Waxman-Markey Day

Well, the wheelers and dealers on Capital Hill are voting on Waxman-Markey today.  Jim Manzi has been doing damn fine work on the subject lately, so browse his archives over at The American Scene if you’re interested at all on what looks to be a very, very bad bill for climate change.  I’m skeptical of any sort of cap & trade legislationManzi summarizes why we all should be worried about Waxman-Markey:

1. It would be a terrible deal for American taxpayers. According to the Environmental Protection Agency, it is projected to impose annual costs of about $1,100 per household (a little less than 1% of total consumption) by 2050. The benefits we will get in return? If the law works precisely as intended, in about one hundred years we should expect surface temperatures to be a about one-tenth of one degree Celsius lower than they otherwise would be. The expected costs are at least ten times the expected benefits, even using the EPA’s cost estimates and assuming achievement of the primary goal of the legislation.

2. The argument that “OK, it’s a terrible deal standalone, but we need to lead the world by example” is extremely unconvincing. First, while you are probably not a climate science expert, I bet you’ve negotiated a few things in your life. What do you think about the negotiating strategy of unilaterally giving away our most obvious leverage – namely “we’ll reduce our emissions if you reduce yours” – and instead hoping that those nice men who rule China will be guilted into sacrificing their perceived economic self-interest if we just go first? Second and more fundamentally, as per many detailed analyses, the global deal that we would theoretically be chasing isn’t even attractive, even if we assume every technical climate change prediction by the UN IPCC is correct.

3. Contrary to early expectations that auctioning cap-and-trade permits would generate $80 billion per year of government revenue, this law would not contribute materially to deficit reduction. You’ve seen the internal negotiations up close. Because so many allowances have been given away to special interests to try to get the votes needed to pass ACES, the CBO now estimates that it will bring in a net of a little over $2 billion per year over the next decade. As you know, this is about one one-thousandth of this year’s budget deficit.

4. A further effect of all of these deals (which are entirely predictable in a democracy) is that ACES is very unlikely to achieve even the limited benefits that are claimed for it. The details of the bill mean that there is now not a hard cap on emissions for at least the first decade of its existence. What do you think the odds are that this will change at some undetermined point in the far future when all of the normal interest group pressures of a democracy are supposed to magically disappear?

5. In short, Waxman-Markey would impose costs at least 10 times as large as its benefits, would not reduce the deficit, and doesn’t even really cap emissions.

This is not to say that we should do nothing about climate change, but this sort of bad legislation is really just going to impede efforts at smart innovations or investment in mass transit which, to my mind, is a much better route to take than creating what is really just a false market for an abstract good.  I suppose other issues – employment, education, health care – seem far, far more vital to me and to this economy.

Oh, and if you’re interested, Michelle Malkin is live-blogging the vote.  It’ll be almost as much fun as watching C-Span!

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39 thoughts on “Waxman-Markey Day

  1. So far as I can tell, this bill is already pretty strong evidence in support of public choice theory. From what I can gather, the compromises that will be necessary to turn it into law are going to turn it into THE poster child for public choice theory.

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      • 1. See points 3 and 4 of Manzi’s post that you quoted.
        2. My understanding is that to secure passage in the Senate, additional special interest giveaways will be necessary (three cheers for more destructive ethanol subsidies!).
        3. Loads of giveaways to various special interests for “clean coal” and other technologies of dubious environmental value that are already in the bill.
        4. So bad are the compromises and giveaways that Greenpeace and a number of other environmental groups want to see the bill killed – they think it does more environmental harm than good, and that doesn’t even take the fiscal costs into account.

        None of this says anything about the likelihood of cap-and-trade to succeed in actually achieving stated goals without destroying our economy, which Manzi has done yeoman’s work on (why not a Pigou tax instead?). Just that, even if you accept that cap-and-trade could be successful, the special interest giveaways and compromises necessary to pass the legislation ensure that it will do more harm than good, no matter what your perspective.

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  2. …A government of by and for the corporations…

    Cap and trade laws will not work without a cap or with these giveaways to corporate donors. That seems to be definitionally true.

    I’m losing faith that we’ll ever get effective world governance on climate change before it’s too late. So we might as well live it up before the super-hurricanes, drinking water shortages, and coastal floods ruin our civilization.

    I’ve got one idea though… why don’t we pit a non-polluting corporate interest against the polluting interests? Let’s say we can turn cap and trade into a gigantic giveaway to Goldman Sachs (let them run the market), then with their lobbying power, we might able to get unadulterated caps.

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  3. Will it create a black market?

    That’s a good rule of thumb for whether your regulations are particularly good regulations.

    If there is a black market (sure, if you want a caveat of something like “of a particular size or larger”, we can do that) then your regulations are bound to fail and you have two choices:

    1) Admit you were wrong and loosen your regulations
    2) Start throwing people in prison

    2) strikes me as unsustainable… Prohibition fell, the USSR fell, it strikes me that we’re on the cusp of the drug war falling.

    If your regulations will create a black market (insert caveat here) then they are bad, bad regulations and will eventually topple.

