WaterWired

G. Tracy Mehan III Reviews Books by Nordhaus and Yergin: Are Green Taxes the Answer to Pollution?

G. Tracy Mehan III, a frequent contributor to WaterWired, is executive director
for government affairs at the American Water Works Association and adjunct professor at the Antonin Scalia Law School at George Mason University. He writes great book reviews (and other things) so when he sends me something I post it.

Here he reviews two books:

The Spirit of Green: The Economics of Collisions and Contagions in a Crowded World  by Nobel Prize winner William D. Nordhaus and The New Map: Energy, Climate, and the Clash of Nations by Daniel Yergin. The review will be publsihed in the January/February 2022 issue of the The Environmental Forum. 

Download Nordhaus Yergin Review

The entire review is pasted below.

Over thirty years ago, as a callow youth running the Missouri Department of Natural Resources, I wrote an op-ed for the St. Louis Post-Dispatch calling for the substitution of revenue-neutral pollution fees for existing taxes on income and productivity — which I believed made sense environmentally, economically, and politically.

Quoting from the likes of TEF contributor Robert Stavins, Peter Drucker, Jack Kemp, and Lester Brown in State of the World 1991, I reasoned that revenue-neutral fees would “internalize the externalities,” imposing costs on the party that generated the pollution, and could be offset by reductions in corporate or marginal tax rates and Social Security taxes. I did not use the term at the time, but they would generate a supply-side economic boost.

“Using these levies on pollution as a substitute for existing, counterproductive taxes on productivity, environmental costs can be incorporated into how America does business to forge a new environmental policy for the next century.” It seemed a surefire way to find common ground between the left and right sides of the political spectrum. It constituted a “no regrets” approach to dealing with a low probability but potentially catastrophic challenge regarding which I was unqualified to assess.

The “next century” is here, but the idea has not caught on, although the New York Times reports that Senate Democrats are now looking at a carbon tax in a desperate quest for revenues for their massive $3.5 to $5 trillion budget. This is not exactly what I had in mind.

Their plan includes rebates to mitigate regressive impacts for lower-income citizens, but there is no supply-side kick from reducing marginal tax rates, capital gains, etc. Quite the opposite in fact. Revenue-neutrality was the key to my proposed political compromise, but that seems out of the question. More on this subject below.

Given my youthful flirtation with pollution fees, I was pleased to take up Nobel Prize-winning economist William D. Nordhaus’s new book, The Spirit of Green: The Economics of Collisions and Contagions in a Crowded World, a very useful introduction to and argument for market-based approaches, with an emphasis on “Green Taxes,” which he deems “the holy grail of public policy.” Moreover, “They are the holy trinity of environmental policy: they pay for valuable public services, they meet our environmental objectives efficiently, and they are nondistortionary” — assuming they are grounded in solid cost-benefit analysis. That first part of the trinity would indicate his lack of enthusiasm for the revenue-neutrality element I held near and dear decades ago.

Nordhaus, a Yale professor, surveys  the basic concepts pertaining to externalities (positive and negative), market efficiency and failure, public and private goods, cost-benefit analysis, and the English economist Arthur Pigou, from whom the “analytical thinking behind the Green movement originated.” The chapters are solid and useful for anyone unfamiliar with environmental economics — and often stimulating and informative even if you are not a stranger to the subject matter. 

Nordhaus also pursues newer ideas, such as green national accounting, sustainability, ESG (environmental, social, and corporate governance), socially responsible investments, and the social cost of carbon. On this latter point, he seems to see a price of $40 or $50+ per ton as just the start of the bidding. This is the range established by the Obama and Biden administrations. He thinks there is justification, nay, necessity for as much as $200 per ton to effectively address the challenge of climate change, which he believes is “a major threat to humans and the natural world” and “the ultimate challenge for Green policies.” 

“Global warming is one of the defining issues of our time,” writes Nordhaus. Indeed, mitigating climate change or reducing carbon emissions will cost in the range of 2 to 6 percent of world income or “roughly, $2 trillion to $6 trillion annually at today’s level of income.” 

Regarding the Green New Deal, Nordhaus wants to be supportive of Representative Alexandria Ocasio- Cortez (D-NY) and Senator Edward Markey (D-MA), the prime movers, but he notes its failure to “include any discussion of using market approaches such as prices, taxes, or tradeable permits as instruments of environmental policy.” He argues that “the inconvenient truth” of climate policies “require aggressive price-raising measures, probably through carbon taxes.” 

