"System change is now inevitable. Either because we do something about it, or because we will be hit by climate change. '...

"We need to develop economic models that are fit for purpose. The current economic frameworks, the ones that dominate our governments, these frameworks... the current economic frameworks, the neoclassical, the market frameworks, can deal with small changes. It can tell you the difference, if a sock company puts up the price of socks, what the demand for socks will be. It cannot tell you about the sorts of system level changes we are talking about here. We would not use an understanding of laminar flow in fluid dynamics to understand turbulent flow. So why is it we are using marginal economics, small incremental change economics, to understand system level changes?"

Thursday, May 14, 2009

A bit more on cap and trade

People who have put more effort than I have into reading the Waxman-Markey bill are coming up with widely differing interpretations, not just of what its impacts will be, but of what it actually means.

One interesting case against is this analysis by Payal Parekh, who thinks the cap and trade components of the Waxman-Markey bill will do very little for American carbon emissions. Others do interpret the provisions differently; the real question is which interpretation will be advanced by the affected economic interests and how it will stand up in court.

I do gather from the comments to that article that a key flaw in trading emissions rights is double counting: a behavior that would likely have been done anyway can now be sold for credits that greatly exceed the expense of the action. This causes the cost of remediation to increase, not decrease.

On the other hand, I begin to see the urgency arguments as well; they do not stem from any physical process that can't delay a year for an effort to design an elegant bill and . They stem from the need for the US not to show up in Copenhagen empty-handed. The whole world is desperate for a semblance of major action from the US. Even if the cap-and-trade provision of Waxman is completely toothless, it sounds big. In other words, it's the semblance that seems to matter.

Of course, the atmosphere pays no attention to symbolic actions. So one question, especially presuming Parekh has it right, is whether a bad bill immediately makes a good bill in the next few years harder to achieve. I suspect so.

1 comment:

David B. Benson said...

I suspect not, but who can count on rational actions by politicans?