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Amazon Fire Fraud

03 Tuesday Sep 2019

Posted by pnoetx in Forest Fires, Global Greening

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Al Gore, Alexander Hammond, Amazon Basin, Amazon Fires, Brazil, Climate Change, Coyote Blog, Deforestation, FEE, Global Fire Emissions Database, Jair Bolsonaro, Leonardo DiCaprio, Michael Shellenberger, P.T. Barnum, Reforestation, Sugar Cane, U.S. Ethanol Mandates, Warren Meyer

Leftist activists recently pounced on another opportunity to mischaracterize events, this time in the Amazon Basin, where recent fires were held to be unprecedented. The fires were also characterized as evidence of a massive conspiracy between capitalists and the new government of President Jair Bolsonaro to open the rain forest to commercial exploitation. Warren Meyer squares away the facts at this Coyote Blog post, which is where I found the chart above. Forest clearing in Brazil has been much lower over the past 10 years than during period 1988-2008. It stepped-up somewhat during the first half of 2019, but it still ran at a rate well below 2008. A key reason for the increase is fascinating, but I’ll merely tease that for now.

As for the fires, Meyer provides the following quote about this year’s fires from NASA in a statement accompanying a satellite photo:

“As of August 16, 2019, satellite observations indicated that total fire activity in the Amazon basin was slightly below average in comparison to the past 15 years. Though activity has been above average in Amazonas and to a lesser extent in Rondônia, it has been below average in Mato Grosso and Pará, according to the Global Fire Emissions Database.“

So what was the cause of all the alarm? Meyer points to a August 22 story in the Washington Post, though WaPo might not have been the first. The article was either poorly researched and “fact checked” or it was a deliberate attempt to raise alarm. The sloppy story was picked up elsewhere, of course, and distorted memes spread on social media condemning the Brazilian government and capitalism generally.

The burning that is taking place has been started by farmers preparing land for crops, a process that occurs every year. Meyer quotes the New York Times on this point, which noted that very little of the burning was taking place in old-growth forests.

What’s really ironic and crazy about all this is that U.S. environmental policy is responsible for some of the burning that is taking place in the Amazon. Meyer notes that U.S. ethanol mandates have subsidized a years-long trend of increased sugar cane production in the Amazon Basin. Of course, burning is a regular part of the normal sugar cane harvest. Moreover, that production has contributed to land clearance, offsetting some of the forces that have brought the rate of deforestation in Brazil down overall.

The whole episode dovetails with the ongoing narrative that fires are burning out of control across the globe due to climate change. We heard similar propaganda last year after several large fires in California. Michael Shellenberger does his best to set the record straight, demonstrating that the annual land area burned worldwide has declined by 25% since 2003. He contrasts that record with the hopelessly errant reporting by major media organizations.

As P.T. Barnum once said, a sucker’s born every minute. He might as well have been talking about the armies of well-meaning but gullible greenies who fall for every scare story told by the likes of Al Gore and Leonardo DiCaprio. And scare stories are exactly what these tales of a global conflagration amount to. Meanwhile, as Alexander Hammond explains, global reforestation has taken hold. In what is apparently a paradox to some, this is largely the result of economic growth. Hammond discusses the logical connections between economic development and environmental goods, including reforestation and biodiversity. The bottom line is that the best policies for reforestation are not those imposing obstacles to growth, as the environmental Left would have it. Rather, it is policies that promote development and income growth, which are generally more compatible with individual liberty, that will encourage growth in the world’s forests.

A Carbon Tax Would Be Fine, If Only …

01 Friday Mar 2019

Posted by pnoetx in Environment, Global Warming, Taxes

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A.C. Pigou, Carbon Dividend, Carbon Tax, Climate Change, Economic Development, External Cost, Fossil fuels, Green New Deal, IPCC, John Cochrane, Michael Shellenberger, Pigouvian Tax, Quillette, Renewable energy, Revenue Neutrality, Robert P. Murphy, Social Cost of Carbon, Warren Meyer, William D. Nordhaus

I’ve opposed carbon taxes on several grounds, but I admit that it might well be less costly as a substitute for the present mess that is U.S. climate policy. Today, we incur enormous costs from a morass of energy regulations and mandates, prohibitions on development of zero-carbon nuclear power, and subsidies to politically-connected industrialists investing in corn ethanol, electric cars, and land- and wildlife-devouring wind and solar farms. (For more on these costly and ineffective efforts, see Michael Shellenberger’s “Why Renewables Can’t Save the Planet” in Quillette.) Incidentally, the so-called Green New Deal calls for a complete conversion to renewables in unrealistically short order, but with very little emphasis on a carbon tax.

