Filed under: Climate Change, Environment, Environmental Policy, International, Legislation, Policy, Trade | Tags: Border Adjustments, Logjam
[I originally published this post at the Breaking The Logjam blog, where I periodically blog. Here's the original. Here's the post explaining my participation at BTL.]
A big concern with national climate change policy proposals regards the issue of international competitiveness. A national climate change policy like a cap-and-trade system or a carbon tax will impose higher costs on the producers of regulated products, and if foreign producers of competitive goods are not similarly regulated, they will possess a competitive advantage over our domestic producers. Without proper measures, consumers in the U.S. will probably prefer to buy the cheaper (less regulated) imported products over the more expensive (but climate change-regulated) domestic goods. This could not only damage domestic industry (even if producing goods just as efficiently as their foreign competition), but could also lead to more production of unregulated, dirty, carbon-intensive goods (what’s referred to as leakage). A double whammy.
One potentially elegant solution to this problem presents itself in the form of “border adjustments“. With border adjustments, a tariff would be imposed on any product imported into this country from a country that did not impose adequate climate change regulations on its production. A recommendation along those lines has been recommended by two large U.S. Unions (the IBEW and the AFL-CIO), and by the U.S.’s largest coal-burning utility, AEP (strange bedfellows indeed). Their proposal would require “large emitter” countries (read: China & India) to submit allowances to the US for any unregulated emissions created during the productions process of products they intend to export to the US.
A second, much less talked about side to border adjustments regards the exporting of US products regulated under climate change legislation. Using the same competitiveness arguments as with incoming border adjustments, if we want our ostensibly “cleaner” US products to be able to compete with foreign products on their turf, we could offer “rebates” to exporters to strip these products of their regulatory costs when exported to these countries. Without such rebates, we’ll be placing domestically produced exports at a competitive disadvantage with their foreign produced, cheaper, and “dirtier” competition; a situation ripe for leakage.
There are a lot of important issues at stake when thinking about competitiveness and climate change policies. When thinking about these and other issues, it’s been helpful for me to realize that by placing a price on greenhouse gas emissions, a cap-and-trade system or carbon tax will be forcing producers of carbon-intensive goods to cover the true (or at least truer) costs of their products (they will be internalizing an externality). If we agree that unregulated producers in other countries (and currently in this country) are not being forced to pay for these costs, then we can also say they are actually being subsidized by their governments. By imposing border adjustments on such subsidized products, we would just be leveling the playing field.
For more information:
- “Competitiveness Under Climate Policy,” a blog post by Daniel Hall at the environmental economics blog Common Tragedies.
- A paper by Richard Morgenstern at Resources for the Future regarding Competitiveness & Mandatory US Climate Policies.
- “Should a Carbon Tax be Border Adjustable?”, a blog post over at Greg Mankiw’s Blog.
Filed under: Agriculture, Climate Change, Environment, Environmental Policy, Legislation, Policy | Tags: Agricultural Lobby, Agricultural Runoff, Agricultural Subsidies, EQIP, Logjam, New Zealand
[I originally published this post at the Breaking The Logjam blog, where I periodically blog. Here's the original. Here's the post explaining my participation at BTL.]
If one were to look for specific examples of “logjams” in U.S. environmental policy, a prime candidate would be the agricultural lobby. This past Sunday the Wall Street Journal, in an article entitled “Farm Lobby Beats Back Assault on Subsidies,” detailed the most recent victory of the agricultural lobby against a proposed (and modest) reining in of the vast system of direct payments and price supports that undergird the multi-billion dollar agricultural subsidy system within the U.S. (make sure and check out their fantastic interactive breakdown of the U.S. agricultural subsidy system).
Thanks in large part to their successful lobbying, agriculture has been practically exempt from environmental regulation, either through explicit exemptions for agricultural activities, or through laws structured in such a way as to allow for farms to escape most or all environmental regulatory impact in what professor J.B. Ruhl (and Breaking the Logjam participant) has deemed the “anti-law of farms.” Professor Ruhl has researched and analyzed agriculture and environmental law in extreme detail, and notes there are “few exceptions to this anti-law.”
It is not a stretch to say that a great many of the harms agriculture is responsible for have been created by or exacerbated by our regulatory coddling of agribusiness. Take just three examples: 1) as noted by fellow BTL blogger Daniel Wieck, agricultural runoff is responsible for the majority of non-point source water pollution in the U.S., yet many “normal farming practices” are specifically exempted from the Clean Water Act; 2) Agricultural price support programs for sugar have artificially raised the price of sugar in the U.S. and have led to the destruction of a large part of the Florida Everglades; and 3) Agricultural activities are also responsible for 7% of domestic greenhouse gas emissions, yet the U.S. is not even considering direct regulation of these emissions.
To top it all off, when Congress actually has legislated curbs on environmental harms from agriculture, they have done so through billions of dollars worth of more subsidy payments – to the very same farms creating the pollution in the first place! (There are two primary types of federal programs that provide subsidies to the agricultural industry ostensibly for environmental protection: land retirement, easement and conservation programs such as the Conservation Reserve Program (CRP), and working lands programs such as the Environmental Qualities Incentives Program (EQIP) (the NYT had a great recent article on EQIP)).
