You’ve missed the point of the analogy, which is not that neoclassical economists are bad people. The point is that $14/ton conflates actual material costs over time with value judgments about the relative importance of compensating people across regions and time.

The median pure rate of time preference in Tol’s study is about 2%/yr. At that rate, effects a century from now are worth 15% of effects today. The $10/ton median cost in the 2% studies in Tol’s survey is thus a statement (very roughly) that $10/ton today would be adequate compensation for marginal damages, as long as your concept of “adequate compensation” is 15 cents on the dollar. From a societal perspective, I don’t see a big difference between stealing from the future and stealing a Lexus, though society clearly places rather different sanctions on each.

I see…so now people who think the marginal damages are less than $14 per metric ton of carbon (once again, 50 percent of the estimates were below $14 per metric ton of carbon) aren’t merely “libertarians,” but are thieving crack dealers! Are you sure they aren’t Holocaust Deniers? Or maybe they’re libertarian thieving-crack-dealer Holocaust Deniers?

“But really I was just baiting you because you brought up the ‘one world government’ baloney.”

So you’ve got a Plan B for what to do when the governments/people of China and India say they have no intention of putting burdens on their present people (in the form of extra prices on fossil fuels) for the hypothetical benefit of people of the future who will almost certainly be better off? What is it? What is your Plan B? How will you convince the governments/people of China and India to impose even greater costs on fossil fuel usage than the costs that they are already bearing? (Note: I’ve already presented *my* Plan B, which is billions of dollars of technology prizes for three or four technologies: fusion, photovoltaics, batteries, and possibly biofuels from sources other than agricultural products).

“One doesn’t have to be a libertarian to observe a surprisingly convenient conviction among many – not just libertarians – that there are no negative social externalities.”

I guess one also doesn’t have to be a libertarian to put up a straw man and kick the straw out of him.

I’m not aware of any time I (or anyone else) ever claimed there were “no negative social externalities.” I merely claimed that the net discounted future damage of climate change is trivial. Richard Tol’s study supports my assertion.

But don’t stop there…every study of which I’m aware that compared global warming to other significant social problems has come up with the conclusion that global warming mitigation doesn’t rank very high in proper societal priorities.

See, for example, the work of Roger’s undergraduate students:

http://sciencepolicy.colorado.edu/prometheus/archives/education/000991class_copenhagen_con.html

Or…let me guess: they must all be libertarians, right?

To state that Tol’s survey proves damages are trivial is like saying that the median reported cost of a Lexus is 50 bucks, without mentioning that the survey participants are a bunch of crack dealers who think it’s OK to steal one.

Also take note of Tol’s 2007 observation that, “The total cost estimates omit some impacts of
climate change; they tend to ignore interactions between different impacts, and neglect
higher order effects on the economy and population; they rely on extrapolation from a
few detailed case studies; they often impose a changing climate on a static society; they
use simplistic models of adaptation to climate change; they often ignore uncertainties;
and they use controversial valuation methods and benefit transfers.”

So, yes, I think the SCC numbers are dodgy.

I think I used cognitive dissonance in quite typical fashion, to denote “the filtering of information that conflicts with what one already believes, in an effort to ignore that information and reinforce one’s beliefs” (a few lines down on your wikipedia cite). But really I was just baiting you because you brought up the “one world government” baloney. One doesn’t have to be a libertarian to observe a surprisingly convenient conviction among many – not just libertarians – that there are no negative social externalities.

I think you need to look up the definition of “cognitive dissonance.” You’re not using it in the same context as others use it. From wonderful Wikipedia:

“Cognitive dissonance is a psychological state that describes the uncomfortable feeling when a person begins to understand that something the person believes to be true is, in fact, not true.”

Therefore, you can only declare a “libertarian cognitive dissonance” to exist if you are a libertarian (and think that you can safely extrapolate your own thoughts to libertarians in general).

There is no “cognitive dissonance” when I say that global warming a trivial problem. And in fact, boatloads of people who are not libertarians say the same thing.