Professor Nordhaus concedes that green taxes are not common, although congestion pricing in Europe has been successful. But even putting carbon taxes in place will not solve the problem without an international enforcement mechanism, given the global nature of the problem. Of course, the undoing of the Kyoto and Paris agreements on climate has been the free-rider problem which, get ready for it, game theory calls “a noncooperative free-riding equilibrium,” and that’s not good. He recommends something nearly as ambitious as a steep carbon tax: an international club or compact of nations which imposes tariffs on free-riding or non-complying nations which do not put on equivalent green or carbon taxes. This, too, is being discussed by Senate Democrats. 

Nordhaus is a towering intellect, but he has strong views and is not shy about expressing them. He hates Trump, despises the Republican Party, abhors Koch Industries, and detests Facebook. That said, he provides a respectful discussion of his agreements and disagreements with his fellow Nobelist, libertarian economist Milton Friedman, and points to several conservative economists who support carbon taxes as the most efficient approach to coping with a changing climate. This is true, to a point; but he fails to mention that several of them would look for cuts in other taxes to compensate for the carbon taxes. For instance, Arthur Laffer of the eponymous “Laffer Curve” wrote a famous letter to the editor to the New York Times clarifying his support for a carbon tax. 

“I am an economist, not a climate scientist, and in my professional capacity I don’t have the slightest idea whether global warming exists or not, or whether mankind has caused it or not. What I do think is true is that a carbon tax offset dollar for dollar with an income tax rate cut would be a positive component of tax reform,” wrote Laffer. “I oppose any carbon tax at any time if it’s not fully offset by a cut in marginal tax rates.” 

Considering the magnitude of the carbon taxes required to achieve any thing substantive by way of mitigating greenhouse gases, and the failure of the Clinton administration in the early 1990s to pass a BTU tax, a rough, imperfect surrogate for a carbon tax not discussed by Nordhaus, it would seem that political reality, if not sound economics, would justify another look at revenue-neutrality by Green economists. 

Given the global nature of the climate issue, readers may want to consult Pulitzer Prize winner Daniel Yergin’s latest tome, The New Map: Energy, Climate, and the Clash of Nations, a sequel to his magisterial volume The Quest, which I reviewed for the Forum nine years ago. Climate is just one part of the geopolitics of energy but is even more pressing since Yergin wrote his previous book.

“‘Climate’ will be a profound determinant of the new map of energy,” maintains Yergin. And “the momentum of climate policies — powered by research and observation, by climate models, and by political mobilization and regulatory power, social activism, financial institutions, and deepening anxiety — will transform the energy system.”

“Net zero carbon” will be the great challenge of the decades ahead, “not just politically but also in how people live their lives and the costs of achieving it.” Today, the world depends on oil, natural gas, and coal for over 80 percent of its energy, “just as it did thirty years ago.” But the shift to a more pluralistic mix of energy sources is underway and will continue over the decades ahead while “disagreement rages, both within countries and among them, on the nature of the transition: how it unfolds, how long it takes and who pays.”

The myth of “peak oil” has now been replaced by the question of “peak demand” for oil and gas. When might we witness such a thing. “The actual answer,” writes Yergin, “will be determined determined by a concantenation of many forces — from what national governments and cities do in terms of regulation and incentives, to economic growth, to the availability of minerals, to the legal liability around autonomous vehicles and the security of the cyber systems controlling them, to the values and lifestyles of millennials, to social media, to the increase in air travel and petrochemicals, to geopolitical conflicts and social instability, to start-ups that have not yet started and new scientific and engineering breakthroughs, and so on.”

There is also the issue of “intermittency” as a challenge to continued expansion of solar and wind and the stability of the grid. “They can flood the grid with electricity when the sun shines and the wind blows, but then almost disappear when the day is cloudy or there is only a murmuring breeze,” notes Yergin. New technologies will be key (another reason Nordhaus argues for internalizing the externalities with a carbon tax), especially storage and battery technology, a stumbling block for wind and solar, as well as advanced reactors and a new generation of small reactors that might jumpstart carbon-free nuclear power.

And what of consumers? “In the absence of a carbon tax or significant incentives or higher gasoline taxes, how many consumers will willingly pay more for greener energy . . . Some will, some won't,” says Yergin.

Economics must, inevitably, for good or ill, give way to politics, and the politics of climate will preoccupy us for a long time to come. Contingency, not certainty, will be the norm.

Enjoy!

