Worthwhile Canadian Initiative

We are all Albertans / On est tous des albertains

One of the least edifying spectacles of the domestic coverage of the Copenhagen conference was the pointing of fingers at Alberta, most notably by the leaders of the provincial (in every sense of the word) governments of Ontario and Québec. The tar sands are in Alberta, so the reasoning goes, and it's up to Albertans to pay for the problems they generate. The hypocrisy of this stance has already been pointed out by several commentators: as Lysiane Gagnon asks, where did the Québec government think the $8.4b equalisation cheque that it cashed last year came from?

Underestimating the costs of climate change policy is not helpful

One of the things about blogging is that you never know what posts will be jumped on or how they will be interpreted. This post about the Suzuki-Pembina report is a case in point: both sides of the debate seemed to think that I was offering aid and succor to the cause of the climate change deniers. (I take particular exception to Colby Cosh's use of the word 'hoax'; there's nothing in what I wrote that would justify that sort of spin.)

The real problem is that the error that Jack Mintz noted - and to which I added the 'assuming a can opener' line - doesn't seem to be an isolated incident. According to this meta-study (a fancy name for a literature review), there seems to be a systematic tendency to downplay the economic costs of climate change policies:

This is best illustrated with the Summary for Policy Makers of the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC 2007). Emission reduction costs are reported for three alternative targets. While 118 results were available for targets in the range of 3.2 to 4.0°C warming, there were only 6 estimates of the costs of keeping warming in the range of 2.0 to 2.4°C. According to the reported results, moving from a 3.6°C to a 3.0°C target would double the abatement costs. Moving from a 3.0°C to a 2.2°C target would increase costs by 37.5% only. As the underlying models are correctly specified – that is, convexity in abatement costs means that stringent targets have higher and accelerating costs – the IPCC results can only be explained by selection bias; only models with low emission reduction costs reported results for the most stringent targets.

This may be part of a communications strategy based on the belief that an honest discussion of the economic costs of climate change policy is something to be avoided. But if Climategate has taught us anything, it is that the power of the environmentalist argument rests entirely on its intellectual integrity.

Random Thoughts

Sometimes my brain can't concentrate on any one topic long enough to write a serious post. Or maybe I just don't know enough to give a good answer to some question I want to answer. So here is a random collection of thoughts:

If Canadians were serious about climate change, Prime Minister Stéphane Dion would be the toast of Copenhagen

Here is what Paul Krugman put at the top of his list of Paul Samuleson's contributions to economics:

Revealed preference: There was a revolution in consumer theory in the 1930s, as economists realized that there was much more to consumer choice than diminishing marginal utility. But it was Samuelson who taught us how much can be inferred from the simple proposition that what people choose must be something they prefer to something else they could have afforded but don’t choose.

Over the past few days, there have been any number of politicians, pundits and pollsters who have scolded the Conservative government for the position it has taken in Copenhagen. But what did they expect? When Canadians were offered a choice between a climate change policy that offered the possibility of personal inconvenience and the siren call of the Axis of Climate Change Dimwits, a clear majority of voters chose parties who promised a climate change policy that would cost them nothing.

Stephen Harper is carrying out the mandate we gave him. We bought all those 'Fossil of the Day' awards; we're going to have to own them.

Memo to journalists: Disregard the Suzuki-Pembina report on the costs of climate change policy

The David Suzuki Foundation and the Pembina Institute recently sponsored a study that concludes that the economic effects of a significant reduction in greenhouse gas emissions would be relatively small. Since its release, any number of journalists have dutifully cut-and-pasted bits from the summary report into their commentaries. But it never seemed to occur to them to ask how these results could be reconciled with what had already been written on the subject.

Climate change talk is cheap, and Canadians are bargain hunters

Some numbers to consider:

• Percentage of Canadians who tell pollsters that "Climate change is mankind's defining crisis, and demands a commensurate response":  65.
• In the 2008 federal election, percentage of votes cast for political parties that acknowledged that any meaningful climate change policy would affect consumer prices: 33.
• In the 2008 federal election, percentage of votes cast for the Axis of Climate Change Dimwits: 56.
• Number of parties represented in the House of Commons that will now publicly discuss the effects of climate change policy on consumer prices: 0.

"Presentation of the Liberal position on climate change and the environment" - cont'd

I went. And apparently it's being sold as a Big Deal; here's the speech. Here are the points I was curious about last week:

• Is this a real policy proposal, or a recital of Conservative failures? A healthy dose of the latter, and some generalities. No details, though.
• Cap-and-trade, or a carbon tax? Cap-and-trade it is. But none of the details that make this more than a catch-phrase. What is the cap? Will be permits be auctioned or given to existing emitters? Any estimates for the effects on prices? Any measures to protect low-income households from the costs? These are the sorts of questions that Stéphane Dion went to a lot of effort to answer.
• How much material can he cover in 45 minutes? Not a lot, especially since he only spoke for 20 minutes.
• Will he answer questions? No.
• Just how good is Michael Ignatieff's French, anyway? Better than I had been led to believe, although he did seem to lean heavily on his printed text.

As a point of electoral politics, there's nothing wrong with replacing a carbon tax policy with cap-and-trade, as long as we all remember that in almost every way that matters, the two models are equivalent: consumers will be faced with higher prices. In the last election, the Liberals and the Greens were the only parties that had the intellectual integrity to accept this fact, and they made an effort to deal with it. I will be very, very disappointed with Michael Ignatieff if his Liberals join the Conservative-NDP Axis of Climate Change Dimwits.

Oh, and I must scold Ms Taber for this throwaway paragraph in the Globe story I linked to:

The Liberals lost badly in the last election, partly as a result of Mr. Dion’s complicated Green Shift plan that would put a tax on carbon. It was not communicated well; Canadians did not understand it.

The Green Shift was NOT complicated: carbon taxes up, other taxes down. What's so hard to understand? Indeed, it was a model of clarity and precision when compared to the muddled schemes that the Conservatives and the NDP were selling.

Macroeconomics and Climate Science: compare and contrast

Similarities:

S1. Both do general equilibrium analysis, trying to understand the interaction between parts of a whole system, with lots of positive and/or negative feedback loops.

"Presentation of the Liberal position on climate change and the environment"

It's not often that the internal Laval e-mail listserve grabs my attention. I guess I have to go, if only to satisfy my curiosity about the following points:

• Is this a real policy proposal, or a recital of Conservative failures?
• Cap-and-trade, or a carbon tax?
• How much material can he cover in 45 minutes?
• Will he answer questions?
• Just how good is Michael Ignatieff's French, anyway?

Maybe I'll live-blog it.

Economic growth, the universe, and the meaning of life

Notes for a panel discussion in Ottawa on Tuesday evening (details below).

200 years ago, economists made a prediction, and we got it wrong. "Big deal" you might say. But it was a big deal; a much bigger deal than some piddling mistake like failing to predict a global financial crisis. Basically, 200 years ago economists predicted that long run growth was impossible. That's the biggest thing in economics you can be wrong about.