A Global Warming Graph

Sometime I've got to get round to understanding global warming. This is a good graph of the time trend. What we need is not just a theory to explain the recent warming (which has now leveled off, it seems) but the cooling periods, e.g. 1880-1910. Otherwise, whatever causes the earlier cooling-- and it was not carbon dioxide-- might be causing the recent warming.

Optimal Gasoline Taxes, Given Externalities

A good article on optimal gas taxes is "Does Britain or the United States Have the Right Gasoline Tax?" Ian W. H. Parry and Kenneth A. Small, The American Economic Review, Vol. 95, No. 4 (Sep., 2005), pp. 1276-1289. In 2000, taxes were $2.80/gallon in the UK and $.40/gallon in the USA. They should have been $1.34 and $1.01, in light of congestion, accidents, and Ramsey taxation (with minor contributions from pollution and CO2).

Wikipedia says taxes are $5.20/gallon in the UK, $.47/gallon in the US, $7.61 in Germany, It is important to include value-added tax, which is done in those figures.

The Inst. for Fiscal Studies, more reliable, gives the fuel duty plus VAT per liter in pence for different European countries as from 55 in the UK (the highest) to 24 in Greece (the lowest). Germany is 40; France is 46 (second highest); Italy is 42; Spain is 28.

Thus, it seems Greece and Spain are about at the optimum and all the other European countries are too high.

Curiously, Parry and Small do not mention one of the major arguments for a fuel tax: paying for road construction and repair. I seem to remember that the effect of cars on road deterioration is trivial (it's all due to trucks), but I might be wrong on that, and it seems as if it has to be wrong for city streets.

Parry and Small point out that a gas tax is poorly designed for controlling congestion and accidents, since it is lower for fuel- efficient cars. Also, as implemented, it is invariant across locations, which vary tremendously in the cost from congestion, accidents, and pollution. They calculate the optimal per-mile tax, which does better. That is hard to enforce, though, since if the tax became high, odometer fraud would become common. (Maybe it could be based on how many miles you live from work, though, and age and sex, as insurance rates are.)

What might work better would be to increase the vehicle registation tax, or to at least base the per-mile tax on where the vehicle is registered. Or, we might combine a gasoline tax with a registration fee based on the vehicle's fuel-efficiency, fuel-efficient cars paying a bigger registration fee since they pay a lower gasoline tax per mile travelled.

In practice, I think, hybrids and suchlike are actually subsidized by the government rather than taxed more heavily. What Parry and Small show is that that hybrids would be driven too much, given that they cause accidents just as much as other cars.

In view of the importance of accidents as an externality, I'd like to see that explored more (maybe it is in the paper; I didn't read carefully). A big car is safer for the occupants, but more dangerous to other cars. So it seems, since the effect on other cars is the externality, that big cars should be taxed more.

Parry and Small find the optimal global warming tax to be very small, even using liberal estimates of the effect on global warming and the cost of it. It seems that European countries are emitting too little CO2 from cars, not too much. That result should be publicized. The conclusion is true even if other countries such as the US and China are emitting too much CO2, I think. The cost estimates of the Stern Report and others are based on "business as usual", which means that the marginal benefit to the world from the UK from increasing or reducing emissions is based on other countries' not changing their current policies. Thus, from the point of view of treating all countries neutrally rather than favoring some at the expense of others, the UK ought to emit more carbon dioxide.

Stern's Ely Lecture on Climate Change and DIscounting

I just finished reading Prof. Stern's Ely Lecture ( Stern, Nicholas. 2008. "The Economics of Climate Change", American Economic Review 98(2), pp. 1-37.). He is in favor of drastic measures to reduce CO2 emissions. Concentrations are now 430 ppm and he wants to stabilize them at 550 ppm. He is fearful of a 5 degree Centigrade temperature increase otherwise. Here are my notes.

1. He says the most recent warm period was around 3 million years ago. Really? There have been lots of ice ages and warmings.

2. He dismisses geoengineering in one paragraph with weak arguments.

3. His Figure 4 from McKinsey has lots of *negative* abatement costs-- things such as insulation improvement, fuel-efficient commercial vehicles, water heating, etc. We can't believe any of that. If it saves money, why isn't it done already? Liquidity constraints?

4. (p. 13). He cites 1.5% as the indexed bonds rate of return on longterm government bonds, and 6-7 percent for private investments:

In the United Kingdom and United States, we find (relatively) “riskless,” indexed lending rates on government bonds centered around 1.5 percent over very long periods. For private very long-run rates of return on equities, we find rates centered around 6 or 7 percent (Rajnish Mehra and Edward C. Prescott 2003, 892; Kenneth J. Arrow et al. 2004, 156; Sree Kochugovindan and Roland Nilsson 2007a, 64; 2007b, 71).

