Kevin Drum - January 2009

Regulating Carbon

| Mon Jan. 26, 2009 12:34 PM EST

REGULATING CARBON....Noah Millman writes today about the best way to regulate greenhouse gases without having the regulations fatally undermined by special interest lobbying:

Well, let's look at the alternatives from the perspective of which is most likely to be deformed by special interests. It's pretty easy to see how a big government investment in alternative energy could become a boondoggle giveaway to connected business interests that does nothing to reduce carbon emissions. Meanwhile, a cap-and-trade scheme is often marketed as being preferable to a tax on carbon because of the additional business associated with the "trade" side of the scheme, and because the existence of a market in emission permits and offsets would ensure the most efficient allocation of the "resource" of net carbon emission.

....I suspect that a small-government egalitarian would say that the best solution, from the triple perspective of trying to avoid regulatory capture by special interests, maximize personal freedom and autonomy, and actually reduce carbon emissions, is to slap a tax on carbon and return 100% of the revenue raised to the people, ideally in the form of a per-capita birthright dividend, something I speculated about here by analogy with Alaska's Permanent Fund.

Noah goes on to say that libertarians are more open to this idea because of their natural distrust of big government. Liberals, who lack that distrust, end up promoting other ideas because they don't take regulatory capture seriously.

In general, maybe there's something to that, but it's wrong in this specific case. In fact, ten or fifteen years ago liberals widely believed a carbon tax was by far the best way to implement some kind of carbon pricing scheme. Many of them still do, and most liberal economists believe that a tax is fundamentally more efficient than cap-and-trade. So why is cap-and-trade so popular on the left these days?

Technically, cap-and-trade has one1 big advantage over a tax: it's a cap. With a tax, you have to set a rate and then hope that carbon emissions go down as much as you think they will. With cap-and-trade, you set a firm cap, and as long as enforcement is adequate you know you'll meet that cap. The "trade" part is merely there to get back some of the efficiencies that you would have gotten automatically from a tax in the first place.

But that's not why cap-and-trade has become so popular among liberals. The reason it's become so popular is that conservatives and libertarians have teamed up to make the word "tax" so toxic that there isn't an environmentalist in the country who thinks we can get a carbon tax through Congress. Remember Al Gore's BTU tax in 1993? It went down in flames and took the Democratic Party down with it. And since then things have only gotten worse.

So: you want a carbon tax? No problem. You can get liberals on board pretty easily: all you have to do is promise them that conservatives and libertarians will climb on board too. And you want a rebate to taxpayers? Again, no problem. Every single liberal carbon pricing plan includes at least a partial rebate, and many include a 100% rebate. If the conservative/libertarian axis decided to give up on its 30-year anti-tax jihad, we could pretty easily end up with a compromise somewhere in the middle.

But that won't happen. And that's why cap-and-trade is the future of carbon pricing. It's conservatives and libertarians who got us here, not liberals.

1There are other differences too. But this is the main one.

Advertise on MotherJones.com

Desperately Seeking Conservatives

| Mon Jan. 26, 2009 11:53 AM EST

DESPERATELY SEEKING CONSERVATIVES....I see that today's Bill Kristol column in the New York Times will be his last. Good. He was boring.

But who should the Times replace him with? It shouldn't be a "liberal's conservative," it should be a genuine, dedicated, smart, reality-grounded, conservative's conservative — someone who will drive liberals crazy. Who best fits that bill?

UPDATE: I was going to add something to this post and then decided not to bother. But I guess I should have. So, in response to Matt's criticism, what I meant is: a conservative who drives liberals crazy because he makes such compelling and hard-to-refute arguments for conservative ideas.

Getting Serious About Climate Change

| Mon Jan. 26, 2009 11:19 AM EST

GETTING SERIOUS ABOUT CLIMATE CHANGE....Barack Obama says he will direct the EPA today to take another look at its refusal to allow California to set stricter tailpipe CO2 standards than the feds:

President Obama will direct federal regulators on Monday to move swiftly on an application by California and 13 other states to set strict automobile emission and fuel efficiency standards, two administration officials said Sunday.

....Beyond acting on the California emissions law, officials said, Mr. Obama will direct the Transportation Department to quickly finalize interim nationwide regulations requiring the automobile industry to increase fuel efficiency standards to comply with a 2007 law, rules that the Bush administration decided at the last minute not to issue.

To avoid losing another year, Mr. Obama will order temporary regulations to be completed by March so automakers have enough time to retool for vehicles sold in 2011.

This shouldn't come as a surprise: during the campaign Obama said he would change course on California's application, and now he has.

