Wednesday, 17 December 2014

A State Carbon Tax?

Washington State Governor Jay Inslee has announced that he will propose some sort of a carbon pricing program to help raise revenues for his state's starved budget, which is currently about $2 billion in the red (over two years, and out of a total budget of about $33 billion), and which includes a Washington Supreme court-mandated increase in school funding. The details remain sketchy at this point, like whether it is a carbon tax or a cap-and-trade program (Greeenwire is calling it a "carbon  fee" and the Seattle Times is reporting it as a cap-and-trade), but the Governor is hoping that it will produce $400 million per year. He has tied it to transportation funding, which both parties in Washington state would agree is badly needed.

Inslee is a Democrat and Republicans have a majority in the Washington Senate, and are just barely a minority in the State House, so prospects of passage might appear dim. But this is a state where the parties still seem capable of working together. Republican state senator Curtis King of Yakima (the hometown of Justice William O. Douglas) criticized the Governor's plan for linking such a tax to general spending projects like transportation projects, but praised the Governor for proposing something in advance of January budget negotiations. (Can we get some of those Republicans down here in Florida?)

I have one problem with this. Washington State still has to figure out a way to comply with the Obama Administration's Clean Power Plan to reduce emissions from the electricity generating sector. Washington's goal is already a heavy lift -- 1,379 lbs./MWhr down to 215 by 2030 -- this is a state with only one coal-fired power plant so it does not have much low-hanging fruit to pick. I would save my political capital for when I needed to propose something for the Clean Power Plan, which is going to really cost Washington State. What Washington could do, much more directly if it truly wishes to fund transportation projects, is just raise its gasoline taxes, currently at 37.5 cents per gallon. That is high (ninth among states) but Washington is one of seven states with no state income tax. If I am a motorist in the Emerald State, I would accept a gasoline tax as the price of having good roads and bridges (a major and important bridge collapsed in Northwest Washington in 2013), and could separate that from carbon reduction measures. Washington State consumed about 64 million barrels in 2013, or 2.7 billion gallons. A tax of 10 cents per gallon would raise $270 million dollars, and 15 cents would raise about $400 million, the hoped-for amount raised by the carbon "fee," or permit price, or whatever it is going to be. Do it now, when gas prices are low!

Thursday, 4 December 2014

House Republicans: One Million Dollar Deduction for Big Trucks, $4,000 for College

There is an op-ed in Wednesday's New York Times on the push by some Republicans to extend a stimulus tax incentive, a "bonus depreciation" provision that allows businesses to deduct the full purchase price of qualifying equipment, essentially deducting it as a business expense (like a luncheon or business travel) up to, in some cases in the past, 50% of the value of the equipment. The provision is part of a tax extenders package in H.R. 5771 which passed the House on Thursday 378-46. That is a bipartisan vote, but make no mistake: it was House Republicans that have been pushing for this provision. In comparison, the maximum deduction for higher education expenses would be capped at $4,000 for an individual whose maximum adjusted gross income can be no more than $65,000 (or $130,000 for joint filers). $500,000 for business equipment, $4,000 for higher education. Qualifying property includes vehicles heavier than 6,000 lbs., off-the-shelf software, office furniture, equipment, and property not part of a structure.

However, there is something else that is moving forward as part of H.R. 5771. Even before you get to bonus depreciation, under section 179 of the Internal Revenue Code businesses can take a first-year deduction of up to $25,000. That means that business, whatever and whoever they are, can expense up to $25,000 of equipment right away. The limit had been, as part of a 2008 economic stimulus package lifted up to $250,000 on capital equipment having a total value of no more than $800,000. That generous limit expired, and House Republicans are now seeking to lift that limit from the current level of $25,000 up to $500,000. That's a total of $1 million for business capital, $4,000 for higher education, in case you were keeping score.

There is actually a website,, that spells everything out for anybody, most prominently small businesses, to figure out exactly how the bonus depreciation works. It is not complicated. For qualifying capital equipment, you can basically expense anything up to $25,000, which becomes $1 million if the House package becomes law.

What is the effect of these tax provisions? These provisions have gone up and down over time, and Eric Zwick and James Mahon have looked at these provisions and their effects on business investment, and how changes in these rates over time have changed investment from year to year. They found that bonus depreciation raised investment by 17.3 percent from 2001 to 2004 and 29.5 percent from 2008 to 2010. They carry out a number of robustness tests, leading them to conclude that these provisions really do work. In fact, insofar as the up-and-down movement of the limits of section 179 and bonus depreciation create "kinks" in the optimal investment levels of firms, firms are observed to be investing right up to the kinks, in effect taking full advantage of these provisions. Firms tend not to take full advantage if they do not have the ordinary income against which to take these deductions (though bonus depreciation has, in past years, been used to create losses which can be carried forward to offset income in future years).

That said, what kind of capital are we subsidizing, and what good is it doing? Even if we ignore the distributional impacts of this disparity between funding business equipment and higher education, what good is this increased business investment doing? This we do not know.

Thursday, 20 November 2014

Why the U.S.-China Climate Deal May Be a Tipping Point

The Obama administration announced a climate agreement with China last week, which was immediately criticized by congressional Republicans. Putting aside partisan churlishness however, this climate agreement may be a turning point.

As I wrote three years ago, and international climate negotiations are, above all, a game-theoretic process. For an international climate agreement to be durable, there must be sufficient confidence on the part of all parties that all of the other parties are committed to mitigation of greenhouse gas emissions. For any individual country, it is likely that the benefits of mitigating greenhouse gas emissions are much greater than the costs. However, this is predicated on other countries also performing their own self-interested cost-benefit analysis and arriving at the same conclusion. It is a fragile agreement indeed, when there are numerous parties, all of which must trust that all of the other parties will reach the same conclusion and will refrain from free-riding. Ironically, a country that makes great strides in mitigation or geo-engineering may actually undermine cooperation, as this would sow doubt among potential partners that such a country may not reach the conclusion that the benefits of reducing greenhouse gases exceed the costs. In an environment of such fragile cooperation, signaling is extremely important. This US – China deal may just be the strongest signal yet that the two largest emitters in the world recognize that the benefits of climate policy exceed the costs.

Tuesday, 18 November 2014

Virginia Possibly Pushing For a State Carbon Tax Under Clean Power Plan

Adele Morris of the Brookings Institution reports that state of Virginia has submitted comments on the EPA's Clean Power Plan that call for additional flexibility in compliance options. Significantly, the Virginia comments were very similar to those that Morris has been advocating, in her push to get states to consider a state carbon tax, and to have a state carbon tax be an option for complying with section 111(d). Morris and others met with Virginia state officials three months ago to discuss a state carbon tax and suggested comments, so apparently that meeting went pretty well.

This is a potentially huge development, because Virginia is a very carbon-intensive state. Under the EPA proposed rule, Virginia is expected to reduce its emissions from a rate of 1438 lbs. of CO2/net MWhr to 884 by 2020, and to 810 by 2030. That a state that is politically purple and with a very important coal industry is considering a state carbon tax is much more significant then if this was under consideration in a state like Massachusetts or Washington.