The Carbon Tax

Many economists support the carbon tax precisely because it’s viewed as an attractive substitute for many other costly policies. Some support using revenue from the tax to pay a flat rebate or “carbon dividend” to everyone each year (essentially a universal basic income). Others have pitched the tax as a revenue-neutral replacement for other taxes that are damaging to economic growth, such as payroll taxes or taxes on capital. Economic growth would improve under the carbon tax, or so the story goes, because the carbon tax is a tax on a “bad”, as opposed to taxes on “good” factors of production. I view these ideas as politically naive. If we ever get the tax, we’ll be lucky to get much regulatory relief in the bargain, and the revenue is not likely to be offset by reductions in other taxes.

But let’s look a little closer at the concept of the carbon tax, and I beg my climate-skeptic friends to stick with me for a few moments and keep a straight face. The tax is a way to attach an explicit price to the use of fuels that create carbon emissions. The emissions are said to inflict social or external costs on other parties, costs which are otherwise ignored by consumers and businesses in their many decisions involving energy use. The carbon tax is a so-called Pigouvian tax: a way to “internalize the externality” by making fossil fuels more expensive to burn. The tax itself involves no prohibitions on behavior of any kind. Certain behaviors are taxed to encourage more “desirable” behavior.

Setting the Tax

But what is the appropriate level of the tax? At what level will it approximate the true “social cost of carbon”? Any departure from that cost would be sub-optimal. Robert P. Murphy contrasts William D. Nordhaus’ optimal carbon tax with more radical levels, which Nordhaus believes would be needed to meet the goals of the United Nation’s Intergovernmental Panel on Climate Change (IPCC). Nordhaus won the 2018 Nobel Prize in economics for his work on climate change. Whatever one might think of the real risks of climate change, Nordhaus’ clearly recognizes the economic downsides to mitigating against those risks.

Nordhaus has estimated that the social cost of carbon will be $44/ton in 2025 (about $0.39 per gallon of gas). He claims that a carbon tax at that level would limit increases in global temperature to 3.5º Celsius by 2100. He purports to show that the costs of a $44 carbon tax in terms of reduced economic output would be balanced by the gains from limiting climate warming. Less warming would require a higher tax with fewer incremental rewards, and even more incremental lost output. The costs of the tax would then outweigh benefits. For perspective, according to Nordhaus, a stricter limit of 2.5º C implies a carbon tax equivalent to $2.50 per gallon of gas. The IPCC, however, prescribes an even more radical limit of 1.5º C. That would inflict a huge cost on humanity far outweighing the potential benefits of less warming.

A Carbon Tax, If…

Many economists have come down in favor of a carbon tax under certain qualifications: revenue-neutrality, a “carbon dividend”, or as a pre-condition to deregulation of carbon sources and de-subsidization of alternatives. John Cochrane discusses a carbon tax in the context of the “Economists’ Statement on Carbon Dividends” (Cochrane’s more recent thoughts are here):

“It’s short, sweet, and signed by, as far as I can tell, every living CEA chair, every living Fed Chair, both Democrat and Republican, and most of the living Nobel Prize winners. … It offers four principles 1. A carbon tax, initially $40 per ton. 2. The carbon tax substitutes for regulations and subsidies and (my words) the vast crony-capitalist green boondoggle swamp, which is chewing up money and not saving carbon. 3. Border adjustment like VAT have [sic] 4. ‘All the revenue should be returned directly to U.S. citizens through equal lump-sum rebates.'”