For my money, though, it's the second part of this that's the most impressive. EPA was pretty much bound by court order to reconsider its CO2 position anyway, but ordering a temporary fuel efficiency regulation right away so that changes could take place in 2011 instead of 2012 shows a refreshing sense of urgency about energy and climate change policy. By itself it doesn't have an enormous impact, but then, almost nothing has an enormous impact by itself. Nonetheless, tighter mileage standards are one of the best tools we have for reducing the growth of greenhouse gases, and the fact that Obama is serious about this suggests that — as promised — he's serious about the rest of his energy package too. Happy days.

Fed Up

| Mon Jan. 26, 2009 1:55 AM EST

FED UP....Barney Frank wants to give the Fed more regulatory power:

Congress is moving to create strong new oversight of the financial sector that would likely give the Federal Reserve authority to examine the workings of a wide range of companies in an attempt to address one of the key failures that led to the financial crisis.

But the initiative, which could be finalized in the House by spring, is raising concerns about whether it would muddy the Fed's traditional mission and concentrate too much power in a single federal body.

This is just an initial gut reaction on my part, but I don't really care much for this idea. Rationalizing our hodgepodge of regulatory agenices is a good idea, but the Fed chairman already has enormous power over the economy — too much power, perhaps — and placing both monetary authority and a vastly increased centralized regulatory authority under a single person strikes me as a pretty severe case of putting all our eggs in one basket. I'd prefer instead to see the Fed streamlined a bit, with an entirely new agency taking over the super-regulatory role if that's the road we go down.

I'm open to arguments on this, of course. But the instinct to create a single, vast, centralized oversight agency whenever something goes wrong — like the Office of the Director of National Intelligence created after 9/11 — deserves to be resisted. It's the kind of thing that makes people think they're solving a problem when they're really just redrawing the org chart. It also makes dissent harder, and that's no good thing. We could probably use more of that, not less.

Factoid of the Day - 01.25.09

| Sun Jan. 25, 2009 12:45 PM EST

FACTOID OF THE DAY....From Mark Kleiman, who has some advice on crime and drug policy for the Obama administration:

Doubling the tax on beer (from a dime to twenty cents a can) would reduce the assault rate by at least 5%, and maybe as much as 20%.

More advice at the link.

Pricing Carbon

| Sat Jan. 24, 2009 2:05 PM EST

PRICING CARBON....A few days ago I linked to post by Sean Casten about the implied cost of CO2 reduction in the Illinois legislature's recent deal to subsidize a "clean coal" plant in Taylorville. It came to about $400 per ton of CO2, which is fantastically higher than anyone would pay if it were done openly, rather than as part of a byzantine maze of corporate giveaways.

Sean is back today with another interesting post that looks at the cost of CO2 reduction implied in the hodgepodege of tax credits and loan guarantees that are scattered around the legislative landscape right now. Depending on who you are and what's on offer, it turns out that your reward for getting a ton of CO2 out of the atmosphere ranges anywhere from $15 to $253. This, of course, is nuts, and Sean asks:

What might a world look like that did provide a consistent policy signal on CO2? One, we would deploy a host of technologies that are cheaper and more diverse than those we currently deploy in the name of CO2 reduction. Two, we would deploy a host of technologies that cannot possibly be contemplated by those who's knowledge of possibilities is limited to those possibilities we are currently deploying. In other words, all of us.

It's all well and good to have programs that motivate people to develop and deploy technologies that reduce greenhouse gases, and carbon pricing can be an effective part of a broad regulatory program to do that. But if we're going to use carbon pricing as part of our toolkit, we're way better off simply setting a price and letting people figure out for themselves which technologies to develop, rather than having the government pick and choose for us. Not only would that get rid of absurdities like subsidizing ethanol at a higher rate than wind (it ought to be just the opposite), but it would open up the playing field to anyone who can come up with a bright idea for reducing greenhouse gases, not just those who have a big enough lobbying presence to get a break for their particular industry. The result would almost certainly be cheaper and more efficient than a patchwork of targeted tax breaks, and would also promote the development of technologies that no one is even thinking about today. It's time to start.

Advertise on MotherJones.com

Dancing

| Sat Jan. 24, 2009 1:01 PM EST

DANCING....Joe Nocera writes today that the original idea behind TARP was right all along: the government needs to buy up toxic assets from distressed banks if we want to get the banking system working again. This idea has gained so much currency in so much of the financial community, he says, "It's pretty much unanimous."

