Tuesday, October 10, 2006

Environmental policy - Carbon trading good, reducing food miles bad

If you have doubts about the merits of carbon trading I suggest you read the following link selling hot air. Not only does it seem that greenhouse emissions trading is working to reduce emissions, but that the side benefit is increased energy prices in areas like Europe (which is further enabling further CO2 reductions), and a large transfer of associated money from the first world to the third world (albeit mainly China) on UN approved project of greenhouse emmission reduction. This brings me to the issue of reducing food miles. This always smacked to me of import restrictions by stealth, just like disease quarantine barriers to banana imports. I think that there should be as little restriction as possible on food imports, because these are critical to pull the third world out of poverty. Third world poverty is what will make them so much more susceptible to future natural disasters. Foreign aid is so paternalistic compared to opening of trade and migrant labour barriers.

Signing Kyoto seems also to be fairly meaningless, as it is being used as a reference line for Australia and the US which didn't sign it, and is being ignored if not flagrantly overrun by countries like Canada, which did.


Dr. Clam said...

'Potentially' seems to be the key word when you say 'potentially costless'.

"Giving the ETS allowances away (rather than auctioning them) made the scheme easy for the power-generators and other polluters to swallow. But it also, in effect, handed them wads of cash: they simply passed the extra costs on to consumers and pocketed the money."

Marco said...

I'm going to have to start talking economic models here. The "cost" in the way Bjorn Lomborg models it is the average economic loss spread over the population. Obviously every policy will have winners and losers, but the establishment of vigorous carbon avoidance industry should offset the losses of carbon based industry. The real problem with cost is misguided subsidies. These cost the taxpayer real dollars and can generate infinitely less efficient carbon reductions in return. It seems the costs of carbon trading are being borne mainly by consumers in Europe, who probably can afford them, and the benefits seem to be flowing to the third world and their governments. Trade in agriculture would probably achieve a greater success (ie. win-win rather than zero-sum game), but Europe wouldn't dream of it.

Dr. Clam said...

What about the opportunity costs of establishing a vigorous carbon avoidance industry at the expense of carbon based industry? Isn't that a lot like establishing a vigorous 'industry' of public servants not involved in actual wealth creation? :)

Marco said...

No, it's not like that at all. It is like mandating a certain number of public servants, and letting their wages fluctuate to help achieve that. There would be an industry in public servants, plenty of them might be under or over-paid, but the industry would essentially be self funding. What public servants would be trying to achieve is generally mandated by government policy, so if they are doing something that voters deem useless, the Government would be under pressure to change that. Adam Smith's invisible hand is doing most of the legwork, making opportunity costs minimal.