Look at the survey of economic studies that Richard Tol conducted, to assess the marginal cost of damage from CO2 emissions. He got a mode (most common) value of $2/tC ($2 per metric ton of carbon) and a median value of $14/tC.

http://www.uni-hamburg.de/Wiss/FB/15/Sustainability/enpolmargcost.pdf

Those are absolutely trivial numbers. Since gasoline emits 2.4 kg of carbon per gallon, it would take 413 gallons of gasoline burned to emit 1 ton of carbon. That means that the median value for damage from CO2 from burning 1 gallon of gasoline was $14/413 gallons, or 3.3 CENTS per gallon.

Do you disagree with any of those numbers?

Do you think that the people who got numbers below $14/tC (HALF of all the estimates in the survey) were simply “libertarians”? After all, half of the estimates for damage from CO2 emissions from gasoline were less than 3.3 CENTS per gallon! (Or do you think my calculations are wrong?)

I didn’t propose subsidizing but long-term loans – for technology which is a proven money saver over the long-term; such as geothermal heating/cooling. It’s a win-win situation. Neither did I say the government were leeches, I said the multiple climate change quangos were leeches. The money going to them should be redirected towards engineering projects, many of which are currently starved of cash. There is apparently no limit to the funding of talkers but not much available for the doers.

Ahh … we’ve reached the usual point of libertarian cognitive dissonance. We can’t deal with climate without cooperation, so let’s just deny that the problem exists. I’m not aware of serious studies indicating that benefits=costs – could you share the rationale?

“Ummmm…I suggest you take a longer look. Economic growth rates ARE super-exponential.”

If you plot gdp/cap for leading economies on a log scale, it’s been a straight line for more than 200 years. The only upward discontinuity I can see was the industrial revolution.

Re PV, this paper http://www.iop.org/EJ/article/1748-9326/1/1/014009/erl6_1_014009.html#erl227672s4 estimates about $4bn in cumulative R&D (eyeballing the graph) and a 20% learning curve. So, to be optimistic, let’s say $2bn cumulative and a 30% learning curve. Dedicate 10% of the prize pot to PV, and you get … a 30% improvement. Not quite the breakthrough needed. Then you have to double the prize to get the next 30%.

Ummmm…I suggest you take a longer look. Economic growth rates ARE super-exponential. The doubling time of GDP per capita is not merely fixed, but is actually declining.

That’s why world per-capita GDP in the year 2100 will probably be more than $1 million (year 2000 dollars, purchasing power parity).

You are completely neglecting that “all else” is NOT equal. If coal and fusion had the same price per unit energy output, there would be far more fusion power plants than coal power plants, because the fusion plants could be placed right at the points of demand, whereas nobody wants a coal-fired power plant in their back yard, and no one wants coal trains running by their houses. Therefore, coal-fired power plants tend to be located near coal sources…or at least out in the country.

“The history of science suggests that a $20b prize portfolio will do next to nothing. Total US R&D is more than 10x that,…”

Total U.S. R&D isn’t the relevant parameter. What has total R&D spending been on fusion? On photovoltaics? On batteries?

I don’t know the exact numbers, but my guess is that total federal government R&D spending on photovoltaics, batteries, and non-tokamak fusion have each been less than $1 billion.

“If you want to go for the big breakthroughs with prizes, fine by me. But in isolation it’s not a robust strategy. What’s your plan B?”

That *is* “plan B!” That’s plan B for WHEN (not “if!”) “efforts to put a meaningful price on carbon fail…”

In one sense, the “meaningful price on carbon” is essentially zero. So in one sense, we’re ALREADY in a situation in which a “meaningful price on carbon” has been established. That’s because the present value of the net discounted future damage from CO2 is essentially zero. It’s “meaningful,” in an economic sense, to tax at a rate that is equal to the net discounted value of the harm produced. How will the essentially zero increase in the price of carbon affect demand for coal, gasoline, and natural gas? Answer: It will have essentially zero effect, because it’s essentially zero increase in price.

So we ALREADY have a “meaningful” price on carbon…in the sense that the present price of zero is approximately equal to the net (problems minus benefits) discounted (discounting future damage to present) value of the damage of CO2 emissions.

But by “meaningful,” Roger probably meant “capable of resulting in a very significant reduction in worldwide CO2 emissions in a few decades.”

And how will a price increase that’s “meaningful” in that sense perform? It won’t, because price increases that would produce significant worldwide reductions in CO2 emissions simply aren’t politically feasible. Far too many laypeople understand, at a common-sense level, that the discounted future damage from CO2 is essentially zero.

