Mark Carney reckons most fossil fuels “un-burnable”?

Mark J. Carney - mine's about this big and its fully sustainable Or so energylivenews says (thanks to J). Their text is:

Governor of the Bank of England Mark Carney appears to agree most fossil fuels can’t be used if the world is to avoid climate change. At a World Bank event on Friday, he is quoted as saying: “The vast majority of reserves are unburnable.” This is a reference to the idea of a so-called carbon bubble – when investors in oil, gas or coal suppliers lose out on money because the reserves can’t be used.

I’ve bolded his words, the rest is editorial interpolation. I find this particularly irritating. If I’m reading about what Carney thinks, I want to read his words, not what someone else thinks about his words. I’m prepared to read analysis of his words, but it has to be primarily based upon what he said. Searching, I can find a bit more in the Graun:

The governor of the Bank of England has reiterated his warning that fossil fuel companies cannot burn all of their reserves if the world is to avoid catastrophic climate change, and called for investors to consider the long-term impacts of their decisions. According to reports, Carney told a World Bank seminar on integrated reporting on Friday that the “vast majority of reserves are unburnable” if global temperature rises are to be limited to below 2C. Carney is the latest high profile figure to lend his weight to the “carbon bubble” theory, which warns that fossil fuel assets, such as coal, oil and gas, could be significantly devalued if a global deal to tackle climate change is reached.

Here again we’ve got the same very brief quote surrounded by acres of unreliable interpolation. Did Carney actually warn about “catastrophic climate change”? In those words? We don’t know. Perhaps, as the text from the Graun above suggests, he only qualified his words with “if global temperature rises are to be limited to below 2C”, which is a very different matter. Indeed, what did he mean by “reserves” or “fossil fuel companies”? If he’s merely saying that we can’t burn all the coal without going over 2 oC then meh: that’s just the bleedin’ obvious, though the fact that he choose to say the bleedin’ obvious might be interesting. Nor is the meaning of “vast majority” obvious. If by “vast majority” he means, say, 90% then I think I’d find that surprising and non-obvious. But I’m not really up with burnable-resources proportions, please feel free to inform me. The Graun links to emergingmarkets.org but that, too, has the same tantalisingly brief quote about my topic. There’s a bit more quote:

The value of integrated reporting, he argued, was to help investors think about “not just things that can be managed in the short term” but also “costs companies are likely to be exposed to as policy responds to challenges” like climate change. He referred to a “tragedy of horizons” – the market failure by which actors including some investors, companies and governments are not looking far enough ahead to coming problems like the environment, even though these are known to them.

and here’s he’s on a reasonable topic for an econ-bod, possible market failures by not looking ahead far enough. Whether he’s right about that I don’t know; what I actually wanted to know was what he’d said about GW, since that was the headline.

The forum referred to is, I believe, How Integrated Reporting Facilitates Transparency and Financial Stability; October 10, 2014; Washington DC. But they don’t seem to have published any text. Anyone know where to find what he actually said?

I’m slightly puzzled this didn’t cross my radar earlier.

Refs

* Bank [of England] prods insurers about climate plans?
* Investors warn of ‘carbon bubble’ as Shell predicts climate regulation will hit profits?

Conservative groups spend up to $1bn a year to fight action on climate change?

Well, of course, this is trivially true, in the sense that $0 is “up to $1bn” and the report doesn’t suggest that it could be more than $1bn. I got this from the Graun which continues to irritate by pointlessly and stupidly failing to link to the original study. I assume they do this because, like the mediaeval church, they regard themselves as gatekeepers and priests of knowledge: we should only be allowed their interpretation, and not see the original for ourselves. But enough ranting.

There’s a note at the bottom which says This headline on this article was amended on 21 December 2013 to reflect that not all the $1bn referred to will have funded climate change work and indeed, this is the rub. The ~$1bn refers to total funding of a group of think-tanky stuff. But how much of that actually went into anti-GW-science? As far as I can see, the study doesn’t even attempt to address this question. Instead it looks at How are these organizations financially maintained? which is indeed interesting, but different. Note in passing that is Q2 in the paper. Q1 is What is the climate change counter-movement? to which the answer turns out to be entities that engage in any of a a wide variety of activities opposing any legislative attempts to enact mandatory restrictions on carbon emissions. Which is interesting, because if you were to regard cap-n-trade as a “mandatory restriction” but carbon taxes as not, then you could argue that I’m part of the CCCM! W00t, way to go.