But then, a thousand words into his piece, he suddenly says that the S&L crisis of the 80s is the right model to emulate:

The S.& L.'s were — no question about it — nationalized. The bad assets were stripped out, and handed over to the Resolution Trust Corporation, which was charged with selling them off....What is particularly appealing about an R.T.C.-type approach is that the government doesn't have to value the assets right away, which has always been the sticking point with the toxic assets on the banks' books. It can simply take control of them, and then figure out ways to sell them off over time....But to carry out this kind of program, the government has to be in control of insolvent banks. This also has to be faced squarely.

What a bait and switch! This isn't TARP. This is Swedish-style nationalization. Nocera just wants to erect a massive rhetorical edifice around the idea to make it sound like that's only a minor side effect.

Come on, Joe. If the defining characteristic of all the good plans for dealing with the banking crisis is, as you say, that "they don't dance around the issue," then don't dance. The headline on your column shouldn't have been, "First Bailout Formula Had It Right." It should have been, "Time to Nationalize."

*Friday Cat Blogging - 23 January 2009

| Fri Jan. 23, 2009 3:07 PM EST

FRIDAY CATBLOGGING....Poor Inkblot! After two weeks of warm, sunny weather, winter has reasserted itself. It's raining outside, and that means he'd have to get his delicate little paws wet if he wanted to go outside. That was not to be, of course, so after a few minutes convincing himself that the rain was here to stay, he decided discretion was the better part of valor and deposited himself on the bed for a nice midmorning snooze.

And why not? It's been a busy week, hasn't it? I think I might need a little snooze myself. Coming up next week: guest catblogging! I'll bet you can hardly wait.

"I Won"

| Fri Jan. 23, 2009 2:49 PM EST

"I WON"....Jonathan Weisman reports on today's bipartisan stimulus meeting at the White House:

Challenged by one Republican senator over the contents of the package, the new president, according to participants, replied: "I won."

The statement was prompted by Senate Minority Whip Jon Kyl of Arizona , who challenged the president and the Democratic leaders over the balance between the package's spending and tax cuts, bringing up the traditional Republican notion that a tax credit for people who do not earn enough to pay income taxes is not a tax cut but a government check.

Obama noted that such workers pay Social Security and Medicare taxes, property taxes and sales taxes. The issue was widely debated during the presidential campaign, when Sen. John McCain, the Republican nominee, challenged Obama's tax plan as "welfare."

Good. Obama's efforts to maintain good relationships across the aisle may mean that he's wiser than me in these matters, but I still don't think it's going to work and I hope he doesn't waste too much energy on it. This is the right response for something that's already been hashed out a hundred times before.

Is Wikipedia Eating the World?

| Fri Jan. 23, 2009 1:51 PM EST

IS WIKIPEDIA EATING THE WORLD?....Three years ago, Nick Carr did a Google search for ten topics off the top of his head. He found that Wikipedia entries were the #1 hit in two cases and among the top ten hits in all the others. Today he did the same searches again and found that Wikipedia was the #1 hit for all ten. This leads him to say this:

What we seem to have here is evidence of a fundamental failure of the Web as an information-delivery service. Three things have happened, in a blink of history's eye: (1) a single medium, the Web, has come to dominate the storage and supply of information, (2) a single search engine, Google, has come to dominate the navigation of that medium, and (3) a single information source, Wikipedia, has come to dominate the results served up by that search engine. Even if you adore the Web, Google, and Wikipedia — and I admit there's much to adore — you have to wonder if the transformation of the Net from a radically heterogeneous information source to a radically homogeneous one is a good thing. Is culture best served by an information triumvirate?

When I first saw this passage over at Andrew Sullivan's blog, I dismissed it. Wikipedia doesn't seem to dominate the searches I do. Quite the contrary, in fact. Usually they're only barely in the top ten.

But then I clicked the link and read Carr's search results. Apparently, for searches of standard topics, Wikipedia is far more prevalent than it is for the kinds of searches I do, which tend to be fairly random assemblages of search terms. What's more, my Google default is set up to return 50 hits per page, so even if Wikipedia is at or near the top, it's only one of many hits. But if you use the standard Google search page, it's one of ten. And if you routinely use the "I'm Feeling Lucky" button to go straight to the top hit, then Wikipedia rules. Carr, it turns out, has a more penetrating point than I thought. (On the other hand, he also has a vested interest in making this point since he's on the board of editorial advisors of Encyclopedia Britannica.)

I'm still not sure what to think about this, but my guess is that way more people use Google his way than mine. And although I'm a big fan (and defender) of Wikipedia, which I think is a miraculously useful reference tool considering how it's put together, I'm not quite sure how I feel if its hegemony in the search universe is really as complete as Carr suggests. So for now, I'm just passing this along.