Ross McKitrick – Breaking the Climate Change Stalemate

Climate change policy is caught in a stalemate between those who fear the environmental consequences of not doing enough and those who fear the economic consequences of overreacting. But controversy over the extent and sources of climate change need not stand in the way of a positive economic policy response.

We could break the stalemate, Ross McKitrick says, if we tie a carbon tax directly to global temperature. Those who discount the likelihood of rising temperatures would expect a low carbon tax in the future, and would not worry about excessive costs associated with too strict environmental policy. Those who fear the rise of global temperatures, and its consequences, would expect the carbon tax to rise, and would not worry about loose environmental policy. Since both camps would expect to get the policy they want, this approach would end the climate-change stalemate.

Comments

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Thank you for this interesting information. I am one of those who economic consequences of overreacting and I think it is easy to understand. Global warming is probably one of the most important questions at this moment.It can lead to some very unexpected consequences.

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Firstl, the global temperature is a masssively lagging indicator of the real state of the climate. This means that increasing the tax once the temperature has increased is rather like locking the stable door once the horse is long gone, dead and has been made into dogfood.

Secondly, we know temperatures are rising, we have the data, but still the rich and powerful can kill any move towards saving the climate. This project would fail exactly for the same reasons. Those betting on low taxes (rich people) are short term thinkers anyway, and they would also bet that, if the temperature did rise, and if they couldn't use the "big tobaco" approach to trashing the science, then that they would simply use their power (one dollar one vote) to loby the politician to change tax policy to save them.

Without a new political system this is all junk.

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Dear Prof. McKitrick,

In your INET profile there is a mention of your research that proposes the solution summarized in this post. Has the research resulted already in any publication? If so, could you please give a reference to the publication(s).

Best regards,
Lev

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Now INET is funding one of the main protagonists of the global warming denialist camp. So much for 'new' thinking. Consult:
http://en.wikipedia.org/wiki/Hockey_stick_controversy
http://en.wikipedia.org/wiki/Ross_McKitrick
I particularly point to a quote from the latter entry:
In 2007 McKitrick was co-author on a paper in the Journal of Non-Equilibrium Thermodynamics arguing that "Physical, mathematical and observational grounds are employed to show that there is no physically meaningful global temperature for the Earth in the context of the issue of global warming".

0

A message for Prof. Perry G. Mehrling, Senior Advisor, INET

(This is my second comment to the post.)

Dear Prof. Mehrling:

You interviewed Prof. McKitrick and, I guess, were instrumental in placing his post on the INET Blog. I think a reader would be in a much better position to discover the essence of Prof. McKitrick’s proposal if the post contained references to the newspaper column and the academic paper which have been mentioned in the video.

The post’s second paragraph describes the proposal. I have gone through an exercise of formulating my understanding of the paragraph’s statements, written up several versions, and ended up in confusion as to which version describes the proposal. Mind you, the versions denote distinctly different policy scenarios.

It would be most useful to have those references.

Best regards

0

Hey steve jennings,

How would you like to coauthor with me an INET Research Note with a critique of Prof. McKitrick’s proposal? Drop me a line. There are two famous Steve Jenningses, are you the one of UCLA?

Would anyone else like to join for the Research Note?

Regards,
Lev

0

Hi Lev,
Sorry to dissapoint you but I am not one of the two famous Steve Jennings's, but I think that you should have a go at McKinntrick's proposal as it is fataly flawed.
Regards
Non-famous Steve

0

Lev, the article is in Energy Economics: http://www.sciencedirect.com/science/article/pii/S0140988310001106

I have several op-eds and other material on the concept at http://www.rossmckitrick.com/t3-taxstate-contingent-policy.html, as well as a chapter in the new Edward Elgar Handbook on Climate Change, edited by Roger Fouquet.

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Dear Prof. McKitrick,

Thank you for the references. Please pardon me, but I can’t help saying that the description of your approach in this blog post does not do justice to your work. I will need several days to follow up with my comments.

Best regards,
Lev

0

Clearly, Oil and Gas companies are concerned about the extent to which climate change is based on man-made C02 emissions. Naturally they are concerned about monitizing the increasing amount of oil and gas that is being discovered. As a result Oil companies as a group spend an enormous amount of money stalling alternative fuel initiatives around the world. However, If we underestimate the rate and extent of global warming based on man made C02 emissions,or for that matter even a naturally occuring warming super cycle and stall or response, the negative agricultural, economic,political and possible military externalities that may based on our incomplete knowledge of climate change may end in tragedy.

