Estimating the Social Cost of Carbon

Frank Ackerman

For the first time, the U.S. government is working to limit carbon emissions – most notably through new fuel efficiency standards unveiled April 1. To inform cost-benefit analyses of proposed policies, the Obama administration has relied on an interagency group’s estimates of the “social cost of carbon,” the socioeconomic impact of every ton of carbon dioxide that goes into the atmosphere. The higher the social cost of carbon (SCC), the more stringent the regulatory standards that will be deemed to be worthwhile.

So far, no definite SCC has been set, but the interagency group has proposed $21 per ton. In a new Economics for Equity and the Environment (E3 Network) white paper, Liz Stanton and I analyze the economic models used by the interagency group. They find significant shortcomings, and show how they lead to substantial underestimates of the risks and costs of climate change.

New Economic Thinking

Earlier this month George Soros created an “Institute for New Economic Thinking,” and sponsored an inaugural conference with the aim to kick start a re-thinking of macroeconomics.  Click here and below for video interviews with Soros, Joseph Stigltiz, and Robert Skidelsky who share some of their thoughts at the conference.

What are your thoughts on this project and these proposals?  Is this the new economic thinking we need to prevent future crises?

Will America Buy a New Climate Policy?

James Boyce

Without much fanfare, U.S. legislators last December unveiled a new climate bill that just might succeed in breaking the political gridlock that has blocked action on global climate change. The bill, co-sponsored by Senator Maria Cantwell (D-WA) and Susan Collins (R-ME), is a sharp departure from the cap-and-trade bill that passed the House of Representatives last June but subsequently died in the Senate.

The Carbon Limits and Energy for America’s Renewal (CLEAR) Act proposed by Cantwell and Collins is a “100-75-25-0” policy:

  • 100 percent of the permits to bring fossil carbon into the U.S. economy will be auctioned. Polluters won’t get any permit giveaways, and there will be no scope for speculation and market manipulation by Wall Street traders.
  • 75 percent of the auction revenue is recycled directly to the public as equal per-person dividends. The majority of households will receive more in these monthly dividends than they pay in higher energy costs.
  • 25 percent of the auction revenue is dedicated to investments in energy efficiency, clean energy, adaptation to climate change, and assistance for sectors hurt by the transition away from the fossil-fueled economy.
  • Zero offsets are allowed. In other words, polluters can’t avoid curbing use of fossil fuels by paying someone else to clean up after them.

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Regional Financial Governance: Lessons from the Eurozone

Ilene Grabel

The strange, complicated drama involving the Eurozone’s bureaucratic core, Germany and Greece, European officials, and the IMF demonstrates that the matter of creating regional alternatives to the global financial architecture is politically charged and even fraught. The tensions raised around Greece reveal many of the deficiencies in Europe’s regional financial architecture—especially the puzzling absence of a lender of last resort, a regional surveillance mechanism, and a mechanism for coordinating fiscal policies among member nations. These deficiencies should be taken seriously by those working in the developing country context insofar as many of us have long looked toward regional financial governance as a more democratic and inclusive alternative to the global financial architecture.

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Why the IMF Changed its Mind about Capital Controls

On Triple Crisis, Ilene Grabel was the first to highlight the IMF’s change in position on capital controls. In this new video for the Guardian and in a related article for Foreign Policy magazine, Triple Crisis blogger Kevin Gallagher also notes the IMF’s acceptance of capital controls and argues that the US should follow suit and stop outlawing the use of controls through its trade and investment agreements.

Read “Control That Capital”, from Foreign Policy, along with more of Gallagher’s research on foreign investment for development.

India and China: Not so decoupled from the global downturn

C.P. Chandrasekhar

With growth recovering significantly in China and India, these countries are once again being presented as decoupled giants who can revive the world economy. Advocates of “decoupling” argue that, despite the force of globalisation, some economies are relatively unaffected by the economic cycles characterising the rest of the world because the factors driving their growth are sui generis. However, this view has been discredited in recent years for two reasons. First, there appears to be a high degree of synchronisation of booms and busts in stock and housing markets across the world. If the appetite for investment among wealth holders or even wealth seekers was stoked anywhere in the world, such investment found its way across the globe, reviving diverse markets simultaneously, even if to differing degrees. The reverse was true when bearish sentiments prevailed.

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Brazil: Latin America’s Big Success Story?

Matias Vernengo

The global media has hyped the performance of the Brazilian economy as an example of successful economic development.  The Economist magazine referred to it as Latin America’s big success story.  Lula was seen as a positive left-of-center leader, in contrast to the negative leadership of Hugo Chávez and other lefties.  Also, Goldman-Sachs lumped Brazil together with Russia, India and China into the so-called BRICs, a group that supposedly would take over the world economy by mid-century.  Further, according to The Economist: “Unlike China, [Brazil] is a democracy. Unlike India, it has no insurgents, ethnic, religious or hostile neighbors. Unlike Russia, it exports more than just oil and arms, and deals with foreign investors with respect.”  In other words, Brazil is in the best of all possible worlds! Or is it not?

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Financial Transaction Tax Links

Kevin Gallagher

Here at the Triple Crisis blog we linked to the video and campaign surrounding a global financial transaction tax.  The accompanying economists letter supporting the tax was signed by many of the economists who blog at Triple Crisis.   Since then there has been a great deal of push back on the idea of such a tax.  To aid those interested in examining in-depth arguments and analyses for and against the tax, Zachary Wermer, a student of Triple Crisis co-chair Kevin Gallagher, put together this fairly comprehensive bibliography (with links) of the pros and cons of such a tax.

FTT Bibliography.

Obama’s New Trade Agenda: What happened to multilateralism and development?

Kevin P. Gallagher

The world has been holding its breath to see what Barack Obama’s campaign promise of a renewed multilateralism would bring to the world trading system. Global trade talks have soured since 2008 when the Bush administration refused to grant the developing countries the right to safeguard their farmers in the event of import surges.

After nearly a year in office, Obama finally unveiled his trade agenda just last week. Rather than bringing a breath of fresh air into the world trading system in a time of crisis, the administration’s agenda has brought gasps across the world—especially in developing countries.

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Economists and the Financial Crisis: What were they thinking?

Matias Vernengo

The role of ideas in promoting the financial crisis has been often disregarded.  It seems as if the development of complex financial instruments and the deregulation of financial markets have taken place in an economic thinking vacuum.  However, the opposite is the case, and modern finance developed and taught in the finance and economic departments, particularly of business schools, has been central for creating the conditions for the current crisis. Esteban Pérez-Caldentey and I deal with the issue in a recent paper published in the Real World Economic Review.

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