Saturday, September 12, 2009

I have to admit that I share a lot of the pessimism about the present trends on climate change negotiations and legislation.
But I keep reminding myself of a few basic points --
1. Almost everything really important I know of went through a long stage (multiple stages really) of seeming
impossible, usually for a lot more than one year (though determination to move with all deliberate haste towards the real target was crfucial to eventual success).
2. Success WITH A RATIONAL TREATY really would be very important for multiple reasons:
a. Until we get this "off our chests" to some degree, it will be hard to get as much attention as we need
for more urgent life-or-death energy issues still on the shelf. (Though of course we should not wait for climate.)
b. Even in the middle-of-the-road case, it is rational to take at least moderate action here. More precisely --
if we neglect the "almost no impact case" (which IPCC rightly assesses as having a 5% probbaility or less, based on what we now know) and the "sixty feet sea level catastrophe, due to Antarctic melting" (which seems to have 5-20% probability)... I tend to agree with Michael Canes (no left winger!) and with Tol (whom he cites) that an extra ton
of CO2 emission would cause about $30 worth of damage, in the middle case. Market economics says that
we will make better, more efficient decisions if "polluters" (emitters?) who "impose a burden on the global commons"
are required to pay a user fee equal to the amount of damage they cause -- which would be $30 per ton. But because
our planet is not entirely ready to adapt well to that high of a price as yet, I believe it would be better at $12 or $20, at least for now.
IN PARTICULAR -- at $20 per ton, some exciting things can start to happen. For example, I know of one very credible new company, Calera, firmly rooted in the private sector (unlike certain companies dedicated to extracting public money),
which estimates that $20 per ton would be enough to let it profitable convert half the coal plant flue gas in the US to useful
"aggregate" material. This is a rough estimate... but we know it would be a huge and visible change in the game.
By the way, this would be even more useful in China, where the need for new building material is greater.
But there are greedy people who want more than $20 per ton, instantly, and who want various kinds
of double-dipping just for them. I get more and more worried about whether we can get past the forces of greed, who are trying to control the entire conversation (or rather prevent a real conversation) -- and are willing to risk
screwing up the whole thing for the sake of their hope of a gigantic Christmas Tree with money for their personal friends. In my view, that is the main story on free allowances and on offsets. (Caveat: the folks who want stronger domestic offsets,
based on the flows of carbon sequestered PER YEAR in farms and forests, to be managed by the USDA, using procedures which BYPASS the silly concept of "additionality," are offering a substantial well-justified improvement
in the legislation. In effect -- people who put a burden on the global comons should pay, while those who reduce that burden snhould be paid in equal measure; THEIR annual contributions should also be assessed as accurately as possible.)
The issue of "border adjustments" (which may include free allowances to folks worried about foreign competition) has become a major probable show-stopper. (In my view, there are three show-stoppers which absolutely need to be overcome
in order to have hope here -- fixing the free allowances, fixing the offsets, and fixing the system of border adjustments.)
The other day I heard that large parts of the public would be happy with a carbon control law... IF other nations
also were subject to the same thing. The issue of other nations has become really central and decisive. If it's not handled right -- no law, no treaty. And it's not being handled right. There MUST be border adjustments for now -- BUT WHEN DO THEY GO AWAY?
Apparently, when the Waxman bill was being written, some folks thought it would be wise not to give clear, simple objective criteria about what other nations have to do to avoid being hit by border restrictions. Why not wait and use holistic judgment? Sounds good. It's great if you are the ruler of the universe and want to preserve your rulership.
BUT... if we wanted any kind of strong global carbon control treaty (without which most believe a US law would
be pointless)... we need a clear, simple signal on how to turn off these things. In fact, even a treaty must deal with the issue of how to handle those outside of the treaty. It's really important to understand that there is a kind of equivalence here. We need to bite that bullet, and purge the blockages which keep us from facing up to the question.
And so... if we do not have clear conditions spelled out, reasonable minimum conditions for a global carbon control treaty,
that would automatically turn off all the border adjustments (including free allowances for trade-impacted industries),
a strong treaty will be harder to get. (Caveat: I would consider even a $12 per ton global carbon fee a strong treaty,
though it would be unrealistic to ask US trade-impacted energy-intensive industries to pay more than the global fee.)
If a strong treaty remains visibly unlikely... and strong border adjustments are enshrined without a clear sunset provision...
the US law itself become far less likely. Of course, the State Departmlent will say they are following the Bali path..
and they are working harmoniously with all the other happy well-fed diplomats of the world to get us eventually
to a beuatiful well-written enobling treaty which provides --
1. China and India and most others will happily do whatever they were going to do anyway
2. The US is firmly internationally bound to do much more
3. We all get to praise each other's existing efforts
4. In return for the right to praise what others are already doing, we pay them many billions
of additional dollars every year
Actually, it's a little worse than that -- but 67 votes from the Senate for that? If that's the best plan in operation right now,
and if a US law is nonproductive without new international action... we could improve the odds
of eventual success both with law and with treaty a WHOLE LOT by struggling to get out of the box.
But will the forces in play now tolerate such an effort?
By the way, I have heard Republicans recently say the new law really ought to be a lot more clear about turning off the possibility of ad hoc additional EPAS regulation of greenhouse gasses as such. I don't see why not -- but I have no
idea whether anyone else even notices.
In the end.... I wouldn't want to be too technical here... but I think that the faulty
strategies here are based in part on a lack of understanding of game theory. The present approach to CO2 negotiations
internationally basically creates a kind of prisoner's dilemma or tragedy of the commons effect.
A common global carbon price (at least for treaty ratifiers which should cover at least 80% of the emissions)
would break that prisoner's dilemma problem. One could write a well-deserved book on this effect, using this case study. But not this morning.
Best of luck,
P.S. As always, just my own views, not representing anyone else.

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