Sunday, 16 November 2014

Land Use Law and Disability

Robin Paul Malloy's Land Use Law and Disability: Planning and Zoning for Accessible Communities has just been published by Cambridge University Press. Malloy argues that Land Use Planning should take greater account of people with mobility impairments and other disabilities that interfere with access. Planning with universal access design guidelines is superior to the de facto litigation-driven process of land use planning for accommodating persons with disabilities.

Thursday, 13 November 2014

The U.S.-China Climate Deal

Everybody, even people disinterested in the environment, has heard by now: President Obama announced a bilateral agreement between the United States and China for the United States to reduce emission 26 to 28 percent below 2005 levels by 2025, and China will peak its emissions by 2030. Those are the central pieces of the deal. There is also agreement to jointly pursue carbon capture and sequestration, funding for a new US-China energy research center, and other feel-goodies, but clearly something that speaks directly to emissions is the big deal.

Mitch McConnell and fellow Kentuckian Ed Whitfield proved again why the Republican Party deserves our scorn, by simply dismissing the deal because it was struck by Obama. If Obama's for it, then Republicans are agin' it. McConnell said that the deal "requires China to do nothing for 16 years." That is true. Of course, the alternative is no deal at all, as if McConnell expects China to cap emissions tomorrow. Rep. Ed Whitfield from Kentucky snarked, "Everyone who's ever dealt with China knows that they've made all kinds of commitments." That's Ed Whitfield, the noted Sinophile. As a more thoughtful commentator pointed out, what matters more is the level at which China peaks than when it peaks. Importantly, though, a 2030 peak will likely keep China below a BAU baseline. It also represents a step in that China is moving away from an intensity target -- which is no cap at all -- to a mass-based cap.

Everyone who reads the newspaper understands the inherent caution and conservatism of Chinese foreign policy, which is driven by the Chinese Communist Party's Politburo Standing Committee, the real decisionmaker, and which makes decision by consensus and under strict Chatham House rules. Policy changes slowly in China. There will be next step, and it will be the specification of an absolute cap, a "how much" and not just a "when."

Sunday, 9 November 2014

Direct Air Capture Technology About to Come Online

"Direct Air Capture" (DAC) is a term that has been used to describe a technology that seeks to suck carbon dioxide out of the ambient air. That contrasts with "carbon capture and storage," (CCS) which seeks to either suck carbon dioxide out of the flue stream of a fossil fuel combustion process, or to de-carbonize coal before combustion.

DAC has never been a mainstream technology, in large part because so much has been invested politically and economically in CCS technology. Senator Lamar Alexander once said "w[e] should launch another mini-Manhattan Project and reserve a Nobel Prize for the scientist who can get rid of the carbon from existing coal plants, because coal provides half our energy." But it would appear to deserve some attention, as an effective post-combustion technology could buy some time. David Keith, who moved from the University of Calgary to Harvard a few years ago, has been the primary agitator for this technology, and even founded his own startup company, Carbon Engineering, which counts Bill Gates as one of its investors. It is a Carbon Engineering pilot project that will begin operations in Squamish, British Columbia, next year. Keith claimed in 2009 that carbon dioxide could be captured at a cost of "closer to $100 per ton than $500 per ton." The American Physical Society came out with a withering criticism, offering its own less sanguine estimate of $600 per ton, at the very least. The physical problem with direct air capture is that carbon dioxide comprises such a small fraction of our ambient air -- 0.04% -- so that capture from ambient air is inherently less efficient than, say, capture near the source (a coal-fired power plant). Nevertheless, I'm going to borrow my Governor's go-to line when faced with uncomfortable scientific facts: "I'm not a scientist." Let's see how this pilot plant in British Columbia does.

The politics of direct air capture are simply that no politician has heard of it, and that David Keith or Carbon Engineering is not yet a major political or campaign contributing source. It has to get picked up by an AEP or a Duke. But given the century-long atmospheric life of carbon dioxide, this technology has to be seriously considered.

The one downside of this technology is highlighted in an article I wrote in 2011: that success would ultimately decrease the pressure to reach an international agreement to reduce emissions. Research on direct air capture could allow say, China and India, to simply free-ride off of the research efforts of Canada and the United States. We could build the massive carbon dioxide collector arrays, and China and India would then go on building coal-fired power plants and emitting. That might be politically unappealing.

Saturday, 1 November 2014

Chile Enacts a Carbon Tax

On September 26, Chile became the first country in South America to enact a carbon tax. This story was picked up the following day by Reuters, and was not picked up by the New York Times until October 29. The New York Times is taking its divestment from climate change coverage seriously, it appears. It appears to be too busy trying its best to save the Senate from Republican control.

The tax will be $5 per ton of carbon dioxide, and is limited to the electricity generation sector, and will cover 55% of country-wide emissions.There is some natural political economy to the measure, as 80% of Chile's energy emissions are from fossil fuels, and most of it is imported oil and coal, so it is not as if domestic production of fossil fuels will be curtailed so much, as it would in the United States. But of course, the electricity generators (there are four big ones) will raise the price of electricity, and the energy-intensive mining industry, an important one for Chile economically, will feel some pain. Chile reports that it expects to collect $160 million per year in carbon tax revenues, which I can't quite back out. In 2013, Chile's emitted of 24 Mt of carbon, or (taking into account the weight of carbon dioxide as opposed to carbon) 88 tons of carbon dioxide. If, as economist Juan-Pablo Montero reports, the tax will cover 55% of Chile's emissions, it would seem to me that the covered emissions would be 48.4 Mt of CO2, and therefore revenues should be around $242 million, not accounting for the demand response to the carbon tax. Maybe the Chilean officials and Dr. Montero have different estimates of what emissions will be covered.

At any rate, Chilean officials and Dr. Montero state the obvious, which nevertheless eludes some in the United States: that of course, Chile will have to go beyond $5 per ton, but that the institutions can now be put into place to pave the way for increases in the carbon tax in the future.

Friday, 31 October 2014

"I'm not a scientist"

That has been the response from some politicians averse to any kind of climate policy, including my own Governor, Rick Scott, but also Mitch McConnell, and John Boehner. Michael McKenna, a prominent Republican energy lobbyist, says: "It's got to be the dumbest answer I've ever heard... .Using that logic would disqualify politicians from voting on anything. Most politicians aren't scientists, but they vote on science policy. They have opinions on Ebola, but they're not epidemiologists. They shape highway and infrastructure laws, but they're not engineers."