He has a puzzling sentence about what discount rate to use:

Given that it is social discount rates that are at issue, and also that actions to reduce carbon are likely to be financed via the diversion of resources from consumption (via pricing) rather than from investment, it is the long-run riskless rates associated with consumer decisions that have more relevance than those for the investment-related equities.

This is a good question, but what is the implication? Consumers are willing to borrow at rates on the order of 10%, so is that the appropriate social discount rate?

He makes the point that environmental goods' prices will change (though he does not point out that those goods are a tiny part of the consumption basket):

Suppose, however, that we persisted with the argument that it is better to invest at 6-7 percent and then spend money on overcoming the problems of climate change later rather than spending money now on these problems. The multi-good nature of the problem, together with the irreversibilities from GHG accumulation and climate change, tell us that we would be making an additional mistake. The price of environmental goods will likely have gone up very sharply, so that our returns from the standard types of investment will buy us much less in reducing environmental damage than resources allocated now (see also Section I on the costs of delay).12 This reflects the result that if environmental services are declining as stocks of the environment are depleted, then the SDR with that good as numeraire will be negative. On this, see the interesting work by Michael Hoel and Thomas Sterner (2007), Sterner and U. Martin Persson (2007) and Roger Guesnerie (2004), and also the Stern Review (Stern 2007, 60). Environmental services are also likely to be income elastic, which will further reduce the implied SDR.

He has some useful sources on the appropriate rate of pure utility time preference:

Indeed, the ethical proposition that delta should be very small or zero has appealed to a long line of illustrious economists including Frank P. Ramsey (1928, 543), Arthur Cecil Pigou (1932, 24–5), Roy F. Harrod (1948, 37–40), Robert M. Solow (1974, 9), James A. Mirrlees (Mirrlees and Stern 1972), and Amartya Sen (Sudhir Anand and Sen 2000). I have heard only one ethical argument for positive delta (Wilfred Beckerman and Hepburn 2007; Simon Dietz, Hepburn, and Stern 2008) that has some traction—namely a temporal interpretation of the idea that one will have stronger fellow feelings for those closer to us (such as family or clan) relative to those more distant.

When it came to choosing a social discount rate, Stern is opposed to using market interest rates. Later, though, when it comes to choosing the appropriate amount of equality and income redistribution, he slyly switches to favoring observed amounts:

Value judgements are, of course, precisely that and there will be many different positions. They will inevitably be important in this context— they must be discussed explicitly and the implications of different values should be examined. Examples follow of what we find when we turn to empirical evidence and try to obtain implied values (the “inverse optimum” approach). Empirical evidence can inform, but not settle, discussions about value judgements... The upshot is that empirical estimates of implied welfare weights can give a wide range of eta, including h below one and even as little as zero.

Here he is trying to squirm out of the powerful growing-income argument against a low social discount rate. The argument goes like this. Suppose we are considering taking $1,000 away from someone earning $40,000/year so we can give $1,600 to someone else earning $107,000/year. Should we do it? Despite the increase in social wealth, it seems unfair and not calculated to increase total happiness. Yet that is what happens when we require $1,000 in abatement costs in in 2008 because it has a 1%/year return in benefits obtained in 50 years, if incomes grow at 2%/year in the meantime. This argument is particularly powerful against liberals, though it works for conservatives too, and lays out starkly the forced transfers that libertarians hate.

There is a lot of posturing going on:

Costa Rica, New Zealand, and Norway, declared targets of 100 percent reductions by 2050, i.e., “going carbon-neutral.” ... California has a target of 80 percent reductions by 2050. France has its “Facteur Quatre”: dividing by 4, or 75 percent reductions, by 2050 (Stern 2007, 516). The United Kingdom has a 60 percent target but the Prime Minister Gordon Brown indicated in November 2007 that this could be raised to 80 percent (Brown 2007). Australia, under the new government elected at the end of November 2007, has now signed Kyoto and has a target of 60 percent...

Costa Rica doesn't matter of course, any more than the United Kingdom does, or anybody else but China and India:

Even with fairly conservative estimates, it is likely that, under BAU, China will reach current European per capita emissions levels within 20-25 years. With its very large population, over this time China under BAU will emit cumulatively more than the USA and Europe combined over the last 100 years.

"BAU" means "business as usual".

Global Warming: Where and When?

