I haven’t figured this out yet, but I’m experiencing ongoing worries. Let me try to articulate them, maybe one of you can cure me. One story I hear is that the new, carbon-friendly energy technology will be subject to decreasing costs, or alternatively increasing returns to scale. In other words, there are high start-up costs, but once it is underway it will be pretty cheap and lots of countries will adopt it. So: 1) the U.S. levies a carbon tax, 2) the U.S. incurs the start-up costs and invents or improves the decreasing cost technology, and 3) lots of countries make the switch. Voila!
Check out Tyler Cowen’s post which sets up some of the key energy policy questions — some of the extensive comments offer insights and links to useful resources. E.g., this comment [search for "Bob Murphy" or scroll down].
I’m late to the discussion, but I thought I’d address two earlier comments before giving my two cents’ on Cowen’s original blog post:
(1) Regarding the question, “Are there any proposals to force other countries to regulate their emissions?” there is the 2nd White Paper from the Committee on Energy and Commerce (pdf). It discusses various ways the US could unilaterally “encourage” other countries to go along with our own cap-and-trade (or carbon tax). The big stickling point is whether such measures would violate WTO rules.
(2) Mike said, Absent some astonishing technological miracle, the world will burn every drop of oil it can raise from the ground for the foreseeable future.
I think I know what you mean, and (if so) I agree with the spirit of your remarks, but actually your statement is either false or vacuous. Right now we don’t raise every drop of we can raise from the ground, because it would cost more than it was worth. And if you amend your statement to mean, we will burn every drop of oil that is profitable to raise from the ground, yes that’s true, but that doesn’t seem to be getting across your point.
Now as for Cowen’s original post, I’ll mention Jevons’ paradox in case readers here haven’t heard of it. This is the principle that as efficiency in resource use goes up, total consumption of the resource goes up too.
I’m a bit confused what alternative scenario Cowen wants us to root for. Is he saying it might be better if we don’t come up with a cheap alternative to gas guzzling machines, so that we maintain billions of people in poverty for a few more decades? (I’m not being melodramatic, I’m honestly asking if that’s what might be the better alternative, in his mind.) As others have said, regardless of whether we increase efficiency or not, the rest of the world will use more carbon as they industrialize and grow. Delaying their spurt in emissions by a few decades would buy us time to come up with geoengineering or some other solution, but by the same token giving more reliable electricity to billions of people might raise up an African Henry Ford to invent a carbon-free technology.
Since there are so many unknowns, I think it’s best to “root for” bringing economic progress to billions of people.
Posted by: Bob Murphy at Feb 24, 2008 7:01:29 PM
Wikipedia has a good writeup on Jevons’ Paradox. For some recent research attempting to demonstrate Jevons’ Paradox in action, see Energy Consumption in Transitional Economies [PDF]. That said, Jevons’ Paradox is an empirical observation, not a theory of operation. My interpretation is to expect energy efficiency gains to result in reductions in aggregate consumption that are smaller than the specific savings.
Recent Comments