Severin Borenstein at UC Berkeley argues against the “try everything” approach to searching for solutions to mitigating greenhouse gas emissions. But he is confusing situations with relatively small incremental consequences (even the California WaterFix is “small” compared to potential climate change impacts.)
Instead, when facing a potentially large catastrophic outcome for which the probability distribution is completely unknown, we need a different analytic approach than a simple cost-benefit analysis based on an “expected” outcome.
We need to be looking for what decision pathways lead us to the situations create the most vulnerability, not for which one has the “optimal outcome.” Policymakers and stakeholders looking desperately for any solution intuitively get the notion of robust decisionmaking, but are not receiving much guidance about how to best pursue this alternative approach. Economists need to lead the conversation that changes the current misleading perspective.
I chuckled when I saw this article extolling how CAFE fuel economy standards should be replaced with “clean tax cuts.” One proponent said, “If you want more of something, tax it less.”
But apparently, these incentives work only one direction. “It’s very common, historically, for companies to not meet the targets and just pay the fines,” said Josiah Neeley, a senior fellow for the R Street Institute. However, the auto companies were not happy with a proposal to increase the penalty 155%. Does that mean that the penalty got large enough to incent greater compliance?
Two board member of the Valley Climate Action Center, Gerry Braun and Richard Bourne wrote two articles on making building energy use in Davis sustainable and resilient. VCAC board members, including myself, had input into these articles. They reflect a vision of getting to a zero-net carbon (ZNC) footprint while being economically viable. Both were published in the Davis Enterprise.
Finally, a real world example of how benefit-cost analysis should be used in practice. Alberta takes the revenues that represent a portion of the society wide benefits and distributes those to the losers from the policy change. Economists have almost always ignored the problem of how to compensate losers in changes in social policy, and of course those who keep losing increasingly oppose any more policies. Instead of dreaming up ways to invest carbon market revenues in whiz bang solutions, we first need to focus on who’s being left behind so they are not resentful, and become a key political impediment to doing the right thing.
I follow Matthew Kahn’s, USC economics chair, blog posts. He expresses a libertarian view. He also writes about climate adaptation. He makes an important point that civilization is not static and we will be able to adapt the human ecology to a range of climate change. But his latest post on how climate change might affect marathon performances raised an important issue for me.
Kahn fails to acknowledge that adaptation to small, incremental climate change is not the concern. It’s the large, catastrophic changes with unknown (and unknowable) probability–deep uncertainty–that is of concern–collapsing ice sheets or ecosystems. He is not addressing the problem of what happens if the climate passes a tipping point. These types of articles and blog posts produced by Kahn and his colleagues trivialize the real risks and consequences, as though we’re just trying to adapt to a change in the weather while ignoring the potential systemic changes.
Wine Country wildfires may have been caused by PG&E electrical lines.
PG&E proposed to the California Public Utilities Commission in an ex parte meeting with a Commissioner that ratepayers rather than shareholders should bear the liability costs from the Wine Country fires. This is part of a larger pattern where the investor-owned utilities have pushed off procurement and management risks onto ratepayers. Yet, the IOUs continue to ask for investor returns that reflect much higher shareholder risks at 14% pre-tax.
If ratepayers are not getting the single most important benefit from investor-owned utilities–that is risk insurance–then it may be time to consider cutting our the middleman–the shareholder–and just go with public ownership. In the end, it looks like there will be no real differences in costs and risks, and we are no longer unduly enriching the wealthy who hold shares in the utilities.
The Vogtle nuclear power plant cost is projected to balloon to more than $12,000 per megawatt. In a study we did for the California Energy Commission in 2009, even at $4,000 per megawatt, nuclear power was uneconomic. This explains why nuclear power is not taken seriously as a solution to reducing greenhouse gas emissions.
Source: Vogtle nuke cost could top $25B as decision time looms | Utility Dive