Solution: Provide oil and gas companies immediate, generous and sustained economic incentives to rapidly develop and own hydrogen fuel cell technology, advanced solar, and thorium nuclear while encouraging a gradually shift away from a dependence on fossil fuel

0

Comments addressed to Prof. McKitrick, the INET Research Programs, and Steve Jennings

I hope everyone at the Institute is well in the wake of Hurricane Sandy.

My first goal is to present my take on where McKitrick’s proposal sits in the overall subject of the environmental threats. I apologize in advance for possible misinterpretations and omissions, and will appreciate anyone’s pointing to those.

My second goal is to find a place in the INET domain for the entire subject of environmental threats.

I have reviewed the readily available materials of those referred to in McKitrick’s comment of October 15, including the formal version of the T3 tax proposal published in July 2008, which I have obtained at http://papers.ssrn.com/ . I have the following points to make.

1. The reservation made in Steve Jennings’ comment of October 6 regarding the temperature being a lagging indicator was a valid one, that is, justified by what we could read in the blog post. It took my requesting the references and doing some digging before I discovered that the reservation was not applicable. Specifically, the emission price is determined by the discounted present value of damages, which is a time series going into the future. Therefore, the price (carbon tax) is not based on the present temperature, as Steve could rightfully assume, but rather on time-weighted values of present and forecasted temperatures. As a side observation, I would like to note that the word 'optimal' in the introduction to formula for "The optimal emission price" (in the formal 2008 article), is out of place. I do not see optimization of any kind in the entire chain of mathematical expressions. The price itself is defined as a straightforward ratio of the added discounted damage to the added emission.

As to the other critique by Steve, Prof. McKitrick is not a fair target. I would suggest, it is up to the INET to prove that progress can be made under the present political system. Steve, why don’t you register as an INET member? We could then do some cooperative work.

2. It is my impression that there is no attempt by McKitrick to calculate, or outline the method of calculating the damage, a variable which is instrumental in determining the emission price. I have found damage costs addressed in references to literature, but not in the body of McKitrick’s work.

3. Global warming is only one of the environmental threats. It would be good, I think, to have an INET research program called, say, Environmental Economics. The global warming project within this program would embrace McKitrick’s work and relevant research by other people. I am going to submit a suggestion to this effect through an appropriate INET channel.

0

While Ross McKitric’s work is intriguing, his assertion that econometricians are ahead of the physical scientists in the field of statistical modeling is a bit of a stretch. While I believe it is important to develop accurate forecasts of carbon emissions of atmospheric temperature in order to set up a appropriate tax protocols, it is important to recognize -I think-that econometric models fail often and fail profoundly; particularly when applied to fields where many unknowns exist that may have an indirect effect on any given phenomenon. For example, climate change may be the result of a natural-super-cycle of warming that may be compounded by human activity or it may be a stand-alone phenomenon that has very little to do with human activity. Lack of clarity of the fundamental scientific issues underlying climate change is creating a “let’s wait and see attitude not only the part of the oil and gas industry -an industry that is anxious to monetize their reserves – but governments as well. From a policy perspective the best policy considering, all of the uncertainty and politics surrounding the science of climate change, is not to penalize the oil and gas industry but assist them with tax incentives to aggressively develop and market alternative energy technologies including: thorium based nuclear power, hydrogen fuel cells and advanced solar. This is a direct approach to reducing C02 emissions while simultaneously increasing more clean energy that may be used to increase global living standards. Any other route, including taxation approaches to limit C02 emissions is simply wasting time and possibly setting the stage for lower economic growth and living standards.

0

James,

The points in your two comments might be interesting to debate. Actually, some if not all of the points are addressed on my websites. However, the major questions in this thread, are whether the materials that present Prof. McKitrick’s approach and proposal are sufficiently complete, defensible and presentable. And is the proposal in such an accomplished state that a governmental policy recommendation can be made under the auspices of INET? My answer is no. The materials are incomplete, at least to the extent noted in point 2 of my previous comment. Also, a lot of additional work will have to be done before a policy recommendation can be put forth. That is why I make a suggestion in point 3.

Take care,
Lev

0

A message for Nicholas Alpha and Perry Mehrling

In point 3 of my comment of November 2, above, I make a suggestion of a new research program. If this is not the area of your responsibility, could you please pass this message to the appropriate person.

A feedback of any kind will be appreciated.

Best regards,
Lev

0

There might well be no "net" costs of policies to abate global warming, if households genuinely have willingness-to-pay for such policies. Despite that willingness-to-pay they would have no incentive to generate income for that purpose since each would realize they were too small to make a difference (an exact analogue in input markets to the well-known free-riding in output markets). For greater clarity, see the following paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1119316
I value your thoughts!
Best, Phil

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