficient car, and driving that next mile just became cheaper. The result: a bit more driving, to the tune of 5 to a maximum of 30%, although most likely much closer to 5-10% of the initial fuel savings. Then there's the indirect effect: Drivers may now use some of the savings to buy other products that consume energy.

You can already see that we can't just add these two effects. If you spend some of the gas money on driving more, you have less to spend on that plane ticket, and vice versa.

Then there are two macroeconomic effects: one via the price and one via technological advances. They are the trickiest to pin down and could, in theory, be the largest. But theory lends a helping hand in getting an upper bound: the basic demand-and-supply relationship tells us that the macroeconomic price effect can't be more than 100%.

And once again, all these effects aren't anywhere near that threshold. 60% is as high as it gets for the combined effect, and only in rare circumstances. For the most part, it's much closer to 5 to perhaps 30%.

So where does that leave us?

When designing energy efficiency policies like clean-car standards, consider the rebound effect, much like the government already does. The Department of Energy's model uses a highly appropriate 10% rebound figure for the car standards. And that's about it. Not much else to see here.

If you did want to take it a step further — full disclosure: a step I couldn't convince my three co-authors to take in the Nature piece itself — everything else equal, the existence of the rebound effect may prompt us to use even stricter energy efficiency standards. If you have an overall target in mind, and the rebound effect shaves off a bit, you ought to consider using a slightly stricter target to get back to where you wanted to be.

For more, check out the full Nature piece. Well worth the $32 to put the rebound effect in its rightful place once and for all.

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Geoengineering: ignore economics and governance at your peril

By | Bio | Published: October 31, 2012

Cross-posted from Climate 411.

How serious is global warming? Here’s one indication: the first rogue entrepreneurs have begun testing the waters on geoengineering, as Naomi Klein laments in her must-read New York Times op-ed.

Sadly, Klein misses two important points.

First, it’s not a question of if but when humanity will be compelled to use geoengineering, unless we change course on our climate policies (or lack thereof). Second, all of this calls for more research and a clear, comprehensive governance effort on the part of governments and serious scientists – not a ban of geoengineering that we cannot and will not adhere to. (See point number one.)

Saying that we ought not to tinker with the planet on a grand scale – by attempting to create an artificial sun shield, for example – won’t make it so. Humanity got into this mess thanks to what economists call the “free rider” effect. All seven billion of us are free riders on the planet, contributing to global warming in various ways but paying nothing toward the damage it causes. No wonder it’s so hard to pass a sensible cap or tax on carbon pollution. Who wants to pay for something that they’re used to doing for free – never mind that it comes at great cost to those around them?

It gets worse: Turns out the same economic forces pushing us to do too little on the pollution front are pushing us toward a quick, cheap fix – a plan B.

Enter the Strangelovian world of geoengineering – tinkering with the whole planet. It comes in two distinct flavors:

  • Sucking carbon out of the atmosphere;
  • Creating an artificial sun shield for the planet.

The first involves reversing some of the same processes that cause global warming in the first place. Instead of taking fossil fuels out of the ground and burning them, we would now take carbon dioxide out of the atmosphere and bury it under ground. That sounds expensive, and it is. Estimates range from $40 to $200 and more per ton of carbon dioxide – trillions of dollars to solve the problem.

That brings us to the second, scary flavor, which David Keith, a leading thinker on geoengineering, calls “chemotherapy” for the planet. The direct price tag to create an artificial sun shield: pennies per ton of carbon dioxide. It’s the kind of intervention an island nation, or a billionaire greenfinger, could pay for.

You can see where economics enters the picture. The first form of geoengineering won’t happen unless we place a serious price on carbon pollution. The second may be too cheap to resist.

In a recent Foreign Policy essay, Harvard’s Martin Weitzman and I called the forces pushing us toward quick and dirty climate modification “free driving.” Crude attempts to, say, inject sulfur particles into the atmosphere to counter carbon dioxide already there would be so cheap it might as well be free. We are talking tens or hundreds of millions of dollars a year. That’s orders of magnitude cheaper than tackling the root cause of the problem.

Given the climate path we are on, it’s only a matter of time before this “free driver” effect takes hold. Imagine a country badly hit by adverse climate changes: India’s crops are wilting; China’s rivers are drying up. Millions of people are suffering. What government, under such circumstances, would not feel justified in taking drastic action, even in defiance of world opinion?