Monday, 6 October 2014

Society for Environmental Law and Economics, Groningen, the Netherlands -- Call for Papers

Society for Environmental Law and Economics (SELE) 2015 Conference
Call for Papers
The seventh annual meeting of the Society for Environmental Law and Economics (SELE) will be held on 21-22 May 2015, at the University of Groningen, the Netherlands.
We hope to build upon the great success of past SELE meetings, and continue to build a community of scholars interested in working at the intersection of law, economics and environmental issues. We welcome both theoretical and empirical papers, ranging from local to international themes. While all topics are welcomed, this year we in particular invite scholars to submit papers on how to balance sustainability and competition: should competition authorities allow for restrictions of competition that benefit the environment?
In a spirit of collegiality, the meeting will take place in a workshop format in which all sessions will be plenary. We strongly encourage all attendees to attend all presentations. Our goal is to create a program that includes a variety of disciplinary perspectives, ideally consisting of about 20 papers over the two-day period.
As in past years, no funding will be available for travel or lodging expenses, but food and drink will be provided during the workshop for the participants and a dinner will be hosted on the first day of the conference.
Further information regarding accommodation, the conference program and other logistic matters will be posted on Inquiries can also be sent to (this year’s local organizer) Edwin Woerdman (
To submit a paper, please email a Word or PDF file to Edwin Woerdman with the subject line “SELE SUBMISSION”, by November 17, 2014. We will review all the papers and get back to you by December 15.
Hope to see you in Groningen!
Edwin Woerdman, Associate Professor, University of Groningen
Daniel H. Cole, Professor, Maurer School of Law and SPEA, Indiana University
Shi-Ling Hsu, Professor, Florida State University College of Law
Jonathan R. Nash, Professor, Emory University School of Law
Josephine van Zeben, Fellow, Worcester College, University of Oxford

Friday, 3 October 2014

University of Chicago Professor Saul Levmore on Thomas Piketty

Saul Levmore has posted on SSRN his review of Thomas Piketty's Capital in the Twenty-first Century. In it, he raises a question that others have raised: is there a problem with inequality, per se? We exchanged emails, and I raised this point: severe enough inequality creates a sitution in which the poor have a comparative advantage in violence. Even if the rich are able, with their resources, able to buy enough security to obtain a sizable absolute advantage in violence, the poor may have such low opportunity costs of violence that they may freely engage in it. Professor Levmore replied that if we are afraid of violent revolution, then we are in a pretty dark place and we are not quite there yet. Agreed. But we may not need to be at a point of violent revolution in order for the threat of inequality-induced violence to impose costs. Is our American gun fetishism part of that? If so, that is pretty costly. Everybody talks about Ferguson as if it were about race, only. Is it? Maybe. But is some of it a fear of the other, that other being quite possibly poor enough to entertain rational thoughts of violence? I dunno. But possibly.

Thursday, 18 September 2014

Solving Climate Change Will Cost Nothing, Sort Of

On Tuesday the Global Commission on the Economy and Climate launched its report, Better Growth, Better Climate, in which it makes the bold-sounding pronouncement that major steps can be taken to address climate change that cost nothing. Over the next 15 years we will spend some $90 trillion in infrastructure investment. "Our argument is that it would be smart to invest the $90 trillion in a good way," said Jeremy Oppenheim on APM Marketplace on Tuesday.

In a way, we have always known this. The question has always been, can you measure and quantify the risks and the known harms from climate change? Even if there remain uncertainties, it is increasingly incredible to deny that the balance of climate risks and mitigation costs tilts in favor of deep emissions reductions. So why do we still debate it? Why does it still seem as though reducing emissions is costly?

The answer goes back to my previous post, in which we do not explicitly grapple with the "losers" from climate policy, coal-related industries and states, petroleum industries, states, and countries, and all of the related industries. There is a lot of capital, physical, human, and social wrapped up in a lot of industries and places, and they may not be able to do much other than what they're doing, which is to continue to service a greenhouse gas-intensive economy. In theory, we could buy them out with the cost savings of avoiding all those climate harms. But in practice, we just don't have the money.

Wednesday, 17 September 2014

Wind and Sun Conquerors of Fossil Fuels and Fossil

The New York Times ran an article Sunday about how Germany is rapidly expanding its wind energy capacity, and realizing unexpectedly lower costs because of economies of scale never before seen in any non-hydro renewable energy industry. Large demand from Germany, Denmark, and a hanful of climate-conscious countries has helped induce the entry into the sector from Chinese businesses, which of course benefit from government support.

The question that hangs over environmentally-focused groups is why don't American utilities seem to be so intransigently wedded to fossil generation? This article seemed to point to the unease of utility executives. My theory is that in addition to a lot of physical capital in the industry, there is a lot of human capital tied up on fossil fuel extraction, transmission, and combustion. Economist and former Enron official John Palmisano used to talk about how he went around the country talking to utility executives, and made what he thought was a pretty strong case for switching to natural gas away from coal. The objection that seemed most heartfelt was that "[Utility Company X] was a company that is the coal-burning business, not the natural gas-burning business. Assuming we could retrofit coal plants to accept natural gas, what would do with all the people that know how to handle coal but not gas?" Add to that the infrastructure demands (gas pipelines, e.g.), it starts to look very difficult to switch from coal to natrual gas, or anything else. If it is that hard to get utility execs to think hard about another fossil alternative, it becomes even harder to think about non-hydro renewable energy sources. But it is not narrow-mindedness per se; it is form of capital that is specific to one way of doing things, and is not easily transferable to another way of doing things. That difficulty may be illusory, but it at least appears to those embedded in the fossil industries as very difficult.

Tuesday, 16 September 2014

Formality and Informality in Cost-Benefit Analysis

Professor Amy Sinden at Temple has posted a paper titled Formality and Informality in Cost-Benefit Analysis. This is an important paper that seeks to transcend a debate about cost-benefit analysis that has gotten intellectually (though not politically) stale in recent years. Professor Sinden points out that there are many levels of cost-benefit analysis, formal and informal, precise and imprecise, analyzing many alternatives and few. The mistake that is made according to Professor Sinden, (who is a critic of how CBA is used in environmental law and related fields) is that the case for CBA is often made by appealing to the intuitive usefulness of informal CBAs, while the formal but falsely precise formal CBAs actually bend public policy. I wonder if this is just a variant of the "false formalism" critique of CBA, but even if it is, it deserves some attention because of the nuance with which it treats different CBAs. Here is the abstract:

Cost-benefit analysis (CBA) is usually treated as a monolith. In fact, the term can refer to a broad variety of decision-making practices, ranging from a qualitative comparison of pros and cons to a highly formalized and technical method grounded in economic theory that monetizes both costs and benefits, discounts to present net value, and locates the point at which the marginal benefits curve crosses the marginal costs curve. This article develops a typology that helps to conceptualize and analyze the multiple varieties of CBA along the formality-informality spectrum. It then uses this typology to analyze the treatment of CBA by the academic community and the three branches of the federal government. In academic and policy circles, the formal end of this spectrum generates far more controversy than the informal end. Additionally, the law (federal environmental statutes and federal case law) seems to favor informal over formal varieties of CBA. Nonetheless, the executive branch appears to be moving toward the formal end of the spectrum. Executive Orders and guidance documents direct agencies to conduct a highly formal mode of CBA. And anecdotal evidence suggests that agencies often go out of their way to give their CBAs the trappings of formality, sometimes in ways that lead to irrational results. I argue that 1) failing to distinguish between formal and informal CBA, and the many varieties in between, has led to muddled thinking and to misuses of CBA; and 2) the trend toward formality in the executive branch is a bad development, in part because it can, and often does, lead to what I call "failed formalism" — a corruption of CBA that can occur when agencies fail to clearly and consistently define where on the formality-informality spectrum a particular CBA falls.

