Taxing Carbon

Alex Tabarrok relays a suggestion today from climate skeptic Ross McKitrick for a carbon tax that would be tied to changes in global temperatures.  If temps go up, the tax goes up.  If they don't, the tax stays low.  "In theory, both climate change proponents and skeptics ought to agree to this proposal, but I predict the proponents will object," Tabarrok says, and sure enough:

Addendum: As predicted most of the objections (in the comments) are from climate change proponents.  In essence, they argue that the problem is so serious that we must act before the evidence is in.  Aside from the obvious epistemic problems with such a position do note that a) this is a way of getting agreement where otherwise there might be none b) the tax can be non-linear so it rises (in Bayesian fashion) with the strength of the evidence, i.e. the tax need not always lag.

I know this is my usual cynicism showing, but I suspect pretty strongly that (a) is just wrong.  Conservatives will never agree to anything like this as long as they're caught in their current cocoon of base pandering denialism and obstruction.  There might be individual conservatives out in think tank land who are willing to discuss this in an academic fashion, but real-world political conservatives almost unanimously think global warming is a hoax designed to allow liberals to take command of the economy.  As long as that's the case, I think ideas like this will never gain any traction.

As for (b), the devil's in the details.  The problem is that temperatures lag CO2 increases, and CO2 stays in the atmosphere essentially forever.  By the time temperatures have actually risen, say, 2°C, CO2 concentrations will already be above 500 ppm and there will be nothing we can do to bring them down.  A big carbon tax at that point will have no effect at all.  We need a tax that anticipates future changes, not one that reacts to them.

So what, then, would "strength of the evidence" mean in practice?  Since CO2 is a precursor to climate change, we inevitably have to rely on models of some kind to predict future temperatures.  But skeptics don't trust climate models, so McKitrick proposes instead a relatively simple function tied to a specific measure of temperature increase:

I suggest that for measuring the effect of greenhouse gases, s(t) should be defined as the mean temperature of the tropical troposphere. Both the UAH and RSS series for the tropical troposphere are updated monthly on-line. I will take the simple annual mean of these two as the appropriate measure.

....[Constants are selected so that the tax in 2002] is $15 per metric tonne of carbon equivalent, in line with the average of about 100 studies of the per-tonne marginal global costs of greenhouse gases as reported in Tol (2005)....As shown in Table 2, [the tax] falls below zero for much of the time prior to the late 1990s. The value reaches a peak of $35.60 in 1998, falls to $15 as of 2002 and is at $8.93 as of 2007.

As I said, I don't think this kind of proposal is meaningful in the current political climate, but as a talking point it could be interesting.  Obviously the precise nature of the tax (how big it is, how sensitive it is to temperature changes, whether it should change annually or be set on the basis of a multi-year moving average, etc.) is all debatable.  But what about the basic idea?  If it were politically feasible, and not just a distraction from real-world proposals, would something like this be a good idea?

Will CT Scans Kill You?

Overuse of MRI and CT scans is a common problem, due partly to physicians who like the fees from the tests and partly to patients who demand them even when they aren't needed.  But it looks like patients ought to think twice about this:

Widespread overuse of CT scans and variations in radiation doses caused by different machines — operated by technicians following an array of procedures — are subjecting patients to high radiation doses that will ultimately lead to tens of thousands of new cancer cases and deaths, researchers reported today.

....In one study, researchers from UC San Francisco found that the same imaging procedure performed at different institutions — or even on different machines at the same hospital — can yield a 13-fold difference in radiation dose, potentially exposing some patients to inordinately high risk.

While a normal CT scan of the chest is the equivalent of about 100 chest X-rays, the team found that some scanners were giving the equivalent of 440 conventional X-rays. The absolute risk may be small for any single patient, but the sheer number of CT scans — more than 70 million per year, 23 times the number in 1980 — will produce a sharp increase in cancers and deaths, experts said.

....The highest doses of radiation are routinely used for coronary angiography, in which cardiologists image the heart and its major blood vessels to look for blockages or other abnormalities. Under the normal dosages of radiation for the procedure, about 1 in 270 women and 1 in 600 men who receive it at age 40 will develop cancer as a result, reported Dr. Rebecca Smith-Bindman, a professor of radiology and epidemiology at UC San Francisco, and her colleagues.

This is bad news for patients, but undoubtedly a boon for CT scan manufacturers, who are going to make a fortune selling newer, safer machines to replace the thousands currently in use.  Siemens stock should do well.