I've posted before about the importance of the time of year and the regions where temperatures are rising. Apparently, the carbon theory of warming has a prediction which is refuted by the evidence, an article in the Australian says (hat tip: Volokh and Powerline):

1. The greenhouse signature is missing. We have been looking and measuring for years, and cannot find it. Each possible cause of global warming has a different pattern of where in the planet the warming occurs first and the most. The signature of an increased greenhouse effect is a hot spot about 10km up in the atmosphere over the tropics. We have been measuring the atmosphere for decades using radiosondes: weather balloons with thermometers that radio back the temperature as the balloon ascends through the atmosphere. They show no hot spot. Whatsoever.

I've heard before about the prediction of the carbon theory that the warming should occur in the upper atmosphere first. I used to think that one carbon prediction that is true is that warming shoudl occur in arid cold areas in winter first, because there is so little water vapor that a small amount of CO2 makes a bigger difference. I realize now, though, that any theory might predict that, because a little initial warming would result in more water vapor and more warming effect there.

Maps of Global Warming

Here is a neat NASA make-your-own map site for global warming. You choose an averaging period--- say 2000-2008--- and see how it compares with another period--- say, 1950-1960, for a given month. Note that th e base period such as 1950-1980 is during the global cooling period.

Carbon Dioxide and Global Warming

This 2007 article on global warming and carbon dioxide looks interesting. It talks about lots of things, including plant use of carbon dioxide.

It has seemed to me that the strongest evidence for a linke between carbon dioxide and warming was the higher amount of warming in cold dry regions. Such regions have less water vapor, so the same absolute increase in carbon dioxide would generate more of a marginal greenhouse effect. I thought of a problem with that, though. If warming in general-- for some other reason such as sunspots-- occurred, then there would be an increase in water vapor, and *that* increase would have more effect in cold dry regions.

NASA's Temperature Data Adjustments

Too little attention has been given to the news last August that NASA had made a year-2000 mistake in calculating US temperatures, a mistake that meant the temperatures after 2000 were all too high. Details are at Coyote Blog. The mistake was in the adjustment NASA makes for the fact that if a weather station's location become urban, the temperature rises because cities are always hotter. What is more important than the mistake itself are that (1) NASA very quietly fixed its data without any indication to users that it had been wrong earlier. (2) NASA's adjustment is by a secret method it refuses to disclose to outsiders. (3) NASA's adjustment appears (hard to say since it's kept secret) to both adjust "bad" stations (the ones in cities) down and "good" stations (the ones that read accurately) up, on the excuse of some kind of smoothing of off-trend stations. (4) The NASA people doing the adjustment are not statisticians. (5) It isn't clear what, if any, adjustment is made to weather station data from elsewhere in the world. The US has some of the best data, and there seems to be no warming trend in the US.

Biofuel Subsidies

Mark Steyn on Biofuels:

The EU decreed that 5.75 percent of petrol and diesel must come from “biofuels” by 2010, rising to 10 percent by 2020. The U.S. added to its 51 cents-per-gallon ethanol subsidy by mandating a five-fold increase in “biofuels” production by 2022.

The result is that big government accomplished at a stroke what the free market could never have done: They turned the food supply into a subsidiary of the energy industry. When you divert 28 percent of U.S. grain into fuel production, and when you artificially make its value as fuel higher than its value as food, why be surprised that you’ve suddenly got less to eat? Or, to be more precise, it’s not “you” who’s got less to eat but those starving peasants in distant lands you claim to care so much about.

Heigh-ho. In the greater scheme of things, a few dead natives keeled over with distended bellies is a small price to pay for saving the planet, right? Except that turning food into fuel does nothing for the planet in the first place. That tree the U.S. Marines are raising on Iwo Jima was most likely cut down to make way for an ethanol-producing corn field: Researchers at Princeton calculate that to date the “carbon debt” created by the biofuels arboricide will take 167 years to reverse....

In order for you to put biofuel in your Prius and feel good about yourself for no reason, real actual people in faraway places have to starve to death. On April 15, the Independent, the impeccably progressive British newspaper, editorialized: “The production of biofuel is devastating huge swathes of the world’s environment. So why on earth is the Government forcing us to use more of it?”

You want the short answer? Because the government made the mistake of listening to fellows like you. Here’s the self-same Independent in November 2005:

At last, some refreshing signs of intelligent thinking on climate change are coming out of Whitehall. The Environment minister, Elliot Morley, reveals today in an interview with this newspaper that the Government is drawing up plans to impose a ‘biofuel obligation’ on oil companies... This has the potential to be the biggest green innovation in the British petrol market since the introduction of unleaded petrol…

Etc. It’s not the environmental movement’s chickenfeedhawks who’ll have to reap what they demand must be sown, ...

