Thursday, February 14, 2008

How do we help the wilfully ignorant to understand?

Tim Worstall makes an interesting point today about Caroline Lucas's failure to understand that the whole purpose of tradeable emissions permits is that it allows those who find it difficult to reduce their emissions to pay those who find it easier to do it on their behalf.

That is: if it's going to cost me £100 to reduce my emissions by some amount but somebody else can do it for a tenner (and they wouldn't otherwise have done it), then surely it's better for me to pay them instead?  We get the same reduction and I'm left with some money to invest back into my business or whatever!

The problem is that the environmentalists just see this as me shirking my responsibility and getting away without paying the "full cost" of my evil behaviour.

This is, of course, ludicrous nonsense but the argument seems to appeal to some people.

So why not turn the argument around to help them understand?

Rather than focus on the cost of a unit emission reduction, why not focus on how far emissions can be reduced for a unit cost?

Going back to my example: for £100, I could reduce my emissions by some amount if I do it myself. Or, I could pay my cleverer friend £100 and they could reduce their emissions by ten times as much - for the same price!

Now, I'm clearly not suggesting people should be forced to buy permits for emissions they're not making (which would be the consequence of forcing me to actually pay that £100 to my friend) but surely it's obvious that the system that allows more to be done with less is the preferable one.

4 comments:

openid said...

So if it's so terribly important that you with your efficient use of carbon (high cost to reduce suggests you're already fairly efficient) reduce, how come your cleverer friend is being given a free ride when he's using more carbon less efficiently?

It comes down to that priviso "and they wouldn't have otherwise done it", if that's true, AND if there is some reason why they shouldn't have been compelled through legislation to do it anyway, then carbon trading is great, otherwise it's just a way of shifting money from areas of strict controls to areas of lax controls. Polluters who can easily pollute less than their "quota" should have had a lower quota in the first place.

I think the whole "on their behalf" thing is what sticks in some peoples throats. There are so many ways that it can be twisted to be immoral. It's clear that you should make emissions reductions where it's easiest first, and emissions trading is a way to organise that. Perhaps that would be a better way of selling it.

Richard Brown said...

I'm not sure I understand your argument.

Is the goal to reduce emissions in the most optimal manner or is it to impose one group's sense of morality on everybody else?

You may not like the idea of tradeable emissions but why not? If it's going to cost me a huge amount to reduce my emissions by a tonne but only cost somebody else less, why shouldn't they do it instead - and I pay them for their efforts?

I think it could be the quotas that are getting you confused: you're quite right to imply that they're a political device, open to abuse.

Imagine a system with *no* quotas and a price for carbon. Now things become plain: if I can reduce my carbon emissions, I pay less. If I can pay somebody else to reduce theirs, then I pay a lower carbon charge, too (off-setting). And, crucially, if they can do it for less than the carbon charge, everybody wins.

I just don't get your objection.

openid said...

The objection is simply the difficulty of fairly distributing the original quotas for emissions, and the perverse incentives whatever distribution scheme used may create.

The very fact that it's difficult for you to reduce emissions but you have to, and it's easy for your cleverer friend, and he doesn't have to (and so can sell you his credits) is a distortion created by poor initial distribution of permits. There are of course exceptions, but I think these are in the minority.

This is not a theoretical problem either, the initial program in europe done under the auspicies of the Kyoto protocol distributed far too many permits and to the wrong people.

That's the real objection. The virtual objection is just that popular perception of carbon trading is damaged by its association with carbon offsetting, which has little to no oversight and enforcement, and often uses unscientific methods, or at best unproven and controversial methods.

The carbon tax idea you suggest is much simpler for the "wilfully ignorant" to understand. A company does something evil and so must pay for it. It also has the marvellous benefit of removing an externality, as long as the price of the carbon tax is set correctly, and the money spent on creating technology to fix or mitigate global warming.

That's not to say I don't like carbon trading, I think it's clever, interesting, and useful, I'm just aware that there are problems.

The real question, and one that different observers have come to different conclusions on is whether it's actually any more effective than simpler solutions. As a hacker (good sense), I'm very aware that the more complex the system, the more ways there are to play it.

Richard Brown said...

btw... I should have asked. Who are you?! :-)


"the objection is simply the difficulty of fairly distributing the original quotas for emissions, and the perverse incentives whatever distribution scheme used may create."

That's OK, then; it sounds like we're probably in more agreement than it may seem. The idea that someone can somehow judge the "correct" level of quotas to cause the "right" outcome is just absurd. I agree that perverse outcomes can result (e.g. quotas being so large that the traded price of carbon is close to zero).

But I think we may fundamentally disagree on the critical point: allowing the lowest-cost reductions in carbon to be performed is *absolutely* a good thing!

The intention is to reduce emissions without bankrupting ourselves in the process.

Removing thoughts of "good" and "evil" and resisting the temptation to "punish" those we disagree with is the best foundation for a sensible policy.

"This is not a theoretical problem either, the initial program in europe done under the auspicies of the Kyoto protocol distributed far too many permits and to the wrong people."

Agreed. The EU messed it up.

"The virtual objection is just that popular perception of carbon trading is damaged by its association with carbon offsetting, which has little to no oversight and enforcement, and often uses unscientific methods, or at best unproven and controversial methods."

True. But we shouldn't confuse the offsetting that would occur with a carbon tax (audited like any other taxable activity) with the offsetting that occurs when the limp-brained middle classes feel a pang of guilt after a holiday in the sun :-)

"The carbon tax idea you suggest is "much simpler for the "wilfully ignorant" to understand. A company does something evil and so must pay for it. It also has the marvellous benefit of removing an externality, as long as the price of the carbon tax is set correctly, and the money spent on creating technology to fix or mitigate global warming."

I *almost* agree with you there.

It's enough for the polluter to pay for the cost they impose on others. If that money is spent remediating the problem then great... but it's important to realise that the key part is the internalisation of the cost. This is what ensures that only truly valuable carbon-hungry activities take place. In other words, if you're paying for your carbon impact and still profitable then you know that your activity - even with its carbon impact - has resulted in a net plus.


"The real question, and one that different observers have come to different conclusions on is whether it's actually any more effective than simpler solutions. As a hacker (good sense), I'm very aware that the more complex the system, the more ways there are to play it."

True. But we must be very wary of "picking winners" (i.e. trying to impose technical solutions that we *think* are correct - cf. the ludicrous biofuels disaster in the US) and, instead, ensure the rules of the game are set up right... so that people acting in their own interests can then decide what is best for them (whilst ensuring they're paying for the impact they have on others)