As I told Roger, even if developed countries could persuade their citizenry to accept taxes on fossil fuels sufficient to reduce demand within those developed countries (and the evidence is overwhelmingly robust that they can’t), there’s no way that China, India, and other countries are going to do the same.

So what is YOUR plan B, when efforts to place a “meaningful” price (in terms of reducing worldwide emissions of CO2) fail?

One world government, perhaps?

The history of science suggests that a $20b prize portfolio will do next to nothing. Total US R&D is more than 10x that, and progress moves according to power law diminishing returns (if it didn’t economic growth rates would be super-exponential, and they’re not). Even if you attribute all economic growth to technology, and recognize that basic research is only a small part of total R&D, the best a small prize is going to do is slightly increase the rate of progress. And of course if the prizes aren’t awarded, you’re not out any money, but you’re decades down the road with nothing to show for it.

Low-carbon primary energy sources are the target most amenable to prizes. In other areas, absent price signals, it can be expected that technical success will be eroded by rebound effects ( see for example http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1088074 ). Just look at the history of the automobile from the mid 80s to the early 00s. Fuel prices and CAFE standards were fairly constant. There were huge technical innovations in engine efficiency, vehicle design, strength of materials, etc. Absent price signals, technical progress was entirely consumed by increased size, weight, power, amenities, and driving. The same happens in the long run to any technology that lowers the cost of energy services.

One of the basic economic insights about regulation is that it’s most effective when as many tradeoffs as possible are allowed. A broad carbon price is effective in that sense because it allows so many tradeoffs: low carbon energy supplies, moving closer to work, buying an efficient car, switching from bottled water to tap, and solving principal-agent problems between home builders and buyers all face exactly the same carbon incentive. Narrow policies, like renewable fuels standards and sectoral cap&trade are generally deficient in flexibility. Prizes are, if anything, even narrower.

It’s wrong to equate $20bn spent on prizes with $20bn carbon tax revenue. The actual cost of the carbon tax is not the revenue; it’s the changes in material allocations in the economy created by the price signal, which could be very different.

If you want to go for the big breakthroughs with prizes, fine by me. But in isolation it’s not a robust strategy. What’s your plan B?

I’m not exactly sure what you mean, but there could be technology prizes for:

Materials that remove CO2 from flue gas:

http://www.sciencedaily.com/releases/2008/03/080303163804.htm

…and separate prizes for processes that utilize concentrated CO2 to produce fuels (possibly in the absence of sunlight, if lack of sunlight seems to be a significant problem).

Or the prizes could be for the total package of going from CO2 in the flue gases to fuel:

http://smarteconomy.typepad.com/smart_economy/2006/10/algae_bioreacto.html

I’m not trying to minimize the issue of what the technology prizes should be, and what the monetary values should be. I think those are both huge questions, requiring large amounts of thought.

I propose that the U.S. government stop or greatly reduce the subsidies it’s currently giving for things like ethanol from corn and the International Tokamak Experimental Reactor, and used the money saved to instead design and implement technology prizes in those areas (or closely related areas, such as biofuels from sources other than agricultural crops, and fusion from sources other than tokamak reactors).

“A prize motivates the discovery, but the discovery may prove a dud in the market.”

That’s true. And I fully accept and support the market deciding questions like that. But presumably, if large amounts of technology prizes are awarded without any of the resulting winners going commercial, then the technology prizes were poorly designed. Presumably, that could be corrected by changing the nature or the amount of the prizes.

“Ultimately the target of the prize has to be picked by someone in the hope of market success (by “picking winners” I meant choosing what goals to reward with prizes, not determining who wins a particular prize).”

Yes, I agree that the target of the prize has to be picked. But let’s take fusion, for example. Fusion is essentially the ultimate energy source. It is energy-dense, with very low pollution per unit of energy (so it can be located near or even inside population centers), is not intermittent (i.e., can be ramped up and down to meet demand), and with an unlimited fuel supply.

So why hasn’t the market already developed fusion? Well, it seems to me that one reason is that the cost to get fusion to commercial status is likely to be billions, or even tens of billions of dollars. And the companies that would be most likely to have both the money and expertise to develop fusion to a commercial technology (e.g. General Electric, Siemens, Westinghouse, etc.) already have competing technologies that are already commercial. So they’d be “cannabalizing” their existing businesses.

