Common Tragedies

Thoughts on Environmental Economics


Posted by Daniel Hall on September 19, 2008

I have been far too distracted by global financial calamity this week to spend much time thinking or writing about environmental economics.  As way of apology I’ve rounded up some good quotes that touch on a few of the (often tenuous) links between the complete meltdown of our economic system and environmental economics:

But the gloomy investment climate suggests that clean energy needs a quick rebound in credit markets more than it needs lawmakers to renew tax credits if it is to avoid a desert of financing options for the rest of 2008 and 2009.

— Nathanial Gronewold and Michael Burnham at Greenwire

The most passable carbon pricing policy up until now was believed to be cap and trade, a system in which emission permits are bought, sold, banked, and so on. Will that begin to look undesirable in the wake of this crisis?

Free Exchange, wondering whether market skepticism will influence the course of climate policy

I think we’ll only get one shot to set things right by throwing a ton of money at the problem, so we’d better think carefully before we throw it at symptoms rather than causes. … As far as the money is concerned, throw it at infrastructure. Increase worker bargaining power by offering Federally funded retraining sabbaticals for any worker over thirty who decides they want to retool. I’d rather see a new WPA than a new RTC.

—  Steve Randy Waldman, with smart thoughts on bailout money and infrastructure spending.  I do worry a bit though about where the green collar job nuts supporters are going to run with this.

Certainly AIG though with the construction bonds that they’re holding and with the insurance that they are holding very, very impactful to Americans…

Sarah Palin, who caught a lot of flak — much of it deserved — for her responses to questions about the crisis.  However, she actually seems to be right about the construction bond point, as Tyler Cowen points out.  Credit conditions are going to make it difficult for municipalities to build infrastructure over the next couple years so in my mind this strengthens Waldman’s argument above.

It’s useful that Paulson seems to have excellent contacts and working relationships with China, which will be America’s most challenging bilateral relationship for the next decades.

Jonathan Zasloff, arguing that Paulson should be kept on as treasury secretary regardless of who the next president is.  Zasloff previously discusses climate change — Paulson is a committed environmentalist — although he doesn’t draw the obvious link: doing anything substantial about climate means getting China on board, and ASAP.  China’s relationship with the U.S. right now is the most important bilateral relationship affecting global economic health, and long-term China’s relationship with the U.S. is the most important bilateral relationship affecting global environmental health.  Speaking of which, who is bailing out whom again?

surely it would be more rational for the Chinese to own the American financial system itself

Robert Preston

In our central scenario, we estimate that the crisis could lower real GDP growth in 2008 and 2009 by an average of 1.8 percentage points per year.

Jan Hatzius.  I’ll note that substantially reducing economic growth should also slow down carbon emissions in America over the next couple years!  Unfortunately this is rather like getting killed by lightning while looking for that silver lining in the cloud.  Speaking of which:

Annoying our neighbors so much that they cut off our oil supplies would, I suppose, be one way of helping us achieve energy independence, but it doesn’t seem like a particularly good idea.

Hilzoy, wondering who exactly is the most knowledgeable person in the U.S. on energy issues these days.  (Hint: It’s not Sarah Palin.)

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