This is a serious logjam in environmental regulation, and many people on both the left and the right agree something needs to be done to lessen agribusiness’s hold on legislation. New Zealand managed to do so in 1984, despite having an economy much more reliant on agricultural production. It’s time we follow suit.
Further Reading:
- Agribusiness: Long Term Contribution Trend (agribusiness lobbying data from the Center for Responsive Politics)
- “Surviving Without Subsidies” (Aug, 2007 NYT article by Wayne Arnold)
- “In the Farm Bill, A Creature from the Black Lagoon?” (January 2008 NYT article by Andrew Martin)
- “EQIP in the News” (post by Anthony Schulz in Agricultural Law Blog)
Filed under: Air Pollution, Climate Change, Environment, Environmental Policy, Policy | Tags: Cars, Google, Logjam, Public Transportation, Urban Sprawl
[I originally published this post at the Breaking The Logjam blog, where I periodically blog. Here's the original. Here's the post explaining my participation at BTL.]
Not to belabor the blog discussion brought up in Lars’s earlier post regarding public transportation (good post, Lars!), but as I was listening to today’s panel discussion, and the point about whether or not public transport was a viable solution for a large part of the U.S., I was reminded of an article I read earlier last year in the New York Times which seems to offer a possible solution to some of the cultural, geographical and logistical difficulties with replacing our car-driven culture with more and better mass transport systems.
Google has managed to build up and run one of the major mass transit systems in the Bay Area to shuttle their employees to and from work. It appears to be wildly successful. Could not other iterations of similar systems be put together by other large-scale employers (or groups of smaller employers) to help lessen the congestion (and its accompanying pollution) problem due to the US’s uniquely sprawled geography? (according to the article Yahoo and Ebay have already started imitating their transport system). If we view congestion and pollution as an externality brought about by large employers locating in areas where most of their employees have to commute long distances every day, would it be insane to expect these employers to foot the bill for alternative transportation systems?
Also, as an aside, since Google explicitly sells their transportation system as a fringe benefit to attract employees, the idea that Americans are unwilling to change their car-driving desires seems to weaken a bit. I for one would rather rely on an efficient and comfortable transport system than have to put up with suburban commuting (but maybe that’s just me).
Filed under: Agriculture, Climate Change, Ecosystems Services, Environment, Environmental Policy, Policy | Tags: Agricultural GHG Emissions, Logjam, New Zealand, Sequestration
[I originally published this post at the Breaking The Logjam blog, where I periodically blog. Here's the original. Here's the post explaining my participation at BTL.]
Panel IV has been discussing the role of ecosystem services in our approach to land and farm policy. Panelist Baron Thompson discussed the wide-randing opportunities and challenges from reframing environmental issues in terms of ecosystem services, and JB Ruhl, while not present at the panel discussion (due to a canceled flight) is presenting a symposium paper on agricultural ecosystem services.
Discussion of ecosystems services brings to the fore the important issue of what role we can expect from the agricultural industry in domestic climate change policy. In the US, agriculture is responsible for approximately 7% of GHG emissions, mostly in the form of methane and nitrous oxide emissions. However, agriculture also has the potential to biologically sequester carbon (and thus reduce atmospheric carbon dioxide) through the adoption of certain farming practices such as reduced tilling. Biological greenhouse gas sequestration is a perfect example of an ecosystem service, and, as professor Thompson pointed out, it is currently one of the only ecosystem services that actually has any money behind it.
Despite agriculture’s non-trivial contribution to GHG emissions, it is highly unlikely to expect U.S. legislation to directly limit agricultural emissions. So far, only New Zealand has planned to include agriculture “within” its cap-and-trade system (which probably has something to do with New Zealand being the only OECD country without a vast system of agricultural subsidies). We will likely see, however, assisted voluntary participation in U.S. climate change policy through the sale of “offset credits” to entities directly capped in their emissions (for example, the current version of the Lieberman-Warner bill — the only bill to have already been passed by the Senate Environment & Public Works Committee — will allow for up to 15% of capped entity emissions reductions to be achieved through the purchase of agricultural offsets). Typically, such an offset system within a larger cap-and-trade program allows for the capped industries to purchase a certain amount of offset credits from individual farms that have adopted practices or technologies that will decrease direct GHG emissions or increase the amount of GHG sequestered.
In such a system, while the agricultural industry will not be forced to reduce their GHG emissions or increase their carbon sequestration, they will be incentivized to do so. If the price that the buyers are willing to pay for the offset credits are more than the cost to farmers for adopting the new practices or technologies required to reduce emissions or increase sequestration, then farmers will adopt these new practices and technologies voluntarily in order to reap the financial benefits from selling offset units. It remains to be seen if such a program will be a useful contributor to domestic greenhouse gas emissions reductions.