Friday, 29 August 2014

The Role of Law in Thomas Piketty's Capital in the 21st Century

There is not a lot of law discussed in Thomas Piketty's book Capital in the Twenty-first Century. Piketty drops a few hints here and there about what laws he thinks likely contributes to widening wealth inequality (the advent of dynastic trusts, the lowering of marginal rates for the highest personal income tax brackets, which contribute to executive "super-salaries"), but his basic policy prescription is a small global wealth tax.

I would not oppose such a tax. There is something elegant about such a tax, if the international tax haven problem can be solved. But in my review of the book, I suggest that some examination of the legal order is in order. Legal rules and institutions contribute to wealth inequality indirectly. In Piketty's world, wealth inequality increases when the rate of return on private capital is greater than the rate of economic growth, or r > g in his vernacular. My review examines several areas of law in which legal rules and institutions drive up rates of return on private capital (r in Piketty-speak) without doing much to increase overall economic growth. These areas are financial regulation, antitrust law, oil and gas tax policy, electric utilities regulation, and the generic practice of grandfathering. In my view, a rather simplistic faith in trickle-down economics has caused policy-makers to support any policy in which Δg > 0, however speculatively, and if Δr >> 0, well then, God Bless. Of course, Δg is very often not greater than zero.

Thursday, 14 August 2014

Regulating Greenhouse Gases Under the Clean Air Act, Version 0.0

There has been so much clamor about the Environmental Protection Agency's introduction of a proposed rule for regulating greenhouse gas emissions from power plants, it's hard to shout above it all. And yet, not much has really been added to the conversation from a policy point of view, and not much can be said. The rule sets an emissions reduction target for each state, but is very vague (or, in EPA's words, "flexible") about how states can achieve those targets. There has been so much sky-is-falling nonsense that one loses sight of the fact that the rule doesn't actually do all that much. The rule provides neither much guidance nor much admonition. Under this part of the Clean Air Act, states will be required to submit for EPA approval State Implementation Plans that set out a regulatory scheme by which they intend to carry out the broader mandates set out by EPA. The required emissions reductions are the product of complicated formulas, but have their ultimate root in emissions rate standards for coal-fired power plants, which were then adjusted for a number of political factors, like individual state efforts to reduce emissions before this rule. The vagueness is intentional. Former EPA general counsel Roger Martella characterizes EPA's posture towards states as "any way you want to reduce greenhouse gas emissions, we'll find a way to make it work." EPA is bending over backwards to let states do whatever they want to do, at the price of perhaps accomplishing too little. Charles Komanoff of the Carbon Tax Center estimates that the implicit price of emitting carbon dioxide under these targets is about $2.15 a ton. That's trivial.

My friends at Element IV, a consulting group founded by a former oil executive and a former Sierra Club lobbyist (!), are not optimistic about the survival about this much-ado-about-not-much rule. They cite legal challenges that were filed within moments of the publication of the rule. 

Despite the disappointment with the ambition of the rule, this rule is important for several reasons. Although Bailey and Bookbinder minimize the significance of what this rule can accomplish -- "give the President something concrete to say at the Paris climate talks next year," and "claim a political legacy beyond that" -- there is real game-theoretic significance to being able to say something "concrete." I noted a few years ago that international climate negotiations are extremely fragile, and that signals of cooperation were very important in preventing the unraveling of agreements. This greenhouse gas rule does allow leaders from other countries, if they are so inclined, to be able to say to skeptical constituents that the United States has done something. Not much, but something. So the facile dismissal that we should do nothing because anything we do will be canceled out by the fact that "China" -- whatever they mean about a nation of 1.3 billion people -- will do nothing, is far too simplistic. Like it or not, the nature of climate negotiations is going to have to be the taking of unilateral steps that are necessary, but not sufficient conditions for international agreement to take place. 

I would like to see a carbon tax, too, but little steps will have to do for now.

Monday, 23 June 2014

The Canadian Government Approves the Northern Gateway Pipeline

Last week, the Canadian government approved the construction of the Northern Gateway pipeline that is intended to ship crude oil produced from the oil sands of Northern Alberta to Kitimat, a small port city on the West Coast in British Columbia. The approval comes with 209 conditions, an unusually high number for the legally parsimonious Canadians, but this is a very controversial project. The Canadian Prime Minister, Stephen Harper is from Alberta, and is desperate to make sure Canadian oil sands crude has an export outlet. Harper is many things, but he is not stupid; he wants to sell oil before greenhouse gas regulations start to gain currency worldwide and the demand for crude starts to ebb. An outlet to the West, and a shipping lane to China, a country that is likely to be one of the last to embrace fossil fuel curtailment, would be a great alternative to Keystone XL, or even the patched-together pipeline route to the East. 

However, Northern Gateway faces intense opposition from the 70 some-odd distinct aboriginal groups in the pipeline's path. The 209 conditions are not likely to be a big deal as far as the federal government is involved, as long as Stephen Harper is Prime Minister. The question is whether the Canadian Supreme Court will uphold aboriginal challenges to the pipeline that are almost certain to arise from at least some of the groups. What must be very alarming, from the perspective of the pipeline proponent, Enbridge, is that aboriginal groups in British Columbia have already accepted a natural gas pipeline that will pass through much of the same territory. In particular, the Haisla Nation, which holds territorial rights around Kitimat, accepts the gas pipeline but vigorously opposed the crude oil pipeline. This suggests that aboriginal groups such as the Haisla are fine with natural gas, but not oil. It will be hard to characterize that legally as unreasonable, as oil pipelines always pose the risk of spills, while gas pipelines are much less onerous to keep clean. I have always found it hard to guess at what the Canadian Supreme Court will do, but past cases such as Haida v. BC Ministry of Forests signal that the Court will expect some pretty sincere efforts to accommodate aboriginal claims and interests.

There is a larger economic question for the whole country of Canada. In the past, large parts of the Canadian economy have centered upon timber, fish, and minerals, and Canada's possession of the second-largest reserve of oil in the world seems to consign Canada to staying that way for a while. I do not believe that crude imposes a traditional resource curse on Canadian exports -- there are many other political factors that render Canada uncompetitive other than a strong petroloonie -- but I do worry that the political economy of Canada will tether Canada's education and commerce infrastructure towards resource extraction. A 2012 paper by Elena Suslova and Natalya Volchikova suggests that a second kind of resource curse is the diversion of public monies towards resource development rather than the development of a more diverse base of human capital, like say, high technology. The pipeline really could create some path-dependencies for the Canadian economy. In that sense, the natural gas pipeline really may not be much better than the Northern Gateway oil pipeline.