Incidentally, I should point out that I’m confused by some of the figures, and I think the Graun is too. They say

The groups collectively received more than $7bn over the eight years of Brulle’s study – or about $900m a year from 2003 to 2010. Conservative think tanks and advocacy groups occupied the core of that effort… AEI was by far the top recipient of such funds, receiving 16% of total funding over the eight years, or $86.7m.

Well, 16% of $7bn is $1.1bn, not $86m. And dividing it by 8 doesn’t help either. I didn’t bother track down the disparity, but I think its related to identifiably sourced income – some is hidden. No matter: I’m going to use American Enterprise Institute (AEI; annual budget about $38m) as an example. First off, there are some obvious not-climate related spending items: the Prez, Arthur Brooks, gets a stonking $0.6m. We can assume that he isn’t dumb enough to spend his own good money on denialism. Cheney gets $150k, incidentally. OK, so that’s trivia. But if I look at [[American Enterprise Institute]] I see an awful lot that clearly isn’t about global warming.

One of the things it does point to is this shocking publication “Climate Change: Caps vs. Taxes” by Kenneth P. Green, Steven F. Hayward, Kevin A. Hassett, Posted: Friday, June 1, 2007, ENVIRONMENTAL POLICY OUTLOOK, AEI Online. This shameful document… errrm, pretty well says exactly what I’ve been saying recently about carbon taxes. There’s a teensy paragraph with token flings against GW but most of it says: if you want to do it, do it via carbon taxes not cap-n-trade. So of the fairly smallish fraction of AEI effort that goes into GW related stuff, not all of it is anti-GW.

There is something in the paper that gets somewhere near this problem: they say, in attempting to define the CCCM:

To develop a comprehensive roster of CCCM organizations for this study, a two-step process was used. First, a consolidated list of all of the organizations identified in prior studies was created. These organizations were then individually examined to identify those that had a substantive focus on climate change. This process identified 118 CCCM organizations.

There’s an ill-defined word in there: “substantive”. What does it mean, in this context? Clearly, it doesn’t mean “a majority of effort spent on”. There’s no doubt that the AEI are currently producing some GW denialism nowadays; but what I’m less convinced by is that its a major part of their operation.

So, while I’m sure there are indeed evil folk funding climate change denial, I don’t think the headline of “up to $1bn” is supported by their evidence. They could have written “up to a completely undetermined amount” but that wouldn’t be a very good headline. Has anyone got pointers to better studies, or is anyone prepared to wade through the supplementary material to sort the wheat from the chaff?

Note, BTW, that there’s no need for the “up to $1bn” headline. Nature World News chose to headline it “Organizations Bankrolling Climate Change Denial Revealed in New Study” which is far more supportable.

[Aaaaannddd: we’re in. Only published 10 seconds ago and already google hit #3. I never knew I was such a thought leader.]

[Update: http://www.twitlonger.com/show/n_1ru6cd9 is Andy Revkin reporting Brulle sayin “You may have seen the Guardian article on my paper: I have written to the newspaper complaining about this headline. I believe it is misleading. I have been very clear all along that my research addresses the total funding that these organizations have, not what they spent on climate activities… (and which, to be Just, came to me via WUWT).]

Review of a review of The Climate Casino

Prompted by PB I read Gambling with Civilization by Paul Krugman, which is a review of The Climate Casino: Risk, Uncertainty, and Economics for a Warming World by William D. Nordhaus. I haven’t read the latter.

The Climate Casino is in no sense the work of someone skeptical about either the reality of global warming or the need to act now. He more or less ridicules claims that climate change isn’t happening or that it isn’t the result of human activity. And he calls for strong action: his best estimate of what we should be doing involves placing a substantial immediate tax on carbon, one that would sharply increase the current price of coal, and gradually raising that tax, more than doubling it by 2030

And so I want to know, “how strong is this strong action”? A carbon tax is good, obviously, but Shirley Nordhaus is a touch more specific than “sharply increase the current price of coal”, so why can’t Krugman be? K continues Some might consider even this policy inadequate… to which the obvious answer is: “how can I possibly know whether its adequate or not, you bozo, unless you tell me how big this tax is?”

