Wednesday, July 08, 2015

Carbon economic modelling uncertainty and its real mis-use

This post is inspired by a couple of tweets by Jason Soon, who links to a short article by Mark Lawson in the AFR citing Robert Pindyck's recent paper arguing that the Integrated Assessment Models used to predict economic costs of action (or non action) on climate are actually so full of uncertainty they are useless.

A few observations:

*  I started quoting other sources for pretty much the same argument a year or two ago.

*  It's pretty clear that Lawson, who wrote a book with the title "Climate Change Lunacy" which was launched by Ian Plimer (who shares the same publisher), wants to rely on this uncertainty argument to suggest no government action is warranted because no one can be sure of the economic benefit.   But in fact, Pindyck has been arguing for some years now that the best response is to price carbon and adjust the price as needed.   He wrote in a Cato publication in October 2013:
I have argued that we simply don’t know the SCC and won’t be able to determine it from the set of IAMs currently available. If we focus on “most likely” scenarios for which temperature increases are moderate and effects are small, the SCC is probably in the $10 to $40 range, justifying only a small tax on carbon emissions. But the “most likely” scenarios are not the ones that should be of major concern. We should focus more on the unlikely but devastating scenarios, i.e., the possibility of a climate catastrophe. Depending on the probability, potential effect, and timing, that might lead to an SCC as high as $200 per ton (although I have not tried to actually estimate the number).
That leaves us with two policy priorities: First, we should take the $20 Interagency Working Group estimate as a rough andpolitically acceptable lower bound and impose a carbon tax (or equivalent policy) of that amount. Of course, climate change is a global problem and we should pressure other countries to adopt a similar abatement policy. There will always be “free riders” (China, for example), but that is not a reason to delay action.

Would anyone reading Lawson's article quoting Pindyck get the impression that this is what Pindyck actually advocates?   I think not.

*  While the Cato Institute has been giving room for some to argue the case for carbon pricing, this is the line up of its "experts" on energy and environment part of their website:
  I don't recognize every name, of those I do, they are a rogues gallery of discredited climate science "experts" all determined to convince that government should take no action.

*  With a line up like that, and in Australia the likes of Sinclair Davidson, and the Senator who, by his own staffer's admission on twitter, is interested in infrasound mainly as a backdoor way of attacking an economic policy he doesn't like, the libertarian wing of the Right be it in the States or here remains a determined enemy of good policy response to climate change.


Anonymous said...


There is nothing essentially wrong with a carbon tax set gloablly, which replaces all subsidies and starts at a low point graduating to higher levels as evidence comes in. That's the what libertarian position would be, you imbecile.

A carbon tax operates like a consumption tax and if it used to replace income taxes then all the better.

However the carbon tax the lying slapper introduced was nothing like this. Old subsidies were maintained, new ones introduced and of course it was the highest abatement tax in the world. Lastly the world had not moved to a carbon tax which unilaterally means you impact the traded goods sector.

No libertarian could go for this disgusting crap, you moron.

Steve said...

If I'm reading Pindyck right, the price Labor's scheme started with was about right.

Seems to me a handful of American libertarians or Right leaning commentators have been suggesting a carbon tax for a few years now, and are convincing virtually no Republicans to follow suit.

Most libertarian thought, meanwhile, is as devoted to arguing against any action at all, because coal is fantastic.