Friday, January 22, 2010

Thoughts on Copenhagen II: On Negotiations amidst the Circus

Back in Copenhagen, I attended a briefing for US NGOs. Two things that struck me.

One is I am ambivalent about NGO invovlement. One notable thing was at the meeting, you had Fred Krupp, president of the one of the largest environmental groups (who quite reasonably should be there), but he was sitting next to a couple kids painted and dressed as green aliens carrying placards. On the whole, it was a surprisingly young group.

The other was again, how similar the US government position is in the current administration as it was under the previous. That the US will not concede sovereignity in terms of taxes it must pay. That the US cannot commit to greater cuts than Congress will allow. That the US cannot commit to spending, in such contexts.

And again, on the sovereignity issue, which is not unique to the US (but a big part of why negotiations broke down with China and India), that the idea of a binding carbon price/limit may be futile because it requires a higher extra-governmental power. The WTO did achieve this (somewhat) but that took half a century, and in general, free trade is win-win (countries generally benefit from lower trade barriers, even though they may suffer from political trouble from noisy constituents, overall countries are typically better off). Whereas in climate change, it is by and large a pure public good to constrain carbon, so an even harder sell without a world government. This suggests again that the technology push is key making green technology cheaper than dirty. (This was the position of the Bush administration--I don't mean to be so defensive on that, really--and also what Bjorn Lomborg has been pushing, hopefully that doesn't automatically discredit the idea) I think economists by and large agree that technology is key, though many would then say that a carbon price would be the key the incentivizing new technology, though I think most economists agree that we have little evidence to that effect, only faith.


Glen Gary said...

I'm 58 years old. Now that my 2 kids have their BS, I'm getting mine! I hope to semi-retire as a high school teacher. (I'm a retired truck driver and National Guard helo pilot.) I surfed by you on the web while looking up info for a term paper in ECON 211 and had to stop. Your credentials are, as we would say here in Maine, "wikid" impressive! I am equally impressed that you might actually read anything I have to say. Now to my point.
I have a theory that alternative energy (as a fix for global warming) will never happen until all the oil is gone. What good is oil under the desert if you can’t sell it? What else does OPEC have to sell? Is it not reasonable to assume that no one will buy the alternative unless it is cheaper? Will OPEC let that happen? I think they will lower the price per barrel to whatever is required to keep it cheaper! Will we then mandate the use of the alternative? We might try, but will OPEC? No, the result would be that energy intensive industries would move to OPEC countries. OPEC would have the energy and the industry! Alternatives will only curb the inflation of oil prices, replace some of the oil, and extend the life of petroleum reserves. It will all get burned in due time!

HoBs said...

reasonable thinking. i think economics is worth learning at any age. OPEC will lower the prices somewhat, but they are constrained, as it still costs them money to get it out of the ground, and in much of the world, (like Venuzuela) it is so expensive that even at today's prices, it is barely profitable. This constrains them.

That said, you're right, people will only switch to alternatives if they are cheaper. So one way to help them out is to tax oil. But only insofar as oil creates externalities.

If people are still willing to pay for oil after paying for the externalities, then that means oil is still a good deal.

But alternatives are fast becoming cheaper, and many are starting to become competitive with the cost of extracting oil