K continues:

it turns out that the rate at which you discount the distant future doesn’t make much difference to optimal policy

Well, that’s fascinating, and rather surprising. Especially given all the fuss over Stern’s numbers – an insight like that would be a major change to the discourse. Obviously K will go on and tell us how this comes about. Ha ha, fooled you – or more likely I didn’t – K just notes this point and moves on. WTF?

K says that N says “there will be mounting costs as the temperature rise goes beyond 2°C”. Again, this is irritatingly vague, and it isn’t clear if there are costs, but they go up sharply post-2°C, or if small net benefits turn into costs post-2°C. Perhaps its not desperately important: the focus is on large changes; and anyway, N isn’t trying to say anything startlingly original at this point. K/N both agree that the std.textbook_method for dealing with emissions is pricing emissions, and are happy with “a carbon tax and/or cap-and-trade”. N says direct regulation is a poor choice; K acknowledges that, but then in his own voice half-argues for regulating coal-fired power stations, on the grounds of political feasability. I’m dubious, as before.

What’s our target for limiting T rise? [Note that there is some dissonance between that question and a carbon tax, which K doesn’t mention, so I don’t know if K does.] “The scientific rationale for the 2°C target is not really very scientific” says N, but you can sense that K doesn’t really like this.

K wonders who is the target for N’s book. As he says, all the sane folk already agree, and the wackos aren’t about to be convinced by rational argument. There is, of course, a failure in self-referentiality there, because one could say exactly the same thing of K’s review. Given his disappointing vagueness about rather important details, its clearly not intended for the numerate.

Climate Change Policy: What Do the Models Tell Us?

Quite a lot really. Unless, of course, you’re looking at the wrong models in the wrong way. As Robert S. Pindyck does. I do have some sympathy for the paper, but its badly written, somewhat confused, and the author has failed to emphasise some key distinctions.

To begin with where I agree, I’m fairly happy with his assertion that “certain inputs (e.g. the discount rate) are arbitrary, but have huge effects on the [social cost of carbon] estimates”. I’m only “fairly” happy, because to say that the discount rate is “arbitrary” is stupid (which is probably a hint that this thing hasn’t been peer-reviewed; its only a working paper); what he means is, that people of good faith can nonetheless disagree about what the correct value should be. And it is certainly true that how much you think future climate damage should be costed now depends rather heavily on the discount rate. However, this is just the bleedin’ obvious, so he gets no points for that. He also whinges about the uselessness of the models, but fails to realise that for exploring the impacts of different discount rates, or different damage functions, they are quite illuminating.

His paper is about “integrated assessment models” (IAMs) – the things used to turn parametrised versions of climate change into damage estimates. I know little about them, so I’m not going to say much about that bit. Of course his title doesn’t specify that. And while his language in the abstract when he says the models’ descriptions of the impact of climate change are completely ad hoc, with no theoretical or empirical foundation is probably defensible, you have to read it fairly carefully to realise he is talking about the “damage functions” bit there – he isn’t talking about the physical-climate-bit at all in the abstract. Later on he is more careless:

There are two types of inputs that lend themselves to arbitrary choices. The first is the social welfare (utility) function and related parameters needed to value and compare current and future gains and losses from abatement. The second is the set of functional forms and related parameters that determine the response of temperature to changing CO2e concentrations and (especially) the economic impact of rising temperatures.

The arbitrariness of “(especially) the economic impact of rising temperatures” may or may not be correct – like I say, that’s not my thing; though I know enough that damage isn’t just temperature, it ought to be precip too, at least. But he’s quite wrong to say that “the set of functional forms and related parameters that determine the response of temperature to changing CO2e concentrations” is arbitrary. That’s just ignorance on his part.

He does talk about the physical-science-bit, wrapping the discussion around climate sensitivity, which is what it all boils down to at this level. But I don’t think he knows what he is talking about; and instead he just talks up the uncertainties. What he should have written for this section (prefixed with “I know nowt about CS…” is “Compared to the uncertainties elsewhere, the uncertainty in CS is small and we may as well assume 3 oC. Or 2 oC. Or somewhere like that”. Instead he repeats the Roe/Baker heresy even down to the Gaussian bit which I pointed out was wrong ages ago.

mt will be happy that he does point out that the IAM models intrinsically don’t deal with “catastrophic outcomes” well, since they’re built to be smooth, i.e. they’re built not to have any catastrophic outcomes. So he gets a point for that.

