Tag Archives: environmental economics

lies, lies, and more lies to the U.S. public about greenhouse gas emissions

The “endangerment finding” through the Clean Air Act may not have been the ideal way to incentivize clean energy technology in our country. But it was one dial we had to turn, and now it has been turned back. This is just a temporary giveaway to the short-term interests of corporate donors in the automobile and fossil fuel industries. In the case of the auto industry, it is not in their long term interests to subsidize inefficient outdated technology, then use propaganda to swindle the public. The lie about “affordability” is particularly egregious.

Affordable vehicle ownership is essential to the American Dream and a primary driver of economic mobility out of poverty in the United States. The Endangerment Finding led to vehicle and engine regulations with an aggregate cost of more than $1 trillion and played a significant role in EPA’s justification of regulations of other sources beyond cars and trucks, resulting in additional costly burdens on American families and businesses. Americans rely on vehicles to reach jobs, education, health care, and essential services. This is especially true in rural areas and regions without robust public transit. The costs imposed by these climate policies have placed new cars out of reach for many American families and harmed Americans’ ability to climb out of poverty or reach essential services. The Trump EPA is expected to deliver Americans over $1.3 trillion in cost savings, which includes reduced costs for new vehicles and avoided costs of purchasing equipment related to EVs. This action will result in an average cost savings of over $2,400 per vehicle. By lowering vehicle and regulatory compliance costs, EPA is improving affordability and expanding consumer choice and ultimately advancing the American Dream by making it easier to reach jobs, grow small businesses, and participate fully in the transportation and logistics systems that power the U.S. economy.

Here is what Gemini has to say about this. And the analysis below is true in the United States. In China, most new vehicles being sold are electric and you can buy one for $10,000. We are being lied to, and as we have withdrawn even more from the world, we are even less aware what is going on elsewhere, but still U.S. consumers are intelligent enough that we will catch on even if there is some delay. Our legacy auto companies will fail again and again, and eventually need to be bailed out again and again, until eventually the economics of electrification is just too obvious to lie about and get away with it.

While the sticker price of an EV is typically higher, the savings in fuel and maintenance usually “pay back” that difference within 3 to 7 years. By the time a car reaches the end of its life, an EV owner in the U.S. has typically saved between $6,000 and $11,000 compared to a gas-car owner. [generated by Gemini]

There’s another sleight of hand. There is rock solid scientific and economic work showing the costs of air pollution, and here I am talking about good old fashioned toxic smoke from factories and tail pipes. There is also solid (but controversial) economic work over decades quantifying the economic value that people place on a year of worker life. For example, a construction worker on a roof might get paid more than one doing the same job on the ground, because there is a greater statistical risk of death on the roof. Aggregate these numbers over many workers, jobs, and time, and you can say the “value of a statistical life” is a certain number of dollars. It seems cold, but it provides a sound data point when a new regulation with some cost is being considered. Put these two things together and you have the scientific and economic basis to compare the costs and benefits of a policy decision. This is old school environmental economics and really a basis for some pretty conservative policy because you are acknowledging it may be rational to sacrifice some human health and life for economic production. And we are not really assigning the environment any intrinsic value in this equation, unless knowing the environment is a little better brings people some pleasure which some value can be placed on, which economists sometimes try. Of course, real world policy decisions are some combination of science, economics, and politics, as they probably should be in a democracy. But what the EPA has recently suggested it is prepared to do is set the value of a statistical life to zero when analyzing costs and benefits of air pollution. [See pp. 214-217 of the document I link to above. I acknowledge this not a crystal clear policy directive, then again, it may be intentionally buried to try to avoid scrutiny, when in fact if you dig deeper EPA is departing from official directives of the federal government, including the President’s own Office of Management and Budget.] In other words, they propose to assume the cost of pollution is zero. This is wrong, fake, naked propaganda! Their policies are killing us AND stealing our money. It is time to get rid of these immoral people claiming to lead us.

environmental economics, behavioral economics, and [E]cological [E]conomics

The journal Ecological Economics has as long article on the history of…ecological economics, which it invented. I started through the article a bit skeptical, and became absorbed. They are now trying to figure out how behavioral economics fits in. There is a ton of interesting stuff here, and I am not sure I can even begin to summarize it.