And universities have no reason to study fusion, because the U.S. and other governments are committed to fusion using the tokamak reactor.

But of the incredibly small amount of research that’s been done on fusion, it seems (to me) that some of the results are very promising.
For example, some people at Navy research labs seem to think that “cold fusion” is a legitimate phenomenon:

http://www.infinite-energy.com/iemagazine/issue44/navy.html

http://www.lenr-canr.org/Collections/USNavy.htm

From that first document:

“We do not know if Cold Fusion will be the answer to future energy needs, but we do know the existence of Cold Fusion phenomenon through repeated observations by scientists throughout the world. It is time that this phenomenon be investigated so that we can reap whatever benefits accrue from additional scientific understanding. It is time for government funding organizations to invest in this research.”

Now, maybe they’re wrong. Maybe cold fusion isn’t a real phenomenon. But my point is that they (the Navy) should not be researching the phenomenon at all. They should be developing technology prizes–and perhaps serving as the testing ground for determining the winners–while universities, and/or industries, and/or non-profit research labs are doing the actual research and development. That way, if “cold fusion” is NOT a legitimate phenomenon, no technology prizes will be awarded. And if “cold fusion” is a legitimate phenomenon, technology prizes will be awarded, with the resultant publicity and incentive to do more research.

“That’s why I think that changing the market landscape that selects technologies through a price signal on GHGs is a prerequisite for success.”

I strongly disagree. For example, if fusion was to produce energy at the same cost as coal right now (even without the “price signal on GHGs”), the game is over. That’s it. That’s the one energy technology that the world will use. (Though it might take a decade a few decades to convert completely to fusion, even if it produced energy at the same price as coal.) Further, no one is going use the “price signal on GHGs” to study fusion. But they definitely WOULD use the price signals of technology prizes for fusion.

There is also the fact that the amounts I’m talking about for technology prizes are trivial compared to any tax on carbon required to produce a meaningful “price signal.” For example, I truly think that fusion technology prizes of under $10 billion would be enough to support the research and development that would bring fusion to the point where private for-profit companies would commercialize it. That’s about *1 year* of *$5/ton* of carbon tax in the U.S. (Worldwide, it would be ~1 year of $1.50 per ton of carbon tax!)

Now, maybe I’m wrong. Maybe fusion isn’t that promising. So that would mean either that the fusion technology prizes would not be awarded at all, or someone would have the chance to see that the $10 billion would be better spent on other technology prizes. Either way, $10 billion is trivial compared to the amount necessary to send reasonable “price signals” based on GHG emissions. Look at gasoline. The U.S. currently spends approximately $500 BILLION a year on gasoline (~130 billion gallons at ~$4.00 per gallon). A tax of an additional 20 cents per gallon would cost ~$25 billion *per year*. And do you honestly think that an additional 20 cents per gallon would cause any significant reduction in U.S. CO2 emissions?

Look at it this way: Set up the technology prizes for fusion, photovoltaics, batteries, and biofuels (from algae or bacteria, or at least something besides food crops). Set the maximum amount for ALL of them combined at $20 billion. That’s chump change compared to anything that will produce any reasonable “price signal on GHGs” (that’s ~$10 per ton of carbon for ***1 year*** in the U.S.). If I’m right, that $20 billion will lead directly to commercialization of technologies that will completely solve the world’s energy and GHG problems. If I’m wrong, the prizes presumably wouldn’t get awarded. Or they would get awarded, but the world’s energy and GHG problems wouldn’t be solved. Then it might be time to think about setting up “price signals.”

“That doesn’t preclude a role for prizes where there are market failures in science; in fact the two policies would be complementary.”

I don’t agree that the policy of sending “price signals” is even necessary. I think that energy technology prizes that would cost a small fraction of the amount necessary to send adequate “price signals” would solve the problem completely. (Though it might be the middle of the century before worldwide GHG emissions were cut by more than 50 percent.) Further, because the technology prize money I propose is so small (relative to the amount necessary to send “price signals”), it should be much more politically palatable. Again, look at the political problems of raising the federal tax on gasoline by even 20 cents per gallon (and costing $25 billion per year)…which would have virtually zero effect on U.S.–let alone worldwide–CO2 emissions. Try the technology prizes first. If they don’t work, then try the price signals.