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Black (Carbon) Friday Ponderance
November 28, 2014 Economics 108

Ponder this. Perhaps the best way to keep global fossil fuel consumption down now is for all nations to sign a global climate accord that promises they will do absolutely nothing about climate change over the next 100 years. Intro econ students should be able to explain why this strategy may prove more successful than current approaches, and for two reasons, not just the one obvious one.

"8" Comments
  1. Okay, the obvious one, I think, is that if people expect something to be done AND if that something is expected to raise the cost of fossil fuels in the future such that fossil fuels are cheaper now than in the future, they’ll buy more today (though they may not consume it, right?). So doing nothing will signal that prices won’t be so high in the future, and people will consume *relatively* less/conserve relatively more today than they would in the alternate scenario. Of course, if that something raises the cost of fossil fuels NOW, say, a carbon tax, then that would lower consumption of fossil fuels today.

    Ugh, I’ve been trying to get (2) but can’t. Hopefully it will come to me and I won’t feel so bad about myself.

  2. I think you are on the right track Alex, but I was thinking if you follow that path, the “limited” amount of fossil fuels will be consumed earlier, make alternative sources genuinely needed faster. This will incentivize their development in commercially competitive form, not subsidized conditions.

  3. One of the effects of any regulation, is that the proposed ceiling quickly becomes the de-facto floor.

  4. I admit I have been puzzled by the idea that we, I assume people, can get global consumption of fossil fuel down NOW, which I assume you mean in the next year or two. But then Samuelson was my textbook for economics 103, not Rizzo, so I can plead ignorance in not seeing a good obvious answer, let alone two.

    But then I assume people of good will do not wish to to demolish the worldwide standard of living. Were we to go back to simpler times, we would not have toilet paper; OK, North Korea does not have toilet paper, and they do not use much electricity, but WC’s question was not about them directly.

    I was thinking one way to reverse global fossil fuel consumption NOW would be to put the world into an economic depression, but that takes a lot of lead time and a lot of political determination to kill the human spirit. The macro guys might not admit it, but their tools are pretty crude and work in unintended ways. If WC’s premise is to promise to do nothing, then activity to screw up our or other nations will not work, certainly not NOW.

    Even if we in the US all started to ride bicycles, take cold showers, and load up with bamboo-stuffed quilts, we could not prevent even the Hong Kong manufacturers, or the Indian manufacturers from using machinery, which uses power, from making what the world needs. Tomorrow, which is NOW, the world will drive to work, and the efficient will heat and cool their homes if they can afford it, and if they cannot they are not part of the fossil fuel problem.

    An aside to Alex: of course we fill up on fuel oil in anticipation of higher prices. If one is a big consumer of a commodity, one can buy a million gallons in the futures market even if one does not have a million gallon tank in the cellar. Buying commodities do reduce risk, as Southwest Airlines did with jet fuel, can be a reasonable business decision; they wanted to stick to running an airline without the added complication of being a jet fuel trader.

    • The parenthetical point I was making, Harry, was that “consumption” here seems to be equivalent to buying, not to using. When it comes to climate change, no one cares how much carbon people purchase, be it at the pump or in futures. They care about how much people burn.

      Still can’t get 2. Hints? Maybe I don’t know enough about the alternatives. All my intuition says doing something (taxing fossil fuels, subsidizing substitutes to increase price elasticity of demand for fossil fuels) does a better job. Even thinking about concepts like normal goods and inferior good, I conclude that as a normal good(?), fossil fuel consumption would go up if incomes were to rise (or if people expected their incomes to rise) in the do-nothing scenario. HEEELPPPP MEEEEE

      • Alex, the diabolical Dr. Rizzo has something up his sleeve. If we were lucky enough to be part of Economics 108, we would by this time have been given clues, assuming we had our brains engaged.

        Regarding burning those fossil fuels we purchase, they will get burned, no question about it. I have doubts about the effect of increasing carbon dioxide from 400 parts per million to, say, eight hundred parts per million and whether that might happen at all, let alone that federal CAFE standards or green dormitories will change the answer by one part per million. I do not pretend to have all the answers to a problem, if there is a problem, but I think it is unwise to chuck fire as a way to keep warm.

        I am still as puzzled as you on how to reduce fossil fuel consumption now or even soon. I thought about Rizzo’s piece on thorium reactors, but then that would be a long-term project. (I asked a nuclear engineer who works with a power company [in the Ocean Bar at the Breakers!] about thorium reactors for $2 billion/800MW, and the person knew nothing about it. Then I said I know this guy at the U of R, who walks into a bar with a rabbit…)

  5. Alex, may I add that doing nothing is likely to yield better results when the actors are U.N. diplomats.

  6. Would WC, in between or after grading exams, please tell us about his perpetual motion machine?

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