Solutions to Global Warming

https://www.youtube.com/watch?v=6RsrRpjAGi8

The video begins by pointing out problems of trying to reduce the emission of CO2 to address the problem.

FYI: Levitt identifies 2 solutions, not 3.

A Conservative Answer to Climate Change

Commentary. A Conservative Answer to Climate Change
by: George P. Shultz and James A. Baker III
Feb 08, 2017
Click here to view the full article on WSJ.com

TOPICS: Environmental Regulation

SUMMARY: Enacting a carbon tax would free up private firms to find the most efficient ways to cut emissions.

CLASSROOM APPLICATION: Students can evaluate whether a carbon tax set at the appropriate level would be yield allocative efficiency. They can also evaluate whether a tax would minimize the cost of a given reduction in carbon emissions. Students can compare a carbon tax and a cap-and-trade mechanism.

QUESTIONS: 
1. (Advanced) Compare the economic efficiency of a carbon tax and cap and trade mechanism. In doing so, set the cap at the same level as the equilibrium level of emissions under a carbon tax.

2. (Introductory) What are the four pillars of the proposed solution?

3. (Advanced) "A levy on emissions would free companies to find the most efficient way to reduce their carbon footprint." However, would the firms with the lowest costs of reducing emissions be the ones that do so?

4. (Advanced) What is a "Pigouvian tax"? Are the authors proposing such a tax?

Regulation, Pigouvian Tax, or Cap and Trade?

California is using both regulation eliminate reusable plastic bags and a tax to reduce paper and reusable non-plastic bags. Is this combination an efficient way to improve the environment?

Opinion. In California, 'Paper or Plastic?' Is Against the Law

by: Allysia Finley
Jan 28, 2017
Click here to view the full article on WSJ.com

TOPICS: Environmental Regulation

SUMMARY: Supermarkets can no longer give out shopping bags, though the claimed benefits are dubious.

CLASSROOM APPLICATION: Students can evaluate whether California's ban on reusable plastic bags and 10 cent per bag regulated price on paper bags and reusable bags passes a cost-benefit test. Instructors can introduce the concept of the Pigouvian tax and ask whether the marginal social cost of the paper and reusable bags equals 10 cents. Students can also critically evaluate the evidence about whether the regulated fee is inefficient presented in the opinion piece and ask whether evidence is missing from the argument.

QUESTIONS: 
1. (Introductory) Does the opinion piece offer convincing evidence that reusable grocery bags and paper bags are worse for the environment than plastic bags? Are all dimensions of environmental harm caused by plastic bags considered in the opinion piece?

2. (Advanced) "Turns out plastic bags make up a tiny share of litter, less than 1% in most cities, according to a 2013 survey by Environmental Resources Planning. A 2009 litter survey by Keep America Beautiful found that plastic bags make up less than 1% of objects caught in storm drainers." Does this evidence suggest that, considering only litter, plastic bags should not be banned? Does it imply that disposable containers other than plastic bags should be higher than plastic bags on the list of items to be taxed or banned?

3. (Advanced) The requirement that stores charge at least 10 cents for alternative bags was meant to keep retailers from undercutting each other by giving them out free. Does this statement imply that grocery stores are playing a game like a prisoner's dilemma when deciding whether to offer paper bags for free? Does it imply that grocery stores are better off with the 10 cents per bag price?

4. (Advanced) What is a "Pigouvian tax"? Is it efficient for a government to impose a Pigouvian tax on goods that create negative externalities?

Would a government bureaucrat have mandated this solution to CO2 emissions?

This article in QZ.com reports that a firm in India has found new way to reuse CO2 released when it burns coal. Here are some questions to consider.

1. Did the firm spend R&D to "be green" or to increase profit?
2. When would R&D spending and the adoption of new green technologies be greater: when firms may emit CO2 without paying an emissions tax or when they must pay an emission tax for each ton emitted?

What happens when no one controls an externality

http://www.newsweek.com/china-issues-first-national-smog-red-alert-538121

Outcomes and externalities in the marijuana market

Review & Outlook. A Brave new Weed
by: Editorial Staff
Nov 02, 2016
Click here to view the full article on WSJ.com

TOPICS: Law and Economics

SUMMARY: The costs so far from marijuana legalization are higher than advertised.

CLASSROOM APPLICATION: Students can evaluate the economic consequences of the legalization of marijuana, including the price of marijuana, usage rates, and drug cartel behavior.

QUESTIONS: 
1. (Advanced) What is the effect of the legalization of marijuana on the supply of the drug? What is the effect of the celebrity glamorization of marijuana on the demand for the drug? What is the effect of legalization and celebrity glamorization on the equilibrium quantity of the drug?

2. (Advanced) What is the effect of the legalization of marijuana on the arrest rates of black and Hispanic youth? What is the effect of the legalization of the drug on traffic accidents?

3. (Introductory) Has the legalization of marijuana eliminated the illegal market for the drug? How has the legalization of the drug affected drug cartel behavior?

Reviewed By: James Dearden, Lehigh University

Yea for a tax on carbon

This opinion in the Washington Post says that the time has arrived for a tax on carbon. Here is the money quote:

"But it would be better to encourage people to buy cleaner cars and cut out unnecessary trips all at once — in fact, it would be better to establish a policy that encouraged individuals and businesses to account for the environmental impacts of driving, turning on the light switch, buying clothes or doing anything else that involves fossil fuels. This policy is a steadily rising carbon tax. A carbon tax would put a lower ceiling on national gasoline use without more aggressive regulatory interventions. It would also encourage every other piece of the economy to green up over time, starting with those for whom doing so is cheapest. This is why it is also the least expensive path to lowering the country’s carbon dioxide emissions."

