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Tragedy of the Commons
Source: Hardin, G. (1968). The tragedy of the commons. science, 162(3859), 1243-1248.
Climate change is an externality
● Externality (def.): an externality is the cost or benefit that affects a third party who did not choose to incur that cost or benefit.
● Greenhouse gases are emitted as a result of economic activities that are essential to our society. ○ By governments, industries, and individuals.
Source: DeSombre, E. R. (2018). Why Good People Do Bad Environmental Things. Oxford University Press.
Solutions to climate change
● Renewable energy● Solar energy● Nuclear power plants● Geoengineering● Biofuels
Source: Bennett, J. O. (2016). A Global Warming Primer: Answering Your Questions about the Science, the Consequences, and the Solutions. Big Kid Science.
stopping
Parking my car on campus is free and there are many spots. Bike racks are also free but there are limited spots!
Driving my car to campus is more convenient than taking public transportation. Saving time is saving money!
I know it’s not environmental, but I forgot my reusable straw. Using a plastic straw just this once isn’t so bad, right...?
everybody.
Problem of pricing
● In general, it is cheaper to buy energy created from fossil fuels than to implement other energy solutions.
● Because there is no price tag on buying energy creating fossil fuels, people have no motivation to choose other options.
● To incentivize people, we would need to increase the cost of consuming energy creating fossil fuels (aka. Carbon emissions)
Source: DeSombre, E. R. (2018). Why Good People Do Bad Environmental Things. Oxford University Press.
What is cap & trade?
The cap part is a limit on carbon emissions. The cap gets stricter over time.
The trade part is a market for companies to buy and sell allowances that let them emit only a certain amount.
Source: Fund, E. D. (2018). How cap and trade works. https://www. edf. org/climate/how-cap-and-trade-works (2018).
How does cap & trade work?
1. Set a limit (cap) on certain emissions, such as carbon.
2. Split the total amount of the cap into allowances.
3. Give each company the allowance. Ex) One ton of emission.
4. Let companies trade their allowances!
Source: Fund, E. D. (2018). How cap and trade works. https://www. edf. org/climate/how-cap-and-trade-works (2018).
Problems of cap & trade
● The cap is arbitrary. Too much is harmful, too little is ineffective.
● It disproportionately harms the poor.
● It incentivizes people to import more than they do now. Ex) oil.
● It is a new system, which makes it difficult to implement immediately.
Source: Fund, E. D. (2018). How cap and trade works. https://www. edf. org/climate/how-cap-and-trade-works (2018).
And...
“...In a Pew Research News IQ Quiz , less than a quarter (23%) of the public was able to identify cap and trade legislation as dealing with energy and the environment (11% said it dealt with health care, 13% banking reform and roughly half admitted they did not know).”
Source: https://www.pewresearch.org/fact-tank/2009/11/10/cap-trade-few-know-what-it-is-but-half-support-the-idea/
Thought experiment
How would this affect your behavior? Life?
The carbon tax
● (Def.) A carbon tax is a fee imposed on the burning of carbon-based fuels (coal, oil, gas).
● When set at a high enough price, the carbon tax will discourage people from buying or using energy that burn carbon-based fuels. When set too low, people will adjust to the small change.
Source: Center, C. T. (2008). Pricing carbon efficiently and equitably. Carbon Tax Center, May, 23.
Where does the tax money go?
● Carbon taxes are revenue-neutral, meaning that the government retains little if any of the tax revenues raised by taxing carbon emissions.
● The revenues are returned to the public, possibly in forms of…
○ Dividends to households / residents
○ Investing in mitigation technology
○ Education of climate change
Source: Center, C. T. (2008). Pricing carbon efficiently and equitably. Carbon Tax Center, May, 23.
experts
The economists actually agree on something!
Source: IGM Economic Experts Panel www.igmchicago.org/igm-economic-experts-panel
Will the carbon tax be effective?
public
Source: Puskin, D., & Mills, S. B. (2017). Moving the needle on American support for a carbon tax. Issues in Energy and Environmental Policy, (30).
Carbon tax opinions back then...
And now?
Climate change skepticism is a thing of the past...
Source: Pew Research Center
...But the issues of climate change remain bipartisan.
Source: Bennett, J. O. (2016). A Global Warming Primer: Answering Your Questions about the Science, the Consequences, and the Solutions. Big Kid Science.
Conclusion
“....a carbon tax offers the simplest and best opportunity for creating a true free market in energy. Perhaps I’m overly optimistic about the power of free markets, but I believe that if we successfully created a free market for energy, we’d rapidly find solutions to the problem of global warming, all while strengthening our overall economy and improving our lives at the same time. For that reason, regardless of your political persuasion, I hope you will join in the growing movement for a carbon tax that will help end the current socialism of our energy economy.”
- Jeffrey Bennett, author of our class reading assignments
● What is your opinion on carbon taxes?
● Let’s address the paradox. As shown before, most people very concerned about global warming. Yet, whenever there is a new environmental policy, such as the carbon tax, there is opposition. Why do you think people oppose such policies? Or carbon taxes?
● America had segregation from the 1800’s to mid-1900’s. At some point, the oppressed people could not tolerate it anymore. Thus, we had the Civil Rights Movement. Arguably, the climate protests are happening on a much grander scale. Yet, there seems to be less accomplishment that one would expect. Why is this the case? Is there something unique about climate change/environmental issues that makes it difficult to address?
● Did you learn anything new today? What was the most interesting / boring thing you learned?
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