Rather than a carbon dividend, Warren Meyer proposes that a carbon tax be accompanied by a reduction in the payroll tax, an elimination of all subsidies, mandates, and prohibitions, development of more nuclear power-generating capacity, and contributions to a cleanup of Chinese and Asian coal-power generation. That’s a lot of stuff, and I think it exceeds Meyer’s normal realism with respect to policy issues.

My Opposition

Again, I oppose the adoption of a carbon tax for several reasons, despite my sympathy for the logic of Pigouvian taxation of externalities. At the risk of repeating myself, here I elaborate on my reasons for opposition:

Government Guesswork: First, Nordhaus’ estimates notwithstanding, we do not and cannot know the climate/economic tradeoffs with any precision. We can barely measure global climate, and the history of what measures we have are short and heavily manipulated. Models purporting to show the relationship between carbon forcing and global climate climate change are notoriously unreliable. So even if we can agree on the goal (1.5º, 2.5º, 3.5º), and we won’t, the government will get the tradeoffs wrong. I took the following from a comment on Cochrane’s blog, a quote from A.C. Pigou himself:

“It is not sufficient to contrast the imperfect adjustments of unfettered enterprise with the best adjustment that economists in their studies can imagine. For we cannot expect that any State authority will attain, or even wholeheartedly seek, that ideal. Such authorities are liable alike to ignorance, to sectional pressure, and to personal corruption by private interest. A loud-voiced part of their constituents, if organized for votes, may easily outweigh the whole.”

Political Hazards: Second, we won’t get the hoped-for political horse trade made explicit in the “Economists’ Statement …” discussed above. As a political matter, the setting of the carbon tax rate will almost assuredly get us a rate that’s too high. Experiences with carbon taxes in Australia, British Columbia, and France have been terrible thus far, sowing widespread dissatisfaction with the resultant escalation of energy prices.

Economic Growth: Neither is it a foregone conclusion that a revenue-neutral carbon tax will stimulate economic growth, and it might actually reduce output. As Robert P. Murphy explains in another post, the outcome depends on the structure of taxes prior to the change. The substitution of the carbon tax will increase output only if it replaces taxes on a factor of production (labor or capital) that is overtaxed prior to the change. That undermines a key selling point: that the carbon tax would necessarily produce a “double dividend”: a reduction in carbon emissions and higher economic growth. Nevertheless, I’d allow that revenue neutrality combined with elimination of carbon regulation and “green” subsidies would be a good bet from an economic growth perspective.

Overstated Risks: Finally, I oppose carbon taxes because I’m unconvinced that the risk and danger of global warming are as great as even Nordhaus would have it. In other words, the external costs of carbon don’t amount to much. Our recorded temperature history is extremely short and is therefore not a reliable guide to the long-term nature of the systemic relationships at issue. Even worse, temperature records are manipulated to exaggerate the trend in temperatures (also see here, here and here). There is no evidence of an uptrend in severe weather events, and the dangers of sea level rise associated with increasing carbon concentrations also have been greatly exaggerated. Really, at some point one must take notice of the number of alarming predictions and doomsday headlines from the past that have not been borne out even remotely. Furthermore, higher carbon concentrations and even warming itself would be of some benefit to humanity. In addition to a greener environment, the benefits include more rapid economic growth, improved agricultural yields, and a reduction in the salient danger of cold-weather deaths.

Economic Development: The use of fossil fuels has helped to enable strong growth in incomes in developed economies. It has also given us energy alternatives such as nuclear power as well as research into other alternatives, albeit with very mixed success thus far. And while a carbon tax would create an additional incentive to develop such alternatives, a U.S. tax would not accomplish much if any global temperature reduction. Such a tax would have to be applied on a global scale. Talk about a political long-shot! Increasing the price of carbon emissions also has enormous downsides for the less developed world. These fragile economies would benefit greatly from development of fossil fuel energy, enabling reductions in poverty and the income growth necessary to someday join in the prosperity of the developed economies. This, along with liberalization of markets, is the affordable way to bring economic success to these countries, which in turn will enable them to consider the energy alternatives that might come to fruition by that time. Fighting the war on fossil fuels in the underdeveloped world is nothing if not cruel.

 

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