"Man is the cruelest animal. No, wait - 13-year-old girls." - apologies to Friedrich Nietszche (via The Funny Times)

G. Tracy Mehan III Book Reviews: Counter-Reformation and Redeeming the Administrative State

Nothing like an unexpected treat - two book reviews by G. Tracy Mehan III He is a frequent contributor to WaterWired, executive director for government affairs at the American Water Works Association and adjunct professor at the Antonin Scalia Law School at George Mason University. His review will appear in the July/August 2021 issue of the The Environmental Forum. 

These are the books:

1) Law and Leviathan: Redeeming the Admisnistrative State by Cass R. Sunstein and Adrian Vermeule 

2) Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health by Michael A. Livermore and Richard L. Revesz 

The review PDF: Download Mehan In the lit

Here is Tracy's introduction and some of the discussion of Book #1:  

The heretics, recently inside the cathedral of the administrative state, were just barely excommunicated in the 2020 election. The Trump administration did not cotton to social, economic, or environmental regulation that it deemed inimical to its plans to revive the economy. To the outrage of some, the president issued executive orders to repeal two regulations for every new one promulgated and mandating, in effect, a regulatory budget for the federal Leviathan, something Congress has not legislated given its historic aversion to facing trade-offs.

Conservatives, and libertarians such as those at the Competitive Enterprise Institute, rail against the “Ten Thousand Commandments” and the “hidden tax” of America’s regulatory state. CEI argues that the aggregate cost of federal regulation is more than $1.9 trillion annually, the cost to each U.S. household exceeding $14,000 annually on average. This is 18 percent of the average pre-tax household budget, second only to housing.

While the Trump administration accounted for fewer pages in the Federal Register than Obama’s, it still averaged 66,490 pager per year versus 80,420, according to CEI.

A more ominous development for defenders of the administrative state, several justices on the Supreme Court are harboring heretical thoughts and writing openly about restricting deference to regulatory agencies, even policing congressional delegation of regulatory authority they deem overbroad.

A counter-reformation has emerged from defenders of administrative law and cost-benefit analysis, the latter having fallen out of favor among some on the political Right.

In Law & Leviathan: Redeeming the Administrative State, Harvard Law professors Cass R. Sunstein and Adrian Vermeule seek to reassure legal and judicial critics of federal agencies and regulation who “converge, above all, on one major concern: that the administrative state threatens the rule of law.” They concur with many of the usual defenses of administrative law and agencies, such as the validity of congressional authorizations and market failures. Nevertheless, “neither of us believes that the status quo is perfect; we might favor quite significant reforms, while not always agreeing on the forms they should take.”

Sunstein and Vermeule offer the critics of Leviathan “a structure that can transcend the current debates and provide a unifying framework for accommodating a variety of first-order views, with an eye to promoting the common good and helping to identify a path forward amid intense disagreements on fundamental issues.” They share the optimism of Justice Robert Jackson regarding the success of the Administrative Procedure Act, who, writing for the Supreme Court in Wong Yang Sung v. McGrath in 1950, stated that this statute, after “a long period of study and strife,” “settles long-continued and hard-fought contentions, and enacts a formula upon which opposing social and political forces have come to rest.”

Moreover, “it would be a disservice to our form of government and to the administrative process itself if the courts should fail, so far as the terms of the act warrant, to give effect to its remedial purposes where the evils it was aimed at appear.”

 Sunstein and Vermeule describe the development of a body of judge-made law, without clear constitutional or statutory grounding, which has evolved over the years, yielding principles which they deem “the internal morality of administrative law.” For example, agencies must follow their own rules; courts should disfavor retroactive rulemaking absent clear congressional intent. Courts and judges have posited “surrogate safeguards” to secure the rule of law for those subject to regulation without undermining the basic legitimacy of administrative law. 

Let's jump to Book #2 and take it to the end.

Professors Michael Livermore and Richard Revesz celebrate cost-benefit analysis in Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health, hoping to gain lost ground with Republicans and populists, as well as “Republican elites,” whom they used to consider supporters of the practice. They are reacting to what they consider the apostasy of the more populist Trump administration. This book complements their 2008 book, Retaking Rationality: How Cost- Benefit Analysis Can Better Protect the Environment and Our Health, in which they sought “to intervene in what we believed was a stale debate between conservatives and progressives over the use of cost-benefit analysis in government decisionmaking.” Indeed, “the progressive opposition to cost-benefit analysis was ineffective and counterproductive.”

Livermore, he of the University of Virginia Law School, and Revesz of New York University School of Law, both recognized experts in the field, have come to bury Trump and not to praise him. The book focuses mostly on health and climate issues. Waters of the United States, for instance, does not appear in the index. Co-benefits, indirect benefits, social cost of carbon, domestic-only benefits, and many other issues are discussed in counterpoint to the positions of the previous administration.

