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The new Smoot-Hawley?
The House bill contains a provision, inserted in the middle of the night before Friday’s vote, which requires the president, starting in 2020, to impose a “border adjustment” — or tariff — on certain goods from countries that do not act to limit their global warming emissions. The president can waive the tariffs only if he receives explicit permission from Congress to do so. The provision was added to secure the votes of Rust Belt lawmakers who were wavering on the bill because of fears of job losses in heavy industry.
Here is the story and Obama deserves praise for opposing this provision. Here are my comments on the issue itself. The bottom line is that Waxman-Markey, as it currently stands, would in fact be counterproductive, once the international scale of the problem is taken into account. That we learn about this provision only now is startling enough.
I write this all as someone who a) favors a much higher price for fossil fuels, b) thinks that if micro-nutrients are a good idea they are not an alternative to addressing climate change; we could do both with positive expected long-run return, c) thinks that many people on the "Right" oppose W-M mostly because its passage would raise the status of environmentalists and others on the "Left" (but they will not admit as much), and d) thinks that our collective American incompetence in limiting emissions does not eliminate our moral obligation to address the problem.
Sadly, Ezra Klein nailed it:
Climate change is a big problem. It will eventually require a big solution. My understanding is that the polling suggests that people don't like it when you tell them this is a big problem and they don't want to be convinced that they need to spend their time worrying about something new. In fact, like kids who want to believe that they're going to the doctor for a lollipop, they want to hear that this is an awesome new jobs program. But it isn't an awesome new jobs program. It's an effort to avert a catastrophe on the only planet we know how to inhabit. I can't see a successful respon[se] to climate change that doesn't presuppose a majority sharing that belief.
Posted by Tyler Cowen on June 28, 2009 at 06:17 PM in Law | Permalink
Comments
I am a little surprised at you Tyler. The science is garbage. Now, I am a conservationist but think this global warming thing is blown way out of proportion. And I agree, to a certain extent, on the need to reduce certain pollutants in the atmosphere. But CO2 is a natural emission of humans and animals and is the primary stuff of life for all plants. There is enough evidence to suggest other causes of the recent warming, not to mention the fact that there has been little warming of note since 1998 while CO2 levels still rise.
Is it really worth laying waste to the US economy over this issue right now?
I think not.
Posted by: JMK at Jun 28, 2009 6:28:43 PM
Waxman-Markey is inadequate, but there is nothing in there that would be "laying waste" to the US economy, at least not if the CBO estimates are anywhere near correct. Of course, if you don't believe that CO2 emissions are a problem then it is not well-targeted.
Imposing carbon charges on imports that haven't had such charges imposed in the exporting country seems similar to VAT on imports/rebates on exports as allowed by the WTO, and I believe I read that in fact the WTO would permit this with respect to carbon, so I don't see any problem in principle.
If the current bill handles this in an inappropriate way, that should be fixed, but I don't see a problem with the concept.
Posted by: matt wilbert at Jun 28, 2009 6:52:22 PM
If we tax (one way or another) coal burning in the US, we are encouraging coal burning in China. We know imported toasters and dvd players were made with power from dirty coal plants. That those plants have fewer "traditional" emissions controls is one more reason that those appliances are cheaper.
Waxman-Markey may be dumb, and this particular tariff provision may be dumb, but the atmosphere will be global regardless. Is a pattern developing that our negotiation with overseas carbon emitters must be done silently with a wink and a nod? Or are the trade implications of carbon, like carbon policy itself, something that we'd rather close our minds to?
"Don't think of Chinese coal plants"?
Posted by: odograph at Jun 28, 2009 7:12:38 PM
If it was inserted in the middle of the night before Friday’s vote of course we learn about this provision only now. Even the people who voted for it didn't know what was in the bill.
Posted by: Paul Johnson at Jun 28, 2009 7:29:26 PM
The dearth of originality on the left is really startling. Even the Republican alternative (The Manhattan project for alternative energy) at least allows for multiple solutions which could be discovered by trial and error. WM not only will have a negligible effect on global carbon emissions, but is like 2000 pages long -- and that can only mean multiple exceptions and subsidies for Democratic supporters and powerful lobbies. How about we invest (in the true sense of the word, not doublespeak for "spend") on synthetic trees? Anyone?