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  4. To be fair, the EPA is only one estimate. According to CBO, the annual cost is $175 per household. That’s a lot different. Which is not to say that this is a good bill, only that Manzi is an ideological hack. Ryan Avent has been a pretty refreshing tonic for a lot of the conservative ideology and evidence-cherry-picking being sold as science by people like Manzi and McArdle.

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  5. I believe a cap and trade scheme has worked well with dealing with acid rain. allthough there may a huge black market for pumping acid rain causing chemicles into the air.

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  6. A question for supporters:

    Is there a way to measure the outcomes for this?

    I mean, if we engage in X, then Y will happen. If Y does not happen, then can we say that X is not working?

    Or will the tendency be to say that X was never really successfully applied, we need to redouble our efforts, we don’t know how bad it would have gotten had we not done these things, etc?

    Because it strikes me that if we are going to do something with this much upside/this much downside, there should be a mechanism for us to say “this ain’t working, we need to try something else entirely”.

    Is what you are proposing measurable?

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  7. Um, sure. Climate science is hard, but it’s still science. We can make reasonable predictions about what happens to CO2 emissions, global temperatures, etc. It won’t be perfect, but it’ll be something. That’s what things like the EPA study are supposed to do: set baselines. If we implement the policy and don’t hit the baselines, then the policy has failed. Isn’t that a basic description of empirical policymaking?

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  8. Ryan:

    The quoted number of $1,100 is for the projected costs (in constant dollars) for the year 2050. If you want to compare the discounted value of that cost to benefits on an apples-to-apples basis with the projected benefits, you would have to discount back the benefits (from beyond 2050, AGW is only projected to have net economic costs to the US after about 2100) as well. I think you will find that discunted comparison to be very, very unfavorable to W-M.

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    • I think we agree that the costs of this bill outweigh the benefits – and probably by a large margin – but it’s frankly irresponsible to report the costs as $1,100 per household when they are not. They are between $134 and $175 (depending on which estimate you like). Discussing impacts in nominal terms is crazy.

      Pure economic cost-benefit analysis does not give anyone a reason to support this bill, by any means. But those of who support it (however grudgingly) do not do so because we think making more money should be the primary goal of a civilized people.

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  9. Ryan:

    i think you’re dismissing Jaybird’s excellent question much too quickly. Climate science is science, but because it is making predictions for an integrated earth-wide system, it is science that cna not have controlled experiments. In this respect, it is very similar to economics. Think of recent predcitions of “number of jobs created or saved” by the stimulus plan (or for any other economic plan by either party): when the actual number of jobless turned out to be much higher than predicted, the argument quickly became “yes, but it would have been even worse had we not done this”. I have some long posts at The American Scence and Atlantic Business on exactly this point if you’re interested.

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    • In which case, I agree wholeheartedly. Climate science has a lot more in common with macroeconomics than a lot of climate scientists (or macroeconomists) would like to admit. If I am to take Jaybird’s question as functionally meaning, “How do we hold politicians’ feet to the flames when the things they promise us don’t actually happen?”, then my answer is, “Good luck.”

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        • Doing nothing is your chosen solution to everything. While I completely agree in many cases doing nothing is best , I can’t see how it is always the correct solution. What are the consequences if it isn’t in this case?

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          • Hey, I’d be down with a plan that was measurable and, if the plan was not working as advertised, we’d be able to stop doing it.

            My problem is that I suspect that whatever we implement will be similar to the War On Drugs.

            No matter what happens, the solution will always be something to the effect of “we need to redouble our efforts”… and if it reaches the point where, seriously, we need to stop, people won’t say “but how many people will lose their jobs if we stop???”

            It’s not that I’m opposed to a plan, it’s that I see “nothing” as better than the plan being proposed here.

            I mean, we can *ALWAYS* stop doing “nothing”.

            I don’t know that we’d be able to stop doing the proposed plan.

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        • I fail to see how, and for two reasons:

          1. $134 to $175 per household doesn’t strike me as terribly expensive. Obviously this is a matter of personal preference, but I think that climate change policy that costs about as much as a NetFlix subscription isn’t “expensive”.

          2. “Hard to measure” and “not measurable” are different things. Just because we can’t know exactly what is happening, will happen, or would have happened doesn’t mean we have to give in to fatalism. We know the general costs (to the world) of climate change are somewhere between “very bad” and “catastrophic”. Doing nothing in the face of that doesn’t strike me as particularly wise or responsible.

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          • “but I think that climate change policy that costs about as much as a NetFlix subscription isn’t “expensive”.”

            I would agree if we could measure the changes we get. If nothing changes? I’d say that it’s far, far, far too expensive.

            “Doing nothing in the face of that doesn’t strike me as particularly wise or responsible.”

            Well, it strikes me that doing something ineffective that we won’t be able to stop doing is worse than doing nothing. It’s downright unwise and downright irresponsible.

            Again: We can always stop doing nothing. I don’t know that we’ll be able to stop doing the proposed plan even if nothing changes. If we start doing things and nothing changes and people say “we need to continue doing this costly thing (instead of some other costly thing) because the world might end if we don’t” strikes me as… well. It reminds me of the importance of Patriot to keeping our Children safe.