No doubt Fullerian morality and cost-benefit analysis have greatly improved regulatory policy and law in the United States over the decades. But is that the end of the story? Jonathan Adler, another legal scholar, often asks, What are the opportunity costs of regulation? Try this thought experiment: Can we, for instance, afford an infinite or unlimited number of cost-beneficial rules? A prior judgment, a prudential judgment, legislative or executive, must be made before undertaking to regulate even before applying corrective practices such as cost-benefit analysis or judicial intuition. Often lost in this discussion, although no fault, certainly, of the proponents of the “New Coke,” is the liberty interest of the citizenry.

In his classic study Democracy in America, Alexis de Tocqueville described “What Kind of Despotism Democratic Nations Have To Fear.” There he provided the prescient warning against overweening regulation: “Thus, after taking each individual by turns in its powerful hands and kneading him as it likes, the sovereign extends its arms over society as a whole; it covers its surface with a network of small, complicated, painstaking, uniform rules through which the most original minds and the most vigorous souls cannot clear a way to surpass the crowd; it does not break wills, but it softens them, bends them, and directs them; it rarely forces one to act, but it constantly opposes itself to one’s acting; it does not destroy, it prevents things from being born; it does not tyrannize, it hinders, compromises, enervates, extinguishes, dazes, and finally reduces each nation to being nothing more than a herd of timid and industrious animals of which the government is the shepherd.” And Tocqueville never read the Federal Register.

Donald Trump, love him or hate him, did not lose re-election because of his regulatory reform or rollback program (choose your own term). It may be one of the reasons why the election was so close. Supporters of reasonable regulation should keep that in mind going forward if the legitimacy of the administrative state is to be restored.

Enjoy!

 "The truth isn't always beautiful, but the hunger for it is." - Nadine Gordimer

G. Tracy Mehan III Book Reviews: 1) 'A Better Planet'; 2) 'The War on the EPA - America's Endangered Environmental Protections'

Nothing like an unexpected treat on the last day of January 2021. G. Tracy Mehan III, a frequent contributor to WaterWired, executive director for government affairs at the American Water Works Association and adjunct professor at the Antonin Scalia Law School at George Mason University reviews two books in a piece that will appear in the March/April 2021 issue of the The Environmental Forum. 

1) A Better Planet: 40 Big Ideas for a Sustainable Future, edited by Daniel C. Etsy.

2) The War on the EPA - America's Endangered Environmental Protections', by William M. Alley and Rosemarie Alley.

Note that Mehan served as Assistant Administrator for Water at the
U.S. Environmental Protection Agency from 2001-2003. Bill and Rosemarie are good friends of mine.

I usually reproduce a few paragraphs of the review before posting its PDF. I won't do that here. I'll go right to the good stuff.

Download A Better Planet and a War on EPA

Enjoy!

"Believe those who are seeking the truth. Doubt those who find it." -  André Gide

G. Tracy Mehan III Review: 'Apocalypse Never. Why Environmental Alarmism Hurts Us All'

It has been a while since I published a review by G. Tracy Mehan III, a frequent contributor to WaterWired, executive director for government affairs at the American Water Works Association and adjunct professor at the Antonin Scalia Law School at George Mason University. He writes great book reviews (and other things) so when he sends me something I post it. This review of Apocalypse Never: Why Environmental Alarmism Hurts Us All by Michael Shellenberger will be published in the November/December 2020 issue of the The Environmental Forum. I am guessing that this review might generate more controversy than most I post. But that is fine.

Download Apocalypse Never Review

Here are the first few paragraphs of his review:

A recent front-page headline in the New York Times stated, “Disastrous Wave of Climate Events Slams California. Scientists Fear Fires Are Just the Start.” Journalists Thomas Fuller and Christopher Flavelle, report that “multiple mega fires [are] burning more than three million acres.” They continue, “If climate change was a somewhat abstract notion a decade ago, it is all too real for Californians.”

These are certainly disastrous events; but Michael Shellenberger, author of Apocalypse Never: Why Environmental Alarmism Hurts Us All, demurs as to any linkage between the catastrophic fires in the Golden State and a changing climate. Actually, he rejects the notion entirely.

