Market Forces

Climate Shock in under 90 seconds

Think of the atmosphere as a giant bathtub. There’s a faucet—emissions from human activity—and a drain—the planet’s ability to absorb that pollution. For most of human civilization and hundreds of thousands of years before, the inflow and the outflow were in relative balance. Then humans started burning coal and turned on the faucet far beyond what the drain could handle. The levels of carbon in the atmosphere began to rise to levels last seen in the Pliocene, over three million years ago.

What to do? That’s the question John Sterman, an MIT professor, asked two hundred graduate students. More specifically, he asked what to do to stabilize concentrations of carbon dioxide in the atmosphere close to present levels. How far do we need to go in turning off the faucet in order to stabilize concentrations? Here’s what not to do: stabilizing the flow of carbon into the atmosphere today won’t stabilize the carbon already there at close to present levels. You’re still adding carbon. Just because the inflow remains steady year after year, doesn’t mean the amount already in the tub doesn’t go up. Inflow and outflow need to be in balance, and that won’t happen at current levels of carbon dioxide in the tub (currently at 400 ppm) unless the inflow goes down by a lot.

That seems like an obvious point. It also seems to get lost on the average MIT graduate student, and these students aren’t exactly ‘average’. Still, over 80 percent of them in Sterman’s study seem to confuse the faucet with the tub. They confuse stabilizing the inflow with stabilizing the level.

Watch this video to avoid making the same mistake:

Excerpted from Climate Shock.

Also posted in Climate science, International, Politics / Leave a comment

What if bees had value?

Episode 5 of Paul G. Allen and Morgan Spurlock’s We The Economy explores the hidden value of natural capital:

A Bee’s Invoice from We The Economy, starring Adrian Grenier, Gernot Wagner, Jodi Beggs, and Robert F. Kennedy Jr.

Posted in 1000 words / Leave a comment

World’s Carbon Markets: EDF, IETA launch online resource on emissions trading programs

(This post first appeared on EDF Climate Talks.)

While Washington is stuck in gridlock, other jurisdictions around the world are moving forward on climate policy.

Market-based approaches to cutting carbon are in place in jurisdictions accounting for nearly 10% of the world’s population. Above: areas shaded blue have emissions trading programs that are already operating; areas in green have programs that are launching or being considered.

Market-based approaches to cutting carbon are already in place in jurisdictions accounting for nearly 10% of the world’s population and more than a third of its GDP. Many more jurisdictions are either moving ahead with market-based measures, or actively considering them.

As interest grows around the world, policymakers are increasingly seeking information about the range of existing and proposed initiatives.

In response, EDF has partnered with the International Emissions Trading Association (IETA), a trade association that represents businesses involved in carbon trading and climate finance, to launch The World’s Carbon Markets: A case study guide to emissions trading.

The online resource provides detailed information about key design elements and unique features of 18 emissions trading programs that are operating or launching around the world.

EDF has also put together a quick reference chart that makes comparing the 18 programs even faster and easier.

Growing interest in emissions trading

Market-based policies are a proven way to limit carbon pollution and channel capital and innovation into clean energy, helping to avert the catastrophic consequences of climate change.

While emissions trading programs around the world, like the ones we have looked at in detail, vary in their features, they all share the key insight that well-designed markets can be a powerful tool in achieving environmental and economic progress.

The countries, states, provinces and cities highlighted in this report, which are moving ahead with strong action on climate change, constitute a vital and dynamic world of “bottom-up” actions that complement multilateral efforts such as the ongoing United Nations climate negotiations.  Jurisdictions considering market-based approaches can use this new resource to learn from their growing number of peers already headed in that direction.

Also posted in Cap and Trade / Comments are closed

Single-action bias

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.

Also posted in Climate science, Politics / 2 Responses

Jobs, jobs, jobs

Co-authored with Nat Keohane.

Marc Gunther lists ten reasons why “Cancun can’t.” We won’t go into his other nine points here, but number three on the list hit home:

Environmentalists have been disingenuous about the climate issue. They’ve argued that regulation of carbon dioxide will create green jobs and grow the economy. Typical is this graphic from Environmental Defense. (“Get a step-by-step picture of how a carbon cap will spark new jobs, lift the economy and clean the air.”) Uh, no. Most economists agree that dealing with global warming will entail short term costs. (See Eric Pooley’s excellent analysis at Slate.)

Talking about jobs is one of the most difficult things to do well in the arena of climate policy. The jobs issue is highly politically charged—and for good reason, given the state of the economy. But it struck us as unfair for Marc to use EDF as his bête noire.

To begin with, the graphic that Marc links to doesn’t make the claim he ascribes to it. We weren’t saying that climate policy was a free lunch. What we were pointing out was that doing something about climate can also create good jobs in some unexpected places. More on that in a minute.

We have bent over backwards to be as balanced and rigorous as possible in our assessment of the economics of climate change.

This turns out to be perfectly illustrated by Eric Pooley’s analysis—the same one Marc links to.

Eric’s indeed excellent analysis makes two points:

First, there is a broad consensus that the cost of climate inaction would greatly exceed the cost of climate action.

That’s the main, often-forgotten point because it seems so obvious: “it’s cheaper to act than not to act.”

We should really stop here and reflect on that for a second. Many—if not most—economists do, in fact, agree on that statement and have for a while.

But that’s not our point here, either. Read More »

Also posted in Cap and Trade, International, Politics / 1 Response

$100 billion in 1000 words

The Copenhagen Accord enshrined $100 billion as the target for north-south climate finance flows by 2020. Earlier this month, the U.N. high-level Advisory Group on climate change Financing (AGF) issued its final report on how to get there.

My colleague Miriam Chaum and I tried to summarize the 80-page report in 1000 words:

AGF report, middle carbon price scenario ($25/tCO2e in 2020). Ranges are for the middle price scenario and span net and gross flows, where applicable.

The main message is clear: $100 billion are out there. The big question is whether we can muster the political will to put the right incentives in place and indeed free them.

Some more messages and background in this short, one-page AGF fact sheet [PDF].

Also posted in International / Leave a comment