Posted by: John at Jun 28, 2009 7:38:28 PM
It's a bad solution for a fake problem. No amount of pathetic attacks, purporting to know the real motivations of the right (and how did you determine this, anyway? You have telepathic powers you haven't shared with us?) changes any of that. But I guess since I denied it, I've also just confirmed your assertion, right? How convenient that must be.
Posted by: Grst at Jun 28, 2009 7:51:25 PM
Tyler: "thinks that many people on the "Right" oppose W-M mostly because its passage would raise the status of environmentalists and others on the "Left" (but they will not admit as much)"
Whjy do you write crap such as this? Why do you think this? Does it not occur to you that people on the "Right" might possibly believe:
1. that the science is bogus?
2. that the dangers of global warming are wildly overstated?
3. that the costs of the proposed "solution" are far, far worse than the supposed dangers?
4. that the proposed "solution" will do very litle to change the warming of the planet?
How are you so sure, Tyler Cowen, that you know what motivates those who oppose cap-and-trade? or who oppose carbon taxes?
Posted by: John Dewey at Jun 28, 2009 8:20:05 PM
Here is the story and Obama deserves praise for opposing this provision.
Tyler, hold the praise just yet. I suggest doing like Jonathan Adler and looking at the transcript of the interview on which the story is based.
Q. One of the provisions that got added very late to this bill that senators had expressed some reservations about was the one that puts tariffs on goods imported from countries that don't have these sort of restrictions. What do you think of that revision and would you like to see the Senate strip it out?President Obama: At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there. There were a number of provisions that were already in place, prior to this last provision you talked about, to provide transitional assistance to heavy manufacturers. A lot of the offsets were outdated to those industries. I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary, given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries.
So certainly it is a legitimate concern on the part of American businesses that they are not disadvantaged vis-a-vis their global competitors. Now, keep in mind, European industries are looking at an even more ambitious approach than we are. And they obviously have confidence that they can compete internationally under a regime that controls carbons. I think the Chinese are starting to move in the direction of recognizing that the future requires them to take a clean energy approach. In fact, in some ways they're already ahead of us -- on fuel efficiency standards, for example, they've moved beyond where we've moved on this.
There are going to be a series of negotiations around this and I am very mindful of wanting to make sure that there's a level playing field internationally. I think there may be other ways of doing it than with a tariff approach.
As Adler notes, this is a lot more equivocal than just opposing the provision. He thinks that there may be other ways than the tariff, and we have to be very careful about it, but OTOH he understands the concerns of those who want a tariff.
Our President very rarely commits himself definitively to one policy. He was a lot more firm about having the credits auctioned off instead of given away during the campaign, and see what happened.
Posted by: John Thacker at Jun 28, 2009 8:39:21 PM
John Dewey, I think Tyler might be right, and people on the "Right" think "the science is bogus" because believing otherwise"would raise the status of environmentalists."
The science is solid, which is why every major scientific organization in the world is on-board. The "alternative science" is coming out of a political movement and ideology.
How hard is it to connect those dots?
Posted by: odograph at Jun 28, 2009 8:49:53 PM
Insertion of this tariff mechanism is indeed disturbing news.
Obama has had to do an awful lot of giving away, and he still
could only get this thing through with a seven vote margin.
The thing is so big with so many loopholes, it will probably
take a long time before we fully figure out what the heck is
in it. Ack!
Posted by: Barkley Rosser at Jun 28, 2009 9:01:52 PM
I have noticed that the longer that the temperatures have stopped rising, and indeed started to decline, the more shrill and irrational the "believers" become. . .
Posted by: Matthew at Jun 28, 2009 9:07:13 PM
Dewey is right that simplistic assertions about motivations are patronizing (and "crap").