Climate Data. Last year I blogged on the good NASA site for weather station data from around the world. The data is arranged so you can pick out stations from a map of the world. I'd really like data where I could pick out a variety of stations at once and put the data into a spreadsheet, which the NASA site is not good for. I'd like to see which stations show warming and which do not. In particular, here are some things I'd like to check:

1. Do rural stations show warming, or just urban stations? (useful for thinking about urbanization bias) 2. Do ocean locations show warming, or just land locations? (useful for thinking about urbanization bias) 3. Do stations with warming show big jumps in warming in particular years and then higher levels? (useful for thinking about urbanization bias) 4. What kinds of stations show zero warming, or cooling? (useful for spotting unforeseen sort of bias)

Global Warming Experts. I just came across some good evidence for why you can't trust the experts when it comes global warming. The Royal Society has a report which relies on claims of authority and accusations of biased funding, omits key facts, and so forth.

There are some individuals and organisations, some of which are funded by the US oil industry, that seek to undermine the science of climate change and the work of the IPCC. They appear motivated in their arguments by opposition to the United Nations Framework Convention on Climate Change and the Kyoto Protocol, which seek urgent action to tackle climate change through a reduction in greenhouse gas emissions.

Often all these individuals and organisations have in common is their opposition to the growing consensus of the scientific community that urgent action is required through a reduction in greenhouse gas emissions. But the opponents are well-organised and well-funded. For instance, a petition was circulated between 1999 and 2001 by a campaigning organisation called the Oregon Institute of Science and Medicine (OISM), which called on the US Government to reject the Kyoto Protocol. The petition claimed that “proposed limits on greenhouse gases would harm the environment, hinder the advance of science and technology, and damage the health and welfare of mankind”.

These extreme claims directly contradict the conclusions of the IPCC 2001 report, which states that “reducing emissions of greenhouse gases to stabilize their atmospheric concentrations would delay and reduce damages caused by climate change”....

It is crazy to say that skeptics are better funded than proponents, who have entire governments behind them, and the liberal sentiments of environmental scientists, not to mention all the environmental lobbying groups. It is also irrelevant.

Misleading arguments 3. There is little evidence that global warming is happening or, if it is happening, it is not very much. Some parts of the world are actually becoming cooler. Increased urbanisation could be responsible for much of the increase in observed temperatures. Satellite temperature records do not show any global warming. If there has been global warming recently, it would not even be a unique occurrence within the past 1000 years. Europe has been much warmer in the past....

The IPCC report recognised that “temperature changes have not been uniform globally but have varied over regions and different parts of the lower atmosphere”. For instance, some parts of the Southern Hemisphere oceans and parts of Antarctica have not warmed in recent decades. The report also noted that there have been two major periods of warming globally: 1910 to 1945 and since 1976. It concluded that “it is virtually certain that there has been a generally increasing trend in global surface temperature over the 20th century, although short-term and regional deviations from this trend occur”.

Europe has indeed been much warmer in the past-- in medieval times, for example. And the world did cool, from 1945 to 1976. And is it just *parts* of Antarctica that have not warmed (as opposed to "have cooled"-- as I recall, there isn't much change, but some of the tiny change is cooling).

Global Warming. This picture is from NASA. It shows nicely that global warming shows up as only small summer changes, with the action coming in winter-spring temperatures in the Arctic centered in Yukon and Siberia. I also came across NASA's page on how they got the 2000-2006 data wrong, with their explanation that the mistakes in their secret method weren't really important. True, but their credibility is gone now, and if they got the USA temperatures wrong in the direction they favor, how about the much harder to measure temperatures elsewhere in the world?

Global Warming: Ice Caps and the Argument from Authority. Why should we trust a PhD in climate science when he talks about ice caps any more than we trust a D.Phil. in theology when he talks about God? Both are experts, but both entered their vocations because they had policy views on their subjects. (Click here to read more.)

This makes it hard to figure out the science on global warming, of course. Here's an example. If there is global warming, will sea levels rise?

Sea levels might rise because the warmth will melt the ice near the North Pole. Also, if sea water is warmer, it will expand, even if there is no more of it.

Sea levels might fall because the warmth and the extra water in the air will increase snowfall near the South Pole, where most of the ice in the world is. Also, there will be more water in the atmosphere instead of in the ocean.

Which is the bigger effect?