Friday, 13 June 2014

Farms Versus Developers

The New York Times ran an article a couple of weeks ago on a new kind of retirement community: not just a sprawling collection houses only for old people, but mixed-use and mixed-age communities with special resources for older people. The visionary developer credited with leading the way of this new, more enlightened model of retirement living was Del E. Webb, whose first retirement community was Sun City, near Phoenix. First-year law students should remember that name. Del Webb developed Sun City, which grew and grew and grew, towards a feedlot owned by Spur Industries, a cattle feedlot. The feedlot had been there since 1956, farming in the area since 1911, and Sun City since 1960. Sun City literally grew toward the feedlot, and when Webb started having trouble selling houses, he sued Spur on the grounds that the feedlot was a nuisance. Most students think it wrong that the late-comer Webb should be able to sue the feedlot, which was already there. The chutzpah!

But as we learn in Property class, why should there be a first-in-time, first-in-right rule? Why should a feedlot essentially foreclose residential development by virtue of being there first? Back when Phoenix was a growing city and residential development was a valuable activity (let's not talk about the water usage for now), why should a feedlot stay there just because it was there? The Arizona court held in Spur Industries v. Del E. Webb that it shouldn't, and sided with Del Webb -- to an extent. Spur had to move its feedlot, but Webb had to pay the move. My students generally like that result, as land moves to its most valuable use (let's not talk about the water usage for now), and the feedlot is made whole. The "coming to the nuisance" defense is not an absolute defense, but merely a factor.

But that case did not sit well with farmers. In every single state plus Puerto Rico, some form of a "Right-to-Farm" law was passed. RTF statutes provide farms with a defense to nuisance claims by plaintiffs that migrate toward (or "come to") any allegedly nuisance-creating farm. RTF statutes commonly set out some definition of the agricultural operations that can raise the defense, a list of permitted operational changes that can be undertaken without losing the defense, and some time limit that serves as an effective statute of limitations on any claims of nuisance against a farm.

So now the coming to the nuisance defense *is* (to varying degrees and subject to lots of qualifications) an absolute defense. Are we happy?

The usual justification of Right-to-farm laws of protecting farms from encroaching residential development rings hollow in light of modern developments in agricultural operations. For example, in Parker v. Obert's Legacy Dairy, an Indiana court upheld a fairly long-standing interpretation of Indiana's Right-to-Farm law as protecting a farm that expanded operations from about 100 cows to almost 1000, holding that such a change was not a "significant change" in the type of agricultural operation, and could therefore not be the subject of a nuisance lawsuit brought by neighbors.

But this is not about the right to farm anymore. The plaintiff's property in Parker was also a farm, albeit a small-scale farm. As between the plaintiff's farm and the defendant's farm, the Right-to-Farm law acts as a subsidy for the defendant's large-scale farm. While economies of scale accrue to larger, more intensive agricultural operations, a variety of environmental and land use laws provide a check on the uncontrolled growth of such farms, ensuring that the negative externalities of such farms are at least commensurate with the economic benefits of efficient large-scale farming. Right-to-Farm laws upset this balance, providing incentives to intensify agricultural operations and enlarge capital investments. The result is a skewing of the distribution of farms toward the larger, the more intensive, and the greater polluting operations.

Tuesday, 10 June 2014

Why Has Thomas Piketty Hit Such a Nerve?

Thomas Piketty has attained a public figure status in the United States dwarfing his celebrity in his native France, and it isn't just because of the now-tired debate about the "one percent" and the "ninety-nine percent." Yes, there is wealth concentration in the United States. It is unprecedented in the United States, but not Old Europe. Piketty makes much of the Belle Epoque, the Gilded Age, a bright period of optimism and joie de vivre, but also extreme French aristocracy and wealth concentration. But in modern America, optimism is still slumping, and the wealth gap is increasing. Piketty proposes a progressive wealth tax; ideally, a global one.

But it isn't just wealth concentration that haunts Americans. Wealth concentration just focuses a unease about the extent to which we control our futures and that of our children. We have handed over much of our lives to singular entities, private or not, consciously or not, voluntarily or not, and it is never clear if we are better off for it. Whether it be due to economies of scale, or some other reason that things are concentrating in the hands of a few, our diminishing lack of choice is disquieting. So much of our day-to-day experiences as Americans are impacted by extremely concentrated industries. The Hachette Book Group has gotten into a dispute with Amazon, through which about 44% of all books sales are made, in which Amazon is reportedly delaying shipments of Hachette books as retaliation for its refusal to agree to ebook rates. This is putatively for our own benefit as bookbuyers, but as a publisher or a writer, are we better off with one widespread, brutally efficient distributor? What are our choices of cable providers? And how do you feel when you get off of a flight on the one of now-three major airlines that you are forced to patronize? [nb: you can always file air travel complaints with the FAA consumer complaint site, which I did after an American Airlines gate agent in Miami slammed a boarding door in my panting, sweating face, sneering "sorry, flight's closed."] [nb2: airlines, it has to be said, are not making money hand-over-fist like the other concentrated industries]. Yesterday, the President announced an executive order that will cap student loan repayments at ten percent of income. That, too, seems aimed at an American malaise about access to success. It gets couched by the President as making sure everyone gets a "fair shot" at success, but what he really means is that success and material wealth should not be concentrated. Piketty himself focuses much of his reform proposals around access to higher education.

This brings me to my earlier post about climate change being a national security threat. Piketty is finds it "terrifying" that the wealth gap could increase back up to Belle Epoque levels. Why? Well, what happens when there are vast wealth inequalities, and a decreasingly small fraction of people that own an increasingly large part of the pie? Can you imagine what it feels like to be one of the 0.1%? Vast inequalities of wealth, concentrated in a vanishingly small few, creates a comparative advantage for violence on the part of the dispossessed. It could be that even expensive, sophisticated security systems, while offering an absolute advantage in violence, suffer a comparative disadvantage when faced with swarms of angry crowds with little opportunity cost of violence. That is the kind of calculus confronting oppressive governments when facing frustrated and hungry mobs with little to lose from violence. This may sound fantastic in modern America, but it is not solely a dystopian, futuristic Hollywood sci-fi risk, as evidenced from the many modern-day political upheavals. Moreover, the problem with this risk is that it is a potential spiral. Once a police state -- private or public -- is erected, it becomes difficult to reverse. Marx warned that class struggles would come; Durkheim warned that they may result in violent upheaval.

I'd pay a wealth tax.

Thursday, 5 June 2014

New York City's Soda Law Will Fizzle

The New York State Court of Appeals, the state's top court, heard oral argument yesterday on New York City's "Portion Cap Rule," which seeks to limit the sales of sugary drinks to containers less than or equal to 16 ounces. This particular case has much less meaning than the media attention would appear to signify, and the outcome is not in doubt. The City will lose.