With the public option now out of the healthcare bill, is it still worth passing?  Regular readers will be unsurprised that I think the answer is pretty firmly yes—and that liberals who now want to pick up their toys and hand reform its sixth defeat in the past century need to wake up and smell the decaf.  Politics sucks.  It always has.  But the bill in front of us—messy, incomplete, and replete with bribes to every interest group imaginable—is still well worth passing.  First, here's me a few months ago:

If you combine (a) Medicare, (b) our current employer-based insurance regime, and (c) community rating along with subsidies for low-income families, you've essentially institutionalized universal healthcare insurance.  Not everyone will take advantage of it—there will always be a few people who go without coverage even if it's affordable—and you still a need a few other things like out-of-pocket caps.  Still, it's basically a statement that everyone in the country can and should be covered.  And once that becomes a cultural norm, it will never go away.

Even without the public option, which can be added on to the current legislative framework later if we stay on the ball and scrape up the votes for it, we're still getting community rating and subsidies for low- and middle-income families.  That's huge.  And here's Ezra Klein:

"This is a good bill," Sen. Sherrod Brown said on Countdown last night. "Not a great bill, but a good bill." That's about right. But the other piece to remember is that more than it's a good bill, it's a good start. With $900 billion in subsidies already in place, it's easier to add another hundred billion later, if we need it, than it would be to pass $1 trillion in subsidies in 2011. With the exchanges built and private insurers unable to hold down costs, it's easier to argue for adding a strong public option to the market than it was before we'd tried regulation and a new competitive structure. With 95 percent of the country covered, it's easier to go the final 5 percent. And with a health-care reform bill actually passed, it's easier to convince legislators that passing such bills is possible.

On its own terms, the bill is the most important social policy achievement since the Great Society. It will save a lot of lives and prevent a lot of suffering.

Ten years ago this bill would have seemed a godsend.  The fact that it doesn't now is a reflection of higher aspirations from the left, and that's great.  It demonstrates a resurgence of liberalism that's long overdue.  But this is still a huge achievement that will benefits tens of millions of people in very concrete ways and will do it without expanding our long-term deficit.  Either with or without a public option, this is more than Bill Clinton ever did, more than Teddy Kennedy did, more than LBJ did, more than Truman did, and more than FDR did.  There won't be many other times in our lives any of us will be able to say that.  So pass the bill.  The longer we wait, the worse it will get.  Pass it now.

One of the criticisms of cap-and-trade from the left is that it would create a gigantic new market in carbon trading that would allow Wall Street players like Goldman Sachs to generate a huge new asset bubble to replace the late lamented housing bubble.  After all, why else would Goldman have a legion of lobbyists working overtime on Capitol Hill to try and get cap-and-trade passed?

Dean Baker pours cold water on this theory today, but then says this:

The reason for the interest is much simpler. The outstanding value of carbon permits will almost certainly run into the trillions of dollars once the system is fully up and running. The annual trading in these permits and various derivative instruments (e.g., options, futures, swaps of various types) is likely to also run into the trillions of dollars, perhaps tens of trillions.

A market that trades $10 trillion a year would generate $25 billion a year in revenue, if fees and commissions average 0.25 percent. If Goldman can capture 30 percent of these trades by getting in on the ground floor, then it stands to generate more than $8 billion each year in revenue from carbon trading. This is enough to explain Goldman's enthusiasm for cap and trade — it's all about as clear as it can possibly be.

I've seen estimates like this before and I've never quite understood where they come from.  Here's a back-of-the-envelope guess about the size of the U.S. carbon market:

  • Total annual U.S. emissions come to about 6 billion tons of CO2e (carbon dioxide equivalent).
  • Most of the permits for these emissions will simply be allocated and used.  At a guess, maybe 20% of them will be traded on the open market.  That's 1.2 billion tons.
  • Another guess: each permit will trade hands four times a year.  That's 4.8 billion tons.
  • Price per ton on the European market is currently about $25/ton, so let's use that as a rough price guideline.
  • Bottom line: the total value of the carbon trading market comes to $120 billion.

There's a lot of guesswork there, so here's another data point: in the first half of 2009, the European ETS carbon market traded 3.1 billion tons of CO2e worth about $50 billion.  That comes to $100 billion per year for a market a little bit smaller than the U.S. market.  So that checks.