What to Do?

Well, don’t read his paper or the “What to Do?” since it doesn’t really go anywhere. Instead, you need to think like Karl Popper (I think; though I could easily have the wrong guy; lets call him “KP” for now) who was talking about building political systems. And laying in to the likes of Plato, who designed their systems around philosopher-kings, who by their very nature were wise and good (even if they were instructed to lie to the populace; but that’s another matter). KP tried to say No; we should not design our systems on the basis that our rulers will be Good; on the contrary, we should design them to survive rulers who are Bad.

Similarly, the answer to “oh noes, our IAM models suffer from unknown damage functions and uncertain discount rates” is not “fiddle with the models” or “select simpler more subjective models”; its to design models that work even if you don’t know such things. Like – aha, you guessed it, I know – a carbon tax that we can ramp up or down slowly as needed.

Why CCS implies over regulation

carbon-tax-now I follow David Hone, though not the details. He’s really keen on CCS, and has (I think) a strong commercial interest in it succeeding. But there is no real answer to “its not commercially viable” – and I think it remains non-viable even at plausible CO2-price levels ($80 / tonne is Sternish, no?). So, inevitably, sigh, the talk turns to regulation (um. Does that ring any bells?).

The latest is Can a technology specific policy exist in a carbon market? I didn’t have the patience to read it all. Just reading a little bit of it is enough to convince me that this is not the right way to go. What is described there (in all seriousness, as far as I can tell) is the way to create yet more heaps of market-distorting environment-distorting regulations and yet more parasitic bureacratic classes.

Carbon Tax Now!

Arctic methane ‘time bomb’ could have huge economic costs?

vast-costs Says Aunty. And the Graun says “Arctic thawing could cost the world $60tn, scientists say”. $60tn is a big number. But lets not trouble ourselves with the popular press: lets go straight to the source, which is Nature (“Vast costs of Arctic change”, by Gail Whiteman, Chris Hope and Peter Wadhams). Is that an impeccable source? Weeell, not quite. Nature whores after big-impact studies in a rather regrettable way, and more importantly this is but a “Comment” not (as far as I can tell) a proper peer-reviewed article.

You’d certainly hope it wasn’t peer reviewed, because some of it is dodgy, most obviously the opening paragraph:

Unlike the loss of sea ice, the vulnerability of polar bears and the rising human population, the economic impacts of a warming Arctic are being ignored.

But lets skip over that (and that Wadhams has form with AMEG), and proceed to the meat of the comment, which proves to be remarkably brief: all they’ve done is plug in a 50 GT methane “burp” into an integrated assessment model and read off the predicted damages. This is something that anyone could do, with no special insight required.

The first Key Point is: is 50 Gt believable? Wiki tells me that annual methane emissions from natural+anthro is about 600 Tg, which is 0.6 Gt by my calculation; so WHW’s 50 Gt is close to 100 years emissions. So its a large number. I’ll come back to that, because I’ve realised I want to pause to put $60 tn in context, which is the second Key Point. As the article says:

This will lead to an extra $60 trillion (net present value) of mean climate-change impacts for the scenario with no mitigation, or 15% of the mean total predicted cost of climate change impacts (about $400 trillion).

So yes its a big number but its “only” a 15% increase on what you’d get anyway. Also, I think (though I’m open to correction on this) that “net present value” means all future impacts, back-calculated to today using discount rates. As the comment puts it, that can be compared to “the size of the world economy in 2012 (about $70 trillion)”. Or put another way, all future impacts of this methane release can be paid for by a single year’s economic output. Which discount rates? Probably Stern-style very low ones, guessing from the Graun stating that WHW are “using the Stern review”. And my recollection is that while the Stern-type numbers are indeed very large, the damages (from GW, and out to 2100 at least) are smaller than the benefits (that we get, economically, from emitting the CO2; I don’t mean that the benefits of GW outweigh its costs). So given the vast uncertainties in the Stern-style process (you can certainly change Stern’s numbers by more than 15% just by tweaking his discount rates a bit) I don’t think an extra 15% is news, ter be ‘onest.