The legal issue is fairly clear. It is not about the City protecting public health, which it can do administratively (without the City Council) for certain emergencies, like quarantines to stem the outbreak of cholera, but cannot do for slow-burning problems like obesity from soda consumption. Cities can no doubt regulate consumption for health reasons, and only the most egregious rules will run afoul of some sort of a dormant commerce clause challenge. But in general, they must do so legislatively. New York City's Charter, while unique, requires it. If this is such an emergency, then limiting soda sizes to 16 ounces won't do the trick, and exempting grocery stores and convenience stores speaks to the non-emergency nature of the problem. So the New York Times is way off in reporting that it is closely watched by cities all over the country, and that the case is interesting. The case will be narrowly decided on the grounds that the Mayoral Administration of Michael Bloomberg, which initiated the Rule, exceeded its powers in enacting this rule without going through the City Council.

This case is a shame in two ways. First, obesity due to soda consumption is significantly higher in communities of color in New York City, most notably African-American and Hispanic communities. It is thus a shame that New York State NAACP president Hazel Dukes came out against the Rule, and the City's Public Advocate, Letitia James, argued against the Rule. Their view: we don't need no stinkin' protection from soda. The Rule infringes our liberty of palate. It is a fact-free, analysis-free, emotional view grounded in ignorance, and exhibiting a stunning disregard for reality. Shame on us for conferring authority on such ignoramuses.

The second shame is the Portion Cap Rule itself. Because Mayor Bloomberg did not want to go through the City Council, he was reduced to this half-baked attempt to do *something* about soda consumption and obesity. A paper I wrote discusses this link, and estimates benefit-cost ratios of at least six to one, and perhaps as high as thirteen to one. Had the former Mayor been able to work with the City Council, he could, without legal controversy, have imposed a small tax on sugary drinks that would have been much more effective, easier to administer, and would truly have been a test case for what cities can do to protect public health. That is a case New York City would have won, and set a precedent for a variety of locally-grown public health measures.

Monday, 2 June 2014

By the way, on greenhouse gas limits, Canada already did this....

To much fanfare, controversy, and promises to sue, litigate, and sue and litigate some more, the EPA unveiled its much-anticipated rule for greenhouse gas emissions from new and existing power plants. United Mine Workers of America say they feel they've been "kicked to the curb," and UMW president Cecil Roberts ominously warned, "we will not go quietly," and "you will hear from us." Tim Phillips, head of the Koch-funded Americans for Prosperity promised a "substantial effort" to defeat the rules.

This is so controversial, such a lightning rod, and ... it's been done already, and not in tree-hugging Europe, but right here, a miles north of Seattle and Buffalo, in Canada. The Canadian federal government -- the Conservative Party-led Canadian federal government, headed up by the almost comically unloved Prime Minister Stephen Harper, introduced roughly the same rule as early as 2011, and finalized it in 2012. The rule, like EPA's announced rule yesterday, sets a rate standard for power plants that is easy for natural gas-fired power plants to meet, impossible for coal-fired power plants to meet, unless a heretofore non-existent carbon capture and storage technology is deployed. The Canadian rule was quite realistic (and unambitious) in requiring that the CCS technology achieve a 30% emissions reduction rate.
No one who has had any experience with Environment Canada, the Canadian version of something like the EPA, believes that Environmental Canada, much less one under the government of Stephen Harper, was capable of forming such a rule (the Canadian rule was also not 645 pages like the EPA rule was). There is a 100% chance that the Canadian rule was developed with considerable EPA input. The Canadian rule also grandfathers up to the end of the "useful life" of a power plant -- 45 years. Sensible to some, but I've argued against grandfathering, as have many.

I can appreciate timing considerations, but remain puzzled. I can see the Obama Administration wishing to avoid rolling it out right before the 2012 re-election bid, but why wait until now? There is no margin for error if the President truly wants this in place by the time he leaves office. If that was his wish, he squandered 18 months getting this rolled out. And all the time, Bob and Doug Mackenzie had already set the precedent.

Saturday, 31 May 2014

Is Climate Change a National Security Problem?

In his commencement address to the United States Military Academy last week, President Obama called climate change a "creeping national security crisis." He means that there will be refugee flows, natural disasters, and conflicts over water and food. But really, in my narrow mind, nothing is a security crisis unless it involves violence or the threat of it. Does climate change pose that threat? Then-Defense Secretary Robert Gates made that point over six years ago.

Bruce Johnsen at George Mason once offered this example. "I'm a big guy [he is]. But if I am threatened by violence on a dark street by someone smaller than me who wants my wallet, I will give it to him even if he is unarmed. Even though I may have an absolute advantage in violence, that person is likely to have a comparative advantage in violence." I am paraphrasing, but you get the point. Also, surely Professor Johnsen is not the only person to have made this point, but he is the only big guy I know to have made this point.

The point is that people have different opportunity costs of violence. A poor mugger on the streets may have a less than 50-50 chance of winning a fight against Bruce Johnsen (that was a few years ago), but because of his extraordinarily low opportunity costs of injury, it is a chance he might take. Professor Johnsen, on the other hand, might have to cancel classes, miss conferences, and *gasp* -- even miss faculty meetings! His costs of injury would be very high. Wealth inequalities are dangerous precisely because they create vast disparities in the opportunity costs of violence.

So goes it with climate change. As the rich get richer and the poor get relatively poorer (indulge me for a moment, as Professor Johnsen noted that these claims are inferential, and may underestimate the adaptive capacity of poor nations) in a climate-changed world, the poor are likely to respond by fighting. Poorer nations are likely to respond with violence, because, after all, when your country is threatened by flooding and tropical storms, what really do you have to lose?

Thursday, 29 May 2014

End the Crude Oil Export Ban And Fix Our Nation's Roads and Bridges

The United States can end the export ban and simultaneously stabilize the insolvent Highway Trust Fund. Bridges are collapsing and 18-wheelers are falling into potholes the size of Rhode Island, and we complain that Congress has not raised the gasoline tax since 1993. That tree-hugging pit of Marxism, the US Chamber of Commerce, has called for a gas tax increase.

IHS Energy, a consulting group headed by energy writer and wonk Daniel Yergin, today released a report advocating for an end to the domestic crude oil export ban. The IHS report, downloadable from this IHS page, reports that lifting a crude oil ban would create an average of almost 400,000 jobs between 2016 and 2030. Surprisingly, ending the ban would lower gasoline prices by an average of 8 cents per gallon. This is because US gasoline prices are set by global crude oil prices not domestic production costs, and lifting a US export ban would add to the world supply by a significant amount. The only losers would be domestic refiners such as Valero, which has opposed lifting the ban. Boo hoo.

So here is an idea: lift the ban, and at the same time impose a gas tax of 8 cents per gallon. The gasoline consumer is no worse off, because the gas tax only counteracts the lower gas prices resulting from ending the export ban, and generate about $9.7 billion annually for the Highway Trust Fund (135 billion gallons of gasoline were consumed in the United States last year, 13 billion of which were ethanol). Ideally, the crude oil export ban should be accompanied by an $9 per ton of CO2 carbon tax, but that's another story.