Shellenberger cites Jon Keeley, a U.S. Geological Survey scientist in California who has researched the topic for forty years: “We’ve looked at the history of climate and fire throughout the whole state, and through much of the state, particularly the western half of the state, we don’t see any relationship between past climates and the amount of the area burned in any given year.” Keeley and other colleagues modeled 37 different regions in the United States and found that “humans may not only influence fire regime but their presence can actually override, or swamp out, the effects of climate.” Indeed, the only statistically significant factors for the frequency and severity of fires, on an annual basis, were population and proximity to deve

Okay, now let's cut to the chase...

Shellenberger discounts a climate apocalypse, but supports nuclear as the primary solution for reconciling economic growth with environmental protection. Many environmentalists envision an apocalypse but discount nuclear energy. It is nothing if not an ironic turn of events.

Shellenberger and his colleagues started organizing pronuclear demonstrations in 30 cities around the world in 2019. Evidently, the cry of “Standup for Nuclear” is resonating in Germany. He was even invited to testify before Congress. Maybe nuclear power is nota lost cause. It should get a second look from the body politic.

Don't forget to read the material I left out. All good.

Excellent - enjoy!

“Never let anyone drive you crazy; it is nearby anyway and the walk is good for you.” - The Cheshire Cat

G. Tracy Mehan III Review: 'A New Coast' A Rising Tide Sinks All Boats - Sea-Level Increase, and What to Do About It

G. Tracy Mehan III, a frequent contributor to WaterWired, is executive director for government affairs at the American Water Works Association and adjunct professor at the Antonin Scalia Law School at George Mason University. He writes great book reviews and today's is no exception: Jeffrey Peterson's A New Coast: Strategies for Responding to Devastating Storms and Rising Seas

The review will be publsihed in the July/August 2020 issue of the The Environmental Forum. Tracy sent me a PDF of his review. I have included a few paragraphs of his review just to wht your appetite.

Download A New Coast review

A few morsels...

Climate policy focused on federal regulation of greenhouse gas emissions
is a hard sell in the United States. From the defeat of the Kyoto Protocol in the Senate 95-0 in 1997, to the failure of the Waxman-Markey cap-and-trade
bill in a Democratic Congress in 2009, up to and including President Trump’s spiking of the Clean Power Plan and reducing vehicle fuel economy improvements and withdrawing from the Paris Agreement, that dog just won’t hunt.

Meanwhile the shale and natural gas revolutions have reduced emissions significantly. States, cities, and many corporations are pursuing their own GHG reduction goals in a civil society movement envisioned by Vanderbilt’s Michael Vandenbergh and Jonathan Gilligan in their thoughtful, hopeful book, Beyond Politics. The Private Governance Response to Climate Change — previously reviewed here. But as noted at the end of that review, “Yet, nowhere in the dozen or so pages of the book’s index will the reader find any references to either adaptation or resilience in the face of climate change.. . . Society, however, may be forced to consider other options given the stark political and economic realities of climate policy.”

Is there common ground left in America to address the impacts of a
variable climate; demographic shifts to coastal zones (doubling by 2060);massive, costly storms, hurricanes, flooding, erosion; and, if you comprehend the arcane art of modeling, rising sea levels that will render storms even more destructive, extend flood zones and move the coastline
further inland due to massive inundation?

Cutting to the chase...

Peterson notes, “Federal supplemental appropriations to recover from the 2017 storms came to $120 billion, and individual major storms have cost tens of billions of dollars.” Moreover, “the Congressional Budget Office estimates future annual property losses of $54 billion and federal government costs of $17 billion annually assuming just existing conditions.” Over and above the money, a proactive policy anticipating sea-level rise would “save lives, sustain coastal ecosystems and protect coastal economies.” Thousands of lives, trillions of dollars saved.

A national planning effort needs to convince Americans to believe in the models predicting sea level rise over many, many decades. But time will tell, and reality will, if Peterson is right, unmute all price signals and concentrate the minds of coastal residents.

 One might, however, argue that he is putting too large a wager on a federally led process, given the current distrust of Washington. Trust, in this polarized age, must be cultivated bottom up and top down. The Pew Research Center reports that “Three quarters of Americans say that their fellow citizens’ trust in the federal government has been shrinking, and 64 percent believe that about peoples’ trust in each other.” Only 46 percent view climate change as a toptier problem. 

So a collaborative approach tocoastal policy, with ample education and mutual learning, between public and private sectors, will be a necessary condition to overcoming the distrust and the challenges both of government failure or neglect, and that of asymmetrical information, one of the classic causes of market failure.

Worth your time - the review and the book.

Enjoy!

"It is curious--curious that  physical courage should be so common in the world, and more coral courage so rare." - Mark Twain