In other words, something in the neighborhood of $100 billion seems like a decent guess for the size of the U.S. cap-and-trade market.  Over time, as allocations decrease and trading increases, that will go up.  But in the near and medium term, it's going to be in the range of $100-200 billion, not $10 trillion, netting traders commissions of about $500 million or so.  That's just the basic trades, of course, but the derivative market for carbon ought to be simple commodity stuff like options, swaps, and futures, not the rocket science credit derivatives that fueled the housing bubble.  I don't have a good feel for how much that expands the market, but if it's 4x then commissions will come to $2 billion or so.  If Goldman gets 30% of that, they're looking at $600 million, which is about 1% of the $50 billion or so they book in revenue every year.  Not exactly a super gigantic new market for them.

Still, even $600 million is worth lobbying for.  And anyway, this is all rough guesswork and I might be way off. But I'm still curious where the trillion dollar plus estimates have come from.  They just don't seem to be in the right ballpark to me.

It looks like both the Medicare buy-in and the public option are dead:

After a meeting among Senate Democrats today, Indiana Senator Evan Bayh said it looked like the proposed Medicare expansion would be dropped. “The general consensus was that we shouldn’t make the perfect the enemy of the good and in order to get all the insurance reforms accomplished and a number of other good things in the bill,” dropping the Medicare expansion “would be necessary to get the 60 votes,” Bayh told reporters.

Earlier, two top proponents of the public option, Senators Jay Rockefeller and Tom Harkin, said they would be willing to give up the public option to win passage. Harkin said he’d also be willing to forgo the Medicare expansion. The senators’ statements suggested a deal might be close. Harkin, an Iowa senator and chairman of the Senate health committee, and Rockefeller of West Virginia both said it was time to focus on what needed to be done to get a bill passed.

“This bill, without public option, without Medicare buy-in, is a giant step forward toward transforming American health care,” said Harkin. “That’s reality, there is enough good stuff in that bill that we should move ahead with it.”

Apparently CNN confirms this.  So in the space of a few days we seem to have gone from more than I expected to less than I expected.  I always figured we'd at least be able to get a public option trigger included, but if this report is right we're not even getting that.  Sic transit etc.

Twitter Mini-Storms

I have a Twitter feed that I update very rarely (though MoJo makes it look a little more active than it is by automatically creating a new tweet every time I publish a blog post).  Normally, I get maybe one or two new followers per day, but every once in a while I get a mini-storm of new follow requests.  This weekend, for example, I suddenly got several dozen for no apparent reason.  Why does this happen?

POSTSCRIPT: OK, I have it.  After several minutes of arduous research, it seems that at 6:16 pm on Saturday Matt Yglesias tweeted about my Matt Taibbi post.  At 6:17 pm I got a follow request, and over the next five hours I got 32 more.  So apparently Matt is the instigator here.

Anyway, my Twitter feed is at for anyone interested in following it.  But bewarned: I still don't post much on it.

David Roberts has a good short summary of the first week of the Copenhagen talks (even shorter summary: lots of sound and fury signifying nothing much) and says this is the only really big story to emerge so far:

The one significant new feature of this treaty round is the emergence of a distinct voice for small island nations and the poorest states—the folks for whom climate change is an existential, not just economic, problem. Inside the talks, this manifested in the tiny island state of Tuvalu’s call for a new, post-Kyoto treaty that would require mandatory reductions not only from rich countries but from the biggest and fastest-growing developing nations, including China and India. It would also set 1.5 degrees C as the target for limiting the rise in global temperature, rather than the 2 C agreed upon in previous talks (and still maintained by big emitters). This amounts to the first big public eruption of the simmering tensions between major developing countries and their smaller/poorer brethren. Whereas China and India want to shelter their economic development above all else, Tuvalu, well, might go under water soon.

Read the whole thing.

Ad Update

In case you're interested, here's an update from the LA Times on efforts to turn down the volume on TV commercials.  As near as I can tell, it's the exact same story we all read six months ago.  Anna Eshoo's bill is still winding its way slowly through Congress; it's still wildly popular with ordinary people; it's still being opposed by Republicans; and the ad industry is still "working to address the problem," with progress expected any day now.  Just thought you'd like to know.