Enacted as part of the Energy Policy and Conservation Act of 1975, the crude oil export ban was meant to secure energy supplies in the wake of the 1973 oil embargo that shocked an energy-complacent United States. The actual legislation just provides that "[t]he President may, by rule, under such terms and Export conditions as he determines to be appropriate and necessary to carry out the purposes of this Act, restrict exports of -- ... coal, petroleum products, natural gas, or petrochemical feedstocks. .." Section 103 goes on to provide that the "President shall exercise the authority provided for in Exemption, subsection (a) to promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States, except that the President may, ... exempt from such prohibition such crude oil or natural gas exports which he determines to be consistent with the national interest..." So it is pretty clear that the ban is a matter of executive discretion. It is just that Presidents Ford, Carter, Reagan, Bush, Clinton, Bush, and Obama have all decided that exporting oil was not in the national interest.

But that was 1975, and the United States is now one of the major oil producers of the world today. Much of the EPCA's provisions, aimed at insulating the United States from volatile global energy prices, still seem useful today, like the Strategic Oil Reserve and fuel efficiency standards for motor vehicles. But lifting the crude oil ban now has bipartisan interest, with Senators Wyden and Cantwell joining Murkowski in calling for at least consideration to ending the ban.

Monday, 19 May 2014

Extra-territorial Application of Domestic Law ... ?

I am preparing for a webinar in series hosted by the Canadian Bar Association, with the administrative leadership of Marc McAree, partner at the Toronto law firm of Willms and Shier, on Cross-Border environmental disputes. My old friend and co-author, Austen Parrish (now Dean at IU-Maurer), will be on hand, and he will lament the breakdown of reliance on international institutions in favor of unilaterial measures, such as domestic litigation. In Austen's previous work, he has outlined his view of the problem, which is that this leads to a breakdown of the implicit norms of international comity, and will lead to an unproductive tit-for-tat world of international diplomacy. In Austen's view, courts are even creatively redefining extra-territoriality out of existence, essentially making almost everything into a "domestic matter." Austen politely (he is Canadian after all) presses a disagreement with "sovereigntists" such as Eric Posner, Jack Goldsmith, and Curtis Bradley for advocating for a world less dependent on international institutions than say, domestic litigation or economic sanctions.

But I think Dean Parrish's cautionary notes ring hollow in several contexts, and the cyber-security threat is a good example of why. Austen's worry is about a breakdown in international legal institutions, and an over-reliance on litigation as a means of settling cross-border disputes. But let's stop and wonder here: what is the endgame? Is it true that this tit-for-tat world will give rise to a breakdown in international cooperation altogether? Surely trade between China and the United States will not suffer too much as a result of this spat over cyber-security. What exactly will bring Russia to heel over its regional ambitions to re-create some subset of the former Soviet Union? I think the U.N. is not up to it, especially with Russia and China on the Security Council. Being unable to use VISA or MasterCard -- now that sounds scary! International institutions, while not dead, are not going to be the sole bulwark against international lawlessness in the future. The deep economic interdependencies among nations will be important, and markets will play a role in disciplining both international lawlessness, and the running amok of domestic litigation. The difficulty of enforcement in areas such as cyber-security also limits the capacity of international institutions to police.

Fundamentally, the effects test as a basis for jurisdiction over foreign entities has fallen on hard times, and perhaps that is the problem. But if there is going to be some resurgence in the role of international institutions, some grappling with extra-territorial effects is going to have to take place. Without a more complex discussion of extra-territorial effects, both the "sovereigntist" and the "internationalist" positions in the abstract sound unrealistic and overbroad.

Friday, 16 May 2014

Nothing is off-limits for the Onion

Continuing on the Piketty-Beaudry-Green work on income inequalities -- that high-skilled workers are finding themselves in lower-skilled jobs -- the Onion has a piece on a high school student and her chemistry teacher applying for the same waitressing job. Nothing is sacred for the Onion: back on October 3, 2001, the Onion, having taken a reading on the national mood, decided that it was going to have a little fun in the aftermath of September 11.

Tuesday, 6 May 2014

Scalia's Blunder, and What Else It Signifies

Much has now been made of a fairly spectacular blunder made by Justice Scalia in his dissent in the EME Homer case announced last week. Scalia opined that EPA was trying to smuggle cost considerations into rulemakings under the Clean Air Act. He also said it was not the first time that EPA had tried this little bit of chicanery, and he cited Whitman v. American Trucking as an example. The problem is that EPA's position was the exact opposite, as Scalia's own opinion reflects. Scalia also ignores another of his opinions in Entergy v. Riverkeeper, in which EPA declined to mandate a very expensive technology on cost considerations. Granted, Scalia is the author of a large number of opinions (over 1000), so maybe he should get a break. Still, Dan Farber notes the casual nature of the writing from his dissent ("Look Ma, no hands!"  "Wow, that's a hard one -- almost the equivalent of asking who is buried in Grant's Tomb") that is really unusual for a Supreme Court opinion. Perhaps Justice Scalia is, in his advancing years, shedding the few inhibitions he still has. 

There are other aspects of Scalia's opinion which suggest a more significant about-face. The broader about-face is what seems to be an about-face in "conservative" (they would call themselves that, I am not sure I would) circles on cost-benefit analysis, as cost-benefit analyses start to make some regulations look sensible, like climate policy. The dismay over the social cost of carbon is a driver of that movement. But we should not be surprised that "conservatives" have discovered postmodernism late in their intellectual lives, including that of climate skepticism. As Eric Rasumussen points out, arguing over facts is more personal than arguing over theories. My view is that "conservatives" sense they are going to be on the losing end of empirical arguments, and are driven less by data than by ideology.

Tuesday, 29 April 2014

Thomas Piketty's Capital in the Twenty-First Century

French economist Thomas Piketty's book, only recently translated into English (and on 2-3 week back order at Amazon) has clearly struck a nerve. Income inequality in the United States has become like climate change -- just too emotional for most people to discuss rationally. It should surprise no one that Paul Krugman loved it, and it should not surprise very many people that David Brooks was more skeptical. You might guess at the political preferences of a French economist who was hired by M.I.T. at the age of twenty-two, but opted to return to France to research and teach, and someone who writes that "the discipline of economics has yet to get over its childish passion for mathematics and for purley theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences." (p. 32) You could guess, but you'd be wrong. I don't actually find Piketty's book particularly ideological. He seeks to convince us that the capital-to-income ratio will, over time and assuming an absence of a shock like a world war, asymptote to some level. For the Krugmans of the world, Piketty's message that capital will become even more important in the future, exacerbating inequality, allows them to say, "see, I told you so!" Unsurprisingly, those critical of Piketty's wealth tax -- a tax on capital, which is hardly a new idea -- label him a Marxist. But Piketty is very critical of Marx, while acknowledging that he did not have the benefit of data that succeeding economists had. At times Piketty verges on the snide in criticizing socialists and modern-day quasi-socialists ("Unfortunately for the people caught up in these totalitarian experiments, the problem was that private property and the market economy do not serve solely to ensure the domination of capital over those who have nothing to sell but their labor power. They also play useful role in coordinating the actions of millions of individuals ... human disasters caused by Soviet-style centralized planning illustrate this quite clearly." p. 532). Piketty is not naive, so the fact that his book as caught the sails of a highly partisan and largely fact-free debate about inequality cannot be a surprise to him. In this vein, I find this book refreshing in its balance and humility.
What I wish Piketty did more was to explain why countries were destined to asymptote to some pre-determined capital-to-income ratio. And here, I wish he would have spent just a little more time thinking about the role that law and legal institutions have in shaping capital formation. A paper by Paul Beaudry and David Green at the University of British Columbia suggests that technological change is not just an exogenous shock, as Katz and Goldin seem to imply, but one that has some endogeneity, adjusting toward relative factor supplies, including education. My own work does not delve into the nature of capital accumulation itself, but the role that legal rules and institutions play. That law and legal institutions play a role in capital formation is obvious, but exactly how it affects, and in what areas, is more complicated.