Posted by: indiana jim at Jun 28, 2009 9:19:11 PM
Odo,
Given that climate has changed drastically throughout earth's history, without any oil-burning by the dinosaurs, wooly mammoths or trilobites, I would say that global warming models explain too much. Natural variation is entirely able to account for any of the climate shifts we saw during the 20th century.
And, of course, during the 21st century temperatures are no longer rising, and indeed are showing some evidence of beginning to decline.
Posted by: Matthew at Jun 28, 2009 9:20:29 PM
The science is far from being decided. There are hundreds of experts who are finally having the courage to speak out against the political consensus. Saying right wingers only oppose Global Warming taxes because it would raise the status of environmentalist is condescending at best. Only time will tell, but some day I will be back to ask if you enjoyed the crow. It may be the only thing you can afford to eat.
Posted by: Mark at Jun 28, 2009 9:21:54 PM
i will never understand why people smart enough to post nuanced subtle technical arguments of economics in an articulate way are incapable of noticing they lack the expertise to make the same kinds of arguments in other disciplines, and yet believe and post with such authority their own grossly inaccurate representations.
is this hubris a pre req to an econ phd?
--The science is solid, which is why every major scientific organization in the world is on-board. The "alternative science" is coming out of a political movement and ideology.
Well, that's convincing. Quite an appeal to authority. except what IS a "major scientific organization"? Funny how actual departments at actual universities don't all have this monolith of opinion.
how about we cite testimony to congress at least, of dissenters?
http://epw.senate.gov/public/index.cfm?FuseAction=Minority.SenateReport
Here are some out-takes--3 of 400. the 400 have a broad range of views, as is common in science not yet settled. the notion of consensus in the "global warming" debate on the "yes" side is either a gross misunderstanding of science or evidence that science is not what they are pursuing.
Geologist/Geochemist Dr. Tom V. Segalstad, a professor and head of the Geological Museum at the University of Oslo and formerly an expert reviewer with the UN IPCC, expressed skepticism of climate fears in 2007. A July 7, 2007 article in Canada's Financial Post read, "In the real world, as measurable by science, CO2 in the atmosphere and in the ocean reach a stable balance when the oceans contain 50 times as much CO2 as the atmosphere. 'The IPCC postulates an atmospheric doubling of CO2, meaning that the oceans would need to receive 50 times more CO2 to obtain chemical equilibrium,' explains Prof. Segalstad. 'This total of 51 times the present amount of carbon in atmospheric CO2 exceeds the known reserves of fossil carbon-- it represents more carbon than exists in all the coal, gas, and oil that we can exploit anywhere in the world.'" The article continued, "Also in the real world, Prof. Segalstad's isotope mass balance calculations -- a standard technique in science -- show that if CO2 in the atmosphere had a lifetime of 50 to 200 years, as claimed by IPCC scientists, the atmosphere would necessarily have half of its current CO2 mass. Because this is a nonsensical outcome, the IPCC model postulates that half of the CO2 must be hiding somewhere, in 'a missing sink.' Many studies have sought this missing sink -- a Holy Grail of climate science research--without success. 'It is a search for a mythical CO2 sink to explain an immeasurable CO2 lifetime to fit a hypothetical CO2 computer model that purports to show that an impossible amount of fossil fuel burning is heating the atmosphere,' Prof. Segalstad concludes. 'It is all a fiction.'"
Glaciologist Nikolai Osokin of the Institute of Geography and member of the Russian Academy of Sciences dismissed alarmist climate fears of all of the world's ice melting in a March 27, 2007 article. "The planet may rest assured," Osokin wrote. "This hypothetical catastrophe could not take place anytime within the next thousand years," he explained. "Today, scientists say that the melting of the permafrost has stalled, which has been proved by data obtained by meteorological stations along Russia's Arctic coast," Olokin added. "The (recent) period of warming was tangible, but now it may be drawing to a close. Most natural processes on the earth are cyclical, having a shorter or longer rhythm. Yet no matter how these sinusoids look, a temperature rise is inevitably followed by a decline, and vice versa."