Once we reach that tipping point, there won’t be time to reverse warming by pursuing collective strategies to move the world onto a more sustainable growth path. Instead, speed will be of the essence, which will mean trying untested and largely hypothetical techniques like mimicking volcanoes and putting sulfur particles in the stratosphere to create an artificial shield from the sun.

That artificial sunscreen may well cool the earth. But what else might it do? Floods somewhere, droughts in other places, and a host of unknown and largely unknowable effects in between. That’s the scary prospect. And we’d be experimenting on a planetary scale, in warp speed.

That all leads to the second key point: we ought to do research in geoengineering, and do so guided by sensible governance principles adhered to be all. We cannot let research get ahead of public opinion and government oversight. The geoengineering governance initiative convened by the British Royal Society, the Academy of Sciences for the Developing World, and the Environmental Defense Fund is a necessary first step in the right direction.

Is there any hope in this doomsday scenario? Absolutely. Country after country is following the trend set by the European Union to institute a cap or price on carbon pollution. Australia, New Zealand, South Korea, and also California are already – or will soon be – limiting their carbon pollution. India has a dollar-a-ton coal tax. China is experimenting with seven regional cap-and-trade systems.

None of these is sufficient by itself. But let’s hope this trend expands –fast – to include the really big emitters like the whole of China and the U.S., Brazil, Indonesia, and others. Remember, the question is not if the “free driver” effect will kick in as the world warms. It’s when.

Posted in Climate science, International, Politics | Leave a comment

Australia's landmark legislation will put price on carbon pollution, create world’s second-largest carbon-price system

By | Bio | Published: November 9, 2011

By Jennifer Andreassen, originally posted on our Climate Talks blog.

As expected, Australia’s upper house of Parliament voted yesterday to adopt a carbon price, which will compel Australia’s largest polluters, beginning July 1, 2012, to pay for their carbon pollution.

Australia will have the largest carbon-price system in the world outside Europe's, after its upper house approved the Clean Energy Future package of bills Nov. 8. The package of bills aims to cut emissions from coal-dependent Australia 80% by 2050 from 2000 levels.

The legislation’s passage will give Australia, which has the highest per capita emissions of any developed country in the world and uses even more coal than the United States, the largest carbon-price system in the world outside of the European Union. (That is, the largest outside the EU until California’s program takes effect in January 2013; California last month approved the largest, first-ever economy-wide carbon market in North America, which could eventually link to other sub-national, national and regional markets around the world.)

EDF applauds Australia on its leadership on the vitally important problem of climate change. This vote is another indication that more and more countries around the world – with the U.S. being a notable exception – are taking climate change seriously. The legislation also backs Australia’s international commitment to reduce emissions by between 5 and 25 per cent by 2020 from 2000 levels.

The Clean Energy Future Package

The Clean Energy Future package is made up of 18 bills that will assign a price to carbon starting July 1, 2012 and cut Australia’s emissions 5% below 2000 levels by 2020 (though the target can be strengthened based on science or international action), and 80% below 2000 levels by 2050.

Australia’s 400-500 largest emitters will be covered by the carbon price, which will take the form of a fixed price (starting at A$23 per metric ton) for the first three years, and shift to a carbon market emissions trading system in 2015.

As we mentioned when Australia’s lower house passed the clean energy legislation on October 11, the Clean Energy Future package will shift Australia’s energy towards cleaner and renewable sources by:

  1. Placing a price on carbon.
  2. Creating a market-based system with plans to link it with ‘credible international carbon markets or emissions trading schemes in other countries’ – like New Zealand and Europe – after 2015.
  3. Giving a big boost to renewable energy research and development and deployment through a new $10 billion financing vehicle, the “Clean Energy Finance Corporation.”

(The Southern Cross Climate Coalition has some more details on the legislation in its analysis, as does Natural Resources Defense Council’s Jake Schmidt in his post Congrats Australia! Law passed which will require mandatory carbon pollution reductions for major polluters.)

Climate groups in Australia welcomed the passage of the laws, as did:

Australian Prime Minister Julia Gillard, who told reporters:

Today we have made history. … This is about what's right for the nation's future.