Now, how about that 50 Gt. Wiki tells me that there are 1,400 Gt potentially going; so 50 is only a small fraction of that. Lets have the whole para, since its quite informative:

Current methane release has previously been estimated at 0.5 Mt per year.[12] Shakhova et al. (2008) estimate that not less than 1,400 Gt of Carbon is presently locked up as methane and methane hydrates under the Arctic submarine permafrost, and 5-10% of that area is subject to puncturing by open taliks. They conclude that “release of up to 50 Gt of predicted amount of hydrate storage [is] highly possible for abrupt release at any time”. That would increase the methane content of the planet’s atmosphere by a factor of twelve.[13]

13 is only an abstract, ending:

The total value of ESS [East Siberian Shelf] carbon pool is, thus, not less than 1,400 Gt of carbon. Since the area of geological disjunctives (fault zones, tectonically and seismically active areas) within the Siberian Arctic shelf composes not less than 1-2% of the total area and area of open taliks (area of melt through permafrost), acting as a pathway for methane escape within the Siberian Arctic shelf reaches up to 5-10% of the total area, we consider release of up to 50 Gt of predicted amount of hydrate storage as highly possible for abrupt release at any time. That may cause ∼12-times increase of modern atmospheric methane burden with consequent catastrophic greenhouse warming

But read that again carefully, noting fault zones, tectonically and seismically active areas. They aren’t (as I read it) saying that the 50 Gt will or might be released due to human activity; they’re saying that geologic events, and leaks through existing holes in the permafrost, might lead to this release. At least I think that’s what they’re saying. In which case its an odd calculation, because they appear to be assuming that all the faults will become active at once. Aren’t they? And my reading of it completely decouples it from GW. So I don’t understand.

WHW don’t ref that abstract, of course. Instead they ref Predicted methane emission on the East Siberian shelf by the same lead author (Shakhova), but this time in a proper journal. Or… is it? the journal is “Doklady Earth Science” which is a journal of the Presidium of the Russian Academy of Sciences. It contains English translations of papers published in Doklady Akademii Nauk (Proceedings of the Russian Academy of Sciences). Is it any good? I don’t know. I can only preview the first two pages of the paper and it looks suspiciously to me as though they are rather more assuming their emission rates than predicting them. Anyone who has access to the full journal, do let me know.

Conclusion: meh.

[Update: more unravelling: mt and Nisbet et al.. And Notz et al. (Nature 500, 529 (29 August 2013) doi:10.1038/500529b) think its nonsense too.]

Refs

* It looks like the Graun has a rather worse take available, which mixes in implausibly early sea ice collapse: “Ice-free Arctic in two years heralds methane catastrophe – scientist”. Gavin isn’t impressed (detail) though as far as I can see, he’s only unimpressed by the sea ice collapse bit. Elsetweet, Gavin also says “nowhere is the v. low plausibility of emission pulse discussed” but since twitter is a pile of dingo’s kidneys I can’t work out how to link to it.
* Good heavens, this is unprecedented. one of the comments at the Graun is sane.
* Ruppel, C. D. (2011) Methane Hydrates and Contemporary Climate Change. Nature Education Knowledge 3(10):29
* A couple of posts on SS by Andy Skuce.
* Methane mischief: misleading commentary published in Nature by Jason Samenow, WaPo; Wadhams replies but continues to not-impress. As Gavin says, “Eemian”.
* Toward Improved Discussions of Methane & Climate
* Nafeez for the Record at P3
* Arctic and American Methane in Context – RC

The world will one day adopt a carbon tax—but only after exhausting all the alternatives

carbon-tax-now Says the Economist.