Israel: Dr. Nathan Paldor, Professor of Dynamical Meteorology and Physical Oceanography at the Hebrew University of Jerusalem has authored almost 70 peer-reviewed studies and won several awards. "First, temperature changes, as well as rates of temperature changes (both increase and decrease) of magnitudes similar to that reported by IPCC to have occurred since the Industrial revolution (about 0.8C in 150 years or even 0.4C in the last 35 years) have occurred in Earth's climatic history. There's nothing special about the recent rise!"Paldor told EPW on December 4, 2007. "Second, our ability to make realizable (or even sensible) future forecasts are greatly exaggerated relied upon by the IPCC. This is true both for the numerical modeling efforts (the same models that yield abysmal 3-day forecasts are greatly simplified and run for 100 years!)," Paldor explained. "Third, the rise in atmospheric CO2 is much smaller (by about 50%) than that expected from the anthropogenic activity (burning of fossil fuels such as oil, coal and natural gas), which implies that the missing amount of CO2 is (most probably) absorbed by the ocean. The oceanic response to increasing CO2 concentration in the atmosphere might be much slower than that of the atmosphere (and is presently very poorly understood). It is quite possible that after an ‘adjustment time' the ocean (which contains far more CO2 than the atmosphere) will simply increase its biological activity and absorb the CO2 from the atmosphere (i.e. the atmospheric CO2 concentration will decrease)," he added. "Fourth, the inventory of fossil fuels is fairly limited and in one generation we will run out of oil. Coal and natural gas might take 100-200 years but with no oil their consumption will increase so they probably won't last as long. The real alternative that presently available to humanity is nuclear power (that can easily produce electricity for domestic and industrial usage and for transportation when our vehicles are reverted to run on electricity). The technology for this exists today and can replace our dependence on fossil fuel in a decade! This has to be made known to the general public who is unaware of the alternative for taking action to lower the anthropogenic spewing of CO2. This transformation to nuclear energy will probably rake place when oil reserves dwindle regardless of the CO2 situation," he wrote. Paldor also noted the pressure for scientists to bow to the UN IPCC view of climate change. "Many of my colleagues with whom I spoke share these views and report on their inability to publish their skepticism in the scientific or public media," he concluded.
Posted by: allison at Jun 28, 2009 9:46:00 PM
As someone skeptical of the 'science' of global warming research, I have no problem with Tyler's comment about the motives of some on the right. Certainly many on the right oppose political action on global warming for the reasons John Dewey mentions above. But many others (and possibly some of the same) oppose the political action because it is a "left-wing issue." They say they don't believe it, but to a large extent they don't believe because they don't trust the left, not because they've tried to learn something from the science and found it unconvincing.
Personally, I think any data about historic world temperature levels based on arctic ice core samples is the equivalent of data about world income levels based on Alva, Oklahoma, USA: possibly less informative than random guessing.
In my mind, the bottom line is that someone always accuses the opposite side of the political spectrum of being guided by political movements and ideology. And that someone, regardless of where on the spectrum he or she is, is always correct.
Posted by: Norman at Jun 28, 2009 9:46:27 PM
the histrionics are crazy. so we need to do this to save the people in bangladesh, per your link, but we don't need to send folk in africa food, medicine, etc.? there are all sorts of way less speculative things we could do right now, for way less money, that would definitely save many, many lives. but we don't. why is climate change the cause of choice? there is no good answer (seriously, someone please try to provide one, and then explain why we aren't doing all the cheap, concrete things we could be doing right now to save lives elsewhere). and don't play the "we should do it all game," because we've got limited resources, political impediments, etc. we should do what we know will work, brings most bang for buck.
seriously, i love your blog, but as an economist, can you for a second just try to do the cost/benefit analysis that justifies working on climate change rather than just about everything else wrong in the rest of the world?
Posted by: dj superflat at Jun 28, 2009 10:09:34 PM
Dj Superflat,
There have been many cost-benefit analysis studies done, and the consensus is that mitigation is a *lot* cheaper than dealing with the consequences later. Type "carbon dioxide cost benefit analysis" on Google Scholar and read away...
