6 Jun 2008

Carbon Reading

Global Warming, Cap and Trade, Carbon Taxes, etc. have been all over the news and blogs (e.g., here, here and here)

What I have not seen is a broader propagation and discussion of some excellent papers. So here I go:

An Overview of Climate Change [PDF] gives an exceptional summary.

The Behavioural Economics of Climate Change [PDF] discusses risk-aversion (fear of downside), intertemporal inconsistencies (willingness to make harsh decisions now that take effect later), and our ability to cooperate and punish in groups. Excellent background material.

An Analysis of US Greenhouse Gas Proposals [PDF]* uses general equilibrium methods to explore different tax proposals (Dingell, Stark, Larson) floating around the Senate. It's an excellent paper (MIT!) that deserves broad distribution. Everyone knows that cap and trade is flavor of the month. This is what they say about C&T:
Though competing interests may seek earmarks of expected revenue, a GHG tax does not create the same type of valuable financial asset to be allocated, as does a cap-and-trade system. While this may raise the political barrier to enacting a tax, it also may avoid an industry giveaway that is weakly connected to the points where the costs will be felt. A concern with carbon taxes that has been frequently raised is that industry concessions will be required to obtain political support for carbon pricing and that providing free permits is more efficient than excluding industries from a tax. This is unquestionably true, but exclusion is not the only way concessions can be provided to the energy sector through a carbon tax.
Bottom Line: Anyone** who wants to participate in the debate over global warming and what to do about it should read (and understand) these papers.

* This is an NBER paper -- I downloaded a copy from behind the firewall so you can get to it. Gated papers suck.

** If anything, GW will increase demand for environmental and resource economists :)

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