THIS is an unusually busy moment in the unhappy history of efforts to curb climate change. In two weeks at the end of June the world’s three biggest polluters unveiled carbon-reducing measures. In China and America these are more ambitious than previous policies. But they fall far short of what is needed to rein in the relentless rise in global carbon emissions… Many of the American and Chinese moves are of the command-and-control variety… In China there is a public-health justification for this sort of approach. Beijing suffered an “airpocalypse” in January, with smog 40 times above safe levels: too high at any price. America has no such justification. Mr Obama is using measures associated with Soviet central planning out of desperation: he cannot get climate laws through Congress, so executive orders are his only weapons… The trouble is, such measures are not very accurate. Bans or quantitative limits restrict emissions without considering the policy’s full costs… you want the biggest bang for your buck. The way to get that is to use market mechanisms to discover, say, the most efficient way of cutting carbon. America does not have such a mechanism at the federal level and is struggling to set one up. Europe can claim to be ahead here… But the scheme is complex and has been undermined by vast exemptions—flaws which apply to China’s new scheme, too… Winston Churchill famously said America would always do the right thing after exhausting the alternatives. The right thing in climate policy for all the big countries is a carbon tax, which is simpler and less vulnerable to fluctuations in emissions than cap-and-trade schemes.

Refs

The right response to Obama’s climate push – when P3 and the R Street Institute agree, you know something must be true.

The Carbon Bubble: All we have to do is decide to not commit civilizational suicide – and the markets crash?

That’s over at P3. But I’ve seen it elsewhere. The idea is that because we’ll need to keep unburnt oil in the ground to hit (or rather, to not hit) a 2 oC commitment, a pile of oil companies are wildly overvalued, leading to… well, who cares what it leads to, because it doesn’t matter.

Via AS I find Tol saying

As soon as the “market” expects that new regulation will seriously devalue an asset, its price drops. Bubbles only arise if the “market” is misinformed. The “market” is by no means infallible when it comes to pricing risk, but an expectation of “not much climate policy any time soon” strikes me entirely realistic

which is pretty well what I was going to say, so I won’t bother re-say it (note, BTW, that I’m of course not saying that I think sticking within 2 oC wouldn’t be a good idea. I think it would be an excellent idea. I’m just dubious about its plausibility). He continues with some econ-type stuff about how even if it were true it wouldn’t have the effects claimed, which seems plausible too, but I’m less interested in that. The Economist says about the same.

P3’s writeup says:

There’s a huge amount of evidence that… mainline financial analysts around the world are taking the argument on-board, and in a big way.

That’s hard to make sense of. If true, why aren’t the stock prices of oil companies tumbling? But I boldly plough on, to the report itself (Unburnable Carbon 2013: Wasted capital and stranded assets). And don’t find much. Perhaps I missed it; its quite long and I only skimmed it.

Refs

* David Appell is even harsher than me.
* Brian is still pushing it at Eli’s; pointer is to ‘Carbon bubble’ threatens stock markets, say MPs.

What’s the similarity between economics and climatology?

Answer: both are complex disciplines. But because they deal with every-day events, amateurs regularly assume that they know enough to dismiss the entire field.

Suppose you wanted to know what was wrong with climatology: how far is it really understood, what can it usefully describe and what not, what can it usefully predict: who would you ask? Not, I hope, one of the many “climate skeptics” whose meaningless ranting echoes around the wub. If you really wanted to know, you need to ask a climatologist. Preferrably, I’d admit, one slightly outside the mainstream and prepared to be forthright. Do we know any of those?

Now suppose you want to know what’s wrong with economics: does it understand the discount rate fully, for example. Where would you get your information: from people who just didn’t like the consequences of having a discount rate, or from people who had actually studied economics? What about the people who don’t like the discount rate but have never studied economics: would you take their views seriously?

You know who you are. Anyone else who wants to know can look at the comments on The ETS is stupid, part n.

To push this further: there are any number of people out there who don’t believe in Relativity, Special or General (some of them might even know the difference, many not). What 99.9% of such people have in common is that they’re utterly clueless about the theory they don’t believe in. So they should be ignored; on that subject.

I’ve said all this before of course. Perhaps I’ll get into the habit of saying it once a year.

This isn’t, BTW, an attempt to end the discussion on the ETS post, merely to provide a more obvious forum to continue it. Because I want to win over the “economics skeptics”.

[Updated: to add the pic. Which is the important bit, not the post behind it.]

Refs

* Models versus radiosondes in the free atmosphere: A new detection and attribution analysis of temperature – Lott et al., JGR 28 MAR 2013, DOI: 10.1002/jgrd.50255.
* Tol / Ackerman fun
* Is the Uncertainty about Climate Change Too Large for Expected Cost-Benefit Analysis? – Richard Tol. See more.