To everyone else using the "there hasn't been warming in 10 years" line: http://www.skepticalscience.com/global-warming-stopped-in-1998.htm .
Posted by: David Shor at Jun 28, 2009 10:42:04 PM
With all due respect, and I love your site, your bottom line is not accurate. Counter-productive in what sense? The legislation would lead to more than 20% of our electric generation capability being converted from carbon to clean, creating more than a million jobs, taking a huge step toward energy independence, and laying the groundwork nor only for reducing our own emissions by much more than 20% but also for striking an international treaty. How is this counterproductive? I've lived with this process for more than a year, and to say that this long and hard-won bill is counterproductive is pretty harsh, especially if one has not read its provisions although perhaps everyone commenting has done so.
Posted by: reed hundt at Jun 28, 2009 11:01:39 PM
You can go straight to h*ll, envirowacko.
Tell the family of six in the Northeast that won't be able to afford heating oil AND gasoline AND electricity AND food which goes up in price because of the cost of this bullsh*t cap and trade.
It's idiots like you who are impoverishing people and breaking this economy and this nation.
Posted by: Tailgunner at Jun 28, 2009 11:25:17 PM
um, you're saying the cost/benefit for the US is clear? in my lifetime? my kid's lifetime? didn't think so. but please, act like it's obvious we should work to save "ourselves" from warming many, many years hence, when there's lots we could be doing right now to save many, many people.
if you look back, i wasn't making a point about the cost/benefit of GW mitigation, but about whether we should be doing other things instead (you're also ignoring that most cost/benefit analyses thus far assume there's no easy fix, when there may be (e.g., spewing particles in the atmosphere), science moving along as it does). you ignored the point, and i haven't seen a good answer for why we shouldn't focus on other things (and yes, i've done my homework).
Posted by: dj superflat at Jun 28, 2009 11:38:39 PM
I'm more worried that a 1200 page bill with 300 pages of revisions is going to be full of horrible, horrible things. FYI, it looks like the CPSIA bill is going to bring after-market automobile supplies to a screeching halt.
Product Safety Law Imposes Major Burdens on Auto Suppliers.
If a hastily passed law meant to protect children from lead exposure has such far reaching consequences, I shiver in fear with what this bill will do.
Posted by: Xmas at Jun 28, 2009 11:43:13 PM
By 2020 the science will be much clearer. If the new data available then shows the earth continuing to get warmer most countries will be cutting back on emissions so it will probaly not be a problem. If the earth has cooled or gone back to normal we will probably repeal the bill.
Posted by: joan at Jun 29, 2009 12:05:24 AM
This provision will certainly kill this bill in the Senate, if it is not already DOA. Don't forget about the B.T.U. tax the Clintons tried to get passed in 1993 and, along with Hillary-care, how badly this boomeranged on the congressional democrats in the 1994 mid-term elections.
http://voices.kansascity.com/node/4964
http://www.nytimes.com/2009/06/28/us/politics/28cong.html?em
The Chinese would never go for this. Given that they own much of our debt, they are likely to have a "veto" influence over any trade restrictions resulting from global warming legislation. If the Chinese cannot sell into our market, they have no incentive to finance our debt. The resulting crash of the dollar would make the cost of Chinese imports into the U.S. so expensive anyways that there would be no point to having any trade restrictions.
Obama is unlikely to get what he wants on health care through either.
I view this year as a repeat of 1993.
Posted by: kurt9 at Jun 29, 2009 12:06:13 AM
Why don't we just send our tax money directly to China? It might be more efficient than this bureaucratic approach to making our power and heavy industry more expensive, so that we have no chance to compete, even as our wages fall.
China is playing us for fools. If we really want CO2 reduction, we do need the tariffs to get China to play along. However, there is no way CO2 reduction is worth the costs of a trade war. "Cap and No Trade" is really going to hurt.
Why don't we just remain in recession with little or no economic growth? That seems likely to hold down emissions.
Posted by: matt at Jun 29, 2009 12:27:47 AM