Wednesday, 5 March 2014

Curbing Sugary Drink Consumption in New York City

By Shi-Ling Hsu, Tyler Fleming, Kaitlin Monaghan, Ian Carnahan, Kevin Schneider, Shannon Mathews, and Kevin Alford

A paper has been posted on SSRN which performs a rough cost-benefit analysis of sugary drink regulation in New York City. Why New York City? Because former NYC Mayor Michael Bloomberg caught all kinds of flak from all kinds of groups for trying to clamp down on soda consumption in the Big Apple (which is not named the Big Soda). Opposition from the National Restaurant Association, or the movie theater industry is expected. But opposition from the New York Chapter of the NAACP is surprising, since African-Americans suffer disproportionately from the ill effects of excess sugary drink consumption: obesity, coronary heart disease, and type 2 diabetes. While the overall obesity rate in New York State is 23.6%, it is 26.3% for Hispanics and 32.5% for non-Hispanic blacks. Rates of diabetes are twice as high for Hispanics and non-Hispanic blacks as for whites. But this ganging-up on Bloomberg, whose imperial instincts do him no favors, has been all heat and no light. One question that we really should be asking (among others) is this: does sugary drink regulation generate more health benefits than it costs sellers?

The answer is almost certainly a strong yes. Our study finds that the costs of a total ban on sugary drinks in New York City would top $500, and is unlikely to approach $1 billion annually. (Such a total ban is fanciful, but it would have been too difficult to do a cost-benefit analysis of Bloomberg's actual rule, the Portion Cap Rule, which limited the size of sugary drink sales to 16 ounces in many locations.) On the other hand, we estimate that such a ban would generate health benefits ranging from $3.2 billion to over $13 billion. These large numbers are largely driven by the premature deaths attributable to sugary drink consumption. A certain number of cases of obesity, coronary heart disease, and type 2 diabetes are attributable to sugary drinks; so, too, are a certain fraction of deaths from these same diseases. These account for most of the costs of sugary drink consumption.

Thursday, 30 January 2014

Carbon Fee and Dividend to be Debated in Canada's House of Commons tonight

Canadian Member of Parliament Bruce Hyer, from Thunder Bay, Ontario, will be delivering a speech in support of a Carbon Fee and Dividend proposal being championed by Citizens Climate Lobby Canada, to impose a carbon tax and refund the proceeds to Canadian households in lump sum payments. MP Hyer, whom I had the great pleasure of meeting last November, is not just a committed environmentalist, but is economically literate, a rarity for MPs and members of Congress. Hyer was the sponsor of Bill C-311, The Climate Change Accountability Act, the only bill in Canadian history to have passed the House of Commons and be quashed in the Senate without discussion, a stain on the normally Democratic and law-abiding Canada. His speech, along with reaction, will be broadcast at 6:45 pm Eastern time, can be followed at

Friday, 17 January 2014

Exporting Natural Gas, Coal, and Oil

Americans have gotten so used to being dependent upon imports for energy, now that the United States has genuine export potential for all three fossil fuels, it does not seem to have the ability to rationally discuss the tradeoffs.

I can say this: calls by old-fashioned, New Deal Democrats to avoid exporting natural gas are short-sighted. For a party that has held a vice-grip on environmental voters, this is a terrible stance. Pro-union sympathy entrepreneurs and energy-intensive manufacturers such as Dow Chemical are calling for a halt to approval of new liquified natural gas export facilities, on the grounds that exports would raise natural gas prices, and deprive American manufacturers of an energy cost advantage. Disturbingly but unsurprisingly, a number of environmental groups are also on board. Here are two reasons this is wrong-headed:

First, do we want artificially low energy prices? Is there any inkling among the New Deal Democrats out there that the United States might benefit from an economy that is more energy efficient? Do they really think -- are they truly dumb enough -- to think that we will develop a more energy-efficient economy by keeping energy prices artificially low? And is it really the raison d'etre of pro-union Democrats to keep skilled workers in energy-intensive manufacturing jobs? What happens if energy prices go up, say, because we get climate legislation (which New Deal Democrats say they favor)? Will these sectors and workers be prepared?

Second, if these New Deal Democrats could look beyond the United States, what is their plan for getting China to burn less coal? Wag our collective fingers at them? Negotiate some sort of meaningless "clean technology cooperation" agreement? The most important thing that can be done right now is to divert the People's Republic of China from its current path of development through coal-fired electricity generation. The best near-term hope of doing this is providing China with cheaper natural gas. Decades of environmental activism have not accomplished a tiny fraction of what hydraulic fracturing has done to finally topple coal from its perch as America's electricity fuel of choice. That is not something to get too giddy about right now -- the study released recently suggesting that natural gas leakage is contributing much more to greenhouse gas buildup than previously thought is very troubling. But that is a fixable problem -- the EPA could regulate those emissions, even without suffering the ignominy of having to go to Congress.

Third, building on that last point, EPA must, must, must clamp down on methane leakage. It must require oil extractors in North Dakota to capture methane. This can be more easily done if natural gas prices are high. It becomes more worthwhile (not completely worthwhile, absent regulation) for oil extractors to capture leaking methane, and it becomes more economically palatable to clamp down on leakage from the gas industry if it is turning a better profit. In fact, fast-tracking LNG terminal approvals might be very subtly politically coupled with some acquiescence from the gas industry to some sensible leakage and flaring regulations.

Now, let me beg out of saying anything about coal exports and oil exports. Coal exports have been on the agenda for years, and this past week Senator Lisa Murkowski opened up the prospect of lifting the U.S. crude oil export ban dating back to the 1970s. I can't really think of a purely economic reason and principled reason to oppose this, but I do. In the end, I am an environmental consequentialist. I think that sharing American coal and oil largess with China and others is a bad idea. Although some of the same arguments above could well apply to coal and gas, I believe that regulation under the Clean Air Act, including new greenhouse gas regulations on power plants and vehicle fuel efficiency standards, will help keep the expansion of coal and oil in check. This would not happen in China. So I say keep American oil and coal within its borders. I will not, however, invoke the disingenuous arguments that New Deal Democrats have put forth in opposing the export of natural gas. The U.S. should avoid exporting coal and oil just because it would defeat goals relating to climate change.