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  10. So Jim what should we do? While climate science is not physics its more then just econ. The large majority of climate scientists, backed by evidence, say we have a climate problem. A problem that could have a massive affect on humanity. So what do we do?

    A tax is obviously out because, Americans will go nuts. Any increase in taxes by even .001 percent per year, even on the highest bracket, is socialism, blah, blah blah.

    Or another question. Can humans learn to take action on long term (decades), strategic problems? Can Americans?

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    • Right, the tax thing is especially frustrating. From what I can tell, the large majority of people involved in the climate debate would like a carbon tax. But we’ve been told for so many years – mostly by the people who are most opposed to cap and trade! – that taxation is theft, destroys the economy, etc. that we’ve conditioned people to automatically react as if taxes are the worst evil there is.

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  11. Unfortunately climate change and it’s remedies are inherently hard to measure. There is no way around that. If “it’s hard to measure” is a sticking point then we will never do anything. Also climate change ,and slowing it, is a loooong term process. The long we wait to do anything the greater the risks are. Many of the moderate to worse projections already suggest we are in for some serious poopie in 40-50 years no matter what we do.

    On the other hand I don’t eat very well, so long term climate change may not affect me that much. Maybe I should go to Burger King for lunch.

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      • No because there is science involved. I know i have seen climate scientists. They had lab coats and clipboards and use numbers. Although I didn’t see Bunsen burners or jars of colored liquids. Scientists usually have that stuff.

        In any case there are testable hypothesis that can be used to assess what is going on. While our info is limited we have some and need to make our best guesses on that. Sort of like life in general.

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        • Are there testable hypotheses, though? Even assuming that it’s a testable hypothesis as to whether a decrease of x tons of greenhouse gases will cause y decrease in global warming, isn’t the real issue whether policy A will, in fact, cause x decrease in greenhouse gas emissions? Is this a testable hypothesis? Or is it more likely to be along the lines of the stimulus package where an increase or insufficient decrease in greenhouse gas emissions will be proof positive that things would have been even worse without Policy A, while a sufficient or excessive decrease in emissions will be proof positive that Policy A was a smashing success?

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        • The problem with “testing” hypotheses is the follwoing: suppose we have some annual rate of emissions X and temperatures follow some path: we can’t know the counterfactual, i.e., what would temperatures have been had we had some other emissions level? This is becauase we have no “control earths” that we can pump up with various levels of CO2 in order to see what happens to temperature.

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  12. Gregalink:

    I agree that climate science is science, and is more than econ (that’s why I was careful to qualify the analogy with “In this respect”). I also agree that the science is clear that we have a problem (though szing it is pretty difficult, and public adovcates have exaggerated the case).

    The first thing I think we should do is avoid obvious, unforced errors, of which I think, for reasons I’ve gone into at length, W-M and any cap-and-trade, carbon tax or similar program are all examples.

    Fundamentally, I think the governemnt should be investing in specific technologies to provide: (1) improved prediction and tracking of AGW, (2) emergency “break-the-glass” alternatives in the event that AGw has much. much worse effects than science currently predicts, and (3) certain basic and targeted reserach that will help us accelerate the ongoing long-run de-carbonization of the economy. In the end, the only solution here, IMHO, is to make clean energy cheaper, not dirty energy more expensive.

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  13. I’d also reiterate that building more walkable cities (through a de-zoning approach to new urbanism, perhaps) and investing in mass transit are two ways that would actually create jobs, real products, etc. and not a false market like cap & trade. They also might do something to reduce carbon emissions and to prepare us for the days when oil becomes simply far too expensive for many drivers to continue driving. (This is better than artificially raising the price of gasoline as well, since it invests in infrastructure rather than simply adding artificially to costs).

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    • E.D.,
      I too would like to see a push toward more walkable cities and away from serpentine suburbs, but I don’t understand why we can’t do that along with a gasoline tax and real Cap & Trade (not what’s being proposed in Waxman-Markey).

      Why hope that we can reduce emissions and move to more fuel efficient cars, factories, etc. when we can make it happen with the right kind of market-driven action? By the way, what’s the difference between the “false” cap and trade market and what I’d assume you consider a real market like the NYSE?

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    • Yay, walkable cities, yay mass transit. Incidentally, spending a summer in East Asia, totally made me an urban mass transit convert. The MTR is air conditioned heaven that runs every minute during rush hour.

      Also, good point about the increase in gas taxes which just in turn goes right back towards road infrastructure (while encouraging people to drive less), it’s the automotive equivalent of taxing cigarettes to pay for anti-smoking ads.

      Final point about gas, prices and taxation of. I think (looking ahead) we really need to look at the issue of rising energy costs more comprehensively. Increases in the price of gas are incredibly regressive and it seems like it’s a lot easier to propose a gas tax or hmm and haw about alternative fuel sources than to figure out the best way to compensate for the increased cost burden of the poor and lower middle class or decouple our society from complete dependence on one fuel source.

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