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Tradable Pollution Permits or Green Taxes/Subsidies?. James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut, USA. CO 2 and Temperature Change.
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Tradable Pollution Permits or Green Taxes/Subsidies? James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut, USA Stodder, Presentation on Pollution Permits, Sept. 14, 2011
CO2 and Temperature Change http://www.ngdc.noaa.gov/paleo/icecore/antarctica/vostok/vostok_data.html Stodder, Pollution Permits, Sept. 14, 2011
CO2 and Industrialization http://www.globalwarmingart.com/wiki/Image:Carbon_Dioxide_400kyr.png Stodder, Pollution Permits, Sept. 14, 2011
Surface Temp & Hurricane Intensity Hurricane Intensity - - - Sept. Surface Temp __ “Increasing destructiveness of tropical cyclones over the past 30 years”, Nature, 8/4/05, ftp://texmex.mit.edu/pub/emanuel/PAPERS/NATURE03906.pdf Stodder, Pollution Permits, Sept. 14, 2011
Majority Believes in Global Warming Source: Yale University Project on Climate Change Communication Stodder, Pollution Permits, Sept. 14, 2011
Good Old Supply & Demand! Stodder, Pollution Permits, Sept. 14, 2011
Planning is Perfect – if No Uncertainty! Stodder, Pollution Permits, Sept. 14, 2011
But if Costs are Uncertain … Stodder, Pollution Permits, Sept. 14, 2011
… Outcome with Quantity Controls Stodder, Pollution Permits, Sept. 14, 2011
Losses with Quantity Controls Stodder, Pollution Permits, Sept. 14, 2011
Losses with Quantity Controls Stodder, Pollution Permits, Sept. 14, 2011
With Cost Controls, further from Equ. Stodder, Pollution Permits, Sept. 14, 2011
Greater Losses with Cost Controls Stodder, Pollution Permits, Sept. 14, 2011
Steep Decline in Benefits => Quantity Controls Weitzman (1973)
What if more Gradual Define in Benefits? Stodder, Pollution Permits, Sept. 14, 2011
Quantity or Cost Controls? Stodder, Pollution Permits, Sept. 14, 2011
Cost Controls Closer to Equilibrium Stodder, Pollution Permits, Sept. 14, 2011
Quantity Controls Further from Equilibrium Stodder, Pollution Permits, Sept. 14, 2011
Costs more steeply sloped than Benefits => CostControls Prices vs. Quantities Revisited: www.rff.org/documents/RFF-DP-98-02.pdf
Best Method is an Empirical Question: If Social Benefits are Less Price Sensitive (More Steeply Sloped) than Costs=> Use Quantity Controls(Pollution Permits). Stodder, Pollution Permits, Sept. 14, 2011
Benefits more steeply sloped than Costs=> Quantity Controls Prices vs. Quantities Revisited: www.rff.org/documents/RFF-DP-98-02.pdf
If Social Benefits are More Price Sensitive (Less Steeply Sloped) than Costs => Use Cost Controls (Taxes / Subsidies). Stodder, Pollution Permits, Sept. 14, 2011
Costs more steeply sloped than Benefits => CostControls Prices vs. Quantities Revisited: www.rff.org/documents/RFF-DP-98-02.pdf
Volatility of S02 Prices, US: 1995-2006 William Nordhaus (Copenhagen, 2009) Stodder, Pollution Permits, Sept. 14, 2011
Basic Business Argument: What is more important for your Business? • Knowing the future price of energy that your business must pay? • or … • Knowing the future quantity of energy that thecountry as a whole must use? Stodder, Pollution Permits, Sept. 14, 2011
Additional Arguments: • Carbon taxes will make the cost of carbon-based energy higher, but also more stable. • Taxes on energy are already in place. Pollution Permits would require new levels of bureaucracy. • Much easier to tax oil at the refinery than check pollution permits at the tail pipe or smokestack. • Carbon tax applies to all users, while permits are monitored for just the biggest polluters. Stodder, Pollution Permits, Sept. 14, 2011
What about the Recession? Martin Wolf, Financial Times, Sep. 6, 2011 Stodder, Pollution Permits, Sept. 14, 2011
Bond Market Worried About Growth http://research.stlouisfed.org/fred2/graph/?id=FII10,