The basic tenet in Ecological Economics (EE) is eloquently stated in the seminal paper by (Røpke, 2004, p. 296): “the human economy is embedded in nature, and economic processes are also always natural processes”. The field gained formal recognition with the founding of the International Society for Ecological Economics in 1988, followed by the launch of the journal Ecological Economics in 1989 and the first international conference in 1990 (Røpke, 2004). It emerged after several unsuccessful attempts to make environmental economics more grounded in physical reality and less constrained by its rigid methodological assumptions. In response to this rigidity, the scholars who founded the EE society and journal opted for openness: any opinion or method could in principle be considered, debated and possibly dismissed only ex post. This stance reflects EE’s commitment to methodological pluralism (Norgaard, 1989), rooted in the belief that no single approach can adequately capture the full complexity of socio-ecological challenges.

That’s the beginning. It goes on like that for a long time. Note that “environmental economics”, which essentially extends the logic of traditional economics to properly deal with external costs and benefits, is not good enough according to the founders of ecological economics. Essentially, we need to acknowledge that the human economy is embedded in the natural world, not the other way around. Behavioral economics extends traditional economics to account for how real individuals (humans, firms) reach conclusions and make decisions, which falls short of pure rationality. The ecological economics crowd says this focus on individual decisions was the breakthrough that allowed behavioral economics to break through into the field of traditional economics. But this is also not good enough because our decisions and actions as a society are more than just the sum of decisions and actions by all the individual actors. That’s my take-home summary, but the article puts it much better backed by evidence and academic studies. Worth a read.

rolling the DICE

The Intercept has a long take-down of William Nordhaus’s DICE climate change economic model. Well, it’s not just this journalist, who may not have past middle school algebra for all we know, in this openly left-leaning publication taking him down, it’s Joseph Stiglitz, Nicholas Stern, and Herman Daly among others. So despite some unnecessarily inflammatory language, I found the article to be a good summary of where this debate stands.

The basic take-down is that Nordhaus’s model ignores those “fat tail” tipping point scenarios, and is basically just extrapolating recent data far into the future in a linear manner, without consideration of true system dynamics. I might agree, but I can also see the point Nordhaus himself makes that our global society is doing much less than even his somewhat conservative model would recommend. Scientists sometimes deserve to be accused of “paralysis of analysis” – because there is some controversy, politicians and corporate leaders can rationalize continuing to do nothing. When in reality, all the economists and scientists cited here, who vehemently disagree with each other, all agree that our global society is doing too little too late to avert catastrophe. If our leaders would do what Nordhaus is recommending, it would be a huge step in the right direction, and then we could have a useful debate about whether we have done enough or still need to do more. We are nowhere near that point so this is quite literally an academic debate. If the more catastrophic scenarios people are talking about were moving the politicians in the right direction, that would be one thing, but I am not convinced. I think seeing the experts argue with each other just gives the politicians excuses. And we KNOW most of them failed elementary school arithmetic.

the Simon-Ehrlich bet

Paul Ehrlich has probably won his 1980 bet with Julian Simon in a number of parallel universes, according to this analysis:

Better lucky than good: The Simon-Ehrlich bet through the lens of financial economics

In 1980, Julian Simon and Paul Ehrlich bet on the future of natural resource prices as a vehicle for their public debate about mankind’s future. Simon ultimately won, and his victory has been used as evidence that innovation can offset material scarcity induced by human economic activity. But does the outcome of the bet truly suggest this? We recast the bet as a short-sale by Simon of Ehrlich’s portfolio of assets, allowing us to carefully analyze the choices made in the bet, including the resources chosen and their amounts and the period of the bet, conditioned on the information available to each man in 1980. We also investigate the role of randomness in the outcome of the bet. We find that, with careful portfolio construction, Ehrlich should win this bet more often than not, validating the age-old adage that it’s better to be lucky than good.

Ecological Economics

Does this mean that humanity as a whole is better off than we maybe “should be” on average? Hard to say.