Fuel-economy targets

Fuel-Economy Debate Comes to a Head
by: Mike Spector
May 25, 2016
Click here to view the full article on WSJ.com

TOPICS: Environmental Regulation, Externalities

SUMMARY: U.S. regulators soon will kick off a review of future fuel-economy targets, intensifying a debate between auto executives and Washington over buyers' willingness to pay for emissions-cutting technology.

CLASSROOM APPLICATION: Students can evaluate the effect of low gasoline prices on the demand for fuel-efficient automobiles and ultimately the ability of auto manufacturers to meet fuel-economy targets. Instructors can also inform students about the economic efficiency of permitting auto manufacturers to trade fuel-economy credits.

QUESTIONS: 
1. (Introductory) What is the economic rationale for fuel-economy standards?

2. (Advanced) The article notes that regulations allow trucks to meet lower standards than cars, and let car makers falling short of targets buy credits from companies that beat them. Does the possible exchange of fuel-economy credits improve the economic efficiency of reducing carbon emissions?

3. (Advanced) How do the fuel-efficiency targets affect the prices that auto manufacturers set for fuel-efficient and gas-guzzling vehicles?

Reviewed By: James Dearden, Lehigh University

Questions:

1. Are fuel-economy standards an example of command-and-control regulation, corrective taxes, or cap and trade?

1. Is using fuel-economy targets the best way to reduce fuel consumption?

Taxes on sugary drinks

Big Soda Faces Test in Philadelphia

by: Mike Esterl
May 20, 2016
Click here to view the full article on WSJ.com

TOPICS: Taxation

SUMMARY: The U.S. soda industry faces its biggest threat yet in Philadelphia, which is weighing a tax that could raise the price of a can of Coke or Pepsi by more than half and sharply curb consumption of sugary drinks.

CLASSROOM APPLICATION: Students can learn about the rationale for Philadelphia's proposed tax on sugary drinks. They can also evaluate the effect of the tax on the price of sugary drinks in the city, consider whether the tax would be regressive, and also whether the tax would have positive health benefits.

QUESTIONS: 
1. (Advanced) How does the effect of the tax on the price of soda depend on the price elasticities of supply and demand for soda? Would the tax result in people substituting away from sugary drinks and toward other sugary products?

2. (Advanced) Would a city tax on sugary drinks create a black market for soda in Philadelphia?

3. (Introductory) What is Philadelphia Mayor Jim Kenney's rationale for proposing the tax on sugary drinks?

4. (Introductory) Would a Philadelphia tax on sugary drinks be regressive?

Here are some money quotes.

1. "Philadelphia ... is weighing a tax that could raise the price of a can of Coke or Pepsi by more than half ...The beverage industry estimates Philadelphia’s consumption would fall by 79% in the first year and the mayor’s office estimates a 55% drop, if fully passed on to consumers."
2. "'I sense Americans generally and I know Philadelphians don’t like the government telling them what they should and should not do'".

What is the best way to reduce carbon emissions?

Long-Term Costs of Cutting Emissions Grow Hazy

How to produce less bad stuff and more good stuff

http://www.cnn.com/2016/04/19/opinions/sutter-carbon-tax-washington-british-columbia/index.html

Proof that a carbon tax works

http://www.nytimes.com/2016/01/19/opinion/proof-that-a-price-on-carbon-works.html?ref=opinion&_r

Putting a price on carbon reduces carbon emissions

http://www.nytimes.com/2016/01/19/opinion/proof-that-a-price-on-carbon-works.html?ref=opinion&_r=0

Pollution in China

http://priceonomics.com/why-is-the-pollution-so-bad-in-beijing/

China plans to use cap-and-trade to limit carbon emissions

http://www.cnbc.com/2015/09/24/china-to-limit-greenhouse-gas-emissions-in-cap-and-trade-program.html

Data on CO2 emissions in the US.

https://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=90&pid=45&aid=8&cid=US,&syid=1980&eyid=2012&unit=MMTCD

How to put teeth into a climate change agreement

http://www.theguardian.com/environment/2015/dec/12/james-hansen-climate-change-paris-talks-fraud

Externality at work

http://www.theguardian.com/environment/2015/dec/07/beijing-pollution-red-alert-smog-engulfs-capital

L24-Public Policies towards Pollution

Here are some optional readings and videos.

1. This article reports that the Pope's encyclical on climate change states, "The strategy of buying and selling emissions credits can give rise to a new form of speculation and would not serve to reduce the global emission of polluting gas. This system seems to be a quick and easy solution with the appearance of a certain commitment to the environment, which however does not imply by any means a radical change in the scale of circumstances. Thus, it may become an expedient that supports continued excessive consumption by certain countries and sectors."
2. Watch MRUniversity A Deeper Look at Tradeable Allowances. It includes a nice comparison of using taxes to reduce pollution with using cap and trade. EcoGeek on cap and trade, carbon. He discusses some of the common arguments against cap and trade.
3. Environmental defense fund on cap and trade, sulfur dioxide. It doesn't describe how the government creates the cap. It does discuss that cap and trade achieves a given reduction in pollution at a lower cost than command and control.
4. This article is a nice summary of carbon taxes around the world.
5. This article is a nice definition of a carbon tax and its effects.
6. Video: Carbon Tax from Australia,
7. Clip on cap and trade. It talks about how the UN distributes permits to emit CO2 to countries who signed the Kyoto Protocol. The US did not sign the Kyoto Protocol.
8. Annie Leonard is not a fan of cap and trade

Older posts on externalities

http://edlikeseconomics.blogspot.com/search/label/Externalities