Monday, November 24, 2008

The problem with Kyoto and such

Climate change issues have to be dealt with on a policy level by economists and not climate scientists. The role for climate scientists is to measure what is happening with as much accuracy as is possible but not to design and implement policy.

Policies have to be measured as to what sort of impact they have on society and the single best way to measure the impact on society is to measure the economic costs and benefits. Every policy has an impact and it needs to be quantified. Not doing something will in some cases be cheaper than doing something. All the policy options can not be enacted, so they need to be measured against each other and the ones that make the most sense are the ones that need to be enacted.

There needs to be an active international process to measure the policies. There is nothing better than using something like the Copenhagen consensus. An active debate before a panel to try and come to some agreement as to the best course is a good way.

More regulation and an attempt to reduce consumption is not going to bring positive results. Most policies are oriented towards these directions and are doomed to failure and cause more problems than they solve.

Solutions have to be focused on what will increase GDP, they have to be ones that can show measurable benefits to society. Everything says that the only real solution is to price green house gasses.

Pricing green house gasses is the only way to go that makes any rational economic sense. By putting a price on C02 of $30 to $60 a tonne, $700 to $1500 a tonne for methane and $9000 to $20 000 per tonne of nitrous oxide. Putting these sort of dollar figures on production of the gasses will make a significant difference to the cost of production of many things. The cost added to a pound of beef would be about 17 cents.

Adding the costs to the products by charging for the GHG emisions will cause businesses to figure out how not to emit them, consumers will seek lower priced alternatives.

If there is then a market for people to get paid for removing CO2 and other GHGs, there will be businesses working on how to capture and store the CO2. The more companies doing it, the better the technology and the cheaper the prices will get.

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