The ETS is stupid, part n

As regular readers will be aware, I think the ETS is stupid, and we should be imposing a carbon price via carbon taxes instead (Time for carbon taxes? and refs therein, if you’re interested in the history).

But David Hone isn’t, he likes the ETS, and nice person that he undoubtedly is, it cannot be mere coincidence that he has a strong financial interest in the trading scheme. Which is one of my objections to it – the inevitable parasitic class that grows up around it (and part of my despair – because carbon taxes are cleaner, they lack a similar parasitic class, and therefore semi-paradoxically they lack a constituency to argue for them. I wonder if there is a general name for this effect? [*]).

But that wasn’t what I wanted to write about. I wanted to write about his Top ten reasons for voting “yes” to “backloading”. Which is a post full of the arcana of the dealing and arm-twisting and special pleading that are necessary to prop up the no-longer-really-even-bleeding corpse of the ETS for a bit longer. And what all this demonstrates rather clearly is that the pols aren’t capable of handing out carbon trading permits in a sane manner. You can argue about why – I’d say there is a huge element of national pols handing out permits to their chums / favourite national industry; or you could if you like say that the post-2007 crisis has upset their calculations; or you could invent something else. But whatever you invent, you’re faced with the reality that their decision making process has produced the wrong result (unless you opt for saying that the number of permits issued was correct, and that the collapse in price, reflecting the ease of buying enough permits, correctly reflects the fact the Europe is on track for CO2 reduction and doesn’t need to do more. DH himself clearly doesn’t believe that).

Which in turn makes the other way of solving this – carbon taxes – look better. To restate (and I owe the clear statement of this to Timmy) there are two fundamentally different ways of limiting carbon: (a) you (in your wisdom) decide how much you’re going to allow to be emitted, and issue permits to this limit. If you get it right, CO2 is limited to a “safe” level, or at least, its limited to the level you’ve decided on; or (b) you (in your wisdom) decide how much damage carbon does, and tax people this amount. If you get it right, you don’t know (or care) what level CO2 ends up at, because you’ve paid for the damage (say by adaption, or other means) up front. That one para hides a huge amount of complexity, of course [update: it also contains an error by me, which I’ve made elsewhere: Timmy’s view – the std.econ view, I believe – is not that the carbon taxes pay for the damage, but that they factor into the market price the cost of the externalities (i.e., the damage), and therefore allow the markets to price CO2 emissions correctly.].

(a), as the ETS is showing, is very difficult to get right, and prone to all sorts of interference. (b) is I think much easier to get right. Though as I’ve said before, I’d argue for starting below the price you think is right, and ramping it up. To compare and contrast, consider how you’d try to implement a similar strategy in the ETS world.

In other news

I found The Great Crash: The Bankers Weren’t Thieves Or Crooks, They Were Deluded interesting (disclaimer: I wouldn’t be surprised if you can quibble the strength of the conclusions or even the methodology, so don’t expect me to defend this to the death). Partly for the conclusion, which is about what I think, but also for the concept: rather than trying to ask them, or ask people who don’t like them, or investigate them, why not try to find an objective method that discovers what they were actually thinking?

I’ve been disagreeing with mt again, over In Support of Slack. I’m coming to realise that I agree almost invariably with mt over the science, and have since at least since the early nineties, and I agree with quite a number of his desires (fnarr) but I disagree with almost all the details of what he says about our political and economic system (see On getting out more. mt thinks the essay he’s praising is “brilliant”; I think its drivel, or perhaps not-even-wrong. But clearly I haven’t made my point well, since no-one there agrees with me.

[*] It might be Public choice theory.

[Update: there’s another aspect which I’ve just realised, and that’s long-term planning, for electricity generators and heavy industry and so on. You want to plan, which means you’d like to know your future costs. With a carbon tax, with an agreed-though-perhaps-not-in-full-detail long-term ramp-up, you have that. With ETS, we presently have massive volatility -W]

Postscript: the “backloading” plan failed to pass the vote; see for-example mt. I disagree with his “All of which reinforces the need for a global agreement and a strictly limited but suitably empowered global agency to enforce it”. We tried that – Kyoto etc – and it was a disastrous failure. Carbon taxes are the answer. There is no need for an agency, let alone a global one.