Obama and the Bankers

Speaking of Obama and Wall Street, here's the latest.  After last night's attack on "fat cat bankers" on 60 Minutes, Obama held a White House meeting with top financial CEOs today that the Wall Street Journal said "was expected to clear the air between the president and the financial sector."  Good to hear!  The New York Times added this:

Mr. Obama, who has faced criticism from Democrats and Republicans alike for being too close to Wall Street, called Citigroup, Goldman Sachs and 10 other big banks to the gathering as anger over last year’s bank bailouts continued to percolate. The president will address the size of salaries and bonuses, an official said, as he seeks to impress upon bankers that they have a “special responsibility” to consumers.

“We have to get them off the sidelines and get them to play a more active role in our economic recovery,” Rahm Emanuel, the White House chief of staff, said on Sunday. “They play an essential role in helping the economy grow.”

Look: bankers are going to keep making lots of money as long as the financial sector makes a lot of money.  That's just the way the business world works, and all the jawboning in the world won't change that.  If Obama really wants bonuses to come down, he needs to propose regulations that will shrink the profitability of the financial industry.  If he does that, bonuses will come down naturally.  If he doesn't, they won't.  He'll get — at most — a bit of short-term posturing designed to relieve public pressure until everyone forgets the whole thing and bankers can go back to business as usual.

So: fewer meetings and more regulations, please.

Taibbi, Round 2

Matt Taibbi is a hard guy to defend.  He exaggerates, he misinterpets, and he uses bad language.  Sometimes he gets his facts wrong.  If I knew what was good for me, I'd just leave it at that and jump on the bandwagon that says his brand of journalism is beyond the pale.

But I'm an idiot, so I won't.  For example: Taibbi says that what unites Obama's economic team is that they're all proteges of Robert Rubin.  I've already said that I think this is a bad interpretation, but Taibbi's underlying point is still a good one: this is a very mainstream group that's overly sympathetic to Wall Street and unwilling to push for really substantial regulatory reform.  Ezra Klein defends them this way:

What unites not only Obama's economic team, but his whole White House, is not its emphasis on rich people. It's the emphasis on people accustomed to dealing with Congress....It's rather difficult to say what these people do and don't believe, as their whole world is finding 218 in the House and 60 in the Senate, and every word, action and policy brief is squarely aimed at that goal.

That leaves two questions worth asking about them: First, are they more or less liberal than the 218th most liberal congressman and the 60th most liberal senator? Second, are they good at their jobs? That is to say, are they good at bringing 218 congressmen and 60 senators into line behind reasonably good policy?

I'm just not sure this works.  It does matter what these people do and don't believe.  Speaking for myself, I'd really like to know whether we have a progressive administration that's hemmed in by Congress or if we have a mainstream administration that pretty much agrees with the 60th most liberal senator in the first place.  If it were the former, we'd at least be hearing leaks that they wanted to propose hard-hitting regulations but eventually decided not to on tactical grounds.  But we haven't.  The regs that came out of the White House earlier this year were mostly pretty soft, and there was very little sense that anyone in the West Wing had been arguing to open the negotiations with Congress from a more forceful starting position.

Now, I suppose one argument is: who cares?  "We don’t want to tilt at windmills," Obama said last June, and hell, maybe he's right.  But that takes things too far.  It suggests that Congress has all the power and Obama virtually none.  I agree that Taibbi should have emphasized Congress, and congressional Republicans in particular, more than he did, but surely it makes a difference if the president stakes out  a courageous position in the first place?  If he gets the public on his side, that's got to count for something.

But he never really even tried, and I think that's largely due not to political considerations, but due to the fact that his team didn't really want to stake out a more audacious position.  Neither did Obama.  He reappointed Ben Bernanke with barely a second thought, after all, which certainly suggests that he's basically OK with Bernanke's general view of the economic world.  And while it's true that in one sense there's nothing new here — Obama was pretty obviously a fairly mainstream guy all throughout the election — he's also the guy that promised at every opportunity to change the way Washington works.  He's the guy who met with bankers and made sure we all knew that he told them he was "the only thing between you and the pitchforks."  He's the guy who tells 60 Minutes that he didn't run for office "to be helping out a bunch of fat cat bankers on Wall Street."  He may be mainstream, but he's certainly doing his best to sound otherwise.

So sure: Congress is a problem.  But so is the White House.  So is the Fed.  So is the SEC.  And that's the whole point.  They're all problems.  Taibbi chose to illustrate this colorfully, and sometimes that color gets in the way of a coherent narrative.  But dammit, at least he's telling the story, and there are damn few others who are even trying to tell it in popular, long-form venues.  As soon as they do, maybe we can all toss Taibbi on the ash heap and take turns raining down curses on him.  Until then, he's what we've got.