Deutsche Bank Australia carbon analyst Tim Jordan, who said:

This is a very positive step for the global effort on climate change. It shows that the world's most emissions-intensive advanced economy is prepared to use a market mechanism to cut carbon emissions in a low-cost way.

CEO of The Climate Institute John Connor, who said:

This is a vital cog in Australia's pollution reduction machinery with the potential to help cut around 1 billion tonnes of carbon pollution from the atmosphere between next year and 2020.

This vote means Australia now brings greater credibility going into international climate negotiations starting later this month in South Africa. It also puts wind in the sails of other jurisdictions about to introduce, or considering, emissions trading schemes which similarly price and limit carbon pollution.

The G20 Cannes Action Plan for Growth and Jobs even highlights the Australian legislation as an example of how members will “enhance competition and reduce distortions” in its plan to create “sustained, broad-based reforms to boost confidence, raise global output and create jobs.”

What’s next for Australia

Now, the Government moves into implementation mode, which means it will take to:

  • Establishing new institutions, including the Climate Change Authority (to recommend on future emissions targets); the Clean Energy Finance Corporation; and the Clean Energy Regulatory to oversee the market;
  • Finalizing contracts next year to close 2000 MW of brown coal power generation;
  • Working with New Zealand and EU officials on linking schemes after 2015.

Linkages to international carbon markets that are built into the system will also see Australia become a key player in the international offset market.

And Australian officials will be able to hold their heads high at the UN climate conference in Durban at the end of this year, as they promote their joint proposal with Norway for a roadmap to a 2015 global climate treaty.

Posted in Cap and Trade Watch, International, Politics | Leave a comment

Single-action bias

By | Bio | Published: August 9, 2011

We all want to do something, anything. We don't just want to sit idle and watch events unfold around us. Call it "action bias."

Then there's "single-action bias."

We all want to do something, anything, but once we've done that one thing, we move on. For something as intractable and complex as global warming, that's a real problem.

Yes, replace your inefficient incandescent light bulb with more efficient compact fluorescent ones, but don't believe for a second that single action solved the problem.

Recycle. Just don’t think it’ll stop global warming. Make the planet notice.

For daily musings like these, take a look at EDF economist Gernot Wagner's personal blog.

Posted in 1000 words, Climate science, Politics | Leave a comment

Newsflash: Clean Air Act saves lives, boosts GDP

By | Bio | Published: February 11, 2011

We have sometimes been the bearers of bad news on jobs in the past. Not bad news, really. Realistic news. So excuse me for being a bit giddy at the sight of the latest piece of very realistic—and very good—news.

The EPA just released a new White Paper that turns out to be as green as it is red, white, and blue.

Lives and health at a bargain price

First, it starts with what really matters when considering the impact of the Clean Air Act—health and the corresponding social and economic benefits:

  • 18 million child respiratory illnesses prevented in 1990 alone,
  • 200,000 lives saved that year (160,000 in 2010),
  • total benefits outpacing costs 30:1 since 1990.

These are the key figures we need to keep in mind. Always.

Healthy kids means a healthy workforce

For anyone who isn't yet satisfied but worries about the economic impact of the Clean Air Act, there's more good news:

Protecting children from neurotoxins leads to workers with higher IQs.

That should be an obvious statement. It also turns out to come with real economic benefits. The latest study by Harvard's Dale Jorgenson et al shows that the Clean Air Act has boosted productivity and growth:

GDP in 2010 is 1.5 percent higher than it would have been without the Clean Air Act.

Again, that's GDP. Hard economic growth. The number that measures everything except that which makes life worthwhile.

Clean and competitive

Lastly, the paper concludes with a look at competitiveness concerns. The verdict: the Clean Air Act does not harm competitiveness.

That's not as strong as saying that the Clean Air Act improves U.S. competitiveness. Improving productivity also improves competitiveness, and combining the standard competitiveness arguments with Jorgenson's productivity results may well show that to be the case.

But no one to my knowledge has done that yet credibly. (Of course, I'd love to be proven wrong on that point.) To the full credit of EPA and the credibility of its analysis, the paper does not go that far either.

The White Paper stays well within the mainstream of economic analysis of the Clean Air Act and bears plenty of good news for health, wealth, and the planet.

Read it at your own peril. It may well be the first piece of economic analysis that makes you giddy yourself.

Posted in Markets 101, Politics, Technology | Leave a comment