Rent-Seeking and Global Warming
The Wall Street Journal writes,
The emerging alliance of business and environmental special interests may well prove powerful enough to give us cap-and-trade in CO2. It would make Hollywood elites feel virtuous, and it would make money for some very large corporations. But don’t believe for a minute that this charade would do much about global warming.
Read the whole thing. Global warming has the potential to be the rent-seeking orgy of all time. Already, it is creating opportunities for the “alternative fuels” industry to suction money from taxpayers.
As the WSJ piece discusses, “cap and trade” would open up a new channel through which the net worth of every industry would be a political variable. It will transfer hundreds of millions of dollars to K street. All for the sake of producing a non-solution to what is probably a non-problem.
Mar 4 2007 at 11:26am
Much here depends on how it is implemented. They have cap and trade in Europe, but it was set at a level where the price of carbon is very low. It does nothing, but a lot of people are making money doing the trading.
Bruce G Charlton
Mar 5 2007 at 1:38am
I guess the root problem is that people in general have not realized that modernizing societes solve tough problems by growth, not by shrinking away from them.
The second problem is that the real problem (if there is a problem) is _coping_ with climate change. It is simply crazy to imagine that humans can influence global climate in a controlled and precise manner when (in the UK, at any rate) we cannot even _predict_ the weather the day after tomorrow.
Mar 5 2007 at 12:14pm
The real problem is the climate change debate is ideologically driven. Socialists believe in global warming because they feel they can advance their socialist agenda. Conversely, Capitalists dismiss any global warming evidence because it’s consequences are against their personal self-interests.
What’s being ignored are the real science, and real solutions to the problem because the politics cannot be divorced from the problem.
Mar 5 2007 at 12:47pm
The business about deciding the initial details of the cap in the political markets may be unseemly, but I’m unsure what the problem is from an efficiency standpoint so long as the caps can’t be reassigned politically some time later. Once we assign the allowances, they’re a property right, right? Doesn’t the Coase Theorem tell us that once you assign the rights, you’re bound to come out with an efficient outcome? The claim here doesn’t seem to be that the transaction costs are too high. So is the question here that we just don’t like transfers of wealth? (Not that that’s not a legitimate point … it’s just that that horse left the gate some time ago.)
Mar 5 2007 at 1:14pm
Someone will make a lot of money if they build extremely polluting factories in a developing country in the next year or two.
Mar 5 2007 at 3:53pm
I agree with WJS here. It is not the job of legislatures to determine caps on co2.
However there are strong possible claims. If temperature is kinetic energy in the atmosphere, then a degree warm,er is about 30% more energy in the storms (measured from the glacial cycle average). This alone will cause insurance companies to raise premiums in storm regions, even in an undisturbed market.
So, I am still waiting for an explanation of why higher insurance premiums should be covered by property owners who had no expectation that the fossil fuel industry would be such a public nuisance.
Mar 5 2007 at 4:30pm
WASHINGTON — Global warming will push up insurance premiums in high-risk areas like coastal Florida and other hurricane-prone parts of the United States, an insurance company official said Tuesday.
“That it will cost more, there’s no question; we can put that on the table right at the beginning,” said Clem Booth, a board member of Allianz Group . “The pricing of an insurance portfolio in a coastal region is a matter of the number of incidents to be expected within a given time and the size of incidents at certain levels.”
This is what I mean.
Where is it in any political faction that we assign cost to property owners for a liability created by a polluting industry?
We can wish it away, prove the incremental cost is small, or pretend it is a hoax. But we still have to assign costs, or else subsidize one industry with money extracted from homeowners.
The AEI would like us all to celebrate the advances gained by the oil industry and therefore ignore the property owner who pays higher costs. Why does the AEI advance a collective solution, socialism for the oil industry?
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